Category: Industrialization

Should the African lion learn from the Asian tigers? A comparison of FDI-oriented industrial policy in Ethiopia, South Korea and Taiwan

Jostein Hauge1 Comment
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The Huajian shoe factory in the Eastern Industrial Zone in Ethiopia. Photo: .

Ethiopia is being hailed as one of the most successful growth stories in Africa. Because of the country鈥檚 rapid economic growth, the high degree of state intervention in the economy, and the state鈥檚 focus on industrialization, people have started to compare Ethiopia to the Asian 鈥榯igers鈥� (; ; , ; ) 鈥� four countries in East Asia (Hong Kong, Singapore, South Korea and Taiwan) that underwent rapid industrialization and maintained exceptionally high growth rates in the post-WWII era.

However, this emerging literature on Ethiopia-Asia comparisons has not yet sufficiently addressed one of the most important aspects of Ethiopia鈥檚 industrialization strategy 鈥� the attraction of foreign direct investments (FDI) into the manufacturing sector.

The rationale of my was this gap in the literature. In it, I ask the question: Should the African lion learn from the Asian tigers with respect to FDI-oriented industrial policy?聽

In short, my answer is yes. While Ethiopia鈥檚 policies are bringing about short-term economic success and showing promise for further industrialization, the state could arguably bargain harder with foreign investors, like it did in South Korea and Taiwan.Read More »

Hirschman鈥檚 Linkages: Pass茅 in the Age of Global Production Sharing?

Wannaphong durongkaveroj3 Comments

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How does economic development happen? After World War II, many development economists rose to prominence, such as Paul Rosenstein-Rodan (the big push), Arthur Lewis (the dual-sector model), Walter Rostow (the linear stages of growth) and Albert Hirschman (unbalanced growth and linkages). Given the continued importance of industrial policy, it is particularly worthwhile to revisit the idea of forward and backward linkages 鈥� one of the central tenets of development thinking pioneered by Hirschman.Read More »

Rethinking the Failures of Mining Industrialisation in the African Periphery

Ben Radley1 Comment
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The remains of one of SOMINKI鈥檚 industrial gold mines (author photo).

The World Bank interpreted the failure of mineral extraction to drive structural transformation in the early decades of African Independence as due to badly managed state-owned enterprises (SOEs), excessive state intervention in the economy, and government corruption. To right these wrongs, since the 1980s, the Bank has loaned hundreds of millions of dollars to the governments of mineral-rich (and mostly low-income) African countries to privatise and liberalise their mining sectors. Spurred on by the most recent commodity super-cycle beginning in the late 1990s, foreign direct investment poured in, and for many low-income African countries today, 鈥渢he mining sector represents one of the most crucial sources of investment and income in their economies鈥� (Farole and Winkler 2014: 177). A major theoretical assumption underpinning this process has been a belief in the superior expertise and efficiency of experienced transnational corporations (TNCs) compared to corrupt and mismanaged SOEs. In this post, I unpack and question the validity of this assumption, by drawing on some of the findings from my doctoral thesis on mining reindustrialisation in South Kivu Province of the Democratic Republic of the Congo (DRC). 聽聽聽 Read More »

Economic development in Palestine and beyond

Patrick Kaczmarczyk1 Comment

Palestine-blog-image-TSuccessful economic development in Palestine will require an adequate theory of development, industrial policy, and institutional reforms.

Recently, the Palestine Economic Policy Research Institute (MAS) published a聽聽on Palestinian economic development. In this report, co-authored by my colleagues Heiner Flassbeck, Michael Paetz, and I, we explore possible solutions as to how Palestine could sustainably finance its deficits. Now, after the Israeli elections, Jared Kushner, the US President鈥檚 son-in-law and senior advisor, is set to announce the details of the US 聽for the Israeli-Palestinian conflict. Given that the Peace Plan is expected to include a large聽聽to solve the conflict, it will be interesting to see to what extent it addresses the fundamental problems we identified in our research.

Our results suggest, succinctly, that under current conditions of excessive imbalances in the external sector (trade and current account), any issuance of debt securities requires fixing these imbalances first, for which, in turn, strategic public intervention is critical. This finding may come as a surprise to most policymakers, as orthodox economic theory suggests that the most efficient ways for countries to develop is through market led (as opposed to state led) policies. Historical evidence demonstrates that none of the advanced countries followed this path in their own development, yet the idea of 鈥榯he market鈥� as the most efficient development tool is still widespread. Based on this belief, Western institutions wreaked havoc in developing countries during the 1980s and 1990s, and continue to do so (although some institutions, notably the IMF, show significant progress in聽).Read More »

To be Poor in Times of the Current Financial Architecture

annloesLeave a comment

Late developers are nowadays confronted with the problem of having to earn foreign currency to finance structural transformation under extremely unfavourable conditions. The dependency on forex is rooted in the international financial architecture and represents a major pitfall for countries trying to catch up. However, this structural impediment to transformation is not paid much attention to by the dominant development economics.Read More »

Despite many changes in today鈥檚 modern global economy developmental states are needed more than ever

RRowden2 Comments

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In the fall of 2017, SPERI鈥檚 Matthew Bishop and Anthony Payne gathered essays from a group of nine development economists who produced essays on 鈥樷�� (SPERI Paper No. 43). They drew upon a body of work published on the SPERI Comment blog and in other publications about the state鈥檚 appropriate role in development and the nature of a modern industrial strategy. The essays examined the current status of the notion of a 鈥榙evelopmental state鈥� in today鈥檚 contemporary context of globalization. This article reviews the series, highlights some key takeaways, and considers some other elements that were not addressed by the essays.Read More »