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Industrialize Africa: Strategies, Policies, Institutions and Financing

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Industrialize Africa: Strategies, Policies, Institutions and Financing Indus front + back cover.qxp_Indus front + back cover 16/11/2017 18:50 Page1 IndusIndus frontfront ++ backback cover.qxp_Induscover.qxp_Indus frontfront ++ backback covercover 16/11/201716/11/2017 18:5018:50 Page1Page1 Indus front + back cover.qxp_Indus front + back cover 16/11/2017 18:50 Page1 INDUSTRIALIZE AFRICA Strategies, Policie, Institutions, and Financing ©2017 African Development Bank Group DISCLAIMER. The findings, interpretations, and conclusions expressed in this report are entirely those of the author(s) and do not necessarily express the views of the African Development Bank Group, its Board of Directors, or the countries they represent. TABLE OF CONTENTS FOREWORD ...............................................................................................................................................9 INTRODUCTORY REMARKS ........................................................................................................................ 11 1 Market Inefficiency ......................................................................................................................................................12 2 The Inevitability of Industrial Policies .....................................................................................................................13 3 Instruments for Sustainable Industrial Policy ....................................................................................................15 SECTION 1: INDUSTRIALISE AFRICA: HOW TO DO IT .............................................................................. 17 Chapter 1 ............................................................................................................................................ 19 Industrialisation – A Primer ............................................................................................................................................................19 1. What is Industrialization and What Role Does It Play in Economic Development? ...............................20 2. Is Industrialization Still Relevant in an Increasingly Digitized Global Economy?¨ .................................22 3. What Exactly is Industrial Policy and can a Government Avoid It? ..............................................................26 4. What are the Theoretical Foundations for Industrial Policy? .........................................................................27 5. Can “Horizontal” be Separated from “ Vertical” Industrial Policies? ..............................................................30 6. Do African Countries have the Capacity to Design and Implement Industrial Policy?.........................31 7. What Institutions can Foster African Industrialization in a World of Global Value Chains?.................33 8. How Could Development Banks Support African Industrialization? ..........................................................39 9. In Conclusion ...................................................................................................................................................................41 References ........................................................................................................................................................................44 Chapter 2 ............................................................................................................................................ 49 Inclusive and Sustainable Structural Transformation in Africa .........................................................................................50 Overview ...........................................................................................................................................................................51 1. Introduction .....................................................................................................................................................................51 2. Structural Transformation towards Manufacturing Matters ..........................................................................51 3. Africa’s Manufacturing Sector Performance Is Mixed .......................................................................................52 4. Multiple opportunities .................................................................................................................................................59 5. Some Key Bottlenecks Must Be Removed to Unleash Potential ...................................................................62 6. Bold and Innovative Policies Are Required for Successful Transformation ...............................................67 7. Conclusion ........................................................................................................................................................................74 References ........................................................................................................................................................................75 3 INDUSTRIALIZE AFRICA Strategies, Policie, Institutions, and Financing Chapter 3 ............................................................................................................................................ 81 Industrial Policy in Africa: From State Leadership to the Investment Climate .............................................................81 1 Introduction .....................................................................................................................................................................89 2 State Ownership and Import Substitution (1960-1980) ..................................................................................89 3 The Triumph of the “Washington Consensus” (1980-2000) ............................................................................85 4 Consolidation and New Directions (2000 - ) ........................................................................................................90 5 Conclusions ......................................................................................................................................................................97 References ........................................................................................................................................................................98 Chapter 4 .......................................................................................................................................... 103 Africa’s Manufacturing Sector: Building Complexity .......................................................................................................... 104 1 Introduction .................................................................................................................................................................. 104 2 Africa’s Demographic Dividend and Structural Transformation ................................................................ 104 3 Employment, Manufacturing and Increasing Complexity ........................................................................... 109 4 Conclusion ..................................................................................................................................................................... 122 References ..................................................................................................................................................................... 124 Chapter 5 .......................................................................................................................................... 137 Ethiopia: Lessons from an experiment .................................................................................................................................... 138 1 Beyond boom and bust in Africa ........................................................................................................................... 138 2 Industrial policy and structural transformation in Ethiopia ........................................................................ 138 3 Policy learning and industrial policies................................................................................................................. 147 4 The challenges of structural transformation ..................................................................................................... 149 5 Conclusion: Lessons from an experiment .......................................................................................................... 152 References ..................................................................................................................................................................... 155 SECTION 2: LEARNING FROM EXPERIENCES .......................................................................................... 159 Chapter 6 .......................................................................................................................................... 161 Industrial Policy and China’s Economic Development: From the Perspective of New Structural Economics .....162 1 Economic Development Requires the Synergy of “Efficient Market” and “Facilitating State” ......... 162 2 Necessity of Industrial Policy and Analysis of the Reasons for Its Success and Failure ...................... 163 3 Five Categories of Industries in China and the Role of the Government................................................ 163 4 Conclusion ....................................................................................................................................................................
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