AID FOR TRADE IN AFRICA: Why Trade Why AID MOBILIZING AID FOR TRADE: FOCUS ON AFRICA Dar es Salaam,

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AID FOR TRADE IN AFRICAWhy Trade?Why
AID?MOBILIZING AID FOR TRADE FOCUS ON
AFRICADar es Salaam, Tanzania

• John Page, Chief Economist
• Africa Region, World Bank October 2007

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Outline

• WHY TRADE?
• Making Growth Sustainable
• Creating an Export Push
• WHY AID?
• Africa can compete. But
• High Indirect Costs Limit Competitiveness
• AID FOR TRADE
• Supporting Institutional and Policy Reform
• Investing in Infrastructure
• Reinforcing the Country Based Model

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WHY TRADE?

• Making Growth Sustainable

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African per capita income is now increasing in
tandem with other developing countries
Annual Change in Real per capita GDP
Forecast
2008
Why trade?
Source World Bank
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Economic Performance is Becoming More Diverse
Why trade?
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THREE KEYS TO SUSTAINABILITY

• Avoiding Growth Collapses
• Accelerating Productivity Growth
• Boosting Private Investment

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WHY TRADE?

• CREATING AN EXPORT PUSH TO SUSTAIN GROWTH
• Export Performance
• Export Diversification

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Exports are important
Source IMF WEO database. Note export shares are
unweighted average.
Creating an export push
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But are growing slowly
Creating an export push
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And are declining in importance for Africas top
performers
Creating an export push
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Africas Share of World Trade is Falling
Creating an export push
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and Africas exports remain concentrated
Source World Bank World Trade Indicators
Creating an export push
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WHY AID?

• African Can Compete, But
• High Indirect Cost Limit Competitiveness

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Factory floor costs compare well with India
China
Direct cost per male shirt
Why Aid?
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Faster Growing African Countries Are Diversifying
Their Exports
Source World Bank World Trade Indicators
Why Aid?
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African firms are sharply disadvantaged relative
to China due to higher indirect costs.

Why Aid?
due to power losses, delivery delays, shipment
losses, crime
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Africa lags other regions in the cost of doing
business
Ease of doing business rank, Simple average by
region
Data sources World Bank Doing Business Database
as of November 2006.. Normalized ranking from
Doing Business 2006. Ranking from Doing
Business 2007.
Why Aid?
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And in access to infrastructure
Access to electricity by region
Data sources The World Bank WDI database, April
2006.
Building the private sector
Why Aid?
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The time to clear goods at port is several days
in many countries in Africa
Why Aid?
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Domestic Constraints Handicap African Firms In
Global Supply Chain Industries
Subramanian (2006)
Why Aid?
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Alleviating domestic constraints could increase
exports in African, particularly for manufactured
products
Why Aid?
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AID FOR TRADE

• Supporting Institutional and Policy Reform
• Diagnostic work to identify key constraints
• Capacity Development
• Improving Policies at and Behind the Border
• Supporting effective Regional Organizations

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AID FOR TRADE

• Investing in Infrastructure
• An Export Push Needs an Infrastructure Push
• Creating Space For The Private Sector
• Public Resources will Still Be Needed

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AID FOR TRADE

• Reinforcing The Country Based Model
• Trade as a Development Issue
• Mainstreaming Trade in Poverty Reduction
  Strategies
• Scaling-up Avoiding Vertical Programs