With a view to assessing the practical implications of the Growth Identification and Facilitation framework (GIFF) (*for more on this, see the bottom of this post) in a concrete country case, Justin Yifu Lin and I are preparing a draft paper applying the framework to Nigeria. The paper (which is expected to be published shortly) identifies as appropriate comparator countries for Nigeria: China, Vietnam, India and Indonesia. The key sectors that are identified by the paper are TV receivers, motorcycles and motor vehicle parts, fertilizers, tires, vegetable oil, meat, meat products and poultry, leather, palm oil and rice, telecommunications, wholesale and retail and construction. Our key recommendation for Nigeria is to address power shortages in a targeted manner through Independent Power Plants located in industrial zones, as well as create other enabling conditions, e.g. through subsidized access to finance and promotion of research and development (agriculture). In the area of trade policy, the government could pre-commit to reducing tariffs over a period of years and at the same time to creating a set of enabling conditions that would obviate the need for tariff protection. That way, significant incentives would be in place for the private sector to lobby the relevant government agencies to keep up their commitment to addressing these constraints. Before finalizing the paper, I visited Nigeria to meet with a range of industries that had been identified by the paper as possible target sectors and better understanding their business prospects and constraints, as well as meet with senior government officials to gauge their reaction to the proposed framework.
The potential for expanding the industrial sectors of African countries is substantial – this was a message I delivered on a recent trip to Italy, Tanzania, Mozambique and Malawi. This can happen through an improved understanding of the mechanics of economic transformation as well as by focusing on how such countries can follow their comparative advantage in natural resources and labor supply.
During my site visits and meetings with the private sector for the African segments of my trip, I became more convinced than ever of the strong untapped potential for private sector-led industrialization. Yet that can only happen when the government plays a facilitating role, such as by overcoming information asymmetries, coordination failures and externalities associated with first-mover actions. In Tanzania, initial experiments with industrial parks look promising, as do agricultural development projects and rural transport initiatives currently under way. In the case of industrial parks, it’s important to have a one-stop shop for registration and other administrative obligations, adequate electricity and water supply, and good transport/logistics links.
One is always grateful to see attention paid to the quality and quantity of household data available to study poverty. It is a subject dear to my heart and to my colleagues in the Living Standards Measurement Study (LSMS ) in the World Bank. In sub-Saharan Africa, as a recent Global Dashboard post titled “What do we really know about poverty and inequality?” by Claire Melamed points out, there is still a dearth of data, even after years of government effort and international support. But there are data -- in some countries lots of data -- so it’s worth highlighting what is there. Today I wanted to add some nuance to the discussion of income and assets raised by Claire and, probably more importantly, steer people to some new data that will, we hope, excite the most blasé of you out there.
'Development aid’ is always surrounded by questions. Some argue whether it shows results, and some worry about the way it is spent. And the imminent question is, where does it go? Well, it does have some impact. According to the latest UNESCO report ‘Financing Education in Sub-Saharan Africa’, development aid accounts for 50% of the government education budget in some countries of Africa. “Over the last decade public spending on education in Africa has increased by more than 6% each year”, says the report. However, much remains to be done to distribute it well between primary and higher education, as often requirements of the primary education system suffer. Thus, cutting aid is definitely not a smart move as explained by Liz Allcock and Jimmy Kainja in their post ‘Cutting UK aid to Malawi will hurt the poor, not the leaders’.
The current food crisis—increasing poverty linked to price volatility and high food prices—have put agricultural growth and food production issues back on the development agenda. Is productivity growth the only way to address the short-run challenge (the food crisis) and longer-term needs (meeting increased demand for food)?
Even though today agriculture is the main source of livelihood for 2.5 billion people, including 1.3 billion smallholders and landless workers, public investment in agriculture in developing countries, as well as the share of agricultural expenditure in total government spending, have been gradually declining since the 1980s. Bilateral and multilateral assistance to agriculture, after an increase in the 1970s, also fell starting in the mid-1980s. It is only in recent years that the World Bank and other aid agencies have increased their lending and boosted their investments. But will these investments be effective? This depends on whether they will have a sizeable impact on agricultural productivity.
By the end of 2009, an estimated 5.2 million people in low- and middle-income countries received antiretroviral therapy (ART). In sub-Saharan Africa, nearly 37% [34%–40%] of people eligible for treatment had access to those life-saving medicines (UNAIDS 2010). This is an extraordinary achievement, considering that as recently as 2003, relatively few people living with HIV/AIDS had access to ART in Africa. The scaling-up of ART in Africa and other regions has saved the lives of countless people and we hope will continue to do so.
At the same time, access to HIV/AIDS treatment might have transformed the perception of AIDS from a death sentence to a manageable, chronic condition, not necessarily different from any other chronic disease. Such a change in perception could lead to change in sexual behaviors. If AIDS is not perceived as a killer disease anymore, it might induce complacency and increase risky behaviors and the mixing between higher- and lower-risk groups in the population. That’s what has been described as the “disinhibition” hypothesis.
Debates over the relationship between trade openness and growth have been going on for around 160 years. A key aspect of that debate is how important growth is for poor countries as they strive to catch up with the best-of-the best in a competitive world. For openness to succeed, you must first put in place ports, roads and other building blocks for prosperity, and you need well functioning bureaucracy to help build the foundation for a strong trade sector. Passionate free-trader Arvind Panagariya, Columbia University Economics Professor and Jagdish Bhagwati Professor of Indian Political Economy, spoke eloquently about this at his February 16 Development Economics (DEC) Lecture at the World Bank. His research has entailed cross-country case studies of what he terms ‘debacles’ and ‘successes’ in Asia, Africa and beyond. On the one hand, Panagariya admitted that free trade is no panacea to overcome stagnation and he acknowledged that trade liberalization has failed to catalyze and sustain growth in many instances. On the other, he argued that there are many more examples of countries failing to stimulate growth through protectionism. Panagariya expressed skepticism about industrial policy, but cautioned that its presence cannot prove either the beneficial or harmful impact of openness on growth. You can watch the interview with Professor Panagariya here.
Rising food prices have once again grabbed everyone’s attention. Prices for some basic foods are nearing the 2008 food crisis levels. In the post ‘Soaring Food Crisis’, Paul Krugman analyzes the data from USDA World supply and demand estimates, and blames the current price spikes on global harvest failures. However, the main question still remains unanswered – is another food crisis afoot? Answers to this and some other concerns are addressed in the latest World Bank Flash and also in the World Food Program’s ‘Rising Food Prices: 10 Questions Answered’ piece.
Should 16 year old Africans vote? Why not… Africa has the youngest and fastest growing population in the world…where more than 20% are between the ages of 15- 24, argues Calestous Juma in an insightful post on the Guardian’s Poverty Matters blog. Speaking of Africa, in an interesting post, ‘Do informed citizens hold governments accountable? It depends…’ (Governance for Development blog), Stuti Khemani from the World Bank’s Research Group examines the impact of radio access on government accountability in Benin.
In the famous movie Forrest Gump (1994), which is the story of an innocent man who represents how the world should be, the main character Tom Hanks remembers: “My Mama always said, ‘Life is like a box of chocolates; you never know what you’re gonna get.’” Development economists working on industrial policy should always keep in mind that motherly wisdom and maintain humility in their random quest for the recipe for economic growth.
In a recent paper on ‘Growth Identification and facilitation: The role of the state in the dynamics of structural change,’ Justin Yifu Lin and I have tried to suggest a rational way of looking at the trial-and-error process that successful economic development always involves. In a new post on his excellent blog ‘Africa Can,’ my colleague Shanta Devarajan welcomes our work but asserts that we gloss over the politics that underlie efforts by governments to guide certain industries toward success.
The extent to which people across the world have access to clean water, education, food, healthcare and other basic needs is measured by the Millennium Development Goals (MDGs), a set of internationally agreed targets adopted in 2000. Last week, world leaders and the developmental community gathered in New York for the MDG summit to urge the international community to speed up progress toward the MDGs.