trade, development and poverty reduction in 13 developing countries from asia and sub- saharan...
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Trade, Development and Poverty Reduction in 13 Developing
Countries from Asia and Sub-Saharan Africa: An Overview
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Development strategy for growth, employment and poverty reduction
‘self-sufficiency’ foreign aid and campaign for ‘trade not aid’
Shift from inward-looking policy
actively engaged in MTNs
Unilateral liberalisation and MTNs promised a new era for growth and poverty reduction.
Background
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However, trade and development experiences are far from being similar
…so diverse that the general relationship is a subject of regular empirical scrutiny.
Main objective of the TDP Project –
to study country cases and understand the nature and dynamics involving TDP linkages.
Background (contd.)
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CUTS-TDP project – overall country and sectoral experiences
Volume – I brings together general
country case studies
A forthcoming volume will contain sectoral case studies
Background (contd.)
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The 13 countries in CUTS-TDP
8 from Asia (Bangladesh, Cambodia, China, India, Nepal, Pakistan, Sri Lanka and Vietnam)
5 from sub-Saharan Africa (Kenya, South Africa, Tanzania, Uganda, and Zambia)
Set of diverse countries Large and Small High growth and erratic growth performance Large and low export response Commodity primary and manufacturing
Diversity offers invaluable insights into TDP linkages
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Countries GDP ($ bill) PC GNI ($) PPP PC GDP POP (mill)
BGD 60 470 - 142
CAM 6 430 2,727 14
CHN 2234 1740 6,757 1,304
IND 805 730 3,452 1,095
NEP 7 270 1,550 27
PAK 111 690 2,370 156
SRL 24 1160 4,594 20
VNM 52 620 3,071 83
KEN 18 540 1,239 34
SAFR 239 4770 11,110 47
TAN 12 340 744 38
UGA 9 280 1,433 29
ZAM 7 500 1,022 12
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X ($b) X/GDP(%) Mfg/Mer X (%)
Agr/GDP (%)
Poverty ratio (%)
BGD 10 16 91 20 44.2
CAM 4 65 97 34 35
CHN 837 38 92 13 7.9
IND 166 21 70 18 26.1
NEP 1 16 74 38 30.8
PAK 17 15 82 22 32.1
SRL 8 34 70 17 22.7
VNM 37 70 55 21 18.1
KEN 5 27 21 27 52.3
SAFR 65 27 57 3 57
TAN 2 17 14 45 35.7
UGA 1 13 17 33 37.7
ZAM 1 16 9 19 68
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TDP Links – Theoretical Insights
TDP Linkages: (1) trade-growth (2) trade-income distribution
But the issue of trade liberalisation and growth draws most attention
Inconclusive theoretical arguments Static gains from trade arguments Dynamic gains leading to higher growth New growth theories - ambiguous
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Empirical evidence is inconclusive
Powerful evidence found to be not credible identifying countries as open and closed is
difficult and often flawed
TDP – Empirical Evidence
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Export-led growth and liberalisation
UNCTAD – ‘export-led growth’ is misleading
Countries that grow fast tend to experience rising export-GDP ratios
Trade-poverty direct relationship is complex
TDP – Empirical Evidence
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TDP: Empirical Evidence
Striking econometric evidence from China 1981-2001 China’s trade-GDP ratio
increased from 15% to 45%. 1981-2001 poverty incidence fell
from 52% to 7%. Statistical analysis finds no evidence of the
relationship between the two indicators (Ravallion 2006).
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Experiences of TDP Project Countries
Strong trade controls in the immediate post independence period
Started opening up with BWI support
Vietnam and China – liberalisation initiative mainly domestically-led
Liberalisation led to: a decline in QRs, rationalisation and diminution of import tariffs relaxation of foreign exchange controls privatisation of SOEs generous promotional measures for exports.
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CountriesPre-reform avg tariffs
Most recent avg tariff
trade-wt avg tariffs
% of lines > 15%
BGD 94 (1989) 15 n.a. 40
CAM 35 (1996) 14 11 19
CHN 40.3 (1990) 9.9 4.7 16
IND 81.8 (1990) 19 15 22
NEP 23 (1988) 14 n.a. 17
PAK 64.8 (1990) 14 13 40
SRL 28.3 (1990) 11 7.4 21
VNM 30 (1989) 17 n.a. 41
KEN 43.7 (1990) 13 6.2 41
SAfR 12.7 (1988) 8 6.1 21
TAN 29.7 (1990) 13 9.7 41
UGA 19.9 (1987) 13 12 41
ZAM 29.9 (1987) 14 12 33
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TDP Countries -stylised Facts
Rising significance of trade (X-GDP ratios)
Growth of exports
Growth of exports and GDPLiberalisation and Growth
GDP growth and poverty reduction
Exports and poverty reduction
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Uganda
South AfricaTanzaniaZambia
Kenya
Vietnam
China
Cambodia
NepalSri Lanka
PakistanIndiaBangladesh
Export-GDP Ratio = -4.1447 ln(population) + 110.67
R2 = 0.0732
0
50
100
150
200
250
9 11 13 15 17 19 21
ln (population)
expo
rt-G
DP
ratio
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0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0Bangladesh Cambodia
China India
Nepal Pakistan
Sri Lanka Vietnam
Export-GDP Ratio in Asian TDP Countries
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Export-GDP Ratio (%) in African TDP Countries
0.05.0
10.015.020.025.030.035.040.045.0
Kenya South Africa Tanzania
Uganda Zambia
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Exports and GDP Growth: World Economies
y = 0.195x + 1.8339
R2 = 0.1824
-4
-2
0
2
4
6
8
10
12
Growth of exports (avg 1990-2005) (%)
Gro
wth
of
GD
P (a
vg 1
990-
2005
) (%
)Exports and GDP Growth in TDP Countries
ZambiaSAfR Kenya
Tanzania
Sri Lanka
PakistanNepal
BGD
Uganda
India
China
Vietnam
CAM
y = 0.3039x + 1.9105
R2 = 0.7333
0
2
4
6
8
10
12
Growth of Exports (Avg 1990-2005) (%)
Gro
wth
of
GD
P (A
vg 1
990-
2005
) (%
)
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Exports and GDP Growth in TDP Countries
Cambodia
Vietnam
China
India
Uganda
BGD
NepalPakistan
Sri LankaTanzania
KenyaSAfR Zambia
y = 0.3039x + 1.9105
R2 = 0.7333
0
2
4
6
8
10
12
Growth of Exports (Avg 1990-2005) (%)Gro
wth
of G
DP
(Avg
199
0-20
05) (
%)
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Uganda
South Africa
Tanzania
ZambiaKenya
Pakistan
Vietnam
Sri LankaNepal
China
Cambodia
BangladeshIndia
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0 5 10 15 20 25 30 35Average tariffs in 2001
Ave
rage
GD
P gr
owth
(199
5-20
02)
Avg. grwoth of developing countries
Avg. tariffs of developing countries
Tariffs and Growth: TDP and Developing Countries
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Pakistan (1991-2001)
Kenya (1992-97)
South Africa (1996-2001)
Cambodia(1993-2004)
Nepal(1991-2001)
Zambia(1998-2004)
Tanzania(1991-2001)
Sri Lanka(1991-2002)
Bangladesh(1992-2004)
Uganda(1992-2003)
India(1990-2000)
Vietnam(1993-2004)
China(1982-2001)
y = 0.7349x - 1.843
R2 = 0.5402
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0 2.0 4.0 6.0 8.0 10.0Avg GDP growth (%)
Ann
ual r
ate
of p
over
ty re
duct
ion
(%)
Growth and Poverty in TDP Countries
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Pakistan (1991-2001)
Kenya (1992-97)
South Africa (1996-2001)
Cambodia(1993-2004)
Nepal(1991-2001)
Zambia(1998-2004)
Tanzania(1991-2001)
Sri Lanka(1991-2002)
Bangladesh(1992-2004)
Uganda(1992-2003)
India(1990-2000)
Vietnam(1993-2004)
China(1982-2001)
y = 0.7349x - 1.843
R2 = 0.5402
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0 2.0 4.0 6.0 8.0 10.0Avg GDP growth (%)
Ann
ual r
ate
of p
over
ty re
duct
ion
(%)
Growth and Poverty in TDP Countries
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Growth Elasticity of Poverty
IndiaNepal
Vietnam
Uganda
China
Bangladesh
Pakistan
Kenya
South Africa
Tanzania
Sri LankaZambia
Cambodia
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
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TDP Country Cases: Lessons
Ownership of the Policy Regime Home grown initiative – implications for PRSP
Export Response to Liberalisation Removing anti-export bias enough?
Initial Distribution of Endowments Can experiences of Vietnam and China be
replicated elsewhere
Easy Reforms versus Critical Reforms Institutional reforms and capacity
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Lessons (contd.) The Role of Agriculture
Despite the need for diversification a dynamic agri sector is crucial
Priority for Future Reforms May not be mere tariff cuts but more
fundamental in nature Supply Capacity and Trade Barriers
Trade reforms do not generate SS-side capacity automatically
Policy Space and Making Use of It Policy space should be used carefully
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Growth and poverty reduction and Pro-active Policy Initiative
Development of Domestic Productive Capacity
Taking Advantage of Liberalised Trade Regime
Lessons (contd.)
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Concluding Remarks
Trade policy – a fundamental component of development strategies
Wide deviations from the general liberalisation and economic prosperity Same set of policies produces dramatically
different results
Country cases exhibit that ‘the same size fits all’ philosophy has failed to deliver
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CUTS-TDP country cases show the need for learning from others’ experiences. But blind replication may not work
The orthodox route to dealing with developmental problems needs to be replaced with heterodox approaches.
requires analytical policy regimes capable of identifying structural weaknesses
Concluding Remarks (contd.)
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In the absence pro-active initiatives growth could bypass the poor.
social and political instabilities and bad governance
a development-friendly international trade regime is important in promoting trade-development and poverty linkages in poor countries.
Concluding Remarks (contd.)