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Professor Mustafizur Rahman on aid for trade

Published in The Financial Express on 8 July 2015.

Aid for trade mired in grey zone
Dhaka gets higher assistance, but far below commitment

Asjadul Kibria

As a least developed country (LDC), Bangladesh received US$ 902.7 million as aid for trade (AFT) in 2013, which was 4.15 per cent higher than the amount disbursed in 2012.

The disbursed amount is, however, significantly lower compared to commitment made by the donors. The donors committed $ 1062 million and $ 1690 million in 2012 and 2013 respectively as AFT.

These data were revealed in a report titled ‘Aid for Trade at a glance 2015: Reducing trade costs for inclusive, sustainable growth.’

World Trade Organisation (WTO), in association with Organisation for Economic Cooperation and Development (OECD), prepared and published the report this month (July).

The report also shows that in 2013, India got the highest amount of commitment of AFT. Donors have committed some $ 5165 million as AFT to India followed by $ 3626 million to Vietnam.

The commitment for Bangladesh stood at $ 1690 million which was the sixth highest commitment. Turkey, Afghanistan and Egypt got higher commitment than that of Bangladesh.

In actual disbursement, Vietnam received highest amount worth $ 2621.1 million in 2013 as AFT. The country is followed by India, Turkey, Egypt, Morocco, Afghanistan, Kenya, Tanzania and Bangladesh.

Statistics presented in the WTO-OECD report also shows that globally total committed amount of AFT stood at $ 55.37 billion in 2013 while disbursed amount stood at $ 41.6 billion.

At the same time global commitment of the total Official Development Assistance (ODA) stood at $ 188.78 billion while actual disbursed amount stood at $ 167.37 billion.

Thus global commitment of AFT was 29.3 per cent of global committed ODA. On the other hand, share of global disbursement of AFT was 24.9 per cent of the total ODA disbursed.

Experts, however, expressed their disappointment on commitment and disbursement of AFT to LDCs including Bangladesh.

They are also of the opinion that in many cases, committed or disbursed aid for other purposes was somehow linked with trade-related activities and labelled as AFT.

“There is a grey area in the whole process of the aid for trade,” said executive director of the Centre for Policy Dialogue (CPD) Prof Mustafizur Rahman. “Some donors try to convert their existing aid into trade-related aid. The scope of the AFT is also to some extent non-transparent.”

The economist also said not all the aid, received by Bangladesh and other LDCs as aid for trade, was actually meant for that.

Echoing the same tone, a former member of the Bangladesh Tariff Commission, said: “Trade facilitation is a clear example of this dilution although it is clearly a different agenda.”

He explained that there was a special trust fund for supporting poor countries through technical assistance in trade facilitation and so including trade facilitation in the AFT was not right.

The WTO-OECD report revealed that three top AFT priorities are: export diversification, trade facilitation and transport infrastructure.

In 2013, Bangladesh received $ 8.77 million for trade facilitation, according to the report.

Again the share of AFT stood at 26 per cent of gross ODA in Bangladesh at the same period.

Decision on introducing the AFT was taken in the Hong Kong Ministerial Meeting of the WTO in 2005 to help developing countries, especially LDCs, to address supply-side bottlenecks and boost their capacity to take advantage of expanded trade opportunities.

There are four subsets of AFT. These are: Trade policy and regulations, economic infrastructure, building productive capacity and trade-related adjustment.

The report also underscored role of private sector to utilise aid for trade. “The success rate of programmes with the involvement of the private sector tends to be high,” it added citing an example of Bangladesh.

“In Bangladesh, the Dhaka Customs House Automation Project is a joint initiative of the Dhaka Chamber of Commerce and Industry and of DataSoft Management Services, which has brought together several public and private sector entities dealing with various trade-related services,” the report mentioned.

It also said that the implementation of the project may ensure doubling revenue within two years, reducing the cost of doing business by at least 70 per cent and lowering customs processing time by 80 per cent.

 

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