Foreign Trade, FDI, and Capital Flows Study
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Publication
Trade as an Engine of Grow in Somalia: Constraints and Opportunities
(World Bank, Washington, DC, 2021-05)International trade can promote efficiency, knowledge diffusion, technological progress, and—what ultimately matters most—inclusive growth and poverty reduction. Boosting export competitiveness is inextricably linked with rebuilding the productive sectors of Somalia’s economy, generating jobs and incomes, and reducing the country’s large structural trade deficits, which have averaged over 80 percent of GDP since 2015. Somalia supplies a limited number of exports to a relatively small set of markets. Its top five export products in 2018 accounted for more than 83 percent of total goods exports. Dominated by live animals, these exports are primarily unprocessed primary commodities that do not generate spillovers to other sectors of the economy and are vulnerable to weather and other shocks. Somalia also exports to a small set of countries: 82 percent of its exports were sold to just five destinations in 2018, mainly the United Arab Emirates, Oman, and Saudi Arabia. Somalia’s annual goods export revenues could be increased significantly by expanding sales of current exports to new markets and markets where potential remains untapped. Export growth opportunities are greatest for sesame seed and fish. There is also some potential to increase livestock exports by seeking new markets, although econometric analysis suggest that some markets in the Gulf may be saturated. Gums and resins (frankincense and myrrh), fruit, and meat also show potential for increased sales. Countries in East and South Asia present the greatest opportunities for growth. These export opportunities could be prioritized in Somalia’s national trade strategy. Limited or unreliable domestic supply constrains many of Somalia’s exporters. The World Bank’s 2018 Country Economic Memorandum (CEM) presents recommendations for sustainably increasing output of fish, sesame seed, animals, and other commodities that Somalia already exports. To break into new markets, Somali exporters must also invest in gathering information about consumer preferences and policies in unfamiliar markets and establish business relationships with new buyers, shippers, and other partners. The 2018 CEM identifies important roles for public and private sectors in strengthening systems to ensure animal and plant health and developing logistical arrangements to support increased trade flows, which could be reflected in the national trade strategy. -
Publication
Monitoring Small-Scale Cross Border Trade in Africa: Issues, Approaches, and Lessons
(World Bank, Washington, DC, 2020-09)This report synthesizes the work carried out as part of a World Bank ASA (Advisory Services and Analytics) activity to identify better systems and practical strategies that countries can use for improved monitoring of small-scale cross border trade (SSCBT). Large amounts of goods are known to be traded through cross border channels in Africa, yet SSCBT is poorly counted leading to a misrepresentation of the true state of regional integration and possible misalignment of trade and development policies. The study assesses the strengths and limitations of existing SSCBT data systems in East Africa to understand the feasibility and cost effectiveness of different data collection methods. It also looks at conditions along trade corridors in other regions of Africa where SSCBT data are only starting to be monitored to identify common bottlenecks and potential solutions for improved trade data collection in different environments. The analysis draws on fieldwork carried out during July and August 2019, as well as subsequent consultations with local counterparts, including with respect to the impact of the COVID-19 pandemic. Through this work, the study aims to inform policy in countries where SSCBT is important and where the establishment of monitoring systems will be relevant and desirable. The project also contributes to discussions and negotiations on regional integration by raising the profile of SSCBT and drawing attention to the importance of addressing barriers that limit this trade. In addition to this report, findings of the ASA are also being shared with a diverse audience of policymakers, economic analysts, and civil society representatives through short policy notes, working papers, and dissemination events. -
Publication
Import Duties and Performance: Some Stylized Facts for Pakistan
(World Bank, Washington, DC, 2020-05)This note discusses the role that import duties have in Pakistan’s economy, and their links with export competitiveness. Import duties play two key roles. First, they are a source of tax revenues for governments. Second, when imposed on a product, they create a wedge between its world price, and the price paid domestically (as well as a wedge between its domestic price, and the price of its substitute in the domestic economy). These wedges affect the allocation of resources. They divert resources away from export markets - in which firms will only fetch world prices for the product - and into the domestic market, effectively creating an anti-export bias. Thus, an import duty is implicitly an export duty. When these duties are applied on inputs that different sectors use to produce, the duty induces firms to substitute away from that - now more expensive - input, and into other substitutes, thus affecting the otherwise optimal technological choice of firms, as well as increasing their production costs. This note is organized as follows: the first section presents a snapshot of import duties in Pakistan. The second section empirically examines the ways import duties induce an allocation of resources that is different from the one that will be obtained without the duty distortion. The third section looks at the role of tariff policy in the context of the COVID-19 (Coronavirus) pandemic. The fourth section briefly describes the recent changes in the tariff policy institutional arrangement. The fifth section concludes and provides policy recommendations moving forward. -
Publication
Look Back to See What’s Ahead: A Review of Mega-PTAs on Services and Investment that Will Shape Future Trade Agreements
(World Bank, Washington, DC, 2020-01)This paper draws the attention to the chapter on trade in services and investment of these agreements and their country-specific sets of commitments. This comprehensive approach is necessary as the disciplines in the text of the agreement set out the rights and obligations for the parties, but it is only the individual country commitments that reveal the sectoral scope and actual content of these PTAs. Not only do agreements differ in how countries approach basic provisions such as national treatment (NT), market access (MA), most favored nation (MFN) treatment and others (see Box 1 for more details) but the actual country commitments reveal whether countries have liberalized certain sectors, and to which extent. Therefore the focus of this analysis is on the services as well as the investment chapters and commitments of these selected five 'mega-PTAs'. Overall the purpose of this paper is to shade light on the critical aspects of the trade in services and investment chapters of the five selected mega-PTAs by highlighting the novelties and in particular by analyzing the annexed commitments (Annex one and two) of each agreement. -
Publication
Actual and Potential Trade Agreements in the Asia-Pacific: Estimated Effects
(World Bank, Washington, DC, 2019-10)This paper assesses and compares economic impacts of four actual and potential free trade agreements in the Asia-Pacific Region; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, sometimes also called TPP-11), the original Trans Pacific Partnership (TPP-12), the Regional Comprehensive Economic Partnership (RCEP), and the Free Trade Area of the Asia-Pacific (FTAAP). FTAs with a larger scale and wider membership are expected to produce higher aggregate gains in terms of increased GDP and trade flows. U.S. withdrawal from TPP-12 reduced estimated GDP gains for the TPP-11 countries by about half. For countries belonging to CPTPP and also negotiating RCEP, the potential gains from an agreement with both China and Korea are substantial, but not as large as if the United States were to re-join TPP-12. On a sectoral basis, significant structural shifts are observed for such sectors as food processing, wearing apparel, textiles, and transport equipment. -
Publication
Ecuador Trade and Investment Competitiveness Report
(World Bank, Washington, DC, 2019-06)The internationalization of the Ecuadorian economy is necessary if the country is to successfully adopt a development model led by the private-sector. The Ecuadorian government is seeking to accelerate growth and sustain social progress by giving greater prominence to the private sector; it does at a time when external conditions are less favorable than at any time in the last decade. This report has three main objectives; to provide a systematic benchmark of Ecuador’s connection to the global economy, to identify key bottlenecks, and to make recommendations for enhancing the competitiveness of the private sector. The assessment is broken down into two sections. First, there is a section about international competitiveness outcomes, which assess Ecuador’s performance and identifies the challenges associated with connecting to international markets. The analysis looks at outcomes throughout the four competitiveness channels; that is, exports, imports, foreign direct investment (FDI), and global value chains (GVCs). The report’s second main section contains a competitiveness diagnostic about the key drivers behind the previously identified challenges and provides actionable policy recommendations to overcome them. The determinants are grouped in four mutually exclusive groups: (i) the macro and fiscal framework; (ii) the institutional and regulatory framework governing trade and investment; (iii) supply-side factors; and (iv) demand-side factors. -
Publication
Chad Growth and Diversification: Leveraging Export Diversification to Foster Growth
(World Bank, Washington, DC, 2019-05-30)This report describes the key policies for Chad to successfully leverage export diversification to foster economic growth. After several unsuccessful attempts at diversifying in the 1990s, Chad has deepened its dependence on commodities, mainly relying on oil; which came to replace cotton. However, the experience of other countries, in Africa and other parts of the world, shows that while large scale production of oil resources offers great opportunities, it comes with major shortcomings. Chad’s Vision 2030 is to become an emerging economy, driven by diversified and sustainable sources of growth. The goal is to triple the average GDP per capita at current prices, by increasing it from US$ 730 in 2014 to US$ 2300 in 2030, while drastically reducing the poverty rate from 46.7 percent in 2011 to 8 percent during the same period. Chad’s economy is overly dependent on crude petroleum, which makes it vulnerable to external shocks. Therefore, to achieve this development goal, only an export diversification strategy can foster a larger menu of goods and services than can become growth-accelerating and job-creating activities. Its implementation challenges are formidable, but the country has little choice, as the social unrest following recurrent oil price slumps, its burgeoning youth population and regional security threats may foment more violence in an already fragile and volatile economy and keep investors away. Hence, this report outlines a strategy to achieve this vision centered on the diversification of its non-oil economy (mainly agricultural-based exports) away from natural resource-based commodities. -
Publication
Pakistan: Unlocking Private Sector Growth through Increased Trade and Investment Competitiveness
(World Bank, Washington, DC, 2018-10)Evidence suggests that Pakistan has the potential for much faster and more diversified economic growth. Energizing trade can help Pakistan to realize its growth potential. Pakistan’s inward-oriented trade policies have had the effect of stalling Pakistan’s integration into regional and global value chains (GVCs). Pakistan’s failure to reform its trade policy to better foster export competitiveness can be attributed in part to institutional fragmentation within the government. This fragmentation has resulted in different agencies sometimes working at cross purposes. Efforts to reduce tariffs have been offset by the introduction of alternative protection instruments such as regulatory duties (RDs) and firm-specific special regulatory orders (SROs). In addition to tariffs, RDs and SROs, other obstacles to global integration include a heavy regulatory burden and perceived risks to investing and operating in the country, which have hurt efforts to attract foreign direct investment (FDI). Growth and competitiveness are also inhibited by inefficient trade facilitation policies, weak logistics services, and underdeveloped infrastructure. These constraints have made it difficult for Pakistan to fully exploit its proximity to China, a trade powerhouse, with which it has a free trade agreement. All in all, the anti-export bias of Pakistan’s trade policy has made it more difficult for outward-looking firms to grow by accessing global markets. A series of actions in the areas of trade policy, trade facilitation and connectivity, and institutional coordination could potentially stimulate Pakistan’s growth through increased trade and investment competitiveness. Integration with other countries in the region and neighboring regions, particularly East Asia, will allow Pakistan to diversify both its product basket and markets. Finally, full normalization of trade relations with India would allow Pakistan to benefit from India’s fast growth and promote complementarities, including valuechain activities and investment potential. -
Publication
CEMAC: Deepening Regional Integration to Advance Growth and Prosperity
(World Bank, Washington, DC, 2018-06-29)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)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.