Aid for Trade Development: Lessons for Lomé V

The private sector has recently been recognised as an engine for growth and a key actor in the development process. However, in ACP countries, decades of preferential market access have not been sufficient to stimulate private sector development and economic growth and a wide range of supply- side constraints have prevented the private sector from becoming really competitive. Aid for trade development is therefore seen as an essential element in preparing developing countrries to address the challenges of globalisation.

After several years experience, donors can report few success stories in their trade-related assistance. It seems that this assistance was often hampered by the policy environment in recipient countries (including factors such as political instability, anti-export bias, repression of the private sector, pervasive intervention of governments) or by poorly-designed projects (including factors such as a focus on governments, their ad hoc nature, and lack of any coherent strategy).

Today, the picture is changing, both in developing countries and among donors. Developing country governments are transforming the role of the state and accepting the private sector as a prime economic mover. Private sector actors are becoming more structured and organised. Donors are aware of the need for a comprehensive approach, for proper coordination with economic reforms, and for a focus on the competitiveness of the private sector. The difficulties in implementing these new approaches should not be underestimated, especially in least-developed countries (LDCs). Field studies in Uganda and Ethiopia clearly show that two crucial hurdles have to be overcome before trade-related assistance can be effective: donor coordination and cooperation with the private sector.