Manufacturing plays a key role in the process of economic transformation that is required for high quality growth, job creation and sustained progress. Yet the share of manufacturing in GDP has been falling in Sub-Saharan Africa over the last three decades and was just 11% in 2014. Recent estimates indicate that the role of manufacturing in driving growth and transformation is likely to decline further. John Page joins a panel of experts to explore the challenges and prospects for industrialisation in Africa.The panel will discuss what caused the lack of industrialisation in sub-Saharan Africa and what can be done to improve it.
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Africa’s industrialisation: reversing the decline | Event | Overseas Development Institute (ODI)
Manufacturing plays a key role in the process of economic transformation that is required for high quality growth, job creation and sustained progress. Yet the share of manufacturing in GDP has been falling in Sub-Saharan Africa over the last three decades and was just 11% in 2014. Recent estimates indicate that the role of manufacturing in driving growth and transformation is likely to decline further. Industrialisation expert John Page links this decline to bad luck and bad policy.
But there are also some positive signs. Manufacturing production has been increasing faster in Sub-Saharan Africa than in the rest of the world, and it now makes up a greater share in world manufacturing than fifteen years ago. Recently, several Asian firms have set up new manufacturing operations in African special economic zones such as in Ethiopia.
John Page joins a panel of experts to explore the challenges and prospects for industrialisation in Africa.The panel will discuss what caused the lack of industrialisation in sub-Saharan Africa and what can be done to improve it.
ODI has undertaken research on industrialisation in the context of a project with JICA on the role of Kaizen and through the SET Programme.
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Dirk Willem te Velde– Head of International Economic Development Group (IEDG) and Director, Supporting Economic Transformation (SET)
Economic growth is necessary for development. The increase in the quantity of resources available to produce and/or distribute is essential in the development process. However, economic growth alone does not guarantee all development objectives. The quality of economic growth matters, and it essential for sustained development that growth involves some form of productivity change and economic transformation.
Trade can be a powerful channel to mobilise resources from low to high productivity sectors and to improve productivity within sectors. The Supporting Economic Transformation (SET) programme has explored the links between trade, trade policy and economic transformation. Trade helps to diversify production, discover and develop new productive capabilities and increase domestic value added. Services are becoming increasingly important in world trade and SET has focused on the role of services in economic transformation.
The aim of this workshop is to examine the links between trade (in services) and economic transformation. How have countries been successful in using trade for economic transformation? How can we analyse what sectors are promising for economic transformation? How does services trade affect manufacturing and agriculture development? What are the implications for trade policy?
Agenda for WTO Ministerial Conference
17 December 2015, 11:00-12:30, Hilton Hotel, Nairobi, Kenya
At the height of the global financial crisis in 2008/9, as the then chairman of the Financial Services Authority, Lord Turner argued that the City in London’s financial sector had become ‘socially useless’. In the following years, he played a leading role in the redesign of global banking regulation as Chairman of the International Financial Stability Board’s major policy committee. In his latest book Between Debt and the Devil: Money, Credit and Fixing Global Finance (Princeton), he explains how our addiction to private debt has caused a global financial crisis.
How can we fix finance so that it is socially useful and helps to transform developing economies? How did the financial crisis affect developing nations and how can they ensure economic growth without sanctioning debt?
The Government of Tanzania, through the President’s Office Planning Commission (POPC), has begun the process of preparing the second Five Year Development Plan (FYDP II) (2016/17 – 2020/21) focusing on the theme “Nurturing an Industrial Economy”. The POPC hopes to conclude the plan by June 2016.
The Overseas Development Institute (ODI) is providing analytical support to aid this process through its Supporting Economic Transformation (SET) programme. On Tuesday 6th October 2015, a workshop was convened in Dar es Salaam on to provide an opportunity for the POPC to outline their initial thinking and to enable discussion on emerging priority areas and potential means of implementation for the FYDP II, both informed by background research undertaken by the ODI and REPOA.
The workshop brought together a diverse range of stakeholders from both the public and private sectors in Tanzania and provided a valuable opportunity for consultation which was less prevalent in the first FYDP. Download the event report below.
Where do we go wrong, and what do we need to do differently to understand economic transformation in Africa?
Morten Jerven’s recent book “Africa, why economists get it wrong” questions what we really know about growth and economic transformation in Africa. He argues that mainstream economists have not used appropriate methodologies or sample periods, used data without critically assessing them, and focused on the wrong policies.
This event organised by ODI’s Supporting Economic Transformation (SET) programme discussed where we are going wrong and what should we be doing differently if we want to properly understand the prospects of economic transformation in low income countries. What are appropriate research methodologies, what data can be used, and what do we know about policies and institutions for economic transformation?
After an introduction to the main points in Jerven’s book, a number of speakers discussed the main questions: Blandina Kilama is an expert on economic transformation in Tanzania, Nick Crafts is a world leading authority on economic history, and Louise Fox is a leading voice on employment and labour markets in Africa.
Economic transformation involves the movement of factors of production toward higher productivity and/or value addition firms or sectors. It has traditionally been assessed through the degree of export diversification, taken as an outcome of the process.
Trade can support this process, e.g. through its impact on firm competitiveness – access to cheaper and better quality inputs, and opportunity to take advantage of economies of scale. The literature on global value chains (GVCs) further suggests a new way of looking at economic transformation (which was traditionally seen as moving from agriculture to manufacturing and services). Integration in global production networks allows countries to unlock their comparative advantage, but rather than focusing on producing all parts of the entire chain, it is now possible to focus on specific tasks and sub-sectors.
The discussion focused on the following questions:
Under which circumstances does trade openness foster export diversification through GVCs?
What are the determinants of GVC integration?
How and under which circumstances GVCs integration spills over beyond integrated sector and benefits the domestic economy, thereby supporting a sustained economic transformation?
What are the trade policy implications at the domestic, regional and global levels?
Leading economist Dani Rodrik shed light on the future of economic transformation in developing countries. For years, developing countries have tended to transition from agriculture to manufacturing to services. Yet recent evidence suggests that countries are running out of industrialisation options much sooner than expected.
Overseas Development Institute, London.
Leading economist Dani Rodrik shed light on the future of economic transformation in developing countries.
Economic transformation is needed for the type of growth that leads to poverty reduction. It leads to growth that generates income across the income distribution, is robust against price shocks and price cycles, and increases the opportunities and options for future economic growth.
Focusing on economic transformation involves understanding what determines growth and productivity at the micro and macro level. For example, how can resources be shifted to higher-value uses? How can diversification of a country’s productive capabilities, including exports, be encouraged?
But economic transformation in low-income countries is changing. For years, developing countries have tended to transition from agriculture to manufacturing to services. Yet recent evidence suggests that countries are running out of industrialisation options much sooner than expected. Is this a cause for concern? Or are there opportunities in agriculture and services that are just as effective at generating growth and ending poverty?
Dr Tang Xiaoyang, Associate Professor of International Relations at Tsinghua University discussed China’s engagement with Africa through an analysis of China’s Special Economic Zones in Africa and how they support economic transformation followed by a Q&A session.
Public and private sector representatives met to discuss the potential for Kenya to become a services hub. The workshop assessed the role of services in economic transformation and job creation in Kenya, and included an in depth discussions of two services sectors – the IT enabled services and financial services sectors.
The aims were to (i) examine Kenya as an example of services-led transformation (ii) examine what needs to be done to raise Kenya’s services sector to become a regional and global services hub; (iii) examine the costs and benefits of a services-led approach to economic transformation and employment vis-à-vis an agriculture or manufacturing-led approach.
Experts from DFID, ODI, the World Bank, IMF, University of Groningen and Harvard Kennedy School discussed different data sources and methodological approaches for analysing economic transformation, with a focus on economic structures and trade data – as part of the SET data portal work.
The workshop addressed the following key questions: what are the key issues in data for economic transformation? What else needs to be done in the near future for SET data analysis? And, what are the economic transformation data gaps in the medium term?