RIYADH: Fragmentation in global trade can be resolved only if emerging economies gain access to international markets and contribute to discussions shaping the economic landscape, several finance ministers said.
During a panel discussion at the AlUla Conference for Emerging Market Economies organized by the Saudi Ministry of Finance and the International Monetary Fund, Nigeria’s Minister of Finance and Coordinating Minister of the Economy Wale Edun said that emerging economies should also try to create a friendly environment to attract domestic and international investments.
According to the EU, global trade fragmentation in the form of increased barriers and higher trade policy uncertainty could significantly reduce global output in the long term, with low-income countries likely to be more negatively affected.
“We need world trade; we need open markets. As emerging economies, and developing countries, we need access to markets for our products, particularly for value-added manufacturing products. World trade growth is a tide that leads to all boats. It is definitely something which we advocate and which we look forward to achieving,” said Edun.
He added: “This is a wake-up call. We need to reform our economies, need to stabilize, reduce inflation and create a conducive environment for investment, particularly domestic investment as well as foreign direct investments.”
Morocco’s Minister of Economy and Finance Nadia Fettah said that emerging economies are less capable of formulating strategies to combat issues surrounding trade tensions.
“I think we have been going through several trade shocks last year, and we saw the beginning of fragmentation and tension for many reasons. I think, in emerging markets, we have more poor pockets than in these big countries that are designing the rules of trade and dynamics of the trade,” said Fettah.
She added: “I think this fragmentation is beneficial to the biggest players in the economy and not for the middle class and the lowest in crisis.”
Fettah said that emerging market economies need globalization much more than advanced economies.
During the same panel discussion, Ukraine’s Finance Minister Sergii Marchenko stated that trade tensions are one of the most pressing and uncertain issues emerging market countries are working to resolve.
He added that emerging markets are less capable of formulating strategies to combat trade tensions as they have limited opportunities and resources.
The Ukrainian minister also praised and said that the Kingdom is a good example of how an emerging economy can successfully combat trade disruptions and march ahead in the journey in a resilient manner.
“The Kingdom is a good example for all of us to be tested and prove that we are good enough and strong enough to trade and be resilient,” said Marchenko.
Edun further said that reduced financial inflows into emerging economies are one of the crucial factors that negatively impact these nations’ economic conditions.
“I think the latest figures show that there is net outflow from emerging economies of $50 billion. For African economies, the latest figures show a deficit of $20 billion, and that is a very worrying trend, alongside the closing down and the tightening of world trade,” said the Nigerian minister.
The vitality of participating in trade conversations
Fettah also emphasized that emerging markets should have opportunities to participate in international talks that shape global trade rules and regulations.
“In this fragmentation, many emerging markets are not part of the conversation of the changing regulations and rules. We need to ask for permission to be part of the conversation. We never have a chance to have a transition or an adaptation plan to these new rules, and this needs to be changed,” she said.
Edun echoed similar views and said that emerging economies still need to seek permission to enter such conversations despite the crucial importance of these countries in the global trade landscape.
Marchenko supported the views of both the Nigerian and Moroccan ministers and said that world trade discussions are necessary and that Ukraine would like to be part of such conversations.
Edun further said that emerging economies in Africa should increase trading with countries on the continent to boost development and the economy.
“There have been huge inflows, relatively cheap and competitive Chinese products in our markets. In Africa, intra-African trade is just 14 percent of the total trade. I think the figure for other emerging markets is higher. In Asia, it is 40 percent. And that is where we look to find our response and increase the capacity to trade with each other.”
Geopolitical tensions
During the talk, Marchenko said the ongoing war with Russia negatively impacted Ukraine’s export trading capacity.
“The impact of war is very devastating. For our exports to Nigeria, the impact was very huge. We lost up to 60 times our potential for exports in 2023. Nigeria did not receive wheat from Ukraine. The same with Morocco, 12 times decrease of our exports,” said the Ukrainian minister.
Fettah also underscored the importance of global stability and peace and said that uncertainty due to geopolitical issues is affecting investments in emerging economies.
“The most difficult thing is the uncertainty, which affects local investors but also all the FDIs. Everyone is waking up in the morning and seeing what has been announced the night before and how it will affect the future. We need peace to trade and we need peace to develop. We need visibility,” said Fettah.
She added that countries should plan for mid and long-term goals, and they should develop a discipline to achieve this.
“Day-to-day shocks and crises need immediate and expensive responses,” said Fettah.
Future outlook
Regarding the future outlook, Edun said that Africa could become the workforce of the world, considering its growing population and the availability of young talents.
“Africa, in particularly countries like Nigeria, we have a very young population that is going to export services, and that will in fact be the workforce of the world because the population in Nigeria is expected to double from 200 million now to 400 million by 2050,” said the Nigerian minister.
Marchenko said that Ukraine has shown its strengths both in the military and economic sectors during the tough times of war, adding that the IMF has provided the country with the necessary support whenever needed.
“I want to praise our cooperation with the IMF. It provides us with necessary relief and it provides us anchor for any possible negotiations with our partners. We would like to have solutions through free flow of goods and services,” said Marchenko.
Regarding the present and future outlook, Marchenko said: “Ukraine is trying hard to stabilize and manage to provide some kind of support for our business which operates in Ukraine. We are also trying to attract foreign direct investments.”
