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Aid for Trade on the Ground: Early Findings from Country Studies ICTSD Project on the Effectiveness and Development Impact of Aid for Trade Since the launch of the Aid for Trade (AfT), the monitoring process lead by the WTO and the OECD has generated critical data and analysis on the initiative’s implementation. Donors have identified and reported their trade related aid projects more systematically, and partners have strengthened their ownership in designing and implementing AfT programmes. The continued focus on monitoring has also contributed to keeping the momentum high, as reflected by the substantial increase in financial resources dedicated to the initiative. Finally, the 2010 call for “case stories” which resulted in a unique and incredibly rich body of experiences from individual projects, has shed further light on the impact of AfT. As a contribution to this process, the ICTSD Project on the Effectiveness and Development of AfT seeks to build on existing monitoring mechanisms by assessing the impact and effectiveness of AfT at the country level. In doing so, ICTSD will provide an integrated approach to capture the unique experiences of individual countries in enhancing their trade capacity as well as addressing both the quantitative and qualitative aspects of AfT. As a first step, ICTSD has initiated pilot studies in six countries - Nepal, Malawi, Cambodia, Peru, Jamaica and Mauritius with an aim of assessing the effectiveness and development impacts of AfT “on the ground”.
The Rationale for a Country-based Approach As highlighted in the Aid for Trade in 2008 report produced by the OECD “The Task Force defined AfT as whatever a partner country considers traderelated. To capture this, the AfT initiative has to go to the local level”. In fact, experience so far suggests that the effectiveness of AfT in boosting trade-related performance is likely to depend crucially on a large number of country-specific factors, which can only be captured at the national level. In this context, country based assessments - beyond individual projects evaluation - might be needed to provide an integrated picture of different AfT projects, including the extent to which they complement and support each other, and ultimately match the development priority of recipient countries. Similarly, the need to engage with and strengthen coordination among national government agencies, local donor representatives and the private sector suggests that monitoring and evaluation need to take place locally and feed into the process and deliberations that inform the national prioritisation processes.
Developing an Appropriate Methodology In order to allow for comparability of country studies, ICTSD and the South Asia Watch on Trade, Economics and Environment (SAWTEE) in Nepal, developed a comprehensive methodological framework for conducting independent evaluation of the effectiveness of AfT at the national level. The initial draft of this methodology was discussed and fine tuned through a workshop conducted with partner countries, donors and AfT experts. The methodology proposes a
series of qualitative and quantitative indicators to measure critical aspects of the initiative such as additionality and predictability of funds, mainstreaming, local ownership of the initiative and donors’ alignment and coordination. These objective indicators are complemented by an impact assessment of AfT projects in a particular sector (e.g. rice in Cambodia) or AfT category (e.g. trade facilitation) and at the macro level. While the methodology was developed for the purpose of a series of six pilot studies, it remains a living document which will be further improved based on practical experience and be used as a basis for further national studies by interested countries
Engaging Local Experts and Stakeholders In its initial phase, the ICTSD project focused primarily on Least Developed Countries (LDCs), but also looked at countries from different income groups to get a more diversified picture of AfT interactions at the national level. Other criterions which guided the identification process included the presence of a diversified donor community, investments in various sectors (e.g. infrastructure, agriculture, energy, tourism, services, etc.) as well as geographical considerations. As a result, LDCs like Nepal and Cambodia in Asia and Malawi in Africa; lower middle income countries like Peru in South America and Jamaica in the Caribbean and an upper middle income country like Mauritius in Africa were identified for conducting the initial country studies. ICTSD has followed a bottom up approach for these national studies. They were conducted by local independent researchers. Before undertaking the studies, a training workshop bringing together all the country study authors was organized by ICTSD to discuss the methodology
described above. The researchers then worked in close collaboration with government agencies, development partners, private sector and other local stakeholders, collecting information and conducting structured interviews with key national players in the AfT field. Their draft reports were then scrutinised through a ‘national consultation’ in each country to share the initial findings from the studies with various stakeholders, whose insights were used to finalize the studies. As a last step, to test these studies and their main conclusions, they underwent a process of peer review at the national and international level, where different academics and practitioners further contributed to them through comments and recommendations. The information generated is intended to assist partner countries in implementing AfT programmes more effectively, and to assist the donor community to better respond to the development needs of developing countries. Through the involvement of local stakeholders, including the private sector, civil society and academic institutions, the project also aims to strengthen their ownership in the AfT initiative, as well as their capacities in planning, implementing and evaluating projects. This inclusive and participatory approach is intended to foster a dialogue among national and regional stakeholders, which is crucial in making AfT coherent for the development policies and priorities of each economy.
Early Findings for Country Studies This section provides an overview of some preliminary lessons learned through the country studies and national consultations held in Nepal, Malawi, Mauritius and Cambodia.
ICTSD Project on Assessing the effectiveness and development impact of AfT at country-level
Training of local research teams
AfT Initiative and Global Monitoring and Evaluation
Need of country analysis
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Country workshops
Peer review
Country studies Methodology
Workshop with AfT experts and donors
(Malawi, Mauritius, Nepal, Cambodia, Jamaica, Peru)
Bringing the findings to the AfT review and to govt. involved
Interviews with governments agencies, donors, private sector, etc.
Aid for Trade on the Ground: Early Findings from Country Studies
July 2011
Funds Trajectory A general increase in the commitment of AfT funding has been observed for most of the countries involved in the ICTSD project even if, in some countries like Nepal, we have noticed untimely disbursements. Overall AfT funds have been additional and predictable. More importantly, increases in AfT funding has not happened at the expense of other sectors such as social or health funding. In all the countries - barring Mauritius - the highest amount of funding has been received for building trade related infrastructure. In spite of increased funding availability however, trade development in most countries has been restricted due to a dearth of human capacity, and many recommendations have argued for diverting focus towards human capacity building and private sector development as a driver for AfT as opposed to infrastructure projects. In this context, some authors have argued that the international focus on short-term results and strong disbursement data might to a degree undermine investment in local human capacity and in the development of local institutions. Sustaining the achievements made through AfT, has been highlighted as an additional challenge. While sustainability criteria are in some cases built into a project’s design itself, this is not the case for all projects and evidence of recipient country’s government providing sufficient funding to the project after donor funding dries up is limited. An example made by the government of Malawi was the donation of computers granted by the WTO under the Joint Integrated Technical Assistance Programme (JITAP) for four reference centres that were established. No funding was allocated for the maintenance of these computers once funding from the WTO ended and as a result the reference centres are currently not in operation.
Ownership by the Partner Country Unsurprisingly, partner country ownership has emerged as a vital factor in achieving AfT effectiveness. Those countries that have mainstreamed trade in a systematic manner and integrated it with their development agenda seem to be benefiting the most from AfT. The impact of AfT in those countries has been stronger and has resulted in increasing their export capacities. Although exports are determined by numerous factors, AfT has been successful in creating a strong base for export development while at the same time providing new opportunities for export diversification during the periods of reduced demand for traditional exports. The cases of Mauritius and Cambodia are examples where AfT has contributed to increasing sectoral diversification in the sugar industry and the rice sector, respectively, thereby resulting in an improved business climate, gains in competiveness and increases in flow of FDI.
In other countries, while trade has been mainstreamed in national development plans, there is still a lack of clear understanding among key stakeholders of how trade objectives can be realised through specific activities at the programme level. Moreover, there is little evidence that trade is mainstreamed in other ministries. In Malawi, for example, for the past five years the ministry of Agriculture and Food Security has focused on maize production rather than export diversification. The objective was to first develop productive capacity and then to find markets at a later stage. As a result some agriculture projects that did mainstream trade only had a limited impact. Due to the current large maize surplus, the government is now realising that trade is important and is starting to move beyond simply focusing on food security. Since 2010 this ministry has been attempting to mainstream trade through the recently launched Agriculture Sector Wide Approach (ASWAP). By contrast, the main road transport corridors in Malawi are being developed with the trade objective in mind, and the energy sector is also being increasingly being driven by trade priorities. The Caribbean Aid for Trade Regional Integration Trust Fund (CARTFund), which was designed to assist CARIFORUM countries in boosting growth through trade and regional integration suffered from a similar drawback, as the region lacked a strategic framework for the use of funds. The Caribbean has not yet elaborated an AfT Regional Strategy and national AfT strategies have also not been completed apart from a late 2010 draft prepared by Belize. Therefore, while ownership can be seen as indispensible for the effectiveness of AfT and to maximise its impact, AfT also needs to take into consideration that developing efficient ownership in countries which lack institutional capacities falls within the ambit of AfT measures.
Alignment When there is a high degree of alignment between the donors and the countries development agenda, the benefits of AfT are the greatest. Mauritius is a shining example of this point. Aid delivery, in the case of Mauritius, is in complete harmony with the country systems, funds are transferred to the National Treasury, blended with domestic resources and are spent across the board. On the other hand, in countries like Malawi and Nepal, the use of country systems is limited. Nepal in particular seemed to have implemented AfT through the rampant use of Parallel Implementation Units, which entailed donors largely dominating project design, staff recruitment as well as procurement. This approach to aid restricts the capacities of the country and in turn facilitates dependence on the donor expertise.
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Donor Coordination When there is efficient donor coordination and projects are not repetitive, AfT also has a positive impact on partner countries. In Malawi for example, donors’ coordination has improved significantly, largely due to the Ministry of Finance’s Division of Labour Matrix, the establishment of Sector Working Groups, Common Approach to Budget Support, and informal donor discussion forums. Another promising example is the multi-donor trade-related technical assistance initiative is the Trade Development Support Program (TDSP) in Cambodia which aims to increase the Royal Government’s efficiency in formulating and implementing effective trade policies, even if so far, implementation has been slow. Inefficient donor coordination and project duplication, as observed in certain areas in Nepal, is both due to lack of information among donors and/ or simply because the government does not make efforts to prevent donors from duplicating efforts.
South-South Cooperation South-South cooperation is furthering the effectiveness of AfT in all the country where studies were conducted. As highlighted in the case of Malawi, South-South donors seem to fund projects that Development Assistance Committee (DAC) donors do not. However, South-South donors do not function within the sphere of the Paris Declaration and thus don’t apply its principles; this in turn runs the risk of limited aid effectiveness while at the same time curtails the scope of enhanced cooperation with other donors.
Absorptive Capacities One of the major challenges that AfT needs to overcome is restrictive local absorptive capacity. It emerges as a strong roadblock in achieving AfT development goals as it invariably retards an efficient utilization process of AfT funds. Absorptive capacities remain weak in all the countries studied except Mauritius. This highlights the need for human resources development to be undertaken through formal training courses, coaching and mentoring by advisers, on-the-job training and learning by doing. As highlighted in the CARTFund example, project design
and technical skills can only be learned through long-term exposure and direct involvement in project management in all phases. It is a long learning curve, but it’s the most effective tool for capacity building. Another key element in the human resources development is for the key ministries to establish a permanent group of dedicate project team to be trained as technical and managerial staff.
Impact While AfT is not the only factor responsible for increasing exports in a country, it certainly has a potential to deeply influence trade performance. This is thus a central indicator for measuring the impact of AfT. The country studies have highlighted that the impact of AfT on trade performance has been extremely varied. For instance, in Malawi, the positive impacts of AfT projects on export levels have not been large enough to allow Malawi to reduce its ballooning trade deficit. The experience of Mauritius tells a different story, as its exports are suffering due to external restraints such as changes in global demand patterns, but AfT has been successful in improving the export performance and the business climate. Cambodia is another success story where export performance and diversification are improving through a shift in the export base, with the share of garments falling to around 49 percent while other sectors (such as pulp of wood/paper, mineral products, plastics and prepared foods) keep gradually growing. Trade facilitation projects financed with AfT funds have been particularly beneficial in improving export competitiveness in Cambodia. In Nepal, infrastructure projects have helped reduce transaction costs and positively influenced trade performance; at the same time, AfT has not been able to address supplyside constraints to increase trade capacity at the macro level. Some countries have a stronger need to develop ownership, while some need AfT for private sector development and local capacity building; others may benefit through economic diversification. In this regard, the alignment between the donor and partner country to assess the true development requirements plays a vital role.
About ICTSD Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an independent non-profit and nongovernmental organization based in Geneva. By empowering stakeholders in trade policy through information, networking, dialogue, well-targeted research and capacity-building, ICTSD aims to influence the international trade system so that it advances the goal of sustainable development. For further information, please visit www.ictsd.org. This paper was produced under ICTSD Competitiveness and Development Programme. ICTSD is grateful for the support of ICTSD’s core and thematic donors including the UK Department for International Development (DFID), the Swedish International Development Cooperation Agency (SIDA); the Netherlands Directorate-General of Development Cooperation (DGIS); the Ministry of Foreign Affairs of Denmark, Danida; the Ministry for Foreign Affairs of Finland; the Ministry of Foreign Affairs of Norway; AusAID; and Oxfam Novib. Information Note by Christophe Bellmann, Paolo Ghisu and Rishabh Kumar Dhir, ICTSD. Citation: ICTSD; (2011); Aid for Trade on the Ground: Early Findings from Country Studies; ICTSD Programme on Competitiveness and Development; Information Note No. 20; International Centre for Trade and Sustainable Development, Geneva, Switzerland.
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© ICTSD, 2011. Readers are encouraged to quote and reproduce this material for educational and non-profit purposes provided the source is acknowledged. The work is licensed under the Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License. To view a copy of this license, visit http:// creativecommons.org/licenses/by-nc-nd/3.0. ISSN 1684 9825