Statement at the session on Regional Cooperation and Trade in Central Asia: Integrating into the Global Economy (en)

Speech by Ms. Arancha González, Executive Director, International Trade Centre
Delivered on 05 December 2013 at the session on Regional Cooperation and Trade in Central Asia, Bali, Indonesia

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Good afternoon, Ladies and Gentlemen

Thank you for inviting me to participate in this very important discussion. I thank the Asian Development Bank and the WTO for inviting ITC to contribute. I will briefly focus on the benefits of WTO accession for the private sector, in particular for small and medium sized enterprises. I also want to share some thoughts on how ITC will assist developing countries and their SMEs both the pre and post accession phase.

Acceding to the WTO is a game changing political and economic decision. Not only is it a political stance that a country sees itself as part of the multilateral decision making process on trade but it is a clear signal to investors, to the private sector and to your trading partners that a country is committed to trade-led growth and to making it more predictable and transparent for SMEs to produce and trade. It is a clear economic decision that an economy is willing to subsume some of its policy making flexibility to ensure global economic stability and multilateral predictability.

Accession is not always easy. There are adaptation challenges that policy makers and business need to come to terms with. There are a great number of opportunities but sometimes the challenges may seem more prevalent- especially at the initial stage. But there are a number of clear examples where accession has led to a further integration of economies into the multilateral trading system and to increasing the profile of these countries as investment and trading ports. Or although opening of markets bring adaptation challenges in the short-term, we need to recall that the primary reason for this, and indeed for joining the WTO, is to be able to capitalize on the opportunities that this change brings about.

Carrying out a trade opening programme and committing to follow WTO rules are critical for attracting FDI and associated gains in the acquisition on new technologies and increased productivity. For example, Vietnam registered a sharp increase in the foreign direct investment flows from USD 2.4 B in 2006, one year before the country acceded to the WTO, to USD 9.6 B in 2008 – an almost four fold increase in two years. Similarly in Cambodia, foreign direct investment flows increased from a small base of USD 84 million in 2003, one year before the country acceded to the WTO to USD 815 million in 2008 – an almost tenfold increase in five years. For both countries, increased levels of FDI have also corresponded to significant higher levels of exports. Cambodia increased its exports from USD 2.2 B in 2004 to USD 5 B in 2010.

Specifically on recent developments in the CAREC region, I fully recognise that the regional economic landscape has undergone major changes in recent years, changes that are likely to persist and will shape trade in the years to come. On the one hand, China and other emerging markets such as Turkey have significantly increased their share of trade with Central Asia. Their high growth over the last years fuelled demand for commodities but also their hunger for new markets. China today is the biggest trading partner for Central Asia. Russia is the second most important trading partner.

On the other hand, there is an ambitious on-going effort for regional integration under the umbrella of the Eurasian Customs Union and with the strong leadership of Russia. These key economic and policy developments will have an impact on the region’s industries, shaping intraregional trade, but also the region’s trade with the world. The sticking point here is to enable countries to leverage the opportunity of WTO accession for their regional integration efforts. In that spirit WTO accession can be seen as part of a wider strategy and enabler to improve domestic reforms, enhance competitiveness and successfully integrate into regional and global value chains.

WTO membership helps to facilitate a pro-competitive business and regulatory environment for local businesses – large businesses but also SMEs. And the Commitments made under the accession process if implemented through a set of structural reforms, can contribute to improving the national business and regulatory environment, which ultimately promotes competitiveness of local business and attracts the real investors in the economy.

But how can countries be best equipped for accession? How can they prepare? This is exactly what ITC has been doing for the past 50 years: help developing countries and their SMEs to fully benefit from market access opportunities and help them to better integrate into value chains through building the capacity to export and trade. From the huge importance of SMEs in the economies of the region, supporting the competitiveness of SMEs will be key to help business tap into the trade opportunities.

ITC is focused on practically translating these trade agreements and commitments into real business opportunities for SMEs. How do we do this? Through various initiatives on the ground, we connect a large and wide population of small businesses to regional and global value chains, buyers and investors. This is done in a number of different ways:

• We help SMEs become internationally competitive and export-ready, and as a result increase their export sales.
• We also build the capacity of policymakers and trade promotion organizations to better support exporters and create a better environment for businesses to flourish; and
• We help deepen regional integration through various trade facilitation solutions that reduce procedural complexity and minimize the related translation costs, while maintaining efficient and effective levels of government control.

And how can we specifically support CAREC countries? Throughout the past 15 years ITC has built a strong presence in Central Asia, and also in some neighbouring countries such as Pakistan and China. We have been providing assistance to the region in many areas of trade, such as building competitiveness of agribusiness and textile and clothing, WTO pre- and post-accession support, export strategies development or building quality management infrastructure. Recent examples of our work include the National Export Strategy in Kyrgyzstan, launched on 30 October this year; the international recognition and accreditation of the Kyrgyz Center of Accreditation (KCA) also in October this year, which ITC supported since 2006; and successful completion of WTO accession in Tajikistan in 2012 which ITC considerably contributed to. These are just some of the examples of what we have done. And we want to do more.

Let me outline a few specific areas of ITC expertise which are particularly relevant in the context of WTO pre- or post-accession. The ITC can and will continue to:

• Support countries WTO accession negotiations through providing customized advice throughout the multilateral negotiations on rules as well as bilateral negotiations on goods and services market access. For example, in Tajikistan, laws and regulations relating to the import licensing system were reviewed, deficiencies identified and recommendations provided to bring it in compliance with the provisions of the relevant WTO Agreements.
• Public private dialogues to raise awareness of all stakeholders of the business implications of WTO accession. For example, Lao National Chamber of Commerce and Industry was supported in the post accession phase to reach out to farmers in their provinces on implications of agriculture commitments.
• Capacity building and advisory services through targeted training and workshops for the private sector on specific sectors, such as financial services, telecoms, transport and logistics, energy, and agriculture; as well as preparation of business guides on benefits stemming from the WTO accession and the potential inherent in the creation of new markets. For example, ITC shared experience of policy and regulatory reforms undertaken by other countries at similar levels of economic development, especially in the infrastructure services to build confidence of the private sector in the merit of undertaking such reforms in Tajikistan, and Lao PDR in pursuance of their bid for WTO membership.
• ITC also supports trade support institutions to become well equipped for business advocacy services so that they can provide answers to exporters’ and SMEs’ queries related to WTO membership and for them, as domestic providers of capacity building themselves, to allow them to sustainably build this knowledge in-country.
• We are also in a position to help countries in the region in the area of Trade facilitation. Effective trade facilitation is critical for all countries but especially so for landlocked countries. Creating a legally binding basis for transit in particular, coupled with the necessary technical assistance and capacity building will help the countries in the CAREC region to trade with more predictability and transparency. The ITC has just launched a catalogue of services related to how it can help countries and SMEs implement, operationalize and understand the elements of the Trade Facilitation Agreement. At the back of the room you will find our recently produced brochure on this issue.

Ladies and Gentlemen, the CAREC region and countries have achieved remarkable progress in the past 20 years. They have mastered the transition to independent economies. Now it is time to unleash the prosperity potential that CAREC countries have - individually as well as a region. ITC is dedicated to support CAREC partners in this journey.

Thank you