Transcript China and Commodities: Does A Southern Engine of Growth Lead

China and Commodities:
Does A Southern Engine of Growth Lead to
Disruptive Development?
IDC Seminar; 23rd September 2009
Raphie Kaplinsky
Julia Tijaja
Vuyo Mjimba
Masuma Farooki
Anne Terheggen
Zeferino Teka
The Drive to Industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
UNIDO World Industrial Development Report 2009
Commodities-Manufactures Terms of
Trade
The Drive to Industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
• Manufactures are (relative to agriculture) income
elastic and price inelastic
• Synthetic substitutes for natural products
• Manufacturing embodies rents – agriculture does
not
• Manufacturing can be labour intensive – primary
commodities are very capital intensive
A Southern Driver of Growth:
Challenging Development Orthodoxy?
Masuma Farooki
A Southern Driver of Growth
• China: The Large Country Impact
– Volume of Demand
– International Sourcing
• China: The Developing Country Impact
– Resource Intensive Growth
– Years to maturity
A Southern Driver of Growth
% Share of Costs of Minerals/Extractive Sector in Industrial Production and Per Capita Income (PPP).
2004
Source: Author’s calculations from GTAP and World Development Indicators.
A Southern Driver of Growth
Changing Traditional Relationships:
• Income Elasticity of Demand for Commodities
– Resource Intensive Growth and Higher Elasticity
• Commodity Price Volatility
– Active Financial Interests and Dampening of Fluctuations
• The Mining Industry
– Supply Inelasticity and Super Cycles
A Case Study of the Cassava
Industry in Thailand
Julia Tijaja
Outline
• The Thai Cassava Value Chains
• Restructuring of Markets
• Implications
The Thai Cassava VC (simplified)
Roots
Chips
Pellets
Native starch
Modified starch
Ethanol
Feed
Food
Non food
Thai Dried Cassava Exports (FRE)
'000 metric tonnes
25,000
20,000
15,000
10,000
5,000
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
0
Calculated from TTTA Annual Report 2003 to 2008
Pellets
Chips
Implications
1. A New Market Option
2. Change in Nature of Demand
Implication 1: A New Market Option
• Cushion impact from shrinking EU market
BUT
• Hamper pellet market diversification
• Disrupt growth of Thai chips users
• Restrict input into Higher Value Subsectors
Implication 2: Demand Changes
• Change in Quality Specifications
• Change in Standard Certification
• Change in Value Added >
Export unit price (by Sub-sector)
4.0
3.5
'000 baht / mt (FRE)
3.0
2.5
Chips
2.0
Pellets
Starch
1.5
1.0
0.5
0.0
1999
2000
2001
2002
2003
2004
2005
Calculated from TTTA Annual Report 2003 to 2008
2006
2007
2008
The Tropical Timber Industry in Gabon
Anne Terheggen
Background
• Gabon:
– High GDP p.c. (USD 9,969) but poor social indicators
– Exports: oil (84.4%), timber (8.3%), manganese (3.1%)
– Oil-dependent, little economic diversification
Background
• Timber Industry:
– Export-orientated industry with focus on logs (okoumé)
– Among the top ten producers and exporters globally
– Traditionally towards EU, now to China
of which to China
of which to EU-15
GA total EX to world
0.60
3000
2500
0.50
2000
0.40
1500
0.30
1000
0.20
500
0.10
0.00
0
1998
1999
2000
2001
2002
Source: own calculations based on FAO ForesSTAT extracted June 2009
2003
2004
2005
2006
Gabon total log exports to world (t cum)
Importer percentage share of combined total volume
0.70
Background
• Timber Industry:
– State-controlled
concession system
– State ‘intervention’
= Forest Code
Source: World Resources Institute: Interactive Forest Atlas for Gabon (2009)
Relegation of EU-Standards
• Buyer-specific Standards (CSFs)
– Stage of processing, species variety, quality, volume,
product specifications, and price
• International Standards
– Fewer applications and these less important
(phytosanitary certificate)
• Private Standards
– No requirements of environmental production methods
and adherence of national legislation
Restructuring of Domestic Industry
• Change of Ownership of
Productive Assets
– Influx of Chinese &
Malaysian (Chinese descent)
companies and traders
– In addition to and
replacing EU and
Gabonese owned
companies
Source: World Resources Institute: Interactive Forest Atlas for Gabon (2009)
Restructuring of Domestic Industry
• Activities
– Increase of intensive + extensive margin
– Management ‘style’
– Easy cash vs. value-added ‘hurdle’
– Certification vs. lack of skills + capital
– Slow change of attitude
• Clash of (political) Interests at Given Opacity
– Gabon vs. EU vs. China
Making the Most of Commodities
(The MMCP Programme)
Making the Most of Commodities
(MMCP Programme)
• The Resource Curse
– Dutch Disease
– Corruption
– Violence
• Sachs-Warner
• But US, Canada, Australia experience
OU and UCT Programme
• Sectors
– Copper, diamonds, gold, offshore-oil, oil, LNG,support
service sector, infrastructure
• Countries
– Algeria, Angola, Botswana, Nigeria, Tanzania, South
Africa, Zambia,
Core MMCP Hypotheses:
Linkages affected by
•
•
•
•
•
•
Ownership
Employment spillovers
National Systems of Innovation
Regional links
Infrastructure
Policy
The Nature And Determinants Of Linkages In
A Remote Minerals Commodity Sector:
A Case Study Of Gold Mining In Tanzania.
Vuyo Mjimba
Gold Prices Trend 1960-2008
1200
1000
800
Close
600
High
Low
400
200
0
1960
1965
Source: FinFacts 2009
1970
1975
1980
1985
1990
1995
2000
2005
The Scene
• Poverty
• Royalties and Taxes
• Ownership
Tanzania
Australia
South Africa
• Globalization
Canada
Theories
• Value Chain
• Outsourcing
• The NSI
• The Resources Curse Thesis
Themes
• Firms Strategies
Impact of firm strategy on
upstream and down stream
linkages.
• The Local Economy
Impact of the local economy on
linkages
Questions
• Spillovers
• Policy
Spillovers between gold mining
industry, upstream/downstream
suppliers and the wider economy
Impact of policy regime upstream and
downstream linkages
Maintenance and Repair Services Market in
Offshore Oil and Gas Upstream Industry on
the West African Coast:
The Chain of Labour and Rents
Zeferino Teka
Oil & Gas Industry Value Chain
Midstream
Downstream
Upstream
Transportation
Services
Exploration
Extraction/Production
Refining
Crude Processing
Subsurface
Activity
(geochemistry)
Manufacturing of
non-fuel products
Marketing
Product
Trading
Transport & Freight
Product
Distribution
Services Sector
Geophysical
(seismis)
Activity
Surface
Activity
(geology)
Seismic Data
Acquisition &
Processing
Manufacturing
DUs, Vessels,
Equipments
Construction of
Production
Facilities
DUs Contracting
Wellheads
Platforms
Pipelines
Drilling
Services
Maintenance &
Repair
Services
DUs, Vessels, Production
Facilities, Equipments
Decommissioning
What About?
KEY ISSUES
1. Power & Governance Structure of the Market
•
Mapping out the value chain
•
Identify LEAD firms
•
Rules of participation
Structure of the
Market
KEY ISSUES
2. Procurement & Outsourcing
•
Criteria & incentive for outsourcing
•
Ownership
•
Inputs sourcing: local & foreign distribution
•
Types of contracts & distribution
Determinants of Rent,
Division of Labour, &
Entry Barriers
KEY ISSUES
3. Upgrading & Learning
• Form of chain governance
• Absorptive capacity
• Upgrading strategy
• Knowledge producers & brokers
Status of Dynamic &
Technological
Capabilities
KEY ISSUES
4. NSI Trajectory
• Macro Policy
• Meso (horizontal) Policy
• Micro Policy
Context
Determinants
KEY ISSUES
5. Spillovers
• Skills & Technology
• Labour
• Capital
• Infrastructure
Backward &
Forward Linkages
Thank You