Transcript Trade and investment regime

Trade and Growth
Belarus: Window of Opportunity to Enhance Competitiveness
and Sustain Economic Growth
A Country Economic Memorandum for the Republic of Belarus
June 29, 2005
1
Outline
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•
•
•
•
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Summary of Trade Performance
Weaknesses in current trade patterns
Trade with Russia
Trade and investment regime
WTO accession issues
Policy recommendations
2
Summary of Trade Performance
All data for 2003 in US$ million unless otherwise
stated
Belarus
Ukraine
Russia
Poland
Lithuania
Germany
EU-15
Export of goods per capita, US$
1022.7
490.9
947.7
1597.2
2217.2
9122.8
7622.0
56.7
47.9
31.4
29.1
42.0
31.4
27.6
1150.2
480.2
530.4
1747.1
2710.6
7285.7
5794.3
Import of goods, ratio to GDP, percent
63.8
46.9
17.5
31.8
51.4
25.1
21.0
Trade balance, ratio to GDP, percent
-7.1
1.05
13.8
-2.7
-9.4
6.3
6.6
120.5
94.8
48.9
61.0
93.5
56.4
48.6
Export of goods growth, percent, average for 19962003
8.2
6.2
6.1
12.0
12.2
5.4
4.3
Import of goods growth, percent, average for 19962003
7.3
2.3
1.6
9.7
11.7
4.1
1.1
Share of manufacturing (groups 5-8 excluding 68,
using the SITC revision 3) exports in export of
goods, percent*
61.8
67.3
21.2
81.2
62.9
84.0
80.6
Share of CIS in export of goods, percent
54.6
27.5
14.1
6.7
17.0
2.5
1.8
Net FDI per capita, cumulative for 1996-2003, US$
193.6
117.0
18.0
1181.9
1015.6
-290.2
-1852.6
1.8
1.8
0.1
3.4
3.9
-0.001
Export of goods, ratio to GDP, percent
Import of goods per capita, US$
Openness, percent
Net FDI, ratio to GDP, percent, average for 19962003
3
-1.1
Strong export growth
Rates of export growth (times)
3.0
2.5
2.7
2.4
2.1
2.0
1.9
1.7
1.7
1.5
1.0
0.5
0.0
2004/1996
Total
Non-CIS
2004/2000
CIS
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Strong Export Growth but
• Mostly driven by growth in exports of few
commodities (refinery products, first of all);
--2004/2000: growth of exports of refinery products to non-CIS by
3.3 times, to EU-15 – by 18.5 times!
--growing importance of price factor (underestimation of TOT
gains);
• Slow pace of trade restructuring and
diversification in terms of export markets
• Limited dynamism of export structure and
worrisome trends in factor intensity of exports
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Role of Price and non-Price Factors
Factors of exports growth
Factors of imports growth
40
Non-price factor
Price factor
45
Non-price factor
Price factor
50
35
25
30
20
15
10
5
0
-5
-10
-15
-25
-20
1997
1998
1999
2000
2001
2002
2003
2004
1997
1998
1999
2000
2001
2002
2003
2004
6
Commodity structure of exports
• Relatively stable
• Changes mostly due to change in the share of
mineral products (2004: 1/3 of total exports and
over 50% of exports to non-CIS)
• Major export categories the same as before
independence: no visible diversification
• Tendency towards greater concentration
• The share of capital- and skilled-labor intensive
goods in exports has been falling
7
Factor intensity of exports
Factor Intensity of exports of selected countries, 2003
100%
16.7
10.1
1.2
6
28.5
11.6
80%
38
30.5
19.5
28.9
20%
30.7
18.2
77.1
24
36.5
40.1
23.8
21.5
0%
Belarus
Russian Ukraine
Federation
Unskilled
Labor
Skilled Labor
13.2
60%
40%
23.8
Belarus: Factor Intensity of exports in 1998 and 2003
Lithuania
Poland
40
35
30
25
Capital
Intensive
33.9
30.5
29.0
Skilled Labor
28.9
23.8
Capital Intensive
19.4 17.7
20
16.7
Unskilled Labor
15
Natural
Resource
10
Natural Resource
5
0
1998
2003
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High Export Concentration
• Markets: CIS accounts for over 50 % of total
exports (compared with 26% Ukraine; 17%
Lithuania; 7% Poland);
• Products: indices of concentration (growing
concentration on non-CIS markets);
• Exporters: small number of exporters responsible
for lion share of exports.
10
Export Concentration: products
0.6
Belarus
0.55
0.54
0.8
0.5
HI
DX
0.71
0.71
0.7
0.4
0.6
0.50
0.46
0.5
0.3
0.72
0.27
0.26
0.26
0.39
0.4
0.19
0.2
0.46
0.45
0.3
0.2
0.11
0.42
0.14
0.14
0.14
0.1
0.1
0.05
0.0
2001
0.0
Belarus
Lithuania
Ukraine
Poland
DX_CIS
2002
DX_ROW
2003
HI_CIS
HI_ROW
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Export Concentration: exporters
Share of 5, 10 and 20 largest exporters
in export to different markets, %
90
80.7
80
5
10
20
70
57.6
57.1
60
46.1
50
42.7
34.9
40
30
44.4
19.6
23.4
26.6
24.8
18.3
20
10
0
Total export
CIS
Russia
non-CIS
13
Slow export diversification on EU-15
market
Export specialization (ESI>2)
14
12
10
8
6
4
2
0
1998
2000
2001
World
CIS
2002
2003
EU-15
14
Risks associated with high
concentration
• Greater vulnerability to TOT movements
• Vulnerability to changes on major market
• Growing dependence from exports of low value
added goods reduces opportunity for creation of
more high-paid jobs, productivity increases and,
thus, increases in living standards
Results of empirical work:
Export concentration hampers
economic growth
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Opportunities
• Trade complementarity
--relatively high TC_15 index
• Intra-industry trade
--positive link between IIT and growth (productivity
gains, diversification)
--linked to FDI
16
Trade complementarity
55
50
45
40
35
TC_EU15
TC_CIS
30
TC _Russia
25
1998
1999
2000
2001
2002
2003
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Export-FDI interlink: global view
Export/GDP ratio av.
1995-2002
0.8
Ireland
0.7
0.6
0.5
Slovak Republic
Oman Belarus
Netherlands
Thailand
0.4
R2 = 0.24
Kuwait
Sweden
0.3
0.2
Panama
0.1
Brazil
0.0
0.00
Lebanon
0.02
0.04
0.06
0.08
0.10
0.12
0.14
FDI/GDP ratio av.1995-2002
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Low level of IIT with non-CIS
Belarus
70
50
20
54.6
53.9
47.4
50.1
60
50
38.4
40
30
58.2
57.5
60
35.6
24.3
40
30
22.5
16.7
16.6
20
10
10
0
0
Belarus **
Ukraine*
Total trade
CIS
ROW
Poland*
o/w: EU15
1998
1999
Total trade
2000
CIS
2001
2002
ROW
2003
2004
o/w: EU15
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Trade with Russia
• Extremely important: was, is and will remain the major
market
• Impact on growth was larger during the 1st period
• Advantages of special relations were used strategically
• Comparative advantages on Russian market are
different from that on the ROW: difficulties in
reorientation
• Some worrisome signs of falling competitiveness
(declining share of Belarusian goods in Russian visual
consumption)
• CU provided with benefits but there some burning
issues. Asymmetry of CU could not last long.
• Adjustment costs to more market-based relations are big
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Trade and investment regime
• Tariff regime is rather liberal (max weighted
average tariff fell from 12.6% in 1998 to 11.2% in
2003; min – from 11.1% to 9.8%)
• Non-tariff regime is rather restrictive, especially
discretionary administrative measures (IMF trade
restrictiveness index for NTBs= 3, i.e. max)
• Investment Code is rather good but investment
image is poor
• Informal and regulatory NTBs and high costs of
doing business undermine the benefits of liberal
tariff regime and good Investment Code
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WTO accession issues
• In the process for more than a decade
• Considerable progress during last year
--introduction of large amount of legislation
--progress on sectoral fronts (agriculture, standards, intellectual
property rights)
• But there is still a long way to go
--no single bilateral agreement is signed yet
--no serious discussion yet about business environment,
subsidies, NTBs.
--3-5 years behind Russia and Ukraine
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Recommendations
• Securing longer-term benefits of cooperation with Russia
• Advancing trade diversification primarily towards the EU
market: FDI attraction is crucial!
• Advancing global and regional integration
• Reforming policies (subsidization and import restrictions)
that may hamper trade integration
• Accelerating WTO-compliant regulatory reforms, incl.
standards and customs administration
• Investing heavily in the country investment image
In short: Capitalizing on benefits of favorable external
environment and special relations with Russia to
advance trade restructuring and integration into the world
economy
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