Necessary, but not necessarily sufficient. That is the verdict reached by the World Banks independent evaluation group on the trade liberalization the Bank has supported in the past, writes the World Bank press review Thursday.
Those conclusions make good sense. But they also underline that the struggle to integrate poor countries into the global economy requires action across a broad front; and that governments of those countries must take a lead.
The shambolic state of both hard infrastructure – roads, ports, railways – and soft infrastructure – customs, business regulation, testing exports for international standards – has prevented many developing countries taking advantage of new trade opportunities.
For most of the 1990s, the Bank thought the private sector would finance large amounts of physical infrastructure to facilitate trade. It was a reasonable belief but it turned out to be wrong. The Bank has now returned to supporting hard infrastructure.
Sensibly, it also advises on improving soft infrastrucure. Building ports and roads is expensive. But in terms of the developing countries own responsibilities, it costs little, at least in cash, to clear bribe-seeking bureaucrats out of the way of exporters. The Bank will provide technical assistance; governments must find the political will.
The World Banks strategies on trade has helped developing countries to open markets, but were not as effective as anticipated in boosting exports and growth and alleviating poverty, the report noted.
– The evaluation confirms that liberalizing trade alone is not enough to generate growth and fight poverty, said Vinod Thomas, director-general of the institutions Independent Evaluation Group (IEG).
– The World Bank has done the right thing in promoting more open trade worldwide, but not necessarily done everything right to help generate the desired payoffs, Thomas added.
The report recommends that the World Bank give greater attention to addressing poverty and distributional outcomes, and to cushioning shocks associated with trade policies.
The study by the World Banks Independent Evaluation Group (IEG) further found that developing countries exports were limited by an absence of competition policy and vital measures to free up labor markets and improve regulatory framework so that countries could compete in world markets and attract more investment.
Lead economist with the IEG, Yvonne Tsikata, said that while trade liberalization had opened up countries economies and provided convertible currencies, the World Bank had not taken into account macroeconomic policies in place in some nations which counteracted what it was trying to achieve.
But she said the Bank was getting better at taking into account the business climate in developing nations, which often have excessive administrative and regulatory hoops making it hard for new firms to operate.
Kilde: www.worldbank.org
