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  • AID FOR TRADE IN ASIA AND THE PACIFIC

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    Aid for Trade in Asia and the Pacific

     

     
     
    International Trade Forum - Issue 2/2009

    Export-led growth has seen the Asia and Pacific region prosper immensely over the past four decades, yet many countries still continue to experience lagging growth and severe poverty. The Asian Development Bank (ADB) estimates that as many as 900 million people in developing Asia live on less than $1.25 a day. Even within the more prosperous countries, rich and poor regions exist side by side, portraying the two faces of Asia as a striking reality.


    The global economic crisis has exacerbated the situation. With a precipitous drop in our region's exports, aggregate growth of gross domestic product (GDP) in developing Asia is forecast to decline from 6.3 per cent in 2008 to around 3.4 per cent this year. Even if the region recovers by the 6 per cent predicted in 2010, lower-income countries and small states are still likely to lag behind. Rising poverty is a major concern.

    Recent meetings in the region have underlined three key points for making Aid for Trade more effective. The first is that regional approaches that support national development strategies are best for multiplying the benefits of Aid for Trade. Second, establishing cross-border economic corridors lies at the heart of successful Aid for Trade programmes. And third, building strong partnerships between governments, the private sector and the donor community ensures the sustainability of benefits.

    Rebalancing growth towards greater domestic and regional demand is an important key to the region's recovery. This will foster increased intraregional trade, help the region recover faster and strengthen Asia's approach to open regionalism. Within this, however, it is essential that countries do not resort to protectionist measures. In the wake of falling demand and job losses, protectionist pressures are rising, largely due to the influence of political lobbies in declining sectors. Some countries appear to be resorting to traditional forms of protection such as tariffs and subsidies, while others are using more subtle measures, particularly sanitary and phytosanitary measures, anti-dumping measures and even so-called "green protectionism". To counter this, the Asia and Pacific region needs to keep markets open, cooperate regionally, train workers and develop safety nets.

    Aid for Trade in action



    ADB has been active in Aid for Trade since 2006, as a member of the World Trade Organization Advisory Group and as co-host for Regional Review Meetings in Manila in September 2007 and Siem Reap, Cambodia in May 2009. It is also the secretariat of the Regional Technical Group for the region.

    For many years the bank has recognized that Aid for Trade is vital for economic recovery, long-term development and structural change. There is no "one size fits all" approach to Aid for Trade projects, but ADB's experience suggests that project assistance yields large returns. Of course, this is best where political will and effective donor coordination combine. Indeed, these are the core lessons that flowed from more than 15 years of support to the Greater Mekong Subregion (GMS) programme. Under this programme, Cambodia, People's Republic of China, Lao People's Democratic Republic, Myanmar, Thailand and Viet Nam have come together to promote development through closer economic linkages.

    Substantial progress has been made since the programme began in 1992. So far 41 GMS projects have been implemented, costing an estimated $11 billion in total. Of this, ADB has extended loans worth $3.8 billion and co-financing worth $4 billion. The GMS north-south corridor, which links China and Thailand though Laos, illustrates what can be achieved. In 1997 it took three days for goods to move across one 270-kilometre section of dirt track along the corridor in Laos. Today that same trip takes four hours, with a large increase in commercial traffic, thanks to a $90 million project equally funded by China, Thailand and ADB. Most importantly, per capita GDP rose sharply last year in one of the poorest provinces in Laos.

    Overall, the GMS countries' share of trade among themselves has risen over the past decade. GMS initiatives have brought rapid expansion to corridor projects. Critically, the transport and trade facilitation programme has already created a demonstration effect and is being replicated in other subregions around developing Asia, such as the recent Central Asia Regional Economic Cooperation initiative.

    As the region's development bank, ADB is the natural catalytic agent for helping mobilize and channel Aid for Trade effectively. This can be done initially in three ways: first, through increased lending for trade-related infrastructure at regional, subregional and national levels; second, by helping to coordinate the many participants in Aid for Trade as the secretariat for the newly created Regional Technical Group, co-chaired by Cambodia and Japan; and third, by sharing cross-border experience and technical expertise on Aid for Trade activities through policy dialogues and studies.

    This article has been adapted from an address made at the Second Global Review of Aid for Trade: Maintaining Momentum on 6 July 2009 in Geneva, Switzerland.