TRADE AND DEVELOPMENT THEORY, PRACTICE, CAMBODIA’S STORY Sven Callebaut, Adviser Ministry of Commerce, RGC sven.cdadviser@gmail.com
OBJECTIVE The session will explore the link between trade and development, and how trade has been able to reduce poverty and increase employment and revenue in Cambodia. It will also highlight the role of MoC in mainstreaming trade into the country’s development agenda
SESSION CONTENTS 1. Check your knowledge: Cambodia’s trade patterns 2. The link between trade and development 3. Trade Policy and Development in Cambodia 4. Trade Mainstreaming
DEFINITIONS • Trade ? the act or process of buying, selling, or exchanging commodities, at either wholesale or retail • Commerce ? the buying and selling of goods, especially on a large scale, as between cities or nations, under legal, technical and regulatory condition
SECTION I CAMBODIA TRADE PATTERNS
DO YOU KNOW YOUR COUNTRY’S TRADE PATTERNS ? What are Cambodia’s main exports ? What are Cambodia’s main imports ? What are the 2 main official export markets ? What are the 2 main unofficial export markets ? What are the 2 largest exported product by Cambodia ? What is larger: Cambodia foreign trade or GDP ?
Recent Evolution of Foreign Trade
CAMBODIA’S TRADE BOTTLENECKS Regulatory / Fees Discrepancies in implementation Predictability Logistics Human Resources / Market knowledge Energy Access to finance
Main Causes of Trade Restrictiveness 100% 90% Others 9 80% 6 Road Transportation 9 70% 10 13 60% 7 10 Aviation 50% 14 Maritime 40% 68 30% 60 Express Delivery 53 43 20% Movement of People 10% 0% Investments Cambodia Cambodia Domestic Foreign Domestic Foreign Ave EAP Ave EAP Customs Source: World Bank, World Governance Indicators, 2012.
CAMBODIA’S TRADE STRENGTHS Physically in a very trade-dynamic region, in an integration process LDC status means preferential market access, but not forever Cheap labour Open economy and liberalized trade Strong donor engagement in trade sector development
CAMBODIA’S RECENT TRADE PROGRESS • Achievements include: – WTO accession; – significant progress in reforming the legal framework for commercial activities; – computerization of customs and implementation of a risk management strategy. – On-going automation of key trade processes – High level of foreign direct investment (around 6 percent of GDP in recent years), continued export growth (23 percent per annum since 1998) – rapid deepening of the financial sector
SECTION II TRADE AND DEVELOPMENT THEORIES
BACKGROUND: TRADE AND DEVELOPMENT • Trade - an engine of economic growth (development). • There are a number of channels through which trade affects development of a country. • Direct channels – income and employment effects, – expenditure effects arising of price changes, and – effects on revenue (public goods and development activities) • Indirect effects through – increased economic growth; – increased investment; – technology acquisition and learning; – dynamic efficiency gains coming from specialization; and – increased capacity utilization (factor of production, resources, etc.).
Source: The Least Developed Countries Report 2004
TRADE DEVELOPMENT STRATEGIES The main strategies for trade sector development are: i. Mainstream trade in the national development agenda. ii. Enhance the supply side capacity of exportable goods and services by increasing their production and productivity. iii. Identify the emerging export potential products and develop their value chain. iv. Develop trade and transit related infrastructures. v. Carry out the export promotion measures and market access. vi. Protect and promote the export of traditional products vii. Carry on the institutional reform and human resources development. viii. Enhance the capacity of private sector institutions.
SECTION III TRADE POLICY AND DEVELOPMENT
SOME BASIC POLICY QUESTIONS 1. What is your basic objective ? · Freer trade (trade liberalization) · More trade (increased quantity of trade) · Better trade (increased quality of trade) 2. Freer trade = more trade = better trade ? 3. What is meant by better trade ? 4. What should be the focus of efforts to integrate trade into development and poverty reduction strategies ? • Exports of Goods and Services • Imports of Goods and Services • Both
BROAD RANGE OF ISSUES Source: The Least Developed Countries Report 2004
Policy Area Objective Policy environment Create the enabling macroeconomic environment, & institutions strengthen public agencies that support PSD Improve the regulatory frameworks and investment Regulations & laws code to foster private sector growth. To enhance the infrastructural platform Infrastructure for PSD by encouraging private investment in infrastructure (PPI) Business facilitation & Remove administrative barriers to business entry and economic diversification operation Creating greater opportunities for access to regional Trade expansion and international markets by businesses To unlock the growth potential of the Micro, Local empowerment Small and Medium scale enterprises
National Development Strategy and the Trade Policy Process National Development Strategy Trade Strategy Support from Multilateral and Government ministries Bilateral Donors and agencies Trade Policy Process Civil Society Private Sector Academia Analysis and Business Formulation of trade and Research Associations policy Institutions Negotiation Implementation Increased Trade Effective and Investment Participation in Trade Policy National and regional MTS competitiveness agenda and mainstreamed capacities Negotiating and implementing in agenda and capacities development
SECTION IV TRADE MAINSTREAMING
WHY TRADE MAINSTREAMING? To effectively leverage the potential of trade for poverty reduction Trade reform in isolation will not yield the expected results Broader development framework provides the anchor to decide on the design and sequence of particular trade reforms and complementary policies
MAINSTREAMING: A DEVELOPMENT APPROACH Within this approach the focus is identifying a country's trade interests within the context of its development objectives, translating those trade interests into a set of trade objectives and identifying the trade policies (including trade liberalization) and non-trade policies which are required to achieve those objectives.
MAINSTREAMING Possible Questions to Assess the Growth and Poverty Reduction Effects of Different Trade Policy Options • In what products and sectors does the country have a comparative advantage? • What are the demand growth prospects of different products and sectors in world markets? • What is the magnitude of local value-added, externalities and potential for learning associated with these products and sectors? • What is the employment intensity of specific export activities and their linkages with the rest of the economy? But the overarching issue is: How do the different trade policy options relate to the overall development strategy?
Good Governance 1. Development of transport & urban infrastructure Promote of 2. Water resource & irrigation system 1. Improved productivity, diversification & commercialization management agriculture sector 2. Promote livestock farming & aqua- 3. Electricity power development 1 3. Land reform, mines clearance & UXO 4. ICT development 4. Sustainable management of national resources. 3 development and Development of Private sector infrastructure employment Physical 2 4 1. Strengthening private sector & 1. Strengthening & enhancing education, promoting investment & business science & technology, &Technical Capacity building 2. Development of industry & SMEs training 3. Development of labor market 2. Promotion of health & nutrition & HRD 4. Development of banking & financial 3. Development of social protection system sector 4. Enhancing implementation population policy & gender equity
Cambodia carried out a country diagnostic trade integration study (DTIS) in 2001
CAMBODIA’S 2007 TRADE INTEGRATION STRATEGY (DTIS 2007)
Second update of DTIS on 18 Feb 2014.
OTHER DIMENSION: INSTITUTIONAL FRAMEWORK Trade is a cross-cutting issue Trade ministry is usually weak Advocacy: Sharing of analytical work/evidence helps with buy-in Broad participation critical for sustainability Strong involvement of line ministries is key: agriculture; planning and finance, etc. Participation of private sector broadly understood: producers, service providers
Role of MoC is the government ministry responsible for regulating and promoting commerce and trade of Cambodia works both domestically and internationally, and within the context of ASEAN, to create opportunities and a good working environment for producers and exporters. is reaching out to line ministries so trade becomes part of the country’s development agenda (not only of MoC) Is MoC a line ministry ??
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