Trade for the world’s 48 poorest countries can be both a great opportunity or a risk, depending on how it is executed. Exports from the world’s least developed countries tend to be concentrated in one sector, or limited to just a few trade partners, making the countries vulnerable to market variations which can ultimately put sustainable economic growth in peril.
The Enhanced Integrated Framework, a Geneva- program of the World Trade Organization, is a multi-donor initiative focused just on LDCs with an eye on how they can reform their trade practices to foster development. With a donor base of 24 member states and a trust fund managed by the United Nations Office for Project Services, EIF partners with governments to support them and deliver its expertise for a maximum five years.
The result, explains Ratnakar Adhikari, the executive director of EIF, is stronger economies and progress on the Sustainable Development Goals. But the work can take time. Adhikari, an expert from Nepal in trade and the environment, talked with Devex recently in New York about why trade in LDCs needs to be rethought, and what it means to “trade better.”
The conversation has been edited for length and clarity.
The WTO is very well known, but the Enhanced Integrated Framework is a bit more specialized. How does it work?
It is a partnership for providing targeted support on aid for LDCs. So we work in 48 LDCs, and three recently graduated countries. And altogether we have 24 countries contributing to our trust fund. There are eight different agencies that bring their resources and expertise to the table to make some of these projects at the country level. We have a governance structure that brings in representatives from LDCs and aid agencies are part of the structure. This provides strategic guidance on a number of key issues.
Ours is a country-driven approach and we go by their priorities. We first go to the country and convince them about the utility of the program. Once they are convinced, we provide them the initial plan to create the structure within the country, so they can undertake diagnostic training and integration studies. The idea of this is to support the countries in identifying opportunities and challenges and identify certain priorities that need to be taken by the country. And once that diagnostic is done, we provide them support to strengthen the institutional structure at the country level. With the help of the institutional support they can undertake some policy reforms and measures. We also provide support on cross-cutting issues such as helping countries trade better. And we also support services like tourism. We have supported over 150 projects and allocated resources of more than $200 million since 2009.
When you talk about trading better, what does that mean, exactly? How should LDCs be altering their trading practices, and why does this matter?
“When I say trading better, it means helping those LDCs exploit the market access opportunity that exists.”—
There are a couple of things. There is a huge market for opportunity that exists globally for the LDCs. A number of countries have provided market access to them and they have also gone to regional trading arrangements as a result of this opportunity. But in order to exploit the opportunities they need to address this. So when I say trading better, it means helping those LDCs exploit the market access opportunity that exists.
And that also means being able to diversify their exports. A lot of these LDCs have been exporting one or two commodities. If there is any fluctuation in the international market demand, the entire demand can crumble. For example, countries such as Angola, Sudan, Equatorial Guinea — these countries rely a lot on oil exports. This is not sustainable in the long run. So we provide support to diversify these exports.
So a place like Angola has other products they could potentially be exporting that are available. Is it hard for them to move into another area?
They do not have the requisite institutional structure in place to take advantage of that opportunity. That’s number one. Angola is not the best example here. We are not effectively working with Angola right now. But other countries such as Cambodia is an example: It has a high export concentration ratio, focusing on one single commodity — garments. So we have actually helped them to diversify into a sub-category of garments and rice exports, and we have supported them on fishery products, cassava, and to diversify to sector services like tourism. Similarly, in the case of Bangladesh, although we started out working them a year ago, they also have a similar high concentration issue. This is the discussion that we are having with them right now, to produce and export what is known as active pharmaceutical ingredients. We are adding the value at the country level so that they do not need to depend on imported inputs, and they can use the inputs in the manufacturing process so as to be able to export more.
And this is a fairly common problem?
“There are a number of areas in which [diversifying LDCs’ export basket] makes contributions to the achievement of the SDGs, such as objectives for employment, poverty elimination targets … women’s economic empowerment.”—
Many LDCs face this problem. We have to help them to diversify their export basket, and that is why we say they are able to “trade better” if they are able to diversify their export basket. There are a number of areas in which this makes contributions to the achievement of the SDGs such as objectives for employment, and then meeting the poverty elimination targets. That is one. Secondly, in the areas of women’s economic empowerment we have done a considerable amount of work at the country level.
In Cambodia, for example, we have supported silk entrepreneurs, women entrepreneurs. And helping the silk weaver to produce quality silk means fitting into the value chain of the exports with the international market. Not only that, they are in the process of integrating themselves into the global economy by going digital. And these are all women workers.
In Rwanda, we have supported cross-border market centered projects. The government identified five different market centers they need to establish along the border with Uganda, and the Democratic Republic of Congo, and we picked up two projects, one bordering Uganda and the other bordering DRC. They were able to mobilize other resources from other partners. They are constructing five different centers. The centers we have constructed have a strong women economic empowerment component because they are part of 74 percent of total cross border trade through this market center.
What are the challenges of trying to introduce the concept of diversifying an export base to an LDC? Does that take time to catch on?
It does sometimes. We feel that this is something they need, and in most of the analytical work we did define this as a problem. The fact that the analytical work is owned by the cabinet [of a given country], not only the document produced by the ministry of commerce, means that it is already a part of their national development strategy, and that makes it easier for them to be convinced.
It comes internally. When it comes to the idea of diversification, sometimes there are certain sectors where I feel it is going extremely well and sometimes there are political challenges they face. There is a challenge in terms of human capacity to deliver. This is our desire, to ensure that these interventions made at the country level become sustainable.
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