The country’s share of “Aid for Trade” in overall official development assistance (ODA) has declined, despite the aid increased globally, says a report released in Dhaka on Thursday.
The report by Center for Policy Dialogue (CPD) revealed that though the total volume of aid for trade has been increasing since 2002, the yearly average rate during 2006-11 is negative.
The AfT initiative, launched by the WTO in 2005, helps developing countries to develop trade infrastructure so they can become competitive in the global trade. Many developing countries face a range of supply-side and trade-related infrastructure obstacles that constrain their ability to engage in international trade.
“If the present trend of AfT flow continues, it will be difficult for the country to have any meaningful impact of aid for trade initiative towards achieving national development goals,” CPD Research Director Fahmida Khatun said in her report presented at a dialogue on “Aid for Trade: Second Generation Issues for Bangladesh.”
The event was organised by the CPD in association with Geneva-based International Center for Trade and Sustainable Development (ICTSD) ahead of a three-day 9th WTO ministerial conference beginning from December 3 in Bali, Indonesia.
CPD Executive Director Mustafizur Rahman moderated the dialogue participated by local and foreign experts.
According to the report, lack of efficient administrative mechanism, low human capacity, political instability and stringent donor requirements are learnt to be major reasons behind the lackluster aid for trade inflows.
Low implementation level of development programmes has been a perennial problem for Bangladesh, affecting the utilisation rate of aid, it said.
Speakers at the dialogue expressed concern over the dwindling flow of AfT and put importance for more coordinated efforts among donors, government agencies and private sector stakeholders to improve the situation.
They also urged the donors to increase the share of grants in AfT as the major part of the aid still come in the form of loans, sometimes very conditional.
To increase the AfT inflows, they also focused more on south-south cooperation specially increasing trade with India and China the two major trading partner of Bangladesh.
World Bank South Asia Region lead economist Dr Sanjay Kathuria said: “Trade imbalance is nothing new it is a political issue. Trade has relation with employment generation.”
He said Bangladesh lacks synchronisation between trade and aid due to policy problem and suggested focusing on developing infrastructure, human resources and long term solution to energy crisis is necessary through cooperation from Nepal, Bhutan and Myanmar.
Chief executive officer of Bangladesh Foreign Trade Institute Mujibur Rahman said investment is a pre-requisite for boosting trade between the two countries. “Trade policy should be formulated to help increase import and export, which might bring an impetus to the national development,” he said.
CPD distinguished fellow Debapriya Bhattacharya said enough discussion was made over the decade about the poverty but clear definition about FTA is yet to be defined. Importance should be given to the regional issues when we talk about the second generation issues.
According to the presentation paper, home-grown projects rather than donor-imposed projects should be given priority.
However in Bangladesh, Aft has addressed some key areas of trade-related needs. Both the government and donors have succeeded in implementing a number of trade-related projects that helped address some of its supply-side constraints, it said.
In case of ownership, it said, AfT projects are closely linked to the objectives of national development policies, but Bangladesh’s effort to mainstream aid for trade into national policies is still limited.
