Magazine article International Trade Forum

Aid for Trade as Investment: In Trade: Engaging the Private Sector

Magazine article International Trade Forum

Aid for Trade as Investment: In Trade: Engaging the Private Sector

Article excerpt

The Third Global Review of Aid for Trade was a successful exploration and examination of the successes and challenges of the six year Aid for Trade initiative. Initiated to aid developing countries in expanding their supply-side and productive capacity and allow them to take better advantage of market access opportunities, Aid for Trade has emerged as an important platform to interweave trade and development issues. As the discourse has deepened and broadened, so has the private sector become more engaged in a variety of Aid for Trade partnerships with governments, international organizations, regional organizations and civil society organizations, both as a provider of expertise and knowledge transfer and as the first beneficiary of the institutional capacity built through Aid for Trade projects.

Private sector development lies at the heart of the Aid for Trade agenda. The importance of galvanizing private actors all along the value chain in least developed countries (LDCs) and lower income countries (LICs) is becoming ever clearer--broadening the network of suppliers by investing in the capacity and competitiveness of producers, traders and trade support institutions. Private sector engagement is essential to ensuring that trade related assistance delivered by development partners delivers sustainable outcomes, in effect, that enhanced capacity persists beyond the end of the project. Furthermore, it is becoming clear that foreign direct investment is being accompanied by important actions to upgrade the capacity of local suppliers to enter new value chains. This is Aid for Trade.

The growing role of the private sector was underlined at the Third Global Review. World Trade Organization (WTO) Director-General Pascal Lamy, in his closing remarks, made particular reference to the enhanced participation of the private sector. His comment about the need to transform Aid for Trade into 'Investment for Trade' was focused squarely on the increasing economic motivations and opportunities that greater involvement of the private sector in Aid for Trade would deliver.

In the plenary session on 'Accessing Global Private Sector Value Chains,' the partnerships between large corporations such as Walmart and Danone and developing country producers were showcased, as was ITC's innovative work on coffee supply chains. These forms of collaborative ventures and value chain investments are growing in number and impact and are charting an innovative way forward for business involvement in trade related capacity building.

The WTO has sought to address this important role for business in a number of ways. In addition to private sector issues forming part of the Aid for Trade work programmes and inviting the business community to participate in the Global Reviews, the WTO continues to work closely with ITC, the World Bank and the private sector arms of regional development banks to ensure that the views, priorities and expertise of the business community are taken on board. The private sector, however, is not a homogenous group. Concurrent with discussions with large multinational corporations on how they can best partner with traditional and emerging donors to support infrastructure projects and value-chain insertion, the dialogue with small and micro-enterprises is very much focused en their trade capacity needs and constraints to trade. ITC has been a leader in this regard, specifically through its country surveys, which shed light on the gaps in assistance that exist. Addressing both ends of this spectrum--the private sector as partner and as recipient--is vital.

In 2009, Aid for Trade resources reached US$ 40 billion, the highest figure reported by the Organisation for Economic Co-operation and Development (OECD) and WTO monitoring framework. Of this total, US$ 18.2 billion was committed to building productive capacity, and for the first time since the global monitoring framework was established, disbursements of Aid for Trade to build productive capacity was the largest category. …

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