Keynote at The Third Voice of Social Sciences Conference (VSS)

on Industrialization and Social Transformation

University of Dar es Salaam, Tanzania, 24-25 November 2016Finn Tarp

Growth, Structural Transformation

and Development

Introduction

Context

• The Economist (11 May 2000): Hopeless Africa

• The Independent (15 July 2009): Africa – the lost continent

• The Economist (3 December 2011): The hopeful continent – Africa rising

• A recent Afrobarometer survey suggests that ‘despite high reported growth rates, lived poverty at the grassroots remains little changed’ (Dulani et al. 2013); and others even question the growth revival referring to poor data

UNU-WIDER’s 2014-18 Research Programme

• 3 Challenges

– Transformation

– Inclusion

– Sustainability

• 3 Concerns

– Africa’s inclusive growth

– Gender equity

– Development finance

• 3 Audiences

– Decision-makers in developing countries

– International agencies, both bilateral and multilateral

– Global research community

Focus Today on Two Large Scale Projects

• Growth and Poverty Project (GAPP)• Re-examined Africa’s growth, poverty and

inequality developments and asked:– What explains the trends in monetary and

non-monetary poverty and their links to growth and inequality in 16 of the 24 most populous African countries?

– What should policy makers do looking forward?

– We cover almost 75% of the African population and 9 of the largest 10 countries.

• Learning to Compete (L2C)• Tried to answer a simple question:

– Why is there so little industry in Africa?• And addressed other questions such as:

– Does it matter?– Is it realistic for Africa to break into global

markets?– What makes firms more competitive?

UNU-WIDER Research Output• Growth and Poverty in Sub-Saharan Africa: Oxford University Press, edited by Channing Arndt, Andy McKay and Finn Tarp

• Measuring Poverty and Wellbeing in Developing Countries: Oxford University Press, edited by Channing Arndt and Finn Tarp

• Made in Africa: The Brookings Press, by Carol Newman, John Page, John Rand, Abebe Shimeles, Måns Söderbom, and Finn Tarp

• Manufacturing Transformation: Comparative Studies of Industrial Development in Africa and Emerging Asia: Oxford University Press, edited by

Carol Newman, John Page, John Rand, Abebe Shimeles, Måns Söderbom, and Finn Tarp

• Africa’s Lions: The Brookings Press, edited by Haroon Bhorat and Finn Tarp

Forthcoming:

• Beating the Odds: Jumpstarting and Sustaining Inclusive Structural Transformation: Princeton University Press, by Celestin Monga and Justin Lin

(see also Justin Lin’s WIDER Annual Lecture)

• Building State Capability: Evidence, Analysis, Action: Oxford University Press, by Matt Andrews, Lant Pritchett, and Michael Woolcock, (see also

Pritchett’s WIDER Annual Lecture)

• The Practice of Industrial Policy: Business Coordination in Africa and East Asia: Oxford University Press, edited by John Page and Finn Tarp

• Growth, Structural Transformation and Rural Change in Vietnam: A Rising Dragon on the Move: Oxford University Press, edited by Finn Tarp

• A LOT MORE: see https://www.wider.unu.edu/publications and https://www.wider.unu.edu/ including a series of special issues of journals and

stand alone articles

GROWTH AND POVERTY PROJECT: GAPP

LEARNING TO COMPETE: L2C

Key Messages

• There is a lot to celebrate in African development (two cheers)

– But not every where, and major challenges remain (not three cheers)

• Africa has a chance to break into the global market for industrial goods

– But business as usual will not deliver desired for results

GAPP Background

The African Growth Turn-Around

Child Mortality – Nearly Halved Since 1995

15

35

55

75

95

115

135

155

175

195

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Europe & Central Asia (developing only) East Asia & Pacific (developing only)

Middle East & North Africa (developing only) Sub-Saharan Africa (developing only)

Latin America & Caribbean (developing only)

Mortality rate, under-5 (per 1,000 live births)

Substantial Variability: The 16 GAPP Country Cases

GAPP Approach and Country

Categorisation

The GAPP Approach

• Bring together:

– Available macroeconomic data

– Comparable household budget surveys

– Demographic and Health Survey data

– A host of other information (prices)

• Critically examine validity and consistency of existing data (triangulation)

• Develop coherent country case stories

Four Categories of Countries

• Relatively rapid economic growth and corresponding poverty reduction: Ethiopia, Ghana, Malawi, Rwanda, and Uganda

• Relatively rapid economic growth but limited poverty reduction: Burkina Faso, Mozambique, Nigeria, Tanzania, and Zambia

• Uninspiring or negative economic growth with corresponding stagnation or increasing poverty: Cameroon, Côte d’Ivoire, Kenya, Madagascar, and South Africa

• Low-information countries: DRC

Selected Findings and Lessons

Three Selected GAPP Findings

• Socio-economic progress in Sub-Saharan Africa has been markedly better than almost anyone expected 25 years ago

• But progress has not been even, the development process has without exception been highly non-linear, and the fragility of gains evident

• The regional powerhouses of Kenya, Nigeria, and South Africa not among the better performers in terms of growth or poverty reduction

Selected Lessons

• Volatility of monetary poverty measures: extreme care in analysis and interpretation warranted

• Importance of multi-dimensional assessments: speaking to non-money metrics of development

• The role of agriculture remains critical

L2C

L2C Conference – Industrial development and policy in Africa

www1.wider.unu.edu/L2Cconf

Ending up where it beganAfrica has deindustrialized since the 1980s

Manufacturing as a Percentage of GDP Sub-Saharan Africa, 1965-2012

5

6

7

8

9

10

11

12

13

14

15

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Pe

rce

nt

of

GD

P

Africa’s deficit in manufacturing

• Africa’s share of manufacturing in GDP is less than half of the average for all developing countries

• Per capita manufactured exports are about 10 per cent of the developing country average

• Africa’s share of global manufacturing is smaller today than in 1980

Mfg. Exports PC 2008

(US$)

Growth Exports PC 00-

08(%)

Mfg. Value

Added PC 2008 (US$)

Share of Mfg. in

GDP 2008(%)

Africa Average 49.0 2.85 138.6 9.4

AllDeveloping Countries

487.2 10.05 412.9 21.7

The L2C country comparative framework

• Eleven countries

– Nine African : Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania, Tunisia and Uganda.

– Two Asian: Vietnam, Cambodia.

• National researchers

– Teamed with global experts

• Three track approach

– Detailed case studies of industrialization and the evolution of public policies

– Econometric analysis of the stock of firm level surveys

– Qualitative surveys of FDI firms and linked domestic firms

New Directions

New Directions for Industrial Policy (1)Reform the Investment Climate Agenda

• Stop Doing (monkey) Business

• Focus on infrastructure and skills development relevant to industry

• Support institutional development for FDI and SEZs

0

5

10

15

20

25

30

35

40

45

50

Pe

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nt

of

Tota

l OD

A C

om

mit

tme

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ODA for Economic Infrastructure 1973-2009

New Directions for Industrial Policy (2)Mount an “Export Push”

• Potential productivity gains high, but also high private costs of entry

– Knowledge of potential markets is the most serious constraint for international market entry

• Entering global markets will need an “East Asian style” export push

– A broadly owned strategy and effective institutions (leadership from the top)

– Trade related infrastructure and trade logistics

• Support for regional institutions and infrastructure

New Directions for Industrial Policy (3)Capabilities and Clusters

• Building Firm Capabilities

– An export push would be a major source of capabilities (demanding buyers; repeated relationships)

– Build effective FDI agencies

– Strengthen domestic value chain relationships

• Creating Clusters

– Agglomeration economies associated with a collective action problem

– SEZs are a means of creating clusters

– Bring Africa’s SEZs up to world class

– Strengthen the links between firms in the SEZ and domestic suppliers/purchasers

Conclusion

Outstanding Challenges• Global demographic projections (2015-2050): from 7.3 to 9.7 billion, and Africa’s population

is set to double to 2.5 billion (bigger than both China and India and Nigeria bigger than US)

• Structural transformation slow

• Jobs and employment creation lagging

• Agriculture and industrialization constrained

• The potential pitfalls are many, but there is every reason – and a distinct need – to push decisively forward in African development over the next 15-20 years (remembering T x G = 69)

• Trickle down alone will not do the trick – see the ”Stockholm Statement” https://www.wider.unu.edu/news/stockholm-statement-%E2%80%93-towards-new-consensus-principles-policy-making-contemporary-world