Foreign Trade, FDI, and Capital Flows Study

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  • 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
    Exports, Export Destinations, and Skills
    (2010-05) World Bank
    This paper explores the links between exports, export destinations and skill utilization by firms. The authors identify two mechanisms behind these links, which we integrate into a unified theory of export destinations and skills. First, exporting to high-income countries requires quality upgrades that are skill-intensive (Verhoogen, 2008). Second, exporting in general, and exporting to high-income destinations in particular, requires services like distribution, transportation, and advertising, activities that are also intensive in skilled labor (Matsuyama, 2007). Both theories suggest a skill-bias in export destinations: firms that export to high-income destinations hire more skills and pay higher wages than firms that export to middle-income countries or that sells domestically. The authors test the theory using a panel of manufacturing Argentine firms. The data cover the period 1998-2000 and thus span the Brazilian currency devaluation of 1999. The authors use the exogenous changes in exports and export destinations brought about by this devaluation in a major export partner to identify the causal effect of exporting and of exporting to high-income countries on skill utilization. The authors fine that Argentine firms exporting to high-income countries hired a higher proportion of skilled workers and paid higher average wages than other exporters (to non high-income countries) and domestic firms. Instead, the authors cannot identify any causal effect of exporting per se on either skill utilization or average wages.
  • Publication
    China in Regional Trade Agreements : Competition Provisions
    (World Bank, 2009-06-30) World Bank
    This report is structured in three volumes: competition provisions; environment provisions; and labor mobility provisions. The main messages of this three volumes are as follows: 1) competition laws and policies are increasingly being established at the regional level, as they could be instrumental in supporting the benefits of trade and investment liberalization; 2) China may want to use the opportunity of these negotiations to: (a) further discipline its state-owned enterprises;(b) carefully consider the possible role of antidumping policies; and (c) promote and lock-in domestic reforms aimed at improving its domestic competition policies; 3) with a shift of the development agenda from primarily pursuing growth to achieving a more balanced and sustainable development and taking into account China's high reliance on trade, it may be increasingly in China's interest to pro-actively engage its partners on environmental issues in its regional trade agreement (RTA) negotiations; and 4) while the world economy stands to gain massively from liberalization in the mobility of labor, adverse popular reaction to the economic and social impacts of immigrants has kept progress in enhancing global labor mobility well below progress in trade and capital liberalization.