International agencies are set to urge an increase in assistance for trade by developing countries at a conference beginning on Monday, amid fears that aid will be eroded by the economic crisis.
"Aid for trade is needed now more than ever," said the World Trade Organisation (WTO) and the Organisation for Economic Co-operation and Development (OECD) in a report to be discussed during the two-day review conference on the "Aid for Trade" process.
The WTO and OECD found in their progress report that aid for trade grew by more than 10 percent in 2007 compared to 2006, with new commitments reaching 25.4 billion dollars. However, "the global economic crisis will affect the medium term outlook," it added.
At least 12 projects in Africa had already been hit by the financial turmoil, said the African Development Bank, which approved on Wednesday a 500 million dollar investment to support trade finance. Among projects delayed by the crisis was a large power project in East Africa, which ran into financing problems after an international investment bank pulled out, said the bank.
The WTO/OECD report emphasised that in the short run such aid for trade "will provide much needed stimulus, through increased infrastructure investment." That view was echoed in a separate World Bank report launched for the conference, which noted that the "global recession has at the same time increased the urgency of making investments today that will allow countries to take advantage of a recovery in the global economy tomorrow, or whenever it occurs."
The Aid for Trade process launched at a WTO ministerial conference in December 2005 aims to help developing countries build infrastructure to take full advantage of a successful world trade liberalisation deal. Aid for trade encompasses grants and loans to build roads, ports and telecommunications, among others, as well as technical assistance in helping countries develop trade strategies or negotiate more effectively.
At least 15 heads of international organisations, including UN Secretary-General Ban Ki-moon, World Bank President Robert Zoellick and International Monetary Fund head Dominique Strauss-Kahn are expected to attend the two-day review conference. A World Bank report also gave a pessimistic outlook, warning that developed nations may opt to cut their aid allocation budgets in order to shrink their own budget deficits or to spend on stimulus to prop up their economies.
"If the volume of overall aid envelopes tapers off or they decrease in size, it is unlikely that aid for trade could increase," the World Bank said. The WTO on Wednesday cut its forecast for trade volumes of developing countries this year to a contraction of 7.0 percent instead of a March forecast shrinkage of 2.0 to 3.0 percent.
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