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Logo of Phnom Penh Post newspaper Phnom Penh Post - Meeting looks to strategies for containing crisis in Asia

Meeting looks to strategies for containing crisis in Asia

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WTO Director General Pascal Lamy notes falling contributions to Aid for Trade programme designed to help developing countries build economic ties

WTO Director General Pascal Lamy, ADB President Haruhiko Kuroda and Minister of Commerce Cham Prasidh during opening speeches Thursday at the Aid For Trade conference in Siem Reap. Photo Supplied

Siem Reap
CAMBODIA will in the coming weeks co-chair a group charged with preparing recommendations to bolster trade finance in developing Asia, a task that the head of the World Trade Organisation  said Thursday would be crucial for a regional economic recovery.

Speaking on the sidelines of a regional trade conference in Siem Reap, Pascal Lamy told the Post that the economic crisis could limit the level of donor funding for Aid for Trade, an initiative launched in 2005 that aims to help developing countries expand trade and implement WTO agreements.   

"We know that there is a risk because of budgetary pressures," Lamy said. "But we are trying to fight this."

A background paper at the conference noted that Aid for Trade to ASEAN countries was on the decline even before the downturn, having dropped 8 percent in 2007 compared with a 2002-05 baseline.

The paper, produced by the WTO and the Organisation for Economic Cooperation and Development, asserts: "A shortfall in financial flows to developing countries is a real possibility, and developed country demand for the commodities on which much of their recent growth was based is declining."

The lack of trade finance - as well as declining commodity prices and "the inability to conclude" the Doha Round of global trade talks - "risk jeopardising the contribution of trade to economic growth and poverty reduction in developing countries", the paper states.

Sok Sopheak, director general for international trade at the Ministry of Commerce, is to represent Cambodia in the Aid for Trade Regional Technical Group meetings this month, which Japan is to co-chair. Recommendations produced by the group are to be presented during a global review of the Aid for Trade initiative, to be held in Geneva July 6-7.

A shortfall in financial flows to developing countries is a real possibility.

In his keynote address, Lamy said ASEAN countries could be among the first to recover from the downturn so long as they avoided protectionism, a point echoed by Jong-Wha Lee, acting chief economist at the Asian Development Bank.

"It's absolutely true that ASEAN countries could recover more quickly than industrialised countries," Lee told the Post on Friday, citing higher growth potential, fairly sound financial systems and effective stimulus packages as factors working in the region's favour.

But Lee said Cambodia would not achieve the double-digit growth rates of the years preceding the crisis without a global recovery.

Though he emphasised the importance of remaining open to international trade, Lamy said he believed the crisis had revealed a need for Cambodia to promote domestic consumption so as to make local industries less vulnerable to the vagaries of global consumer demand.

"What this crisis will probably trigger is an acceleration of this rebalancing" away from foreign consumption toward domestic consumption, he said in an interview. "It's not a question of either/or. It's a question of finding the right balance."

Though he said Cambodia, like other ASEAN countries, had been "hurt very heavily by this crisis", Lee commended the government for "very coherent policies in terms of promoting trade".

Working with private sector

Mona Haddad, sector manager for the World Bank's International Trade Department, also praised government trade policies, saying in a presentation that Cambodia had been successful in coordinating aid and creating links between development partners and the private sector.

During the Siem Reap conference, which brought together government, private sector and donor representatives, participants echoed Lamy's call for expanded trade finance and policies to facilitate trade.

Patricia Francis, executive director of the Geneva-based International Trade Centre, said she hoped the regional working group would recommend that assistance be provided to developing countries as they devise trade-promotion policies.

"Without that, the region will not be globally competitive," she said in an interview.  

During a panel she chaired on the role of the private sector in expanding trade, Francis said she hoped that private sector representatives would be included in policy discussions.

"In the developing world, we have public sector representatives, but sometimes we don't know if there has been dialogue with the private sector," she said. "We have to remember that these are the people who trade."

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