Transcript 3. Methodology - Trade Websites

EU-Libya Trade SIA
Civil Society Dialogue Meeting
Thursday, 29 January 2009
Consortium Attendance
• Dr Willem van der Geest, DEVELOPMENT Solutions, Brussels
based trade consultant
• Clive George, University of Manchester, School of Environment
and Development, Senior Research Fellow
• Paul Pierrot, DEVELOPMENT Solutions, Project Officer
Apologies
• Oliver Miles, Project Team Leader, Chairman MEC International
• Joseph Francois, Centre for Economic Policy and Research,
Research Fellow
EU-Libya Trade SIA
• Trade Sustainability Impact Assessment (SIA) of the EU-Libya
Free Trade Agreement (FTA)
• A project funded by the European Commission, DG Trade,
through Terms of Reference
• Assess the potential impacts of proposed liberalisation on all
pillars of sustainable development in order to help optimise
policy decision-making
• Consultation with key stakeholders in Europe and Libya is an
important component throughout the SIA
Draft Inception Report
• Overview of conceptual framework of sustainability assessment
analysis and methodologies
• Follows a review of literature, covering prior studies of relevance
to the economic, social and environmental context of the
regions, as well as previously implemented studies of similar
design using quantitative or qualitative analysis
• Designed to prompt discussion and preliminary analysis
• Available via the project website – www.eulibya-sia.eu
Draft Inception Report Outline
• Section One: background to EU-Libyan trade and the context
that has created opportunities for deeper economic partnership
• Section Two: work plan of the SIA and the reports that will be
produced and structured consultations that will take place
• Section Three: methodology to be employed in the study,
examining the quantitative modelling components and the
qualitative approaches, include social and environment impact
assessment
• Section Four: consultation tools that will be used in the study to
solicit feedback from key stakeholders to inform the work of the
project
1. Economic Background
• Series of Libyan policy shifts:
 End of UN sanctions in 2003
 Application to join the WTO in 2004
 Recent $5 billion settlement with Italy relating to outstanding
issues arising from the colonial period
• Libya on the cusp of significant economic reform
• Existing trading partners presently found in Europe
collaboration opportunities with the European Union are
significant
1. Economic Background
• Libya suffers from significant structural imbalances
 its territory is roughly three times the size of France yet most
of it is uninhabitable
• Most basic infrastructure requires massive investment
• Libya is also one of the least diversified economies in the
Maghreb: in 2005 oil comprised 94 percent of total exports, 25
percent of GDP and 60 percent of wages
• The energy sector returns little in the form of local employment
• Rising unemployment levels and a rising population, and the fact
that Libya imports 75 percent of its food intake
economic diversification has become a policy priority
1.1.1 Trading Profile
• Libya 2007 balance of payments:
 export revenue of LD55 billion, of which oil makes up almost LD54 billion
 Imports amount to almost LD22 billion, leaving a trade balance of just over
LD33 billion
 The current account reflects a surplus of LD29 billion, or 26% of GDP, down
from 35% in 2006
• Oil accounted for 97.3% of all exports, while remaining exports
are mainly made up of chemical materials
• Imports comprise goods and services of almost every kind (other
than alcoholic drinks and products containing pork), with
machinery, foodstuffs, transport equipment and consumer goods
• In recent years, imports increased by 311% while exports
expanded by 887%
1.1.1 Trading Profile
• Italy, Germany, Great Britain, France and Spain are Libya’s
leading partners, with the former two comprising 37.8% and
14.8% of Libya’s merchandise exports in 2006
• Europe’s market share has trended slowly downward. By 2006
total European exports that year were worth over $4 trillion,
while imports to the European Union were substantially less, at
roughly $250 million
• Machinery, electrical products and metals dominate European
exports to Libya. Petroleum accounts for a staggering 96.6% of
Libya’s exports to Europe.
1.1.2 Tariffs
• In August 2005 the Libyan Customs Administration eliminated
duties from over 3,500 product categories
• About 80 products, including high-end furnishings and furs retain
duties of between 25 and 50%
• By 2007, overall import duties had been reduced to 0% for all
goods except tobacco, which incurs an applied tariff of 10%
 Under the Petroleum Law, including all equipment for use in the oil sector
and products, must be at least 40% Arab in origin.
• Exports duties meantime are applied to agriculture in varying
amounts. Manufactured goods incur an export duty of 50%
• On average none of Libya’s imports incurred a tariff. Libyan
exports are subject to low tariffs, at a weighted average of 0.2%
in the EU, where 98.5% of Libyan goods are imported duty free
1.1.3 Horizontal Issues
• Exports need full clearance prior to berthing and the estimated
waiting time before final clearance is one week
 For general cargo, excluding food, there is no pre-clearance available and the
estimated waiting time in-port is at most one week
 For food imports requiring health clearance there is an estimated waiting
time of ten days before final clearance is granted
• Libya is not yet a member of Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS)
 Widespread violations of trademarks, but foreign firms have occasionally
pursued claims against trademark infringements successfully.
1.1.4 Agriculture, processed
foods and fisheries
• Only 1% of Libya’s land mass is considered arable due to poor
water conditions
 agriculture comprises just 12% of GDP
 Sustainable irrigation is a major issue
 Credit facilities for seeds, fertilizers and machinery are widely available,
including to foreign investors
 Significant opportunity is also found in Libya’s under-exploited commercial
fishing stocks
• While agriculture contributes little to aggregate GDP, it is
responsible for around one-fifth of employment, and thus the
sector yields significant social influence
1.1.5 Energy Sector
• Libyan oil has low cost of recovery, high quality and is close
proximity to European markets
 Highest proven oil reserves in Africa at 41.5 billion barrels, with further
discoveries being probable
• Plan to raise daily production levels from 1.7 million to 3 million
barrels by 2010-13
 Libya is seeking to discover about 20 billion barrels of oil, estimated
investment of US$ 10 billion, for which Libya is seeking international
investment of more than US$ 7 billion. Over 40 foreign companies already
operate in the country’s energy sector
• Proven natural gas reserves meanwhile are at 46.4 trillion cubic
feet, ranking 14th in the world
 The Western Libya Gas Project dominates gas production, and pumps gas
from Libya’s southern border to Sicily and mainland Italy
 US, Germany, the Netherlands, UK, Russia, Algeria and Poland investment
1.1.6 Financial Services
• Libya remains largely a cash economy with an archaic banking
system focused on trade financing
 Eleven commercial banks, four specialised credit institution, 48 regional
banks (most of which have already been or are in the process of being
merged), one exchange bureau and five insurance companies
• Banking system assets are equivalent to about 60% of GDP,
suggesting considerable potential for growth
• Tangible privatisation efforts began in 2007
1.2 Social Context
• Labour
 The labour force comprises around 1.3 million people, of whom 31% work in
industry, 27% in services, 24% in government and 18% in agriculture
 Officially unemployment stands at 13%. Unofficially the rate is estimated to
be at least 30%
 Libya has relatively well developed legislation concerning labour and
employment issues: dismissal regulations, laws and enforcement tend to be
strict and to favour the employee.
 Trade unions and professional associations remain illegal, while women
remain underrepresented with only 32% of work-able women joining the
active labour force against 82% of men
1.2 Social Context
• Migrants
 Migrant flows to Libya usually related to oil price rises. Workers typically
from African states including sub-Saharan Africa, ultimately act to take
advantage of proximity to Europe for onward migration purposes, legal or
illegal
 As at mid-2008, over 166,000 foreign nationals, or one-fifth of the labour
force were legally residing in Libya, while illegal migrant workers were
estimated to number 800,000 from Africa alone in 2006
• Equity
 Despite high unemployment, equity is relatively high, helped by high
government subsidies on a number of basic needs such as healthcare,
education, housing, utilities, staple foods and energy goods such as oil
1.2 Social Context
• Health
 Medical system is considered to be relatively well developed, especially by
regional standards
 Sanitation over 97%; Access to safe drinking water 72%
• Education
 Compulsory and free education for the 12 years of primary and secondary
education
 Cost of private and tertiary education has declined by 19.2%, further
increasing access to educational opportunities
 Women over the age of 15 have lower literacy rates than men but more
likely to continue their education to the tertiary level
1.3 Environmental Context
• Atmosphere
 CO2 emissions continue to grow but remain low in terms of per capita
emissions, at only 9.3 tonnes per capita in 2004, compared to 13.2 in highincome OECD countries but notably higher then the Arab countries average
of 4.5 tonnes per capita
• Water
 Severe water shortage – Great Man-made River Authority
 Eventually, over 6.0 million cubic metres of water will be conveyed every day
from well fields deep in the Sahara desert to population centres that are
concentrated on the coast
 Over 70% of the water from this man-made river system is intended for
agricultural purposes. It is expected that 130,000 hectares of agricultural
land will result
2. Work Plan
• Inception Report (January 2009) – Set-up, scoping and scenario
definitions
 Baseline for research methodologies and information sourcing
 Kick-off meeting 16 January 2009
 Report will in turn provide a summary of the collective preliminary results of
the qualitative and quantitative research, presented at the initial Civil
Society Dialogue meeting in Brussels on 29 January 2009
• Interim Report (February – March 2009) – Parallel field work and
computational modelling work
 Delivers the significant quantitative and qualitative impact assessment
 Quantitative modelling will be undertaken by the modelling team
 The findings of the local and modelling teams will in turn be used to
recommend sector selection for deeper analysis of the social and
environmental issues
 Draft Interim Technical Report, expected to be available in late March 2009
2. Work Plan
• Final Report (April – late August 2009) – Consultations and
detailed social and environmental assessment
 A local workshop in Tripoli, subject to conditions
 Dynamic feedback will be taking place between project teams to ensure new
information is constantly included into final scenarios and teams will be
working towards refining and concluding their research and analysis
 At this stage ex post indicators for key impact studies will also be selected,
and policy conclusions and recommendations will be discussed
 Additional Civil Society Dialogue Meeting in Brussels (mid-July 2009 tbc)
 Collective results from which are fed into the Final Report are expected to be
available at the end of August 2009
3. Methodology
• Integrated approach whereby qualitative economic, social and
environmental data and civil society survey results will be
evaluated in parallel with the modelling process
• Quantitative analysis of a trade agreement with Libya poses
unique challenges as Libya is not in the standard databases for
model-based analysis involving computable general equilibrium
models. Special data collection and organisation is necessary
• Partial equilibrium modeling of key sectors will provide output
on the expected changes in a number of economic indicators bilateral export, output, value added and employment
3. Methodology
• Modeling output will provide the baseline for onward
employment analysis, as well as for qualitative analysis (mostly
using causal chain analysis techniques) of important social
variables, including gender, child labour and labour mobility
• While it is recognised that data limits preclude full, multi-sector
CGE modeling, there is scope for 123-type CGE modeling to
identify possible dynamic effects related to trade liberalisation
and increased FDI flows
• Model estimates the effects of trade liberalisation on bilateral
trade, production, national income, and price effects of market
integration, including likely third country effects
3. Methodology
• With appropriate data, the model can be augmented to identify
employment effects, and the price impacts of NTBs
• The qualitative modelling will use a series of microeconomic
indicators to identify the on-the-ground implications of the
estimated economic scenarios
• Trade and investment flows will be examined, which will include
a broad evaluation of the relative likelihood of trade creation and
trade diversion
3. Methodology
• The following issues are noted as being of particular importance
within this range of research:
 public procurement, competition, IPR, sustainable development and dispute
settlement, while agriculture and processed agricultural products, fisheries,
energy products/petrochemicals, and services such as telecoms, financial
services construction and distribution
• Modelling results will form the baseline for the environmental
and social assessment of liberalisation of trade
• Baseline environmental study will outline Libya’s range of
geographical, climatic and other environmental characteristics,
as well as variations in biodiversity value in many areas
3. Methodology
• Environment assessment will examine varying degrees of
pressure on natural habitats, land degradation, water resources
and pollution levels, with considerable differences between rural
and urban areas
• Water shortages affect nearly every aspect of economic, social
and environmental impact assessment in Libya and will likely be
a key area of analysis
• The potential impacts of climate change will also be included and
also review the status of the regulatory systems through which
social and environmental pressures are managed
3. Methodology
• Social Assessment will capture the impacts across three themes:
 Poverty
 Equity
 Health and education
• Reference will be made to international objectives such as ILO
indicators for decent work and the Millennium Development
Goals
• Account will also be taken of interactions between the
agricultural and non-agricultural sectors related to the social and
environmental effects of rural-urban migration and urbanisation
4. Consultation
• Two civil society Dialogue Meetings in Brussels (January 09 and
mid-July 09 tbc)
• One local workshop in Libya, subject to conditions (May 09 tbc)
• Interviews and questionnaires
 A provisional list of stakeholders to be consulted is listed in the Draft
Inception Report and additional suggestions encouraged
 Areas to be covered will highlight key issues on the ground impacting foreign
investment and trade and business facilitation. Will include asking business
to measure the opportunities lost from these key impacts indentified as a
portion of their overall business
 The stakeholder network would be surveyed to highlight key sectors and
horizontal issues affecting the economy and solicit the indication of key
issues which have acute social and environmental implications
4. Consultation
• Newsletter and website: project information, reports and events
www.eulibya-sia.org
• Enquiries and project/research feedback: [email protected]
General Discussion
www.eulibya-sia.org
[email protected]