Globalize Wgvictor

United Nations Conference on Trade and Development
Economic liberalization as a driving force of globalization: experiences of countries in North and Central Asia
Victor Ognivtsev Trade Analysis Branch, DITC UNCTAD Moscow 29 September, 2005
Structure of this Presentation:

General trends of the unfolding globalization process The role of economic liberalization, particularly of trade liberalization, in the reform transition process Specific experiences of countries in North and Central Asia and results achieved Lessons learned
Division on International Trade in Goods, Services and Commodities Commodities United Nations Conference on Trade and Development
Introduction
Countries in the Northern and Central Asian region have been undergoing 15 years of profound, often historically unprecedented reforms in the process of transition to a market economy from a previously centrally-planned system, in which economic liberalization, particularly trade liberalization and integration in the world economy were major elements of the reform strategy. The economic and social transition of these countries was carried out against the background of the unfolding globalization process. This made their situation even more challenging.
Economic liberalization and globalization: Brief description of terms

Economic liberalization may be described as the freedom to engage in economic activity at home and/or abroad, a freedom subject to institutional and policy constraints needed to guarantee public interests at large. Globalization may be seen as a major driving force of global economic integration and has the following main features: (1) internationalization of production with very fast changes in the structure of production; (2) liberalization and expansion of world trade in goods and services; and (3) unprecedented expansion of international financial flows supported by the latest technological advances.
Role of Trade
International trade is widely recognized as an important engine of the world economic growth and the evolving process of globalization. It had also a major contribution to make in the process of transition of formerly centrally-planned economies. In the transition process, normally, the first measures were trade-related and consisted of phasing out the state foreign trade monopoly, allowing enterprises to carry out foreign trade transactions directly and freeing their access to foreign currency for trade purposes.
Trade Liberalization
Trade liberalization has been the central part of mainstream policy advice for at least 20 years, and has been actively picked up by most developing countries and economies in transition in the design of their development strategies. However, the intensive international discussion over the benefits of trade liberalization and its welfare effects on developing countries and their societies is far from over. The search for consensus continues, while some simpler postulates like a freer trade alone brings more economic growth, which, in turn, have beneficial effects on social life and leads to better living standards, including reduced poverty have produced mixed results, thus raising a general concern of whether open trade can contribute substantially and directly to the process of development.
Washington Consensus One Size Fits All

John Williamson originally coined the phrase in 1990 to refer to the lowest common denominator of policy advice being addressed by the Washington-based international financial institutions 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
Washington Consensus: Evolution

Over 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
Trade liberalization (cont.) The approaches to trade liberalization are becoming more complex and realistic in that liberal trade policy are no more entirely delinked from other policy issues (e.g. financial, monetary, environmental protection, adjustment costs, supply constraints and capacity building in developing countries, etc.) It is now widely recognized that the scope and form of government interventions, vis--vis markets and the private sector, have to be based on a rational determination of the basic economic state functions, and not on biased ideological approaches.
Transition Reforms in the Region: Gradualism or Radicalism?

Many of the countries in the Northern and Central Asian Region decided to embark on a radical way of transformation. Apart from positive impacts of such approach, such strategy, however, also resulted in a number of cases in drastic decrease of GDP, and consequently substantial lowering in the standard of living of their citizens. By the year 2004, many of these countries 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 and that the market alone would balance the economy and generate wealth. In fact, the aim of any economic policy is development, while everything else is the means to achieve this aim. Unfortunately, quite often in policymaking the aim is confused with instruments to achieve that objective. For example, stable exchange rates are sometimes taken for the target of economic policy. The lowest possible inflation, whatever the cost, is sometimes assumed to be the ultimate policy aim. The same goes for accession to certain international organizations like the WTO.
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Reform Experiences of Other Countries in the Region and Elsewhere

The experiences of now developed countries, as well as of some countries in the Region would also suggest that a more empirical analysis of approaches to reforms, particularly to trade liberalization is required. The effects of freer trade, as suggested by such experiences, can be quite beneficial after a country has achieved a certain level of economic and institutional development, as well as after its economy has reached a degree of international competitiveness and has effective access to world markets for its exported products and services. Thus, a certain Triad could be formulated for a successful trade liberalization strategy Supply Capacity, International Competitiveness and Market Access. Such empirical approach also reveals that trade liberalization requires the existence and smooth functioning of a number of interrelated institutions, which facilitate the implementation of liberalization measures at the lowest possible social and political costs. To mention just a few of the institutions required: a social safety net for those who become unemployed; retraining for the labour force which is becoming redundant; assistance for business entities in introducing the necessary structural adjustments; and labour mobility to facilitate the movement of labour among different regions of the country.
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Experiences of Countries in North and Central Asia several considerations

The accumulated experience of transition economies in the Region warrants some inconclusive considerations: The importance of legal and regulatory issues The need for coherence and coordination of all components of economic strategy and policies Full account of national cultures and other specificities Trade policy reform, in particular, should include not only the removal of tariffs and traditional trade barriers, but also the development of appropriate regulations and institutions Trade liberalization should be assessed not only in terms of its effects on trade flows, but also by its contribution to stimulating economic growth, increasing overall economic efficiency, improving economic regulations and institutions Reform sustainability and public support depend on the capacity of the governments to deal with inevitable adjustment costs that emerge in the initial stages of the reform process A favourable business and economic environment should be created
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Role of Regional Integration

Regional integration should play an important supportive and positive role both in the context of economic reforms and globalization process. It has a very strong potential manifested by the empirical evidence in other Regions and ongoing efforts in the North and Central Asian Region.
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Results of Reforms in the Region: Selected Development Indicators
To illustrate the reforms achieved so far, let us explore some selected development indicators on a country-by-country basis. The sources of data are from UNCTAD and the World Bank.
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Population growth (annual %)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 -1 1 1 -1 2 -1 1 1 1 -1 1 2 -1 1 2001 -1 1 1 -1 2 -1 1 1 1 -1 1 2 -1 1 2002 -1 1 1 -1 2 -0 1 1 1 -0 1 2 -1 1 2003 -0 1 1 -1 1 0 1 1 1 -0 1 1 -1 1
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GNI (current US dollars)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 2,026,622,336 4,912,775,680 1,063,813,120,000 3,111,522,048 455,611,187,200 18,864,269,312 460,375,031,808 1,373,377,664 941,419,264 250,308,493,312 1,112,984,576 2,885,190,912 34,353,143,808 15,431,982,080 2001 2,172,214,528 5,341,731,328 1,138,632,818,688 3,064,528,128 477,931,077,632 20,108,328,960 501,103,591,424 1,382,703,872 957,899,328 259,626,418,176 1,065,393,600 3,338,782,976 35,354,198,016 13,868,641,280 2002 2,441,106,432 5,857,832,448 1,237,896,658,944 3,285,784,832 493,996,867,584 22,618,537,984 537,129,254,912 1,453,215,488 1,037,427,328 305,521,033,216 1,135,435,776 4,064,029,184 38,213,963,776 11,488,569,344 2003 2,888,358,144 6,714,029,056 1,416,683,454,464 3,846,015,744 571,260,731,392 26,911,703,040 577,223,065,600 1,725,416,704 1,198,585,600 373,874,327,552 1,344,935,936 5,289,255,936 46,928,003,072 10,832,100,352
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GNI per capita (current US dollars)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 650 610 840 660 450 1,250 9,790 280 390 1,720 180 620 690 630 2001 700 660 900 660 460 1,350 10,580 280 400 1,790 170 710 720 560 2002 800 720 970 710 470 1,520 11,270 290 420 2,120 180 850 780 450 2003 950 820 1,100 840 540 1,810 12,050 340 480 2,610 210 1,090 970 420
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GDP growth (% annual)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 6 11 8 2 4 10 8 5 1 10 8 19 6 4 2001 10 10 8 5 5 14 4 5 1 5 10 20 9 4 2002 13 11 8 5 4 10 7 -0 4 5 9 20 5 4 2003 14 11 9 11 9 9 3 7 6 7 10 17 9 4
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Agriculture value-added (% of GDP)

Countries 2000 2001 2002 2003
Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan
26 17 16 22 25 9 4 37 33 6 29 25 17 34
28 16 16 22 25 9 4 37 30 7 29 25 16 34
26 15 15 21 23 9 4 38 30 6 29 .. 15 35
24 14 15 20 22 8 3 39 28 5 23 .. 14 35
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Industry value-added (% of GDP)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 35 45 50 22 27 40 36 29 19 38 26 45 36 23 2001 33 47 50 22 26 39 35 29 17 36 25 44 35 23 2002 35 50 51 24 27 39 34 23 16 34 25 .. 38 22 2003 39 55 52 25 27 38 35 23 15 34 20 .. 40 22
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Services value-added (% of GDP)

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Export of goods and services (% of GDP)

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High-technology exports (% of manufactures exports)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 5 4 19 13 5 11 35 .. 0 14 .. 5 5 .. 2001 .. 9 21 38 5 10 30 .. 0 14 .. .. 5 .. 2002 2 8 23 .. 5 .. 31 6 0 13 .. .. 5 .. 2003 1 5 27 24 5 9 32 2 0 19 .. .. .. ..
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Internet users (per 1,000 people)

Countries Armenia Azerbaijan China Georgia India Kazakhstan Korea, Rep. Kyrgyz Republic Mongolia Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan 2000 11 2 17 5 5 6 414 11 13 20 0 1 7 5 2001 13 3 26 9 7 9 .. .. 17 .. 1 2 12 6 2002 16 37 46 15 16 16 .. .. 21 .. 1 .. 19 11 2003 37 .. 63 31 17 .. 610 38 58 .. 1 .. .. 19
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COUNTRY (out of 155 studied countries)
EASE OF DOING BUSINESS 1 2 3 4 10 21 27 46 61 65 79 84 86 91 93 98 100 116 124 138
STARTING A BUSINESS
DEALING WITH LICENSES 2 7 17 21 5 101 25 55 22 53 143 65 112 136 137 139 127 124 98 ..
REGISTERING PROPERTY
New Zealand Singapore United States Canada Japan Malaysia Korea Armenia Mongolia Bangladesh Russian Federation Kyrgyz Republic Kazakhstan China Turkey Azerbaijan Georgia India Ukraine Uzbekistan
4 5 3 1 81 57 97 41 49 52 31 27 33 126 46 96 55 90 110 67
1 14 12 27 36 53 64 9 21 151 35 54 68 24 49 51 17 101 127 149
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LESSONS LEARNED (1) Effective Social Protection: The development of a reasonably effective social protection system oriented to renewed progress in terms of human development is essential and requires growth in real terms of social expenditure.
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LESSONS LEARNED (Cont.)

(2) Professional public administration: The vital role of a professional public administration cannot be overestimated. Enforcing laws and regulations on enterprises, affluent people and local bodies cannot be achieved by demoralized, illinformed, and poorly paid officials. In other words, the administrative functioning of the state must be considerably strengthened. Beyond being reasonably well-paid, so as to provide motivation and to lower the probability of civil service corruption, officials in public administration must be well-trained in technical and cultural terms, know foreign languages.
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THANK YOU!
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Globalize Wgvictor

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Globalize Wgvictor

Hochgeladen von

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United Nations Conference on Trade and Development

Structure of this Presentation:

Economic liberalization and globalization: Brief description of terms

Washington Consensus One Size Fits All

Washington Consensus: Evolution

Transition Reforms in the Region: Gradualism or Radicalism?

Reform Experiences of Other Countries in the Region and Elsewhere

Experiences of Countries in North and Central Asia several considerations

Role of Regional Integration

Results of Reforms in the Region: Selected Development Indicators

Population growth (annual %)

GNI (current US dollars)

GNI per capita (current US dollars)

GDP growth (% annual)

Agriculture value-added (% of GDP)

Industry value-added (% of GDP)

Services value-added (% of GDP)

Export of goods and services (% of GDP)

High-technology exports (% of manufactures exports)

Internet users (per 1,000 people)

COUNTRY (out of 155 studied countries)

EASE OF DOING BUSINESS 1 2 3 4 10 21 27 46 61 65 79 84 86 91 93 98 100 116 124 138

1 14 12 27 36 53 64 9 21 151 35 54 68 24 49 51 17 101 127 149

LESSONS LEARNED (Cont.)

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