Foreign Trade, FDI, and Capital Flows Study
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Publication
Services and Manufacturing Linkages: An Empirical Analysis for Lao PDR
(World Bank, Washington, DC, 2016-02)This report seeks to shed light on the ways in which the services sector has contributed to Lao PDR’s competitiveness and integration into the global marketplace. It focuses on two complementary roles that the services sector plays: first, as an avenue for export diversification and growth and, second,by providing inputs into other productive sectors of the economy, such as the manufacturing sector. As economies grow, the importance of the services sector generally increases, but its role as an enabler of other sectors of the economy in moving up the value chain is frequently overlooked. However, the services sector is critical in raising competitiveness of these other sectors to boost growth and create better quality jobs. The main policy recommendations that emerge from this report are aimed at increasing competition in the services sector, reducing distortive regulations, and opening up the sector to foreign participation, building up skills, both at the individual and at the firm level, and investing in hard and soft infrastructure to promote the development of the sector. -
Publication
The Impact of the Syrian Conflict on Lebanese Trade
(World Bank, Washington, DC, 2015-04)The devastating civil war in Syria is arguably one of the major civil conflicts in recent times. The conflict started with protests in March 2011 and soon after escalated to a violent internal war with no end in sight to this date. The conflict has by the end of 2014 caused well in excess of 150,000 fatalities, and 6 million internally displaced people (UN), and led 3 million refugees to move out of the country (UNHCR). Beyond the human tragedy, the conflict has disrupted the functioning of the economy in many ways. It has destroyed infrastructure, prevented children from going to school, closed factories and deterred investments and trade. The economic effects of the war extend beyond the country’s borders affecting also the neighboring countries. In particular trade is one of the main channels through which the effects of the crisis are transmitted to neighboring countries. For example, the demand for goods and services in Syria is likely to have fallen thus affecting the many exporters to Syria in neighboring countries. Moreover, to the extent that Syria has become harder to cross, the war may have made trade through Syria more difficult. At the same time producers in neighboring countries may have replaced Syrian producers in Syria and in other markets as their productive assets in Syria were destroyed. This report examines the effects of the Syrian war on the Lebanese economy via one of the most important channels through which the economic impact of the war occurs, i.e. the trade channel. In doing so, it partly updates and extends the previous economic assessment of World Bank (2013b) carried out last year. Focusing specifically on trade allows us to examine in more depth the trade effects than that report was able to do. Indeed, we go beyond the effects on aggregate and sectoral imports and exports to also examine the effects on exports at firms’ level, comparing the effects in Lebanon with those in other neighboring countries, including Jordan, Turkey and Iraq. -
Publication
Algeria-Mali Trade: The Normality of Informality
(World Bank, Washington, DC, 2015-03-22)This paper estimates the volume of informal trade between Algeria and Mali and analyzes its determinants and mechanisms, using a multi-pronged methodology. First, the authors discuss how subsidy policies and the legal framework create incentives for informal trade across the Sahara. Second, the authors provide evidence of the importance of informal trade, drawing on satellite images and surveys with informal traders in Mali and Algeria. The authors estimate that the weekly turnover of informal trade fell from approximately United States (U.S.) 2 million dollars in 2011 to U.S. 0.74 million dollars in 2014, but continues to play a crucial role in the economies of northern Mali and southern Algeria. Profit margins of 20-30 percent on informal trade contribute to explaining the relative prosperity of northern Mali. The authors also show that official trade statistics are meaningless in this context, as they capture less than 3 percent of total trade. Finally, the authors provide qualitative evidence on informal trade actors and mechanisms for the most frequently traded products. -
Publication
Evaluation of the EU-Turkey Customs Union
(Washington, DC, 2014-03-28)The implementation of the customs union (CU) in 1995 was the culmination of thirty-two years of association between the European Union (EU) and Turkey and was expected by Turkey to be the first step in the EU accession process. The CU has been a major instrument of integration for the Turkish economy into both European and global markets. The CU covers trade in just industrial goods (including the industrial components of processed agricultural products) and excludes primary agriculture, services, and public procurement but has proved to be a powerful force of regulatory convergence. The evaluation s objectives are to assess the impacts of the CU and to make forward looking, solution-orientated recommendations for its improvement with an emphasis on the economics behind the various trade irritants and options for dealing with problems related to asymmetries as well as examining the case for widening. The evaluation provides quantitative and qualitative estimates of the effects of the CU and demonstrates that the trade agreement has been highly beneficial for both Turkey and the EU. The evaluation consists of two main parts: (i) an evaluation of the impact of the CU on trade, foreign direct investment (FDI), and more broadly, welfare in Turkey through the effects it has had on trade policy, eliminating the need for rules of origin (ROOs) on preferential trade with the EU and implementing the acquis in areas covered by the CU; and (ii) a review of current limitations of the existing trade arrangement, potential gains in dealing with these as well as modalities for reform. The evaluation has six sections. Section one gives introduction. Section two reviews trade and investment outcomes between the EU and Turkey. Section three examines the effects the CU has had on the trade policy environment for Turkey. Section four provides an overview of EU-Turkey trade relations in terms of Turkey s harmonization with EU regulations and use of trade defense instruments. The fifth section examines the potential impacts of widening the trade arrangement to cover new areas in agriculture and services and makes proposals for the modalities that can be used to include these as part of an agreement including in the context of full accession. Section six presents conclusions and recommendations. -
Publication
Republic of Malawi Diagnostic Trade Integration Study Update : Reducing Trade Costs to Promote Competitiveness and Inclusive Growth
(Washington, DC, 2014-03-25)The diagnostic trade integration study (DTIS) update identifies the trade related constraints holding back Malawi from diversifying and deepening its production base, and increasing trade. The DTIS update identifies and quantifies specific trade costs that determine the availability and price of inputs and the ability of producers to get their products to regional and international markets. The report focuses on tariff policies, regulatory issues impacting on trade, trade facilitation and logistics, and policies affecting agricultural trade and trade in services. Recognizing that the (enhanced) integrated framework and the DTIS (including the 2003 DTIS for Malawi) have not been effective in addressing many of the broader issues requiring large-scale physical investments in most countries, this DTIS update focuses on specific trade related policy and regulatory issues within the mandate and policy space of the ministry of trade and the national implementation unit or similar implementation mechanisms. In this context, the report is structured as follows: chapter one gives introduction. Chapter two outlines the current macroeconomic position and the level of trade openness, summarizes the status of the business enabling environment. Chapter three describes Malawi's current trade policy with a detailed review of the existing tariff schedules. Chapter four addresses a range of the key regulatory issues that raise costs for all producers in Malawi. Chapter five looks in depth at how the trade and regulatory policies within the agricultural sector impact on competitiveness. Finally, chapter six addresses the important issues of trade in services through focusing on professional services such as engineering, accounting, and law. -
Publication
Estimating Trade Flows, Describing Trade Relationships, and Identifying Barriers to Cross-Border Trade Between Cameroon and Nigeria
(Washington, DC, 2013-05-07)Cameroon and Nigeria share a common border of nearly 1,700km and both countries have strong historical and cultural ties. However, the partnership between the two countries has had its difficult periods, most recently when the relationship turned hostile over the disputed Bakassi Peninsula, and economic linkages between the economies remain limited. Expanding trade between the two countries could play a critical role in accelerating economic development and regional integration by opening up new markets for producers, and allowing them to benefit from economies of scale. This will require reducing barriers to cross-border trade, allowing increased trade flows to reach the larger market, and permitting private sector producers to increase the scale of their activities. Removing barriers to trade between the two neighbors is likely to benefit particularly relatively remote areas of both countries. The study finds that regulatory and security barriers at the border and along the road remain key impediments to trade. The remainder of this report proceeds as follows. Section one describes drivers for cross border trade such as historical relations, economic factors, and the policy environment. The next section describes the reality of trade flows by describing existing trade corridors and estimating current trade flows. Section three describes how goods are actually traded across borders between the two countries, and how different actors are involved. Section four describes the barriers to trade, and identifies which barriers are most important. Section five describes the potential for increasing trade. Section six summarizes the findings and presents prioritized recommendations for policy reform. -
Publication
Reshaping Economic Geography of East Africa : From Regional to Global Integration (Vol. 1 of 2)
(Washington, DC, 2012-06)Five East African countries Burundi, Kenya, Rwanda, Tanzania, and Uganda have made solid progress on integrating regionally in the East African Community (EAC) since 1999. Such advances are crucial, as integration in East Africa has the potential for higher than usual benefits: Burundi, Rwanda, and Uganda are landlocked, with very high costs to their economies. Successful integration will transform the five countries into one coastal, regional economy, slashing such costs. Looking at the East African integration through the lens of economic geography helps to improve sequencing of the integration process and to develop new policies to complement ongoing efforts, maximizing their benefits. Reducing disparities in provision of social services will increase the chances of workers from the inland parts of the EAC to find jobs, especially as administrative obstacles to labor mobility are being removed under the Common Market Protocol. Implementing and deepening the current program of regional infrastructure improvements will ensure that consumers and producers throughout the region are better connected to each other and to global markets. Integration policies facilitating greater economic activity in the coastal areas will help the EAC take advantage of the global demand for manufactured goods and thus to promote employment. That will also generate substantial demand for services and agricultural goods produced inland, amplifying the benefits of the customs union. -
Publication
Reshaping Economic Geography of East Africa : From Regional to Global Integration, Volume 2. Technical Annexes
(Washington, DC, 2012-06)Five East African countries Burundi, Kenya, Rwanda, Tanzania, and Uganda have made solid progress on integrating regionally in the East African Community (EAC) since 1999. Such advances are crucial, as integration in East Africa has the potential for higher than usual benefits: Burundi, Rwanda, and Uganda are landlocked, with very high costs to their economies. Successful integration will transform the five countries into one coastal, regional economy, slashing such costs. Looking at the East African integration through the lens of economic geography helps to improve sequencing of the integration process and to develop new policies to complement ongoing efforts, maximizing their benefits. Reducing disparities in provision of social services will increase the chances of workers from the inland parts of the EAC to find jobs, especially as administrative obstacles to labor mobility are being removed under the Common Market Protocol. Implementing and deepening the current program of regional infrastructure improvements will ensure that consumers and producers throughout the region are better connected to each other and to global markets. Integration policies facilitating greater economic activity in the coastal areas will help the EAC take advantage of the global demand for manufactured goods and thus to promote employment. That will also generate substantial demand for services and agricultural goods produced inland, amplifying the benefits of the customs union. -
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
Baltic States and Poland Trade Logistics Review: Enhancing Trade Competitiveness by Improving Transport and Logistics
(Washington, DC, 2010-07)The Baltic States; Estonia, Latvia and Lithuania and Poland are situated along strategic trade corridors within Europe, constituting the EUs eastern border with Russia and other CIS countries. EU membership has triggered rapid economic growth for the Baltic States and Poland due to the removal of trade barriers and reduced transaction costs. A heavy influx of EU grants has targeted development and improvement of transport infrastructure, and this support will continue until 2015. The EU grants are largely used for development of international corridors, which play a key role in strengthening the competitiveness of these new member states. Since their accession to the EU in 2004, these countries enjoyed remarkable growth. While the countries underwent varying degrees of contractions in 2009, signs of recovery are showing albeit with considerable uncertainty in the future. Growth in Estonia, Latvia and Lithuania in recent years has been unsustainable and was driven by a disproportionate increase in the non-tradable sector (construction, financial intermediation, real estate). This has had negative implications for competitiveness. The global economic crisis in 2009 has ended Poland?s fast economic expansion over the recent years, but in contrast to its neighbors Poland has avoided a decline in economic activity. Over the medium term, growth in Poland is expected to accelerate steadily in line with an improving external environment. The Baltic States and Poland are relatively competitive in trade logistics and have initiated reforms to facilitate trade, compared to their eastern neighbors, particularly Russia. Despite the plunge in 2008, freight transport and logistics development in the region has potential to continue to grow in the medium-term as some signs of recovery have begun to appear. The current economic situation has triggered a significant overcapacity of transport and warehousing which is characterized by very low prices for these services. While Poland remains relatively stable, Estonia, Latvia, and Lithuania are exhibiting higher vulnerability to external shocks. The most critical bottlenecks of transport logistics in the Baltic States and Poland are found in the deteriorating condition of their transport infrastructure, particularly that of road networks, lessdeveloped intermodal connections, and inefficiency of custom processing at border crossing points. Deteriorating road condition in these countries is largely due to inadequate maintenance and a comprehensive asset management system, albeit improving. Intermodal connections that are often inefficient are partly attributed to institutional arrangement that lacks inter-agency collaboration at the level of policy development and public investment. Custom procedures are particularly cumbersome and inefficient at the borders to non-EU member states. Nevertheless, the Baltic States and Poland have relative strengths in efficiency of domestic transport/logistics, cost-efficiency of trucking industry, and price-competitive port operation. The report various recommendations for strategic policy priorities for the Baltic States and Poland to leverage their own strengths to respond to various opportunities and challenges.