Vishnu BASSANT, Director, Development Cooperation

1
Identifying Indicators for Monitoring AFT
Competitiveness, capacity and performance

• 15 September 08, Geneva

2
For effective monitoring of AFT

• Beneficiary has an AFT-compliant development
  agenda with trade liberalisation at the core.
  Must be embedded in regional programs and in EPAs
• Programme endorsed by development community
• AFT pledges have are being delivered and are
  aligned to recipient agenda
• A set of prior actions, triggers and KPIs that
  govern disbursement of funds as well as
  milestones to ensure that programme remains on
  track are agreed to
• In the absence of these prerequisites, evaluation
  and monitoring cannot be effective

3
The case of Mauritius

• A 10-year AFT-compliant reform agenda initiated
  in FY 06/07 to reduce reliance on preferences to
  move towards global competitiveness
• Main objective is to open up to the rest of the
  world for trade in goods (duty free island) and
  services, movement of labour and capital.
• Agenda also embedded in the regions integration
  strategy and interim EPA
• In the first year 40 major reforms and over 150
  specific measures introduced around 4 pillars
• Fiscal consolidation
• Improve Trade Competitiveness
• Improve investment/business climate to be in top
  10
• Democratise the economy Participation, Social
  Inclusion and Sustainability
• Programme endorsed and financed by development
  partners (EU, WB, ADB, AFD)
• Basket of indicators covering wider reforms
  agreed with development partners (8 -10 per year)

4
Selected components of the programme
5
The Results Framework

• Fiscal performance i) stabilize revenue and ii)
  reduce expenditure (with increases in pro-poor
  expenditures)
• Trade competitiveness i) Revamp incentives to
  reduce anti-export bias ii) Raise productivity
  of existing sectors and iii) Facilitate
  development of dynamic new sectors (v)
  restructure firms affected by liberalisation
  (Enterprise Programme)
• Investment climate i) Facilitate investment ii)
  Increase labor market flexibility iii) Attract
  skilled foreign workers iv) Improve
  infrastructure and v) Ensure environmental
  sustainability
• Democratise the economy i) Improve education
  ii) Provide transitional support for unemployed
  workers (Empowerment programme) iii) Supply
  low-income housing and iv) Strengthen social
  safety nets to target the most needy

6
Fiscal Performance

• Reduce primary spending as a percentage of GDP
  relative to FY 05/06.
• Reduce tax expenditures by 0.5 of 05/06 GDP by
  measures enacted in the 06/07 Finance Act.
• Use fiscal rules to set budget envelope and
  strengthen monitoring to ensure allocations to
  line ministries accord with preset ceilings.
• Pass legislation to abolish ministerial
  discretion over tax and duty exemptions

7
Trade Competitiveness

• First year of phased tariff reduction toward
  eventual duty free island by cutting top ad
  valorem rate from 65 to 30 percent and reducing
  average tariffs by 2 percent
• Unify tax and regulatory regimes for EPZ and
  non-EPZ firms, with the exception of labor
  regulation
•  Reduce cost of International Private Leased
  Circuits by 20-35

8
Investment Climate

• enact Business Facilitation Bill to enable ex
  post verification rather than ex ante approval
• designate the Registrar of Companies as one a
  one-stop center for business registration in the
  Business Registration Act
• Amend the Planning and Development Act to merge
  development and building permits.
• transform the trade licensing fee into a single
  municipal fee to be paid post business operation
  through amendment of the Local Government 2003
  Act.
• Ease entry of foreign skilled workers by issuing
  permits within 3 working days on published rules
• Link wages to productivity increases by replacing
  present wage setting mechanism with National
  Wages Council
• Introduce flexibility in recycling labor while
  protecting workers not jobs.

9
Democratise the Economy

• Set up machinery for Empowerment Programme to
  spend Rs5 billion over 5 years on social
  protection, retraining and SME support.
•  
• Design measures to facilitate growth of formal
  SME sector, including access to assistance,
  technical assistance and capacity building, SME
  consultancy service
•  
• Replace consumer subsidies with targeted cash
  transfers, with additional measures to increase
  support and opportunities to the poorest.
• Evaluation, consolidation and refocusing where
  necessary of existing social welfare programs. 

10
Improving the delivery of AFT Lessons Learnt
and Challenges

• Need to untie TA , increase TA to MICs and build
  local capacity
• IFIs and bilateral donors to pool resources and
  expedite provision of support in a predictable
  manner
• Strengthen country offices or set up new ones in
  countries that have AFT-compliant programs
• Donors need to ensure AFT-compliance when
  financing national programmes as is the case with
  the EC
• Better coordination required with RECs by
  seconding staff
• Country economists to interact with regional
  departments to ensure policy coherence
• Regional IDA and Regional ADF should be made more
  flexible to support policy reforms in addition to
  financing projects
• EC support to COMESA Fund may be replicated in
  other RECs
• Donors need to agree on KPIs to assess the
  effectiveness of their responses