TRADE: Single Export Dependency Bad for Asia’s Poorest – U.N. Official

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, May 13 2005 (IPS) - Asia’s poorest countries are facing a mounting challenge to benefit from the international free-trade regime due to the lack of diversity in their export sector, says a senior U.N. official.

According to Anwarul Chowdhury, the U.N. under-secretary-general for the least developed countries (LDCs), landlocked developing countries and small island developing states, high dependency on one product – namely garments – has shut these nations out from tapping global markets.

This dependency, he added, also prevents poor countries from taking advantage of the fall in trade barriers to get their other exports into the developed world.

These countries have become more vulnerable following the end of the Multifibre Arrangement (MFA) in December, Chowdhury pointed out during an interview with IPS. That arrangement created a quota system, enabling poor countries to capitalise on their cheap labour to produce clothes for markets in the United States and Europe.

Bangladesh is typical among the poor nations coming to grips with this shift. ”It has seen a drop of six percent in its textile exports in just five months,” stressed Chowdhury. ”Till December, Bangladesh’s products were four percent of the global textile market, but they expect it to drop to two percent with the MFA ending.”

”Developed countries need to take into account the weaknesses and vulnerabilities of least developed countries,” he added. ”If not, the free market environment will be a hostile place for LDCs.”

Bangladesh, in fact, was among the leaders of the region’s poorest nations that concentrates on the garment and textile sector to boost its exports. In 2003, over 84 percent of that South Asian country’s total exports were made up of clothing.

Cambodia, an LDC in South-east Asia, offers numbers that are higher – 87 percent of the country’s exports are attributed to garments and textiles, according to a 2005 report on the region’s economies released last month by the Economic and Social Commission for Asia and the Pacific (ESCAP), a regional U.N. agency.

In other LDCs like Nepal, garments make up 50 percent of annual exports, while in Laos it’s 48 percent and the Maldives 32 percent.

”With women forming an important part of the largely low-skill workforce in the (clothing) sector in developing countries, the social costs of job losses and factory closures could be high,” the report, ‘Economic and Social Survey of Asia and the Pacific 2005,’ states.

China, with its vast army of cheap labour, seems to be gaining the most since the MFA ended, because of the relocation of garment factories there. India, too, has emerged as another beneficiary with the end of the quota system for supplying clothes.

The 14 LDCs in the Asia-Pacific region are Afghanistan, Bangladesh, Bhutan, Burma, Cambodia, East Timor, Kirbati, Laos, Maldives, Nepal, Samoa, Solomon Islands, Tuvalu and Vanuatu. There are 50 LDCs across the world.

This week, during a regional conference for Asia and Pacific countries that began in the Thai capital, Chowdhury called on the U.S. government to help those 14 countries in the same way Washington has stepped forward to help the weak economies in Africa.

The U.S. government should have an Asian version of the African Growth and Opportunity Act (AGOA), he told the meeting, which included government officials from Asia’s LDCs.

Under that arrangement, Africa’s poorest countries have been guaranteed preferential access to the huge U.S. market.

The lack of such international support would drive down further the already low economic growth figures in the Asian LDCs, said another U.N. official. That would make it difficult for them to meet the international development targets, including the aim to reduce global poverty by half in 2015.

”The current rates of economic growth are insufficient to overcome poverty. Few jobs are created and there is little money to invest in much needed social services,” Raj Kumar, head of ESCAP’s poverty and development division, told IPS.

Currently, the agriculture products in Asia’s LDC are not heading towards the markets of the developed countries due to the high premium placed on quality, standards and even packaging, he added.

Cambodia’s rate of economic growth in 2004, for instance, was 4.3 percent, of which the agriculture sector grew by only 0.4 percent, the ESCAP report states. Burma’s economy grew by only 3.6 percent during the same year, of which the agriculture sector grew by four percent.

The economy in East Timor, the world’s newest nation, grew by one percent last year, down from three percent in 2002, the report adds.

”Almost 90 percent of the markets in the developed countries are accessible for these LDCs,” said Chowdhury. ”But because of their supply-side constraints and due to them not having appropriate exportable goods, they cannot access these markets.”