Central Asia, Afghanistan and Azerbaijan heralded a new phase in regional trade development at the end of their Ministerial Conference yesterday, with the launching of a Regional Aid-for-Trade (Aft) Implementation and Monitoring Council. Hosted by the Azerbaijani Government in Baku, 1-2 December 2010, the Aid for Trade Road Map for SPECA Ministerial Conference gathered officials and experts from the five countries of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan) plus Afghanistan and Azerbaijan (the countries that make up the United Nations Special Programme for Central Asia: SPECA), who came together with their development partners in a multi-stakeholder forum to discuss and agree an Aid- for- Trade Road Map for SPECA.
The Council will bring together beneficiary countries, multi-lateral and bi-lateral donors and UN agencies working on trade issues, in order to:
The Council will also work in close partnership with the SPECA Project Working Group on Trade, which features high-level representation from SPECA countries. The aim is to ensure greater inclusion of SPECA countries in the World Trade Organization (WTO) AfT initiative, launched in December 2005 to help developing countries consolidate the required trade-related and infrastructure capacities for benefiting from WTO agreements and expanding their trade.
Vice-Minister of the Ministry of Economic Development of Azerbaijan, Mr. Niyazi Safarov, called for “more intensive collaboration” among SPECA countries and international organizations in the area of trade development. He noted that the AfT initiative could be a valuable mechanism in supporting SPECA countries’ efforts to diversify their economies. The initiative also gains much importance for overcoming problems facing the landlocked SPECA countries.
In this respect, Mr. Samir Veliyev, Head of staff of the Ministry of Economic Development of the Republic of Azerbaijan, said that his country looks forward to working closely with the SPECA AfT Council, which will provide a much needed mechanism for coordinating trade development efforts in SPECA countries. By involving all relevant national, regional and international development partners, the Council provides an institutional mechanism for avoiding the duplication of efforts. It also provides for the development of responses to development needs that strike a balance between the specific needs of individual countries and broader, regional strategic goals.
As regards the Regional Aid-for-Trade (Aft) Implementation and Monitoring Council’s efforts to support SPECA countries’ national and regional trade development, Ms. Virginia Crams-Martos, Director of UNECE’s Trade and Timber Division, explained that the Council will focus on ensuring that all trade development priorities agreed by SPECA countries are adequately supported by projects and funding.
As laid out in the Ministerial Declaration, at a regional level, these priority areas will be:
Mr. Jean-Jacques Hallaert, OECD Senior Trade Policy Analyst, emphasized that Aid for Trade can help SPECA countries realize their growth potential. He noted that while the SPECA countries have been rather successful in attracting AfT, when flows are measured on a per capita basis they are somewhat above average, the region is still at a risk of marginalization. While Asia witnessed a 40% increase in donor commitments of AfT in 2008, SPECA countries saw a modest increase of 8%, with Afghanistan included, and a reduction in total commitments of 16% without Afghanistan. This risk of marginalization is not a fatality and SPECA countries could attract more AfT. The first step is to express their trade-related needs. In this context the Roadmap agreed in the Ministerial conference is crucial and should be complemented by countries active participation in the joint OECD/WTO monitoring exercise that will underpin the 3rd Global Review of Aid for Trade.
Mr. Jens Wandel, Deputy Regional Director of UNDP Europe and Director of the UNDP CIS Bratislava Regional Centre, pointed out during the conference, that at the end of the day, “the success of any initiative is a function of the level of national commitment and national ownership and it is for this reason that the members of the high-level SPECA Working Group on Trade need to be fully involved both in providing guidance to the SPECA AfT Council on country priorities and in the Council itself, discussing future directions for trade development in the region”.
Note to editors
Organizational and advisory support for the conference was provided by the United Nations Development Programme (UNDP), the United Nations Economic Commission for Europe (UNECE), the United Nations Industrial Development Organization (UNIDO), the International Trade Centre (ITC), the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group; and financing by the Finnish Government and the ITFC.
The slow recovery of Central Asia and Azerbaijan from the global financial crisis highlights the need for targeted efforts to support deeper regional integration. Regional integration will be a key element in responding to long-standing economic weaknesses in these countries and, particularly, the lack of economic diversification. In Afghanistan, for instance, the all-time record high of 22.5% gross domestic product growth registered during the first quarter of 2010 will be difficult to maintain, fueled as it is by donor aid.
SPECA countries remain beset by the harmful effects of domestic and regional imbalances. The middle-income countries are marked by large income gaps between urban and rural areas. In 2009, the oil-and-gas-rich countries of Kazakhstan, Azerbaijan and Turkmenistan enjoyed “middle income” per capita gross national income (GNI) of between US$ 7,000 and 10,300. In the remaining four countries, the GNI was between US$ 1,100 and 2,900.
Central to the SPECA countries’ development predicament are inadequate levels of trade capacity and a lack of export diversification. Despite the Governments’ intensive efforts to develop external trade, the countries continue to show a narrow export mix. A small range of unprocessed, semi-finished, and light manufactured products make up the bulk of exports, as well as agricultural products (especially in Afghanistan), oil and gas.
SPECA countries must develop their productive capacities -- that is, their abilities to efficiently and competitively produce an increasing range of higher value-added goods and services. Otherwise, they will find it hard to achieve sustained income growth and end the chronic vulnerabilities within their economies. With their current heavy dependence on exports of primary commodities and low-value-added manufactures, even boom periods will do little to improve the living standards of the majority of the population – and might even reduce living standards through increased inflation.
Regional trade integration offers an important part of the solution. It could provide nearby markets, enable the emergence of new growth poles, and boost investment. However, such integration remains an unexplored potential. Intra-regional trade is still low, even in those products that rank high on the SPECA countries’ exports to the rest of the world, such as fruits, vegetables and vehicles.
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