Trade for development fund

Projektkurzbeschreibung

Title: Global project – Trade for development fund
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Countries: Global
Overall term: 2015 to 2018

Trade for Development Fund. Border crossing between Mali and Senegal. © GIZ

Context

Participation in cross-border trade offers developing countries an opportunity to reduce poverty. They are able to tap into new regional and international markets for local products and create jobs in the export sector. Consumers also benefit from a wider variety of products and lower prices. This can foster pro-poor growth and sustainably reduce poverty – provided that trade promotion is geared towards development.

Two factors are instrumental in determining whether the environment in partner countries and economic communities is conducive to cross-border trade – developments in the increasingly complex international trade system, and the policies and structures in place at national and regional level. In developing countries, for example, there are often multiple non-tariff barriers to trade, such as complicated and lengthy customs procedures. These processes need to be simplified and made more transparent in order to cut costs and help to increase competitiveness. However, many partner countries, especially the least developed countries, lack the resources and capacities required to influence international negotiations and kick-start reform at local level.

The 2030 Agenda for Sustainable Development and the Trade Facilitation Agreement of the World Trade Organization (WTO) require Germany to step up its support to developing countries in their efforts to integrate into the world trade system. As such, trade promotion must be mainstreamed on a broader basis in German development cooperation activities. In particular, there is a need for measures to facilitate trade. In accordance with WTO’s Trade Facilitation Agreement, which recently entered into force, Germany is obliged to assist developing countries in implementing the relevant measures.

Objective

German development cooperation activities help to facilitate trade in developing countries, particularly in the least developed countries.

Approach

In order to incentivise trade promotion in partner countries, the German Federal Ministry for Economic Cooperation and Development (BMZ) set up the Trade for Development Fund. On behalf of BMZ, GIZ plans and implements projects financed by the Fund that in the first instance serve to facilitate trade in developing countries. When selecting project countries, priority is given to the least developed countries.

The aim of the Fund is to mainstream trade promotion in German development cooperation programmes and projects in the medium term. The Fund enables trade facilitation measures to be flexibly docked to existing activities. Approaches that have been successfully piloted through the Fund can then be rolled over into ongoing projects and programmes once the measure supported by the Fund has ended. This ensures that support measures are sustainable.

Results

The Fund is supporting various projects. The project designed to facilitate trade between the two capital cities Dakar in Senegal and Bamako in Mali exemplifies what a measure promoted by the Fund can achieve.

Transporting goods between Senegal and Mali is expensive and time-consuming. To make trade between Dakar and Bamako faster and less costly in future, GIZ is working on behalf of BMZ to help the two countries simplify and harmonise their transit procedures. Cross-border committees have been set up to plan joint activities and implement these together with national decision-makers. The first steps have been taken towards standardising customs and IT systems and producing information material on transit processes. Training courses have also been run for transport companies. As part of the project, the previously exorbitant customs escort fees for unsealed trucks in Senegal have now been reduced by 50 per cent. Overall this leads to greater transparency and planning certainty, thus saving time and money for drivers and traders at border crossings. It also makes trade in both countries more competitive. The improved flow of goods benefits consumers as well if savings translate into lower prices.

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