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IDB Institutional Strategy to Support Regional and Global Integration Strategy Profile Consultation

Paolo GIORDANO

Integration and Trade Sector - INT Vice Presidency of Sectors and Knowledge

Regional Cooperation on Financing for Development Expert Group Meeting United Nations – New York, November 15-16, 2010

Presentation • Vision – Adaptation to new integration drivers • Diagnosis – Towards a third-generation integration strategy • Lessons learned – The IDB support to integration • Objectives, areas and modalities of intervention A new integration strategic compact • Dialogue - Feedback from stakeholders and experts

Vision

LAC is facing new global integration drivers

New integration drivers New architecture of regional and global economic integration with “multiple agendas” and “variable geometry”

Importance of the private sector logic vs. state-driven integration

New strategies of external partners and competitors

Relevance of non-traditional costs of international integration

Attention to regional and social asymmetries associated with global insertion

New architecture of regional and global economic integration with “multiple agendas” and “variable geometry” 1990s

UR-WTO (94)

C

Car

J

J

M

US

K

APEC-BG (94) K

C NAFTA (94) US M

FTAA (94)

CA

CA

C

C

P ASEAN

P

S

I

Car

P ASEAN (93)

AC

NZ

NZ

C

A

AC

C

A

MER

Pre-1994

MER (94)

Circa 1994

FTAs

J

P

S

I

K

EAC/APC

C NAFTA US M

Car

FTAAP

J K

CA ASEAN+3

C

PATHWAYS C Car NAFTA US M CA N

C

ASEAN

P

S NZ

I A

Post-1994

C

P

P AC

ASEAN NZ

I

C

P

S

V

ASEAN+6

MER

Today

A

P-4 / TTP

E AC

B V

C ARCO MER

2000s

Importance of the private sector logic vs. state-driven integration Contracts between electronics sector firms 1990s

2000s

New strategies of external partners and competitors “Integrate regionally” to “compete globally” Common regional strategies as a response to the new logic of international integration

Relevance of non-traditional costs for international integration Logstic costs: Freight vs. Tariffs compared (% of LAC to EE.UU export value, 2006)

Relevance of non-traditional costs for international integration The growing importance of public and private health and sanitary standards

Attention to regional and social asymmetries linked to international integration…

México : Contribution to Natiponal Export Growth, by State (1993-2003)

PERÚ: Simualted Impact of FTAs on Employment, by Region

TLC - EE.UU.

TLC - UE

TLC - China

… which are fueling anxiety on the distributive impact of integration Percentage of LAC population in favor of economic integration

1990s

2000s

Diagnosis Towards a third generation integration strategy

The integration model shifted over time, but there are notable global and regional gaps to be bridged… OLD REGIONALISM 1970 1994 SOUTH-SOUTH

NEW REGIONALISM 2000 NORTH - SOUTH

2010

20??

BILATERALISM

Global Trade

Intra-regional Trade

(% of global trade in goods)

(% intra-regional / total trade in goods)

… but the region has some assets it can build upon: Investment in the software and hardware of integración Software CAN / CARICOM / MCCA / MERCOSUR RTAs w/ US, EU, Asia Convergence (RdO)

Collective Action

Trade Facilitation

Multimodal Transport

IIRSA / PM

Migration

Energy mkts

SIEPAC

Productive integration

Communication mkts

RICAM

Trade Integration

Hardware

Phisical Regulatory Integration in Strategic Markets

Regional Institutions Functional Cooperation – Regional Public Goods National Complementary Institutions and Policies

Integration

Lessons learned The IDB support to integration

The IDB support to integration 9 Supporting integration is part of the institutional identity of the Bank… The objective of the Bank is to "contribute to the acceleration of economic and social progress […] individually and collectively." (Art. I IDB Founding Chart)

¾ Generating new ideas to expand the integration frontier ¾ Responding to requests of technical asistency ¾ Facilitating the integration of the private sector ¾ Innovating to finance regional public goods ¾ Acting as an honest broker ¾ Promoting policy dialogue on a shared long term regional vision ¾ Mobilizing the donors community ¾ Building capacity on a critical mass of integration agents ¾ Progressively regionalizing infrastructure investment

Lessons learned 9 The 9th General Capital Increase renews and strengthens the integration mandate of the Bank and is an opportunity to learn lessons regarding: ¾ The knowledge and capacity building gap – – –

Need to feed the region with innovative ideas The Bank contributes to the region’s long term vision Facilitate the materialization of latent demand of regional collective projects

¾ The policy dialogue gap – –

Include key executive strategic actors Widen the dialogue to new stakeholders

¾ The mainstreaming gap – –

Support countries to include integration in national development strategies Strengthen the programming framework with which the Bank supports integration

Objectives, areas and modalities of IDB intervention A new integration strategic compact

How can the IDB help LAC countries to close the global and regional integration gaps ? Software - Enhancing the quality of collective policies and regional regulatory frameworks Hardware - Intensifying investment in regional infrastructure

Promote LAC integration in the global economy

software

Strengthen LAC regional integration

Mainstream integration in national development priorities

hardware

Support to global and regional integration : the role of the IDB Strategic Objectives

IDB Instruments

Promote LAC integration in the global economy

Global Initiatives & Partnerships

Strengthen LAC regional integration

Mainstream integration in national development priorities

Regional Programs

National Programs

Objectives of the IDB integration strategy 9 Consolidate the knowledge foundations of the integration agenda > retain intellectual leadership and serve as a regional brain trust

9 Strengthen the capacity to manage modern integration initiatives > leverage expertise and act as honest broker to support the institutional architecture

9 Build regional additionality into IDB operations (SG and NSG sectors) > meet the 15% lending target while promoting high-quality projects and balanced interventions along the regional software-hardware continuum

9 Mainstream integration into the Bank’s operational program > mainstreaming integration into the Bank’s operational program while defining eligibility criteria and incentives for integration interventions

Areas of intervention 9 Preliminary list > to be validated via an open consultation process including civil society, government officials, private sector; a focused exchange with a group of regional experts and Bank staff; and a detailed analysis of the comparative advantage of the Bank ¾ Software - trade and investment facilitation, financial integration, productive integration, migrations and labor market integration ¾ Hardware - sustainable regional infrastructure in transport, energy and telecommunications ¾ Functional cooperation - standards and regulatory harmonization, social protection and health, climate change and natural disasters, science and technology and other areas in which collective action at the regional level may add value to national interventions

Intervention modalities A renewed strategic compact of financial an non-financial products

Policy dialogue

Non-financial products

Capacity building

Applied research Strategic initiatives

GRANTS

Programas Financial products

Priorization of integration projects

Regionales

LOANS regional & national

GUARANTIES

Feedback from stakeholders and experts 9 Objective of the consultation ¾ Receive comments, suggestions and validate the Profile as an intermediate step towards the preparation of the strategy 9 A few questions for the debate. What is your opinion on: ¾ the main integration challenges for LAC? ¾ The diagnosis of the Bank of the main integration gaps for LAC? are there issues that have not been identified? ¾ the new compact of instruments proposed by the IDB? ¾ how can the private sector contribute to integration? does the private sector need additional instruments that the IDB can provide? ¾ the flanking measures that the countries of the region need to adopt to complement the effort of the IDB? ¾ other comments and/or suggestions on the document?

THANK YOU for participating to the open consultation http://www.iadb.org/en/civil-society/public-consultations/publicconsultations,5599.html or https://www.surveymonkey.com/s/Q6PHWYF Integration and Trade Sector Vice-presidency of Sectors and Knowledge Inter-American Development Bank