Transcript IMPACT ASSESSMENT OF CAPACITY BUILDING (TRAINING

Presented to the Trade & Industry Policy Studies, 14th June, 2011, Pretoria.
William S. Mbuta
RESEARCHER
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The strong positive correlation between share of MVA in
GDP and GDP / Capita
Poverty is still a menace in the SACU region
Other countries have significantly reduced poverty through
industrialization.
Country
Botswana
Lesotho
Namibia
South Africa
Swaziland
China
MVA / Capita (US$)
Manufactured Exports /
Capita (US$)
2000
2005
2000
2005
146.8
73.4
180.4
521.1
331.3
307.2
146
85.9
224.1
575.9
346.4
495.9
1,515
185
525
419
804
182
2,082
186
776
703
1,299
556
Country
Share of MVA in Total
GDP (%)
2000
Botswana
Lesotho
Namibia
South Africa
Swaziland
China
4.1
15.2
10
17.3
24.9
32.1
2005
Share of MVA in Total
Exports (%)
2000
3.2
15.6
10.8
16.3
24.3
34.1
2005
96.2
98.2
75
61
94.3
92.1
97
93.8
63
70.2
93.6
95.1
Country
Botswana
Lesotho
Namibia
Swaziland
Exports to SACU
(Excl. SA) in %
Imports to SACU
(Excl. SA) in %
2002
2007
2002
2007
1.0
0
1.8
0
1.8
0
2.2
41.2
0.6
0.1
0.2
0
0.7
0.1
0.6
4.3
Market Side:
 Small size of the local market
 Poor supply chain Links
 Small domestic market due to the small size of
the country’s population
 Lack of understanding of international trade
practices and policies
 Market access, especially the export market
 The small size of the local economy is a serious
constraint on the ability of the country to set and
run efficient industrial activities.
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The lack of information on foreign markets also
limits the ability of Namibian producers to
provide the right products to the export markets.
Limited access to external markets
The lack of “interesting investment opportunities
in the tradable sector”
Small domestic market due to the small
population, with limited purchasing power;
Shortage of exports markets due to high
competition markets.
Limited markets opportunities, particularly in the
international market,
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Low human capital levels at all levels of
production
Obsolete production technology
Erratic access to industrial inputs
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The concept of economic integration process which involves the
amalgamation of separate economies into larger free trading
areas. The key elements relate to the deepening of intraeconomic interdependence through intra-regional trade, foreign
direct investment and harmonization of commercial regulations,
standards and practices. Some division of labour is also
necessary for economic integration (Dennis and Yusof,2003).
While the international flows of goods and services and
investment are the key parts of economic integration, the
process of economic integration is accelerated by movements of
labour, technology and information, especially in recent years of
information and communication technology (ICT) and ecommerce. These forces put increasing pressure on economies
towards commercial harmonization of standards such as
customs standards and procedures. A combination of market
forces and the push towards liberalization has enhanced
economic integration in various parts of the globe.
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Preferential Trade Area:
Free Trade Area:
Customs Union
Common Market
Economic Union
Political Union
Sectoral Integration
Limits of integration lies in the long term production
function. It is also the function that generates the
debate industrial policy
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To address issues of adjustment
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Contents of Policy
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Identified struggling industries with latent
comparative advantage and those with
potential for global competitiveness in the
long term
cars, aircraft, shipbuilding, coal, steel,
textiles and clothing, railway rolling stock,
telecoms equipment, consumer electronics
Support given include subsidies in factor
inputs for capability development, explicit
protectionism, special regulations, antidumping, among others
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By 1980, most of the products had become competitive and targeted
support had been phased out on such industries.
In place of sectoral and specific approaches, EU industrial
policy drifted into endeavours to strengthen fundamental
determinants of competitiveness, to some degree
corresponding to dynamic comparative advantage.
Since the 1990s, there has been the 'horizontal' emphasis on
research strategies, skills and human capital and a general
promotion of innovation throughout industry.
This was expected to accord well with the deepening of the
internal EU market that had been going on, and the
consistency of EU competition policy
While policy reversals are not totally excluded if pressures are
extreme, competitiveness and hence adjustment still retain
overriding importance.
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Institutional Framework
Country
Italy
France
Germany
Net/lands
Belgium/L
ux
Italy
France
149.7
111.5
156.2
51.4
219.7
92.1
109.7
56.5
Germany Net/lands
163.3
100.8
94.2
54.5
119
111.4
33.6
-33.4
Belgium
Lux/borg
84.4
42.3
57
-4.7
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1993 – ASEAN FTA Created
2004 – Regional Industrial Policy Framework
Developed & Implemented
12 sectors identified for accelerated integration and
policy support
Criteria for Selection: Comparative Advantage,
Labour & skills availability, Cost Competitiveness,
Value addition, & market penetration.
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Agro-based products
Air travel,
Automotives
e-ASEAN
Electronics
Fisheries
Healthcare
Logistics
Rubber-based products
Textiles and apparel
Tourism
Wood-based products
Liberalization of Trade in Services such as:
Business and professional services such as
accounting, auditing, architecture, and
engineering;
Construction, distribution, education,
environment, healthcare, maritime transport
telecommunications, and tourism services;
financial services and air transport services
architectural, accountancy, engineering, dental
practitioner, medical practitioner, nursing, and
surveying qualifications
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Palm Oil
Motor Vehicle Parts
Computer Components
Health Services
Rubber-based products
Cotton Woven Apparel
Hardwood, Plywood & Flooring
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Upon this selection, the ASEAN Framework
Agreement for the Integration of Priority
Sectors was ratified together with the
roadmaps for each priority sector and related
industries with specific measures that needed
to be implemented, and the broad crosscutting initiatives such as trade facilitation
measures, including timelines for their
implementation.
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Market Size: Intra ASEAN & Extra ASEAN
Comparative Advantage
Geographical/Locational Advantage
FDI Attraction
Regional Value Chain
Intermediate Input Application Diversity
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Massive Storage Infrastructure through
cheaper finance
Massive refineries through FDI
Relaxation of Work Permits for Foreign Skilled
Workers
Establishment of Standards and safety
measures in collaboration with international
agencies
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Agro-Products Trade increased by 50%
Palm Oil (Intra Asean) Trade increased by 66%
Palm Oil (Extra Asean) Trade increased by
133%
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A growing regional and global market
Comparative Advantage due to the huge local
market, technological capabilities, and
natural resources existing
Regional Production Networks
FDI Attraction
Technological Capabilities
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Promotion of FDI
Elimination of tariff & non-tariff measures
customs cooperation,
improvement of the rules of origin,
harmonization of standards and conformance
improvement of logistics services,
technological capabilities enhancement
through establishment of a training and skill
certification system
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Intra ASEAN exports increased by 111%
Extra ASEAN exports increased by 106%
Adopted FTA integration approach;
Uniform tariff elimination was adopted
No industrial policy or selective instruments applied
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Intra NAFTA Trade increased by 150%
Extra NAFTA Trade increased by 50%
Canadian exports to NAFTA increased by 100
percent while export to the ROW stagnated
American exports to NAFTA increased by 120%
while to the ROW increased by 50%
Mexican exports to NAFTA increased by more
than 200% while those to the ROW increased by
80%
Mexican imports more than doubled the value
of exports resulting into trade deficits
Adopted the Common Market stage of Economic
Integration
Also adopted the Industrial Policy for Automobiles
Industry with criteria being:
Market size
Latent comparative advantage
Regional production networks
Local content rules
Tax exemptions and Credits on domestic
inputs and export processing zones
Direst finance for exports
Preferential duties to set export targets.
Intra Regional trade increased by more than 400%
driven by the automobiles industry while extra
regional trade increased by 92%.
The trade deficit with the rest of the world coupled
by macroeconomic instability resulted in
abandoning of the incentives regime and
consequent contraction of the automotive industry.
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Where member states provide optimal conditions for
development of industrial sector ie
Stable macro-economy with low and stable inflation
rate and stable exchange rate;
Effective sectoral Policy measures such as adequate
infrastructure; technological capabilities, etc;
Targeting measures have been effectively applied to
infant industries.
The primary purpose for integration should
therefore be to benefit from economies of scale both
in terms of factor inputs and market access;
Apart from establishing common intra block and
extra block tariff and non tariff measures, Macroeconomic convergence is a must.
This means that accessing both the trade account
must be aided by the capital account.
In spite of opening these two accounts, some
industries with potential for long term
competitiveness may be unable to access them and
this is where the target based regional industrial
policy comes in.
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That the primary criterion for targeting an industry
for policy support should be its propensity to be
competitive in the medium to long term. Added to
this are attributes such as:
a growing regional or global market
regional production networks
Intermediate products with multiple industrial
application
Industries with high value addition
Industries with propensity to attract FDI
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Identify priority industries through detailed policy research
Design Convergence Programmes based on the needs of
selected industries
Design sectoral policies aligned to the needs of the selected
industries
Design industry specific policy measures according to the needs
of selected industries
Design an institutional framework with sufficient authority not
only to monitor the performance of the selected industries but
also to intervene within reasonable time
Create a road map for policy support indicating the type of
intervention, the time, the magnitude of intervention and the
exit point at which the market will take over.
This is a dynamic and on-going process.
END OF PRESENTATION
THANK YOU