Sub-Saharan Africa (SSA) is home to the world’s poorest countries. The region’s geographical disadvantages are often viewed as an important deterrent to its economic development. A country’s geography directly affects economic development through its effect on disease burden, agricultural productivity or the availability of natural resources. However, the new economic geography (NEG) literature, initiated by Krugman (1991), highlights another mechanism through which geography affects prosperity.
I visited three African countries – Ethiopia, Rwanda, and South Africa– during my first week as Chief Economist at the World Bank in June 2008. Many visits to other African countries followed, but Ethiopia holds for me a special interest. I’ve just visited again, for a fourth time. While I am sure I will go back again after I depart the Bank on June 1 this year, this was my final visit to Africa as Chief Economist.
Over four years, I’ve seen Ethiopia gradually embrace structural transformation and its practical application. Leaders there are acutely aware that, if they are to maintain a robust growth rate (GDP growth has been around 10.5% on average over the past few years), they must move away from agriculture, the dominant sector, toward industrial upgrading and technological innovation, often by imitating economies just a few rungs up the economic ladder. Ethiopia’s agriculture sector is important and should not be neglected, but that alone won’t get the country onto a path toward middle income and finally to high income status.
One widely-accepted political economy research finding is that informed citizens receive greater benefits from government transfer programs. The evidence for the impact of information comes from particular contexts—disaster relief in India and welfare payments in the USA during the Great Depression. Do other contexts yield similar results? New research on the distribution of anti-malaria bed nets in Benin suggests: “No.” Instead, local health officials charged more informed households for bed nets that they could have given them for free.
The Benin context differs in three ways. First, the policy is not the distribution of cash, but of health benefits. Households’ access to information then influences not only their knowledge of government programs to distribute such benefits, but also the value they place on them.
Second, the political context also differs. In younger democracies, like Benin’s, citizens are more likely to confront additional obstacles, besides a lack of information, in their efforts to extract promised benefits from government.
At the 2012 World Economic Forum’s Annual Meeting in Davos last week, a record 2,600 global leaders discussed a frenetic mix of economic and social issues facing the global community. A number of panels (some of which were overlooked with all the talk of the unfolding Eurocrisis) focused on the important transition Africa is making from an underdeveloped continent to one characterized by sustained growth -- backed by strong trade and investment flows.
Leaders discussed the need for greater market integration to increase intra-African trade and better cooperation on infrastructure to facilitate investment and trade. Alpha Condé, President of Guinea, called for the establishment of Pan-African ministries to drive greater integration and coordination on the continent. “At the next African union meeting, we must consider establishing three of four ministers for all of Africa,” he said. “These new posts should at least cover energy, infrastructure, and trade in Africa.”
With the global recovery slow to pick up speed, the latest World Economic Outlook (WEO) isn’t exactly an uplifting read. However, for those of us with an eye on the developing world there are some bright spots: the low-income-countries (LICs) in Africa, for example, have returned to their pre-crisis growth rates and their economies are expected to expand by a respectable 6.5 percent in 2012.
Despite this seemingly good news, there are some dark clouds on the horizon. The WEO attributes the quick rebound to the fact that the African LICs were, “largely shielded from the global financial crisis owing to their limited integration into global manufacturing and financial networks.” Although limited international exposure is a boon in the short-term, it also signals trouble down the road.
I blogged a few months ago about a paper Justin Lin and I were writing that focused on applying the Growth Identification and Facilitation Framework in Nigeria. The paper has just recently been completed and is now available online.
In the meantime, attacks on the UN house in Abuja have highlighted the extreme social tensions experienced by Nigeria. Many of these tensions may be related to the country’s persistent poverty. In fact, notwithstanding high and sustained growth over the past decade, Nigeria’s job creation has barely kept up with the relentless growth of its workforce, and youth unemployment has further risen. Moreover, formal sector employment has fallen, as a result of privatization and civil service retrenchment, while employment in informal family agriculture has increased.
Nigeria urgently needs to increase employment intensity and sustainability of its growth performance, and our paper can be a useful tool for developing a strategy to do so.
On July 8th 2011, President Mwai Kibaki launched the Kenyan Open Data Initiative, making key government data freely available to the public through a single online portal. The 2009 census, national and regional expenditure, and information on key public services are some of the first datasets to be released. Tools and applications have already been built to take this data and make it more useful than it originally was.
This is, so far, the story of open government data in many other countries; what's special about Kenya?
Since its inception, the World Bank’s Open Data initiative has generated considerable excitement and discussion on the possibilities that it holds for democratizing development economics as well as for democratizing the way that development itself is conducted around the world. Robert Zoellick, in a speech given last year at Georgetown University, expounded on the many benefits resulting directly from open data. Offering the example of a health care worker in a village, he spoke of her newfound ability to “see which schools have feeding programs . . . access 20 years of data on infant mortality for her country . . . and mobilize the community to demand better or more targeted health programs.” Beyond this, Zoellick argued that open data means open research, resulting in “more hands and minds to confront theory with evidence on major policy issues.”
The New York Times featured the Bank’s Open Data initiative in an article published earlier this month, in which it referred to the released data as “highly valuable”, saying that “whatever its accuracy or biases, this data essentially defines the economic reality of billions of people and is used in making policies and decisions that have an enormous impact on their lives.” The far-reaching policymaking consequences of the data are undeniable, but the New York Times touches upon a crucial question that has been overshadowed by the current push for transparency: what about quality?
Recently, economists began proposing the strategy for industrial development in low-income countries. But there are few explicit recommendations as to what role governments should play in fostering industrialization. Related question is whether we can draw useful lessons from successful experience of industrial development in East Asia for other regions, such as sub-Saharan Africa (SSA).
The paper entitled “A Cluster-Based Industrial Development Policy for Low-Income Countries” (Policy Research Working Paper 5703) proposes an industrial policy consisting of four pillars of recommendations based on roughly 20 case studies of industrial clusters in Asia and sub-Saharan Africa.
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.