1 aid for trade in africa: why trade? why aid? mobilizing aid for trade: focus on africa dar es...
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AID FOR TRADE IN AFRICA:
Why Trade?Why AID?
MOBILIZING AID FOR TRADE: FOCUS ON AFRICA
Dar es Salaam, Tanzania John Page, Chief Economist
Africa Region, World Bank October 2007
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Outline: WHY TRADE?
Making Growth Sustainable Creating an Export Push
WHY AID? Africa can compete. But… High Indirect Costs Limit Competitiveness
AID FOR TRADE Supporting Institutional and Policy Reform Investing in Infrastructure Reinforcing the Country Based Model
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WHY TRADE?
Making Growth Sustainable
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-4-3-2-101234567
1990 1995 2000 2005
Developing CountriesDeveloping excluding China and India
Sub-Saharan AfricaHigh-Income Countries
Annual Change in Real per capita GDP %
Forecast
2008
Source: World Bank Why trade?
African per capita income is now increasing in tandem with other developing countries
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Economic Performance is Becoming More Diverse
Why trade?
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THREE KEYS TO SUSTAINABILITY:
Avoiding Growth Collapses
Accelerating Productivity Growth
Boosting Private Investment
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WHY TRADE?
CREATING AN EXPORT PUSH TO SUSTAIN GROWTH
Export Performance Export Diversification
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Exports are important …
Creating an export push
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
E. Asiaand
Pacific
ECA LatinAmerica &Caribbean
MNA S. Asia SSA
Non-oil export share of GDP (%)
1983-1985
1993-1995
2003-2005
Source: IMF WEO database.Note: export shares are unweighted average.
9
…But are growing slowly…
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1960's 1970's 1980's 1990's 2000~2005
Exp
ort
s g
row
th a
nn
ual %
, sim
ple
avera
ge Africa Average Africa top performers Asia top performers China
Creating an export push
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…And are declining in importance for Africa’s top performers
0%
10%
20%
30%
40%
50%
60%
70%
1960's 1970's 1980's 1990's 2000~2005
Expo
rt as
% o
f GD
P
Africa average Africa top performers Asia top performers China
Creating an export push
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Africa’s Share of World Trade is Falling
Creating an export push
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and Africa’s exports remain concentrated
Source: World Bank World Trade Indicators
Concentration and Diversification of Export: 2000-2004 Average
0
10
20
30
40
50
60
70
80
90
Europe and CentralAsia
East Asia- Pacific South Asia Latin America andCaribbean
Middle East andNorth Africa
Sub Saharian Africa
0
20
40
60
80
100
120
140
160
180
Export Concentration Index (0-100)left axis
Share of Top 5 Products in Total Exports (%) left axis
No. of Exported Product Categoriesright axis
Creating an export push
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WHY AID?
African Can Compete, But… High Indirect Cost Limit
Competitiveness
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Factory floor costs compare well with India & China
$0.16 $0.18$0.12 $0.16 $0.19
$0.65
$0.17$0.29
$0.00
$0.20
$0.40
$0.60
$0.80
Mad
agas
car
Kenya
Ghana
Moz
ambiq
ue
Lesoth
o
South A
frica
India
EPZ China
Direct cost per male shirt
Why Aid?
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Faster Growing African Countries Are Diversifying Their Exports
Source: World Bank World Trade Indicators
Export Concentration Index (0-100)
0
10
20
30
40
50
60
70
Other African Countries High Growth African Countries
1995-99 Ave. 2000-04 Ave.
Share of Top 5 Products in Total Exports (%)
64
66
68
70
72
74
76
78
80
82
84
Other African Countries High Growth African Countries
1995-99 Ave. 2000-04 Ave.
No. of Exported Product Categories
0
10
20
30
40
50
60
70
80
90
Other African Countries High Growth African Countries
1995-99 Ave. 2000-04 Ave. Why Aid?
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African firms are sharply disadvantaged relative to China due to higher indirect costs.
*due to power losses, delivery delays, shipment losses, crime
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
net TFP excess indirect costs gap gross TFP gap due to losses* unexplained gross TFP gap
Why Aid?
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Africa lags other regions in the cost of doing business …
Data sources: World Bank Doing Business Database as of November 2006..*Normalized ranking from Doing Business 2006.** Ranking from Doing Business 2007.
Ease of doing business rank, Simple average by region
132
7281
92 92102
131
74 7784
98105
0
20
40
60
80
100
120
140
Sub SaharanAfrica
East Asia &Pacific
East Europeand Central
Asia
Latin Americaand Caribbean
Middle Eastand North
Africa
South Asia
2005*
2006**
Average Ranking of Doing Business, the lower the better
Why Aid?
18
Access to electricity by region
24.7%
40.8%
86.6% 87.3%90.4%
0
10
20
30
40
50
60
70
80
90
100
Access t
o e
lectr
icit
y (
% o
f p
op
ula
tio
n)
Sub-Saharan Africa South Asia Latin America & Caribbean
East Asia & Pacific Middle East & North Africa
Data sources: The World Bank WDI database, April 2006.
… And in access to infrastructure
Building the private sector
Why Aid?
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The time to clear goods at port is several days in many countries in Africa
02468
101214161820
Eritrea
Ethiop
ia
Moz
ambiq
ue
Nigeria
Ugand
a
Zambia
Kenya
Mor
occo
China
India
Days to clear imports, median Days to clear exports, median
Why Aid?
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Subramanian (2006)
Domestic Constraints Handicap African Firms In Global Supply Chain Industries
Why Aid?
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Alleviating domestic constraints could increase exports in African, particularly for manufactured products
15.8
1.9 2.3
17.1
2.2
15.3
02468
1012141618
Export CustomsProcedures
Internet Access PowerInfrastructure
All Mechandise Exports
Manufactured Exports
Predicted Increase in Bilateral Exports (%) of
Africa
10% improvement in Exporter Country in Africa
Source: Africa’s Silk Road (2007)
Why Aid?
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AID FOR TRADE
Supporting Institutional and Policy Reform
Diagnostic work to identify key constraints
Capacity Development Improving Policies at and Behind the
Border Supporting effective Regional
Organizations
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AID FOR TRADE
Investing in Infrastructure An Export Push Needs an
Infrastructure Push Creating Space For The Private
Sector Public Resources will Still Be
Needed
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AID FOR TRADE
Reinforcing The Country Based Model
Trade as a Development Issue Mainstreaming Trade in Poverty
Reduction Strategies Scaling-up: Avoiding Vertical
Programs