Race to the Next Income Frontier
Chapter

Chapter 13. Structural Reforms in Countries That Have Achieved Emerging Market Economy Status: A Comparative Study

Author(s):
Ali Mansoor, Salifou Issoufou, and Daouda Sembene
Published Date:
April 2018
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Author(s)
Aliou Faye Bertrand Belle and Nyasha Weinberg

Introduction

On February 26, 2014, the President of Senegal, Macky Sall, launched the Plan Sénégal Émergent at the seventh meeting of the Consultative Group of Donors and Creditors. The plan is an inclusive, sustained, and sustainable growth strategy designed to accelerate Senegal’s progress toward upper-middle-income status and its emergence as a hub linking West Africa to the rest of the world. Its underlying vision is to achieve emergence by 2035 with social solidarity and good governance, prioritizing a form of economic development that consolidates existing growth sectors and invests in new areas to achieve a sustainable reduction in poverty.

The Plan Sénégal Émergent comprises three primary areas designed to create conditions for emergence by removing bottlenecks to growth and promoting private initiative. First, it aims for a structural transformation of the economy to stimulate investment, job creation, and social inclusion. Second, it seeks to improve living conditions to reduce inequality and assist with regional development. Finally, it aims to improve governance and security to promote stability with the protection of rights and liberties.

Weakness in GDP growth over the last 30 years can be explained, in large part, by governance problems related to rent seeking and patronage. In turn, weak governance has limited the quality as well as the quantity of economic infrastructure and handicapped the building of human capital. This translates into weak supply chain structures, low levels of productivity, and problems with access to land and finance. To reduce the effects of these constraints on growth, the Plan Sénégal Émergent focuses on improving the foundations for emergence, such as establishing modern infrastructure, the conditions for investment, improvements in human capital, and improvements in the availability of finance. The plan acknowledges that success is also dependent on state capacity, which will therefore be supported by a program of public administration reforms.

To date, 27 flagship projects have already been approved. These include the initiation of new activities, such as the mining of iron ore deposits in the southeast of Senegal, and the improvement of existing activities. These 27 flagship projects are expected to increase current per capita GDP, contributing an additional 2.7 percentage points to the targeted 7 percent annual average growth. This goal would lead to a doubling of per capita GDP every 10 years, increasing it from approximately US$1,000 in 2014–15 to US$2,000 in 2025 and to US$4,000 by 2035.

In light of Senegal’s past experience, a 7 percent annual growth rate can be sustained over 20 years only if there is a fundamental paradigm shift away from patronage and rent seeking and supportive of an open platform that encourages initiative and enterprise. This means structural reforms targeted at unlocking inclusive growth comparable to the reforms undertaken by the countries that have preceded Senegal on the path to emergence. These structural reforms are distinct from the 27 flagship projects already identified in the Plan Sénégal Émergent. Indeed, without these economic governance reforms, the 27 projects are more likely to result in debt than in growth acceleration. But if they are supported by the necessary reforms that would crowd-in private investment by small and medium-sized enterprises and from foreign direct investment, these same 27 projects are likely to be the foundation of sustained and inclusive high growth.

The first section of this chapter aims to conduct a comparative analysis of the factors that have led to emergence. It compares the effects of structural reforms in emerging market economies that enabled them to embark on a path to robust, inclusive, and sustainable growth. An overall analysis of different global experiences with growth provides important lessons. A range of emerging markets are reviewed. While there is no agreed definition on emerging market status, Table 13.1 shows the 23 countries currently included in Morgan Stanley Capital International’s (MSCI’s) Emerging Markets Index. To this group we add some comparators, such as Botswana, Cabo Verde, Cameroon, Ghana, Hong Kong Special Administrative Region, Mauritius, Morocco, Mozambique, Pakistan, Seychelles, Singapore, Tanzania, and Vietnam, from which there are useful lessons to be drawn.

TABLE 13.1Emerging Markets as Identified by the Morgan Stanley Capital International Emerging Markets Index
North, Central, and

South America
Europe, Middle East, and AfricaAsia
BrazilCzech RepublicRussiaChinaPhilippines
ChileEgyptSouth AfricaIndiaTaiwan Province of China
ColombiaGreeceTurkeyIndonesiaThailand
MexicoHungaryUnited ArabKorea
PeruPolandEmiratesMalaysia
Qatar
Source: Authors’ compilation based on Morgan Stanley Capital International’s (MSCI’s) Emerging Market Index.

In the second section, this chapter analyzes the structural reforms and proposals in the Plan Sénégal Émergent. The analysis draws lessons from emerging markets’ experience with maintaining the robust, inclusive, and sustainable growth dynamics that implementation of the plan is expected to yield. Finally, prior to drawing conclusions, the chapter examines the organizational measures required to effectively manage the plan projects and for private sector enrichment of that portfolio.

Background

With a view to making Senegal an emerging market by 2035, an inclusive society governed by the rule of law, the Plan Sénégal Émergent rests on three main pillars.

Pillar 1 focuses on structurally revamping the economy. The planning and implementation of Pillar 1 is expected to translate into average annual growth of 7.1 percent from 2014 to 2018. Exports are predicted to increase by 7.2 percent a year in real-growth terms and imports by 6.1 percent a year, with inflation remaining below a 3 percent threshold. The fiscal deficit is predicted to fall below the 3 percent threshold in 2019, and the current account to below 6 percent in 2018. It is forecast that 285,000 new jobs will have been added by 2018.

Pillar 2 concerns the development of the human capital needed for Pillar 1 to succeed. It also covers the social protection system required for inclusive development and interventions to raise living standards, protect the environment, and promote development.

Pillar 3 is geared to peace building and social cohesion; bolstering equipment and facilities for the country’s defense and security forces; promoting the rule of law through greater access to high-quality and effective judicial systems; advancing gender equity and equality through the empowerment of women and girls, especially in agriculture; reforming the state and strengthening public administration, including improvement of economic governance and stronger efforts to combat corruption and the lack of transparency; bolstering regional and local government capacities; developing urban centers; and further developing decentralized and regionalized public policies.

Finally, a series of cross-cutting issues need to be taken into consideration. These include emergence fundamentals, gender, capacity building, results-based management, protection of human rights, and sustainable development.

Structural Reform Associated with Emergence

Sustained high economic growth in a subset of East Asian, Latin American, African, and European transition economies has led analysts, strategists, and national authorities in developing countries to take a closer look at reform packages that expedite growth and inclusive development. One of the most notable of these attempts was in the release of the World Bank’s Growth Report (Spence 2008), which synthesized the experience of 13 successful emerging market economies that have had annual post—World War II growth rates of 7 percent or more for a quarter of a century.

The Growth Report covers Botswana, Brazil, China, Hong Kong Special Administrative Region, Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan Province of China, and Thailand. Annex 13.1 covers the growth period for each country. These countries were selected by the report’s author to demonstrate that fast and sustained growth is possible. The report examines proximate causes of growth, such as technology, capital, and human capital, but also covers advances in science, finance, trade, education, medicine, public health, and governance. The first observation to be drawn from these countries is the nonexistence of a generic formula for sustained economic growth over a long period (see Table 13.2).

TABLE 13.2Variability in Strategies Pursued by Emerging Market Economies
CountriesApproach
Hong Kong Special Administrative Region, Malaysia, Indonesia, and SingaporeLiberalized the economic sector, promoted exports and foreign direct investment. There is some competition from China, especially in labor-intensive industries (textiles, shoe manufacturing, and so on).
BrazilInitially opted for an import substitution industrialization policy and promoted the expansion of the middle class to provide a market for consumer durables. Since then, the strategy has been updated to provide incentives for investment and promote exports. Today, Brazil’s comparative advantages are to be found in the mining, oil, and biofuel sectors. The challenge now facing the country is to increase the capital intensity of its industrial sector by stepping up research and development.
JapanRelied on domestic investment to shift emphasis from electromechanical to information technologies, from natural resources to human resources, and from production to design. These changes have been achieved by gearing production to complement human capital endowments and promote products in which labor value added counts for more than raw materials. This strategy calls for massive investment in human resources, especially in the area of technical and vocational training.
ThailandDeveloped a successful, export-oriented agricultural system. The other well-developed sectors are agri-food (fish processing) and tourism.
ChinaEmphasized industrialization, benefiting from its well-qualified and cheap workforce and its huge domestic market. Such policies encourage offshoring by Western enterprises.
Botswana and OmanContest the idea of the resource curse. Botswana developed thanks to its diamond output (80 percent of exports), combined with sound macroeconomic management and good governance. According to Transparency International, it is the least corrupt country in Africa. Oman’s economy depends on oil but remains sound, having attracted foreign direct investment and the development of a manufacturing sector.
IndiaIndia is positioning itself in human-capital-intensive sectors (information technology, the pharmaceutical industry, and biotechnology), while avoiding head-on competition with China in labor-intensive industries.
Source: Authors’ compilation based on material from the Growth Report (Spence 2008).

However, what these countries do appear to share is an opening up to and integration into the world economy and a long-term commitment by their political leadership to deliver results. The process is long and requires patience, perseverance, and pragmatism. Patronage and rent seeking are subsumed by a social contract that reflects results as a basis for continued state support. The size of the country is neither an advantage nor a disadvantage for high performance, given that the Asian tigers are small, while Brazil, China, and India are almost continental in size. Generally, economic performance depends on the institutional arrangements and policies implemented. This is good news for decision makers, as they can control both.

In implementing their reform programs, successful countries seem to share the following 11 key components:

  • A vision of economic and social development that galvanizes all sectors of society at both the national and local levels.

  • Leadership in the values, priorities, and institutions of committed elites: national and local officials and civil servants and those in positions of responsibility in the private sector, civil society, universities, and the media.

  • A decision to opt for inclusive growth and institutions and policies to deliver this.

  • Institutions that strengthen the economy’s capacity for change.

  • An all-encompassing, single development policy of concerted efforts to expedite growth that is facilitated by a close coordination of medium-term economic planning and annual budgeting.

  • Tailoring of the labor market for growth while ensuring social solidarity by reconciling flexibility, human capital training, and protection for workers instead of protecting employment.

  • The establishment of a body to coordinate the identification and removal of the main constraints on growth and development.

  • A focus on designing and implementing institutions, policies, and problem solving, often done in a consultative manner.

  • The promotion of regional and local development by reconciling top-down and bottom-up approaches.

  • Exploitation of each region’s specific advantages and their transformation into engines driving growth, involving both nationals (including the diaspora) and foreign labor.

  • The appointment of a national body responsible for analyzing performance and comparing it with subregional and global trends.

These elements are confirmed by Wolff (2014), who highlights how success in emergence rests on openness to external trade and foreign direct investment, the changing structure of the population, and sociopolitical variables (democracy, inequalities, governance). These elements feed into

  • Mechanisms to generate catch-up effects through openness not only to foreign direct investment, but to new ideas.

  • Investments, including through foreign direct investment, for absorbing technological progress, information and communication technologies, and public infrastructure.

  • The level of education of the workforce.

  • Science and technology, including research and development.

  • Basic social institutions (political stability and the rule of law).

These findings are consistent with the list of structural engines of growth identified by Bergheim (2005) for the Deutsche Bank’s research department. These point to the importance of

  • The population and demographic trends—quantity of labor input.

  • Workforce qualification and education levels—quality of labor input.

  • Engagement with global trade and investment to promote learning.

  • Improvements in macroeconomic policies and in the institutional framework and accumulation of capital.

The World Economic Forum’s annual reports such as Global Competitiveness Report 2014–2015, edited by Schwab (2014), also highlight similar factors of success.

The Global Competitiveness Reports draw on sets of indicators to analyze national competitiveness, such as those presented by Delgado and others (2012), who actually estimate the relative importance of the three key areas for policy action as follows:

  • 1. Quality of political institutions: 53 percent.

  • 2. Quality of social infrastructure: 35 percent.

  • 3. Quality of the business environment: 12 percent.

The relative importance of political institutions reflects the principle that success largely depends on the capacity to develop a new social contract to replace classical patronage and rent seeking, which have no concern for overall welfare.

Aiginger, Bärenthaler-Sieber, and Vogel (2015) analyze the factors that led to greater competitiveness in the United States compared with Europe in the latter half of the 1990s. Their study classifies national competitiveness indicators under three categories: price competitiveness indicators, quality competitiveness indicators, and outcome indicators. This form of analysis supplements GDP with other indicators that reflect the aspirations of the inhabitants of the country under review. Aiginger, Bärenthaler-Sieber, and Vogel (2013) define the above approach as measuring the “ability of a country (region, location) to deliver beyond GDP goals for its citizens” incorporating cost, productivity, structural, and abilities indicators to explain macroeconomic outcomes. Figure 13.1 illustrates the determinants of national competitiveness.

The determinants of national competitiveness are understood to be price competitiveness (wages, productivity, unit labor costs), the structure of production and exports, and the country’s acquired abilities (innovation, education, institutions, social system, and ecological ambitions). National competitiveness is related to GDP per capita, employment and unemployment, the fiscal balance, the current account, and the debt. This framework is offered to assist countries in constructing policy for stronger, socially inclusive, and ecologically viable growth.

Figure 13.1.Competitiveness under New Perspectives

Source: Aiginger, Bärenthaler-Sieber, and Vogel 2013.

An economic complexity index has been developed by Haussmann and others (2013), and this index has been cited by Hartmann and others (2017) as a reliable indicator of a country’s growth potential. The economic complexity index is calculated for a country’s products and a basket of exports. These indicators demonstrate close links between the structure of a country’s productive apparatus and equitable income distribution, level of human capital, and quality of institutions. The index uses the country’s products to measure its capabilities, and therefore higher index values suggest that more capabilities are incorporated into the country’s products. Products that are less ubiquitous will yield greater revenue.

When the complexity index is negative, as is the case in Senegal, the country concerned has a basket of exports that are less processed than the global average. Hartmann and others (2017) suggest that Senegal make capital investments and undertake structural reforms to revamp the structure of its productive apparatus—and by extension its exports—to strengthen its institutions and to develop its human capital.

Insights for the success of the Plan Sénégal Émergent may also be gained by considering some country experiences in some of the key dimensions found to be important for successful emergence.

Integration into the Global Economy and Trade Liberalization

Open markets enable an economy’s goods and services to be sold on a larger scale, where demand can be considered infinite and diversified. The volumes and variety of global demand make specialization possible, allowing economies to tailor their products to the human and physical capital available. Integration into the global economy can therefore provide a powerful means whereby countries can grow and reduce poverty.

Growth strategies that rely exclusively on domestic demand (import substitution) are intrinsically limited by domestic markets, which are generally too restrictive to ensure sustainable growth and do not always offer an economy the production margins it is seeking from potential areas of specialization. Moreover, the tariff and nontariff barriers put in place to protect the domestic market are all too often sources of rent seeking, which economic transactors stubbornly defend at the expense of more coherent policies that could improve products in a competitive environment. Most important is that exports provide an objective measure of success, which allows subsidies and preferred access to credit to be channeled on the basis of results rather than reflecting patronage and rent seeking.

In addition, trade liberalization also makes it possible to import higher-quality goods and services at lower prices, and this in turn raises living standards and enhances population well-being. In addition, freer trade increases economic productivity, especially through capital goods that bolster investment. Opening up an economy also facilitates the entry of ideas, knowledge (know-how), and technology from other countries. The channels through which this knowledge is transmitted are foreign direct investment (which comes with technology transfers), imports of equipment and inputs, participation in global value chains, foreign managerial expertise, and studies abroad. Apprenticeships (a more practical option than starting from scratch) help overcome productivity lags with respect to the advanced economies. These benefits are also transmitted through higher education and a training system that disseminates knowledge and the technology of the future.

If trade liberalization is also accompanied by greater mobility for international labor, it contributes to building up human capital in the short term, pending longer-term investments in education bearing fruit. Furthermore, if the authorities put the right kind of support program in place, small and medium-sized enterprises could, thanks to foreign direct investment inflows, participate in global value chains and learn production skills that in time could enable them to become exporters themselves.

Malaysia, for instance, has attracted foreign direct investment in electronics by exempting multinationals in that field from taxes. For their part, Japan and Korea have focused on US multinational licensing agreements to penetrate the electronics sector to such an extent that, for a time, Sony became the leader in electronics in the US market. Mauritius leveraged preferences to develop its manufacturing and to generate resources for investment in public infrastructure and human capital. Morocco used its partnership agreement with the European Union to attract investment for production for the European market.

From this perspective, Senegal needs to continue efforts to boost exchanges of goods and services not only with the United States and the European Union, but also with countries in the subregion, including members of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU), as well as countries that represent the new economic growth poles (Brazil, Russia, India, China, South Africa). Here, the competitiveness of the economy has to be reinforced through a marked improvement of cross-border infrastructure and the production of goods and services meeting international standards, in particular concerning plant health standards for food products. Moreover, economic governance needs to be reformed to facilitate investment by small and medium-sized enterprises and foreign direct investment.

However, efforts are also required to ensure that trade liberalization works. When import growth exceeds export growth, this can increase the vulnerability of countries to external shocks. For example, in some Latin American countries, current account imbalances arose because capital inflow and foreign direct investment were not sufficiently linked to boosting exports. Consequently, lower levels of protectionism failed to lead to sustained export-led growth (Bouzas and Keifman 2003). For trade liberalization to be effective, countries need to ensure the existence of a macroeconomic policy regime consistent with outward orientation and the promotion of competitiveness, so as to avoid the dislocations and risks flowing from premature opening to foreign competition.

Stable Macroeconomic Environment

The experience of developing countries has typically been one of much greater macroeconomic instability than advanced economies. Macroeconomic instability undermines private sector investment, thus restricting economic growth. During their boom periods, the 13 emerging markets referenced in the World Bank’s Growth Report (Spence 2008) enjoyed price stability. This ensured that market signals were preserved, the countries had a positive long-term investment outlook, and monetary—especially bank—savings were protected. Furthermore, fiscal management was generally characterized by sustainable public sector deficits, with the amount of outstanding debt increasing at a slower rate than economic growth.

The crises of the 1990s suggest that any agenda seeking to improve levels of macroeconomic stability should go beyond fiscal, monetary, and exchange rate policies. It should also encompass policies to reduce financial fragility. This includes policies concerning the domestic financial system and the management of the capital account.

Because Senegal is a member of an economic and monetary union, its regional authorities have responsibility for monetary policy and bank supervision. Thus, the role of fiscal policy is particularly important to guarantee its macro-stability, which is a prerequisite for long-term sustained growth.

Fiscal Policy

Countries that have emerged have generally tried to reduce the incidence of procyclical fiscal policies. Fiscal flexibility is an important component of credibility, and buffers are required to enable the country to respond to shocks without pushing debt to unsustainable levels.

In Senegal, the macroeconomic framework is generally sound, as it is characterized by low inflation and a viable public debt. However, the fiscal position needs to be strengthened, especially since debt has been rising relentlessly in recent years. The fiscal deficit needs to be kept at levels consistent with a low risk of debt distress and, at a minimum, in line with the WAEMU convergence criteria.

Monetary Policy and Exchange Rate Regimes

Monetary policy must be twinned with fiscal policy, and to be successful it must be anti-inflationary. The arrangements in Brazil, Chile, Colombia, Korea, and Thailand rest on a central bank operating a floating exchange rate, with a publicly announced inflation target. This allows domestic authorities to develop anti-inflationary credibility. In Chile this arrangement has proved remarkably successful in avoiding price instability since the 1990s.

For Senegal, these instruments rest with the regional central bank.

Domestic Financial System

The country’s domestic financial system should be adequately supervised and regulated so as to avoid vulnerability arising from risky lending activities and balance sheet mismatches.

High Savings and Investment Rates

Emerging market economies have managed to achieve high savings and investment rates thanks, above all, to their stable macroeconomic frameworks. Fiscal restraint has boosted government savings. Low inflation has maintained private sector confidence, which in turn has encouraged private savings. This enabled China to mobilize domestic savings equivalent to one-third of national income for 25 years. The low dependency ratio (children and older persons per worker), known as the demographic dividend, has also helped mobilize savings.

In a number of countries, specific measures were adopted to encourage savings. Pension funds and post office savings collections are examples of mechanisms to encourage savings employed in Japan, Korea, Malaysia, and Singapore. Savings rates in several emerging markets have averaged 30 percent of GDP

In comparison, the national savings rate in Senegal remains somewhat low at 15 percent of GDP on average, including migrant remittances. Improvements in the savings rate could be made through reduction in the household dependency ratio, caused by Senegal’s progression through the demographic transition. To create a demographic dividend—the accelerated growth that may result from a decline in fertility rates—and increase the working-age population relative to dependents, Senegal needs to further curb the fertility rate, which remains high at five children per woman.1 It also needs to create productive jobs and promote pension and life insurance. Emerging markets have invested in girls’ education and opened pathways for them to participate in the labor force while creating the required jobs through structural reforms and opening up the economy.

Government investment in infrastructure is also crucial. In China, Thailand, and Vietnam, infrastructure investment averaged about 7 percent of GDP in the period under review. This appears to be the level needed to ensure robust growth, provided the quality of the investment is also high.

Government investment in Senegal has reached these levels. However, the quality of and return on the investment in Senegal have both been relatively low. Available data suggest that almost 30 percent of investments do not constitute gross fixed capital formation. Moreover, too much investment is undertaken without sufficient assessment of cost effectiveness and with poor implementation oversight.

Reliance on Market Flexibility and Mechanisms

Strong growth requires the proper functioning of the market, which should provide price signals and decentralize decisions and incentives. Entrepreneurial freedom enables agents to gradually discover (through trial and error) the comparative advantages of the economy as well as the types and best combinations of factors of production.

Functioning markets promote resource mobility and structural transformation in which the market share of certain industries fluctuates. Populations become increasingly urbanized in such economies; in Malaysia, the share of employment in agriculture declined from 40 percent in 1975 to 15 percent in 2000. Urbanization brings challenges, including creating housing, sanitation, and health and education services. Moreover, productivity gains in agriculture, as a result of and in support of the decline in the labor force in agriculture, require investment in irrigation, land preparation, and mechanization as well as storage and, possibly, market facilities. Intervention may also be needed in transportation, road infrastructure, and market clearing.

To ensure that market mechanisms perform as they should, governments need to tackle the rent seeking and patronage that are often endemic in low-income countries, including Senegal. Unless these practices can be rolled back, it will be difficult to roll back the economic distortions that limit competition, especially these:

  • Collusion between regulators and economic agents.

  • Single-tender government procurement or tenders in which those with access have an advantage.

  • Imperfect and/or selective dissemination of information.

This is an area in which Senegal faces major challenges with various monopolies and privileged networks, which will need to play a different role if the Plan Sénégal Émergent is to succeed. Progress will require substituting a transparent and rules-based approach for discretion in regard to regulations. This will set the stage for economic activity to be undertaken on the basis of ex post verification of adherence to the rules rather than requiring approval beforehand. Moreover, beneficiaries of privileged access need to be offered a social contract. Instead of the current one-way arrangement for access that leads to opportunities for doing well for the well connected, there needs to be a two-way deal. In exchange for the benefits from the state, the receiving agent will need to commit to delivering national wealth creation that is globally competitive and the associated creation of well-paying jobs.

Labor Market Issues

The promotion of market flexibility must be balanced with the need to safeguard labor rights. This can be achieved by a move from protecting jobs to protecting workers. This means that efforts should focus on supporting workers in obtaining the required retraining to obtain new jobs, to assist in job searches, and to provide financial assistance to workers during spells between jobs. It may also be associated with encouraging workers to save for retirement and long-term incapacitation through the appropriate pension and social security funds. Several emerging markets have boosted savings through this device while enhancing social protection. Mauritius relaxed regulations on releasing labor in exchange for an unemployment insurance scheme under which workers were provided with individual accounts financed by employer and employee contributions. The government has also subsidized the cost of on-the-job training and paid for job searching.

For Senegal, this is an important area for reform, since current arrangements lead the country to have some of the highest unit labor costs among low-income countries. At the same time, the existing institutions offer opportunities to expand coverage relatively rapidly, that is, if action is taken to facilitate labor from the informal sector in taking up new opportunities created by the reforms discussed here. Other emerging market economies have adopted these reforms and achieved success. One pathway to make this politically acceptable and financially affordable would be to set up such schemes as part of the special economic zone framework (see Chapter 2).

Committed Leadership and High-Quality Governance

Political leadership is the first prerequisite for strong and sound growth, inasmuch as economic success requires (1) a willingness to confront beneficiaries of the status quo; (2) building coalitions to sustain reform in the face of resistance; (3) demonstrating steadfast commitment for long-term benefits and the willingness to bear the short-term costs, which can be very high in terms of political economy; and (4) making trade-offs between the present and the future that place the weight on current sacrifice for later payoff. Articulating the importance of investing in the future and putting greater weight on the next generation will be important aspects of successful political leadership. The 13 emerging markets analyzed and other high-performance economies all share the feature of competent, credible, and motivated public administrations that have successfully navigated the perilous shoals of the political economy of reform.

Thus, decision makers need to emphasize long-term planning in which rent seeking and patronage play a much smaller role and are generally linked to a social contract. This will require an articulation of the mutual accountabilities of state and citizens to create an implicit or explicit social contract. Such a contract should articulate the importance of a quid pro quo between any favor from the state and the obligation to generate new wealth and create jobs. It will also entail ensuring that the most privileged members of society are willing to pay their fair share of tax contributions to enable the state to expand the scope and improve the quality of public services required for emergence to succeed. Among other things, this will encompass universal access to health care and quality education, a strong social safety net that protects workers and the most vulnerable (or least privileged), and a legal system that is fast and fair.

In Botswana, growth has been fueled by minerals, particularly diamonds. This wealth was redistributed as a result of the role of strong consultative institutions at the tribal level, known as kgotla. In other countries, faith in leaders facilitated economic transformation strategies. On the other hand, the chief advantage of democracy lies in the trust that the population places in the leaders it elects and the opportunity it has to penalize them if they fail.

In Senegal, presidential elections accompanied by a peaceful transfer of power on two occasions have enhanced the regime’s credibility and consolidated faith in change through democratic elections. This has set the stage for the leadership of President Sall and the vision he has set out in the Plan Sénégal Émergent. Thus, the prerequisites are in place for the implementation of effective economic policy to make the plan a reality. What is now called for is the decisive implementation of the reforms required to relegate patronage and rent seeking to a back seat and to forge a new social contract in which small and medium-sized enterprises can flourish and foreign direct investment can be welcomed to make the country a hub for globally competitive activity.

Other Favorable Factors

Education is a major determinant of long-term growth in countries with steadily rising enrollment rates and swift declines in illiteracy. The illiteracy rate in China in 2009 was 7.5 percent. In Brazil, in 2008, it was 12.5 percent. In Botswana and Senegal, the illiteracy rates in 2009 were 21.5 percent and 59 percent, respectively. To attain the maximum benefits of schooling, education departments should take into account cognitive skills; that is, countries that have students remain in school for longer periods reap development benefits only if the children and youths are learning. The education offered must also include higher education, labor-market-oriented vocational training, and training for entrepreneurs to promote business development.

It is also worth noting that having a large informal sector does not, in itself, constitute a major obstacle to a high rate of growth over a long period. Labor market analysis suggests that this characteristic is found in virtually all the emerging market economies. In Indonesia, in 2009, informal sector jobs accounted for 60 percent of all employment in the nonagricultural sector. In Brazil, that share exceeds 40 percent. The same is true of Botswana and Malaysia.

In the case of Senegal, the scale of the informal sector, which accounts for nearly half of GDP, and the large number of untrained workers explain the economy’s low level of productivity. Vocational training must include the informal sector. Literacy should be made a priority in Senegal, with dual (workshop and studies) training programs to enable informal sector workers to validate their practical skills and obtain official recognition of their qualifications. A stronger emphasis on training on the job may be helpful in this regard. Mauritius has introduced schemes in which the government pays for half the on-the-job training costs in the first year.

LESSONS FOR SENEGAL

This section covers the conditions for implementing the Plan Sénégal Émergent, taking into account the experience of emerging markets. It presents the growth policy options available to Senegal: structural reforms that complement the plan’s investment projects and a strategy for implementing both the flagship projects and the proposed structural reforms.

Similarities between the Plan Sénégal Émergent and Strategies Pursued by Emerging Market Economies

A classification of emerging markets drawn up by Assouad (2015) suggests that Senegal is a good candidate for economic growth, provided some of the institutional weaknesses can be tackled. On the one hand, Senegal exhibits certain features of a group of emerging markets that includes Bulgaria, Cabo Verde, Georgia, Malaysia, Mauritius, Romania, and Seychelles, all of which invest abundantly in education and are developing their ties with the outside world.

On the other hand, one area of difference between Senegal and this last group of countries is in the quality of the institutions necessary for economic governance. A democratization process is underway in Senegal that, over time, may generate pressures for better governance. However, currently the emphasis placed on the quality of institutions has been too limited, as evidenced, for example, in the continued creation of a myriad of agencies that produce little value added and have a high cost per unit of social output.

The ambitions displayed in the Plan Sénégal Émergent suggest that Senegal wishes to resemble the group of countries including, among others, Cabo Verde, Estonia, Hungary, Korea, Mauritius, Poland, Seychelles, Thailand, and Vietnam. These are countries that have invested heavily in infrastructure, education, and the liberalization of their economies; they recognize the importance of the systemic development of institutions and of strong connections with the outside world. They have high investment ratios, significant levels of public investment in both public infrastructure and human capital, and a less extensive informal sector because of efforts to support the emergence and growth of small and medium-sized enterprises. These countries have generally strived to achieve greater equity and position themselves in fields that are dynamic and attractive for economic activities. They usually regard institution building as a precursor for long-term political, social, and economic progress.

Thus, to develop the engines of growth that could achieve the aims of the Plan Sénégal Émergent, Senegal will need to

  • Engage in institution building, including actions to roll back patronage and rent seeking.

  • Invest in human capital, including social protection and empowerment of the population.

  • Provide basic infrastructure: energy, information and communication technologies and logistical platforms, financial deepening, and improvement of the business environment.

  • Develop the state’s ability to formulate reforms and monitor and evaluate implementation.

Hong Kong Special Administrative Region’s growth, driven primarily by services, may offer inspiration to Senegal. It provides a model for turning Dakar into a trade and financial hub. Hong Kong Special Administrative Region’s tertiary sector is its leading source of wealth (46.7 percent of its GDP in 2014), and its domestic financial sector’s productivity is the world’s highest (McMillan and Rodrik 2011). Following this model would complement the subregional business park project found in the Plan Sénégal Émergent, which needs to be supplemented with a logistics platform capable of regularly and reliably serving the economic capitals of the subregion.

Thailand is another country with numerous similarities to Senegal. In fact, 49 percent of the economically active population in Thailand works in the agricultural sector, although agriculture accounts for only 8.4 percent of GDP These figures are similar to those in Senegal. Thailand has been able to rely on abundant agricultural output coupled with a growing agri-food-processing industry. Building up its agri-food-processing industry would both ensure Senegal’s food security and promote its rural economy. Rice production, in which Senegal is competitive, as well as being a major consumer of rice in sub-Saharan Africa (700,000 tons of imports in 2009–10), could become a key part of the agricultural sector. Senegal’s ambition in this product line should go beyond self-sufficiency and aim at turning rice into an export product. Senegal has made a good start in investments in modernizing irrigation and industrial techniques for processing. These efforts need to be expanded to offer Senegal opportunities to fully exploit the economy of paddy rice.

If the required reforms are rapidly implemented, the Plan Sénégal Émergent offers Senegal a framework for joining the top tier of emerging markets. To achieve its economic emergence objective, Senegal must consolidate and deepen the economic reforms aimed at modernizing its productive apparatus and liberalizing trade. Opening up to world trade will enable it to increase the benefits it derives from the dynamism of international exchanges. Greater openness to foreign capital will facilitate funding of projects arising out of the new growth dynamic. As in the successful emerging markets, industries like telecommunications have significant room for expansion. Senegal will also have to address major infrastructure needs in energy, housing, road construction, and land use planning.

Boosting Exports

To boost exports, Senegal must be prepared to face competition from the emerging markets of Eastern Europe, which sell 75 percent of their exports to the European Union, and emerging markets in Latin America, which have the great advantage of proximity to the large US market. Growth in these countries has mainly been driven by developing trade and improving macroeconomic management, particularly fiscal discipline. The resulting low interest rates and subdued inflation facilitate investment decisions.

Senegal needs to offset its relative disadvantage due to an exchange rate that is fixed to the euro, over which it has no control. This calls for more flexibility in wage costs relative to countries that actively use their exchange rate to remain competitive. This will be particularly important if Senegal is to attract enterprises from advanced economies that are looking for offshoring opportunities and for firms looking to diversify production from China in view of rising costs there. To achieve this, Senegal must have a labor regime that allows flexibility while also investing in the productivity of its labor force. It will also need to rely on foreign direct investment and open its labor market to global talent to improve the quality of products.

Moreover, Senegal will need to invest in logistics and infrastructure to observe commercial practices strictly, particularly regarding delivery times and the management of stocks of materials or merchandise. While these are medium- and long-term objectives, they require immediate, decisive steps to strengthen technical and management capacity and build up the necessary infrastructure at the port, airport, and transport corridors to these outlets. Equally important will be the investment in institutional arrangements that ensure controls do not get in the way of the free flow of inputs and final products.

Competitiveness, Stability, and Social Challenges

Economic opportunities that offer higher wages than those paid in the informal sector or to farm workers must be promoted without undermining the competitiveness of products and enterprises. The introduction of special economic zones (see Chapter 2) could hasten growth by promoting activities that offer competitive wages while ensuring a labor regime that emphasizes flexibility while protecting workers.

Since 1994, Senegal has greatly improved its macroeconomic fundamentals. Its return to fiscal sustainability, its inflation rate (which is well below the WAEMU target), and its economic growth rate in recent years of 4 to 6 percent all indicate that Senegal could be on the way to maintaining a sound financial position while adapting to globalization and technological change.

Nevertheless, despite its notable macroeconomic progress, Senegal still faces major challenges: raising the employment rate, especially among youth and women, by turning into dividends the demographic opportunities present since the end of the 1990s; eliminating child malnutrition; and providing better prospects for the general population by affording them greater access to education and quality health care while providing a more effective social safety net. Addressing the youth employment issue through education, technical and vocational education, and better access to information will help create a qualified workforce, whose productivity will be essential for the dynamics of sustainable economic growth. At the same time, Senegal will need to develop entrepreneurial spirit and business initiative by changing its approach to regulation to emphasize ex post verification over ex ante authorization.

Political Leadership

In Botswana, as mentioned earlier, diamonds were key to fueling growth, and the resulting wealth was redistributed with the aid of strong consultative institutions at the tribal level.

In Senegal, the leadership of the President of the Republic and the vision he has set out in the Plan Sénégal Émergent are prerequisites for the implementation of effective economic policy. This now needs to be complemented by forging a social contract to redirect the energies of those who benefit from patronage and rents. Instead of the current one-way flow of benefits, those who currently benefit from state support or largesse will need to commit to creating new wealth and good jobs. This may require a Senegalese version of US President John F. Kennedy’s appeal: “Ask not what your country can do for you; ask what you can do for your country.”

Agriculture

The Plan Sénégal Émergent sets out a plan for developing grain corridors. These are modeled on the agricultural growth corridors in Tanzania and Mozambique, which provide concrete evidence that it is possible to create such corridors through public-private partnerships. These agricultural growth corridors include guaranteed access to long-term capital through the combination of government and private funds. They are also likely to receive assistance from nongovernmental organizations and international philanthropic organizations, like the Bill and Melinda Gates Foundation, to cover funding needs all along the value chain, including those of farmers and farmers’ associations.

In Tanzania, a partnership to develop agriculture (in the broad sense), comprising domestic and international partners, issued authorizations to public-private partnerships wishing to take advantage of investment opportunities within the corridor. A corridor management center, constituted as a joint stock company, lends purely professional assistance to help economic agents implement their projects.

The grain corridors envisaged in the Plan Sénégal Émergent could usefully encompass both the ecological-geographic zones making up the national territory and the New Partnership for Africa’s Development (NEPAD) integration corridors (Dakar–Cairo via Morocco to the north; Dakar–Ndjamena in Chad or Port Harcourt in Nigeria to the east; and Dakar–Lagos along the Atlantic coast). Appropriate offloading points would be identified to receive the logistical platforms envisaged by the Plan Sénégal Émergent, in addition to the highways and/or railways that would link these sites. The corridor concept was piloted by South Africa as a regional development initiative. It subsequently spread to other southern African countries and then the rest of the continent via NEPAD’s integration corridors program, described by Jourdan (2007).

Another benefit of contract farming is to avoid land grabbing. It is also a measure to ensure food security and has been used in numerous cases since the 2007–08 food crisis. Agriculture will be essential to establish the necessary conditions for feeding the projected world population of 9 billion people by 2050. Examples of initiatives that Senegal could tap into include the Comprehensive Africa Agriculture Development Programme (CAADP), GrowAfrica, the Alliance for a Green Revolution in Africa (AGRA), and the New Alliance for Food Security and Nutrition (NASAN).

The promotion of commercial agriculture and integrated projects in the Plan Sénégal Émergent will require a reexamination of the approach established at independence. The plan’s approach proposes clustering, an organizational arrangement in which farmers collaborate on a shared project to optimize one or more segments of an agricultural value chain. This approach establishes relations between industrial or commercial enterprises and farmers in which both parties’ commitments are mutually and clearly defined. It aims to remove constraints on farmers’ access to inputs, credit, and market outlets and on industrial or commercial enterprises’ need for a sufficient supply of quality products.

The Plan Sénégal Émergent aims to apply the cluster approach to between 150 and 200 high-value-added family farming cluster projects. In that respect, the experience acquired in the Green Morocco Plan (PMV) could prove to be rich in practical lessons useful for implementing the Plan Sénégal Émergent’s agricultural component.

To ensure the success of the cluster approach, a new law is needed to

  • Define the principles governing agricultural clusters (l’agrégation agricole).

  • Safeguard the commercial transactions of the contracting parties by establishing mandatory clauses in cluster contracts.

  • Establish the regulatory framework for agricultural clusters, which should require prior approval by the Ministry of Agriculture.

  • Put in place the set of regulations required for the settlement of disputes arising from the execution of cluster contracts, either by conventional mediation or through a collegial government/professional branches/chamber of agriculture mediation body.

BOX 13.1Green Morocco Plan

Launched in April 2008, the Green Morocco Plan has two mainstays: expedited development of high-value-added agriculture and the bolstering of precarious farming in disadvantaged areas through substantial government subsidies. The plan’s vision is to create greater integration between the productive upstream and agro-industrial downstream of the agricultural chain of value through increased investment. This includes the structural transformation of the Ministry of Agriculture, building human capital, implementing required infrastructure, updating water policy, improvement of the agricultural business environment, and removing constraints on private investment in the sector to support the launch of numerous large agricultural projects.

For operational purposes, the plan is broken down into two major pillars: product lines and regions.

Product Lines

Between 2008 and 2011, the government and professional organizations entered 10 product line program contracts. The development plans for each were based on proactive management of domestic and international outlets to maximize domestic and export sales.

The social product lines were designed to raise productivity, enhance the quality-to-price ratio for Moroccan consumers, and reduce the competitiveness gaps relative to the international market, while respecting farmers’ rights. For example, intensification, engineering, and diversification goals associated with high-value-added farming were designed to combat grassroots poverty, through the provision of proactive support for small-scale farmers and the targeting of disadvantaged farms in vulnerable areas. High-value crops have allowed small farmers to become more productive, and diversification has allowed for the development of niche products that create additional sources of agricultural income.

Regions

In 2009, elected officials and authorities signed 16 regional agricultural contracts. The goal pursued by regional agricultural plans is to forge a shared regional vision and agricultural output, mindful of the need to balance economic and social concerns and make it possible to engage the state and its domestic and external partners around shared goals.

In addition, several projects have been launched to make the agricultural sector more attractive to investors. For example: the exploitation of public land within the framework of public-private partnerships, the establishment of a body devoted to assisting investors, reexamination of the Agricultural Development Fund’s set of incentives, harnessing of the banking sector to finance agricultural projects, and the establishment of agricultural insurance schemes. These plans aim to increase output levels of certain products, improving the quality and terms on which that output is marketed, and enhancing appreciation of the value that should be attached to water for irrigation, using quantified assessments of its impact on job creation.

Implementing the plan required a significant revamp of legal and regulatory frameworks, including a legal framework for interbranch cooperation (I’interprofession), a law on farmer clusters, and a law on organic farming to improve market position. Assistance to farmers was a core concern; to remedy the shortcomings of agricultural extension provisions, a new agricultural extension advisory was adopted in 2010. This last was supplemented by innovative tools that provide farmers with guidance to improve long-term farming practices, creating greater transparency in the mapping of agricultural performance and income.

The overhaul of the agricultural fabric, composed of farmers and other agricultural actors, was achieved through new organizational frameworks put together with the help of managerially competent intermediaries using specific schemes tailored to each product line. Its implementation also benefited from the fact that it was accompanied by coordinated cross-cutting policies on land ownership, fiscal policies, and hydraulic and irrigation policies, as well as policies to promote domestic agricultural products and agricultural exports and to strengthen information systems.

All in all, the Green Morocco Plan strives to achieve a balanced and gradual development of product lines, mindful of growth goals and social stability constraints. It also suggests confining the use of agricultural basins to specialized functions in order to achieve savings in logistics and productivity factors.

Several major projects from the plan remain outstanding, and their completion remains necessary to consolidate positive trends: the reform of agricultural training and research; integration in the agricultural value chain; harnessing and preserving water resources; and boosting supply chain integration, especially through processing and marketing.

Regional Agricultural Development

The implementation of the Plan Sénégal Émergent’s agricultural component requires the establishment of agropoles (agricultural centers) and zones greniers (breadbasket zones). Agropoles should make it possible to reconcile, on a sustainable basis, economic transformation, transformation of the physical environment, and the transformation of human resources. The agropole concept refers to experiments like the Green Morocco Plan (see Box 13.1) but also to the “agropolitan district,” a term coined in 1975 by John Friedmann and Michael Douglass to denote a balanced urban/rural development planning framework.

The agropolitan district concept encompasses a broader vision of territorial development and of the relations between urban areas and the surrounding countryside. Establishing such a district involves, first, identifying small urban centers (with between 10,000 and 25,000 inhabitants) to serve as district capitals and centers of information, supplies, and services for the population. The agropoles and zones greniers aim to promote the spread of modern agricultural, forestry, and pastoral enterprises all over Senegal by demarcating and fitting out areas suitable for developing agricultural product lines and contributing to the aims of the Plan Sénégal Émergent more broadly.

In Morocco, agropoles are used to promote agro-industry in a favorable environment. The productivity of these zones can be enhanced through improvements to logistical and services infrastructure, marketing and distribution platforms, agro-industrial and services training centers, and other areas for tertiary sector activities. Each agropole has research and development and quality control units. Each is represented and spearheaded by its own legal entity (an association, cooperative, or public-private partnership), made up of industrialists, scientists, academics, or representatives of local communities or public authorities. A framework contract should govern relations between the agropole, the state, and the local communities and authorities involved.

These agropoles could be managed within a broader Agroparc. In France, the Avignon Agroparc is a benchmark technological center (technopole) that brings together internationally renowned companies, research units, and educational and training establishments.

In Morocco, the Green Morocco Plan promotes agropoles organized by the Caisse de Dépôts et de Consignations (Deposit and Consignment Office) or its equivalent. These branches assist the authorities by monitoring implementation of tourism, industry, agricultural development, trade, seafood products, and energy policies. Gabon has also sought Morocco’s advice on setting up agropoles.

The zones greniers also use aggregation to meet volume challenges and prevent fragmentation of landholdings. A zone grenier makes it possible to (1) connect small producers to the various global agricultural and industrial value chains; (2) offer financing to small producers benefiting from collective (“aggregation project”) contracts; and (3) share risks among small farmers, manufacturers, and merchants. Zones greniers should enable Senegal to develop agricultural holdings that show grain production potential in the form of natural potential (such as adequate water and climate), technical potential (high volume of production, high yields, infrastructure), or market-related potential (strong demand). Aggregation could help revive peanut-based product lines and the development of aquaculture and crafts by structuring and organizing small producers, establishing development centers, and supporting trade associations. As in Morocco, a national law on agricultural aggregation, perhaps in the form of an enabling regulation for the framework agricultural, forestry, and pastoral law, would strengthen the ability of stakeholders to perform their various functions.

Cameroon’s agropoles program was established by the Prime Minister’s decree of August 6, 2012. It called for “guaranteed food security, supplying industry, and encouraging exports by promoting medium-sized and large agricultural, forestry and pastoral enterprises throughout the national territory.” In 2014, Cameroon allocated CFAF 22 billion to establish 15 agropoles. The total number of up-and-running centers was expected to increase to 32 by end-2015. However, according to Picard, Coulibaly, and Smaller (2017), the agropole program of Cameroon is focused on mobilizing private sector funding for small projects instead of developing larger areas with the contribution of foreign investments. Up to May 2017, 40 small projects have been created.

In Pakistan, the small urban centers, or agrotowns, approach was inspired by the rural development strategy promoted by Mao Tse-Tung to transfer planning authority and decision making to rural populations, a transfer that Senegal hoped to bring about under its own rural communities policy and as Act III of its centralization plan.

Indonesia was the first country to fully implement the approach, under the dual responsibility of the ministries of agriculture and infrastructure. Its aim was to support and encourage agribusiness, trade, and related activities in the agroville and surrounding towns and villages. Remote detection and geotracking devices are used to demarcate the perimeters of an agropole based on criteria relating to the crops planted or to be grown (nature of the soil, climate, and topography), the infrastructure in place, and the available human capital.

In Senegal, 50,000 to 150,000 people would participate directly in the implementation of the three pillars of the Plan Sénégal Émergent within the perimeter of the agropole. Livelihoods and income would be derived from crops grown either by individual farmers or collectively, and collectively owned equipment and social services could be accessed within the agropole. Local governance, security concerns, and promotion of social cohesion would be taken care of in the provisions governing administration of the center.

To develop agriculture, in addition to preparation of a law on agricultural aggregation, dialogue with the sector’s stakeholders could also address the conditions needed for a revival of the cooperative movement. That dialogue could likewise address the question of the appropriate perimeters of the corridors, breadbasket areas, and agropoles, as well as the choice of the towns and cities around which the agropoles would be formed (agrovilles). This would be undertaken with a view to ensuring that the whole territory is networked, giving every Senegalese citizen a chance to participate directly in implementation of the Plan Sénégal Émergent as a creator of wealth and recipient of benefits.

Bearing in mind the potential of its own economic pole, each secondary town should be able to pursue its own path in keeping with the Plan Sénégal Émergent’s emergence strategy. These paths, or vocations (callings), would be taken into consideration in choosing the kinds of special economic zones and dedicated sites (platforms, parks, and so on) to be built and the social infrastructure (universities, hospitals) to be put in place or developed. In this way, the infrastructure and logistical platforms would be installed based on the necessary movement of persons and freight as well as the layout of natural reloading points.

Construction and Low-Cost Housing

In the construction and low-cost housing sector, the Plan Sénégal Émergent seeks to promote product lines of local construction materials and public-private partnerships, to partner with low-cost international actors, to increase the land reserve (réserve foncière), and to help households remain solvent to create a buoyant local economy. Following the business models of high-impact social investments will ensure the viability of the approach. On the supply side, a partnership between the state, large national or multinational enterprises, international foundations, and potential beneficiaries would enable large enterprises wishing to exercise corporate responsibility through this niche to contribute to

  • The generation of business opportunities with a competitive advantage.

  • The opening of new prospects for lower-income families seeking to raise their standard of living.

  • Access to credit.

  • A stronger capital base.

A similar business model was successfully tested in Mexico by a multinational enterprise in the cement production sector (see Prahalad 2006, 147–48). APIX S.A. and Dalberg Global Development Advisors (2012) have studied the ecosystem of companies seeking to make a social impact in Senegal and found that small and medium-sized enterprises are the best medium for wealth generation. APIX S.A. and Dalberg find that, until now, small and medium-sized enterprises’ development has been restricted by the lack of available capital and of a sufficiently supportive business environment, including promotions, incentives, exit options, and a range of other sector-specific issues.

Industrial Sector

In the industrial sector, two pillars (social inclusion and the generation of exports and foreign direct investment) are foundational for all Plan Sénégal Émergent activities that require the promotion of job-generating and other activities aimed at diversifying exports. Creating a quality living environment that meets international standards is a criterion used by foreign direct investors to determine investment potential. Therefore, to better contribute to the plan’s sustainable development dimension, industrial parks and special economic zones could be turned into eco-parks integrated with smart city projects. The “internet of things” offers opportunities to assure investors that infrastructure (transportation, electricity, water, household waste collection, housing, roads) function.

Diamniadio, the first industrial park launched in connection with the Plan Sénégal Émergent, requires smart city development planning. This should include digitization of services and high-speed internet access. Making the city “smart” could serve as an example to other, secondary towns when they prepare and implement their own emergence plans.

Just as the development of agropoles must be shaped by the idea of a circular (recycling) economy, industrial platforms and hubs must take environmental and ecological issues seriously. Platforms and hubs then must address the ecological viability of industrial activities by relying on stakeholder collaboration and the synergies from geographical proximity. The best way of making industrialization more environmentally friendly may be by developing platforms and hubs through a public-private partnership allowing commercial risks to be optimally passed on to developers. Not only is this approach more likely to lead to faster development, but it will also ensure that eco-industrial park projects are completed with a benefit rather than a cost to the national budget.

Regional Growth and Development

Finally, the regional multiservices project in Dakar encompasses two educational and health cluster projects, a regional business park, and several hubs, including an air hub, a logistics hub, and a regional mining services center.

Dakar Regional Campus Project

The practice of promoting multiple international educational institutions has already been tried in Asia, particularly in Malaysia and Dubai. The Dubai Knowledge Village houses outsourced faculties of international (especially US) universities and international students. A number of foreign universities have already established themselves in Dakar, and Senegal has created a national educational quality control agency. This momentum should be maintained by creating a framework for collaboration, partnership, and equipment sharing, where possible.

Implementation of the Dakar Regional Campus Project would also benefit from being built into a broader human capital development approach with greater emphasis on reforms that would provide access while developing a system that is financially sustainable through appropriate user charges. Complementary action would be required to raise the general level of education. This would include enforcement of the compulsory school attendance law; upgrading the quality of education, including in traditional Islamic schools; and tying vocational and technical training more closely to the demands of the workplace. Schemes for on-the-job training would also ensure that the needs of the economy can be met while creating employment opportunities.

Dakar Medical City Project

The Dakar Medical City Project offers medical tourism based on the international reputation of the Medical Faculty of the Cheikh Anta DIOP University in Dakar. Again, a comparable project was also launched in Dubai, at a cost of US$1 billion. The Dubai project targets noncommunicable diseases and comprises a complex surrounding the international hospital, located within 15 minutes by car from the airport. Rooms are available for patients, guests, and conference participants. The project should include an integrated approach to the eradication of communicable diseases, the effective handling of noncommunicable diseases, and the creation of human capital to answer these problems.

In Ghana, a similar international hospital was built near the airport, as the result of the preferences of the Ghanaian diaspora. Indeed, international airports are increasingly giving rise to airport satellite cities (Kasarda 2011), often called aerotropolises, which include international hospitals.

Aerotropolises offer a development strategy that increases the competitiveness of air transportation of passengers and freight for clients operating internationally. It requires integrating airport design, urban planning, and the design of industrial parks and other sites set aside for enterprises to ensure efficient and viable economic, social, environmental, and aesthetic development. Again, for these projects to be undertaken without risk to the budget and to maximize the likelihood of success, the way forward would be for a transparent international tender for a public-private partnership in which the developer takes on all the commercial risk.

Regional Business Centers and Other Hubs

Senegal’s regional business center project is linked to transforming Dakar into an air hub and includes a logistics hub, a financial center, and infrastructure to accommodate the research services of large multinational enterprises. There is also a project to make Senegal a regional mining services center. However, the Ghanaian Institute of Management and Public Administrating (GIMPA) has already embarked on a three-year project to establish a regional knowledge hub for English-speaking Africa to provide educational, training, and coaching services to those in the oil, gas, and mining sectors. In addition, this Ghanaian project is backed by Revenue Watch Institute, an international nongovernmental organization that examines transparency in the mining industry and provides training and assistance services to civil society organizations, parliamentarians, and journalists in Africa and worldwide.

Structural Reforms to Maintain Inclusive, Equitable, and Sustainable Growth and the Momentum Needed for Economic and Social Change

In addition to the investments listed earlier, structural reforms that improve economic governance will also be needed to secure sustained growth. These reforms include movement away from reliance on the primary sector, improvements in productivity, improvement in the business environment, incentives to attract greater foreign direct investment, supporting greater foreign trade, and encouraging entrepreneurship. All are discussed in turn in the following.

Movement away from the Primary Sector

The share of the primary sector as a component of Senegal’s GDP has been steadily declining, though rather slowly, with a reduction of about 5 percentage points since 1995. Moreover, the primary sector still accounts for 60 percent of the workforce. Unlike in other successful emerging market economies, in Senegal the declining share of the primary sector in the workforce has reflected a shift to services and the urban informal sector rather than manufacturing for exports.

The two sectors that raised productivity levels and created jobs between 1980 and 2009–financial services and cement manufacturing—are not labor intensive. Similarly, real estate activities, machinery industry, telecommunications, and the chemical industry all posted high levels of productivity but a considerable number of lost jobs. Simultaneously, although oil refining was highly productive, it was accompanied by a reduction in jobs generated between 1980 and 1994 and by only a small increase between 1995 and 2009.

For successful emerging markets and low-income countries on the path of emergence, one can observe three patterns: (1) a decline in agriculture’s share of GDP; (2) an upward trend in manufacturing’s share of GDP, followed by a slowing down and then a decline, with a curve shaped like an upside-down U; and (3) a tendency for services to account for a stable share of GDP, followed by a marked acceleration when per capita GDP approaches US$700. That profile of the development process was also observed in the high-income countries as they rose up the income ladder.

Herrendorf, Rogerson, and Valentinyi (2013) find that the share of manufacturing value added reaches its apex when a country’s per capita income is about US$7,600 (in constant 1990 dollars), a level at which the share of services in GDP tends to accelerate. Dabla-Norris and others (2013) point out that (1) a country’s fundamentals explain to a significant degree the shares accounted for by agriculture and services in its GDP; (2) the predominance of natural resources is associated with slower change in the structure of the economy; and (3) changes in the various sectors’ share of GDP are not an inflexible process; rather they reflect the speed and magnitude with which public policies and the institutional framework seek to transfer resources (land, capital, and labor) to high-productivity sectors.

Dabla-Norris and others (2014) conclude in another study that for less advanced economies, maintaining sustained growth requires significant gains in agricultural productivity, a sustained transfer of labor from agriculture to other sectors, rapid capital accumulation, and the dissemination of latest-generation technology in labor-intensive sectors. As for reforms, in order to trigger new productivity and potential growth margins the following priorities are identified: strengthening the economic institutions capable of managing a globalized market, lowering trade barriers, reforming the agricultural and banking sectors, and improving education and basic infrastructure.

As a low-income country transitioning to middle-income status, Senegal especially needs to lower barriers to foreign direct investment and facilitate the emergence of small and medium-sized enterprises from the informal sector. It also needs to further liberalize business activities in order to make the services sector more dynamic while upgrading available human capital. This will call for enhancing the quality of secondary and higher education, and overcoming the bottlenecks observed in regard to the infrastructure development specifically needed for the growth sectors.

The agriculture-related reforms needed are those that will address the challenges of ensuring food security, the generation of an agricultural surplus to be transferred to the rest of the economy, rural employment, and inclusive growth aimed at achieving a significant reduction of poverty. Such a paradigm requires, among other things (1) appropriate management of soil accessibility and fertility; (2) an approach to agricultural development that goes beyond improving productivity and output and considers the whole agribusiness chain of value and rural services, with a view to exploiting and maintaining comparative advantages; and (3) linking the revival of the rural economy with an industrial development strategy that creates jobs and income.

Productivity Improvements

To achieve the Plan Sénégal Émergent’s inclusive growth goals, the economy needs to include substantial productivity hikes in sectors whose activities have positive impacts on the living conditions of a major portion of the population, such as agriculture and retail trade. Analysis of the various growth phases Senegal has experienced since independence confirms the role that the growth of investment and exports must play as a channel between the authorities’ practical initiatives and the fulfillment of the population’s needs for economic and social advancement.

Figure 13.2 shows Senegal’s growth patterns since 1960. Senegal’s exports do not yet appear to have significantly spearheaded the country’s growth dynamics. The figure demonstrates that investment has accompanied government expenditure as the driver of growth only since 2000. This signals significant room for improvement, provided major reforms are enacted to boost competitiveness. In the absence of effective implementation of measures breaking with past practices, the Plan Sénégal Émergent is unlikely to give exports a significant role in driving growth. Without the reforms to crowd-in private investment by small and medium-sized enterprises and foreign direct investment, the current government-led growth spurt will not be sustained, as has happened four times already since 1990.

In West Africa, Senegal rates below Côte d’Ivoire in estimates of products exported with a comparative advantage. It does rank among African countries with a diversified basket of exports, but one composed of standard products. Senegal’s economic complexity index, calculated in the 2014 Economic Complexity Atlas, remains negative at –0.579, compared to 2.209 for Japan, the country at the top of that ranking.

Figure 13.2.Major Indices of Growth, Senegal, 1960–2014

(CFA francs)

Sources: Agence Nationale de la Statistique et de la Démographie (ANSD); Direction de la Prévision et des Etudes Economiques (DPEE); and estimates by the Centre d’Etudes de Politiques pour le Développement (CEPOD).

Note: G = government expenditure; I = gross fixed capital formation (GFCF); m = average propensity to import; s = average propensity to save; t = tax burden; X = exports.

Business Environment

Table 13.3, which shows the Doing Business survey rankings for Senegal alongside those for Mauritius and Morocco, indicates that to have a credible chance of becoming an upper-middle-income country by 2035, Senegal will need to align its business environment with that of these two countries. Senegal should also aim to attract direct investment and substantially increase the rate of growth of its exports to something close to Vietnam’s rate. Chapter 2 proposes that Senegal adapt the Chinese or Mauritian model of a special economic zone, with liberal economic rules in a public-private framework. Doing this would enable competent administrative authorities (including the tax and customs administrations) to prepare themselves to manage a complex business environment comparable to that of countries ranked in the top 10 of the Doing Business survey rankings.

As Table 13.3 makes clear, comparative analysis of the scores of the three countries in the Doing Business survey points to the need for improvement by Senegal in a variety of areas. An initial analysis suggests that the most important areas are paying of taxes, providing electricity, protecting minority investors, registering property, dealing with construction permits, enforcing contracts, and getting credit.

TABLE 13.3Doing Business Rankings, Mauritius, Morocco, and Senegal, 2016
MauritiusMoroccoSenegal
RankDistance to

Frontier
RankDistance to

Frontier
RankDistance to

Frontier
Doing Business 2016 (rank among 189 economies)3275.057564.5115348.57
Starting a Business3792.494392.068585.94
Dealing with Construction Permits3576.512977.6514859.89
Getting Electricity4181.935578.2717040.18
Registering Property9961.187666.3215247.49
Getting Credit4265.0010940.0013330.00
Protecting Minority Investors2965.0010550.0015538.33
Paying Taxes1391.926278.9118329.83
Trading across Borders6680.0510265.6411362.05
Enforcing Contracts2770.505962.3414548.15
Resolving Insolvency3965.9413033.898843.85
Source: World Bank 2015.Note: “Distance to Frontier” is the percentage gap between the performance of the country and the best practice in the sample of classified countries; it varies between 100 (best) and 0 (worst).

The proposed policies raise questions about the relationship between probusiness reforms and direct (especially, foreign) investment and growth, between foreign direct investment and exports, and between human capital and institutions. Recent empirical studies have attempted to address these questions and prioritize reforms aimed at lowering costs and improving operations (commonly known as “shortening the time taken to get things done”).

For Busse and Groizard (2008) and Loayza, Oviedo, and Servén (2004, 2005), excessive business and labor market regulations hamper growth and encourage expansion of the informal sector, above all when a country’s institutions are weak. Dawson (2006) analyzes the direct and indirect effects of an improvement in a country’s Doing Business score and concludes that there is a 16-percentage-point increase in the rate of overall growth of GDP over 20 years when the improvement is of a magnitude comparable to the standard deviation observed for a sample of 64 countries. Djankov, McLiesh, and Ramalho (2006) conclude that, in the 1993–2002 period, moving up from the lowest quartile of countries to the highest quartile on the Doing Business scale translates into a 2.3-percentage-point increase in the average annual growth rate recorded over 10 years.

Hanusch (2012) points out that reforms relating to getting credit and enforcing contracts have the greatest impact on growth. The improving cost and delay indicators are most likely to stimulate growth over a five- or ten-year period in developing countries, regardless of the geographical region considered. Dutz and others (2011) point to a positive correlation between improvement in the Doing Business indicator or one of its subindicators and product innovation and production-process innovation in newly established enterprises in countries that are not members of the Organisation for Economic Co-operation and Development (OECD).

Haidar (2009, 2012) shows, for two samples of 170 and 172 economies, respectively, that the countries that best protect investors tend to grow faster. Haidar (2012) adds that each reform improving a Doing Business indicator translates into a 0.15 percent increase in the rate of growth of GDP, with that figure increasing to 0.18 percent three years after the reform. More recently, on the basis of a sample of 162 countries between 2007 and 2011, Messaoud and Teheni (2014) point to a robust link between improving Doing Business indicators and growth, with the exception of indicators on trading across borders and dealing with construction permits.

In short, a credible and lasting commitment to improving the Doing Business indicator and its subindicators yields additional annual average and long-term percentage-point increases in the growth rate. Pending improvements in the overall business climate in Senegal, which will take time, efforts should focus on having a business climate that ranks in the top 10 in the special economic zones.

TABLE 13.4Global Competitiveness Report Rankings, Mauritius, Morocco, and Senegal, 2015–16
MauritiusMoroccoSenegal
RankScoreRankScoreRankScore
Basic Requirements Subindex395.0554.71143.8
Institutions344.5474.2634.0
Infrastructure374.8553.01093.0
Macroeconomic Environment734.7584.81034.2
Health and Primary Education426.1775.61284.0
Efficiency Enhancers Subindex614.2823.91033.6
Higher Education and Training524.61063.41103.3
Goods Market Efficiency254.9644.3694.3
Labor Market Efficiency574.31233.6724.2
Financial Market Development344.4703.9753.8
Technological Readiness654.1783.61003.1
Market Size1192.8534.31033.0
Innovation and Sophistication513.8923.4543.8
Factors Subindex
Business Sophistication344.4823.8654.0
Innovation783.2983.1473.5
Source: Schwab 2015.Note: Rank is among 140 countries; score is based on a scale from 1 (worst) to 7 (best).

Business and Foreign Direct Investment

As for the relationship between the Doing Business survey and foreign direct investment, one can cite Bayraktar (2015), who notes a strong correlation during the 2004–13 period between GDP growth and an increase in the inflow of foreign direct investment and between external trade liberalization and foreign direct investment. He also observes that the elasticity of GDP relative to incoming foreign direct investment is significant and high (0.6). At the same time, there is a significant but low estimated correlation between incoming foreign direct investment flows and corruption, and similarly between incoming foreign direct investment flows (as a percentage of GDP) and per capita GDP. His findings confirm those of authors like Piwonski (2010), Morris and Aziz (2011), and Nnadozie and Njuguna (2011) and suggest that countries that have recently experienced increasing foreign direct investment flows have also increased their Doing Business scores, particularly in Africa. Likewise, Githaiga and others (2015) demonstrate, for the 1980–2012 period, a positive impact of foreign direct investment on integration and foreign exchange liberalization indicators, as well as on domestic credit to the private sector. However, the data collected also point to a negative relationship between incoming foreign direct investment flows and human capital, the exchange rate, and inflation.

Celebi, Civelek, and Cemberci (2015) find that the proportion of the effect of logistical performance transferred to economic growth via foreign direct investment is significant. Kariuki (2015) lists the following determinants of foreign direct investment in Africa: the level of economic risk, changes in the commodities price index, infrastructure (although Feulefack Kemmanang and Kamajou [2015] suggest that this applies only to non-oil-producing countries), foreign trade liberalization, and foreign direct investment inflows in the preceding year. Finally, Feulefack Kemmanang and Kamajou (2015) point out that, as with infrastructure, the good-governance criterion is considered only for non-oil-producing countries.

In short, non-oil-producing African countries like Senegal need to show that they are in good economic health, and attracting foreign direct investment should indicate genuine openness to foreign trade and good infrastructure. This is where a rules-based regime needs to replace the current system based on discretion, which favors insiders with access to policymakers. Investors also consider commodity price trends and the analyses found in the International Country Risk Guide. These considerations lead Keho (2015) to point out that, over the long term, the direction of causality goes from GDP and exports to foreign direct investment in Benin, Burkina Faso, Gabon, and Senegal.

Trade Facilitation

As for foreign trade facilitation, an analytical comparison of Senegal’s scores with those of Mauritius and Morocco points to the need for more substantial efforts to reduce the difficulties of accessing external markets and to improve the availability and quality of transportation infrastructure, as well as the availability and use of information and communication technologies. The same exercise applied to the three countries’ scores in the Global Competitiveness Report 2015–2016 suggests that the same effort is needed with respect to infrastructure in general, as well as increased education, training, and, to a lesser degree, technological readiness (Table 13.5).

TABLE 13.5Ranking on Trade-Enabling Indices, Mauritius, Morocco, and Senegal, 2014
PillarsMauritiusMoroccoSenegal
RankScoreRankScoreRankScore
Domestic Market Access46.11004.21143.6
Foreign Market Access54.5323.5642.6
Efficiency and Transparency of534.7454.9754.2
Border Administration
Availability and Quality of374.2364.3882.8
Transport Infrastructure
Availability and Quality of674.0534.31043.6
Transport Services
Availability and Use of Information664.1654.11052.9
and Communication Technologies
Operating Environment774.0454.5324.8
Source: Hanouz, Geiger, and Doherty 2015.Note: Rank is among 138 countries; score is based on a scale from 1 (worst) to 7 (best).

At the same time, it is worth remembering that the samples examined for the Doing Business survey do not reflect the real circumstances of any specific country, so no specific reforms should be considered based on these rankings alone. Rather, the rankings suggest the nature of the reforms that need to be implemented, as well as the order of magnitude of the impacts one might expect, depending on the degree of development of the country under review, the structure of its economy, and other reforms already undertaken.

Figure 13.3.Structural Reforms Deserving the Highest Priority, by Country Status

Source: IMF 2015.

Note: Comparisons among reforms, within each country group. Darker shades represent the higher-priority reforms likely, on average, to have larger gains. AEs = advanced economies; EMs = emerging markets; LIDCs = low-income developing countries.

Entrepreneurship and Investment

Senegal needs to implement a two-pronged strategy: promoting, in the growth sectors addressed in the Plan Sénégal Émergent, appropriately designed special economic zones as a means of rapidly establishing a business environment comparable to that of Mauritius or Morocco, and encouraging and sustaining the process whereby entrepreneurs discover new business opportunities regardless of what sector or part of the country they pertain to.

By promoting growth through investment and encouraging entrepreneurship, it is possible to address the three main sources of low productivity in emerging markets identified by institutions such as the McKinsey Global Institute through studies relating, for instance, to Brazil and Mexico. These three sources are

  • The sectoral structure of the economy.

  • A large number of microenterprises and a large informal sector.

  • The level of qualifications.

In other words, the success of the Plan Sénégal Émergent rests on human capital development policy and institution building to favor investment by small and medium-sized enterprises and foreign direct investment, together with Doing Business reforms that will support an export-oriented strategy. Solely implementing the 27 flagship projects would not suffice to make Senegal an upper-tier middle-income country. Instead, after a short-term boost to growth, Senegal would likely end up with crippling debt that could actually reverse its short-term progress. Without deep reforms that break with past and ongoing dominance of patronage and rent seeking, Senegal is likely to remain stuck at its long-standing annual per capita growth rate of about half a percent. This means that by the end of the Plan Sénégal Émergent horizon, the country would only reach a level of per capita GDP of US$1,500.

Strategy for Implementing the Plan Sénégal Émergent Projects and Needed Structural Reforms in Senegal

Following are recommendations for implementing the flagship projects laid out in the Plan Sénégal Émergent, managing and monitoring them, and putting into effect the necessary structural reforms discussed throughout this chapter.

Planning and Coordination

The flagship projects in the Plan Sénégal Émergent are presented in language that is markedly spatial (corridor, zone, platform, hub, center, crossroads, city, campus) and oriented toward processes of inclusion, integration, and partnership. This approach makes it possible to build into the plan concerns about equity, solidarity, inequality, and the “territorialization” of public policies. It also sanctions a participatory approach emphasizing the multiactor partnerships needed to implement those projects. For each flagship project, the state, alongside local partners, needs to identify the development sites and bring affected communities and populations into the process of establishing a legal framework (association, cooperative, public-private partnership, contract farming). Including a range of community stakeholders will improve economic and social prospects for the wider population. It will also protect land and other assets from transfers without adequate compensation and support the required shift from patronage and rent seeking to a more open system in which all can benefit from public resources.

In addition, Senegal needs to implant the structural reforms referred to in the previous section within dedicated economic zones, with a view to enabling its administrative apparatus to prepare to extend those reforms to the rest of the economy. Already, the directives issued by WAEMU in 2009 regarding the budget law and fiscal transparency, which have been transposed into Senegal’s domestic laws, instruct the public administrations to adopt results-based budgeting. Moreover, the Plan Sénégal Émergent includes performance monitoring as one of its key elements, which has already translated into the establishment of a team to monitor implementation.

In the United Kingdom under the government of Prime Minister Tony Blair, “delivery units” were used to carry out development strategy, each under the authority and political leadership of the head of the Executive Branch. This approach created synergies for the administrations in charge of formulating and implementing development strategy, monitoring performance, and building capacities. Senegal also has had a delivery unit since 2014: the operational Plan Sénégal Émergent Monitoring Bureau, which can play the role of troubleshooter, assisting implementing units in clearing up bottlenecks. A framework for close collaboration between the bureau and the Ministry of Finance has been put in place for this function to work effectively.

At a minimum, the Senegalese administrative offices responsible for these functions stand to gain from experimenting with appropriate forms of effective collaboration. Scaling up would then expedite the momentum of Plan Sénégal Émergent implementation, after lessons have been learned and possible adjustments made based on evaluations of the projects. Each flagship project could be considered a mini–Plan Sénégal Émergent. On a small scale, each project embodies the three pillars of the emergence strategy and draws strength from the fundamentals of emergence, the structural reforms identified for continuous increases in productivity, and a performance-monitoring mechanism.

To maximize the effect of the Plan Sénégal Émergent, each flagship project and each reform project should be planned and coordinated with the administrative office in charge of the strategy and the involvement of other stakeholders. The planning papers should include measures to keep track of changes through outcome mapping. This approach would make long-term planning possible by identifying future developments expected to result from the project and identifying strategic partners, strategies to be pursued, and the principal outcomes to be attained. Outcome mapping would likewise facilitate agreement on the monitoring and evaluation mechanisms chosen to assess project impact. Finally, this approach would make stakeholders accountable for joint operational plans: each stakeholder’s role can be specified in a program coordinated with the body in charge of monitoring performance.

Here again a close coordination between the bureau and the Ministry of Finance could generate important synergies. For example, the existing reserve envelope could be used both to provide resources and to act as an incentive to promote the reforms on which the bureau and the implementing unit agree.

Project Implementation and Management

Simultaneously, the implementation programming, documents, and master plans should make use of the spatial dimensions of each project to propose an integrated approach. The economic, social, and physical changes envisioned for the grassroots communities involved should be mapped out. Drawn up in that way, the master plans would take the transformation goals of the targeted geographies and populations into account. Drawing up a master plan for development and safeguards based on outcome mapping would result in reference material that a project manager (selected through competitive and professional criteria) would need to have on hand to manage the project and achieve the expected results.

The project manager should draw up the project description with relevant colleagues. They should then conduct a conceptual and technical analysis of the project as described, propose a timetable for implementation, prepare bidding documents for studies and construction work, and organize a project outcomes mapping workshop. Next should come the project cost assessment, using the life cycle cost analysis formula. The unit in charge of monitoring performance should hold discussions with the project manager and competent ministries regarding project execution costs and time frames, based on best international practices.

For this kind of work, the bureau already draws extensively on human resources from the Senegalese diaspora. It may be useful to develop a formal program for mobilizing such expertise, complemented as required with global hiring of foreigners. This would provide implementing agencies with the human resources they may lack to properly undertake the planning and link this to budget execution and the delivery of targeted outcomes.

Implementing Structural Reforms

Champions for structural reforms should come from either the administration or the private sector, depending on the project. A reform champion begins by coming to an agreement with the various bodies in charge of the strategy, performance monitoring, and capacity building regarding the description of the reform project and expected outcomes and impacts. Champions will then proceed to conduct a conceptual analysis of the reform, including its political economy aspects, and propose a timetable for studies, any necessary consensus building, and the preparation of any required laws and regulations.

It is up to the government to take the initiative and promote, coordinate, and support the implementation of the flagship projects and structural reforms. This should be conducted in dialogue with other actors, including the private sector and research, training, and financing institutions. To achieve this, teams led by champions and project managers knowledgeable in strategic planning and outcome mapping would be adequately equipped to meet action plan—defined targets.

Performance monitoring officers will then challenge teams to complete priority actions, meeting high standards, by closely defined deadlines. One option for staffing these teams may be to recruit staff with experience in strategy, performance management, capacity building, and the private sector from the Senegalese diaspora within the program suggested above. Support for this work could be provided by development partners.

Conclusion

This chapter has reviewed lessons from the experience of emerging markets to throw light on the structural reforms that Senegal could implement to achieve a lasting improvement in both private sector growth and overall economic productivity. The portfolio of flagship projects contained within the Plan Sénégal Émergent is designed to combine social inclusion concerns with opportunities for growth, including opening up to external markets through the export of goods and services and attracting foreign direct investment.

The analysis pursued in this chapter points to a need in Senegal to focus on structural reforms that can change the incentive structures and to enhance the quality of institutions and human capital. To achieve growth, it is recommended that Senegal do the following:

  • Facilitate the supply and increase the competitiveness of products with high global demand, like paddy rice and tourism, as well as more complex manufactured products and services.

  • Substantially improve the business environment by moving from prior authorization to ex post verification and by proactively tackling rent seeking and patronage. These actions are essential if constraints on investment by small and medium-sized enterprises and foreign direct investment are to be rapidly relaxed to allow greater export of processed products.

  • Promote and support the processes by which entrepreneurs discover new business activities, especially in regions with an emphasis on providing support services to small and medium-sized enterprises.

To initiate these reforms, it is suggested that they first be tested within the bounds of special economic zones suitable for harboring corridors, agropoles, industrial parks, logistical platforms, and more mining hubs, while in each case taking into account the whole set of Plan Sénégal Émergent options and objectives.

To implement the flagship projects and structural reforms, dedicated teams comprising members of the diaspora, supplemented as necessary with global talent, could undertake conceptual, technical, and political-economy-oriented analyses and propose schedules for their implementation to the competent departments. An organized program to allow the mobilization of such human capital could facilitate matters. Simultaneously, government departments should participate in awareness-raising and capacity-building programs geared toward spearheading changes aimed at bringing about a marked improvement in the quality of public service. To get the process rolling, those programs could target the departments in the administration in charge of ensuring that the previously mentioned economic zones function properly.

If the reforms suggested in this chapter are adequately implemented, Senegal should have a good chance of achieving emergence by 2035. However, it is imperative that actors in Senegal keep in mind the original vision: the imperative to achieve emergence with social solidarity, the rule of law, and a reduction in poverty levels.

Annex 13.1 Success Stories of Sustained High Growth
TABLE 13.1.1Success Stories of Sustained High Growth
EconomyPeriod of

High Growth
Per Capita Income

(constant 2000 US dollars)
Beginning of

High-Growth Period
2005
Botswana1960–20052103,800
Brazil1950–809604,000
China1961–20051051,400
Hong Kong Special1960–973,10029,900
Administrative Region
Indonesia1966–97200900
Japan1950–833,50039,600
Korea1960–20011,10013,200
Malaysia1967–977904,400
Malta1963–941,1009,600
Oman1960–999509,000
Singapore1967–20022,20025,400
Taiwan Province of China1965–20021,50016,400
Thailand1960–973302,400
Source: Spence 2008.Note: A period of high growth is defined as a period in which GDP growth was 7 percent per year or more.
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According to the Demographic and Health Multiple Indicator Cluster Survey (EDS-MICS).

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