Transcript AFT needed to help Economies to Open Up to the World

Development Cooperation Forum
Enhancing Coherence in Policies
Affecting Development Cooperation –
The case of a Reforming Economy
13 November 2009 in Vienna
Policy Coherence
 Policy coherence occurs mainly in 3 policy areas, which
are fundamental to economic relations: aid, trade and
investment policies.
 My presentation will focus on two of these policy areas
which I have combined in one theme ‘Aid for Trade’.
 AFT goes beyond trade policy issue as we need aid to
implement reforms designed to promote economic
growth that can allow and sustain the opening of the
economy.
 We need a wide development agenda to help countries
integrate the world economy.
The cost of trade liberalisation
 Difficult Adjustment Problems when opening the economy
 Lowering barriers to trade has immediate economic and
social costs
 Loss of employment, loss of customs revenue , closure of non-
competitive firms
 Whilst benefits accrue in the medium to long term
 If not addressed upfront these can have political and social
costs that may lead to a reversal of policies
 DCs have tight budgets and may not be able to access capital
markets to meet the costs of reform
 The international community need to provide adequate
and predictable resources to mitigate these risks
What are our Contraints to Trade
Liberalisation
 World economic crisis : Mauritius (Growth rate of
5.0% in 2008 but slowed down to 2.7% in 2009).
 The Government forced to balance the long-run policy
measures with more immediate focus on economic and
social consequences from the crisis.
 There are 0ther serious challenges to economic and
social development: climate change, oil prices, food
security
 Reforms are integral part of the MTEF and PBB: need more
predictability and multi-year commitments on AFT flow.
What the development community can do?
 Most donors are focusing their interventions on TA and
Capacity Building
 Necessary but not sufficient
 Need to facilitate effective integration of DCs in the global
economy
 Support to be extended to:
 Develop comprehensive national development strategies with
trade liberalisation at the core.
 Estimate the adjustment costs and lobby the development
community to finance these. A Flexible mechanism needed.
 Building productive capacity and infrastructure to diversify
exports and improve competitiveness
 Delivery mechanism and access rules to AFT to facilitate
implementation of AFT agenda and necessary reforms
Some suggestions for greater coherence in
Aid policy
 Need for greater coherence in IFI strategy with respect to
regional and global integration initiatives and national
development strategies:
 Rely Field Staff knowledge and observation.
 Need single or streamlined framework of conditions and
manageable KPIs derived from national budget/devt
strategy:
 Burden of conditionalities to be kept to a reasonable
minimum as reform is a long term process and progress can
only be cumulative
 Need to have flexible financial instruments similar to those
put in place to deal with the global crisis.
 Consolidate on work that have already been done:
 Paris Declaration on Aid Effectiveness.
 OECD work on Policy Coherence for development.
Reforms Agenda linked to AFT.
 At the Government’s request, an “Aid for Trade” mission
visited Mauritius in early 2006 to assess the country’s trade
competitiveness, facilitate the adjustment from protection
to global competitiveness and link to the international
community’s AFT initiative. The mission report proposed a
mixed of policies and measures to:
 strengthen competitiveness;
 move resources out of declining and into dynamically
growing sectors;
 improve the quality and cost of input services such as
telecommunications, air transport, and cargo handling; and
 strengthen transitional support for displaced workers
Reform Agenda
 The core of the reform agenda initiated in July 2006:
 open the economy to the rest of the world
 to be achieved over a 10 year period
 implement wide economic and social reforms that
incorporate the recommendations of the AFT mission.
 These wide economic and social reforms comprise:
 stabilising macroeconomic fundamentals
 Improving public sector efficiency
 Enhancing global competitiveness of industry- ENTERPRISE
PROGRAMME
 Improving business climate to attract FDI
 Making labour more mobile
 Providing social safety nets, workfare programmes and
widening the circle of opportunities- EMPOWERMENT
PROGRAMME
 Four reform Pillars have been designed.
The 4 Reform Pillars
 Improve fiscal performance and Public Sector
Efficiency:
 Reduce expenditure: Bring the level of primary spending
to 20.6% of GDP by 2011, compared to 22.1% in 2008/09
 Tax system was revamped (single flat tax on personal
and corporate income)
 Improve Trade competitiveness:
 Revamp incentives to maintain exports at 65% of GDP
over the period 2011, compared to 64% in 2008.
 Reforms over the ICT regulatory environment: ICT
sector’s contribution to GDP to 6.7% by 2011, compared
to 5.5 % of GDP in 2008
Reforms Programs
 Improve investment climate by implementing
strategies to remove obstacles to business operations.
 Raise Mauritius’ ranking in the World Bank’s “Doing Business
Report” to a top 10 position by 2011, compared to 17 (out of 183
countries) in 2009.


Business registration and regulation procedures simplified
Restrictions on land acquisition by foreigners eased
 Improve infrastructure -Mechanisms to improve
implementation capacity;
 Widening the circle of opportunity through participation,
social inclusion, and sustainability.
 Empowerment programme for training of redundant
 Plan for Eradicating Absolute Poverty launched


Provide transitional support for unemployed workers;
Supply low-income housing;
What are our Challenges
 The challenge is to balance national cost and benefit of
being consistent with the economic and policy regimes
promoted by aid donor agencies and ensure that adequate
aid is received to make such policy coherence sustainable.
 Increase our export and mobilise sufficient FDI to sustain
development and reform process and for knowledge
enhancement, technology transfer and innovation,
enhancement of managerial skill and creation of high value
employment and give a boost to small and medium
enterprise.
 Mauritius need support to integrate its domestic financial
market.
 Mobilise sufficient AFT to sustain reform.