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Aid for trade

Filipe Naigulevu
Thursday, February 08, 2018

AID for trade (AfT) remains an integral part of developing countries' development; several key solutions must be considered to further boost trade efficiently.

Particularly for the Pacific, aid for trade has helped strengthen economic infrastructure and the productive capacity needed for economic development to achieve higher levels of sustained and inclusive growth.

And while it accounts for about 40 per cent of official development assistance in Asia and the Pacific, Asian Development Bank (ADB) vice-president for knowledge management and sustainable development Bambang Susantono said it was important for Pacific countries to continue improving their business environment and minimise barriers to services trade.

Speaking at the opening of the Aid for Trade in Asia and the Pacific conference in Suva yesterday, Mr Susantono said governments could make efforts to leverage sectors with the most potential to contribute to inclusive growth, trade flows, and to generate economy-wide spillovers.

The two-day workshop focuses on key findings from the ADB 2017 Aid for Trade Report which analyses how AfT can increase trade in services through regulatory reform and modern trade facilitation such as paperless trade.

"For example, around 70 per cent of the total output in the Pacific is generated by services, such as tourism, which employs a large proportion of the workforce ranging from about 10 per cent here in Fiji to almost 50 per cent in Palau with strong links with the rest of the economy," Mr Susantono said.

"This can help the Pacific nations to overcome the challenge of geography, better connect with international trade flows and achieve inclusive growth."

Aid for trade flow to Asia and the Pacific have been growing steadily, where disbursements grew faster than overall official development.

Sea-locked Pacific economies rely more significantly on Aid for Trade, which accounts for 2 per cent of GDP.

Aid for trade had also been mainly targeted at the transport and storage including energy and agriculture sectors.

Since 2002, about $US300 billion ($F604b) globally and $US9.3b ($F18b) in Asia and the Pacific had been put towards aid for trade by development partners.

Out of this, over the same period Fiji had received $US10.4 million ($F20m) in AfT, which is 0.11 per cent of Asia and the Pacific. The rest of the Pacific received 3 per cent.

From a low base $US4.1b ($F8b) in 2002, aid for trade disbursements reached nearly $US14b ($F28b) in 2015, which was 38.2 per cent of $US36.3b ($F73b) in total official aid to the region in 2015.

Mr Susantono also highlighted the opportunities for Pacific economies to increase trade, tap into niche export markets and promote inclusive growth through rapid digitalisation and the growth of e-commerce.

"While Pacific nations have made great strides toward regulatory reform of telecommunication services to enhance investment, much still needs to be done," he said.

"For instance, with just 60 per cent of the population holding mobile subscriptions and only 13 per cent with internet access, there is an urgent need to expand ICT infrastructure."

He said a regulatory environment should be enabled to help the Pacific nations to share the benefits of the digital economy.

Mr Susantono further reiterated the need for trade costs to be lowered further, which was key to integrating developing economies — especially lower-income countries — into the global economy.

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