Transcript HISTORICAL SUCCESS Sustained Growth (Percent)

AID FOR TRADE
ARCHITECTURE
MAURITIUS VIEW
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EXPECTATIONS FROM AFT
Type of assistance: Non-debt increasing
Eligibility: All DCs suffering from erosion of
preferences
Duration: Between now and end of 10th EDF
Modality:
Budget
Support
preferred/
infrastructure, human capital and social safety nets
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WHY NON DEBT INCREASING?
Public finance cannot support market rate
debt given need to consolidate in response
to shocks
 Only transitional support concentrated on
initial years- will decline over the period
 In present value terms, cost of support is
lower than cost of preferences for ever
 High return -increasing resilience and
reducing reliance on aid
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WHY BUDGET SUPPORT?
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Policy flexibility
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Faster response to adjustment needs
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Adjustments are easier through the budget
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A higher degree of national ownership
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Improves coordination with other development
partners
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HOW SHOULD AFT BE
OPERATIONALISED?
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Seek grants under the AFT Scheme through
multilateral/bilateral channels
Linked to trade liberalisation as well as regional
integration
Have a well defined programme for the transition
Have a full costing of the programme
Have a self assessment checklist
Existing or future Regional Funds could be
redirected
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Benefits of Redirecting Regional Funds

Same type of interventions would be supported at
the regional level
– Regional Infrastructure
– Upgrading of Human Capital
– Behind the Border Trade Facilitation
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Higher payoffs as measured by:
– Reduction in external tariffs and removal of NTBs
– adoption of trade facilitation measures
– Improving scores on Doing Business and the Heritage
Index of Economic Freedom
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ROLE OF INTERNATIONAL
INSTITUTIONS
Support for developing a programme
 Help identify the reforms
 Help with costing of the transition
 Endorse the programme and self assessment
checklist of each country
 Monitor the use being made of the AFT
money
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Role of Regional Organizations
Provide a framework for encouraging
reform by countries ready to go while
assisting those that need more time
 Emphasize performance related policy
reform and assist in the monitoring
 Link multi-lateral liberalization and regional
integration
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CASE OF MAURITIUS
Having to face the triple shocks of
dismantling of MFA, cut in the price of
sugar, rising energy prices
 Government finances and the
macroeconomic situation are deteriorating
 Making the transition is socially and
economically very costly and politically
difficult
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OUR PROGRAMME
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Fiscal consolidation
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Investment Climate Improvement
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Restructuring and consolidating existing
economic pillars
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Diversifying into new economic activities
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TARGETS AND INDICATORS
FISCAL CONSOLIDATION
 Golden
Rule
 Sustainable
Investment Rule
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TARGETS AND INDICATORS
INVESTMENT CLIMATE
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Move from 23rd in Doing Business to Top
10
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Implementing the principle of Silent
Agreement
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Consolidating Existing Pillars and
Diversification
2000
1990
TEXTILE
SUGAR
TOURISM
1980
1970
TEXTILE
SUGAR
TOURISM
FINANCIAL
SERVICES
FREEPORT
TEXTILE
SUGAR
TOURISM
FINANCIAL SERV.
ICT / BPO
REAL ESTATE
SEAFOOD/
AQUACULTURE
KNOWLEDGE
PHARMACEUTICALS
ENERGY
SUGAR
Monocrop
Economy
Manufacturing
& Tourism
Manufacturing
& Services
Economy
Business
Platform
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OVERALL OBJECTIVE
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From a 4-pillar to an 8-pillar economy in 10
years
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First, we must succeed the transition
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COSTS OF TRANSITION
Four billion euros over 10 years
 Frontloaded
Investing in production
1.9 billion
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Infrastructure
1.8 billion
Training & retraining
100 million
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SUPPORT FROM
INTERNATIONAL
INSTITUTIONS
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IMF: Fiscal consolidation & finding fiscal space
for social safety nets
World Bank: Review of incentive framework,
need for infrastructure support, programmes to
assist reallocation of resources
IMF/WB assist countries in determining the cost
of transition from preference dependent to
liberalised trade as a basis to support their efforts
to mobilise financing under AFT
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MECHANISMS FOR
INTERNATIONAL SUPPORT
NEEDED NOW
Shocks already having impact
 Cost of inaction by Int’l community is high
 Cost is low compared to benefits
 A visible AFT program could favourably
change the dynamics of the Doha Round
 Donor community need to lead
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THANK YOU
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