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The trade SWAP concept
JUN 30 -
Nepal and Cambodia got accession to the World Trade Organisation (WTO) in the same year 2004 as the 147th and 148th member countries respectively. Despite both being least developed countries (LDCs), their achievements after accession to the WTO in terms of mainstreaming trade into the international market vary significantly. Cambodia seems to have made impressive progress while Nepal’s performance has not been very satisfactory. Nepal could learn many lessons from Cambodia on how it has been integrating its trade into the international market.
Besides having joined the WTO at the same time and both being LDCs, Nepal and Cambodia share almost similar situations of trade integration into the international market during the 1990s and both have emerged from violent internal conflicts.
The WTO as a rule based multilateral trading system, its ultimate objective is to create conditions by minimising
all tariff and eliminating non-tariff
barriers in order to facilitate the natural flow of goods, services and intellectual property around the globe on the basis
of comparative and competitive advantage. Due to low level of competitive and supply side capacity, most LDCs including Nepal have not been able to benefit from the WTO system.
Realising the low level of supply side capacity of the LDCs, six agencies, namely the WTO, UNDP, ITC, WB, IMF and UNDP initiated the Integrated Framework (IF) in 1997 to support them in the process of globalisation and integrate their economy into the global economy. The main objectives of the IF were to mainstream trade into national development plans/processes and assist in the coordination of the delivery of trade related technical assistance (TRTA). From 2004, the IF has been enhanced in terms of funds, institutional mechanism, accountability and coordination as the EIF (Enhanced Integrated Framework).
There is a “de facto role” of the IF and EIF in implementing the Cambodian “trade integration strategy 2007” through which Cambodia has been able to integrate its products and services into the international trading system. Nepal can learn much from Cambodia in this process. Nepal has developed the Diagnostic Trade Integration Study-DTIS in 2004, and considering the changes on the political and economic fronts, it published an updated DTIS, or Nepal’s Trade Integration Strategy-NTIS in 2010. The NTIS 2010 has identified 19 goods and services as having comparative advantages for international trading. The NTIS, based on results approach, can be taken as “a constitution” for integrating trade into the international and global markets. It demands coordinated efforts to provide the necessary support to make these products and services more competitive in the global market.
We can learn a lot from Cambodia regarding the use of the EIF fund since we are in the process of developing the necessary projects to implement the NTIS 2010. One of the major initiations made by the Royal Government of Cambodia in this regard is “trade SWAP” (Trade Sector Wide Approach) that is an innovative mechanism in nature too. Trade SWAP can be defined as a mechanism to coordinate and plan resources (government, development partners and stakeholders) around a single trade strategy (e.g., NTIS 2010) for a limited set of shared objectives in order to develop the trade sector. Trade SWAP provides the framework to implement Cambodia’s Trade Integration Strategy formulated in 2007.
In order to respond to the objectives and needs identified in the 2007 strategy, “three pillars” have been created. The pillars are Pillar 1: Reforms and cross-cutting issues for trade development; Pillar 2: Products and services export development; and Pillar 3: Capacity building for trade development. Since trade is dynamic and interrelated to many government and private sector agencies, it needs to be taken from a broader perspective — a programme or sector approach with continued commitment and dedication of all the concerned parties. Cambodia’s success momentum on trade SWAP is its well educated, dedicated, sincere and strong leadership backed by political stability. As a result, Cambodia has been able to sit in the driver’s seat and get massive support from development partners as per its needs and not with their intention. Trade SWAP in Cambodia has been effective in consolidating its ownership of aid for trade, strengthening the effectiveness of its development partners’ TRTA, and moving forward the country’s integration into the global economy.
For the implementation of the NTIS 2010 to integrate Nepal’s trade into the global regime, Nepal needs to materialise the trade SWAP concept that is one of the challenging blocks too. For effective materialisation of trade SWAP, greater political consensus is a must. At present, we have a very pitiful situation where economic agendas have been sidelined by political agendas that has resulted in the mushrooming of violent conflicting groups in the country. It has been proven worldwide that without economic prosperity, peace and political stability can’t be achieved. Thus, our political leaders of all the major parties need to make relentless efforts to reach a consensus on the major economic agendas in general and implementation of the NTIS 2010 in particular.
In this global village as a member of WTO, Nepal needs to benefit from the system by integrating its trade into the global and international market by implementing the NTIS 2010. This
is the era to make the country developed through integration of national trade into international markets on
the basis of comparative and competitive advantage. To reap the benefits from the global system, Nepal needs
to reach a consensus and make continued efforts to integrate the newly
identified 19 products and services into the international market through the trade SWAP approach. This requires a much higher level of inter-ministerial coordination as well as with the
business sector to make these services and products more competitive in the international market.
Since the trade SWAP approach and methodology is a very challenging concept, it may be rather impossible to achieve without greater political consensus, commitment, dedication and strong leadership. In the absence of such a situation, the NTIS might remain as a document gathering dust on the shelves.
(The author is associated with the Ministry of Commerce and Supplies)
Posted on: 2010-07-01 08:07
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