ROK’s Aid for Trade policy towards Asia-Pacific developing partners

Jun Ho Shin, Ph.D.

Director, Policy Assessment Division, Ministry of Strategy and Finance, ROK

Despite some issues to develop further, the ROK has recognized the importance of trade for economic development and has developed its Aid for Trade (AfT) policy based on what it is able to contribute towards Asia-Pacific countries both in terms of quality and quantity.

Main point

Outline

I. Overview

V. ROK’s AfT policy

VI. Way forward

III. ROK’s ODA figures

II. Key features of ROK’s Official Development Assistance (ODA)

IV. ROK’s Aid for Trade (AfT) performance

I. Overview

* Source: Pinterest.com and Webnode.me

1. Korean conundrum?: Changes over half a century

Seoul, 1950 Seoul, 2016

1

1960s 2010s

Per Capita GNI (USD)

110(1962)

27,440(2015)

Merchandise Exports (USD)

32 million(1960) 527 billion (2015)

% of GDP

Agriculture Industry Services

39.4(1965) 21.3(1965) 39.3(1965)

2.3(2015) 38.0(2015) 59.7(2015)

Life Expectancy 55.3(1960) 82.4(2014)

Enrollment Rate(%)

High Schools Univ./Colleges

48.8(1980) 11.4(1980)

93.5(2015) 68.1(2015)

* Source: KOSIS and WB data

2. Socio-economic performance

2

GNI per capita, 27,440

Exports per capita, 10,843

0

5,000

10,000

15,000

20,000

25,000

30,000

19

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USD

GNI and Exports per capita of the ROK

Asian Financial

Crisis

Global Financial

Crisis

* Source: WB

3. Rapid growth in GDP and exports per capita

3

II. Key features of ROK’s ODA

1. Transformation from an aid recipient to an aid donor

2. The fast growing ODA by volume

3. Possibilities of South-South Cooperation

4

Recipient (1945-mid1980s)

One of the poorest countries in the world

- GNI per capita USD 110 (1962)

Received and borrowed 13 Billion USD

from the world community

Donor (late1980s-present)

1. Transformation from an aid recipient to a donor

11th largest economy, 6th largest trade volume

- GNI per capita USD 27,440 (2015)

Establishing Economic Development Cooperation

Fund (EDCF) in 1987 and Korea International

Cooperation Agency (KOICA) in 1991

Joining OECD Development Assistance Committee

(DAC) in 2010

5

- In absolute terms, still a small amount (2014) OECD DAC 115billion dollars

2.4billion dollars - Despite two global financial crises, the fastest pace of ODA growth OECD DAC: 1.7% 17.0%

2. Fast growing ODA by volume

* Source: OECD

1.7%

-0.5%

8.3%

3.0%

17.0%

-2.5%

2.0%

-0.05

0.00

0.05

0.10

0.15

0.20

DA

C C

ou

ntr

ies,

To

tal

F

ran

ce

G

erm

any

J

apan

K

ore

a

U

nit

ed K

ingd

om

U

nit

ed S

tate

s

Annual growth rate of ODA (2006-2014, commitment)

6

vs.

vs.

3. Possibilities of South-South Cooperation

Facing some difficulties in applying

existing development models

Highlighted Asian

development models

(esp. ROK)

Global Financial Crisis

(i) Encouraging developing countries

(ii) High Applicability (iii) Good will

- Deep understanding about recipient

- countries’ situations

- Started from a very basic level of

infrastructure

Increasing demand for a new model

- Colonial experience and a civil war

- Accomplished industrialization and

democratization in one generation

7

III. ROK’s overall ODA figures

1. ODA composition (2014, net disbursement, USD Billion)

Total ODA

1.86

Multilateral

0.46

Bilateral

1.40

0.88

Grants

0.51

Concessional Loans

Development Banks and others

0.35

UN

0.11

75%

25%

63%

37%

78%

22%

* Source : ROK government

- Multilateral: Development banks(78%)> UN(22%)

- Bilateral: Grants(63%) > Loans(37%)

8

- Having mainly focused on Asia

and having diversified to Africa

and America

2. Regional distribution

* Source : ROK government

0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014

Regional Distribution (net disbursement)

Others

Occeania

Asia

America

Africa

Europe

0

100

200

300

400

500

600

700

800

900

ODA distribution in Asia

Ohters

Southeast

Central/Southwest

Middle East

- In Asia, mostly going to

Southeast and

Central/Southwest Asia

9

- Social infra 46%, Economic infra 24%, Production 10% (2014)

(Loans) Mainly on economic infra(e.g. transportation, energy)

(Grants) Mainly on social infra(e.g. education, sanitation)

3. Sectoral distribution

* Source : ROK government 10

0

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014

Sectoral distribution

Others

Debt relief

Commodity aid etc.

Multisector

Production

Economic Infra.

Social Infra.

IV. ROK’s AfT performance

- Global Aid for Trade Review (2007)

- Aid for Trade at a Glance (2009)

- Seoul Development Consensus (2010)

- Donor Questionnaire on AfT (2011)

- OECD-DAC Peer Review (2012)

- Aid for Trade at a Glance (2015)

1. ROK’s readiness for Aid for Trade

11

2. International comparisons

- Despite the economic recession,

ROK’s AfT has been increasingly implemented till 2014

- In absolute terms, it is still small

* Source: OECD 12

0

2000

4000

6000

8000

10000

12000

USD

mill

ion

AfT commitments (2013 constant)

2009-11 avg.

2013

2014

0

1000

2000

3000

4000

5000

6000

7000

8000

ROK US UK France Germany Japan

AfT disbursements (2013 constant)

2009-11 avg.

2013

2014

3. ROK’s sectoral distributions in AfT

- ROK’s AfT has been peaked in 2014

- Economic infrastructure> Building productive capacity > Trade policy and regulations

13

0

200

400

600

800

1000

1200

2010 2011 2012 2013 2014 2015

AfT commitments of ROK (USD million) Others

Trade-relatedAdjustment

Trade PolicyRegulations

BuildingProductiveCapacityEconomic Infra

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015

AfT disbursements of ROK (USD million)

Trade-relatedAdjustment

Trade Policy Regulations

Building ProductiveCapacity

Economic Infra

* Source: ROK government

4. ROK’s AfT in Asia-Pacific region

- Showing similar pattern in volume and composition

* Source: ROK government 14

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015

AfT commitments for Asia and the Pacific (USD millions)

Trade-related Adjustment

Trade Policy Regulations

Building ProductiveCapacity

Economic Infra

* Top 5 partners (commitment): Bangladesh, Myanmar, Viet Nam, Philippines, and Pakistan

0

100

200

300

400

500

2010 2011 2012 2013 2014 2015

AfT disbursments for Asia and the Pacific

Trade-related Adjustment

Trade Policy Regulations

Building ProductiveCapacity

Economic Infra

* Top 5 partners (disbursement): Bangladesh, Viet Nam, Sri Lanka, Philippines, and Indonesia

V. ROK’s AfT policy

1. Vision

Analyzing ROK’s related experiences and identifying some competent areas

ODA programs

Strategy

Economic infrastructure/ Building productive capacity/Trade policy etc.

Selection & concentration

Field & results based

approach

Participation & cooperation

with NGOs and int’l organizations

Supporting partner countries’ poverty reduction & sustainable development

15

2. Policy Coordination

Committee for International Development Cooperation (CIDC)

(Chair: Prime Minister)

Working Committee

(Chair: Vice Minister of Prime Minister’s

Office)

Prime Minister’s Office

(Secretariat for the CIDC)

Ministry of Strategy and Finance

(concessional loans and multilateral aid to MDBs)

Korea Eximbank

(Economic Development Cooperation Fund, EDCF)

Ministry of Foreign Affairs

(grant aid and multilateral aid to the UN and others)

KOICA

Other Ministries

Consultations

Consultations

16

3. Strategy

1) Establishing Country Partnership Strategies (CPS) for its 24 priority partners*

* Criteria : Income levels, Economic relations, Regional distribution, etc.

- 11 Countries in Asia-Pacific region: Bangladesh*, Cambodia*, Indonesia, Lao PDR*, Mongolia, Myanmar*, Nepal*, Pakistan, Philippines, Sri Lanka, and Viet Nam

* 5 Least Developed Countries (LDC)

17

3. Strategy

2) Accumulating and analyzing evidence relating to ROK’s trade experiences

-WTO membership -FTA roadmap and negotiation strategy -Free Economic Zone -Training Trade Professionals -Establishing agencies to support exports, etc. (e.g. Korea Trade-Investment Promotion Agency (KOTRA),

Korea Int’l Traders’ Association (KITA))

i) Trade Policy/Regulations/Adjustment

18

- Green growth

- ICT R&D system

- Agricultural cooperative system

- Reforestation

- Fisheries development, etc.

ii) Building productive capacity

3. Strategy

19

iii) Economic Infrastructure

- Fiscal policy management

- Establishment of an economic planning agency

- Improvement of power energy Infrastructure

- National land development

- Industrial complex development, etc.

3. Strategy

20

Some cases

Greater Mekong Sub-region (GMS) Southern coastal Corridor

- One of ADB’s GMS corridor programs - Region: Cambodia and Viet Nam - Total amount : EDCF 250 million USD * Co-financing with ADB (82 million USD), AusAid (34million USD) - Cross-border project - Adopting ADB safeguard policy

* Source: ROK government

Cases 1: Economic infrastructure

21

Case 2: Trade policy/regulations and adjustment

Policy consultation with Myanmar on establishing Myanmar Trade-Investment Promotion Agency (MYANTRA) (’16)

* Establishing the Navoi Free Industrial Economic Zone (2009)

Case 3: Building Productive Capacity

Industrial development and export promotion policy for Uzbekistan (’05)

* Assisting with a master plan for establishing the agency and following capacity building workshops in Korea and Myanmar

22

VI. Way forward

2. Focusing more on LDCs

1. Independent policy guidelines on AfT

3. Ensuring policy coherence on AfT as a cross cutting issue

23

Thank you

For questions and comments: ssss99@mosf.go.kr