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Policy coherence for development A case study of the impact of Spain-Ecuador economic relations on Ecuador’s development

Policy coherence for development A case study of the impact of Spain-Ecuador economic relations on Ecuador’s development. Iliana Olivié Elcano Royal Institute Rhodes, 26 April 2007. Policy coherence for development : Spain-Ecuador.

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Policy coherence for development A case study of the impact of Spain-Ecuador economic relations on Ecuador’s development

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  1. Policy coherence for development A case study of the impact of Spain-Ecuador economic relations on Ecuador’s development Iliana Olivié Elcano Royal Institute Rhodes, 26 April 2007

  2. Policy coherence for development: Spain-Ecuador • Elcano project on policy coherence for development: basic concepts • 1.1. What is policy coherence for development? Why study policy coherence? • 1.2. Contents and results of the project • Ecuador country study • 2.1. Overview of trade and financial links • 2.2. Trade flows • 2.3. Migrants’ remittances • 2.4. Spanish direct investment in Ecuador • 2.5. External debt • 2.6. Recommendations

  3. Policy coherence for development: Spain-Ecuador • 1.1. What is policy coherence for development? Why study policy coherence? • Definition. “Absence of incoherences which occur when other policies (…) impair the effects of development policy or run counter to its intentions. A second, more ambitious definition sees policy coherence as the interaction of all policies that are relevant in the given context with a view to the achievement of overriding development objectives” (Ashoff, 2005). • Classification. (Picciotto, 2005): • Internal: consistency between goals and objectives of a policy or programme. • Intra-country: consistency between aid and non-aid policies in terms of their contribution to development. • Inter-donor: consistency of aid and non-aid policies across members (of a given union) in terms of their contribution to development. • Donor-recipient coherence.

  4. Policy coherence for development: Spain-Ecuador 1.1. Why does policy coherence for development matter? Selected foreign economic indicators of developing countries Source: World Bank, World Development Indicators, online database

  5. Policy coherence for development: Spain-Ecuador • 1.2. Content and results of the project • http://www.realinstitutoelcano.org:9081/wps/portal/rielcano/Coherencia • - Más allá de la ayuda. Coherencia de políticas económicas para el desarrollo, Ed Ariel and Real Instituto Elcano, Madrid, June 2006, I. Olivié and A. Sorroza. • All donors, all partner countries • “Coherencia para el desarrollo: recomendaciones para España en materia económica”, Informes Elcano, Nr. 5, Real Instituto Elcano, June 2006, I. Olivié and A. Sorroza. • Spain, all partner countries • “¿Es coherente España con el desarrollo de Senegal?”, DT, Real Instituto Elcano, February 2007, I. Olivié, M. Dansokho and C. Oya. • Spain, Senegal • “Coherencia de políticas para el desarrollo: impacto de los vínculos económicos con España en el desarrollo de Ecuador”, forthcoming July 2007, FLACSO, OECD, Real Instituto Elcano • Spain, Ecuador

  6. Policy coherence for development: Spain-Ecuador • 2.1. Institutional framework for economic relations between Spain and Ecuador • Spain • international development: Millennium Declaration, MDGs, Monterrey Consensus, Maastricht Treaty, Law 23/1998 of International Cooperation for Development, Master Plan for Spanish Cooperation 2005-2008. • towards Ecuador: planning limited to international development –Master Plan and CSP–. • Ecuador • institutional crisis • LMIC • development strategy?

  7. Policy coherence for development: Spain-Ecuador 2.2. Overview of trade and financial links Thousands of euros Sources: Banco de España, MITC (Datacomex and Datainvest), MAEC, OECD (OECD. Stat)

  8. Policy coherence for development: Spain-Ecuador 2.2. Trade flows Main features of bilateral trade Spain: marginal trade partner for Ecuador; Ecuador: marginal trade partner for Spain. But recently increasing trade flows. Traditionally positive balance for Ecuador (excluding 2001 and 2002) and strongly increasing since 2003. Concentration of Ecuadorean exports: 93% in four products in 1997-2006, in food –fish (canned tuna, shrimps), fruits, vegetables, sugar, coffee and cocoa-. Lower concentration of Spanish exports: 57% in five products in 1997-2006, of higher added value –industrial machinery, chemical products, transport, fishery products–. Institutional framework for trade relations EU Agreements: SGP drugs, SGP plus Partnership agreement?

  9. Policy coherence for development: Spain-Ecuador 2.3. Migrants’ remittances Source: Spain, important country of origin for Ecuadorean remittances; Ecuador, leading destination of remittances from Spain. Sending costs: more expensive informal channels. Use of remittances in Ecuador: 61% first needs (C), 17% luxury goods (C), 4% real estate (I), 2% education (I), 8% businesses (I) and 8% S. Some features of recipients: Concentration: 14% of total population Not the lowest-income population High volume of remittances -→ high per capita remittances -→ scope for investment (instead of consumption)

  10. Policy coherence for development: Spain-Ecuador • 2.4. FDI • Stylised facts • Spain, marginal investor in Ecuador (3rd). • Sectoral concentration of investment: 90% in three sectors between 1997 and 2005, in activities related to oil (83%) and fish canning (6%). • importance of extractive industry Support from Spanish Administration FAD COFIDES: FONPYME y FIEX ICO CECO

  11. Policy coherence for development: Spain-Ecuador 2.5. External debt Management of external debt limited to stock of official bilateral debt That excludes: - management of debt flows - policy measures for multilateral debt stocks (HIPC-like initiatives) January 2006: Debt for Development 50 million: 30 million hydroenergy projects, 20 million education projects

  12. Policy coherence for development: Spain-Ecuador 2.6. Recommendations R.1. Comprehensive institutional framework for all economic relations. R.2. Reforming CAP: preponderance of food in Ecuadorean exports to Europe. R.3. Pushing further tariff reductions. R.4. Respect for norms agreed in multilateral fora. R.5. More and better information on sending and use of remittances. R.6. Furher reducing sending costs: support of AECI to the formalization of microcredit institutions. R.7. Support for Spanish FDI tied to development criteria: enhancing structural change and diversification, reducing concentration in extractive industries. R.8. More effective debt relief through international initiatives: multilateral debt.

  13. Policy coherence for development: Spain-Ecuador 2.6. Recommendations R.9. Reducing refundable aid: FAD loans. R.10. No more FAD programmes. R.11. General support for conditions of FDI impact on development: not only through support to Spanish FDI but also directly through development programmes and projects.

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