tralac’s Daily News Selection

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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Xinhua

The AfDB’s Vice-Presidency for Economic Governance and Knowledge Management has posted a series of new Working Papers and Economic Briefs: we profile analyses by Dr Arkebe Oqubay (Minister and Special Advisor to the Prime Minister of Ethiopia, Dr Abiy Ahmed)

(i) Arkebe Oqubay: The structure and performance of the Ethiopian manufacturing sector. This paper is organised in five sections (pdf). The first section reviews the slow pace of manufacturing growth and patterns of industrial development in Ethiopia. The second section examines the structure of the Ethiopian manufacturing sector with a particular focus on firms’ dynamics (growth of firms, firm size and ownership, agglomeration patterns, linkages, and manufactured value added and output). The third section explores the ‘paradox’ of slow industrial development, the intensifying structural constraints on Ethiopia’s structural transformation in recent years, and the key global structural pressures. The fourth section highlights the government’s recent policy responses to improve the performance of the manufacturing sector. There are now clear signs of dynamism in the manufacturing sector, which gives hope for the possibility of late industrialization in the early 21st century Ethiopia. The final section summarizes some of the key challenges and their policy implications.

(ii) Arkebe Oqubay: Industrial policy and late industrialisation in Ethiopia. Conclusion: Late development and learning to catch up (pdf). Critics have suggested that there is no such thing as Ethiopian industrialization. This paper has acknowledged the profound shortcomings of the industrial policy and its outcomes thus far. But it has also shown that there have been clearly designed policy interventions, which have had non-negligible effects. Industrial policy in Ethiopia is not a mirage. It draws on a longer term historical experience of policy experiments and manufacturing activity since the time of the Italian occupation in the 1930s. It has since the 1990s and especially after 2003 achieved more than was achieved in the past. Policymakers have engaged with the shifting pressures of the global economy to produce some remarkable results, though overall the strategy remains a work in progress and the jury is still out on outcomes.

The paper also presents an alternative to the dominant perspective in mainstream development economics, which often denies sectoral considerations and suggests that industrial ambitions are beyond the reach of African countries. Instead, mainstream development economists argue that African countries should limit themselves to existing ‘latent comparative advantages’, and that the state should be ‘facilitative’ and confine itself to periodically addressing ‘market failures,’ rather than playing an active developmental role to create and shape markets. Finally, much of the literature on industrial policy fails to link it with the learning that is central to late industrialization. The evidence in this paper shows how policy learning has evolved in Ethiopia, reinforced not only by policy independence, but also by learning by doing and emulation. [Note: Dr Oqubay holds a PhD in development studies from SOAS, University of London, and is a research associate at the Centre of African Studies in the University of London]

Other featured papers

Chuku Chuku: Regional financial integration and economic activity in Africa. Our aim in this brief is two-fold (pdf): first, to determine the degree and timing of financial integration in selected sub-Saharan African stock markets using an unobserved latent variable; and second, to understand the effect of regional financial integration on economic activity in Africa. Perhaps the pertinent question is: why should markets, especially those in Africa, be regionally integrated?

Justin Yifu Lin: Industrialization – lessons from China for North Africa. An important reason for China’s success is that it did not follow the Washington consensus. Instead of shock therapy, China adopted a pragmatic, dual-track approach. On the one hand, it provided continuously transitory protection and subsidies to large scale, capital-intensive state owned enterprises, which violated China’s comparative advantages but were essential for national defence and people’s basic needs. On the other, it liberalized private and foreign firms’ entry to China’s comparative advantage industries, with the state facilitating the industries to become the nation’s competitive advantages in domestic and international markets by overcoming bottlenecks in hard and soft infrastructure.

Joseph E. Stiglitz: Structural transformation, deep downturns, and government policy. Concluding remarks: Markets typically don’t work as well as the textbook models of perfect markets would suggest. At times, these market failures become very significant, and government intervention is required. This chapter has discussed one such instance—the structural transformation of an economy. We have explained why market failures are likely to be particularly significant when the economy is going through a major structural transformation, and described some of the market interventions that might be desirable. In particular, we have argued that Keynesian industrial policies can play an important role in simultaneously stimulating the economy, reducing unemployment, and facilitating the required transition.

Southern African Regional Integration Stakeholder Forum outcome statement: participants proffered 14 recommendations (UNECA)

Highlighted recommendations (pdf): The private sector should be involved in the design, formulation, implementation, and monitoring of regional protocols, strategies and programmes on industrialization, regional value chains, cross-border trade, private sector development and issues of trade negotiation; Governments should have a long-term term view regarding costs and benefits of regional and continental agreements and protocols, rather than focusing on short term revenue gains; Governments and the RECs should ensure greater efficiency and smoothness at border posts for easy and timely passage of trucks and other economic related movements. This should include speedy clearance of goods through the use of technology, ensuring uniformity of rules between countries, providing adequately skilled human resources, as well as facilitating cross-border movement of persons; There is need for greater support for the informal cross border traders, particularly women traders in building their capacities in terms of understanding of policies, protocols and procedures regarding cross border trade, access to information on their rights, and access to facilities such storage, finance and general services;

AUC Deputy Chairperson Kwesi Quartey: speech to opening of Permanent Representatives Committee (AU)

The centrality of the role of the PRC in the architecture of the various organs of the AU imposes on you, important obligations, as the interface between the Member States and the Commission to ensure, through quality information, convergence of views between the latter and the Commission in the best interests of the alignment and coherence of our actions. in this regard it is important to stress the need for interaction with the Commission within a balanced relationship, as the best means of pursuing the objectives set out in the Agenda 2063 calmly and effectively. Therefore, we respectfully call for the 2019 budget to be examined in the light of two imperatives: accelerating the implementation of flagship continental-scale programs as vehicles for integration and substantially reducing the reliance of the African Union on funds of external partners.

Martin Kingston: How to rebuild trust and integrity in South Africa (WEF)

It is imperative that South Africa rehabilitate its reputation, and return to the values espoused by Mandela and the founding fathers of the ANC. Business and institutions need to work together to rebuild trust and integrity in the country’s economic and political systems. To achieve those objectives, the following five steps must be taken. They will form a credible and sustainable approach to rooting out pervasive corruption, and instilling a culture that confers legitimacy on society and its key stakeholders. (4) Understand that business leadership is critical for driving collective action. The private sector can spearhead the development of innovative networks for public-private cooperation to discuss and address anti-corruption in constructive and open dialogue. (5) Enhance the uptake of technology and its application across stakeholders to reduce the opportunities for corruption. Big data, blockchain, artificial intelligence and e-governance systems are valuable tools in the prevention, detection, investigation and prosecution of corrupt practices.

Morocco systematic country diagnostic: governing towards efficiency, equity, education and endurance (World Bank)

Extract: Economic sustainability (2.1) (pdf): Morocco’s growth model is showing signs of running out of steam. It risks quickly finding itself having to contend with the limitations of growth based on fixed capital accumulation. Despite positive demographics, the labor factor has contributed little to the recent growth trend. Morocco has one of the lowest labor force participation rates in the world with less than one in two Moroccans employed or seeking work. Growth is heavily penalized by the economy’s difficulty in managing available human resources (including labor market policies that constrain recruitment and retrenchment across both public and private sectors), leveraging its human capital (especially young people and women), and swiftly reallocating labor across sectors for efficiency purposes. Unlike the labor factor, capital accumulation has made a large contribution to growth, mainly owing to one of the highest investment efforts in the world in the last decade (Figure 2.1). The rate of investment rose from 25% in 2000 to an average of 32% in recent years. It now stands at the rate observed in the “economic miracle” countries.

To increase its economic sustainability and lessen its reliance on debt-creating domestic demand, Morocco also needs to diversify its economy toward more export-oriented sectors. While export competitiveness is determined by a large array of factors from cost of labor to monetary policy, Morocco could take some specific actions to improve it. For instance, increasing its efforts to promote innovation would help expand the potential of high value activities that would move from a logic of technology consumers to a logic of developer. Given the uncertainties in the regional and international environment, Morocco cannot solely rely on foreign demand from its traditional markets in Europe and must open up to new markets. In that regard, the openness to Sub-Saharan Africa is promising for both Morocco’s and Africa’s growth and development prospects—especially in light of Morocco’s recent readmission in the AU and its bid to join ECOWAS. All things considered, Morocco will essentially have to continue relying on its own strengths to create the conditions for steadier foreign demand, by continuing its strategy of diversifying target markets and promoting exports.

Major US firms executives in Kenya for trade talks (The Standard)

American firms are in the country shopping for deals with Kenyan companies ahead of direct flights to the US that are planned to commence October this year. The more than 60 executives drawn from major US firms are accompanying the Undersecretary for International Trade and Commerce Gilbert Kaplan on a three-day tour. They will be looking out for opportunities, including partnerships with local firms.

Total Official Support for Sustainable Development measurement framework: update on the Nigeria pilot (pdf, OECD)

Nigeria represented an ideal candidate for hosting a TOSSD pilot. The country is a very active member of the TOSSD Task Force. It attracts substantial amounts of concessional and non-concessional finance and a recent OECD survey has shown that Nigeria is ranked the second largest receiver in the world of private finance mobilised through official development interventions. Nigeria also has long-standing experience in providing development co-operation programmes to other partner countries, including through its full-fledged Directorate of Technical Aid Corps. The first of the six pilots was carried out from 30 April to 11 May 2018 in Abuja. The three main objectives of the proposed pilot study were to: (i) Refine and test the statistical methodology of TOSSD to establish sound eligibility criteria (e.g. link with the SDGs) and measurement boundaries (e.g. extent of coverage of short-term trade finance); (ii) Provide estimates of TOSSD flows to Nigeria; (iii) Carry out a light assessment of the capacity of Nigeria to access, collate, analyse and use data on external official finance in support of sustainable development. Preliminary highlights of the pilot are as follows:

All hands on deck: reducing stunting through multisectoral efforts in Sub-Saharan Africa (World Bank)

As part of the effort to understand the underlying multisectoral nature of improving nutrition outcomes in sub-Saharan Africa, stylized country specific analyses were carried out for the 33 countries in the study. The methodology used for the regional study was applied at the country level, and the results are offered as a starting point for understanding and evaluating the multisectoral dimensions of nutrition in specific country contexts. Extract: The negative outcomes later in life are numerous, and some can even be quantified in economic terms. Recent World Bank estimates suggest that the per capita income penalty a country incurs for not having eliminated stunting when today’s workers were children is around 7% of GDP per capita, on average. In Sub-Saharan Africa and South Asia, these figures rise to about 9-10% of GDP per capita. [Note: Chapter 6 of Volume 1 provides an example applying the same methodology based on data from only one country, Tanzania]