Coordinating Public and Private Action for Export Manufacturing: International Experience and Issues for Rwanda

David Booth, Linda Calabrese and Frederick Golooba-Mutebi, July 2017

One of the keys to economic transformation across Africa today is a greater role for employment-intensive, export-oriented manufacturing. After taking due account of differences in contexts and time periods, international experience – especially in Asia but also in Africa-region leaders such as Mauritius – points to employment-intensive manufacturing as a crucial and indispensable step in the transition from poverty to development.

David Booth, Linda Calabrese and Frederick Golooba-Mutebi, July 2017

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One of the keys to economic transformation across Africa today is a greater role for employment-intensive, export-oriented manufacturing. After taking due account of differences in contexts and time periods, international experience – especially in Asia but also in Africa-region leaders such as Mauritius – points to employment-intensive manufacturing as a crucial and indispensable step in the transition from poverty to development.

Rwanda is – along with Ethiopia – exceptional in Africa in that it has in place a nation-building project centred on the aim of economic transformation. Features of its political economy also mean Rwanda lends itself easily to comparison with the best-documented experiences in Asia. This paper explores the ways in which international experience of success in manufacturing-based economic transformation can provide valuable insight for Rwanda, in the areas of government coordination, engagement with and representation of the private sector, and the experimental learning process.

Photo credit: UNIDO, 2016 via Flickr

Financing Manufacturing in Rwanda

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.

Linda Calabrese, Phyllis Papadavid and Judith Tyson, June 2017

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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 report 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 foreign direct investment (FDI) into the economy.

Despite the country’s successes, though, developments in manufacturing have not been as encouraging: the sector’s share of the economy and exports is still small. The report aims to analyse Rwanda’s financial backdrop, and the composition of its investment flows into manufacturing, with a view to exploring constraints and opportunities in manufacturing.

In analysing financial and economic challenges, this paper concludes that high transport and utility costs, the elevated real effective exchange rate and weakness in bank lending are key challenges to be tackled. Looking ahead, special economic zones should continue to be a focus alongside export-oriented investments; prudential measures could target manufacturing finance and disincentivise overly high levels of real estate lending

 

Photo credit: A’Melody Lee / World Bank (Flickr)

Supporting Economic Transformation: Briefing Papers

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.

Margaret McMillan, John Page, David Booth and Dirk Willem te Velde, March 2017

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As continuous and sometimes remarkably fast economic growth has become more usual in much of the developing world over recent decades, attention has shifted to the pattern and quality of that growth. Issues of concern include the persistence of extreme poverty in many countries, despite growth in gross domestic product, and the weak capacity of many sectors to produce sustained increases in employment. Much of recent growth in sub-Saharan African economies has been due to factors like buoyant urbanisation, and an expansion in the service economy that serves only the middle- and upper-classes. This pattern of growth is both highly skewed and non-inclusive. Another way to express this is that these economies are achieving growth without depth, or economic growth without economic transformation.

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.

Photo credit: ILO/Sarah-Jane Saltmarsh, 2010

Foreign Direct Investment and Economic Transformation in Myanmar

Stephen Gelb, Linda Calabrese and Xiaoyang Tang, March 2017, June 2017

The paper and briefing reviews 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.

Stephen Gelb, Linda Calabrese and Xiaoyang Tang, March 2017

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Stephen Gelb and Linda Calabrese, June 2017

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This study assesses the potential for foreign direct investment (FDI) to contribute to Myanmar’s economic transformation, by raising productivity and growth. The study focuses on four sectors – agriculture and agro-processing, garments, construction and tourism – selected for their significance for both transformation and FDI in Myanmar, particularly FDI from China.

The paper begins with a brief review demonstrating that economic transformation over the past two decades has been limited, though data limitations make it difficult to reach firm conclusions. Following this, a review of trade and investment looks at overall performance, as well as in the four selected sectors, and at relations with China. Exports have grown especially into China, but are dominated by extractives (particularly natural gas and precious stones). Garment export potential has raised manufacturing FDI since 2012. The trade and investment regimes are still undergoing liberalisation to encourage entry. Forty firms in the selected industries were interviewed, of which 31 were Chinese investors which suggest the Chinese firms are fairly satisfied with their performance in Myanmar, and with the productivity of low-skilled Myanmar labour (adjusted for wages). The Chinese and non-Chinese firms are not very different with respect to their main concerns: the quality of infrastructure (energy and transport particularly) and trade facilitation; the quality of local employees in higher-level managerial and technical positions; the limited breadth of the financial system, including the narrow scope of financial and foreign exchange instruments; and the unpredictability or absence of regulation.

The paper reviews in some detail the foreign presence in each of the four sectors 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. The paper also concludes with a number of policy recommendations for UK DFID.

This study has contributed to a comment on factory jobs for the poor which can be read here.

Media coverage

Torino World Affairs Institute, 2 August

Myanmar Times, 9 August

Fibre2fashion, 10 August

Myanmar Times, 18 August

Photo credit: Axel Drainville (Flickr)