International Competitiveness of Manufacturing Firms in sub-Saharan Africa
AbstractAs the success of East Asian countries has shown, labor-intensive industry is recognized to lead economic growth in the early stages of development, utilizing relatively low labor costs. This same growth process has already started in South and South East Asian LDCs since the mid-1990s. However, the manufacturing sector in sub-Saharan Africa has been underdeveloped and manufacturing exports, in particular labour-intensive goods, have stagnated. This paper investigates the international competitiveness of the African manufacturing sector and its determinants through an analytical survey of empirical studies and a comparison with Asian low income countries. Empirical evidences indicate that primary factors of competitiveness, namely productivity, labour cost and exchange rate are unfavorable in sub-Saharan Africa. Representative arguments attribute the weak competitiveness to problems in the business environment, factor endowment, and the exchange rate. However, careful review shows that labour cost is beyond the range explained by endowment and misalignment of exchange rates have been reduced in Africa. Moreover, comparison with Asian low income countries which have competitiveness in labour-intensive goods shows no difference in the quality of business environment, while the labour cost is significantly lower than sub-Saharan African countries. Although results should be considered tentative, high labour cost beyond endowment and conservative investment behavior emerge as important factors for the weak competitiveness in sub-Saharan Africa when controlling income level.
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Bibliographic InfoPaper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 2.
Date of creation: May 2004
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 2. 2004.5
Postal: Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-03 (All new papers)
- NEP-CSE-2007-02-03 (Economics of Strategic Management)
- NEP-EFF-2007-02-03 (Efficiency & Productivity)
- NEP-INT-2007-02-03 (International Trade)
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- Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness," IMF Working Papers 08/172, International Monetary Fund.
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- Edwards, Lawrence & Balchin, Neil, 2008. "Trade related business climate and manufacturing export performance in Africa: A firm-level analysis," MPRA Paper 32863, University Library of Munich, Germany.
- World Bank, 2007. "Uganda - Moving Beyond Recovery : Investment and Behavior Change, For Growth, Volume 1. Summary and Recommendations," World Bank Other Operational Studies 7576, The World Bank.
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