Trade Capacity Building in SubSaharan Africa: Impact and Challenges

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Trade Capacity Building in Sub-Saharan Africa
Impact and Challenges

• Patrick Osakwe
• UN Economic Commission for Africa

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I. Background

• The Millennium Declaration specifies targets for
  poverty reduction in poor countries
• If current trends persist, several countries in
  Sub-Saharan Africa are unlikely to meet the
  specified targets
• Research studies suggest that the region would
  need additional resources equivalent to 20
  percent of GDP if it is to achieve the MDGs

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• The required resources can come from one of three
  sources
• Increase in domestic savings
• More FDI inflows
• Increase in international trade

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• Given the difficulties associated with raising
  domestic savings and attracting FDI to Africa,
  more emphasis is being placed on trade as a
  possible solution
• But Africa has not been able to integrate itself
  fully into the global trading system due in part
  to trade capacity constraints

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II. Objectives of Paper

• Identify the capacity constraints facing Africa
  in the trading system
• Assess likely impact of current trade capacity
  building programmes
• Suggest ways in which trade capacity building
  could be improved to ensure that trade is used as
  an effective vehicle for poverty reduction in
  Africa

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Figure 1 Types of Trade Capacity Constraints
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III. Main Capacity Building Programmes

• Joint Integrated Technical Assistance Programme
  (JITAP)
• Designed primarily to provide assistance to
  African countries
• Launched in 1996 but became operational in 1998
• Integrated Framework (IF)
• Designed to respond to capacity building problems
  of LDCs
• Inaugurated in 1997 with the objective of
  mainstreaming trade into development strategies

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Figure 2 Regional Distribution of Expenditure on
Trade Capacity Building (millions of US)
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Figure 3 Main Beneficiaries of Trade Capacity
Building in Africa ()
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IV. Impact of Trade Capacity Building Programmes

• It is difficult to conduct an assessment of the
  impact of donor-funded trade capacity building
  programmes in recipient countries
• Outcomes of programmes are observable only in the
  medium-to-long run
• Donor support is not the only factor that affects
  trade capacity development. Domestic policies are
  also important
• Until recently aggregate data on trade capacity
  building was either not available or accessible

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Methodology

• There are at least three ways to conduct an
  assessment of the impact of trade capacity
  building in recipient countries
• Before-and-after programme approach
• Regression analysis. If outcomes are known this
  can tell us whether they are explained by trade
  capacity building
• Correlation analysis. When outcomes are unknown,
  this can tell us whether or not trade capacity
  building is associated with factors that affect
  long-term capacity development. Data limitation
  restricts us to this approach.

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Question

• The key question in this paper is What is the
  likely impact of current trade capacity building
  efforts on long-term capacity development in
  Africa?
• Note that complementary domestic policies (an
  enabling environment) are required for trade
  capacity building to have positive long term
  impact in Africa

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• Given this fact, our test relies on cross-country
  correlations between expenditures on trade
  capacity building and economic and social
  variables capturing whether or not there is an
  enabling policy environment
• Degree of political instability
• Extent of governance
• Incidence of HIV/AIDS
• Education
• Exports and Export Diversification

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Table 1 Cross-country Correlations of Trade
Capacity Building with Selected Variables in
Sub-Saharan Africa (2001-2002)
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Key Policy Implication of Results

• If current trends persist, trade capacity
  building programmes are unlikely to have any
  sustained positive impact on capacity development
  in Africa due to Political Instability and the
  HIV/AIDS epidemic.
• Political instability encourages Brain Drain
• HIV/AIDS destroy precious human capital

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Table 2 Estimated and Projected Loss of Labour
Force due to HIV/AIDS
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V. How can trade capacity building be made more
effective?

• African governments must create an enabling
  policy environment for individuals to take the
  initiative to develop their human capacity
• Institutional capacity development should be
  given priority
• Need to change the attitude of policymakers
  towards research and policy analysis
• Private sector must be more involved in trade
  capacity building and policy formulation
• Need to address the risks posed by political
  instability and the HIV/AIDS epidemic
• Trade capacity building cannot be done in
  isolation. A comprehensive approach is needed.

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Challenges for African Governments

• The degree of attention to devote to trade and
  trade capacity building relative to other
  development problems
• How to reduce risks of policy reversals to ensure
  sustainability of capacity building programmes
• Ensuring that all local stakeholders participate
  actively in the process
• Enhancing coordination and timely exchange of
  information among government departments to
  ensure policy coherence

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Challenges for Donors

• Increasing donor coordination of programmes
• Reducing the incidence and risk of biased aid
• Ensuring local ownership of programmes and
  outcomes
• Generating sufficient funds domestically to
  support capacity building in recipient countries

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Challenges for Executing Agencies

• Coordinating capacity building programmes to
  enhance the effectiveness of assistance
• Resisting the temptation to focus on outputs
  rather than outcomes
• Ensuring that programmes are sustainable and
  create and incentive for recipient countries to
  develop the ability to help themselves