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Aid for Trade: a letdown

A CPD study says the WTO scheme had little impact on Bangladesh's exports

Star Business Report
Aid for Trade, an initiative of the World Trade Organisation to enhance developing countries' capacity to trade, could not make any notable impact on Bangladesh due to erratic and low flow of funds, the Centre for Policy Dialogue said yesterday.
Launched in December 2005 at the Sixth WTO Ministerial Conference in Hong Kong, the initiative seeks to mobilise resources to address the range of supplyside and trade-related infrastructure obstacles that developing and least-developed countries face, which constrain their ability to engage in international trade.
The private think-tank, after examining the dataset from 2002 to 2011, came to the conclusion that Aid for Trade (AfT) had no impact at the macro level in Bangladesh.
Although exports have increased since the initiative took off, it is difficult to make any straightforward association between AfT disbursements and export performance in Bangladesh.
Rather, a combination of donor- and state-driven policy changes starting in the late 1980s was instrumental in creating a favourable business environment to boost exports, said Fahmida Khatun, research director of CPD.
Fahmida's comments came at a dialogue on "Aid for Trade: second generation issues for Bangladesh", co-organised by the CPD and Geneva-based International Centre for Trade and Sustainable Development, at the capital's Brae Centre Inn.
Developed countries and donor agencies have disbursed only one-third of the funds they committed annually for the purpose of facilitating trade in the country, she said.
Between 2006 and 2011, Bangladesh received $391.74 million on average as aid for trade per year against the average annual commitment of $1047.99 million, the CPD study found.
"Competing priority of donors, reorientation of donors' programmes and a lack of adequate demand for such projects from Bangladesh may have contributed to the lower flow ofAfT,” Fahmida said.
A sectoral disaggregation of the disbursed AfT in Bangladesh reveals that though total volume of AfT is increasing, the yearly average growth rate during 2006-11 is negative (-28.68 percent) as opposed to 67 percent at the global level, she added.
"Aid for trade is completely a joke for Bangladesh as it does not have any effective impact on the economy,” said Md Mozibur Rahman, chief executive officer of Bangladesh ForeignTrade Institute.
He suggested some of the AfT funds be instead used for the workers' safety and that the government make a separate AfT strategy to get more funds.
"The most important factor to facilitate trade is policy. Trade is a policy driven variable. If policies are efficient, it will respond accordingly," said Sanjay Kathuria, World Bank's lead economist for the South Asia region.
He said the country's readymade garment industry has flourished due to the supportive trade policies of the government.
"Trade is very important for efficient job creation. For example, one RMG sector in Bangladesh has created over 3.5 million jobs, "he said.
Debapriya Bhattacharya, distinguished fellow of the CPD, said trade policy is a 'means' to facilitate export and import and that the country should make 'strategic trade policy' by focussing on export diversification and development of local industry.
He went on to call for inclusion of some AfT projects for development of social infrastructure. "Why will the aid for trade only be for the entrepreneurs? It should be for workers, too."
Fazlul Haque, a former president of Bangladesh Knitwear Manufacturers and Exporters Association, too said that AfT has not brought any significant benefit in the last eight years for the RMG sector.
He urged the government to involve the private sector in AfT projects. "We are still in dark on AfT issue as the government does not communicate with us on it."
Mustafizur Rahman, executive director of the CPD, chaired the discussion, and Toufiq Ali, former permanent representative of Bangladesh to the WTO and United Nations agencies in Geneva, also spoke.