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Mr. Sanjeev Gupta, Mr. Kevin J Carey, and Mr. Ulrich Jacoby

Abstract

What is the impact on trade in sub-Saharan Africa of the recent rapid growth in China and other Asian countries, and the associated commodity price boom? This paper looks at how trading patterns (both destinations and composition) are changing in sub-Saharan Africa. Has the region managed to diversify the products it sells from commodities to manufactured goods? Has it expanded the range of countries to which it exports? And what about the import side? The time is ripe for sub-Saharan African countries to climb up the value chain of their commodity-based exports and/or achieve an export surge based on labor-intensive manufacturing.

Mr. Sumio Ishikawa, Ms. Sibel Beadle, Mr. Damien Eastman, Ms. Srobona Mitra, Mr. Alejandro Lopez Mejia, Ms. Wafa F Abdelati, Mr. Koji Nakamura, Mr. Il Houng Lee, Ms. Sònia Muñoz, Mr. Robert P. Hagemann, Mr. David T. Coe, and Ms. Nadia Rendak

Abstract

Cambodia's reconstruction and reform efforts have spanned almost 25 years following the Khmer Rouge period, which ended in 1979. Economic reforms began in earnest in the early 1990s, but reform efforts were beset by ongoing internal tensions and civil unrest. Although external factors, including sizable aid inflows and a trade agreement with the United States, helped boost growth in the past decade, the country remains one of the poorest in the region. The current coalition government has announced a strategy aimed at revitalizing economic reforms, and in 2004 Cambodia formally joined the World Trade Organization. But elimination of the garment quota system under the Agreement on Textiles and Clothing is exposing an underlying deterioration in competitiveness, which, coupled with slow growth in the agriculture sector and other structural obstacles to private sector growth, has resulted in a medium-term outlook that remains uncertain.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

In recent years, African policymakers have increasingly resorted to regional trade arrangements (RTAs) as a substitute for broad-based trade liberalization. This trend has long-term implications for the effectiveness of trade policy as a tool for poverty reduction and growth. This paper examines the record of RTAs in promoting trade and investment. It also explores policy measures that may help improve RTAs' performance.

Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

Mauritius has achieved remarkable success since its independence in 1968. It has one of the highest per capita GDPs in Africa, the economy has diversified from complete dependence on the sugar crop, into textiles, then tourism, and recently information and communication services. This paper examines the factors that have contributed to this impressive growth, including macroeconomic stability, a solid institutional framework, political stability, an efficient administration, a favorable regulatory framework, and a well-developed financial system, and outlines the challenges that remain to ensure continued sustainable growth in Mauritius.

Mr. Michael Keen

Abstract

This paper, based on the considerable practical experience of the IMF’s Fiscal Affairs Department, sets out a successful strategy for modernizing customs administration. The essence is to establish transparent and simple rules and procedures, and to foster voluntary compliance by building a system of self-assessment supported by well-designed audit policies. Having set out this strategy--and its benefits--the paper discusses in depth what is required in terms of trade policy, valuation procedures, dealing with duty reliefs and exemptions, controlling transit movements, organizational reform, use of new technologies, private sector involvement, and designing incentive systems for an effective customs administration.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

The discussion so far highlights the need to take a broad perspective in thinking about how to make African RTAs work better. Careful design and sustained implementation are necessary to make any RTA deliver, but the more fundamental determinants of RTA performance seem to be policies and conditions that affect the overall environment for trade. In this context, MFN liberalization, improvements in regional infrastructure (particularly transport), and reductions in trading costs at borders are critical. These are all conventional development issues but nonetheless pose difficult challenges for African policymakers. African countries need to protect their revenue base in undertaking MFN tariff reductions, and, when such tariff cuts are implemented in their trading partners, they need to address the consequence of preference erosion.34 Efforts to improve infrastructure and reduce trading costs will require adequate local capacity of implementation, in addition to financial resources. In all these areas, the IMF can lend its support to African countries, beyond its core expertise area of macroeconomic management, which is also essential to create a conducive environment for trade.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

Over the past decades, African countries have set ambitious goals for their regional trade arrangements, but the results have so far fallen short of expectations. Most African RTAs started with a low level of intraregional trade. Thus, even if the RTAs had been more successfully implemented, the impact of these arrangements on Africa’s overall trade would have been small—unless they had created a more favorable environment for overall trade. The potential of the RTAs in exploiting economies of scale and enhancing competition has been limited by the lack of trade complementarity among RTA partners, small market size, poor transport infrastructure, and high trading costs at the border. More important, relatively high barriers against trade with the rest of the world have essentially turned RTAs into an import substitution policy at the regional and subregional levels.

Mr. Sanjeev Gupta and Yongzheng Yang

Abstract

Africa is home to some 30 regional trade arrangements (RTAs), many of which are part of deeper regional integration schemes.1 On average, each African country belongs to four RTAs (World Bank, 2004). There has been a renewed push in recent years for broader and deeper preferential trade arrangements in Africa. Some of the previously defunct regional arrangements (e.g., the East African Community) have been revived, while continental institutions—namely, the African Economic Community (AEC), the African Union, and the New Partnership for Africa’s Development (NEPAD)—have been launched under the auspices of the Organization of African Unity (OAU). In addition, African countries are preparing to negotiate FTAs with the European Union (EU) under the Economic Partnership Agreements (EPAs). The Southern African Customs Union (SACU) is negotiating an FTA with the United States. South Africa, the largest African economy, has already signed an FTA with the EU.2

Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

Mauritius has one of the more sophisticated financial systems in Africa, a system that is soundly capitalized and profitable. Assets of the banking system represent about 100 percent of GDP. While the financial sector was already relatively well developed at independence, the robust economic performance over the last two decades strongly contributed to its further expansion. At the same time, the solidity and sophistication of the financial system also played a key role in supporting the diversification of the economy. It can be argued therefore that a virtuous cycle was established from early on, in which the financial system and the productive sector strengthened in parallel, with each sector providing support to the other and contributing to its modernization and deepening. A sound regulatory framework and monetary policies geared to macroeconomic stability provided a key contribution to the soundness of the financial system.

Mr. James Y. Yao, Mr. Gamal Z El-Masry, Padamja Khandelwal, and Mr. Emilio Sacerdoti

Abstract

Despite strong economic growth, averaging just below 6 percent per year over the last two decades, a “U”-curve phenomenon of Mauritian unemployment can be observed (Figure 5.1). The unemployment rate plunged from about 21 percent to less than 4 percent from the early 1980s to the early 1990s. Notwithstanding sustained economic growth averaging 5½ percent per year between 1991 and 2002, the declining trend in unemployment was reversed, and the rate steadily increased, reaching approximately 10 percent by end-2002. According to the 2000 census, a majority of the unemployed were young, had never held a job, had failed primary or secondary school education, had no technical or vocational training, and were single and family supported. Despite the rising unemployment rate, two paradoxical facts about the 1990s can be noted: (1) the EPZ was crippled by skilled labor shortages and was compelled to import foreign workers, mainly from China; and (2) the number of unfilled skilled-job vacancies, especially in the financial services sector, increased over the decade.21 There is little consensus in Mauritius as to the exact nature and causes of the unemployment problem.22