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Growth Framework

In Nigeria, One Size Doesn’t Fit All

Volker Treichel's picture

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. 

Uzbekistan explores a path to growth

Justin Yifu Lin's picture

Does a remote double-landlocked Commonwealth of Independent States country have the potential to grow at 8 percent a year for the next 20 years? Call me an optimist, but I have just been to the country and I am convinced it’s true. My lecture to a packed audience in Tashkent on ‘Uzbekistan: New Strategies and Opportunities for Structural Transformation’ was well received. Perhaps they were just being extraordinarily polite hosts, but officials there thought my visit marked a transformation point and at the end of my visit, they said they’d start working on a long-term development vision report together with the World Bank and their think tanks.

The recipe for dynamic growth in a developing country is to tap into latecomer’s advantages by developing industries in accordance with its comparative advantages in a well-functioning market economy with the state playing a facilitating role. In the case of Uzbekistan, the potential of late comer advantages have been enormous in many sectors including the traditional ones, such as carpet, garment and horticulture, and modern ones, such as consumer electronics and cars. I visited a carpet factory in Samarkand. Impressed by the owner’s entrepreneurship and the abundant supply of well-educated, disciplined, wage-competitive workers, I am convinced Uzbekistan can out compete Turkey as the world’s production center of synthetic carpets in the coming years.

Leveraging Nigeria’s Comparative Advantage

Volker Treichel's picture

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.

Choosing countries as models for industrial growth

Justin Yifu Lin's picture

Train station. India. Photo: © Curt Carnemark / World Bank

Shanta’s thoughtful comments on our Growth Identification and facilitation (GIF) paper are most welcome. The issues of industrialization and structural transformation are at the heart of economic development. Following comments already made by my co-author Célestin Monga on this blog, let me offer a few thoughts to this exchange.

First, the GIF approach explains the economic success of a very diverse group of countries: China (with 1.3 billion population), Japan (100 million); Taiwan-China (20 million); Korea (40 million); Singapore (5 million); or Mauritius (400.000). The framework has also been applied in large Western countries such as Germany, France, and United States, and small European countries like Sweden, Norway, Finland, and Ireland. The political systems of those economies are also very different, some are democratic and some are authoritarian.

Growth identification and facilitation – let the debate begin

Célestin Monga's picture
 photo: istockphoto.com

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.

Sectoral upgrading a half century later – 2010 is not 1960

Howard Pack's picture

There is an increasing consensus about the need of poorer economies to shift away from low technology, low productivity areas into new product areas, particularly to generate non-commodity exports. The figure below shows the low level of manufactured exports from the poorest region, sub-Saharan Africa (SSF) as well as from Southeast Asia (SAS) compared to other regions. It is this disparity that many have in mind in urging a sectoral transformation. In the 1950s and early ‘60s there was an argument for a “big push” in development premised on export pessimism.

*lcn- Latin America & Caribbean, mea- Middle East & Africa, SAS - Southest Asia, ssf- Sub-Saharan Africa, eap- East Asia & Pacific, and eca- Europe & Central Asia

The emphasis on the big push and balanced growth continued until the 1970s when the success of export oriented countries in Asia such as Korea and Taiwan (China) demonstrated that it was possible to escape  the need to have balanced  internal growth. Annual export growth of 15 percent or more helped to effect a major transformation in many of the newly industrialized Asian nations.  A critical question is whether five decades later this option is still open.

Why ‘Securing Transformation’ matters in development economics

Justin Yifu Lin's picture

In his September 29 speech at Georgetown on ‘Democratizing Development Economics’, World Bank Group President Robert B. Zoellick insisted on the importance of ‘securing transformation’. The new structural economics approach to development, which I have proposed, aims exactly at that objective.

 Photo: © Simone D. McCourtie / World Bank
As I see it, ‘securing transformation’ highlights certain key features in the economic development process: the importance of endowments; different industrial structures atvarious stages of development and various distortions stemming from past, misguided interventions by policymakers whose belief in old structural economics led them to over-estimate governments’ ability to correct market failures.