SECTOR ASSESSMENT (SUMMARY): INDUSTRY AND TRADE 1

Transcription

1 Regional Upgrades of Sanitary and Phytosanitary Measures for Trade (RRP MON 46315) Sector Road Map SECTOR ASSESSMENT (SUMMARY): INDUSTRY AND TRADE 1 1. Sector Performance, Problems, and Opportunities 1. The Central Asia Regional Economic Cooperation (CAREC) program strategic objectives are expanded trade and improved competitiveness. CAREC activities directly target more openness to trade and greater intraregional trade, among others. In 2013, intra-carec trade as a proportion of total trade has been improving, after falling slightly from Growth in both intraregional and total trade was more restrained in 2013 than in From 2002 to 2013, intraregional trade grew by 18% on average The CAREC Transport and Trade Facilitation Strategy (TTFS) 2020 seeks to achieve three target outcomes: (i) competitive corridors across the CAREC region; (ii) efficient movement of people and goods through CAREC corridors and across borders; and (iii) sustainable, safe, user-friendly transport and trade networks. 3 The consolidated approach of the TTFS optimizes the use of resources devoted to increasing the region s competitiveness and trade. The TTFS identifies the improvement of trade and border crossing services, including modernization and reform in sanitary and phytosanitary (SPS) measures, as one of the outputs to meet the CAREC 2020 objectives. 3. CAREC countries remain committed to an open economy model of economic development for growth and poverty reduction on which accession to the World Trade Organization (WTO) is fundamental. SPS issues are among the most important issues blocking accession and are important for the implementation of commitments for countries that have acceded to the WTO or that are expected to accede in the near future. The accession of the Russian Federation to the WTO implies that markets that accept GOST standards are declining, 4 and it is important to begin a process of adoption of international standards for Central Asian Common Wealth of Independent States (CIS) countries. It is important for all CAREC countries, regardless of WTO membership status, to acknowledge the importance of the WTO SPS Agreement Mongolia joined the WTO in The two main agencies in Mongolia involved in the application of SPS measures are (i) the General Agency for Specialized Inspection, responsible for inspecting food, products of animal and plant origin, exports and imports, and for border inspection generally; and (ii) the Veterinary and Animal Breeding Agency, responsible for disease prevention and control, laboratory services, and accrediting and licensing veterinarians. Assessments undertaken concluded that the SPS laboratory network has insufficient capacities to establish an appropriate level of protection against internal and external risks to animal and plant health and public health in Mongolia. At present, Mongolia has no internationally ISO accredited laboratories. Effective inspections at the border are also a major challenge. Border 1 This summary is based on Asian Development Bank (ADB) CAREC 2020: A Strategic Framework for the Central Asia Regional Economic Cooperation Program, Manila; and ADB Transport and Trade Facilitation Strategy Manila. 2 ADB Central Asia Regional Economic Cooperation Program Development Effectiveness Review: A Refined Perspective. Manila. 3 ADB CAREC Transport and Trade Facilitation Strategy Manila. 4 The Set of Standards of the former Union of Soviet Socialist Republics (GOST). 5 ADB, Central Asia Regional Economic Cooperation (CAREC) Program CAREC Trade Policy Strategic Action Plan for Astana.

2 2 crossing points (BCPs) where agri-food products are traded lack facilities for disinfecting vehicles, unloading and loading of animals and/or premises for quarantine of live animals, and storage of animal origin products. Moreover, inspectors do not have adequate equipment for examination of live animals and sampling of pathological material. 5. The WTO mandates application of risk management including selectivity of controls for protecting human, animal, or plant health. 6 Excessive sampling of products and ineffective laboratory tests result in unnecessary delays. At the Mongolian border, a risk-based approach of inspections has begun to be implemented, but this system relies on product type as the single criterion for assessing risk. A risk management system needs to be fully developed by incorporating other criteria and automating risk assessment and management processes. 6. It is important for Mongolia, which is landlocked between two giant states the People s Republic of China (PRC) and the Russian Federation to identify correctly and implement trade policy accurately. The government considers the multilateral trading system an important aspect of economic development, improving living standards, since 37.1% of Mongolia s gross domestic product (GDP) accounts for exports. 7 Since joining the WTO, Mongolia has been implementing liberal trade policies. Table 1 indicates Mongolia s foreign trade turnover. The country s foreign trade turnover of 92.3% compared with GDP shows that Mongolia s economy is still heavily dependent on external trade. Table 1: Foreign Trade Turnover ($ million) Item a Total turnover 3, , , , , , , ,627.0 Export 1, , , , , , , ,272.6 Import 1, , , , , , , ,354.6 Balance 57.2 (221.0) (710.0) (252.3) (291.6) (1,780.9) (2,353.7) (2,082.0) ( ) = negative. a 2013 preliminary. Source: Statistic of Mongolia Customs General Administration. 7. In 2013, Mongolia traded with 135 countries. The PRC, the Russian Federation, the United States, Canada, the European Union (EU), the Republic of Korea, and Japan are its main trading partners as indicated in Table 2, accounting for 90% of total foreign trade turnover. Mongolia s imports are more diverse and less centralized than its exports. In 2013, heavy machinery, equipment, and electrical appliances accounted for 8.6% of total imports; fuel 20.7%; vehicles 12.5%; textiles 10.4%; and food and foodstuffs 7.7%. These goods accounted for more than 60% of total imports. In 2013, imports from the PRC, the Russian Federation, the EU, the Republic of Korea, and Japan accounted for more than 80% of total imports. Mongolia s main export products to the Russian Federation are products of animal origin and minerals, including horsemeat, fluorspar and copper concentrates, and gold; its main export products to the PRC are coal, iron ore, copper, wool, cashmere, hides, and skins. 6 Article 5 of the WTO Agreement on Trade Facilitation. 7 WTO Trade Policy Review Report: Mongolia by the Secretariat. tp397_e.htm

3 3 Table 2: Main Trading Partner Countries (%) Item a People s Republic of China Russian Federation United States Canada European Union Republic of Korea Japan a 2013 preliminary. Source: Statistic of Mongolia Customs General Administration. 8. Mongolia has a trade deficit for agricultural products, and both imports and exports have increased considerably over the past three years. Since 2004, the structure of imports has changed, as imports of some commodities (such as wheat, flour, and potatoes) have tended to decline while imports of processed agricultural products (such as sugar, candy, and beverages) have increased steadily Exports of agricultural products from Mongolia are mostly cashmere, combed goat hair, and leather. Mongolia does not apply taxes on exports of agricultural goods, except for a tax on exports of unwashed camel wool MNT200 per kilogram (female) and MNT100 per kilogram (male). According to its most recent notification to the WTO Committee on Agriculture, Mongolia did not use export subsidies during (footnote 8). 10. In 2013, Mongolian economic growth reached 11.7%, inflation was 12.5%, the unemployment rate was 7.6%, and GDP per capita presented a 22.7% increase from 2012 reaching $3,972. The foreign trade balance was a deficit of $2,082 million, decreased by 13% compared to The trade sector produced 17.4% of total GDP and accounted for 12.4% of the workforce. The sector is considered a high workforce absorbing sector, so it plays a significant role in employment and national workforce development Government s Sector Strategy 11. Mongolia is a member of the World Customs Organization and the WTO, and has acceded to a number of corresponding conventions. The Action Plan of the Government of Mongolia, studies the possibilities that arise from regional cooperation agreements as well as increasing Mongolia s role in regional development, promoting and intensifying trade and investment cooperation in the region, and negotiating free trade agreements with trading partners. Mongolia has successfully concluded its accession to the Asia-Pacific Trade Agreement, and entered into the Economic Partnership Agreement with Japan in February Domestic policy has focused on increasing production as a way to improve food security and rural development, and is set out in the Agriculture Sector Development Strategy ( ), the National Programme for Food Security ( ), and the Livestock Programme ( ). Livestock Programme priority areas are improvement of the legal framework and support services (veterinary and training); production practices, including breeding services; disease prevention and control measures; pasture management, fodder, and water supply systems as well as risk management; and processing of livestock products, including meat, skins, 8 WTO Trade Policy Review Report by the Secretariat. 9 WTO Trade Policy Review Report by Mongolia.

4 4 and wool. The budget for the total program is MNT1.4 billion, of which 35% is from Mongolia and the rest from development partners. 13. The agricultural programs and policies are aimed at making Mongolia self-sufficient. However, imports of agricultural goods generally and of processed products (including rice and goods made from wheat), as well as the trade deficit in agricultural goods, have increased. The increase in imports is driven primarily by economic growth, while production is based on livestock. Exports are based on cashmere, which depends on economic performance in the export markets and livestock numbers in Mongolia. 3. ADB Sector Experience and Assistance Program 14. Mongolia joined CAREC in Since then, ADB has mobilized $544 million for 10 projects in Mongolia through the CAREC program. ADB has funded investments in CAREC Corridor 4 under the Regional Roads Project and the Western Regional Road Corridor Investment Program. It also helped Mongolia establish an automated customs information system. 10 The CAREC program is improving Mongolia s transport and trade infrastructure and policies, and is helping to make the country s economic growth more sustainable. Stronger economic links fostered by CAREC are helping Mongolia to promote the view that better connections between neighbors and with global markets are key to unlocking the region s vast resources and human potential. 15. ADB has been assisting the Mongolian agriculture sector since It has provided a number of technical assistance projects, including the Agriculture Sector Strategy Study. 11 This became the foundation of the Agricultural Development Strategy of Mongolia, , which has shaped government strategy for agricultural development. ADB has also provided grants and loans for the sector, including the Agriculture Sector Development Program, which promoted regional development and poverty reduction by addressing major constraints in the agriculture sector. 12 SPS-related inspections are a common cause of delay for perishables, which make up one-fifth of transit goods. Improvement in the administration and application of SPS measures, especially at BCPs, is a major item in the CAREC integrated trade facilitation agenda. ADB regional technical assistance on promoting cooperation in SPS measures for CAREC funded the conduct of an assessment of SPS measures in CAREC countries including Mongolia. As a result, members of CAREC are endorsing a common agenda for the modernization of SPS measures in CAREC. 13 The proposed project promotes the efficiency and transparency of trade processes and procedures, and facilitates the trade of agri-food products along CAREC corridor 4. It will directly benefit SPS agencies of Mongolia to be able to provide better food safety, and plant and animal health services to consumers, exporters, importers, and producers of agri-food products. 10 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to Mongolia for the Regional Road Development Project. Manila.; ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan to Mongolia for the Western Regional Road Corridor Investment Program. Manila.; ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant Administration to Mongolia for the Customs Modernization Project. Manila. 11 ADB Technical Assistance to Mongolia for the Agriculture Sector Strategy Study. Manila. 12 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loans and Technical Assistance Grant to Mongolia for the Agriculture Sector Development Program. Manila. 13 The Common Agenda was endorsed during the CAREC Ministerial Conference on 25 September 2015.

5 5 Problem Tree for Industry and Trade CAUSES CORE PROBLEM EFFECTS Reduced agricultural trade opportunities lead to reduction in economic potential SPS infrastructure is in poor condition Central and regional laboratory capable of conducting basic tests only Equipment at laboratories and BCPs for diagnosis is obsolete or lacking Laboratory quality management, accreditation and training of staff need major improvements Outdated SPS system impeding agricultural trade Rudimentary and manual risk management system resulting in high cost with unknown quality of control Import/export approval is based on paper documents, involves multiple and duplicated data agencies, and up-to-date information on import/transit/export requirements is difficult to access Risk management system based only on type of goods without considering other risk criteria Risk to public health resulting from outbreaks of animal diseases and pests Standards from the former Soviet Union and rules and regulations increasingly becoming obsolete for major trading partners Many standards used are not consistent with international standards Measures not fully based on international standards, so not consistent with WTO SPS Agreement Lack of facilities at BCPs for unloading animals and premises for quarantine BCP = border crossing point, SPS = sanitary and phytosanitary, WTO = World Trade Organization.

6 6 Outcomes with ADB Contribution More efficient movement of people and goods across borders Sector Results Framework (Industry and Trade, ) Country Sector Outcomes Country Sector Outputs ADB Sector Operations Indicators with Outputs with ADB Indicators with Planned and Ongoing Targets and Contribution Incremental Targets ADB Interventions Baselines Number of documents required for approval of import and export of agri-food goods reduced by 25% (2014 baseline: 12 for import and 11 for export) Duration to process import and export of agri-food goods reduced by 20% (2014 baseline: 45 days for import and 44 days for export) Laboratories and BCP inspection and quarantine facilities upgraded SPS IMS, including a risk-based inspection system, operational SPS control and inspections aligned with international standards Laboratory buildings rehabilitated with new equipment in 3 aimags (provinces) (5 laboratories) by 2018 (2014 baseline: 0) Inspection, quarantine, and disinfection facilities constructed at 2 BCPs by 2018 (2014 baseline: 0) 100 lab staff trained by 2019 (2014 baseline: 0) SPS IMS developed and operational by 2019 (2014 baseline: No IMS system) International accreditation of laboratory tests by 2019 (2014 baseline: 0) Laboratory manuals for testing and sampling techniques in line with international standards developed by 2019 (2014 baseline: 0) Planned target areas Trade facilitation Information and communication technology for improving efficiency in trade Pipeline projects with estimated amounts Mongolia: Regional Improvement of Border Services Project ($27 million) Ongoing projects with approved amounts Agriculture and Rural Development Project ($49.7 million, additional financing) Joint Control of Transboundary Animal Diseases in the People s Republic of China and Mongolia ($0.5 million) Regional Logistics Development Project ($45 million) Western Regional Road Corridor Investment Program ($170 million) Main Outputs Expected from ADB Interventions Planned target areas and pipeline projects Improved and modernized key BCPs along the CAREC priority corridors Single Window facilities installed in key BCPs and regional platform for interconnectivity designed Improved harmonization in trade and border procedures Ongoing projects Improved value chains for about 40 agro-processing companies Mechanism, enhanced capacity, and manual on prevention and control of major transboundary animal diseases Multimodal facility developed for international and regional trade promotion in Mongolia Road section constructed; urban roads and bridges constructed toward inclusive economic growth promoted by enhanced local and regional connectivity ADB = Asian Development bank, BCP = border crossing points, CAREC = Central Asia Regional Economic Cooperation, IMS = Inspection Management System, SPS = sanitary and phytosanitary. Source: Asian Development Bank.