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Globalize wgvictor

  1. 1. United Nations Conference on Trade and DevelopmentEconomic liberalization as a drivingforce of globalization: experiences of countries in North and Central Asia Victor Ognivtsev Trade Analysis Branch, DITC UNCTAD Moscow 29 September, 2005
  2. 2. Structure of this Presentation:General trends of the unfolding globalizationprocessThe role of economic liberalization, particularly oftrade liberalization, in the reform transitionprocessSpecific experiences of countries in North andCentral Asia and results achievedLessons learned Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 2
  3. 3. Introduction Countries in the Northern and Central Asian regionhave been undergoing 15 years of profound, oftenhistorically unprecedented reforms in the process oftransition to a market economy from a previouslycentrally-planned system, in which economicliberalization, particularly trade liberalization andintegration in the world economy were major elementsof the reform strategy. The economic and social transition of thesecountries was carried out against the background ofthe unfolding globalization process. This made theirsituation even more challenging. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 3
  4. 4. Economic liberalization and globalization: Brief description of terms Economic liberalization may be described as thefreedom to engage in economic activity at home and/orabroad, a freedom subject to institutional and policyconstraints needed to guarantee public interests atlarge. Globalization may be seen as a major driving forceof global economic integration and has the followingmain features: (1) internationalization of productionwith very fast changes in the structure of production;(2) liberalization and expansion of world trade in goodsand services; and (3) unprecedented expansion ofinternational financial flows supported by the latesttechnological advances. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 4
  5. 5. Role of Trade International trade is widely recognized as animportant engine of the world economic growth and theevolving process of globalization. It had also a majorcontribution to make in the process of transition offormerly centrally-planned economies. In the transition process, normally, the first measureswere trade-related and consisted of phasing out thestate foreign trade monopoly, allowing enterprises tocarry out foreign trade transactions directly and freeingtheir access to foreign currency for trade purposes. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 5
  6. 6. Trade Liberalization Trade liberalization has been the central part of mainstreampolicy advice for at least 20 years, and has been activelypicked up by most developing countries and economies intransition in the design of their development strategies. However, the intensive international discussion over thebenefits of trade liberalization and its welfare effects ondeveloping countries and their societies is far from over. Thesearch for consensus continues, while some simplerpostulates like a freer trade alone brings more economicgrowth, which, in turn, have beneficial effects on social lifeand leads to better living standards, including reduced poverty– have produced mixed results, thus raising a general concernof whether open trade can contribute substantially and directlyto the process of development. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 6
  7. 7. “Washington Consensus” – «One Size Fits All»John Williamson originally coined the phrase in 1990 “to refer tothe lowest common denominator of policy advice beingaddressed by the Washington-based international financialinstitutions to Latin American countries”: Fiscal discipline Tax reform (to lower marginal rates and broaden the tax base) Interest rate liberalization A competitive exchange rate Trade liberalization Liberalization of inflows of foreign direct investment Privatization and deregulation Secure property rights Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 7
  8. 8. “Washington Consensus”: EvolutionOver the time, some additional elements were added: Corporate governance Anti-corruption measures Flexible labour markets WTO agreements Financial codes and standards “Prudential” regulations over financial flows Effective and stable exchange rate regimes Independent central banks/inflation targeting Social safety nets Targeted poverty reduction Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 8
  9. 9. Trade liberalization (cont.) The approaches to trade liberalization are becomingmore complex and realistic in that liberal trade policyare no more entirely “delinked” from other policyissues (e.g. financial, monetary, environmentalprotection, adjustment costs, supply constraints andcapacity building in developing countries, etc.) It is now widely recognized that the scope and form ofgovernment interventions, vis-à-vis markets and theprivate sector, have to be based on a rationaldetermination of the basic economic state functions,and not on biased ideological approaches. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 9
  10. 10. Transition Reforms in the Region: Gradualism or Radicalism?Many of the countries in the Northern and Central Asian Region decided toembark on a radical way of transformation. Apart from positive impacts ofsuch approach, such strategy, however, also resulted in a number ofcases in drastic decrease of GDP, and consequently substantial loweringin the standard of living of their citizens. By the year 2004, many of thesecountries still have not reached the GDP level from the year 1989.The “shock therapy” approach was based on a naive, ideological – indeed,almost religious belief that there is no need for development policy andthat the market alone would balance the economy and generate wealth.In fact, the aim of any economic policy is development, while everythingelse is the means to achieve this aim. Unfortunately, quite often in policy-making the aim is confused with instruments to achieve that objective. Forexample, stable exchange rates are sometimes taken for the target ofeconomic policy. The lowest possible inflation, whatever the cost, issometimes assumed to be the ultimate policy aim. The same goes foraccession to certain international organizations like the WTO. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 10
  11. 11. Reform Experiences of Other Countries in the Region and ElsewhereThe experiences of now developed countries, as well as of some countriesin the Region would also suggest that a more empirical analysis ofapproaches to reforms, particularly to trade liberalization is required. Theeffects of freer trade, as suggested by such experiences, can be quitebeneficial after a country has achieved a certain level of economic andinstitutional development, as well as after its economy has reached adegree of international competitiveness and has effective access to worldmarkets for its exported products and services.Thus, a certain “Triad” could be formulated for a successful tradeliberalization strategy – Supply Capacity, International Competitivenessand Market Access.Such empirical approach also reveals that trade liberalization requires theexistence and smooth functioning of a number of interrelated institutions,which facilitate the implementation of liberalization measures at the lowestpossible social and political costs. To mention just a few of the institutionsrequired: a social safety net for those who become unemployed; retrainingfor the labour force which is becoming redundant; assistance for businessentities in introducing the necessary structural adjustments; and labourmobility to facilitate the movement of labour among different regions of thecountry. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 11
  12. 12. Experiences of Countries in North and Central Asia – several considerationsThe accumulated experience of transition economies in the Regionwarrants some inconclusive considerations: The importance of legal and regulatory issues The need for coherence and coordination of all components of economicstrategy and policies Full account of national cultures and other specificities Trade policy reform, in particular, should include not only the removal oftariffs and traditional trade barriers, but also the development ofappropriate regulations and institutions Trade liberalization should be assessed not only in terms of its effects ontrade flows, but also by its contribution to stimulating economic growth,increasing overall economic efficiency, improving economic regulationsand institutions Reform sustainability and public support depend on the capacity of thegovernments to deal with inevitable adjustment costs that emerge in theinitial stages of the reform process A favourable business and economic environment should be created Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 12
  13. 13. Role of Regional IntegrationRegional integration should play an importantsupportive and positive role both in the context ofeconomic reforms and globalization process. It hasa very strong potential manifested by the empiricalevidence in other Regions and ongoing efforts inthe North and Central Asian Region. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 13
  14. 14. Results of Reforms in the Region: Selected Development IndicatorsTo illustrate the reforms achieved so far, let usexplore some selected development indicatorson a country-by-country basis. The sources ofdata are from UNCTAD and the World Bank. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 14
  15. 15. Population growth (annual %) Countries 2000 2001 2002 2003Armenia -1 -1 -1 -0Azerbaijan 1 1 1 1China 1 1 1 1Georgia -1 -1 -1 -1India 2 2 2 1Kazakhstan -1 -1 -0 0Korea, Rep. 1 1 1 1Kyrgyz Republic 1 1 1 1Mongolia 1 1 1 1RussianFederation -1 -1 -0 -0Tajikistan 1 1 1 1Turkmenistan 2 2 2 1Ukraine -1 -1 -1 -1Uzbekistan 1 1 1 1 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 15
  16. 16. GNI (current US dollars) Countries 2000 2001 2002 2003Armenia 2,026,622,336 2,172,214,528 2,441,106,432 2,888,358,144Azerbaijan 4,912,775,680 5,341,731,328 5,857,832,448 6,714,029,056China 1,063,813,120,000 1,138,632,818,688 1,237,896,658,944 1,416,683,454,464Georgia 3,111,522,048 3,064,528,128 3,285,784,832 3,846,015,744India 455,611,187,200 477,931,077,632 493,996,867,584 571,260,731,392Kazakhstan 18,864,269,312 20,108,328,960 22,618,537,984 26,911,703,040Korea, Rep. 460,375,031,808 501,103,591,424 537,129,254,912 577,223,065,600KyrgyzRepublic 1,373,377,664 1,382,703,872 1,453,215,488 1,725,416,704Mongolia 941,419,264 957,899,328 1,037,427,328 1,198,585,600RussianFederation 250,308,493,312 259,626,418,176 305,521,033,216 373,874,327,552Tajikistan 1,112,984,576 1,065,393,600 1,135,435,776 1,344,935,936Turkmenistan 2,885,190,912 3,338,782,976 4,064,029,184 5,289,255,936Ukraine 34,353,143,808 35,354,198,016 38,213,963,776 46,928,003,072Uzbekistan 15,431,982,080 13,868,641,280 11,488,569,344 10,832,100,352 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 16
  17. 17. GNI per capita (current US dollars) Countries 2000 2001 2002 2003Armenia 650 700 800 950Azerbaijan 610 660 720 820China 840 900 970 1,100Georgia 660 660 710 840India 450 460 470 540Kazakhstan 1,250 1,350 1,520 1,810Korea, Rep. 9,790 10,580 11,270 12,050Kyrgyz Republic 280 280 290 340Mongolia 390 400 420 480RussianFederation 1,720 1,790 2,120 2,610Tajikistan 180 170 180 210Turkmenistan 620 710 850 1,090Ukraine 690 720 780 970Uzbekistan 630 560 450 420 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 17
  18. 18. GDP growth (% annual) Countries 2000 2001 2002 2003Armenia 6 10 13 14Azerbaijan 11 10 11 11China 8 8 8 9Georgia 2 5 5 11India 4 5 4 9Kazakhstan 10 14 10 9Korea, Rep. 8 4 7 3Kyrgyz Republic 5 5 -0 7Mongolia 1 1 4 6RussianFederation 10 5 5 7Tajikistan 8 10 9 10Turkmenistan 19 20 20 17Ukraine 6 9 5 9Uzbekistan 4 4 4 4 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 18
  19. 19. Agriculture value-added (% of GDP) Countries 2000 2001 2002 2003Armenia 26 28 26 24Azerbaijan 17 16 15 14China 16 16 15 15Georgia 22 22 21 20India 25 25 23 22Kazakhstan 9 9 9 8Korea, Rep. 4 4 4 3Kyrgyz Republic 37 37 38 39Mongolia 33 30 30 28RussianFederation 6 7 6 5Tajikistan 29 29 29 23Turkmenistan 25 25 .. ..Ukraine 17 16 15 14Uzbekistan 34 34 35 35 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 19
  20. 20. Industry value-added (% of GDP) Countries 2000 2001 2002 2003Armenia 35 33 35 39Azerbaijan 45 47 50 55China 50 50 51 52Georgia 22 22 24 25India 27 26 27 27Kazakhstan 40 39 39 38Korea, Rep. 36 35 34 35Kyrgyz Republic 29 29 23 23Mongolia 19 17 16 15RussianFederation 38 36 34 34Tajikistan 26 25 25 20Turkmenistan 45 44 .. ..Ukraine 36 35 38 40Uzbekistan 23 23 22 22 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 20
  21. 21. Services value-added (% of GDP) Countries 2000 2001 2002 2003Armenia 39 38 39 37Azerbaijan 38 37 35 31China 33 34 34 33Georgia 56 56 55 54India 49 49 51 51Kazakhstan 51 52 53 54Korea, Rep. 59 61 63 62Kyrgyz Republic 34 34 39 38Mongolia 48 53 54 57Russian 61Federation 56 58 60 56Tajikistan 45 45 46 ..Turkmenistan 30 30 .. 46Ukraine 47 49 47 43Uzbekistan 43 43 44 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 21
  22. 22. Export of goods and services (% of GDP) Countries 2000 2001 2002 2003Armenia 23 25 29 32Azerbaijan 39 41 43 43China 26 25 29 34Georgia 23 25 29 32India 14 13 15 14Kazakhstan 57 46 47 50Korea, Rep. 41 38 35 38Kyrgyz Republic 42 37 40 38Mongolia 65 64 67 68RussianFederation 44 37 35 32Tajikistan 81 63 64 60Turkmenistan 54 41 .. ..Ukraine 62 55 55 53Uzbekistan 25 28 31 37 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 22
  23. 23. High-technology exports (% of manufactures exports) Countries 2000 2001 2002 2003Armenia 5 .. 2 1Azerbaijan 4 9 8 5China 19 21 23 27Georgia 13 38 .. 24India 5 5 5 5Kazakhstan 11 10 .. 9Korea, Rep. 35 30 31 32Kyrgyz Republic .. .. 6 2Mongolia 0 0 0 0RussianFederation 14 14 13 19Tajikistan .. .. .. ..Turkmenistan 5 .. .. ..Ukraine 5 5 5 ..Uzbekistan .. .. .. .. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 23
  24. 24. Internet users (per 1,000 people) Countries 2000 2001 2002 2003Armenia 11 13 16 37Azerbaijan 2 3 37 ..China 17 26 46 63Georgia 5 9 15 31India 5 7 16 17Kazakhstan 6 9 16 ..Korea, Rep. 414 .. .. 610Kyrgyz Republic 11 .. .. 38Mongolia 13 17 21 58RussianFederation 20 .. .. ..Tajikistan 0 1 1 1Turkmenistan 1 2 .. ..Ukraine 7 12 19 ..Uzbekistan 5 6 11 19 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 24
  25. 25. COUNTRY (out of 155 EASE OF STARTING A DEALING REGISTERINGstudied countries) DOING BUSINESS WITH PROPERTY BUSINESS LICENSESNew Zealand 1 4 2 1Singapore 2 5 7 14United States 3 3 17 12Canada 4 1 21 27Japan 10 81 5 36Malaysia 21 57 101 53Korea 27 97 25 64Armenia 46 41 55 9Mongolia 61 49 22 21Bangladesh 65 52 53 151Russian Federation 79 31 143 35Kyrgyz Republic 84 27 65 54Kazakhstan 86 33 112 68China 91 126 136 24Turkey 93 46 137 49Azerbaijan 98 96 139 51Georgia 100 55 127 17India 116 90 124 101Ukraine 124 110 98 127Uzbekistan 138 67 .. 149 Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 25
  26. 26. LESSONS LEARNED(1) Effective Social Protection:The development of a reasonably effectivesocial protection system oriented torenewed progress in terms of humandevelopment is essential and requiresgrowth in real terms of social expenditure. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 26
  27. 27. LESSONS LEARNED (Cont.)(2) Professional public administration:The vital role of a professional public administrationcannot be overestimated. Enforcing laws andregulations on enterprises, affluent people and localbodies cannot be achieved by demoralized, ill-informed, and poorly paid officials. In other words,the administrative functioning of the state must beconsiderably strengthened. Beyond beingreasonably well-paid, so as to provide motivationand to lower the probability of civil servicecorruption, officials in public administration mustbe well-trained in technical and cultural terms, knowforeign languages. Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development 27
  28. 28. THANK YOU!Division on International Trade in Goods, Services and Commodities CommoditiesUnited Nations Conference on Trade and Development 28

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