1

AID FOR TRADE AID FOR TRADE ARCHITECTUREARCHITECTURE

MAURITIUS VIEWMAURITIUS VIEW

2

EXPECTATIONS FROM AFTEXPECTATIONS FROM AFT

Type of assistanceType of assistance:: Non-debt increasing Non-debt increasing

Eligibility:Eligibility: All DCs All DCs suffering from erosion of suffering from erosion of preferencespreferences

Duration:Duration: BBetween now and end of 10etween now and end of 10thth EDF EDF

ModalityModality: : Budget Support preferred/ infrastructure, Budget Support preferred/ infrastructure, human capital and social safety nets human capital and social safety nets

3

WHY NON DEBT INCREASING?WHY NON DEBT INCREASING?

Public finance cannot support market rate Public finance cannot support market rate debt given need to consolidate in response debt given need to consolidate in response to shocksto shocks

Only transitional support concentrated on Only transitional support concentrated on initial years- will decline over the periodinitial years- will decline over the period

In present value terms, cost of support is In present value terms, cost of support is lower than cost of preferences for everlower than cost of preferences for ever

High return -increasing resilience and High return -increasing resilience and reducing reliance on aidreducing reliance on aid

4

WHY BUDGET SUPPORT?WHY BUDGET SUPPORT?

Policy flexibility Policy flexibility

Faster response to adjustment needsFaster response to adjustment needs

Adjustments are easier through the budgetAdjustments are easier through the budget

A higher degree of national ownershipA higher degree of national ownership

Improves coordination with other development Improves coordination with other development partnerspartners

5

HOW SHOULD AFT BE HOW SHOULD AFT BE OPERATIONALISED? OPERATIONALISED?

Seek grants under the AFT Scheme through Seek grants under the AFT Scheme through multilateral/bilateral channelsmultilateral/bilateral channels

Linked to trade liberalisation as well as regional Linked to trade liberalisation as well as regional integrationintegration

Have a well defined programme for the transitionHave a well defined programme for the transition Have a full costing of the programme Have a full costing of the programme Have a self assessment checklistHave a self assessment checklist Existing or future Regional Funds could be Existing or future Regional Funds could be

redirectedredirected

6

Benefits of Redirecting Regional FundsBenefits of Redirecting Regional Funds

Same type of interventions would be supported at Same type of interventions would be supported at the regional levelthe regional level– Regional InfrastructureRegional Infrastructure– Upgrading of Human CapitalUpgrading of Human Capital– Behind the Border Trade FacilitationBehind the Border Trade Facilitation

Higher payoffs as measured by:Higher payoffs as measured by:– Reduction in external tariffs and removal of NTBsReduction in external tariffs and removal of NTBs– adoption of trade facilitation measures adoption of trade facilitation measures – Improving scores on Doing Business and the Heritage Improving scores on Doing Business and the Heritage

Index of Economic FreedomIndex of Economic Freedom

7

ROLE OF INTERNATIONAL ROLE OF INTERNATIONAL INSTITUTIONSINSTITUTIONS

Support for developing a programmeSupport for developing a programme Help identify the reformsHelp identify the reforms Help with costing of the transitionHelp with costing of the transition Endorse the programme and self assessment Endorse the programme and self assessment

checklist of each countrychecklist of each country Monitor the use being made of the AFT Monitor the use being made of the AFT

moneymoney

8

Role of Regional OrganizationsRole of Regional Organizations

Provide a framework for encouraging Provide a framework for encouraging reform by countries ready to go while reform by countries ready to go while assisting those that need more timeassisting those that need more time

Emphasize performance related policy Emphasize performance related policy reform and assist in the monitoringreform and assist in the monitoring

Link multi-lateral liberalization and Link multi-lateral liberalization and regional integrationregional integration

9

CASE OF MAURITIUS CASE OF MAURITIUS

Having to face the triple shocks of Having to face the triple shocks of dismantling of MFA, cut in the price of dismantling of MFA, cut in the price of sugar, rising energy pricessugar, rising energy prices

Government finances and the Government finances and the macroeconomic situation are deterioratingmacroeconomic situation are deteriorating

Making the transition is socially and Making the transition is socially and economically very costly and politically economically very costly and politically difficultdifficult

10

OUR PROGRAMMEOUR PROGRAMME

Fiscal consolidationFiscal consolidation

Investment Climate ImprovementInvestment Climate Improvement

Restructuring and consolidating existing Restructuring and consolidating existing economic pillarseconomic pillars

Diversifying into new economic activitiesDiversifying into new economic activities

11

TARGETS AND INDICATORSTARGETS AND INDICATORSFISCAL CONSOLIDATIONFISCAL CONSOLIDATION

Golden RuleGolden Rule

Sustainable Investment Rule Sustainable Investment Rule

12

TARGETS AND INDICATORSTARGETS AND INDICATORSINVESTMENT CLIMATEINVESTMENT CLIMATE

Move from 23Move from 23rdrd in Doing Business to Top in Doing Business to Top 1010

Implementing the principle of Silent Implementing the principle of Silent AgreementAgreement

13

SUGARSUGAR1970

Monocrop Monocrop EconomyEconomy

TEXTILETEXTILESUGARSUGARTOURISMTOURISM

1980

ManufacturiManufacturing & ng & TourismTourism

TEXTILETEXTILESUGARSUGARTOURISMTOURISMFINANCIALFINANCIALSERVICESSERVICESFREEPORTFREEPORT

1990

ManufacturinManufacturing & Services g & Services EconomyEconomy

TEXTILETEXTILESUGARSUGARTOURISM TOURISM FINANCIAL SERV.FINANCIAL SERV.ICT / BPOICT / BPOREAL ESTATE REAL ESTATE SEAFOOD/SEAFOOD/AQUACULTURE AQUACULTURE KNOWLEDGEKNOWLEDGEPHARMACEUTICALPHARMACEUTICALS S ENERGY ENERGY

2000

Business Business PlatformPlatform

Consolidating Existing Pillars Consolidating Existing Pillars and Diversificationand Diversification

14

OVERALL OBJECTIVEOVERALL OBJECTIVE

From a 4-pillar to an 8-pillar economy in 10 From a 4-pillar to an 8-pillar economy in 10 yearsyears

First, we must succeed the transition First, we must succeed the transition

15

COSTS OF TRANSITIONCOSTS OF TRANSITION

Four billion euros over 10 yearsFour billion euros over 10 years FrontloadedFrontloaded

Investing in productionInvesting in production 1.9 billion 1.9 billion

Infrastructure Infrastructure 1.8 billion1.8 billion

Training & retrainingTraining & retraining 100 million100 million

16

SUPPORT FROM SUPPORT FROM INTERNATIONAL INTERNATIONAL

INSTITUTIONSINSTITUTIONS IMF: Fiscal consolidation & finding fiscal space IMF: Fiscal consolidation & finding fiscal space

for social safety netsfor social safety nets World Bank: Review of incentive framework, World Bank: Review of incentive framework,

need for infrastructure support, programmes to need for infrastructure support, programmes to assist reallocation of resourcesassist reallocation of resources

IMF/WB assist countries in determining the cost IMF/WB assist countries in determining the cost of transition from preference dependent to of transition from preference dependent to liberalised trade as a basis to support their efforts liberalised trade as a basis to support their efforts to mobilise financing under AFT to mobilise financing under AFT

17

MECHANISMS FOR MECHANISMS FOR INTERNATIONAL SUPPORT INTERNATIONAL SUPPORT

NEEDED NEEDED NOWNOW Shocks already having impactShocks already having impact Cost of inaction by Int’l community is highCost of inaction by Int’l community is high Cost is low compared to benefitsCost is low compared to benefits A visible AFT program could favourably A visible AFT program could favourably

change the dynamics of the Doha Roundchange the dynamics of the Doha Round Donor community need to leadDonor community need to lead

18

THANK YOUTHANK YOU