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The Cases of Mali, Chad, Niger Leveraging ExportLeveraging in Fragile Countries Diversification Public Disclosure Authorized Public Disclosure Authorized Leveraging Export Diversification in Fragile Countries Public Disclosure Authorized The Emerging Value Chains of Mali, Chad, Niger, and Guinea José R. López-Cálix Public Disclosure Authorized INTERNATIONAL DEVELOPMENT IN FOCUS INTERNATIONAL INTERNATIONAL DEVELOPMENT IN FOCUS Leveraging Export Diversification in Fragile Countries The Emerging Value Chains of Mali, Chad, Niger, and Guinea JOSÉ R. LÓPEZ-CÁLIX © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 23 22 21 20 Books in this series are published to communicate the results of Bank research, analysis, and operational experience with the least possible delay. The extent of language editing varies from book to book. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http:// creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: López-Cálix, José R. 2020. Leveraging Export Diversification in Fragile Countries: The Emerging Value Chains of Mali, Chad, Niger, and Guinea. International Development in Focus. Washington, DC: World Bank. doi:10.1596/978-1-4648-1490-7 License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. 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All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e- mail: [email protected]. ISBN: 978-1-4648-1490-7 DOI: 10.1596/978-1-4648-1490-7 Cover photo: © SEYAL-TCHAD Sarl. Used with the permission of SEYAL-TCHAD Sarl. Further permission required for reuse. Cover design: Debra Naylor / Naylor Design Inc. Contents Acknowledgments ix About the Author xi Key Messages xiii Abbreviations xvii Overview 1 Notes 16 References 16 CHAPTER 1 Development Context for Export Diversification in Mali, Chad, Niger, and Guinea 17 Challenges in the quest of export diversification 17 Annex 1A 29 Notes 31 References 31 CHAPTER 2 Why Export Diversification Matters to MCNG Countries 33 Why past diversification efforts failed 34 Rationale for export diversification 36 Notes 39 References 40 CHAPTER 3 Conceptual Approach: The Export Diversification Ladder and Structural Transformation 41 What theory says about export diversification and growth 41 The export diversification ladder 43 Diversification and structural change dynamics 44 Notes 49 References 49 CHAPTER 4 Micro Foundations (1): Identifying Opportunities for Export Diversification 51 Previous efforts at identifying new exports 52 Applying revealed comparative advantage analysis 52 Applying product space analysis: A complementary approach 55 Applying the fitness approach: Another complementary approach 56 Opportunities for export diversification 57 Annex 4A: Technical definitions 59 Notes 60 References 61 iii iv | L EVERAGING EXPORT DIVERSIFICATION IN FRAGILE COUNTRIES CHAPTER 5 Micro Foundations (2): Upgrading Agricultural Value Chains 63 Introduction 64 The position of Mali, Chad, Niger, and Guinea in the typology of global value chains 65 How are global value chains in the key agriculture sector organized? 69 How do the value chains differ in each country? 71 What are the relevant actors at national and regional levels? 73 Scope for diversification: Specific upgrading strategies and policy options 76 Notes 80 References 80 CHAPTER 6 Macro Foundations (1): Revisiting Trade Policy and Logistics 83 Background 84 Pitfalls in the trade policy framework of MCNG countries 86 Trade logistics and facilitation 90 Policy options 94 Notes 99 References 99 CHAPTER 7 Macro Foundations (2): Business Environment and Firms’ Productivity 101 Major obstacles to the investment climate observed in the MCNG countries 102 Measuring the quality of business regulations 108 Cross- country comparisons of firms’ productivity 11 0 Main policy options 115 Notes 120 References 120 CHAPTER 8 Revamping Export Diversification Policies in MCNG Countries: A GVC 2.0 Cluster-Based Approach 121 Need for a new GVC 2.0 development approach to projects in MCNG countries 122 New GVC 2.0 development approach: Introducing cluster- based policies 123 What works and what does not with market incentives 126 Implementing the GVC 2.0 development approach to success and the priority agenda 128 Maximizing Finance for Development and the key role IFC can play in attracting foreign direct investment to GVC 2.0 development 132 Notes 139 References 140 Bibliography 141 Boxes O .1 Learning from failure: The case of COPEOL in Guinea 2 O.2 Learning from a promising start- up: The case of SOGUIPAH in Guinea 3 5.1 Benchmarking- based methodology for classifying global value chains 64 5.2 Learning from best practices worldwide for process and product upgrading 75 6 .1 High informality in regional trade in West Africa 84 6.2 The role of border bazaars 89 6.3 Estimating the fiscal impact of trade reform: The case of Niger 91 Contents | v Figures O .1 Since 2016, Mali, Chad, Niger, and Guinea have been classified in the “Alert” category in the Fragile States Index 5 O.2 Per capita GDP income levels in Niger, Mali, and Chad have broadly stagnated over 35 years 7 O.3 Export diversification ladder 8 O.4 Decomposition of labor productivity growth in Niger, 1990–2015, and other world regions, 1990–2005 9 1.1 Human Capital Index in Sub- Saharan Africa (low-income countries only) 21 1.2 Degree of export diversification, 2015 21 1.3 Exports, by product, 2015 22 1.4 Exports destinations, 2015 23 1.5 Growth in oil vs. non- oil exports in Chad 23 1.6 Nonresource export growth in Guinea, Niger, and Mali 24 1.7 World export shares of selected regions, 2002–06 25 1.8 Regional exports of selected regions 25 1.9 Share of foreign value added in exports, 2008– 12 26 1.10 Sub- Saharan Africa: Depth of integration into global value chains, average 1991– 95 vs. 2008– 12 26 1 .11 Inward FDI flows over time for MCNG countries, 2007– 16 27 1.12 FDI typology: Share of Mali’s greenfield FDI by type, 2012– 16 28 1.13 FDI typology: Share of Mali’s greenfield FDI by type and sector, 2012– 16 28 1.14 FDI typology: Share of Guinea’s greenfield FDI by type, 2012– 16 28 1.15 FDI typology: Share of Guinea’s greenfield FDI by type and sector, 2012– 16 28 2 .1 Since 2016, Mali, Chad, Niger, and Guinea have been classified in the “Alert” category in the Fragile States Index 34 2.2 Niger, Mali, and Chad per capita GDP income levels have broadly stagnated over 35 years 35 2.3 Oil price slumps have dramatically deteriorated Chad’s fiscal position 37 2.4 Rainfall and GDP growth: Niger’s growth has featured wide booms and busts, due largely to the fact that the economy relies on rainfall and the price of uranium 37 3.1 Export diversification ladder 43 3.2 Manufacturing value added in Chad vs. Sub- Saharan Africa 45 3.3 Mali’s industrialization is stagnating 46 3.4 Guinea: Correlation between sectoral productivity and changes in employment share, 2006– 15 47 3.5 Niger and Chad’s correlation sector productivity and changes in employment, 1990– 2015 and 2005– 15 48 3.6 Chad: Decomposition of labor productivity growth, 2005– 15 48 3.7 Decomposition of labor productivity growth between Niger, 1990–2015, and world regions, 1990– 2005 48 4 .1 Product space for Chad, Guinea, Mali, and Niger, 2014–15 56 4.2 Mali, Chad, and Niger’s economic fitness, 2012– 17 58 5.1 Governance in agricultural commodities value chains in Chad, Mali, Niger, and Guinea 70 5.2 Typical product diversification path from live bovine meat for countries with Niger’s capabilities 77 5.3 Typical product diversification path from sesame seed and shelled cashew for countries with Mali’s capabilities 78 5.4 Typical product diversification path from sesame seed and gum arabic for countries with Chad’s capabilities 78 6 .1 Chad’s trading partners: Predicted vs.
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