Linda Calabrese, Phyllis Papadavid and Judith Tyson, June 2017
Rwanda is one of Africa’s “rising stars”. The country’s economy has seen solid rates of economic growth since the civil conflict in the mid-1990s. Strength in investment flows has followed in the path of this macroeconomic and institutional stability. As this paper highlights, a large part of Rwanda’s success has been the result of proactive policies undertaken by the government of Rwanda in facilitating a good domestic investment climate, which have been conducive to strong rates of growth in FDI into the economy.
Phyllis Papadavid (Senior Research Fellow – Team Leader of International Macroeconomics, ODI) 19 June 2017 Further US dollar weakness The US dollar rose by 5% in trade-weighted terms following the US election of President Trump in November 2016. Since its peak at the end of December 2016, the dollar has reversed all of its post-election rise […]
Anzetse Were, Dirk Willem te Velde and Gituro Wainaina, June 2017
Developed by SET in partnership with the Kenya Association of Manufacturers (KAM), this booklet addresses Kenya’s current economic predicament and makes the case for political and financial investment in manufacturing. The central 10-point policy plan lays out seven policies and regulations that should be enacted to create a conducive environment for manufacturing to flourish, and three further suggestions for how to implement them in practice.
Manufacturing is also a key element in the African Development Bank’s Hi-Fives (Industrialize Africa) and a priority area in Goal number two of the African Union’s Vision 2063. ACET in partnership with the Oversees Development Institute (ODI) and the Government of Ethiopia organised the manufacturing chapter meeting of PACT. The aim of the manufacturing meeting was to kick start a continuous conversation for African leaders to shape their countries’ industrialisation issues in the context of Africa’s transformation agenda.
Phyllis Papadavid (Senior Research Fellow – Team Leader of International Macroeconomics, ODI) 15 May 2017 ‘Stagflation’ risks could rise According to the International Monetary Fund (IMF), recent global manufacturing activity and global trade is showing some signs of recovery. The start of 2017 saw world trade volumes expand by an average 10% annualised rate, compared to only […]
Dirk Willem te Velde (Director of SET Programme, Head of IEDG and Principal Research Fellow, ODI) 24 April 2017 (based on a presentation at Chatham House 20 April 2017). This note argues that the UK can offer an appropriate support package using smart aid, targeted development finance, free trade and foreign direct investment (FDI) promotion and temporary (legal) migration policies to help with economic transformation and job creation in Africa.
On 14 March, SET hosted a workshop in Yangon to present and discuss the findings of the recent research paper, ‘Foreign direct investment and economic transformation in Myanmar’. Attendees explored questions around the role of the garment sector, including: what role does the garment sector play in promoting exports, employment and the transfer of skills in Myanmar? How does foreign investment contribute to Myanmar’s garment sector? And how can foreign investment, from China and other countries, further contribute to economic transformation in Myanmar?
Phyllis Papadavid (Senior Research Fellow – Team Leader of International Macroeconomics, ODI) 20 April 2017 Ghana’s recent debt sale presents an opportunity The cost of, and access to, finance is important for economic transformation in developing countries’ manufacturing sectors. However, among some firms in sub-Saharan Africa (SSA), the costs for borrowing are significantly higher than for […]
Margaret McMillan, John Page, David Booth and Dirk Willem te Velde, March 2017
Launched alongside Supporting Economic Transformation: An Approach Paper, these briefings summarise the central tenets of SET’s approach to the challenge of promoting economic transformation and explore its importance for driving sustainable, inclusive development in the world’s poorest countries.
Stephen Gelb, Linda Calabrese and Xiaoyang Tang, March 2017
The paper reviews in some detail the foreign (Chinese) presence in four sectors in Myanmar and its impact on economic transformation. Significant positive effects include employment and exports in garments, local enterprise development and downstream user costs in construction (and infrastructure), and exports, technology transfer and product market competition in agriculture and agro-processing and finally makes a number of policy recommendations for UK DFID.
Margaret McMillan, John Page, David Booth and Dirk Willem te Velde, March 2017
This approach paper seeks to define economic transformation, offers an approach to measuring progress towards it, and examines case studies from African and Asian economies where transformative policies have been successful to greater and lesser extents. The paper concludes by presenting a multi-disciplinary approach to identifying opportunities, diagnosing constraints and mapping out realistic policy options for countries to use to turn their economic growth into genuine transformation.
Rising wages for unskilled workers in China signals that low-cost manufacturing may start to lose its competitive limit.  Our own ongoing background work suggests that from 2009 to 2014, China’s real manufacturing wages increased by an annual average of 11.4%, even though this was in the aftermath of the worst financial crisis since the Second World War. Both foreign multinationals located in China and Chinese manufacturers that are engaged in labour-intensive production in China are therefore actively seeking to relocate to new low-cost destinations.
Economic transformation often denotes a move away from low-productivity to high-productivity growth. Promoting economic transformation in the aftermath of shocks is one strategy for developing economies to build resilience to further shocks. This is particularly true for resource dependent economies, given that they are more vulnerable to shocks. Many of these countries are still managing the fallout from multiple economic shocks, including the continued effects of the commodity price downturn. Fuel exporters saw GDP growth fall from 5.7% in 2014 to -1.6% in 2016 and these countries now face the risk of external debt distress.
On 23 February, SET, in partnership with the All-Party Parliamentary Group for Trade and Investment, hosted a private roundtable event in the Palace of Westminster, London. The event brought together representatives of developing countries with donors, private investors and representatives of the City of London to identify opportunities for private sector investment in sub-Saharan Africa. Amongst topics of discussion were the practical and financial challenges facing British investors seeking to finance development, including in sectors such as infrastructure, energy and manufacturing, ways to overcome barriers to the achievement of high-quality, sustainable economic transformation, and the growing role of development finance institutions.
Edited by Bernard Hoekman and Dirk Willem te Velde, February 2017
Services play a vital role in economic transformation and job creation in poor countries, but the effects are different from those in agriculture or manufacturing. While much of the discussion on economic transformation centres on transforming agriculture and moving into manufacturing, services are an under-explored component of economic transformation strategies.
This set of essays analyses the role of services, and especially trade in services, in economic transformation.
Economic transformation has the potential to reduce poverty and drive sustainable, inclusive growth in developing countries. Yet, efforts to promote transformational policies have not always proven to be successful; many low-income countries that have attempted to transform their economies have experienced low-quality, job-less growth with little in the way of genuine transformation. This ODI panel event sees the launch of SET’s flagship approach paper, and bring together key figures driving forward the transformation agenda to discuss: what is economic transformation, what does it mean for the world’s poorest, and how can it be supported in practice?
Industrialisation of the Kenyan economy has remained an important goal for Kenyan policy-makers since independence and especially since the mid-1970s. This was when the country started facing more socioeconomic challenges, partly associated with a slowdown in the country’s economic performance following the global oil crisis. It has become clear over the years, however, that, for the country’s industrialisation process to experience a truly transformative phase, there is a need for a conducive institutional framework that encompasses the following areas: industrial policy-making; trade facilitation; clustering; investment promotion; building local capability; infrastructure modernisation; a more focused public–private sector dialogue and coordination; and building financing capability.
In collaboration with DFID, the ODI-SET team organised a Trade in Services Roundtable Event hosted at DFID London on 11 November 2016. The roundtable sought to unpack the key challenges and opportunities for trade in services in developing countries and identify what DFID can do over the next five years to support services. The event report summarises key thematic issues emerging based on roundtable reflections from representatives from ODI, TheCityUK, Commonwealth Secretariat, European University Institute, ILEAP, International Centre for Trade and Sustainable Development, International Growth Centre, International Trade Centre, Sussex University, United Nations Conference on Trade and Development, Centre for Global Development, and World Bank.
The SET programme, in collaboration with the Economic and Social Research Foundation (ESRF), organised a private sector consultative workshop on 27 October 2016 in Dar es Salaam. The workshop sought to build consensus around how to approach implementation of the FYDP II and on the core elements that should constitute a strategy and framework to guide the effective implementation of the Plan. In addition, the workshop was designed to develop a shared understanding of the practical roles that different stakeholders – both in the public and private sectors – should play in implementing the FYDP II.
‘I am giving preference to those who are “Made in Nigeria,”’ announced the moderator at the Nigerian Economic Summit, which took place from 10 to 12 October in Abuja. His bias, echoing the theme of the summit, perfectly encapsulated Nigeria’s response to its current economic malaise… and the muddled economic thinking that is making it hard for the country to emerge from its current economic crisis. As Africa’s largest economy, and with its largest population, of 170 million people, Nigeria should dominate the continent. But the country has long been one of the world’s prime examples of the resource curse: 60 years after discovering oil Nigeria still relies on it for over 90% of export revenue, and the government depends on it for 62% of its revenues.
Despite improvements in the collection of services trade data over the past 15 years, in many low-income and least- developed countries (LICs) the macro- and micro- level services data needed for meaningful economic analysis simply do not exist. This acts as a fundamental roadblock to having informed services trade negotiations and to using services trade policy to leverage services for inclusive growth and structural transformation. The relative paucity of services and services trade data has contributed to obscuring the role that services have increasingly been playing, alongside agriculture and manufacturing, in the process of structural transformation.
Neil Balchin, Bernard Hoekman, Hope Martin, Maximiliano Mendez-Parra, Phyllis Papadavid, David Primack and Dirk Willem te Velde, November 2016
While much of the debate on economic transformation centres around transforming agriculture and moving into manufacturing, the potential of services is often left unexplored. It is crucially important for policy-makers in low-income countries, many of whom may not regard services, or trade in services, as a prime focus of action on economic transformation. This paper explores how policies both directly and indirectly affecting trade in services can have a major impact in terms of increasing the contribution of services to economic transformation.
In a new report published jointly by The New Climate Economy and the ODI’s Supporting Economic Transformation programme, we aim to shed light on a key question that will probably become ever more relevant within the economic policy sphere in Africa: how do economic transformation, climate change and societal change intersect? More importantly, what are the requirements for positive economic transformation in the light of these interactions? In light of these, we have attempted to highlight the fact that economic transformation in Africa can present win-win scenarios that promote both growth and climate change adaptation.
Milan Brahmbhatt, Russell Bishop, Xiao Zhao, Alberto Lemma, Ilmi Granoff, Nick Godfrey and Dirk Willem te Velde, November 2016
Africa’s “Growth Miracle” in the 21st century has reversed a long standing narrative of pessimism about the region. It has emboldened hope for the future. GDP growth reached around 5% annually from 2001-2014. Rates of extreme poverty fell substantially.
Yet big challenges remain.
Nigeria has so far missed the opportunity to embark on progressive economic transformation as characterised by a reallocation of economic activities away from low- towards high-productivity activities. Rather, under the rubrics of laissez-faire policy and its associated aversion to development planning, during the high-growth era of 2000–14 Nigeria experienced a perverse form of economic transformation, whereby economic activities shifted from low-productivity agriculture and high-productivity manufacturing to other low-productivity other industry and services.
Morten Jerven made a splash with his exposé of the woeful state of economic data in the developing world, Poor Numbers, and his second act Africa: Why Economists Get it Wrong has won him more fans. In this book he argues that economists were misled by cross-country growth regressions into thinking that Africa is incapable of development, and that by seeking to explain a failure of growth economists missed the chance to study historical growth episodes and show how Africa can grow.
The key questions explored at this roundtable were around Kenyan manufacturing: Why is productivity low in manufacturing? Why is informality not decreasing with economic growth? Why is there a lack of linkages between services on the one hand, and manufacturing and agriculture on the other hand? And what can be done about these challenges? The SET team is currently scoping out support for Kenya’s transformation with analytical and other inputs. The roundtable aimed to discuss and develop this collaboratively.
The SET programme will be participating at TICAD side events in partnership with (JICA and IDE-JETRO. Industrial development and economic transformation are crucial for Africa’s development, but there is a heated debate on how to achieve them. Three events will explore the respective roles of government and private sector in policy development and implementation for Africa’s industrialisation.
Linda Calabrese, Neil Balchin and Maximiliano Mendez-Parra (ODI) 15 June 2016 Africa’s regional economic communities (RECs) are looking to achieve deeper regional integration that goes beyond reducing tariffs. This has generated greater focus on trade facilitation to ease the movement of goods across borders and promote economic transformation. A recent paper prepared jointly by the […]
Neil Balchin, Tim Kelsall, Blandina Kilama, Alberto Lemma, Max Mendez-Parra, Donald Mmari, Dirk Willem te Velde, Sam Wangwe, Leah Worrall, May 2016
The Government of Tanzania launched the second Five-Year Development Plan (FYDP II) (2016/17-2021/22) in June 2016, focusing on the theme Nurturing Industrialisation for Economic Transformation and Human Development. This study informed the preparation of FYDP II.