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WTO AFT GLOBAL REVIEW Vishnu Bassant Deputy Director General Ministry of Finance and Economic Development Mauritius 19 November 2007, Geneva
Liberalisation is a catalyst for increased trade, investment and growth BUT Trade liberalization has not made much progress in Africa because of the fear of the unknown The associated economic and social costs of adjustment are high Costs are incurred immediately but benefits are reaped in the longer term To make these adjustments economically and politically feasible adequate support is required during the transition phase AFT must therefore be viewed as a vehicle for overall economic development with the aid component supporting an overall programme where trade liberalisation is at the core.
Opening a preference-dependent economy requires A change of mind sets to believe that freer trade really brings greater prosperity A comprehensive strategy harnessing trade as an engine of growth and development Embedding the national strategy in a regional context as a first step ( eg COMESA FTA , EPA negotiations as a stepping stone to an FTA with EU and with the US as a natural evolution of AGOA) Technical support of the IFIs and RDBs needed to help develop the strategy, estimate the costs and benefits and provide viable options to decision makers Endorsement of the strategy by development partners that will eventually provide part of the financial resources The strategy can be in National Development Plans, PRSPs or any document approved by Government
What the Mauritius AFT strategy aims at To unlock growth to attain the goals set, including MDGs, employment creation, poverty reduction, economic diversification etc by Opening the economy to the rest of the world Implementing wider economic reforms simultaneously to Maintain stable and predictable macro economic fundamentals Improve public sector efficiency and service levels Enhance industry global competitiveness and labour mobility Improve the business environment to attract investment and FDI Build productive capacity and diversify into new sectors to consolidate the resilience of the economy Protect the welfare of citizens likely to be affected through social safety nets and workfare programmes– EMPOWERMENT PROGRAMME Restructure sunset industries and support sunrise industries – ENTERPRISE PROGRAMME Develop Trade Related Infrastructure (Port, airport, roads)
Cost of the programme (Billion Euros) Total cost 4.0 Private sector/FDI 1.8 External partners 1.2 Government 0.5 Financing Gap 0.5
External financing of the programme SAM-Sugar Accompanying Measures
Donor alignment/harmonisation Bring their experience to support nationally owned programmes At the heart of AFT is TRTA/CB but it is not sufficient It is also necessary to finance TRiF and TRAM Focus existing ODA instruments to implement national and regional AFT strategies Avoid creating vertical silos by aligning their interventions on nationally owned strategies instead of focusing on their areas of interest Better coordinate amongst themselves to ensure coherence and reduce the administrative burden on recipient countries Agree on the architecture of KPIs that puts in place a framework for success Regular meetings with development partners needed to monitor implementation and take corrective measures
Conclusion Liberalisation requires a vision and an integrated plan since reform is required across sectors IFIs to help in analytical and advisory work to design policies and programmes countries can own and implement with confidence Development Partners to formally endorse the programme and align their intervention accordingly LDCs require AFT even more than MICs since they can only access IDA and ODA which are inadequate to fund such programmes. MICs can at the limit borrow from the market but to finance the economic and social costs this may not be viable Reforms are painful and, if not explained, may lead to social resistance, reversal of policies, a slow down in the pace of reforms or regime change Private sector involvement in infrastructure financing and management necessary