african miracle presentation
TRANSCRIPT
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AFRICAN MIRACLE
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STRUCTURE
The Economics of Convergence &
Structural Transformation Perspective
Structural Change & Industrializationin Africa
High Growth Scenarios for Africa
Is an African Growth Miracle Possible?
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THE ECONOMICS OF CONVERGENCE &
STRUCTURAL TRANSFORMATION
PERSPECTIVE
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CONVERGENCE
j=(ln y*(j)ln yj) + j
j= growth fundamentals
Institutions (Acemoglu et al)
Geography (Sachs)
Colonizers (Glaesar et al)
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STRUCTURAL TRANSFORMATION
Dual economy
= (ln y*() ln y)
+MMM(ln y*(M)ln yM)
+ (M-T)dM
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STRUCTURAL TRANSFORMATION
Investment infundamentals
(human capital,
institutions)
Structural transformation,
Industrialization (d)
Slow Rapid
Slow No growth Episodic
growth
Rapid Slow growth Rapid,
sustainedgrowth
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STRUCTURAL CHANGE AND
INDUSTRIALIZATION IN AFRICA
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STRUCTURAL CHANGE
Laborers move out from agriculture
and rural areas but primary beneficiary
has not been formal manufacturers Absorbed into less productive and
informal sector
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IMPORTANCE OF MANUFACTURING SECTOR
Manufacturing industry has been playing an insignificant role
After 1975: de-industrialization
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COMPARISON WITH ASIAN COUNTRIES
Under all level of income, Africa is underindustralized as compared to Asian
countries
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PATTERN OF STRUCTURAL CHANGE: VIETNAM
Labor move from agriculture to productive urban sectors
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ETHIOPIA AND KENYA
Labor move from agriculture to less productive services
Magnitude of growth-promoting structural change is smaller
Manufacturing sector expands less
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INFORMALITY
Formal manufacturing share is low as 6% in some countries;
manufacturing dominated by informal and less productive firms
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PRODUCTIVITY
Growth is rising but services and manufacturing are far behind in
terms of productivity-because of informal sector
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HIGHGROWTH SCENARIOS FOR AFRICA
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OPTIONS
Africa has 4 options to generate sustainedand rapid growth into the future :
1. revive manufacturing sector
2. generate agriculture-led growth
3. generate rapid growth in productivity in
services4. growth based on natural resources
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INDUSTRIALIZATION
So far, there has been signs ofgreenfield investments in many Africancountries
Africa has potential to take advantageof rising costs in Asia and become nextglobal manufacturing hub
But this is not happening. Why?
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POOR BUSINESS CLIMATE
Cost of doing business in Africa is high
Exchange rate can be used as a remedy
Undervaluation may help in spurringindustrialization, and therefore growth
Macroeconomic policy adjustments needed
to achieve and sustain competitive realexchange rate
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Countries are deindustrializing at lower levels of income
Possible reasons are a combo of global demand shifts, global competition and
technological changes
Africa has strong competition in a now tougher environment
PREMATURE INDUSTRIALIZATION
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AGRICULTURE
Poor business climate a hindrance here too
Extension, land rights and input provision are amongst
problems governments need to fix
Main argument against this, is lack of examples of
countries that have pulled it off
Strongest correlates of economic development is export
diversification away from agriculture
Outmigration from countryside in Africa
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SERVICES
Traditionally not an escalator sector
Services that can be productivity escalators
require high skills
Human capital, institutions and governance
growth needed
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NATURAL RESOURCE
Very few countries achieved rapid growth based
on natural resources
Those that did are small countries with
exceptional circumstances ; e.g. Botswana, CapeVerde, Equatorial Guinea
Rich in minerals and fuel
Resource sectors generally highly capital intensiveand absorb little labour
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NATURAL RESOURCE
Resource rich economies have volatile terms of
trade
Difficulty in managing resource rents
Institutional underdevelopment
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IS AFRICAN GROWTH
MIRACLE POSSIBLE?
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IS THE AFRICAN GROWTH MIRACLE POSSIBLE?
Knowing the reality
Why the growth? i.e. Drivers, factors
Is the growth sustainable?
Why if is/is not sustainable?
What to expect
Prospect of the continents growth
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A GLIMPSE OF AFRICAN GROWTH
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WHY THE GROWTH?
Due to temporary boosts
external factors i.e. Huge inflow of FDIs
Awaken from the prolonged economic decline
Improved fundamental
i.e. institutional quality, governance,
infrastructure
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WHY THE GROWTH? (CONTD)
Political and social stability
End of civil wars
Advantages of:
High commodity price (price high, interest low)
Increased trade and investment(Increasing direct investment i.e. China)
Minimal impact of Global Financial Crisis
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IS THE GROWTH SUSTAINABLE?
Fundamental improvements were seen, however, at
infantry stage
Traditional engines are operating at less than full
power High youth unemployment, which could lead social
unrest (Filmer and Fox, 2014)
High dependence on foreign aid and FDI
Business climate
E.g. Poor hygienic condition (Ebola outbreak)
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SUSTAINABILITY
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STABILITY
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TECHNOLOGY PROGRESS
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WHAT TO EXPECT?
It concludes the growth should be
moderate and stable rather than great
If the growth is great, the growth model is
said to be unique and different from
normal growth factors (e.g.
industrialization)
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QUESTIONS?