In developing countries, transport and storage are aid-for-trade winners

Listed as a priority in the Addis Ababa Action Agenda, aid for trade, according to the resulting document from the third International Conference on Financing for Development, “can play a major role” in mobilizing international trade for development, especially in least-developed countries. Trade, a note from the Organization for Economic Cooperation and Development and the World Trade Organization clarified, is “not a ‘sector’ — it covers a wide range of activities and encompasses not just goods, but also services.” Aid for trade has a similarly wide-ranging scope. OECD divides the areas to which aid for trade is directed into several broad sectors: transport and storage, communication, energy, banking and financial services, business and other services, agriculture, forestry, fishing, industry, mineral resources, trade policies and regulations, and tourism. In LDCs, where there is often a lack of trade capacity in terms of information, institutions and infrastructure, aid for trade can help ease the much-needed integration into the world market. Over the past decade — that is, from 2004 to 2013 — aid for trade committed to LDCs amounted to $109.5 billion and mostly mirrored the aid-for-trade focus of donors in all developing countries. Accounting for nearly 90 percent of all aid for trade committed, transport and storage ($38.3 billion), agriculture ($26 billion), energy ($24.4 billion), banking and financial services ($4.9 billion), and business and other services ($4.5 billion) were the five main sectors in these countries. In 2013, the latest year for which aid-for-trade figures are available, aid for trade for energy and transport and storage saw a sharp uptick and reached their highest levels, climbing 68.3 percent and 46.3 percent, respectively, from their amounts in the previous year. With an increase of 15 percent from 2012, business and other services experienced more modest growth. Aid for trade for agriculture, which rose 10 percent in 2013, similarly had a moderate increase. Meanwhile, aid for trade committed to banking and financial services stayed in the same level as in the previous year. Below, we dig into 2013 project-level data to learn more about the major donor, the largest recipient, the biggest project and the dominant type of flows in each of these five sectors. In sectors that involve hard infrastructure projects — transport and storage as well as energy — Japan emerges as the top donor, with loans as the primary financing instrument. Given Japan’s infrastructure expertise and its preference for loans, this isn’t too surprising. Transport and storage Commitments to the transport and storage sector reached $5.9 billion in 2013. Loans, which exceeded $3 billion, were the financial instrument that donors preferred. The primary donor to the sector, Japan had nearly $1.3 billion in transport and storage aid-for-trade commitments. Its $296.6 million bridge construction and repair project in Bangladesh, which was also the main recipient of transport and storage aid for trade, was the largest effort. Agriculture Aid-for-trade commitments to agriculture amounted to $3.8 billion in 2013. Making up around $2.4 billion of this amount, grants were the main form of assistance. The World Bank’s International Development Association, with almost $801 million in commitments, was the top donor to the sector. In 2013, it committed $110 million to a pastoral community development project in Ethiopia, which was also the largest recipient of aid for trade allocated for agriculture. Expected to be completed in 2018, the project aims to ease the access to social and economic services for Ethiopia’s pastoralists and agropastoralists. Energy At $5.6 billion in 2013, energy aid-for-trade commitments had the highest increase from 2012 levels. The bulk of these commitments — $3.2 billion — were in the form of loans. Japan, with $1.2 billion in commitments, was the main donor, while Afghanistan, which saw commitments amounting to $1 billion, was the primary recipient of energy aid for trade. The largest project, however, was a combined cycle power plant initiative by the Japan International Cooperation Agency in Bheramara in Khulna, Bangladesh’s third-largest city. Banking and financial services While they stayed above $526 million, aid-for-trade commitments to banking and financial services had a minimal decrease in 2013. The majority of these commitments were roughly split between grants ($246.3 billion) and loans ($226.8 billion). Equity investments, however, also accounted for a significant portion — around $53 million, or 10 percent — of the total amount. IDA and Myanmar were the main donor and recipient, respectively, in the sector. The World Bank’s re-engagement and reform support program in the previously closed-off country was the primary focus of banking aid-for-trade commitments in 2013. Business and other services Aid for trade committed to business and other similar services were at $614.3 million in 2013. A huge chunk of these commitments, or $486.5 million, was in the form of grants. The United States was the top donor to the sector, and Afghanistan was the main recipient. The U.S. Agency for International Development’s Afghanistan workforce development program was the largest U.S. project in terms of commitments in 2013, but Denmark’s business sector program support, which assisted developing countries like Kenya and Vietnam, had the highest commitment, at $106.8 million. 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