Foreign Trade, FDI, and Capital Flows Study
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Publication
Afghanistan Diagnostics Trade Integration Study
(Washington, DC, 2012-11)Trade enables countries to import ideas and technologies, realize comparative advantages and economies of scale, and foster competition and innovation, which in turn increases productivity and achieves higher sustainable employment and economic growth. Countries open to international trade tend to provide more opportunities to their people, and grow faster. Afghanistan could derive far more benefit from its international trade opportunities than it does at present. This Diagnostics Trade Integration Study (DTIS) report is intended to identify concrete policy actions in three areas of endeavor: lowering the transaction costs of trade, increasing Afghanistan's competitiveness in world markets, and providing an analytical foundation for Afghanistan's national trade strategy. The study examines how to do this, looking not only at trade performance and policy, but also at three sectors with great export potential: agriculture, gemstones and carpets, as well as the investment climate, customs as a driver of trade facilitation, and on promoting infrastructure services. All five chapters in this report provide a detailed and comprehensive analysis of trade issues intended to reduce the transaction costs of trade. Growth in Afghanistan has been strong and volatile because of its heavy reliance on agriculture. Now it faces a transition: prospects of a drawdown of international military forces and a decline in civilian aid by 2014. Security issues and political instability could undermine Afghanistan's Transition. Such threats could harm not only economic growth, but deterioration would repel private-sector investment. -
Publication
Consolidating and Accelerating Exports in Bangladesh : A Policy Agenda
(Washington, DC, 2012-06)For Bangladesh to become a middle-income country, growth in exports needs to accelerate exports of basic garments will continue to be important in the near future, but Bangladesh's competitive advantage in this area could erode over time. As such, looking ahead, accelerating exports will require not only consolidating existing strengths in basic garments but diversifying gradually into other products such as higher value garment and service exports. Forward-looking policymaking requires that measures be put in place now to encourage such diversification in future, while building on existing strengths. How can Bangladesh make this happen? Available research shows that the infrastructure deficit, especially energy, as well as lack of appropriate skills and the weak regulatory environment continue to hinder exports from Bangladesh. These weaknesses still persist. To complement work done so far, this report focuses on the role of trade logistics, skills and compliance with labor standards in consolidating existing strengths and moving to higher value products, using the garment sector as a lens. In addition, given the growing importance of services in world trade, the report also examines prospects for diversifying into a 'reach sector' such as Information technology (IT)-enabled services that can provide high-quality jobs. This report supports the knowledge agenda of the World Bank, which goes hand in hand with its lending role. Indeed, such knowledge is critical for better and more effective lending approaches, and for supporting the Bank's policy dialogue with Government. The report forms part of the growth and trade work program being undertaken by Bangladesh's poverty reduction and economic management team. -
Publication
The Service Revolution in South Asia
(Washington, DC, 2009-06)The story of Hyderabad, the capital of the Indian state Andhra Pradesh, is truly inspiring for late-comers to development. Within two decades, Andhra Pradesh has been catapulted straight from a poor and largely agricultural economy into a major service center. It has transformed itself from a lagging into a leading region. Fuelled by an increase in service exports of 45 times between 1998 and 2008, the number of information technology companies in Hyderabad increased eight times, and employment increased 20 times. Service-led growth has mushroomed in other parts of India and South Asia as well. Indeed, growth in the services sector has enabled South Asia to grow almost as fast as East Asia in this century, with growth of just under seven percent annually between 2000 and 2007. Growth rates in South Asia and East Asia have converged. The two fastest growing regions in the world, however, have very different growth patterns. While East Asia is a story of growth led by manufacturing, South Asia has thrived on service-led growth. The promise of the services revolution is that countries do not need to wait to get started with rapid development. There is a new boat that development late-comers can take. The globalization of service exports provides alternative opportunities for developing countries to find niches, beyond manufacturing, where they can specialize, scale up and achieve explosive growth, just like the industrializes. The core of the argument is that as the number of goods and services produced and traded across the world expand with globalization, the possibilities for all countries to develop based on their comparative advantage expand. That comparative advantage can just as easily be in services as in manufacturing or indeed agriculture. -
Publication
Bangladesh : Improving Competitiveness through Trade Policy Reforms
(Washington, DC, 2007-05)In an increasingly competitive, globalizing world, Bangladesh needs to rationalize its tariff structure and lower overall protection so that its exports can compete in world markets. At the same time, the government needs to protect revenues in a fiscally-constrained year. This note proposes a package of tariff reforms that simplifies the rate structure, lowers average nominal protection, improves economic efficiency and is virtually revenue neutral. Adverse revenue impact, if there are any, could be addressed by strengthening the large taxpayers units, reducing the numerous exemptions in value-added tax (VAT), and expanding the tax base. -
Publication
Bangladesh : Growth and Export Competitiveness
(Washington, DC, 2005-05)Bangladesh's growth over the past two decades or more, in terms of developing-country standards, has been notable. Such record of progress is one guide to the country's potential to grow, and to score well in world markets. To this end, i.e., to make the most of its export opportunities on a changing international playing field, Bangladesh needs to follow a strategic game plan, invest in infrastructure, technology and skills, streamline policies, and improve quality and safety standards. This report describes actions that can untie the hands of the country's exporters, and put solid progress within their grasp. The concrete recommendations made in the report for improving export competitiveness, could serve as a critical basis for making the needed revisions in the two pivotal trade policy instruments of the Government --Import Policy Order 2003-06, and Export Policy Order 2003-06 -- in light of the current global trading environment. The report looks at the sources of competitive disadvantage, and stipulates macroeconomic stability is, and must remain the strategic foundation for all of Bangladesh's competitive prospects. On economic governance, the results of this study's breakthrough use of a powerful analytical tool -- integrated value-chain analyses (IVCA) -- pinpoint the price exacted by obstacles to export growth, confirming entrepreneurs' point of view on corruption, namely bribes, duty exemptions on imports, and in addition, the rising costs of bribes. Also addressed is infrastructure, stating that to improve the climate for both domestic and foreign investors, policymakers must first acknowledge the damage that flawed governance - corruption, burdensome regulation, and breakdowns in law and order -- is doing to the country's growth in general, and its export performance in particular. Beyond this recognition, the authorities need to understand the price the country is paying for severe infrastructure bottlenecks in the delivery of power, gas, and telecommunications to all enterprises and - especially for exporters -- in the malfunctioning of the country's land and sea ports. Within each of the export areas examined under the study, industry-specific barriers to competitive success loom large. Specifically, recommendations suggest that to bring high payoffs in export competitiveness, reform should be a priority in Customs as well as the Duty Exemption and Drawback Office (DEDO); implementation of a strong program to match infrastructure services to the needs of a growing, outward-looking economy, namely, to remedy the transportation infrastructure, and trade logistics (Ports, Highways, and railways, etc.). -
Publication
Trade Policies in South Asia : An Overview, Volume 2. An Overview
(Washington, DC, 2004-09-07)During the last decade, South Asia's five largest countries - India, Pakistan, Sri Lanka, Bangladesh and Nepal - have been implementing trade policy reforms, gradually moving their economies away from protectionism toward greater trade openness and global economic integration. In the late 1980s and early 1990s, the four mainland countries began to follow the liberalizing course on which Sri Lanka had embarked in the late 1970s. Each country faces differing opportunities to exploit and resistances to overcome. Because many of their circumstances and choices are similar, however, this paper seeks to assess their situations collectively as well as separately. Many of its findings are broadly applicable. So, with allowances for historic, economic and social differences, are many of its policy recommendations. The bulk of the report describes key aspects of the current trade regimes in the Jive largest South Asian states and the policies and practices that have produced the systems now in place. It principally focuses on traditional trade policies which affect imports and exports i.e. tariffs, non-tariff barriers, anti-dumping, export policies, and to a limited extent aspects of sanitary and technical regulations that affect trade. All of these are still major issues of concern and debate in South Asia. The report does not attempt to describe where the South Asian countries stand on newer trade policy issues which are prominent in World Trade Organization negotiations, such as trade in services, intellectual property, government procurement and Customs valuation. The report also does not attempt to place the South Asian countries' trade policies in the context of their trade and other aspects of their economic performance. Its purpose is rather to provide up-to-date information about, and interpretations of, the current trade policies it covers, with the idea that this should provide starting points for further applied economic research on useful and relevant topics, as well as points of reference and factual information for discussion and debate. Nevertheless, the report does assess, on theoretical and empirical grounds, the appropriateness of the policies described. Conclusions and suggestions for change are generally summarized at the end of each stocktaking section. This summary, in condensing the work of stocktaking, highlights the key issues that all or most of the countries have addressed and need to pursue further. To reinforce the operational nature of those findings, the summary deals with the recommendations next, as an immediate continuation of the central policy questions. It then reviews trade policies in three key sectors- agriculture, fertilizers, and textiles and clothing. -
Publication
Trade Policies in South Asia : An Overview, Volume 1. Operational Summary
(Washington, DC, 2004-09-07)During the last decade, South Asia's five largest countries - India, Pakistan, Sri Lanka, Bangladesh and Nepal - have been implementing trade policy reforms, gradually moving their economies away from protectionism toward greater trade openness and global economic integration. In the late 1980s and early 1990s, the four mainland countries began to follow the liberalizing course on which Sri Lanka had embarked in the late 1970s. Each country faces differing opportunities to exploit and resistances to overcome. Because many of their circumstances and choices are similar, however, this paper seeks to assess their situations collectively as well as separately. Many of its findings are broadly applicable. So, with allowances for historic, economic and social differences, are many of its policy recommendations. The bulk of the report describes key aspects of the current trade regimes in the Jive largest South Asian states and the policies and practices that have produced the systems now in place. It principally focuses on traditional trade policies which affect imports and exports i.e. tariffs, non-tariff barriers, anti-dumping, export policies, and to a limited extent aspects of sanitary and technical regulations that affect trade. All of these are still major issues of concern and debate in South Asia. The report does not attempt to describe where the South Asian countries stand on newer trade policy issues which are prominent in World Trade Organization negotiations, such as trade in services, intellectual property, government procurement and Customs valuation. The report also does not attempt to place the South Asian countries' trade policies in the context of their trade and other aspects of their economic performance. Its purpose is rather to provide up-to-date information about, and interpretations of, the current trade policies it covers, with the idea that this should provide starting points for further applied economic research on useful and relevant topics, as well as points of reference and factual information for discussion and debate. Nevertheless, the report does assess, on theoretical and empirical grounds, the appropriateness of the policies described. Conclusions and suggestions for change are generally summarized at the end of each stocktaking section. This summary, in condensing the work of stocktaking, highlights the key issues that all or most of the countries have addressed and need to pursue further. To reinforce the operational nature of those findings, the summary deals with the recommendations next, as an immediate continuation of the central policy questions. It then reviews trade policies in three key sectors- agriculture, fertilizers, and textiles and clothing. -
Publication
Trade Policies in South Asia : An Overview, Volume 3. Some Key Sectors
(Washington, DC, 2004-09-07)During the last decade, South Asia's five largest countries - India, Pakistan, Sri Lanka, Bangladesh and Nepal - have been implementing trade policy reforms, gradually moving their economies away from protectionism toward greater trade openness and global economic integration. In the late 1980s and early 1990s, the four mainland countries began to follow the liberalizing course on which Sri Lanka had embarked in the late 1970s. Each country faces differing opportunities to exploit and resistances to overcome. Because many of their circumstances and choices are similar, however, this paper seeks to assess their situations collectively as well as separately. Many of its findings are broadly applicable. So, with allowances for historic, economic and social differences, are many of its policy recommendations. The bulk of the report describes key aspects of the current trade regimes in the Jive largest South Asian states and the policies and practices that have produced the systems now in place. It principally focuses on traditional trade policies which affect imports and exports i.e. tariffs, non-tariff barriers, anti-dumping, export policies, and to a limited extent aspects of sanitary and technical regulations that affect trade. All of these are still major issues of concern and debate in South Asia. The report does not attempt to describe where the South Asian countries stand on newer trade policy issues which are prominent in World Trade Organization negotiations, such as trade in services, intellectual property, government procurement and Customs valuation. The report also does not attempt to place the South Asian countries' trade policies in the context of their trade and other aspects of their economic performance. Its purpose is rather to provide up-to-date information about, and interpretations of, the current trade policies it covers, with the idea that this should provide starting points for further applied economic research on useful and relevant topics, as well as points of reference and factual information for discussion and debate. Nevertheless, the report does assess, on theoretical and empirical grounds, the appropriateness of the policies described. Conclusions and suggestions for change are generally summarized at the end of each stocktaking section. This summary, in condensing the work of stocktaking, highlights the key issues that all or most of the countries have addressed and need to pursue further. To reinforce the operational nature of those findings, the summary deals with the recommendations next, as an immediate continuation of the central policy questions. It then reviews trade policies in three key sectors- agriculture, fertilizers, and textiles and clothing. -
Publication
Trade and Regional Cooperation between Afghanistan and its Neighbors
(Washington, DC, 2004-02-18)The report envisages significant, medium-term benefits for Afghanistan and its neighbors from trade policy liberalization, from country-by-country reforms in trade logistics, and, especially within Afghanistan, from road rehabilitation and building a commercially-oriented enabling environment for trade, private investment and entrepreneurial development. The growth of regional and transit trade will boost private investment and growth in the short-to-medium term and help to realize the long-term vision for Afghanistan as a country moving toward middle-income status, based on sustainable development of its resources. Recommendations focused on Afghanistan include calls for priority action, with broad support from the international community, aimed at: improving security throughout the country both for persons and property; completing the main road rehabilitation, extending telephone and other telecommunication systems and ensuring that after reconstruction maintenance is undertaken to sustain roads in good condition; streamlining of border crossing procedures; reestablishing formal financial and insurance systems including development of a effective clearance and settlement system; implementing a national customs and transit system; eliminating restrictions on direct transit; removing internal checking-posts and en-route inspections; and increasing domestic trucking competition. To foster a strong, enabling environment for domestic and foreign trade, the study also advocates a set of immediate and short-term measures, including implementing a functioning payments system for international and domestic transfers though the formal banking system; making transit bonds and transport insurance available to shippers; redefining the role of the Afghan Ministry of Commerce to emphasize its mandate in trade and investment promotion relative to it role in trade regulation; supporting a larger role, distinct from that of government, for a private chamber of commerce to assist in export promotion; designing and implementing major capacity-building programs to develop skills and professionalism in banking, insurance and customs; and encouraging truckers and freight forwarders to establish national private industry organizations and to affiliate with international organizations. -
Publication
Nepal : Trade and Competitiveness Study
(Washington, DC, 2003-10-22)This study analyzes Nepal's trade policies and performance, identifies constraints to increasing trade competitiveness, and recommends policy changes and technical assistance to improve trade performance. The study is timely, as Nepal's interim Poverty Reduction Strategy Paper of 2003 assigns a key role to trade and exports as drivers of broad-based economic growth-one of the four main pillars of its strategy. Key conclusions of this report suggest Nepal's trade policies are generally sound, and the country is competitive in a variety of products. However, these positive factors are tempered by constraints that make Nepal's productivity among the lowest in the region, create an inhospitable business climate, and discourage foreign direct investment-a key conduit for export-market access and technology transfer. The most critical constraints are: 1) delays in customs and transshipment to India's Kolkata port; 2) high infrastructure costs, especially transport and power; 3) a rigid, formal labor market; and, 4) weak policy and institutions in the areas of taxation, investment and trade promotion. But Nepal's prudent macroeconomic stance throughout most of the 1990s, helped increase its competitiveness. Low levels of domestic borrowing by the public sector, the nominal anchor of an exchange-rate peg with India, and a large jump in remittances by expatriate Nepalese labor have enabled Nepal to maintain macroeconomic stability. Notwithstanding, and despite liberalization and growth of trade in the 1990s, the study shows that competitiveness of Nepal's economy is low, as measured by firm-level surveys in manufacturing, farm yields, and aggregate productivity estimates. Labor productivity in manufacturing and agriculture are among the lowest in the region, while manufacturing unit labor costs are among the highest, even though Nepal has comparative advantage in a range of agriculture and manufacturing products. This study shows how three key factors contribute to low price competitiveness and productivity in Nepal's economy: a) inadequate mechanisms and incentives for firms to acquire new technology, b) weak infrastructure, and, c) an unfavorable business climate. Conclusions suggest major impacts of trade on the poor can come from switching to high value cash crops from subsistence agriculture. A key constraint to that is inadequate transportation infrastructure. Growth of transport can lead to welfare effects for the poor by enabling commercial crops and use more fertilizers by farmers. Transportation also has direct welcome effects through creation of employment and income-generating opportunities. To this end, transition from traditional subsistence agriculture toward higher-margin, tradable crops (such as spices, tea, and vegetables) can be promoted by increasing access to year-round irrigation, inputs, technology, and, most importantly, markets.