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ENABLING FACTORS

Excerpts from “The Global Enabling Trade Report 2008”

Published by the World Economic Forum (WEF), June 2008
Analysis by RÉHAB EL-BAKRY

The key to success in today’s global economy is the ability of countries to grow their international trade and investment. In an effort to benchmark the performance of countries, the WEF issued the first Global Enabling Trade Report. The report ranks 118 countries based on data gathered from the information services of various countries, international indices as well as the input of the business community.

“The principal aim of this report is to measure the extent to which countries around the world have in place the factors and policies for enabling trade. [...] The Enabling Trade Index (ETI) [...] measures the factors, policies and services facilitating the free flow of goods over borders and to destinations.”

The ranking of the various countries on the ETI is based on their performance on four subindices: market access, border administration, transport and communications infrastructure, and business environment.

“The first subindex measures the extent to which the policy and cultural framework of the country welcomes foreign goods into the country. Once goods have been allowed into the country, the second subindex assesses the extent to which the administration at the border facilitates their entry. Once the goods have made it over the border, the third subindex takes into account whether the country has the transport and communications infrastructure necessary to facilitate the movement of the goods from the border to destination. Finally, the fourth subindex looks at the overarching regulatory and security environment impacting the transport business in the country.”

Hong Kong and Singapore ranked first and second, respectively, of the 118 ranked. This is a reflection of the prioritization of trade by both countries as the key to economic growth, development and job creation. Nordic countries also did very well, with Sweden ranking third, Norway fourth, Denmark sixth and Finland seventh. Canada was ranked fifth, nine positions ahead of the US. Ranking eighth is Germany, followed by Switzerland in ninth place, and New Zealand wraps up the top 10 rankings.

There are 13 countries from the Middle East and North Africa region included in the rankings, with the United Arab Emirates ranking highest, 23rd overall, beating Israel, which ranks 28th.

“The very good result at the global level is not surprising when one considers the impressive development of Dubai over recent years into the most important transport and logistics hub in the region, and the UAE has made significant efforts to improve the business environment for the transport and logistics sector.”

Moreover, the UAE ranked well for having a conducive business environment and with regard to the ease of hiring foreign nationals. However, high tariffs make it difficult to access the UAE market. It also means that trade does not rank high on the government agenda.

“Bahrain, at 37th position, [...] is the third-place country from the region. Although Bahrain is fairly open to foreign investment, the country remains, despite its small size, relatively protected from international competition through tariffs. The low share of duty-free imports and the reluctance to engage in multilateral trade rules coupled with low reliance on export markets point to a low priority that is attached to trade by the authorities.”

Closely following Bahrain, Qatar ranked 41st. Despite a good ranking on the business environment subindex, restrictions to market access for imported goods hinder its movement up the ranks. Similarly, Tunisia (49th) boasts a particularly strong business environment and efficient border controls.

“Yet the country’s markets remain sheltered from international competition, with some of the highest tariff barriers in the entire sample, ranking 114 of 118 countries. At the same time, Tunisia’s border administration is fairly efficient and its business environment is secure, although additional opening up to FDI and labor migration would benefit the country’s trade performances. Equally, investment in infrastructure and the use of ICTs would further enable the country to take advantage of the benefits in trade.”

Oman and Jordan ranked a close 50th and 51st, respectively. Saudi Arabia, which ranked 53rd, did not particularly excel on any of the subindices, but it did have a consistent performance across the board. The fact that the country has only recently acceded to the WTO and opted to ratify a small number of multilateral trading agreements hinders trading with the kingdom. While its trade policies are simple on paper, the system suffers from inefficiency.

Ranking 58th, Kuwait had a consistent but low ranking on all subindices, reflecting its protectionist policies towards both investment and trade. Morocco, ranked 74th, had an uneven performance with higher scores on both the border administration and business environment subindices. However, poor rankings on the market access and the transport and communications subindices resulted in a low overall ranking.

“Egypt ranks a low 87th for the ease of getting goods across the border. The country’s relative strengths include a fairly conducive business environment, especially with regard to the ease of hiring foreign labor and the fairly well developed transport infrastructure, including the associated services. Egypt stands out positively for its maritime connectivity and the related services, where it ranks in the top 20, as well as for the quality of its roads. Although importing goods is neither costly nor time consuming, importers raise concerns about the efficiency of customs and other border agencies. The high tariffs, which apply to 70 percent of all imported goods, as well as the tariff barriers, constituted the most important impediment to enabling trade in Egypt.”

Syria and Algeria ranked a low 107th and 108th on the index reflecting their conservative policies towards enabling international trade and investment.

This report is available on the website of the World Economic Forum at www.weforum.org

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