Dr. Ratnakar Adhikari is currently the Executive Director of the Executive Secretariat for the Enhanced Integrated Framework (EIF) at the World Trade Organisation, Switzerland, where he oversees the implementation of trade capacity building programmes spanning 47 least-developed countries (LDCs) and four recently graduated countries. He manages a Trust Fund of USD 370 million, which has so far invested over USD 230 million across 180 projects. Business 360 interviewed Dr. Adhikari about the work EIF has been doing in the LDCs and plans for the Phase Two program of EIF on his recent visit to Nepal.
Since taking up the role of Executive Director of the Executive Secretariat for EIF in October 2013, you look after the evaluation of the Phase One of the programme. What were the points included in the first phase of the programme? What was accomplished from the programme?
Most of the targets which we had set for Phase One of the programme were accomplished. EIF is a partnership organisation having memberships of various international organisations and 24 donors in total who contribute to our resources, through which we are operating in 51 countries. So, it was a complex programme and to achieve all the objectives in totality was difficult but a majority of them were achieved.
One of the objectives was to mainstream trade in the national development project. Mainstreaming trade means integrating trade in the national development agenda of a country. We did it in many of the LDCs. Our target was to achieve results in countries where we were working. In 2/3 of the countries we were able to achieve the target.
The second objective was to help countries to identify key priority sectors to help them integrate themselves better into the multinational trading system and this was also achieved to a great extent. The first step in this objective is to develop strategies, then we ask the countries to identify the priorities. Once the priorities are identified, we support them by providing institutional strengthening funding to create necessary institutions at the country level to take forward the recommendations and the priorities that are identified through an analytical process.
The third objective relates to providing support to build the capacity of the country. Some countries might face challenges for inaugural processing, others might face challenges in moving the value chain data, whereas some might face problems of general nature such as trade facilitation at the border because they cannot export and report their product in a seamless manner. Some countries produce good products but they are unable to sell it to the international market because they don’t meet the standards or requirements. The global standard, particularly of agricultural products, is very high. If one wants to export to European Union countries, there are thousands of criteria. Many LDCs are unable to meet these criteria and this is when EIF provides them support to establish a laboratory, proper equipments, draft the necessary policies and legislations to be able to meet the international standard and to capture the international market. So, this is the third part which is quite critical in the sense that we provide funding upto US$3 million only for one particular project because we always want these countries to mobilise resources from elsewhere. Some of the projects could be fully funded by us, but in the international development scenario when you provide support to a project, after three years the project closes and then the benefit goes to the beneficiary.
Some LDCs have several problems like change of government, lack of stable policies and changing priorities of the government; which has been a real challenge for us. These are the types of problems with severe risks and conflicts. So in those countries, it is difficult to achieve objectives, but in many other politically stable countries and where the government is fully committed, we have achieved almost all objectives.
Currently Phase Two of the programme, which started in 2016 and will end in 2022, has been implemented. What are the key points included in the programme?
The key points included in Phase Two of the programme is to further help countries to leverage additional resources because the weight for trade resources is shrinking for LDCs. The resources we were able to mobilise in the second phase of the programme is quite limited as we have the target for US$274 million, but so far we are able to mobilise only US$115 million. We are still working with our partners and donors to see if we are able to mobilise additional resources and planning to organise a conference in early 2019. At the same time we felt that we will not be able to support the projects of an amount up to US$3 million, so we have reduced that to US$1.5 million in order to encourage countries to mobilise additional resources. So the first criteria is potential ability of the countries to mobilise additional resources.
The second point is to focus on sustainability. This is to pursue the productive capacity and institutional support to achieve sustainability. In institutional support, EIF provides each institution with support up to US$1.5 million for building their institutional capacity. Taking an example of Nepal, we have set up the National Implementation Unit within the Ministry of Commerce. We pay the employees’ salary, and provide them support for the establishment of their office and necessary utilities. At the same time, they are to implement the priorities that are included in the Diagnostic Training Integration Study, which in the case of Nepal is known as Nepal Trade Integration Strategy (NTIS). In many countries, the National Implementation Unit is housed within the Ministry of Commerce but not part of the Ministry’s structure. Initially we provide support for a period of three years, we undertake a mid term evaluation after three years, and if the evaluation comes out with positive results and continuing the project is still relevant, then we extend support for the project for an additional two years. So, now in total we provide support to a project for five years.
In the past, we faced problems with the project being shut down after our support ended, i.e. five years, I proposed a plan to the board, which also got approved, which is to provide an additional two year support called ‘sustainability support’. We provide the funding on an installment basis, which is US$ 300,000 per year for five years, and after that in the ‘sustainability support’ EIF provides support of US$ 150,000 per country for two years. The idea is to now encourage the country to mobilise internal resources in which the government should also contribute so that the government can take care of the operation and administrative expenses. Eventually the idea of the National Implementation Unit is to integrate the Unit within the structure and function of the Ministry, after they are able to ensure institutional sustainability, and where the government is in charge of the project and managing the trade agenda of the county. Many countries have already done so.
These are process related issues. But in terms of the ideas of the second phase of the programme i.e. substantive agenda, we have a number of areas. One is the area of global value chain, another is the area of regional integration, the third is the area of private sector, the fourth is the area of women economic empowerment, the fifth is youth employment opportunities, and sixth actually is harnessing the role of technology which is an emerging issue and we are working on it in the last phase of the second phase of the programme, i.e. from 2019-2022.
What we realised is that there is a tremendous potential for regional economic integration given the fact that most countries where we work have been focusing on exporting to developed countries. We thought that it will be more useful to engage them in regional trade because countries that are closer to each other share a similar culture and business practices, and thus will be able to integrate better than in countries outside their regional territories. For example, in West Africa, South Asia, or East Africa, the level of integration is very low. With the regional context if you have a regional trading arrangement, the standard that is required for regional countries are almost similar and easier to trade in. In order to do that, what EIF is trying to achieve is to create regional support. Now, the support we provide to the countries is purely based on the demand or request from the country. The country will receive support of EIF to undertake studies for regional integration as well as to be able to export to regional markets or better integrate with the regional framework, but at the same time there is a possibility of providing support through the regional window. Currently in West Africa we are looking at a trade facilitation project in the regional context. The second project we are looking at is in the context of South Asia and this relates to creating a paperless trading system where all the trading documents are done digitally. Similarly, in West Africa, we are looking at the possibility of seeing if they are in a position to take advantage of e-commerce opportunity in the region. In East Africa, we are looking at a project where they can integrate themselves into a regional agriculture value chain which is the regional aspect of EIF.
The second one is to promote integration of countries into global and regional value chains. What this means essentially is that the bulk of trade happens within different countries for the production of a product. Production of Apple iPhone is a very good example of integration of countries. Currently the least developed countries are missing out on these types of opportunities because of simple reasons like not having the capacity, not understanding the market, not having proper technologies and expertise. Therefore, we are assisting LDCs to be able to integrate themselves into the global value chain. If it is not possible to integrate themselves into the global value chain, then EIF is trying to integrate them into the regional value chain.
The third point relates to increase in the engagement of the private sector. At the end of the day, it is the private sector that does the business. The support we provide to the government is mainly to create the institutional apparatus. Since the primary beneficiary of our support is the private sector ,and then the benefits circulates down to the employees, it is our thinking that the private sector should be involved in the contribution also.
The other issue in Phase Two is women’s economic empowerment. The reason we are emphasising on this particular agenda is because there exists tremendous potential for women entrepreneurs towards economic growth. Many women entrepreneurs have the necessary capacity to produce quality products and supply to the domestic market, overall sell to the intermediaries who will sell it to the international market. So what we are trying to do is eliminate these intermediaries and making women export ready so that they can directly connect to regional or international buyers and become involved in export trading.
The fifth agenda is youth employment. In LDCs, half of the population is in the age bracket of 18-35 years. They need to be involved in productivity otherwise this can create significant problems for the society. If we provide employment opportunities to the youths, when they are in their most productive age, they can input their services at a cost that is significantly lower than in the global market which makes them competitive in the global market resulting in higher export. When a country exports more, they can generate more income and expand the business operation through more investment which is only possible through youth employment.
The final point is harnessing the potential of technology. There are so many things happening in the global market currently. We are in the fourth industrial revolution which involves using the internet and artificial intelligence. While trading, both import and export, there are many steps and processes involved, which consume huge amounts of time and money. In the world of digitization, these entrepreneurs can use ‘blockchain’ to shorten the depreciation, to enhance efficiency, and digitize their trade. E-commerce is another point of harnessing the potential of technology. There is great potential for small and medium enterprises to connect directly to the local market and eliminate intermediaries. What EIF is doing is to create a pool of these small and medium enterprises, like a cooperative, and through use of the internet they can do business directly with customers.
What issues or backfalls have you faced related to women empowerment in LDCs?
In a continent like Africa, where cultural barriers exist, it is not possible for women to participate actively in business opportunities outside their homes. But we have gradually overcome those challenges in many of the LDCs. I would not say that we will overcome all the challenges, but in many countries women have started coming out and getting involved in businesses. In countries like Mali which is culturally a bit conservative, the government and the people of Mali have realised the potential of women getting involved in the economy and assisting in economic growth. Challenges exist everywhere, but then how one works with the community and the people who are the real beneficiaries to make those changes and create an impact on the ground is important.
Youth are human capital of a country, but in LDCs like Nepal, the youths are going to other countries in search of education, employment and a better future. What kinds of programmes are EIF thinking or working on to help the government of LDCs to minimise this issue?
If the government requests us to provide trainings for the youths to enhance job opportunities and productivity according to the requirement of the industry, EIF provides the necessary support. The aim of this program is to create youth with sufficient skills to work in various working environments.
It is said that the WTO is bullied by a handful of powerful nations and in turn bullies the world’s poorest countries. Your thoughts.
That’s not true. The WTO is a rule based system where interests of small nations like Nepal is protected. The bullying happens when bilateral deals or regional deals are signed. Just imagine if Nepal signs a trade and investment agreement with the USA. If Nepal needs to negotiate a free trade agreement with the USA, Nepal will not be able to get the best possible deal in the negotiation with the kind of intellectual and practical resources that they have compared to Nepal. Nepal has not even been able to get the best possible deal with India in the free trade negotiation. However bullying is not the word that should be used. When a country is negotiating bilateral trade and if a country is relatively weaker in terms of capacity to negotiate than the other country, the weaker country gets a raw deal. In the WTO, the system is such that there is the MFN (Most Favoured Nation) clause. Suppose the USA agrees on a particular concession with Australia, this concession will then have to be given to the other 162 member countries also. The WTO also has the Dispute Settlement System in which a complaint or case can be filed. The kind of protection the WTO provides to smaller countries is much higher than availability in regional or bilateral trade agreements.
WTO negotiations have moved from relative straight forward debates about tariffs and quotas to much more controversial and political questions involving the environment, health, development and other issues. Has the WTO bitten off more than it can chew?
I completely agree with this statement. There are several issues that have come up and these are based on the evolving dynamics of global trade and facing political realities in many countries. The WTO is a membership based organisation and when the majority of members want to bring some issues, then it is the responsibility of the WTO to provide the platform for the discussion of those issues. If environmental needs and services is one of the issues that some countries feel is necessary to be brought to the agenda, like even now the focus on environmental sustainability is a globally accepted goal with emphasis on climate change, use of solar and biochemical products being a burning topic, these topics can be entered into the WTO discussion while talking about change in global reality. Health standards has been there since 1947 and has been part of the WTO since its establishment. The WTO has agreements related to sanitary and phytosanitary requirements that talk about human, plant and animal health, and technical biologist trade that talks about levelling requirements and standards. So, these issues have been a part of an agenda, but now the significance of this agenda is increasing. So, if the WTO says that they will remain apart from the global change topics no matter what is happening and concentrate only on tariffs and quotas, then it will probably lose its relevance. Rather than thinking of it as a threat, I see this as an opportunity.
Some commentators have suggested that the WTO has faded into irrelevance; has become unworkable or even superfluous, destined to be replaced by bilateral and regional trade deals. What would you say to the naysayers?
The WTO’s relevance will continue to increase despite bilateral and regional trade agreements. I would consider bilateral and regional trade agreements a bit of a hype. Even when the WTO was at its peak in terms of successful conclusions of successful management of disputes, trade policy and monetary exercises and negotiations moving in the right direction, the regional trading agreements were growing. So regardless of whether something happens in the WTO or not, regional trading arrangements will continue to happen on its own. The statement of WTO fading into irrelevance is something that I don’t agree with given the fact that some of these negotiations can be only taken place at the WTO.