The World Bank Group and Aid for Trade

FACT SHEET

The World Bank Group and Aid for Trade

The World Bank Group is a major provider of aid for trade for low-income countries

·         Through its International Development Association (IDA), which supports the poorest countries with interest-free loans and grants, the World Bank Group (WBG) provided an average of around US$3.1 billion a year in aid for trade to low-income countries over 2002-2005, according to estimates of the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD). 

• The OECD/WTO break this down into three main categories:

o     Trade policy and regulations                                              US$32 million

o        Economic Infrastructure                                                    US$1.7 billion

o        Building Productive Capacity                                             US$1.3 billion

(Note: This definition includes all economic infrastructure (energy, telecommunications, and transport); the WTO/OECD is working to refine its methodology, so numbers are subject to revision.)

·         Bank aid for trade in low-income countries has included support for customs modernization in Cambodia, WTO accession in Ethiopia, trade reform in Laos, and the East Africa Transport and Trade Facilitation Project.

The WBG provides an extensive program of assistance for all developing countries

·         Other lending: In addition to the concessional loans and grants through IDA counted in the OECD/WTO statistics, the World Bank Group also provides nonconcessional lending based on market terms to middle-income countries for trade-related activities in building productive capacity and infrastructure.  For example, in Fiscal Year (FY) 2007, the WBG lent US$4.9 billion for transportation, energy and mining, and industry and trade on nonconcessional terms, some substantial portion of which helps trade directly or indirectly.       

·         State of the art trade training for low and middle-income countries: Over FY 2006-07, the WBG held an average of 48 trade-related training courses (around 14,000 participant training days a year), both country-based and regional/global. Courses offered included, for example:

o        WTO accession (China, Vietnam), issues in the Doha Round (including in collaboration with the WTO), and Free Trade Agreements (FTA) negotiating experiences (Egypt, Thailand).

o        Safeguards and antidumping (the Andean countries, Morocco), services trade (Central American countries, Bangladesh), agricultural trade and FTAs (regional courses in Africa), and on-line courses on agro-food standards and services.

·         Tailored technical assistance (TA): Over FY06-07 the WBG conducted an average of 36 TA activities a year for all developing countries, in addition to those provided in the context of loans. Around one third of these were in Africa. Examples include:

• Seminar with the WTO and Common Market for Eastern and Southern Africa on trade in information and communications technology services for telecommunications regulators, ministry officials and Geneva trade negotiators from 16 African countries.
• Workshops on export diversification in Argentina and Botswana.
• Tools to assist Morocco to estimate the impact of tariff reductions on fiscal revenue, import flows and protection to domestic industry. 

·         And comprehensive analysis and advisory services: Over FY06-07, the WBG  produced an average of 79 trade policy notes, studies, and reports a year at the request of developing country clients. Just under one third of these requests came from Africa.

• Examples include: trade diagnostics in Kenya; ports and shipping in India; investment climate in Mongolia; trade in services in Europe and Central Asia; garments and the end of quotas in Bangladesh and the Middle East and North Africa; Latin America’s response to India and China; and financial services in Egypt, Algeria and Tunisia. In addition the Bank has conducted over 30 trade diagnostic studies as part of the Integrated Framework.

The World Bank Group also works directly with the private sector

·         Run under the World Bank Group’s private sector arm, the International Finance Corporation (IFC), the Global Trade Finance Program (GTFP) helps small and medium sized traders in developing countries gain access to trade finance by providing risk mitigation in the form of payment guarantees to international trade banks offering trade credit lines to local banks in the emerging markets.  The GTFP:

o        Operates under a revolving limit of US$1 billion and is currently available to provide risk mitigation to 87 banks in 48 developing countries. 

o        Provided US$770 million of guarantees in FY07, set to increase to US$1.3 billion in FY08.

o        Issued guarantees in its two years of operation to support trade in Africa (55%), Latin America and the Caribbean (25%) and the Middle East (12%), Europe (5%) and Asia (3%).

o        Supports south-south trade such as exports of rice from Pakistan to Yemen, solar panels from India to Uganda, fertilizer from Morocco to Bangladesh, cereals from Argentina to Ecuador.

o        Includes an advisory program for participating local banks to build skills in trade finance.  To date, 227 bankers from 120 banks across 65 countries in Africa and Latin America have been trained. 

·         The IFC’s Foreign Investment Advisory Services has also developed checklist tools on improving competitiveness for selected industries such as agri-business and forestry, apparel, and tourism. Value-chain analyses for critical sectors have been undertaken in Honduras, Nicaragua, Cambodia, China, Mozambique, Indonesia, China, Senegal, Peru, Pakistan, and Russia.

The World Bank Group intends to do more. 

President Robert B. Zoellick announced on November 21^st expanded work on trade:

1.       Increased country programs of analysis, assistance and lending for trade and competitiveness. 

2.       More resources for trade-related infrastructure. Bank concessional lending to low-income countries is expected to continue to increase. For middle- income countries, the Bank has cut the costs of borrowing to levels last seen in the 1990s, and will reduce administrative costs associated with borrowing.

3.       Expanded trade finance services. Over the next 4 years, the IFC’s trade finance program (GTFP) will almost double its annual commitments toUS$2 billion, double the number of banks covered to 260 and increase the number of transactions five-fold to reach 4,000.  

4.       Expanded assistance on trade facilitation, including logistics, transport and supply chains. The Bank will increase its program of analysis, assistance and lending on trade facilitation to help countries identify bottlenecks and design and implement reforms to address them.

5.       Expanded training and capacity building in strategic areas such as standards, WTO accession, trade facilitation and negotiation of preferential trade agreements.

6.       New indicators and tools for trade and competitiveness. Besides trade indicators in Doing Business, and strengthening the World Integrated Trade Solutions database and tools for tariff analysis, the Bank is launching the Logistics Performance Index and the World Trade Indicators.

7.       Further develop knowledge on how to harness globalization for growth and overcoming poverty, and to inform key trade policy debates.

This program will cover both low- and middle-income countries. The exact amount of assistance will depend on demand from countries that wish to make trade and competitiveness a pillar of their growth strategies. A successful replenishment of IDA15 (the Bank’s concessional arm for low-income countries) will also help to ensure additional financing for aid for trade.