Comparative Study on Export Policies in Egypt, Morocco, Tunisia and South Korea

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Comparative Study on Export Policies in Egypt, Morocco, Tunisia and South Korea Comparative study on export policies in Egypt, Morocco, Tunisia and South Korea African Development Bank Banque africaine de développement Comparative study on export policies in Egypt, Morocco, Tunisia and South Korea Banque africaine de développement African Development Bank 3 Foreword A robust structural transformation is critical to shape a country’s ability to generate a faster and more inclusive growth that is required to tackle social challenges, such as unemployment and poverty. Structural transformation driven by export is highly relevant for Egypt, Morocco and Tunisia; countries where several trade strategies and export promotion policies have been undertaken but are yet to take full advantage of their export led-growth strategies. Progress has been insufficient to secure the types of benefits experienced by other countries which have pursued higher value production for their economies. Considering the social and political upheavals that dominated the region in 2011, the current context is particularly opportune to identify the gaps and obstacles encountered in the reforms initiated over the past decade and to address the constraints which hinder Egypt, Morocco and Tunisia from moving up the value chain—a move which could create more and better quality employment opportunities for the youth of the region. This study considers how increasing productivity and moving up the value chain could enhance economic development in North Africa. Particular attention is paid to how development of export- led growth strategies requires a host of improvements to the institutions and services that support trade. Egypt, Morocco and Tunisia have to create an environment where a greater diversity of productive activities can thrive, in particular, activities that are more complex than the current export basket. The study has been prepared with in-depth dialogues with the Governments of Egypt, Morocco and Tunisia, through in-country 4 missions and consultation seminars. This effort made the study more relevant to the situation in the countries and makes the policy recommendations concrete. The report is a milestone in guiding the Bank Group interventions in these countries as well as providing an intellectual basis for policy dialogues between the Bank and its stakeholders in the areas of trade and industrial policies. We believe that the report will provide policy makers with insightful information on strategic industries to promote in order to move up the value chain. We hope that it will create a good basis for dialogue in this critical juncture to ensure a healthy economic recovery from the social and political unrest of 2011. Zondo Sakala Vice President Country and Regional Programs and Policy African Development Bank Group 5 Preface During the first decade of the Millennium, with annual growth rates averaging nearly 5 percent and good progress towards achieving the Millennium Development Goals, developments in North Africa seemed to cement the view that the economic gains were translated into improvements in the real and perceived wellbeing of people in the region. The social and political changes that started in Tunisia in the early days of 2011 and spread across the region, therefore, took many, if not most observers by surprise. However, many of the underlying issues and key drivers behind the calls for change had been emerging for some time-notably the very high levels of unemployment among youth, educated youth in particular; the entrenched and, in some cases, very high levels of poverty and within borders regional disparities; and the modest progress in areas related to voice, accountability and transparency. What North African countries experienced in the lead-up to the social and political upheavals in early 2011, it could be argued, was the classical dual middle income country trap: insufficient political, social, and economic inclusion combined with a pattern and level of economic growth insufficient to absorb a growing and better training labor force. North Africa’s decent growth performance has generally reflected high rates of investment rather than major gains in productivity. Experience from fast-growing emerging regions elsewhere in the world, South East Asian notably, suggests that diversification and economic transformation towards higher value- added production are essential ingredients in bringing about productivity gains and stronger and more sustained economic growth-dimensions that are likely to go a long way in addressing some of the key challenges related to inclusion and job creation in North Africa. 6 Comparative study on export policies South Korea-a country with almost no natural resources yet posting a thirteen-fold increase in per capita GDP during the 1980-2010 period-is a particular instructive example in that it has achieved sharp increases in economic productivity and economic welfare through policies that an export-oriented strategy that enabled rapid access to technology and firms to capture scale economies. This report explores the South Korean experience, with a view to extract the lessons that may be gained for North African policymakers, and provides a diagnosis of the conditions and constraints to growth prevailing in Egypt, Morocco and Tunisia along with preliminary, hands-on policy recommendations on how these countries could improve their exports in the strategic industries. We hope policy makers, researchers, and representatives of the civil society and the private sector in North Africa will find this report useful and we would welcome any feedback you may have. Jacob KOLSTER, Regional Director, North Africa A - AfDB Nono MATONDO-FUNDANI, Regional Director, North Africa B - AfDB Comparative study on export policies 7 Acknowledgements This Comparative Study of Export Policies in Egypt, Morocco, Tunisia and South Korea was produced by a team of AfDB staff and external experts. Its content and the topic selected were discussed with the Governments of Egypt, Morocco and Tunisia. Jieun Choi (Country Economist of the AfDB) conceptualized and task managed the study. Meanwhile, Yasser Ahmed (ORNA, AfDB) provided substantive contributions to the preparation of the study while Kaouther Abderrahim (ORNA, AfDB) provided intellectual inputs and coordination with Governments and other authors throughout the preparation of the Report. The report was prepared under the supervision of Jacob Kolster, Regional Director (ORNA, AfDB), who provided critical analytical advice and quality assurance. Chapter I, Structural transformation in Egypt, Morocco and Tunisia: A comparison with China, South Korea and Thailand, was drafted by Prof. Ricardo Hausmann and Sebastien Bustos from Harvard Kennedy School. Chapter II, Country Specific Context - Review of existing policies and identification of constraints, was drafted by Jieun Choi and Kaouther Abderrahim of the AfDB. Chapter III, The Korean Experience and Policy Implications for North African Economies, was drafted by Prof. Jihong Kim from Korea Development Institute. While preparing each chapter, the authors visited the countries and interacted with the Governments, scholars, and civil society in order to make the findings of the study useful to each country. The Report benefited from useful comments from peer reviewers: Bernard Hoekman (Director, International Trade Department, 8 Comparative study on export policies World Bank), José Guilherme Reis (World Bank) and Thomas Farole (World Bank). Ahmed Galal (Managing Director, Economic Research Forum) and Hoda Selim (Economic Research Forum) also provided their intellectual inputs and concrete suggestions to improve the quality of report. The Report benefited from practical advice of Gil Seoung Kang (EDRE, AfDB) and Christian Lim (OSGE, AfDB) for scoping of the study. The Report also received analytical comments and editing from William Shaw. Special thanks go to Nono Matondo-Fundani, Regional Director (ORNB, AfDB), and Amani Abou Zeid, AfDB’s Resident Representative in Morocco, who supported the preparation of the report and provided strategic guidance to the team. Barry Boubacar-Sid (ORNB, AfDB), Abou Amadou Ba (ORNB, AfDB), Charles Muthuthi (EGFO, AfDB), Almaz Amine (EGFO, AfDB), Tarek Amar (EGFO, AfDB), and Charaf Eddine (ORNA, AfDB) provided support and inputs during the consultation missions. Aoua Dembele and Sana Miled (ORNA, AfDB) provided logistical assistance. Special thanks goes to the Korean Government and the Korean Trust Fund at the AfDB, which provided substantial financing without which the study and the report would never have seen the light of day. In this context, prompt support from Kazumi Ikeda-Larhed (Head of Unit, ORRU, AfDB) and Belinda Jeruto Chesire (ORRU, AfDB) regarding the budget and administration was forthcoming throughout. The Report has been prepared as a part of the on-going policy dialogues between the Bank and the countries in the areas of trade and industrial policies. During the consultation mission to Egypt, Morocco, and Tunisia, the team met the Government officials, private sector, and Civil Society of each country and received their feedback. Comparative study on export policies 9 In Egypt, the mission visited Ministry of Finance (Ms. Amina Ghanem and Ms. Omneya Ramadan), Mr. Mohamed Ragui (Export Fund), GAFI, and the Industrial Zone in Giza. The team presented the initial findings of the study and received comments from various scholars from ERF, ECES, ENCC, American University of Cairo and other institution such as Social Fund for Development, African Exim Bank, and the private
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