AID FOR TRADE

plication for export promotion

SEC A, GROUP 5
26A, 29A, 39A, 48A

Foreword
Trade can be a powerful engine for economic growth and
poverty reduction, but harnessing its power is difficult for
many developing countries.

WHY ?

Lack of capacity in terms of

Information
Information

Policies
Policies

Institutions
Institutions

Procedures
Procedures

Infrastructur
Infrastructur
ee

Unable to integrate and compete

effectively in global markets

Call for more and better aid for

trade

hat is Aid for Trade

Aid for trade is about assisting developing countries
to increase exports of goods and services, to integrate
into the multilateral trading system, and to benefit
from liberalized trade and increased market access.
Launched at the World
Trade Organizations (WTO)
Hong
Kong
Ministerial
Conference in December
2005, Aid for Trade has
become embedded in ITCs
work
Three strategic objectives
- Make national policy
environments friendlier for
export
business;
Strengthening national and
regional institutes; Helping
enterprises
to
become
more competitive

Aid for Trade

agenda

Trade
Tradepolicy
policy
and
and
regulations
regulations

Trade
Trade
development
development

Building
Building
productive
productive
capacity
capacity

Trade
Traderelated
related
adjustment
adjustment

Trade
Traderelated
related
infrastructure
infrastructure

much Aid For Trade is there (1/2)

Aid for Trade by
region

USD 174 billion in aid for trade was disbursed since 2006
Annual disbursements increased by 53 percent between 2006 and
2011
Ten countries received 35 % of these disbursements, dominated
by Asia routinely been the largest regional recipient of
commitments
Source : OECD Creditor reporting system

much Aid For Trade is there (2/2)

Aid for Trade
commitments

Reflecting the increasing priority that donors attach to private

sector development, aid dedicated to building capacity
increased in 2011 by USD 171 million to reach USD 18.2 billion
In one of the largest projects reported in 2011 the World Bank
committed USD 1 billion in loans to India for agricultural
development through national rural livelihood project

Source : OECD Creditor reporting system

asuring Aid for Trade

Aid for Trade comprises of following
categories :

Technical assistance for trade policy and regulations(e.g.

helping countries to develop trade strategies, negotiate trade
agreements, and implement their outcomes)
Trade-related infrastructure(e.g. building roads, ports, and
telecommunications networks to connect domestic markets to the
global economy)
Productive
capacity
building,
includingtrade
development(e.g. supporting the private sector to exploit their
comparative advantages and diversify their exports)
Trade-related adjustment(e.g. helping developing countries
with the costs associated with trade liberalization, such as tariff
reductions, preference erosion, or declining terms of trade)
Other trade-related needs, if identified as trade-related
development priorities in partner countries' national development
strategies

r Trade & Development Finance

Increased trade and foreign direct investment (FDI), combined
with complementary policies, can boost economic growth and
provide a significant source of employment
To address trade related constraints, a variety of financial
instruments are used Loans, Grants, Pooled Funds, Trust Funds
While Aid for Trade has been defined in terms of ODA, other
sources of finance can help build trade capacities
Renewed attention is being given to ways to finance
development beyond traditional aid

Source : OECD Creditor reporting system

Development
finance flows in

nitoring Aid for Trade

The OECDand the WTO established an aid-for-trade monitoring
framework based on the recommendation by the WTO Task Force on
Aid for Trade of establishing two accountability mechanisms, which
help track progress in the implementation and enhance the credibility
of the Aid for Trade Initiative:
At thelocal level, to foster genuine local ownership and ensure
that trade needs are integrated into national development
strategies and adequately addressed
At theglobal level, to increase transparency about what is
The Logical
happening, what is not, and where improvements are required

Framework
Demand

Response

Outcome

Impact

Mainstreaming and
prioritizing trade

Trade related
Projects and
Programs

Enhance capacity to
Trade

Improved Trade
performance and
reduced poverty

ho are donors
Bilateral donors still provide the majority of aid of trade,
accounting for 60 percent of total support in 2011. However, the
total amount they provided in that year fell from 65 percent in
2010

Top 10 Aid for Trade

donors

Source : OECD Creditor reporting system

disbursements by sector

Source : OECD, DAC-CRS Aid Activities Database

w is AFT delivered
Aid for trade is part and parcel of regular ODA, which is composed of
grants and loans meeting certain conditions (i.e. transactions that
are concessional in character and convey a grant element of at least
25 percent)
Half of aid for trade is in grant form and half in the form of
concessional loans. This distribution has been more or less
consistent in recent years
Poorer countries tend to benefit from more concessional forms of
finance. Of the support received by LDCs, 60 percent is in grant form
while UMICs receive only 23.8 percent of their aid for trade as grants
Nevertheless, the choice of the finance instrument used tends to be
more dependent on the project type. Almost all (97 percent) trade
policy and regulations projects are funded with grants, compared to
just 36.5 percent of economic infrastructure projects. For building
productive capacity, 60 percent of the aid provided is in grant form
and 40 percent in the form of loans. Trade-related adjustment
remains small, but is also dominated by grants (83 percent)

ans & Grants for AFT

Source : OECD Creditor reporting system

her Official Flows

It is not just concessional loans which are provided by the official
sector. Other Official Flows (OOF) provided by the official sector are
transactions that do not meet the eligibility conditions for
ODA, mainly because they have a grant element of less than
25 percent (i.e. they are low concessional loans).

Source : OECD Creditor reporting system

ting the effectiveness of AFT (1/2)

Key
Questions
Is aid for trade effective in
increasing trade, thus fostering more
rapid economic growth and sharper
reductions in poverty, and if so,
under what circumstances is aid
most effective?
As global and regional value chains
become a central feature of the
trade landscape, what changes does
this imply for aid for trade, and has
past aid for trade contributed to
effective participation in global and
regional production chains?
Do
management
systems
of
governments, in partnership with
donors, improve the effectiveness of

Much like all development

assistance, aid for trade has
as its ultimate objective
raising
standards
of
living
and
reducing
poverty
through
its
effects
on
economic
growth. As described by
the OECD (2011b), three
generalized propositions link
the transmission of aid for
trade to growth and poverty
reduction:
Aid for trade leads to
more rapid growth of
exports and imports.
More rapid growth of
trade raises productivity
and income growth

ting the effectiveness of AFT (2/2)

Aggreg
ate
Cross
Countr
y

Evaluation
Techniques

Sectoral
and
Program
me

Progra
m
Level

One way to approach the analysis of the

effect of aid for trade on trade growth is
to apply econometric techniques to
multi-country
panel
data.5
These
typically attempt to solve the attribution
problem by isolating aid for trade from
other probable determinants of trade (or
trade costs) performance.
The
Commonwealth
Secretariat
reports suggest that a doubling of aid
for trade to economic infrastructure
would raise merchandise exports by
3.5 percent, while a doubling of aid
to trade facilitation would lower
import costs by 5 percent
Similarly, econometric studies of
Africa
by
the
UN
Economic
Commission for Africa (UNECA) show

ade & Development Indicators (1/4)

Indias Top Donors

Source : OECD, DAC-CRS Aid Activities Database

Japan has a USD 376 million

project to promote energy saving
in SMEs in India
Other projects included a USD
232 million loan from Japan to
India for the Madhya Pradesh
Transmission
System
Modernization Project and a USD
232 million loan to enhance
high voltage distribution systems
in rural areas
In 2010 aid provided for rail
infrastructure, rail equipment,
locomotives, light rail (tram) and
underground systems amounted
to over USD 4.2 billion,
including USD 2.5 billion in
loans from Japan to India to
construct a dedicated freight
corridor, extend the Delhi Mass

ade & Development Indicators (2/4)

Investment and
Financing (Inputs)

Trade Performance
(Outputs)

AFT in sectors such as transport and communications have resulted in significant

increase in trade volumes in these sectors

: OECD, DAC-CRS Aid Activities Database, World Bank, World Development Indicators, International Debt Statistics

ade & Development Indicators (3/4)

Trade Indicators
(Outcomes)

Development
Indicators
(Impacts)

: OECD, DAC-CRS Aid Activities Database, World Bank, World Development Indicators, International Debt Statistics

ade & Development Indicators (4/4)

: OECD, DAC-CRS Aid Activities Database, World Bank, World Development Indicators, International Debt Statistics

as contribution in AFT
India often delivers aid as part of a larger package of investments
and trade deals. Hence, commercial considerations can be an
integral component of its development co-operation programme. India
is also engaged in infrastructure development through concessional
lending and technical assistance
In 2010 its export finance institution, the Exim Bank, extended a USD
3 billion new line of credit, of which USD 1 billion was for Bangladesh
alone, the highest one-off amount to any country from India
In 2011 the Exim Bank approved 12 new lines of credit worth USD
473.30 million to ten countries to finance various projects, ranging
from agriculture and agro-industry (sugar industry, cassava
plantation, milk processing), mining (limestone) and energy (rural
electrification, solar energy, bio-diesel, power generation) to
construction of broadcasting facilities and a multi-specialty hospital
The 2013 Confederation of Indian Industry (CII) India-Africa Project
Partnership Conclave discussed emerging opportunities to boost
bilateral investment co-operation. The essence of the Conclave was to
: OECD, DAC-CRS
Aid Activities
Database, exporters
World Bank, Worldto
Development
Indicators,
International
Debt Statistics
encourage
Indian
access
African
countries
and to

onclusions (1/2)
Aid for trade does have a significant and positive association with
greater exports. The results suggest that a 10 percent increase in the
amount of bilateral aid for trade committed to developing
countries would increase their exports by about 0.3 percent.
While these amounts may appear small, they indicate that an increase
in aid for trade of 10 percent (or about USD 1 billion) would increase
exports of developing countries by about USD 9 billion in recent years

Expected increase in total exports associated with

total Aids for Trade

onclusions (2/2)
Aid for trade is effectivebut requires a supportive
environment
According to the OECD report 2013:
While evidence is mixed for different types of aid flows, it appears
that those targeted to specific trade-related activities such as
trade facilitation and infrastructure are most effective in
promoting exports.
Some evidence suggests that aid to infrastructure, particularly
transport infrastructure, is more effective in low income
countries, while aid flows to the business sectors are more
effective in higher income developing countries.
Evidence suggests that Sub-Saharan Africa is one of the regions
most likely to benefit from aid for trade
Aid for trade can promote regional and global value chains
Improving in-country management systems can contribute to better
aid-for-trade effectiveness
One corollary is important: complementary policies essential for
successful aid for trade need not indeed could not be included in
every aid-for-trade project. Often issues of job creation, education,
environment and social protection (all important complements of

Thank You !!