Trade, Growth and Poverty in the context of Lao PDR

Transcription

1 Trade, Growth and Poverty in the context of Lao PDR Dr. Yan Wang Senior Economist The World Bank Prepared for the joint workshop on Lao PDR: Trade and The Integrated Framework Vientiane Lao PDR, June 28-30, 2004

2 Outline Why trade global context? For export and economic growth For job creation and poverty reduction How have other countries liberalized? China and others Trade as a part of poverty reduction strategy for Lao PDR Key issues and challenges 2

3 I. Why Trade Integration? Gains from global trade reform potentially large and widely shared, according to a World Bank study using linkage model High trade barriers, esp in industrial countries, remain a concern Need to take adjustment and poverty impacts into account 3

4 40 35 Base Year Tariffs (percent) Agric Proc. Food Nat. Res. Txt. & App. Oth. Manf Industrial Low-income Middle-income Source: World Bank,

5 Base Year Agricultural hya Protection (billions of 1997 dollars) jpn eur Export Factor Input Output Tariffs usa Source: Will Martin

6 Global gains from trade reform Change in real income in 2015 from baseline scenario ($billion) All Ag & Food Manuf Industrial Developing World Source: Dominique van der Mensbrugghe and John Beghin 6

7 II.How have others liberalized? China started its rural reform in 1979 and opened up in early Both trade and FDI increased dramatically and led to rapid growth and poverty reduction Growth: Real GDP has grown an average 9.4 percent a year since Poverty: Using the World Bank s $1/day consumption measure, the number of poor declined from 360 million in 1990 to 223 million in 1999 (and 161 million in 2002). Openness has created growth centers in coastal regions which created millions of jobs for rural workers good for poverty reduction. But it led to income inequality. 7

8 The Share of trade in goods and services in GDP (%) [import+export] China India Brazil Source of data: World Bank World Development Indicators and Global Development Finance Database, August

9 The share of FDI in GDP (%) China India Brazil Source: World Bank World Development Indicators and Global Development Finance Database, August

10 60 50 China s growth, poverty reduction and inequality, Average Per-capita GDP Grow th % 7.2% 10.9% 8.9% 6.7% Poverty Rate based on income Gini Index Source: Chen and Wang (2001) 25 10

11 Regional income disparities, Standard Deviation of Log of Per Capita Income Coast versus Interior All Provinces Intra-coast Intra-Interior

12 An example: Labor Mobility Component Of Southwest Poverty Reduction Project SWPR Project areas 3provinces (region) 35 counties 291 townships 1798 administrative villages Agricultural population million, million laborers 0.73 million surplus laborers 0.28 million laborers were relocated in coastal regions and found jobs, of which, 68% male and 32% female. Actual investment was 490 million yuan. 12

13 Openness and poverty reduction Directly increased income It was shown in the sample survey, of laborers sent out form 1995 to 2000: The remittance amounted to bn yuan, the goods purchased valued to 0.25 bn yuan, totaling 1.59 bn yuan. The production and living condition of project farmers were improved by the remittance: To invest in agricultural production To build houses To pay off the debts To pay the education fees To pay for health 13

14 III. Lao PDR: Trade Integration as a part of poverty reduction strategy Real GDP grew by 6.3 % per year; Poverty fell - 39% in 1997/98 to 31%, 2002/03; Agriculture grew by 5% per year, faster than most Industry grew 10% a year, services by 6% a year Need to: Expand Job opportunities by Facilitating the private sector development Expanding export (both goods and services) Expanding tourism (a part of services) Strengthen Capacities by Learning by doing, learning from others Education, on the job training and improving health and other services 14

15 Lao PDR: Poverty Trends Lao PDR Poverty and Inequality, 1992/3-2002/3 1992/3 1997/8 2002/3* Poverty Incidence (Headcount) Urban Rural National Inequality (Gini) National Source: LECS I to LECS III. *The numbers are still unofficial. 15

16 Lao PDR: Social Indicators Lao PDR MDGs Averages - MRY E. Asia SSA S Asia Low income GNP per capita * 1, Adult literacy rate (%) Total Fertility Rate Life expectancy % Population below poverty line (headcount index) Poverty and Malnutrition Population below 1$ a day (%) % Children underweight ( under 5 years old) Education and Gender Indicators Net enrollment rate (ages 6-14)** % Cohort reaching grade 5** Youth literacy rate (ages 15-24) Ratio of girls to boys in primary and secondary ed Ratio of literate females to males Health Indicators Infant Mortality Rate (per 1,000 live births) Under 5 mortality rate (per 1,000) Maternal mortality ratio (per 100,000 live births) Prevalence of HIV/AIDS(%) 0.1 % Population access to safe water

17 Potential in Export New Economic Mechanism introduced in Foreign trade & inter-provincial trade opened starting 1987, & few export taxes in Private investment & FDI opened in 1988 Export/GDP rose from 11% in 1990 to 35% in 2001 Exports grew 9% a year in & 15% in faster than most countries; Main exports: Coffee, wood, garments, hydro; Tourism accounted for a large share of exports of goods & services 17

18 Lao PDR has great potential in exporting services: export more than it imports Trade in Services (mil. US$), Lao PDR Exports Imports Source: World Bank Global Development Finance (GDF) & World Development Indicators (WDI) Database (April, 2003) 18

19 Composition of Service Export, Lao PDR Service Exports (mil. US$) & Composition, Lao PDR Communications, computer, etc. Insurance and financial services Travel services Transport services Source: World Bank Global Development Finance (GDF) & World Development Indicators (WDI) Database (April, 2003) 19

20 Summary Trade integration may yield large gains from growth, job creation, and learning by doing. Trade integration is a part of an overall strategy for poverty reduction (see NGPES) Making commitment in regional or WTO negotiations is a good way to lock-in reforms Learn specifics about Lao private sector/exporters constraints; Learn more from other countries experiences Capacity building in trade and WTO is key 20