BELARUS: THE HUMAN DEVELOPMENT IMPLICATIONS OF TRADE POLICY

United Nations Development Programme

The nexus of macroeconomic/trade policy and human development in Belarus• Belarus inherited from the Soviet era a large,

export-oriented manufacturing base, therefore it economic prosperity is highly dependent on foreign trade.

• Trade still remains a key factor of economic growth.

• This growth fully meets the definition of pro-poor, as it has reduced the poverty rate, and increased the average income relative to the minimum consumer budget.

• During the growth period, the share of the population living below the minimum subsistence level decreased from 38.4 to 5.4%.

Economic growth and the poverty rate

Belarusian foreign trade has experienced a number of negative trends in recent years• Many traded goods have been losing

competitiveness in international markets, leading to persistent current accounts deficits.

• Belarusian export specialization has shifted towards primary commodities, and away from investment goods and high-tech products.

• The high proportion of resource-intensive exports by industries with limited growth potential points to unfavourable changes in the economy, affecting prospects for job creation and productivity increases

• Belarusian trade basket became less diversified in

1998 - 2008, particularly outside the CIS. • High export concentration makes the economy

highly vulnerable to negative shocks.• The level of tariff protection in Belarus was below

the world average, but significantly above the average level for the Europe/Central Asia region and for the ЕС -27. Of the CIS countries, only Russia had a higher weighted average tariff than Belarus.

• Belarus ranks below most other CIS states by a majority of foreign trade liberalization measures, including the World Bank’s Trade Restrictive Index, and the EBRD Index of Forex and Trade Liberalisation

• Belarus continues to have a low ranking on the trading across borders index (moving up in 2008 – 2009 from the global 129 to 128th place out of 183

• Belarus continues to have a low ranking by the World Bank’s trade facilitation measures (including the logistics performance index (110 place), and the Export Credit – Ensured Exposures indicator (85 place)).

• According to estimates and data from UNCTAD’s ICT Belarusian exports are poorly adapted to changes in world demand and world market dynamics.

• Beyond economic growth, above trends also have implications for human development.

Main recommendations of the report

Belarus should:•Diversify its exports, and promote export specialization in medium- and high-technology goods•Facilitate the inflow of FDIs to maximize their positive economic impacts and create competition. •To attract FDIs to high value added sectors, it is essential to strengthen domestic firm absorption capacity, improve the finance system, strengthen the legal framework and protection of property rights, and increase the quality of the workforce

• Develop a privatization programme, linked to the FDI promotion programme;

• Emphasise development of partnerships with international producers and sellers to facilitate entry of domestic manufacturers to international markets. Participation in global value chains is an important means to access new technologies, and to adopt and comply with new quality standards;

• Accelerate WTO accession to facilitate integration in the world economy

• Strengthen the institutional environment for foreign trade, and pursue trade promoting policies, including:

• reduction of export and import formalities,

• improving foreign trade finance, • closing the logistics development gap

with the neighbouring states;• Pay special attention to industries that are

sensitive to trade policies, such as the food and light industries.

Concept notes for international technical assistance projects in Belarus• Expanding trade and export potential of

light industry in the Republic of Belarus.• Improving training and expertise of

researchers and technicians working in the food industry and creating a network of certification laboratories to test food products for compliance with the EU food safety regulations.

• Creating an Internet portal of the State Customs Committee of Belarus for electronic submission of notices of export or import