Building Capacity in Central Asia to Utilize Trade Policy for Human Development

1. Building Capacity in Central Asia to Utilize Trade Policy for Human Development Trade and Human Development by Ameir Mbonde, Consultant Almaty, Kazakhstan October 2007

2. Business Environment and Institutional Framework for Trade and Investment Outline: • Business Environment and Investment Policy • Investment • Institutional Framework for Mainstreaming Trade • Trade Facilitation and Standards • Sectoral studies

3. Business Environment and Investment Policy • The objective is to identify gaps in policy as well as articulate trade, investment and technical assistance needs. • This assessment will help the landlocked Central Asian countries build the supply-side capacity and trade-related infrastructure needed to expand trade and benefit from a liberal global trading environment as defined in WTO Agreements. • Areas to be assessed include related ‘red tape’ costs, access to and cost of pre-shipment finance and working capital, as well as barriers to investment (regulations, negative lists, equity restrictions and nationality requirements, role of state-owned enterprises, including status of privatisation programs, and transfers from the budget). • Emerging priorities to be supported by development partners

4. Business Environment and Investment Policy • Conduct a benchmarking exercise to identify challenges and constraints, comparing your country both in terms of policy reforms and performance (economic, social) vis-à-vis other landlocked developing countries in the region and other parts of the world. • Analyse problems and recommend corrective measures • Examples of comparative indicators from South Pacific countries

5. Ease of doing business Looks at the ease of doing business in 10 areas: • Starting a business • Dealing with licences • Employing workers • Registering property • Getting credit • Protecting investors • Paying taxes • Trading across borders • Enforcing contracts • Closing a business

6. COMPARATIVE INDICATORS

7. COMPARATIVE INDICATORS

8. COMPETITIVENESS INDICATORS FOR SELECTED COUNTRIES

9. Business Environment and Investment Policy General issues: • Gather information and conduct analysis. • Analyse and examine the trade potential of the relevant sector. Focus will be on the human development potential and poverty reduction of trade in country, e.g., emphasis on labour-intensive sectors and areas where SMEs can best thrive. • Up to 10 concrete, executable recommendations based on the analysis in the study, e.g., policy reforms needed, technical assistance needed to meet capacity gaps. • Provide an assessment of the priority and sequencing to be given to each of the recommendations. Identify linkages and sequencing priorities between the sector and other sectors. • Indicate areas where existing policy is flawed or where there is an inappropriate use of time and effort. Identify key policy, regulatory and institutional constraints. • Obtain background information on existing businesses from documents (bibliography of studies and key policy documents) and interviews

10. Business Environment and Investment Policy Specific issues: • Emphasis will be placed on the adequacy of policies (both macro and microeconomic, e.g. transport or port monopolies, not only their infrastructure) and the business environment (property rights, rule of law). • There will be an analysis of investment trends and the investment climate, including the role of the country’s investment promotion agency. • Other specific issues, e.g., competition policy, utilities and telecommunications, including recommendations to improve performance and delivery, land ownership • The country’s WTO commitments • The suitability or otherwise of business incentives, e.g., an export-processing zone, duty drawback schemes. • Other issues to be defined

11. Investment Policy Outline of investment policy review: • FDI trends, say something about how FDI has made a difference, e.g. promoted diversification, movement into higher value added sectors, international competitiveness • Investment policy framework, i.e., reforms favourable to a more attractive investment environment, best practice (openness to FDI, transparency of policy) • Strategic perspective of the country under review, i.e. its long-term forward looking strategy, an assessment of how it is achieving its goals and objectives and what it further needs to do in order to achieve them • FDI potential in high growth sectors identified by the country as well as other sectors identified by the reviewer that have high potential • Recommendations on improving the contribution of FDI in the country

12. Investment Policy Investment Trends, 2002–2006 (in millions of US Dollars)

13. Institutional Framework for Mainstreaming Trade • Purpose is to integrate trade in the national development strategy • Mainstream trade at three levels: • Policy (e.g., Poverty Reduction Strategy Paper, sectoral policies) • Institutions (e.g., Aid-for-Trade national focal points, government stakeholders, academia, think tanks, business associations, trade unions, standard and quality control agencies, investment promotion agencies, export promotion boards) • Government-donor dialogue (e.g., Consultative Group and Round Table meetings) • Systematically promote initiatives (policy coordination, legislation, business associations, NGOs, think tanks) for government and civil society that place trade at the top of the national agenda • Promote broad-based consultations between the private sector, NGOs and relevant government agencies to formulate trade strategies, action plans and project proposals using diagnostic tools such as SWOT and value-chain analysis to identify needs • Create a standing committee to monitor and evaluate implementation of action plans (see example of Vanuatu’s proposed revised National Trade Facilitation Committee) • Develop human resources capacity (trade policy analysis and development, capacity to negotiate, interpret and implement trade agreements)

14. Institutional Framework for Mainstreaming Trade Revised National Trade Facilitation Committee

15. Institutional Framework for Mainstreaming Trade • Discuss national trade priorities with relevant stakeholders, including line ministries and government departments, relevant civil society organisations such as chambers of commerce, trade associations • Obtain the most recent data • Assess the capacity of the relevant government Ministries to mainstream trade. These include at least the Ministries of Trade, Industry and Tourism; Finance and Economic Management; Foreign Affairs; Agriculture; Lands, Water and Energy, Geology and Mines. • Identify opportunities and constraints, be they human resources, organizational and/or financial. This will necessitate analysis of government spending on each Ministry, Department and activity. • Assess where any Departments or Ministries may be duplicating work, and the possibilities for merging responsibilities. • Look at the linkages between Ministries, and ways in which inter-departmental communication can be improved.

16. Trade Facilitation • What is trade facilitation? Creating an environment that is conducive to efficient trade and reduced transaction costs, including transport and transit transport costs. • Trade facilitation aims to achieve efficiencies in • Physical movement of goods (transport and transit) • Import and export procedures (customs, border crossing) • Payments and insurance to facilitate cross-border trade (export and import financing)

17. Trade Facilitation • Simplification and harmonisation of customs and border procedures • Improve border control capacity (infrastructure, computerisation) • ASYCUDA (Automated System for Customs Data) • ACIS (Advance Cargo Information System)

18. Trade Facilitation • Discuss priorities of the trade needs assessment with relevant stakeholders, including the relevant Ministry, Ministry of Trade and Industry, and relevant members of the National Steering Committee or relevant coordinating body • Obtain the most recent data • Interview and provide background information on businesses in the relevant sector • Point out important policy, regulatory and institutional constraints; state the policy reforms needed

19. Trade Facilitation Specific issues: • Sanitary and phytosanitary measures, focusing particularly on export requirements • Staple goods and other export commodities • Transportation (multimodal transport networks, i.e., shipping, road, rail, air, transit corridors, etc.) • Storage (warehousing, cold storage) • Wharf fees, port charges • Tariff rates, as they apply to the macroeconomic picture, tourism and investment • The operation of the department of customs • The operation of the quarantine and inspection services • E-commerce • Identify priorities and areas needing technical/donor assistance

20. Trade Facilitation • Benefits of trade facilitation • Reduced costs • Improved services • Increase in trade volume • Increase in tax revenue • Complexity of procedures reduced • Employment • Increase in incomes for the poor

21. Trade Facilitation • The benefits of trade facilitation for landlocked developing countries (LLDCs): Kazakhstan, Kyrgyztan and Uzbekistan • Overcome landlockedness through • Efficient customs and border controls • Multimodal transport networks, transit corridors, inland waterways • Regional cooperation among LLDCs and transit developing countries

22. Standards • Exporters of agricultural and industrial products face barriers to trade in the form of technical regulations, and sanitary and phytosanitary (SPS) standards. • Technical regulations refer to product standards for industrial goods. • Sanitary standards refer to food safety and diseases, while phytosanitary standards cover plant-borne pests and diseases.

23. Standards • WTO has introduced two agreements to facilitate trade through international product standards • Agreement on Technical Barriers to Trade (TBT) • Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) • WTO Agreements promote uniform standards and predictability in international trade; counter the abuse of standards by importing countries to restrict trade • A successful export strategy requires goods that meet internationally recognised standards for agricultural and industrial products

24. Source: ITC

25. Standards • The standard and quality control process in-country includes certification and quality assurance procedures for product safety and hygiene • For example, the SPS architecture includes • Animal health • Plant health • SPS certification • Quality assurance and standards • Food safety

26. Standards • There are over 50 organisations that develop and promote international standards for use in international trade • Benefits of membership • Countries can participate in determining standards by becoming members • Receive technical assistance • However, some developing countries have not been able to benefit fully from membership

27. Standards International Standard-Setting Organisations Source: ITC, Influencing and Meeting International Standards, 2004.

28. Sectoral Studies • Identify sectors with trade potential and potential for human development, e.g.: • Agriculture • Fisheries • Tourism • Industry

29. Sectoral Studies • Discuss priorities for the study with relevant stakeholders, including the relevant Ministry and other government departments. • Obtain the most recent data on the sector and related sectors without duplicating previous work • Interview and provide background information on existing businesses in the relevant sector • Point out key policy, regulatory and institutional constraints, contribution of the sector to the economy

30. Agriculture Specific sectoral issues (agriculture, livestock, forestry): • Crops and other staples with export potential • Livestock • Forestry • Prioritise between these areas, and within them; make an assessment of existing initiatives in the sectors; analyse the potential of each area; and outline possible future areas of donor assistance.

31. Fisheries Specific sectoral issues: • The sustainability of the live fish trade • Fishing revenues from resource-rental • The potential for deep-bottom fishing and artisanal/ coastal fishing • The economic impact of small-scale fishing on local communities • The advisability of onshore fishing facilities • Fisheries sustainability • The potential for conflict with other sectors, such as tourism • The impact of trade agreements such as the EU EPA on the fishing industry • Outline concrete policy priorities for the fishing sector, with a focus on human development and sustainability.

32. Tourism Specific sectoral issues: • An assessment of the capacity of the Department of Tourism and other tourism promotion agencies • An overview of the tourism sector • An assessment of the size, growth, and characteristics of the sector • An assessment of its economic potential • A look at ways in which the yield per tourist can be improved, including an assessment of ways to improve linkages between the tourism sector and other areas of the economy. • A look at the impact and outlook for tourism in key tourist locations • The sustainability of tourism and its cultural impact • Some ideas for future development of the tourism sector, including training.

33. Industry • Energy • Mining • Food processing • Construction materials • Textiles • Others? • Prioritise between these areas, and within them; make an assessment of existing initiatives in the sectors; analyse the potential of each area; and outline possible future areas of donor assistance.

34. Industry Specific sectoral issues: • An assessment of the capacity of the Department of Industry and other related agencies • An overview of the industrial sector • An assessment of the size, growth, and characteristics of the sector • An assessment of its economic potential • A look at ways in which productivity can be improved, including an assessment of ways to improve linkages between an industrial sub-sector and other areas of the economy. • A look at the impact and outlook for industry in its local setting • Sustainability of the industry (energy, mining) • Potential for conflict regarding sharing of water resources, energy • Adequacy of skilled labour, infrastructure • Outline concrete policy priorities, with a focus on human development and sustainability. • Some ideas for future development of the sector, including training.