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March 2014

A Fragile Country Tale: Restrictions, Trade Deficits, and Aid Dependence

Massimiliano Calì's picture

 Masaru Goto, World BankPart of the World Bank’s new vision is to step up its efforts to help fragile and conflict-afflicted states break the vicious cycle of poverty. But this is no easy task.
 
The destruction of productive assets and the restrictions on the capacity to produce are among the most severe economic impacts of conflicts and fragility. These effects explain why countries in conflict or emerging out of conflict typically have very large trade deficits. The productive sector is often particularly weak by international standards, so exports are low and domestic consumption has to rely on imports. Indeed, five of the ten countries with the largest trade deficit in the world (Timor-Leste, Liberia, the Palestinian territories, Kosovo and Haiti) are considered fragile by the World Bank and other regional development banks (figure 1).
 

In a Complex World, Logistics Improvements Require Measurement and Strategy

Jean-François Arvis's picture



In a report released today, Connecting to Compete 2014: Trade Logistics in the Global Economy, we summarize the results of the Logistics Performance Index (LPI), and examine some of the factors behind different countries’ performance. The index and report, which have been produced about every two years since 2007, rank countries on a number of dimensions of trade, including customs performance, infrastructure quality, and timeliness of shipments.

Nowadays the importance of efficient supply chains for trade integration is recognized globally. Most sources of friction in the global economy—trade costs—are attributable to logistics bottlenecks. These might be physical deficiencies, red tape, especially at borders, or a lack of quality services. The LPI has greatly helped the realization that policy does matter for efficient logistics, and is widely referred to as a guide by policy-makers, including in rich countries such as those in the EU. It has contributed to creating a dynamic of reforms in many developing countries where the Bank has logistics-oriented programs. We are just back from Georgia and Indonesia, and our team is currently in Rabat, Morocco, where we are promoting projects to integrate supply chains of the Maghreb.