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Aid for Trade’s 2.0 upgrade

12 July 2017
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by Guest author

Access to global digital trade can give the development agenda the boost it needs, writes Jorge Moreira da Silva, Director, OECD Development Co-operation Directorate (DCD)

What does digital connectivity for sustainable development actually look like? Take the case of business owner, Praew from Thailand, who travelled 15 km each day to sell her clothes at the Chiang Mai night bazaar. At first, her attempts to move her small women-led business online to meet customers’ demands met with barriers that prevented access to the global market. In 2015, she learned how to utilise Amazon to ship worldwide and saw her profits grow by 70%, allowing her to employ others in her community. Or consider Clotel, who grew his small perfume shop to be the top online perfume retailer in Cameroon after receiving digital and management skills training. His sales went up fivefold. Chinese entrepreneur Du Qianli is another case in point: he uses his online Taobao shop to sell natural plants gathered from villagers in the Taihang Mountains, helping farmers earn extra income to send their children to school. By harnessing the power of digital connectivity, these entrepreneurs now have the power to help themselves and others in their communities out of poverty.

These are just three of 145 Aid for Trade case studies the OECD collected for the 2017 OECD-WTO Aid for Trade at a Glance. They demonstrate the aim that is at the heart of the financing for development agenda: to ensure that EVERYONE is lifted up by the mobilisation of unprecedented levels of public and private resources. Aid for Trade that supports access to digital markets is in line with the 2030 Sustainable Development Agenda, which calls for a more inclusive and interconnected world.

The joint publication casts a spotlight on how digital and physical connectivity is transforming societies, and contributing to inclusive trade and sustainable growth. Better connectivity offers more business opportunities by making it easier and less costly for business people in micro, small and medium sized enterprises (MSMEs) in developing countries to access markets.

Capitalising on connectivity to bridge the digital divide

Accessible and affordable internet connections are necessary for creating an interconnected global market in which no one is left behind. But they are not enough. To leverage the digital economy for developing countries, digital literacy, identity and financial inclusion also need to be improved.

In developing countries, information and communications technology (ICT) infrastructure continues to lag, which makes it harder to overcome the digital divide not just between developed and developing countries, but between cities and rural areas, women and men, and the educated and uneducated. Some 3.9 billion people remain offline, with only a quarter of people in Africa using the internet and only one in seven in least developed countries.

Since the launch of the Aid for Trade Initiative, a total of USD 155 billion has been disbursed for trade-related infrastructure and energy supply. Both sectors are essential for turning digital opportunities into trade realities. Cumulative disbursements in programmes to improve economic infrastructure, build productive capacity and support capacity-building in trade policies reached almost USD 300 billion since 2006. Aid for Trade commitments have increased annually by more than 10% and now stand at USD 54 billion.

While the imperative of bridging the digital divide has support among development partners, we have yet to see a concomitant rise in concessional financing for ICT projects. Official development assistance (ODA) for digital development has remained relatively stable over the last ten years at an annual average of around USD 600 million. This must change.

This underscores the need for coordination with the private sector. The most active donors work closely with the private sector to focus their support on helping developing countries create a regulatory framework that is conducive to attract private investment in building the physical ICT infrastructure. The Addis Ababa Action Agenda (AAAA) recognises the key role that broader sources of development finance will play in reaching the Sustainable Development Goals (SDGs). More synergy between the public and private sector will be needed to lift resources from billions to trillions in support of the SDGs, and to leverage investment in ways that can truly lead to better lives for all.

The OECD is supporting implementation of the Addis Ababa agreement through transformational financing for development, such as blending aid money with private finance and developing new ways of measuring official support. While discussions about how to do this are ongoing among OECD-DAC members, what is important is that we attract additional investment for sustainable development and work together to mobilise these resources effectively, ensuring financing for development is both “fit-for-purpose” and “fit-for-future.”

References and further reading

OECD/WTO (2017), Aid for Trade at a Glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development, WTO, Geneva/OECD Publishing, Paris. http://dx.doi.org/10.1787/aid_glance-2017-en

Alibaba (2012), Alizila News: E-commerce in Rural China, https://www.youtube.com/watch?v=LKSxZZk6y28

Nkoth Bisseck, Candace (2016),Changing traders’ lives via eCommerce in Africa, https://www.youtube.com/watch?v=WsuaeYdSXjQ

Roth, David K. (2016), Aid for Trade–Case Story: Lanna Clothes Design, http://www.oecd.org/aidfortrade/casestories/casestories-2017/CS-88-Amazon-How-a-small-rural-business-in-a-developing-country-was-empowered.pdf

Third International Conference on Financing for Development (2015), Countries reach historic agreement to generate financing for new sustainable development agenda, http://www.un.org/esa/ffd/ffd3/press-release/countries-reach-historic-agreement.html

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