Foreign Trade, FDI, and Capital Flows Study

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  • Publication
    Post Covid-19 - Building a Resilient and More Sustainable Recovery in El Salvador, Guatemala, and Honduras: Central America Competitiveness Report
    (Washington, DC : World Bank, 2022) World Bank
    The Coronavirus (Covid-19) pandemic has had widespread negative effects in developing countries around the world, generating an unprecedented shock. Latin America and the Caribbean (LAC) was a particularly affected region, recording a significant contraction in regional GDP and international trade in 2020. This report focuses on the impact of Covid-19 and recovery in El Salvador, Guatemala and Honduras. These three Central American countries (CA3), albeit unique in their history and characteristics, share many similarities in their economic context and challenges for achieving sustained growth. The region includes one of the poorest countries in the Western Hemisphere, with low economic growth rates relative to other Latin American countries.
  • Publication
    CEMAC: Deepening Regional Integration to Advance Growth and Prosperity
    (World Bank, Washington, DC, 2018-06-29) World Bank
    The Central African Economic and Monetary Community (CEMAC), which consists of Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea and Gabon, is one of the oldest regional groupings in Africa. The main objectives for achieving this are: (i) the creation of a fully functional and effective customs union, (ii) the establishment of a robust system of macroeconomic surveillance, and (iii) the harmonization of sectoral policies and legal frameworks that will create a common market for goods, capital, and services.Despite this ambitious vision, regional integration in the CEMAC zone remains shallow.The oil price shock of 2014-15 severely affected the six CEMAC economies and promoted re-commitment to deepening regional integration.At the regional level, the PREF also aims to: (i) improve the coordination of public financial management (PFM) and fiscal policy; (ii) accelerate regional integration through improvements to the regional economic plan; (iii) improve the business climate; (iv) increase economic diversification; (v) enhance monetary policy transmission mechanisms; and (vi) improve prudential banking supervision.CEMAC is right to focus on reforms to deepening regional integration as a driver of growth.The objective of this Regional Study on CEMAC is to support policy makers in CEMAC in efforts to strengthen regional integration to support economic growth and to reduce the need for economic adjustment. The Regional Study focuses mainly on what can be done at the regional level to support regional integration, macro-stability and long-term growth in the CEMAC area; as such, the Regional Study aims to complement country-specific policies and initiatives to support macro-stabilization, economic development and integration.
  • Publication
    Niger: Leveraging Export Diversification to Foster Growth
    (World Bank, Washington, DC, 2017-12-09) World Bank
    Niger’s Vision 2035 acknowledges the country has little choice but to create ‘a competitive anddiversified economy.’ Economic diversification is a cornerstone component of the Economic Orientation Document (EOD) 2016-19 and the PDES 2017-21. The EOD defines Niger’s economic diversification as moving exports away from natural resources and increasing the value-added component of exports as the foundation for its agro-based industrialization and employment creation policies. Hence, an exports diversification strategy is akin to the country’s economic diversification and, not surprisingly, the PDES contains several axes of policy interventions supporting it. However, Niger faces serious structural challenges to diversify into new productive activities. The country is landlocked, exporting costs are high and, given multiple infrastructure and logistics gaps, access to markets is difficult beyond neighboring regional markets. Rapid population growth and low human capital turns into a low skilled population. Volatile economic growth, reliant on a few commodity exports that closely follow the vagaries of weather and boom and busts of international prices, makes hardly obtained poverty gains vulnerable.
  • Publication
    Impact of the Libya Crisis on the Tunisian Economy
    (World Bank, Washington, DC, 2017-02-01) World Bank
    This study assesses the main spillover effects of the Libyan crisis on the Tunisian economy and estimates the crisis’ overall social welfare and fiscal impacts on Tunisia. The authors consider four main effects on Tunisia: (i) the increased presence of Libyans in Tunisia (both short- and long-term), and the return of Tunisian workers from Libya; (ii) the level and dynamics of illicit informal trade and informal cash flows between the two countries; (iii) the deterioration of civil security in the region and its effects on private investment and tourism; and (iv) the increase in the Tunisian government’s security spending. The chapter is organized as follows. Section one describes the objectives of the investigation and methodology. Section two estimates the number of Libyans living in Tunisia (temporary and permanent) and their demographic characteristics. Section three analyzes the living conditions of Libyan households in Tunisia and provides an estimate of their poverty level. Section four analyzes the shocks to Libyan households, and those households’ adaptations and resilience in response to shocks. Section five discusses the migratory decisions of Libyan households, in particular their preference to either return to Libya or remain permanently in Tunisia.
  • Publication
    Assessing the Impact of WTO Accession on Belarus: A Quantitative Evaluation
    (World Bank, Washington, DC, 2016-06) World Bank
    As a small and open economy, Belarus' development perspectives are intrinsically linked to its ability to produce and sell goods and services competitively in the global marketplace. While Belarus is an open economy, its trade links are concentrated both in terms of products and markets. Mineral goods –most importantly refined oil and potassium chloride - are the main export product accounting for more than 1/3 of total exports. Non mineral exports, including most importantly machinery, vehicles and transport equipment are mostly exported to Russia and other CIS markets, which account for 74 percent of non-mineral exports while the share of EU countries in Belarus non-mineral exports account for less than 15 percent. With Russia's WTO accession in 2012 competitive pressures on Belarus’ major market for non-mineral exports have further intensified. As Belarus is accelerating its own negotiations with the WTO, understanding the challenges and opportunities faced by the country's exporters is critical to putting in place an effective adaptation strategy that will enhance competitiveness and ensure Belarus can take full advantage of more open market access. The objective of this note is to analyze the economic impacts of Belarus' potential accession to the WTO. The note utilizes a modern computable general equilibrium model of the economy of Belarus to simulate impacts on the economy as a whole and on individual sectors.
  • Publication
    Moldova Trade Study: Note 4. The Performance of Free Economic Zones in Moldova
    (Washington, DC, 2016-03-03) World Bank
    In 1995, Moldova introduced free economic zone (FEZ) legislation with the aim of accelerating socioeconomic development by attracting domestic and foreign investment, promoting exports, and creating employment. Since then, seven free economic zones offering tax and customs benefits have been established. This note assesses the static and dynamic economic benefits of the program in Moldova. The free economic zones have been successful in attracting investment from both domestic and foreign sources. The economic zones have become true export platforms, generating a five-fold increase in exported industrial production from the zones between 2004 and 2014. On average, employment in the economic zones had a robust growth in the last seven years and almost doubled since 2008. Evidence suggests that the economic zones have significantly contributed to the diversification of exports and to the changing structure of the Moldovan economy. The effect of the economic zones on domestic firms appears to be modest, however, and unlikely to contribute to the technological upgrading and sophistication of the Moldovan economy. Free economic zones tend to attract industrial activities requiring intensive use of human resources for certain operations. The economic impact of Moldovan free economic zones is ambiguous. Moldovan legislation provides sound and transparent provisions, but the main issue is how this legislation is implemented. The majority of recommendations are focused on streamlining the implementation process, making it easier for companies to operate. Here are the main recommendations for improving the zones : (i) the importance of fiscal incentives should be downgraded by shifting to targeted services for businesses; (ii) reduce corruption and increase accountability by establishing one-stop-shop procedures and elements; (iii) establish a proper mechanism for monitoring and reporting with the zones residents and administrator; (iv) empower the regulator with additional relevant institutional capacities and capabilities; (v) the role of residents in appointing the administrator should be determinant; and (vi) establish a proper mechanism for compensating residents of the zones for restrictive treatment of the real assets.
  • Publication
    Costa Rica : Five Years after CAFTA-DR, Assessing Early Results for the Costa Rican Economy
    (Washington, DC, 2014-06-13) World Bank
    The Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR) has been fundamental in creating a stable framework for Costa Rica's trade with the United States. For Costa Rica, CAFTA-DR is more than a trade agreement. Besides eliminating tariffs and reducing non-tariff barriers between member countries, CAFTA-DR also introduced major changes to the legal framework of member countries, reducing barriers to services, promoting transparency, and ensuring a secure and predictable environment for investors. This report analyses how CAFTA-DR has impacted the Costa Rican economy in the five years after ratification, both on a macro level and in key specific sectors. The report shows that CAFTA-DR is yielding benefits to the Costa Rican economy, but it is too early to provide a complete account just after five years. The agreement has succeeded to further trade integration between Costa Rica, the US, and other CAFTA-DR countries. Exports to the US began increasing several years before the agreement, but CAFTA-DR accelerated the trend. Costa Rica continues attracting FDI above levels observed in other CAFTA-DR countries, with an increasing share from US investors and a focus on medical devices and business services. Online survey and interviews of high-tech firms in free trade zones found that CAFTA-DR was an important factor in the investment decisions. CAFTA-DR ignited an explosion of changes in the telecom and insurance sectors, bringing new regulatory frameworks, competition, product innovations, and price reductions. Consumers are reaping the benefits of improved telecom and insurance services. But some issues remain for those markets to mature. Finally, the concern regarding the potential negative impact on the Costa Rican Social Security Administration's finances due to the intellectual property rights measures have not been observed.
  • Publication
    Evaluation of the EU-Turkey Customs Union
    (Washington, DC, 2014-03-28) World Bank
    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) World Bank
    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) World Bank
    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.