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Development Centre Seminars with the IMF and the AERC

Policies to Promote Competitiveness in Manufacturing in Sub-Saharan Africa

Edited by

Augustin Kwasi Fosu, Saleh M. Nsouli, Aristomène Varoudakis

INTERNATIONAL MONETARY FUND (IMF)

AFRICAN ECONOMIC RESEARCH CONSORTIUM (AERC)

DEVELOPMENT CENTRE

OF THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Organisation for Economic Co-operation and Development

Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed:

• - to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy;

• - to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and

• - to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.

The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became Members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention).

The Development Centre of the Organisation for Economic Co-operation and Development was established by decision of the OECD Council on 23rd October 1962 and comprises twenty-three Member countries of the OECD: Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Korea, Luxembourg, Mexico, the Netherlands, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, as well as Argentina and Brazil from March 1994, Chile since November 1998 and India since February 2001. The Commission of the European Communities also takes part in the Centre’s Advisory Board.

The purpose of the Centre is to bring together the knowledge and experience available in Member countries of both economic development and the formulation and execution of general economic policies; to adapt such knowledge and experience to the actual needs of countries or regions in the process of development and to put the results at the disposal of the countries by appropriate means.

The Centre has a special and autonomous position within the OECD which enables it to enjoy scientific independence in the execution of its task. Nevertheless, the Centre can draw upon the experience and knowledge available in the OECD in the development field.

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THE OPINIONS EXPRESSED AND ARGUMENTS EMPLOYED IN THIS PUBLICATION ARE THE SOLE RESPONSIBILITY OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THOSE OF THE OECD OR OF THE GOVERNMENTS OF ITS MEMBER COUNTRIES.

Publié en français sous le titre:

PROMOUVOIR LA COMPÉTITIVITÉ MANUFACTURIÈRE EN AFRIQUE SUBSAHARIENNE

© IMF/AERC/OECD 2001

Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, tel. (33–1) 44 07 47 70, fax (33–1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750–8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: www.copyright.com. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue Andre-Pascal, 75775 Paris Cedex 16, France.

Foreword

This work was produced following an international conference jointly organised by the International Monetary Fund and the OECD Development Centre in Johannesburg in November 1998. It is published in the context of the Development Centre’s research on “Emerging Africa” and precedes a volume of that title, also published in 2001.

Acknowledgements

The Development Centre would like to express its gratitude to the Government of Switzerland for the financial support given to the project on “Emerging Africa” in the context of which this study was carried out.

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Sub-Saharan Africa

The boundaries and names shown on this map do not imply official endorsement or acceptance by the OECD.

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Table of Contents

• Preface Mohsin S. Khan, Jorge Braga de Macedo and Delphin G. Rwegasira

• List of Abbreviations

• Chapter 1. Promoting Competitiveness in Manufacturing in Sub-Saharan Africa

• Saleh M. Nsouli, Augustin Kwasi Fosu and Aristomène Varoudakis

• Part I: The Role of Exchange-Rate Policy in Promoting Competitiveness

• Chapter 2. Can Africa Export Manufactures? Endowments, Exchange Rates and Transaction Costs

• Ibrahim A. Elbadawi

• Chapter 3. Kenya’s Recent Exchange-Rate Policy and Manufactured Export Performance

• Francis M. Mwega and Njuguna S. Ndung’u

• Part II: Enhancing the Effectiveness of Production Factors

• Chapter 4. Structural Factors Affecting Manufacturing Competitiveness: Comparative Results from Cameroon, Côte d’lvoire, Nigeria and Senegal

• Adeola Adenikinju, Ludvig Söderling, Charles Soludo and Aristomène Varoudakis

• Chapter 5. The Role of Trade in Technology Diffusion

• Dalia Hakura and Florence Jaumotte

• Part III: Building an Appropriate Institutional Environment to Promote Competitiveness

• Chapter 6. Competitiveness and Foreign Direct Investment in Africa

• Sara E. Sievers

• Chapter 7. Exporting and Efficiency in African Manufacturing

• Arne Bigsten, Paul Collier, Stefan Dercon, Marcel Fafchamps, Bernard Gauthier, Jan Willem Gunning, Jean Habarurema, Abena Oduro, Remco Oostendorp, Catherine Pattillo, Måns Söderbom, Francis Teal and Albert Zeufack

• PART IV: Concluding Comments

• Chapter 8. Issues in Competitiveness in Sub-Saharan Africa

• Saleh M. Nsouli

• Chapter 9. A Panoramic View of Policies for Competitiveness in Manufacturing in Sub-Saharan Africa

• Augustin Kwasi Fosu

• Epilogue: Promoting Competitiveness in Manufacturing: A Continuing Challenge for Improving Sub-Saharan Africa’s Integration into the Global Economy

• Saleh M. Nsouli and Aristomène Varoudakis

• Contributors

Preface

The papers in this volume were presented at a conference organised by the African Economic Research Consortium (AERC), the Development Centre of the Organisation for Economic Co-operation and Development (OECD), and the International Monetary Fund, held in Johannesburg, South Africa, on 6-7 November 1998.

The conference focused on what is needed to ensure the sustainability of the recent economic recovery in the region and highlighted the importance of Africa’s rapid integration into the global economy. After years of stagnation, many African countries experienced renewed growth in the 1990s, the result, largely, of the broad economic and structural reforms implemented during those years. The region, however, is still heavily dependent on primary commodity exports at a time when such reliance makes these economies particularly vulnerable to swings in the terms of trade and fluctuations in weather conditions. An essential element for integrating the countries into the world economy and reducing their vulnerability to exogenous shocks is to shift away from dependency on primary commodity exports by promoting a more competitive manufacturing sector.

The papers in this volume address three important issues: i) the role of exchange-rate policy in enhancing the competitiveness of African manufactured exports; ii) the steps that can be taken to improve production efficiency; and iii) the role of institutional and structural reforms in promoting competitiveness in manufacturing and in improving Africa’s attractiveness to foreign direct investment. An Epilogue, written by Aristomène Varoudakis, now of the World Bank, evaluates progress and developments since the conference which gave rise to this volume was held.

It is our hope that the materials in this book will serve both the scholars and the policymakers interested in Africa’s continued economic growth and further integration into the global economy.

Mohsin S. Khan Director IMF Institute	Jorge Braga de Macedo President OECD Development Centre	Delphin G. Rwegasira Executive Director AERC
March 2001

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Mohsin S. Khan Director IMF Institute	Jorge Braga de Macedo President OECD Development Centre	Delphin G. Rwegasira Executive Director AERC
March 2001

List of Abbreviations