Sussex Development Lecture 13 October 2011: Fostering industrial development in Africa in the new global environment

Fostering Industrial Development in Africa in

the New Global Environment

Milasoa Chérel-RobsonEconomic Affairs Officer, UNCTAD

Economic Development in Africa Report 2011

Special Issue: Joint UNCTAD and UNIDO publication

The context

• Good growth performance despite global crisis.

• A growing middle class and increasing interest from the international business community.

• But issues of sustainability of economic growth and challenges in tackling unemployment

Good growth performance

GDP per capita relatively high in many countries

Good macroeconomic stability in many countries

But…

Vulnerability to external shocks due to heavy dependence on commodity exports.

Little evidence of structural transformation.

Broad political commitment to industrialisation as a condition for development:

Example:

“Transformation of Uganda’s economy is one of the fundamental goals and commitment of the National Resistance Movement Government.”

“However, Uganda’s is still classed as “undeveloped and third world”. Uganda’s households are still relying on subsistence agriculture. The persistency of the above situation limits the tax-base, the purchasing power, employment, and generally inhibits economic transformation.”

“Consequently, the “National Industrial Policy; A frame work for Uganda’s Transformation, Competitiveness and Prosperity” provides long-term perspectives needed for Uganda to achieve sustained transformation of the economy.”

Selected lessons from the past

• Linkages are needed between agriculture and industry. They should not be considered as alernatives but rather complementary options.

• The nature of domestic policies matters. Policies should be geared to supporting domestic firms but also challenging them.

• There is a need for greater interaction and coordination between the government and the private sector.

Structure of the remainder of the presentation

I. Rationale for a renewed commitment to industrialisation in Africa.

II. Key messages of the report.

III. Stylised facts about the state of industrial development in Africa.

IV. The How of the new industrial policy making.

V. The new global environment

VI. Policy recommendations.

I. Rationale for a renewed commitment to industrialisation in Africa

• There is a political commitment to industrialisation in Africa both at national and at regional levels.

• The focus on industrial development is not new.

• There are lessons learnt from the past.

II. Key messages of the report• African countries should intensify efforts to develop manufacturing

because it presents great opportunities for sustained growth, employment and poverty reduction.

• Deliberate government action is needed to promote manufacturing development and induce structural transformation.

• Africa needs a new approach to industrial policy to achieve industrial development objectives.

• The new global environment presents challenges and opportunities which countries will have to take into account.

III. Stylised facts about industrial development in Africa

• Africa still accounts for a very low share of global manufacturing.

• Manufacturing in Africa is small relative to other developing-country regions and has been falling as a share of both GDP and exports.

• Africa is heavily dependent on resource-based (RB) manufacturing.

• Africa is losing ground in labour intensive and in low technology manufacturing.

African countries are heterogenous

IV. The How of industrial policy making.

What should be the focus of industrial policy?

• Acknowledging the need for selectivity.

• The promotion of scientific and technological innovation;

• The creation of linkages in the domestic economy;

• The promotion of domestic entrepreneurship and good State-business relations.

• The improvement of government capabilities.

IV. The new global environment

Changing international trade rules.

Growing number of restrictions on policy making tools.

Growing influence of industrial powers from the South: market and learning opportunities. But also increased competition.

Internationalization of production.

Increasing concerns about climate change.

V. Policy recommendations

A new approach to industrial policy based on the following principles:

• supporting, as well as challenging firms;

• building effective State-business relations;

• recognizing the political feasibility of proposed actions;

• focusing on lifting binding constraints;

• and putting in place a mechanism for monitoring, evaluation and accountability.

But industrial policy should not happen in a vacuum

Industrial policy needs the following additional and complementary measures:

• Avoiding exchange rate overvaluation.• Adopting appropriate monetary and fiscal policies.• Enhancing resource mobilisation.

Whilst strengthening regional integration and maintaining political stability.

The full report is available at:

http://www.unctad.org/en/docs/aldcafrica2011_en.pdf

Thank you.