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Netherlands Aid for Trade
Strategy
Directorate for Sustainable
Economic Development
Place: The Hague, Netherlands
Date : September 10, 2008
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OECD CRS Table on NL Aid for Trade
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Main elements Aid for Trade strategy
• Enable developing countries to
participate in global trading system
• Link up to demand driven poverty
reduction strategies, owned by
beneficiaries
• More effective joint donor support to
develop concrete programmes
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History Aid for Trade
- 1999 Poverty Reduction Strategy Papers
- 2001, Monterrey, Financing for Development;
Introduction concept of ‘trade related assistance’
- WTO Hong Kong: “aid-for-trade” extended with
building productive capacity, infrastructure
- EU Joint Aid for Trade Strategy; concrete workplan
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- WTO Global Review November 2007
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General features of Aid for Trade
Assist countries in building their supply side,
infrastructure and trade capacity, but:
• Safeguard demand driven character
• Use innovative concepts
• Catalytic contributions to government, private
sector
• Avoid disruption of local production and markets
• Focus on sustainable poverty reduction
• Where needed social safety nets
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Components Netherlands Aid for Trade
implementation programme
1. Legal and regulatory environment
2. Access poor to skills, knowledge, assets
3. Economic infrastructure
4. Sustainable energy programmes
5. Financial sector development, credit insurance
6. Foreign direct investment
7. Public-private partnerships, Schokland fund
8. Market access
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1) Legal and regulatory environment
• Why? Voices of the poor. Less costs and risks for
business and level playing field
• What? Property rights, customs, commercial law,
corruption, business registration, decent work
• How?
- Embassies: policy dialogue, embassy programs,
Corporate Social Responsibility
- Central: Doing Business, partnerships with WB /
IFC/ AfDB
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Doing Business example
• Improvement tax regulations in South-Africa
• In 2005: 32 payments, 44% tax rate
• In 2006: 23 payments, 38% tax rate
• Today in the newspapers that Doing Business is
becoming easier worldwide
• Africa still lagging behind but shows most
improvements
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2) Access poor to skills and knowledge
Why: Inclusion of the poor in economic growth
What: Vocational training, business capacity building,
business membership organisations
How:
Embassies: support local programs
Central:
– Company to company cooperation
– Retired managers programme
– Trade Unions programme
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3) Economic Infrastructure
• Why? Basic services are a condition for economic
development
• What? Roads, energy, ICT, water and sanitation,
transport
• How?
Embassies: support to local programmes
Central: FMO, ORET/ORIO, water, energy, PIDG,
World Bank, European Commission
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4) Sustainable energy programmes
Why: Enable developing countries to develop
renewable energy policies. Access to modern energy
important for economic development and MDGs
What:
• Additional effort of 500 mln euro in next four years
How:
• Support in a.o. African countries for biogas, solar,
wind and waterpower programmes
• PPP about 10 million green lights (rechargeable
solar lamps) with Philips and African partners
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5) Financial Sector Development
Why: create access poor to financial services
What: microfinance, saving, insurances and improving
the capacity of financial institutions
How:
• Embassies: local programs
• Central instruments:
– FMO: credit, equity, venture capital
– International financial institutions
– Guarantees for local currency funding
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6) Foreign direct investment
Why: compensate savings gap and stimulate economic
growth
What: support ‘sustainable’ foreign direct investments
How:
Embassies: Policy dialogue, monitoring, match making
Central: Export credit insurance, investment insurance,
FMO
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7) Public-private partnerships
Why:
• More leverage, additional opportunities to achieve
development goals
What:
• Examples: Schokland Agreement to reach MDGs
How:
• By pooling knowledge, skills, resources and
coordinating efforts
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8) Market access
Why: Create opportunities for export growth
What: Improve market access for developing countries
How:
– Negotiations: WTO, EPA’s, EBA, CAP reform
– Knowledge-building: Trade-related technical
assistance (WTO, ACWL)
– Sensible standards
– Fair trade (additional poverty reduction)
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Joint EU Aid for Trade Strategy
• Improve effectivity Aid for Trade programmes of the
EU Commission and the EU member states
• Increase Aid for Trade budgets as part of growing
ODA commitments
• Special attention for ACP regions (historic reasons)
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WTO Global Aid for Trade Review
Lessons learned:
• Better data needed about country, regional and
sectoral focus of Aid for Trade programmes
• New roadmap to discuss national and (sub)regional
strategies of beneficiary countries
• Next WTO Global Aid for Trade Review in 2009
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Some economic policy aspects of Aid
for Trade in beneficiary countries
• NEED FOR SUPPORTIVE, NON-DISRUPTING
ACCOMPANYING MACRO ECONOMIC POLICIES, F.E.
1. EXCHANGE RATE POLICY
2. INTEREST RATE POLICY
3. WAGE AND PRICE CONTROLS
4. PUBLIC SECTOR SPENDING VERSUS PRIVATE
SECTOR DEVELOPMENT
5. INFANT INDUSTRY POLICY
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Exchange rate policy
• Enable necessary imports for reasonable prices in
local currency
• Should help to contain inflation
• Avoid Dutch disease (risk in commodity exporting
countries) which hurts non-commodity exports
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Interest rate policy
• Stimulate local savings
• Support private sector development
• Help to control inflation
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WAGES AND PRICE CONTROLS
• Laissez-faire politically often not feasible
• Minimum wages can stimulate purchasing power
• High wages can start inflation and hurt employment
• Price support for food items sometimes needed to
preserve social peace but can be extremely costly
• Minimum prices for agricultural products can induce
more production but risk of overproduction
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PUBLIC SECTOR SPENDING VERSUS
PRIVATE SECTOR DEVELOPMENT
• Public sector deficits can lead to domestic borrowing
which crowds out lending to private sector
• High public sector spending sometimes needed for
investments in infrastructure, healthcare, education
• Growing financial flows to developing countries
(remittances, FDI, philantropy, ODA, debt relief,
China/India) but very unevenly divided
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INFANT INDUSTRY POLICY
• Learn from joint industrial development policies that
Asian countries have designed in close cooperation
between government and private sector
• Focussed support (research, tax break, financing) or
border protection can facilitate take-off for new
industries
• However, protection for certain industries will raise
costs (rent) for other sectors and undermine their
growth prospects and protection periods should not
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become indefinitive
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Accompanying micro economic policies
1. Competition/subsidization policy: more competition
lowers prices but beware of regulatory framework
2. Investment policies: sustainability aspects
3. Pro poor policies: legal, taxation, eduction etc.
4. Regional policies: trade off between maximum
direct benefits and development poor regions
5. Sectoral policies: different kinds of employment
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Some conclusions:
• Growing economic importance of developing
countries, supported by increased financial flows
(however Sub Sahara Africa still lagging behind)
• Near universal recognition of the importance of the
private sector in the fight against poverty
• The investment climate is the central driver of
growth and poverty reduction
• Aid for Trade deserves our continued support
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GROWTH AND EQUITY !
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