Transcript Economic Diversification for Sustainable and Inclusive

Economic Diversification for
Sustainable and Inclusive Growth
Vandana Chandra (PRMED)
Inclusive Growth Course
March 24, 2009
1
Rationale
•
By the mid-1990s, most developing countries had implemented the
macroeconomic reforms that are a necessary condition for economic growth.
Various other reforms also followed. BUT
•
Economic diversification that was expected to follow ex post reform and is
essential for sustained prosperity and inclusive growth did not ensue in many of
the Bank’s client countries.
•
Absence of economic diversification – has become the source of social and
political pressures.
•
Impatient to diversify, some client governments have announced industrial policies
targeted at industries they believe can deliver faster and more inclusive growth.
•
Government’s choice of industries is often ad hoc and uninformed, and targets
non-traditional industries in which the country has no comparative advantage.
Most choices are also driven by pro-poor or inclusive growth considerations.
• This recent shift in public policy from an industry-neutral to an
industry-specific approach in our client countries has created
among their development partners a demand for analytical
tools to study the economic growth implications of active
development policies.
2
Course Objective
• Introduce questions and concepts that can be useful in
exploring the nexus between economic diversification and
income-enhancing, sustainable, and inclusive growth.
• Provide a measure of the income potential of a country’s total
exports based on Hausmann, Hwang and Rodrik (2007).
• Offer an EXCEL-based toolkit (A) to study these approaches
and measures.
• The country economist (CE) may not be able to dissuade an
impatient client (government) from implementing its
industrial policy but may find the concepts useful in informing
policy decisions.
3
Warning
• Industrial policy discussions warrant industry-level analysis. BUT
• The toolkits are not intended to produce a menu of industries that
should be recommended to clients as candidates that deserve
government’s special attention.
• Wanting a hi Tech industry does not imply that the country will be
able to develop an efficient and competitive hi Tech industry .
• The application of the toolkit is a desk exercise that uses
disaggregated product-level statistical evidence from the trading
patterns of all countries, developed and developing over a long
time series.
• Strength: Statistically robust. Objective. Transparent.
• Weakness: Cannot substitute for in-depth country-knowledge.
• Needs to be complemented with a proper field assessment of the
state of existing industries, what works and why.
4
Why does economic diversification matter for
sustainable growth in developing countries? -Outline
1.
2.
3.
4.
5.
6.
7.
How can we measure economic diversification?
What is the relationship between economic diversification and sustained
growth ?
Openness, diversification and growth – some stylized facts
Are some patterns of diversification more income-enhancing than
others? Examine the traditional approaches to diversification.
Explain PRODY - a concept that measures a product or industry’s export
sophistication by linking it with a notional level of income.
Explain EXPY - a concept that measures the sophistication of a country’s
export basket by linking it with a notional level of per capita income.
The framework we use is useful for cross-country and country-specific
analysis over a long period. Example: an application to Burkina Faso.
5
Two simple measures of economic diversification
•Production data series for developing countries is not easily available.
• Proxy: export data
• Herfindahl Index of export concentration (HI). Sum of the square of the shares of each product
exported.
N
HERFINDAHL 
s i2

i 1
•HI lies between 0 and 1 where 1 implies complete concentration
•Common observations:
•Nigeria and other oil exporters: between 0.9 and 1 (oil and minerals exporters)
•Primary product and minerals exporters – often between 0.8 – 0.2
•China/Brazil, India and countries with large domestic markets: closer to
0.02 – 03
•Most of East Asia and most large countries were already very diversified in the 1980s
•Strength: HI is useful for understanding general direction of export diversification
•Weakness: HI is uninformative about the composition of exports or their income potential
6
The Herfindahl Index of export concentration has remained high for Nigeria
(dominance of oil exports) and increased for Burkina Faso (rising dominance
of cotton) in comparison to low levels for large and highly diversified
countries like China, India and Brazil.
Trends in the Herfindahl Index of export concentration (scale 0 - 1)
Herfindahl Index of export concentration
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1977
1979
Brazil
1981
1983
China
1985
India
1987
1989
1991
Bangladesh
1993
1995
1997
Burkina Faso
1999
2001
Nigeria
2003
2005
Peru
7
Another measure of diversification: trends in the export share of the top
5, 10 or 20 products is consistent with the Herfindahl Index
Share of the top 5 products in total exports in large
economies
60
Share of total exports (%)
50
40
30
20
10
0
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Brazil
China
South Africa
India
8
The share of the top five exports in Nigeria (oil), Burkina Faso (cotton) and
Bangladesh (garments) are high and consistent with their Herfindahl Index.
Q: To reduce the share, what else can these countries export?
Export shares of the top 5 products
Share of the top 5 products in total exports (%)
120
100
80
60
40
20
0
1977
1979
1981
1983
1985
1987
Burkina Faso
1989
1991
Bangladesh
1993
1995
Nigeria
1997
1999
2001
2003
9
The relationship between sustained growth and openness/exports
Conventional theory - as economies diversify, their income grows (positive relationship).
Hesse (2009) confirms that diversification and per capita income are positively
correlated.
Imbs and Wacziarg (2003) – empirical evidence indicates that there is a U-shaped
relationship between sectoral diversification and income. Initially, negative, i.e., as
diversification increases, per capita income increases. After reaching $10,000 (2000
constant USD), sectoral diversification decreases and the relationship becomes
positive (based on employment and production data for developed and developing
countries).
In natural resource-based economies, diversification helps to dissipate the negative effects
of terms of trade shocks. In more developed ones, agglomeration effects reinforce
economic concentration.
We find that for most of the Bank’s client countries, the relationship is L-shaped. Along the
vertical axis are low income countries in Sub-Saharan Africa, South Asia and even
China. The range of the HI is very large. Close to 0.9 for Nigeria and 0.02 for India!
Hesse (2009) confirms that diversification and per capita income are positively correlated.
We need a better measure of diversification that links exports to a country’s per capita
GDP. Q: What type of products should China export to catch up with Brazil? Cannot
answer with the HI.
10
In low income countries, the relationship between HI and income is L-shaped.
The HI for China and Korea is similar but it does not tell us what China must
export to catch up with Korea.
GDP per capita and Export Diversification, 2000-2004
AGO
.8
NGA
GNQ
Korea
COG
TCD
.6
BWA
GAB
MLI
VEN
BDI
ZAR
SYC
.4
LBR
MOZ
BFA
China
RWA
.2
ETH
ZMB
MLT
BHR
UGA
GHA
TGO
0
ZWE
KEN
TZA
IDN THA ZAF
BRA
CHN
0
CHL
5000
BRB
MEX ARG
MAC
KOR
10000
15000
20000
GDP per capita constant US$(2000)
SGP
HKG
25000
Author's calculations
Data Source: UN Comtrade (SITC Rev. 2 - 4 digit) and the World Bank (World Development Indicators)
11
Burkina Faso: A high HI has constrained sustained
growth in per capita income – what else can it export?
Burkina Faso
0.6
300
0.5
250
0.4
200
0.3
150
0.2
100
0.1
50
0
0
1980
1982
1984
Burkina Faso
1986
1988
1990
1992
Herfindahl Index 4-Digit
1994
1996
1998
2000
2002
2004
GDP per capita (constant 2000 US$)
12
A drop in HI drove growth in per capita GDP but the level of the
HI is still very high and of income too low. What else can
Bangladesh export?
Bangladesh
0.16
450
0.14
400
350
0.12
300
0.1
250
0.08
200
0.06
150
0.04
100
0.02
50
0
0
1980
1982
1984
Bangladesh
1986
1988
1990
1992
Herfindahl Index 4-Digit
1994
1996
1998
2000
2002
2004
GDP per capita (constant 2000 US$)
13
A low HI has helped but what China exports explains why it has
grown so fast
China
0.08
1400
0.07
1200
0.06
1000
0.05
800
0.04
600
0.03
400
0.02
200
0.01
0
0
1980
1982
1984
China
1986
1988
1990
1992
Herfindahl Index 4-Digit
1994
1996
1998
2000
2002
2004
GDP per capita (constant 2000 US$)
14
Openness fosters diversification and sustained growth
•
Export led-growth played an important role in fostering fast and
sustained growth.
•
In small or poor countries, the purchasing power of the domestic
market is low and exports are often the only source of growth.
•
Between 1980 – 2007: in most low and middle income countries, the
export/GDP ratio was small – less than 20 percent. In these
economies, per capita GDP (constant USD) increased little.
•
Examples: Brazil, India, Burkina Faso, Ghana.
•
In fast growing countries, growth was export-led and compensated for
small domestic markets. A high share of exports in GDP was matched
by a faster increase in per capita income. Many countries graduated
from a low to a middle income status. Examples: South Korea,
Malaysia. More recently, China.
15
Openness and its nexus with per capita income. Note, SSA is more
open than even China. What explains the differences in income within a region,
and between regions?
• Macro
Stability?
• Openness?
Regional average Total exports/GDP
SA
LAC
Or
• Is it the
Export
Mix?
CHN
SSAnoZAF
Second_EA
First_EA
.8
.6
.4
Total exports/GDP, (%)
1990-95
Data: WDI and COMTRADE
.2
2000-04
0
Sustained growth was led by exports in East Asia
Growth was export-led in fast growing East Asia
130
5000
4500
4000
90
3500
3000
70
2500
50
2000
1500
30
1000
GDP per capita (2000 constant USD)
Exports of goods & services /GDP (%)
110
10
500
-10 1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004 0
China Exports of goods and services (% of GDP)
Malaysia Exports of goods and services (% of GDP)
Thailand Exports of goods and services (% of GDP)
China GDP per capita (constant 2000 US$)
Malaysia GDP per capita (constant 2000 US$)
Thailand GDP per capita (constant 2000 US$)
17
Herfindahl Index of export concentration (0 – 1) and share of
exports in GDP (%) – no clear relationship!
China - HI (0-1) and exports as a share of GDP (% )
Burkina Faso - HI (0-1) and exports as a share of GDP (% )
0.08
40
0.07
35
0.06
30
0.05
25
0.04
20
0.03
15
0.02
10
0.01
5
0.6
14
12
0.5
10
0.4
8
0.3
6
0.2
4
0.1
0
0
1980
1982
1984
China
1986
1988
1990
1992
Herfindahl Index 4-Digit
1994
1996
1998
2000
2002
2
0
2004
0
1
Exports of goods and services (% of GDP)
3
5
Burkina Faso
Bangladesh - HI (0-1) and exports as a share of GDP (% )
7
9
11
13
Herfindahl Index 4-Digit
15
17
19
21
23
25
Exports of goods and services (% of GDP)
Ghana - HI (0-1) and exports as a share of GDP (% )
0.16
18
0.45
0.14
16
0.4
14
0.35
12
0.3
10
0.25
8
0.2
6
0.15
4
0.1
2
0.05
0
0
60
50
0.12
40
0.1
0.08
30
0.06
0.04
20
10
0.02
0
1
3
Bangladesh
5
7
9
11
Herfindahl Index 4-Digit
13
15
17
19
21
23
25
Exports of goods and services (% of GDP)
0
1
3
Ghana
5
7
9
11
Herfindahl Index 4-Digit
13
15
17
19
21
23
25
Exports of goods and services (% of GDP)
18
When can diversification be income-enhancing and
inclusive?
1. Is there empirical evidence to suggest that certain patterns
of diversification can be more income-enhancing than
others?
2. East Asia relied on export diversification in manufactured
products to achieve faster and sustained growth. Is the East
Asian diversification pattern optimal and feasible for all
developing countries that are eager to catch up?
3. Are natural resources a curse for a low income country?”
4. Country-specific level examination:
1.
2.
Can Burkina Faso’s (BF) current exports transform it into a MIC even in the next several
decades?
Do the trends in BF’s exports reflect the level of its technological capabilities and
indicate how it compares with comparators, ie., other landlocked, cotton or primary
product exporters over the longer term?
19
Some hypotheses about the export mix and the
growth path
• Technology classification (Lall, 2005)
– Links a product to its technology content.
– Cereals and fish are primary (PP), minerals are resource-based (RB) and
manufactured products are low, medium or hi tech (LT, MT,HT)
• Is there a natural resource curse? Prebisch and Singer in 50s and 60s
and Sachs and Warner ’90s). “Natural Resources are Neither Curse nor
Destiny” – Lederman and Maloney, 2006.
• Is Sub-Saharan Africa special? Transactions costs,
and risks of manufactured
exports (Collier, 1998, 1999), Primary Commodity Dependence and Africa’s Future,
Paul Collier (2002), low skills, land abundance (Mayer and Woods, 2001) and low Net
TFP (Eifert, Gelb and Ramachandran, 2005); infrastructure (Habiyaremya and
Ziesemer,2006).
• Deterministic – These hypotheses suggest that in poor countries,
manufactured exports are the PATH to growth
20
Why natural resources and primary products appear to be a curse?
Ex: the relationship between the export share of cotton and per capita
income is negative. Burkina Faso, Benin and Mali did not diversify away
from it.
0.80
TCD
Cotton (% Total Exports)
0.70
MLI
0.60
BEN
BFA
0.50
0.40
TKM
0.30
TGO
SDN
0.20
PRY
TZA
0.10
CAF
KGZ
NIC
PAK
EGY
AZE
0.00
5
5.5
6
6.5
7
7.5
Log of GDP pc (constant US$)
21
Most countries in Sub-Saharan Africa did not grow.
Exception: Lesotho (LSO) diversified into garments and water exports and
enjoyed sustained growth.
Sub-Saharan Africa - trends in per capita income (2000 constant USD)
700
600
400
300
200
100
BDI Burundi
MWI Malawi
MDG Madagascar
GHA Ghana
TZA Tanzania
KEN Kenya
ETH Ethiopia
SLE Sierra Leone
MLI Mali
MOZ Mozambique
ZMB Zambia
SEN Senegal
06
20
04
20
02
20
00
20
98
19
96
19
94
92
19
90
19
88
19
86
19
84
19
82
19
80
19
19
78
19
76
19
74
19
72
19
70
19
68
19
66
64
19
62
19
19
60
-
19
GDP per capita
500
NER Niger
CAF Central African Republic
BFA Burkina Faso
BEN Benin
NGA Nigeria
LSO Lesotho
Technology hypothesis: High and sustained growth has occurred in
countries that export mostly LT, MT and HT products
Cereals and fish are primary (PP), minerals are resource-based (RB) and
manufactured products are low, medium or hi tech (LT, MT,HT)
Regional export composition, Tech categories
2000-04
0
0
.2
.2
.4
.4
.6
.6
.8
.8
1
1
1990-95
SA
LAC SSAnoZAF OECD
First_EA
SA
SSAnoZAF LAC
OECD
First_EA
HT
MT
HT
MT
LT
RB
LT
RB
HV
PP
HV
PP
First EA: HKG, TWN, KOR and SGP
First EA: HKG, TWN, KOR and SGP
• Problem: Too deterministic and ad hoc. Implies manufactured exports are
the only path to growth. Can PP and RB exporters leapfrog into LT, MT and HT
exports?
Must all countries export manufactured products to
grow?
Trade patterns have changed and are indeterminate in this era of
globalization. Production networks are fragmented globally. For
example:
1. East Asia – exports mostly Hi-tech products now. China is replicating
the East Asian model. Imports parts and exports hi Tech products.
They have acquired a competitive advantage in these products.
2. Some other countries have successfully reversed export patterns and
discovered new products. Chile has diversified from copper to fish
and wine; Columbia from coffee to cut flowers ; Kenya and Uganda
from coffee, tea and cotton to fish and flowers. India has reversed the
historical flow of services exports. Where the share of new exports is
large, income growth has been fast and sustained.
These approaches to diversification do not offer a metric that objectively
indicates whether the new products are good or bad for a sustained
increase in per capita income.
Metric: PRODY denotes a product’s sophistication which
suggests a notional level of per capita income
• Designed by Hausmann, Hwang, and Rodrik (2007).
• PRODY and EXPY are indexes that measure export
sophistication or which suggest a notional level of income
for a product and country’s exports respectively.
• The core idea is that (ceteris paribus) “An economy is better
off producing goods that richer countries export.”
• “Countries that export goods associated with higher
productivity levels grow more rapidly”
•
•
Sources: Hausmann, Ricardo, Jason Hwang, and Dani Rodrik. 2007. What you
export matters. Journal of Economic Growth (U.S.) 12, No. 1:1-25.
Rodrik, D. (2006). “What’s So Special About China’s Exports,” NBER Working
Paper Series, No. 11947.
25
Export Sophistication (Hausmann, Hwang, and Rodrik
(2007).
• How sophisticated is a particular product?
where the PRODY of product k is the ratio of the export share of k in country j to
the sum of the export shares of k in all countries weighted by their per capita
incomes of the countries that export the product. In a sense, it reflects a
notional income level of k. The higher the PRODY, the ‘richer’ or more
sophisticated the product.
• Using this measure, how sophisticated is a country’s export basket?
• EXPY measures the sophistication or notional income level of a country’s total
exports. It is the sum of the export share of each product weighted by that
product’s PRODY. High is better.
26
Source: Authors’ calculations using UN Comtrade Database
Maize
(corn),unmilled
Palm Oil
Olive Oil
20
Milk and cream
25
Fruit, fresh or
dried
Cocoa, beans
Electronic
microcircuits
Internal
combustion
Wood and
resin based
Television
receivers,
Articles of
leather
Knitted/croch.
Fabric
Fish, prepared
or preserved
Printing and
writting paper
Bacon, ham &
other dried
Potatoes, fresh
or chilled
Coffee, whether
or not roasted
PRODY ('000)
PRODY for Selected Products – natural resources are neither
curse nor destiny – it all depends on what you do with them
High and Medium Tech
Low Tech
Resource Based
Primary Products
15
10
5
0
27
Certain products have been good for Catch-up in East Asia, (see Rodrik
(2006))
• Leapfrogging does not require all exported products to be transformed
immediately into high PRODY ones.
• China’s catch up with Hong Kong and Korea occurred when it started exporting
some High Prody products.
Five main exports (1980-84)
Country
Prody
Product Description
share (%)
5127
8
Cotton(other than linters) not carded
1531
Other parts & accessories of motor vehicles
Fabrics woven of silk or noil or other
Cotton yarn
Children's toys, indoor games, etc
share (%)
13315
4
3
13526
4
13511
8685
4183
3
3
2
Footwear
Children's toys, indoor games, etc
Parts of apparatus of radios, TVs, etc.
14349
13962
12278
3
3
3
13962
8
15002
9
21281
5155
4591
5022
6
5
5
3
Electronic microcircuits
Parts of and accessories suitable for Office mach
and elect. Appliances
Electronic appliances
Jersey, pullovers, twinsets, cradigans.
Other outer garment of textile fabrics
13526
13924
4591
5155
5
5
4
3
Footwear
Fabrics woven of continuous synth.
Electronic microcircuits
Art. of apparel & colthing accessories
14349
10361
15002
6379
7
3
3
3
15002
18851
18331
13315
12
8
8
4
Korea Rep. Jersey, pullovers, twinsets, cradigans.
4591
3
Electronic microcircuits
Passenger motos cars, for transport
Radiotelegraphic and radiotelephonic
Peripheral units,incl.control & ada
Parts of and accessories suitable for Office mach
and elect. Appliances
13526
4
Watches, watch movements and cases
Other outer garment of textile fabrics
Hong Kong, Jersey, pullovers, twinsets, cradigans.
Trousers, breeches, etc of textile fabric.
China
2000-04
Petrol.oils & crude oils from bitum. Minerals
Prody
Peripheral units,incl.control & ada
Parts of and accessories suitable for Office mach
and elect. Appliances
China
1980-84
Product Description
Five main exports (2000-04)
28
Manufactured Exports are not the only path to faster and sustainable growth
Other developing countries’ success stories are natural resource-based
6825
8.1%
4.7%
10625
5492
Coffee,whether or
60.7%
638
4.2%
1515
2.1%
530
2.5%
2286
40.0%
17.7%
638
517
Sugars,beet and cane
Cotton (other than
linters),not car
Cut flowers and
foliage
Coffee,whether or
not roasted
Tea
Coffee,whether or
not roasted
95.3%
638
Shares Prody
Copper alloys
31.2%
6825
16.7%
2.5%
1825
5932
19.3%
5261
11.4%
7534
6.2%
638
4.5%
2286
17.5%
16.2%
2286
517
5.8%
638
33.0%
638
21.0%
6.4%
6034
2286
Chile
37.4%
Copper ores
Fish,frozen
Colombia
Copper alloys
Flours & meals,of
meat/fish
Grapes
Petrol.oils & crude
Other
coal,whether/not
pulverized
Coffee,whether or
not roasted
Cut flowers and
foliage
Kenya
Shares Prody
Main exports,
Country 2004
Cut flowers and
foliage
Tea
Coffee,whether or
not roasted or fr
Uganda
Uganda
Kenya
Colombia
Chile
Country
Main exports,
1980
Coffee,whether or
not roasted
Fish fillets,fresh or
chilled
Cut flowers
Netherlands:
Cut flowers
USA and
Canada: Fish
fillet and Frozen
Fish
29
EXPY is a good measure of the export sophistication of a
country’s exports. EXPY & GDP per capita are highly correlated
Source: Hausmann, Hwang and Rodrik (2005)
30
Summing up (1)
1. Openness and diversification matter for sustainable growth. But not any type of
diversification. The L-shaped curve for the Herfindahl Index and per capita income in
low income countries shows this.
2. There are alternative growth paths for primary and natural resource-based product
exporters. They are not cursed.
•
To leapfrog and grow faster – a country needs to diversify into and scale up at least
some sophisticated (higher PRODY) products.
2. Country and product/industry specificity are key.
•
The diversity of country experiences indicates that there is more than one way to do
it.
3. Comparative advantage can be created/developed. Technological capabilities can be
acquired and can change what you export. There is no need to rely only on your
natural endowments to guide export patterns.
4. As usual, there are trade-offs.
Summing up (2)
Should we make policy recommendations based on these new
concepts that link a product to its sophistication level –
NO.
1. EXPY indicates that higher PRODY products can lead to a higher level of per
capita income. BUT it does not tell us which high PRODY products.
2. A higher PRODY suggests that one product is more sophisticated than another.
BUT it does not indicate whether the country has a comparative advantage in
exporting that product.
3. Judging whether a high PRODY product is optimal for a country depends on
whether the country has the technological capabilities and other
complementary inputs required to produce that product profitably.
4. This requires a lot more homework, analysis and in-depth knowledge of what
constrains the emergence and scaling up of high PRODY products that seems
suitable for a country.
An analysis of diversification and growth in Burkina
Faso
Brief background:




In 1977, BF had a per capita income of US$ 186 (constant 200 dollars).
In 2004, after 27 years, it had increased to only $248.
Annual growth rate was only 1.1%.
Central question: If Burkina Faso wants to become a middle income country,
can it continue to pursue the same growth path that it has tread in the past
30 or more years?
Outline:
 International comparisons are useful
 Sources of growth
 Why exports matter
 Why diversification matters
 Into what can it diversify?
 Whatever it is, it must be income-enhancing diversification.
 For more details, refer to the diversification and growth chapter in CEM 2009
(draft)
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-69
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-89
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-99
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00
-03
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04
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05
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06
20
07
Table 2.1: Trends in per capita Gross National Income in Burkina Faso and Comparators (current PPP US $)
Burkina Faso
86
148
270
269
250
340
400
420
430
Landlocked (LL), cotton
Nepal
65
99
165
205
232.5
270
300
320
340
LL, leather, beans
378
302
320
420
450
500
580
LL, coffee, wood
Kyrgyz Republic
388
298
400
450
500
590
LL, cotton, gold, tobacco
Uzbekistan
605
515
460
530
610
730
Landlocked
Lao PDR
Turkmenistan
850
686
650
1474
579
475
690
810
1000
1290
LL, wool, wood,minerals
851
867
953
960
1020
1110
1260
LL, petroleum, tin
Paraguay
1569
1185
1080
1230
1410
1670
LL,cotton, soya beans, wood
Cambodia
286
305
380
440
490
540
Sya beans, wood, rubber
Mongolia
Bolivia
490
LL, nuts, tobacco, cotton
Senegal
250
366
548
591
485
640
740
760
820
Groundnuts, seafood,min.
Nicaragua
224
484
670
467
738
820
890
930
980
Coffee, cotton, bananas
Sri Lanka
154
234
371
664
875
1070
1200
1350
1540
Tea, rubber
Guatemala
294
611
1101
1328
1700
1930
2080
2250
2440
Cotton, coffee, sugar
Burkina Faso
86
148
270
269
250
340
400
420
430
Landlocked, cotton
Burundi
63
109
231
165
100
90
90
100
110
Landlocked, coffee
Malawi
58
116
168
186
155
220
220
230
250
Landlocked, tobacco
Rwanda
44
112
284
274
218
210
250
280
320
Landlocked, coffee
283
243
240
250
270
300
340
Landlocked, cotton, coffee
Uganda
Mali
Benin
70
114
144
193
241
319
293
328
270
340
390
450
450
510
460
530
500
570
Cotton
Cotton
Zambia
270
483
443
356
323
410
500
640
800
Landlocked, copper
Source: WDI
Figure 5.2B: In spite of high growth rates in the past two years, per capita income in Burkina
Faso lags its comparators outside Sub-Saharan Africa
2580
Income per capita (Current US $)
2080
1580
1080
580
80
1962
1965
1968
1971
Guatemala
Mongolia
Burkina Faso
1974
1977
1980
1983
1986
Kyrgyz Republic
Nepal
Paraguay
1989
1992
1995
1998
Lao PDR
Nicaragua
Sri Lanka
2001
2004
2007
Figure 5.2: Income Potential (EXPY) of Burkina Faso’s exports (EXPY) has remained low
relative to landlocked and cotton exporters outside Sub-Saharan Africa
EXPY (cosntant 2000 $)
5000
4500
4000
3000
2500
2000
1500
1000
Benin
Burkina Faso
Bangladesh
Guatemala
Lao PDR
Paraguay
Nicaragua
Mali
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
500
19
76
EXPY
3500
Our framework: A classification of Burkina Faso’s exports by
Revealed Comparative Advantage (table 1)
CLASSICS – prodcuts in which BF’s RCA in the earlier
period was high and in recent period continues to
remain high.
Implication – its strong, maintain it
1980-84: RCA = 1
2001-05: RCA = 1
DISAPPEARANCES – prodcuts in which BF’s RCA in
the earlier period was high but in recent period is
low. Implication – declining competitiveness, leave
them alone.
1980-84: RCA = 1
2001-05: RCA = 0
MARGINALS – products in which BF did not and does
not have a RCA
Implication – observe and let them grow
1980-84: RCA = 0
2001-05: RCA = 0
EMERGING CHAMPIONS – products in which BF’s
RCA was low in the earlier period but high in
recent period. Implication – build on these new
discoveries and nascent products.
1980-84: RCA = 0
2001-05: RCA = 1
A classification of Burkina Faso’s exports by Revealed
Comparative Advantage and PRODY (table 2)
(a) The Classics
(b) Disappearances
RCA 80-84 = 1
SHARE
SHARE
RCA 00-04 = 1
80-84
00-06
Cotton uncarded
PRODY
RCA 80-84 = 1
SHARE
SHARE
RCA 00-04 = 0
80-84
00-06
PRODY
32.1
62.3
1,500
Gold
2.3
1.2
5,716
Sesame seeds
4.0
3.9
1,179
Oil cake & residues
2.6
0.3
5,718
Leather
0.9
1.5
2,159
Sheep and lamb skins
2.1
-
4,956
Other Vegetables
4.0
1.3
5,477
Basketwork, wickerwork
0.2
-
7,789
(c) Emerging Champions
(d) Marginals
RCA 80-84 = 0
SHARE
SHARE
RCA 00-04 = 1
80-84
00-06
PRODY
Sugar
-
3.4
4,516
Cigarretes
-
3.2
12,204
Sheep/lamb skin leather
Cotton seed oil
0.1
-
1.7
0.8
2,526
3,173
RCA 80-84 = 0
SHARE
SHARE
RCA 00-04 = 0
80-84
00-06
PRODY
Cotton seeds
-
0.9
2,473
Cotton yarn
-
0.8
4,262
Bovine animals
Work of Art
3.4
0.2
0.1
0.2
4,391
8,542
A classification of Burkina Faso’s exports – thinking at the industry or more
aggregated level (table 3 )
• Classics: These are Burkina Faso’s traditional exports and the group is formed by 6 product
•
•
•
•
•
•
categories. It includes some
fresh or chilled vegetables;
fresh fruits,
sesame seeds,
oil seeds and oleaginous fruits;
not carded cotton; and
leather of other hides or skins. They tend to have low PRODYs but the highest densities for
Burkina Faso.
• Disappearances: It includes 4 categories of bovine, goat, sheep, and lamb skins;
basketwork; and notably gold. Hides and skins exports to Europe have declined
systematically. Gold was one major product exported by Burkina Faso whose production
decline. Now gold mining has a promising recovery.
• Emerging champions, High PRODY products but small in number (only 15) and export
values. Some reversals in exports during 2005-06 suggest the existence of constraints in the
economic environment that prevents them from scaling up. Cotton seed oil, soap,
horticultural products, some low tech manufactures, and two leather and skin products.
A classification of Burkina Faso’s exports by Revealed Comparative
Advantage, tech code, PRODY and share – detailed (table 4)
Table 9.1: Options for export diversification in Burkina Faso
PRODUCT DESCRIPTION
TECH
CODE
DENSITY
SHARE
SHARE
SHARE
SHARE
PRODY
(00-04)
00-06
80-84
90-94
00-04
05-06
0.154
0.153
0.156
Fruit,fresh or dried, n.e.s.
Other fresh or chilled vegetables
Leather of other hides or skins
PP
PP
LT1
5,187
5,477
2,156
Cotton seed oil
Fixed vegetable oils,n.e.s
Sugars,beet and cane,raw,solid
Sugar confectionery and other sugar
Vegetable products,roots & tubers,f
Plants,seeds,fruit used in perfumer
Buckwheat,millet,canary seed,grain
Maize (corn),unmilled
Sheep and lamb skin leather
Bones,horns,ivory,hooves,claws,cora
Sacks and bags,of textile materials
Manufactures of wood for domestic/d
Household appliances,decorative art
Other musical instruments; not 898.
Cigarettes
Soap;organic surface-active product
Gold,non-monetary
RB1
RB1
LT1
RB1
PP
PP
PP
PP
LT1
PP
LT1
RB1
LT2
LT3
RB1
MT2
RB2
3,173
5,377
4,516
8,772
4,789
3,622
5,009
6,430
2,526
4,419
5,209
5,919
8,725
3,843
12,204
5,409
5,716
0.145
0.140
0.182
0.127
0.158
0.156
0.131
0.129
0.162
0.145
0.146
0.141
0.113
0.106
0.118
0.150
0.144
Type
2.0
4.0
0.9
1.5
5.8
2.2
0.9
1.5
1.8
2.0
0.7
0.9
Classic
Classic
Classic
0.9
0.0
0.2
0.1
0.0
0.3
0.1
0.0
0.0
0.0
0.0
0.0
0.0
2.3
0.4
0.0
0.0
0.0
0.1
0.2
0.0
0.0
0.1
0.0
0.0
0.1
16.9
1.1
0.2
4.2
0.2
0.3
0.1
0.3
1.5
2.2
0.1
0.1
0.2
0.0
0.1
4.0
0.2
1.2
0.1
0.2
1.4
0.0
0.3
0.1
0.1
0.1
0.6
0.0
0.0
0.1
0.0
0.0
1.0
0.0
1.2
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Emerging Champion
Policy Implications - What can this framework tell us of incomeenhancing export possibilities in Burkina Faso? Part 1
1. GOOD NEWS: there are alternative growth paths for Burkina Faso which is a
primary commodity exporter.
2. What our framework shows:
– That Burkina Faso’s traditional or “Classic” export products are mostly
low PRODY.
– That there are some “Disappearing” exports. Some are high PRODY. We
don’t know why they are disappearing but we need to get more
information.
– There is a long list of “Marginal “ products. We should be reluctant to
suggest they might be good products. We need more information.
– There is a set of high PRODY “Emerging Champions” which seems
attractive. We don’t know why they have not scaled up and what is
holding them back. We need more information.
– MOST importantly, we do not know whether Burkina Faso has the
technological capabilities and inputs to produce the “Emerging
Champions.” We need more information.
Are we ready to comment on Burkina Faso’s industrial
policy yet? NO
We should feel comfortable sharing information and comment
on the sophistication of the Classics, Disappearances,
Marginals and Emerging Champions as identified by our
framework.
BUT
We are not ready to endorse any product or industrial policy.
We need to do more homework. How much more?
Some answers can be found in a companion course.
How do we prepare a report that helps us how to replicate the
concepts in this course for other countries or products? We
recommend that you play with our toolkit, and cut and paste
charts and tables into your reports.
42