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International Monetary Fund

Abstract

The papers in this volume address three important issues: the role ofexchange-rate policy in enhancing the competitiveness of African manufactured exports; the steps that can be taken to improve production efficiency; and the role of institutional and structural reforms in promoting competitiveness in manufacturing and in improving Africa's attractiveness to foreign direct investment. An epilogue evaluates progress and developments since the conference that gave rise to this volume was held.

Mr. Arne L Bigsten
This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.
International Monetary Fund
This Background Paper and Statistical Appendix describes economic and financial developments in Botswana during 1993–94. Although real GDP in Botswana recovered somewhat to 2.5 percent in 1993/94, compared with a decline of 1.5 percent in 1992/93, this outcome represented a decline in real GDP per capita for the second consecutive year. The government sector continued to expand relatively fast as the civil service continued to grow fairly rapidly, leading to an increasing share in the nonmining GDP, which rose from 34.8 percent in 1992/93 to 36.1 percent in 1993/94.
International Monetary Fund

Abstract

Can Africa ever hope to have comparative advantage in manufactured exports? This question, posed in the following chapter, becomes a theme that reverberates throughout this volume. The ongoing debate among economists about how to answer it and thus give guidance to policymakers pits two fundamental and opposing theoretical views against one another. This book not only discusses the debate, in which the authors duly take their positions, but also tries to break new ground in empirical tests that would support an answer of “Yes!” to the question. As will become evident, however, such an answer depends heavily on supportive policies, resolutely pursued. The final chapter, one of the two that pull together the various contributions in the book, reminds us that “… there is no free lunch”.

International Monetary Fund

Abstract

The key issue of how sub-Saharan Africa might build a strong comparative advantage in exports, especially of labour-intensive manufactures, preoccupies current debates on African development2. The concern stems from two turns of events. First, one of the most visible manifestations of the subcontinent’ s multifaceted development failures during the past 30 years has been its marginalisation in world trade, especially in the global market for manufactures. Second, recent development successes elsewhere have taught that export-oriented policies either have facilitated them, as in Korea and Chinese Taipei, or actually have generated export-led growth, as in Chile, Mauritius, Tunisia and the countries of Southeast Asia3.

International Monetary Fund

Abstract

Trade liberalisation has formed a major component of the several structural adjustment programmes that Kenya has implemented since the mid-1970s. It has involved a reduction in tariffs and their variance as well as the tariffication of quantitative restrictions. Efforts to implement compatible macroeconomic and institutional reforms have accompanied it, along with direct export-promotion policies that, as explained below, have not had much success. This chapter analyses how, within this context, the real exchange rate (RER) has influenced the performance of Kenyan manufactured exports during the 1980s and 1990s.

International Monetary Fund

Abstract

The economic situation of sub-Saharan Africa has improved markedly in recent years. Increased stability—macroeconomic and political—and market liberalisation in many countries enhance the opportunities for economic development led by the private sector. Previous examples from, for instance, Mauritius and Tunisia as well as Southeast Asia, point to the potential of manufacturing exports for making sustained growth possible. The advantages of manufacturing exports include spillover effects, such as competitive pressure, economies of scale and technology transfer. Several studies provide empirical and theoretical indications that manufacturing exports have a beneficial impact on total factor productivity; a few of them include Edwards (1997), de Melo and Robinson (1990), Biggs, Shah and Srivastava (1995), Tybout (1992), Bigsten et al. (1997) and Lucas (1993).

International Monetary Fund

Abstract

Trade is considered a major channel of international technology transfer. This chapter investigates its role in transferring technology from industrial to developing countries1. Defined broadly, technology covers production methods, product design and organisational methods. According to Grossman and Helpman (1991), trade can foster technology transfer through two main channels: production and information. Through trade with countries that are technological leaders, developing countries can gain access to intermediate products and capital equipment of higher quality (vertical differentiation) and broader variety (horizontal differentiation). They can also gain access to more open channels of communication about production methods, product design, organisational methods and market conditions. Finally, they can adapt to their use the foreign technologies used in their imported products, often at lower cost than innovation would require.

International Monetary Fund

Abstract

The term “competitiveness” causes many academics some discomfort, piques the attention of policymakers and assumes near-mantra status in much of the private sector1. The competitiveness index rankings that this chapter discusses were designed as a tool for businesses and governments, a spur to reform and a signal of success rather than a strict academic exercise. The index subordinates market size, natural-resource endowments and other characteristics of business interest to economic growth, which represents a better estimate of the medium-term health of national economies. Survey results and empirical data both show that the most important factor in propelling economic growth, attracting foreign direct investment in the long term or allowing the healthy increase of domestic firms is a stable, well-managed economy. The work described here, conducted originally for the 1998 Africa Competitiveness Report, measures the competitiveness of 23 African countries based on estimates for their medium-term economic growth, controlling for levels of initial income (Table 6.1).

International Monetary Fund

Abstract

The many cross-country studies of the determinants of growth in Africa undertaken in the last few years typically conclude that the inward orientation of African countries has been a major obstacle to growth (see, for example, the survey in Collier and Gunning, 1999)1. A variety of mechanisms to increase openness and thereby growth have been proposed. To compete against international producers, domestic firms must adopt newer and more efficient technology or use the same technology with less x-inefficiency in order to reduce costs (Nishimizu and Robinson, 1984). Higher volumes of trade increase international technical knowledge transfer (Grossman and Helpman, 1991). If domestic firms have different degrees of inefficiency, the exit of the less efficient ones results in lower average costs and higher productivity. The firms that remain are forced to adjust in two ways: by expanding their scale of production and exploiting economies of scale, and by reducing their technical inefficiencies2. Both these adjustments will decrease average industry costs and raise productivity (Krugman, 1984; Roberts and Tybout, 1991). One may argue that the primary sources of development are learning and knowledge accumulation and, since international trade is one of the most important channels through which knowledge gets transferred, the degree of integration in the world trading system becomes a crucial determinant of growth prospects.