An audience of 22 students and lecturers from Vi Bosnia and Herzegovina core member, the University of Sarajevo, joined UNCTAD for a videoconference presentation on the 2016 Trade and Development Report (TDR) November 11.
Igor Paunovic, of the Division on Globalization and Development Strategies, reported that "the current trends in trade and development have severe repercussions on developing economies and their growth prospects." He said "there is nothing normal about the slow economic growth," which is resulting in "suffering in developing countries."
In the first part of the presentation, Paunovic highlighted the economic trends of 2016 presented in the TDR. According to the report, Africa will experience a 2 percent growth in 2016 and Latin America will suffer the consequences of the Brazilian and Venezuelan recessions, resulting in a negative growth rate this year.
In addressing countries with economies in transition such as Bosnia and Herzegovina, Paunovic stated two reasons for the slow growth of the group average: a reduction in commodity prices and the economic embargo on the Russian economy.
Moving to the second part of the presentation on structural transformation for inclusive and sustained growth, Paunovic said that "export-led growth is no longer an option. It simply does not work in a situation where international trade grows less than the global GDP, and so trade doesn’t give the same impetus for development as it did before."
First-tier new industrializers (newly industrialized countries - NIEs), such as Taiwan and other East Asian countries, have managed to lead in the catchup by investing in manufacturing and diversifying their markets. Their growth has shown that it was possible to substantially reduce the gap with developed countries.
However, "the world is moving to a new paradigm of development, where moving from either low to medium, or medium to high-income is possible, is becoming progressively difficult and requires innovative strategies." The lesson to be learned from NIEs is that investing in manufacturing is one of the most important ways to diversify the economy and develop.
Continuing the discussion with development indicators and elements for sustainable and inclusive development, Paunovic indicated a correlation between intraregional trade and development. He argued that intra-regional trade helps economic development, so in regions such as Europe, where intraregional trade accounts for 70 percent of overall trade, and in East Asia where intra-regional trade accounts for 50 percent of trade, the economic growth has resulted in more diversified economies than in Africa where intra-regional trade is around 15 percent.
Another element identified for growth is financing and investment. "A key issue now is that profits are not being reinvested in manufacturing, but are being channeled into shareholder dividends," Paunovic said. "Unfortunately, the data shows a decrease in the investment-to-profit ratio."
Paunovic concluded by presenting three key recommendations of the TDR 2016. The first is that industrial policies are necessary for promoting diversification. The second is policy coherence, especially in terms of macroeconomic, trade, industrial and financial policies. The third element is creating efficient and capable institutions which support and guide the private sector in the quest for development.