Vishnu BassantDeputy Director General

Ministry of Finance and Economic Development

Mauritius19 November 2007, Geneva

Trade liberalization has not made much progress in Africa because of the fear of the unknownThe associated economic and social costs of adjustment are highCosts are incurred immediately but benefits are reaped in the longer termTo make these adjustments economically and politically feasible adequate support is required during the transition phase

AFT must therefore be viewed as a vehicle for overall economic development with the aid component supporting an overall programme where trade liberalisation is at the core.

A change of mind sets to believe that freer trade really brings greater prosperityA comprehensive strategy harnessing trade as an engine of growth and developmentEmbedding the national strategy in a regional context as a first step ( eg COMESA FTA , EPA negotiations as a stepping stone to an FTA with EU and with the US as a natural evolution of AGOA)Technical support of the IFIs and RDBs needed to help develop the strategy, estimate the costs and benefits and provide viable options to decision makersEndorsement of the strategy by development partners that will eventually provide part of the financial resources

The strategy can be in National Development Plans, PRSPs or any document approved by Government

To unlock growth to attain the goals set, including MDGs, employment creation, poverty reduction, economic diversification etc byOpening the economy to the rest of the worldImplementing wider economic reforms simultaneously to

Maintain stable and predictable macro economic fundamentalsImprove public sector efficiency and service levelsEnhance industry global competitiveness and labour mobilityImprove the business environment to attract investment and FDIBuild productive capacity and diversify into new sectors to consolidate the resilience of the economyProtect the welfare of citizens likely to be affected through social safety nets and workfare programmes– EMPOWERMENT PROGRAMME•Restructure sunset industries and support sunrise industries – ENTERPRISE PROGRAMME

Develop Trade Related Infrastructure (Port, airport, roads)

(Billion Euros)

Total cost 4.0Private sector/FDI 1.8

External partners 1.2Government 0.5

Financing Gap 0.5

External financing of the programmeUS $ Million Total 06/07 07/08 08/09 09/10 10/11 11/12 12/13

WB GBS 90 30 30 30

PL 120 60 30 30

AFD GBS 90 30 30 30

PL 140 40 40 60

ADB GBS 30 10 10 10

PL 30 10 10 10

EU EDF 54 24 14 5 5 6

SAM* 190 15 50 43 41 41

China PL 162 32 32 32 32 34

BADEA PL 5 5 5 5

SAM-Sugar Accompanying Measures

Selected components of the programmeSector (In Million of Euros) TRTA/CB TRPCB TRIF TRAM TOTAL

1. Sugar

Research , Derocking/irrigation

Income Support14 63 11 88

Mechanization /VRS II Comp 24 97 121

Centralization/ Cess restructuring 43 24 67

Power Plant/ Blue Print Compensation

215 35 250

Ethanol/ Debt Servicing 16 41 57

2. Enterprise Programme 100 120 220

3. New Sectors

Knowledge Hub

Empowerment Programme145 45 190

Seafood Industry 160 100 260

Pharmaceutical/ Land-based oceanographic industry

85 85

Port & Airport/ ICT 190 660 850

Light Engineering 60 60

Total 114 743 918 473 2,248

Bring their experience to support nationally owned programmes

At the heart of AFT is TRTA/CB but it is not sufficient

It is also necessary to finance TRiF and TRAM Focus existing ODA instruments to implement national and regional AFT strategies Avoid creating vertical silos by aligning their interventions on nationally owned strategies instead of focusing on their areas of interestBetter coordinate amongst themselves to ensure coherence and reduce the administrative burden on recipient countriesAgree on the architecture of KPIs that puts in place a framework for success

Regular meetings with development partners needed to monitor implementation and take corrective measures

Liberalisation requires a vision and an integrated plan since reform is required across sectors IFIs to help in analytical and advisory work to design policies and programmes countries can own and implement with confidenceDevelopment Partners to formally endorse the programme and align their intervention accordinglyLDCs require AFT even more than MICs since they can only access IDA and ODA which are inadequate to fund such programmes.MICs can at the limit borrow from the market but to finance the economic and social costs this may not be viable

Reforms are painful and, if not explained, may lead to social resistance, reversal of policies, a slow down in the pace of reforms or regime changePrivate sector involvement in infrastructure financing and management necessary