Transcript ICT, trade in services and small countries

Infrastructure and
international trade
World Bank Group and the private sector, CMI 14
June 2005
Hildegunn Kyvik Nordås,
SNF and University of Bergen
Overview
Why is infrastructure important?
 How does it affect trade?
 What are the policy implications?

Why is infrastructure important?
6000
5000
4000
$ mn
Intermediate services
Intermediate goods
3000
Capital
Taxes
Wages
2000
1000
0
Zara 2003
15% higher cost of intermediates
15% higher output price
Infrastructure
Improves the ability of companies to pay
its workers;
 Improves the ability to enter higher value
added market segments

Vertical specialization –
outsourcing
Established practice in manufacturing;
relatively new phenomenon in services.
 Driven by falling transport and other trade
costs;
 Lead time is a crucial competitive factor

 Wal-Mart’s
week
delivery time requirement is one
International production networks;
import content of exports
Zimbabwe
Zambia
Vietnam
Tanzania
Sri Lanka
Singarpore
Philippines
Peru
New Zealand
Electronics
Clothing
Netherlands
Mozambique
Malaysia
Ireland
Indonesia
India
China
Botswana
Bangladesh
0
10
20
30
40
50
60
70
80
90
Vertical specialization
Important for small countries
 Important for poor countries
 A way of getting access to foreign
distribution networks and technology

High import content, Just in time
Good infrastructure is essential
How does infrastructure affect
bilateral trade?

An extra day in transit has been estimated to
cost the equivalent of 0.8 percentage point ad
valorem tariff.
 Customs
clearance takes on average 7-30 days in
many African countries
 A 10 per cent increase in tariffs reduces bilateral trade
by more than 10 percent on average;

A 10 percent improvement in port efficiency
increases exports by about 6 per cent;
The most important determinants of
vertical specialization
Size of local market
 Distance to major markets
 Port efficiency
 Control of corruption
 Telephone density

Policy implications for Africa

Improved port efficiency is essential




Improved control of corruption important in its own right and for
improving port efficiency (a high correlation between corruption and
port efficiency)
Trade facilitation (the only Singapore issue left in the WTO
negotiations) can reduce time in transit in a cost efficient way
A case for special economic zones and transport corridors?



How to reconcile with new safety regulation?
Infrastructure is expensive and resources are limited
But creating enclaves isolated from the local economy does not
generate much development
A need to rethink local content requirements in preferential trade
arrangements