Transcript And they may be direct or indirect - Commodities

The rise of the Asian Drivers
and the implications of
Development Strategy
Raphael Kaplinsky
Development Policy and Practice,
The Open University
China’s growth is not unique..
GDP (constant prices)
3.5
Log of export growth
Log of GDP growth
Growth of exports
3
2.5
2
1.5
6
5
4
3
2
1
0
1
1
6
11
16
21
26
31
36
6
11
16
21
26
31
36
Years from beginning of growth surge
41
41
Years from beginning of export surge
China (1989-2003)
China (1989-2003)
Japan (1960-2003)Japan (1960-2003)
Korea (1963-2003)
Korea (1963-2003)
And they may be direct or indirect
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
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
The orthodoxy
Manufacturing exports are key:
• Competitive effects
• Scale effects
• Learning effects
Distribution of MVA
Share of
developing
countries
Share of the
World
By Income
1985
1995
2005
1985
1995
2005
4.1
12.9
19.7
29.2
59.5
69.4
1.4
5.1
9.8
10.2
23.6
34.7
Latin America
6.7
6.9
6.4
46.9
31.5
22.6
Sub-Saharan Africa
1.0
0.3
0.3
7.1
1.3
1.0
S. and E. Asia
of which: China
World Manufacturing Export Price,
1986-2000
Annual price change (%)
25
20
15
10
5
0
-5
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
-10
IMF, World Economic Outlook Database
EU Imports from China
1st Q 2005/1st Q 2004
China Market Share in EU-25
Imports
Volumes %
Price %
1 Q 2004 %
1 Q 2005 %
T-shirts
164
-26
7
17
Pullovers
534
-47
6
38
Men’s trousers
413
-16
6
35
Blouses
186
-24
6
22
Women’s coats
184
-18
6
10
Bras
139
-15
30
49
Socks and
pantyhose
63
-22
30
54
Linen and ramie
yarns
51
1
27
45
Linen fabrics
257
1
10
45
Source: Euratex data as reported by Nathan Associates
% of sectors with negative price
trends, 1988/9-2000/2001
35
% of sectors
30
29.7
25.6
25
18.3
20
17.2
15
8.5
10
5
0
Low income
China
Lower-middle
income
Uppermiddleincome
High income
Commodity Price Movements 1960-2008
350
300
250
200
150
100
50
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
Source: UNCTAD All Commodity Price Index, 2000=100
The Rise in Commodity Prices
Food
Ores &
Metals
Early
2003
Mid
2008
%
Change
100
269
169
500
450
400
350
300
250
200
89
392
340
150
100
Oil
All
90
100
470
300
422
200
50
0
2003
All
2004
2005
2006
Minerals & Metals
UNCTAD Commodity Price Index 2003-08. (2000=100)
2007
Oil
2008
Food
Actual and projected global share of
China’s consumption of base metals
30%
25%
% of total
20%
15%
10%
5%
0%
1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Coppe r
Source: Macquarie Mining
Alum inium
Zinc
Nick e l
Ste e l
Iron Ore (Trade )
China's Share of Global Demand
China's Share of Total World
Growth
26%
100%
99%
95%
24%
90%
22%
76%
73%
68%
67%
51%
50%
20%
18%
16%
14%
8%
0%
Steel
Nickel
Copper Aluminium
Source: Macquarie Mining
2003
10%
2002
10%
2001
20%
2000
12%
1999
30%
1998
2000-2003
1995-2003
1997
40%
1996
% share
60%
% of total World
80%
70%
Steel
Nickel
Copper
Aluminium
1995
100%
28%
China’s demand for agricultural
commodities
•
•
•
•
•
•
•
20% world population, 7% arable land
Biofuels
Industrial inputs
22% global rubber consumption (2006)
Imports 27mt cotton vs 7mt domestic production(2008)
Pork, other meat and animal feeds
Switch domestically from grains to fruit and vegetables
Global outlook for the agricultural sector,
2007-2016 (OECD/FAO, 2007)
 “…structural
changes such as increased
feedstock demand for biofuel production, and the
reduction of surpluses due to past policy reforms,
may keep [agricultural product] prices above
historic equilibrium levels during the next 10
years….
 Winners are:
 Brazil (sugar, oilseeds, meat)
 Argentina (cereals and dairy products)
 Russia/Ukraine (coarse grains)
 East and south east Asia (rice, veg oils, poultry)
The Impact on Africa
Manufacturing for the domestic
market
• SMEs in Ethiopian shoe industry
–28% bankrupt
–32% downsize
• SA Clothing and textiles
–Employment fell from 119,000 in 2004 to
87,000 in 2005
• Zambia’s Mulungushi mill
–Closure in 2007 with
What happens when Africa exports the same
products as China to the USA? (2004-2006)
Exports from
AGOA
Kenya
Lesotho
Madagascar
Mauritius
SA
Swazi
Value of
Country’s
exports
-26
-5
-15
-26
-48
-53
-24
Value of China’s
exports
85
113
171
108
104
89
136
Number of countries accounting for 90% of SSA Exports (excl SA)
25
20
15
10
5
0
Agricultural Materials
Ore and Metals
Fuels
SSA EXPORTS
SA, Lesotho,
Swaziland,
Madagascar,
Kenya, Mauritius
Hard
commodities
Clothing
footwear
SSA LOSS
SSA GAIN
Oil exporters, Zambia, SA, DRC,
Botswana, Ghana, Gabon, etc
CHINA
IMPORTS
CHINA
EXPORTS
All SSA
Oil
SSA LOSS
SSA GAIN
Most SSA
SSA IMPORTS
Clothing
footwear
Slow Down in Global Growth
GDP Growth (% Change)
10
8
6
4
2
0
1970
1975
1980
1985
1990
1995
2000
2005
-2
-4
Advanced Econ.
Source: IMF WEO January 2009
Emerging & Developing Econ.
World
2010
The Fall of Commodity Prices
Mid
2008
End
2008
%
Change
500
450
400
350
Food
Ores &
Metals
269
184
-32
300
250
200
392
207
-47
150
100
50
470
147
-69
All
300
185
-38
0
Ju
n2
00
8
Ju
l2
00
8
Au
g2
00
8
Se
p2
00
8
O
ct
20
08
N
ov
20
08
D
ec
20
08
Oil
All
Food
UNCTAD Commodity Price Index 2003-08. (2000=100)
Minerals & Metals
Oil
What’s in a Price Movement?
Commodity Boom:
A peak that is much higher than previous peaks.
The Cycle:
Short Term, 2-4 years; a peak/trough to peak/trough
measurement.
The Super Cycle:
Medium Term, 6-10 years; a prolonged trend rise over a
decade.
The Structural Break:
Long Term; a long-run change in relative prices.
Commodities-manufactures terms of
trade: What does the future hold?
2015
2030