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BBOOOOKK OOFF AABBSSTTRRAACCTTSS

UoM-WCP INTERNATIONAL CONFERENCE ON

INTERNATIONAL AND INVESTMENT

Le Meridien Hotel,

19-21 December 2011

TABLE OF CONTENTS

Paper/ Title Page Abstract No.

1 Trade Orientation and of CEMAC : 1 Opportunities from the Chinese . D. Diaw & A. Lessoua

2 Trade openness and Economic Growth: Evidence From Mauritius 3 B. Seetanah, J. Matadeen & J. S. Matadeen

3 Firms and Export Spillovers: Evidence from 4 B. Kinuthia

4 Do Domestic Firms Learn to Export From Foreign-Owned Firms? Evidence 5 from Kenya D. Kamuganga

5 Global Financial Crisis and Stock Market integration: A study on the impact 6 of the Global Financial Crisis on the level of Financial Integration between the US and Indian Stock Market S. Gangadharan & C. Yoonus

6 Predicting the Impact of a Euro Currency Crisis on Exports Level in 7 Mauritius: A Panel Gravity Model B. Nem & T. Lukho

7 Trade and Finance – Post-Crisis Regulatory Reforms and the Future of 8 Developing Nations P. Pooran

8 How Regional and Global Development Banks Responded to the Financial 9 Crisis? S. Kingah & A. Salimzhuarova

9 Multi- and Product Evidence on Trade Costs and Comparative 10 Advantage Prof D. Greenaway, D. McGowan & Prof C. Milner

10 Does Induce or Deter Repayment Capacity of 11 Developing Countries? Looking Through the Lens of the US Subprime Crisis I. Ramlall

11 Export Diversification and Economic Growth. Case Study of a Developing 12 Country: Mauritius S. Matadeen

12 Leveraging On Trade Opportunities with Non-Traditional Partners: The 14 GCC- Perspective E. Devadason, A. Baharumshah & T. Subramaniam

II

13 Reality check for the SADC, EAC and COMESA Tripartite Area: 15 Problems and Prospects A. Saurombe

14 Pulled Along or Pushed Aside: Do Small Countries In Regional Negotiating 16 Groups Gain From Trade Agreements? A. DiCaprio

15 Regional Trade Integrations: A Comparative Study of African RTAs 18 B.Seetanah, V. Sannassee & V. Tandrayen-Ragoobur

16 An Estimation of the Trade Effects of the East African Community (EAC) 19 Customs Union Agreement Prof S. Buigut

17 The Impact of International Trade and Maladministration of Energy on the 20 Environment Causing in Mauritius D. Michel

18 Cross-Border and Integrated Reforms of Trade and Environmental 21 Tax Policies in Large Prof P. Hatzipanayotou, N. Tsakiris & Michael S. Michael

19 A Dynamic Econometric Study of Aggregate Output, Energy and Exports in 22 Mauritius – Implications for Climate Policy R. Sultan

20 Mineral Depletion, Fuel Imports and Development In the 23 Energy Scarce Country over 1970-2006 H.Chen & B. Singh

21 The Impact of Tourism on Non Tourism Sectors of the 24 R. Durbarry

22 Les Introductions en bourse à la Bourse Régionale des Valeurs 25 Mobilière(BRVM) : Théories et Analyse du cas des sociétés non cotées du Bénin B. Aderomou & Mr L. K. N’Dri

23 The Evolution Of Cross – Border Higher within the WTO/ 26 GATS:The Case of Mauritius K. Padachi & Mrs A. Mohamudally – Boolaky

24 Flow of Global Capital in the Post Globalised and its Impact on 27 Economic Growth Prof R. Dhankar

25 Investment Opportunities in Indian Micro Small and Medium Enterprises 31 Sector S. Muhnot

26 The Challenge Of The Double Bottom Line: What Can 33 Investment Vehicles Learn From The SRI World? L.Urgeghe

III

27 FDI, Trade and Growth, a Causal Link? 34 R. Bissoondeeal & N. Driffield

28 FDI and Spillovers Efficiency 35 S. Fauzel

29 Examining the Role of Foreign Direct Investment in ’s Economic 36 Development Prof Zu'bi M.F. Al-Zu'bi 30 Foreign Direct Investment and Export Performance of the Ugandan 37 Sector: Empirical Evidence J. Nannyonjo

31 Factors that Contribute to Declining Trade Share and Comparative Advantage 39 of Processed and Agricultural Products in the SADC Region. M. Kalaba & J.Kirsten

32 The Asian Eye on African Trade and Investment: A Panel VAR Approach 40 V.Tandrayen-Ragoobur, H. Kasseeah & B. Sooreea-Bheemul

33 The Rise of : A New Fear of Trade Competition for Mauritius? 41 B. Nowbutsing & S. Ramsohok

34 Zoning In on Special Export Zones in Mauritius 42 V. Tang

35 No Chinese Jackets Required: Quotas, Consumer Prices and Import 43 Quality in T.Naughtin ,Lawrence Edwards & Neil Rankin

36 What Drives Intra-African Export Survival and Export Depth? 44 D. Kamuganga

37 India’s Demand-driven Inflation: A General Equilibrium Investigation 46 Prof J. S Bandara & E. Valenzuela

38 Testing the J-Curve Hypothesis between South Africa and Its Six Major 47 Trading Partners G.K Setou, T.M Mokoena & E. Ndou

39 High Growth Firms: What Makes You Tick? – A Cross-country Panel 48 Investigations Y. Temouri & Jun Du

40 Financial Globalisation and International Financial Integration: Analysis of 50 Impact of Financial Integration on Economic Activity, Trade Openness and Macroeconomic Volatility in Africa G. Mougani

41 Trade and Financial Openness, Institutional Quality, and Financial 51 Development in Sub-Sahara Africa (SSA) Prof J.P. Asiama &M. Hakeem

IV

42 Payment by Letter of Credit (LC) In International Trade: Disputes on Fraud 52 Exception with special reference to Malaysia R. Che Hashim

43 The Impact of the REPAs-EU Negotiations On The SADC Configuration 53 And Trade Protocol: Integration-Disintegration, Stumbling Blocks Or A Glimpse Of Hope for a Developing Africa? R P Gunputh

44 Globalisation and Rights in Africa: Implications for Trade and 54 Investment Prof J.C Mubangizi

45 Globalisation: An evaluation of the Prospects and Challenges and The Call 55 for a Global Mind Transformation N. Becceea and His Holiness Swami Paramananda

46 Can Trade Liberalisation Reduce Regional Disparity and Bring Long-term 57 Peace and stability in Post-War ? Prof J.S Bandara & A. Naranpanawa

47 Investment Climate and Technical Inefficiency in Vietnamese Manufacturing: 59 Firm-level Panel Data Evidence Dinh Long Pham

48 Investigating the Effects of Foreign Direct Investments on Mass 60 Customization Capability in Jordan Prof Zu'bi M.F. Al-Zu'bi

49 On the Determinants of Foreign Capital Flows: Evidence from an African 61 Economy N. Beghum, Prof R V Sannassee, B. Seetanah &M. Lamport

50 Africa’s Endemic Dependency on Foreign : a Dilemma for the Continent 62 Prof R. Ilorah

51 Strategic Policy Responses to Aid and Investment Flows: Growth and 63 Development in ECOWAS V. Tang & R. Simson

52 Country of Origin Attitudes in Mauritius and its Implications for Investment 64 and Trade R .Ramsaran-Fowdar & Sooraj Fowdar

53 Trade Liberalization Policy: Is it working for Jordan? 65 A. Taleb

54 Exchange Rate Volatility and Macroeconomic Performance in Small Island 66 Developing States V.Polodoo, K. Padachi & B. Seetanah

55 The Impact of Exchange Rate Volatility on Bilateral Trade Flows between 67 Mauritius and USA D. Ramdhony & P.Ramphul

V

56 Phasing Out of the MFA: Impact on Women Workers in the Mauritian EPZ 68 Sector V. Tandrayen- Ragoobur & Y.A. Ayrga

57 Raising the role of women in International Trade: A developing country’s 69 perspective N. Ragodoo

58 MNC Legitimacy and Labour CSR: A Case Study 70 Prof R. Croucher

59 Assessing Cultural Adaptation Competencies at Senior Executive Level: The 71 Case of Expatriates in Mauritius Prof. A. Ramgutty-Wong & I.Dusoye

60 Local Government’s Role in Trade for in South Africa 73 Prof B.C Mubangizi

61 Market Competition in Export Cash Crops and Farm 74 N. Depetris Chauvin & Guido G. Porto

62 Why are Quality Matters Essential In Agricultural Markets? The Case of Rice 75 Marketing in T. Rakotondramanitra

63 The Changing Agri-Food Export Composition: - Strategic Options For 77 Sanitary and Phytosanitary (SPS) Compliance in Mauritius H. Neeliah & S. Neeliah

VI

Abstract No: 1

Trade Orientation and Economic Growth of CEMAC Countries: Opportunities from the Chinese Market

Albert Lessoua1 Ecole Supérieure du Commerce Extérieur, France [email protected]

Diadié Diaw University of Rouen, France [email protected]

Since the early 1990s, there has been an increasing trend towards economic with the aim of increasing international and regional trade. In 2011 approximately 490 trade agreements were notified to the WTO, 200 of which, dealing with goods and services, are now in force. has accelerated regional integration as a necessary and major driver in the development of emerging economies. According to Balassa (1961), regional economic integration can be seen as both a process and a state: a process because it works to eliminate all forms of economic discrimination among the countries’ economic units and a state because it is defined as the absence of economic discrimination among national economies. Regional integration has played an important role in Africa; since the 60s, African countries have been eager to enter into economic agreements. In central Africa, this process began in 1962, when the treaty establishing the Customs and Economic Union of Central Africa (UDEAC) was signed in Brazzaville; it would go into effect in 1966. This union developed as a force for market integration and in 1994 became the Economic and Monetary Community of Central Africa (CEMAC). Its six member states are (Yaoundé), (Bangui), (N’Djamena), Equatorial (Malabo), Republic of Congo (Brazzaville), and (Libreville). The goal of this union is to facilitate the economic integration begun with the UDEAC and to increase regional and international trade. The group’s main goals are as follows:  Harmonizing member countries’ economic policy and legal environment;  Seeking ways to create an effective common market;  Creating mechanisms to prevent, manage, and resolve regional conflict.

Overall, the CEMAC’s primary goal is to develop harmonious relations among its member states by strengthening economic and trade ties. While these are praiseworthy goals, many studies of the effects of trade agreements among developing countries have not been able to discern any positive effects (Cadot, De Melo & Olarreaga, 2000; Longo & Sekkat, 2004; Mayda & Steinberg, 2006; Schiff, 1997; Subramia & Tamirisa, 2001; , 2000; Yeats, 1998). These results have led scholars to question whether developing countries are in fact inclined to do business with each other. However, the countries of the CEMAC, like other developing countries, have recently expanded their trade with emerging countries, especially China. Now that this rising economic power has opened its markets, China has managed to strengthen its

1 , business, and diplomatic ties with the rest of the world. It is widely believed 1Presenter that China has initiated trade relations with African countries primarily to satisfy its need for natural resources (OECD, 2006; UNCTAD, 2005). Certainly China needs these trade relations to maintain consistent access to natural resources, and the countries of the CEMAC are particularly attractive partners because of the vast reserves of energy resources that make up a major share of their exports. This new situation raises a major question about trade relations among the CEMAC member countries and the economic growth they may enjoy due to their specialization in natural resources: will trade with China create sustainable growth in these countries, or will it have a long-term negative effect because it promotes and further preserves specialization in natural resources? To answer this question, we study in this paper the growth dynamics of the CEMAC countries in relation to their trade orientation, their specialization, and the inflow of capital in the area. To this end, we use panel data estimation methods (both static and dynamic), which allow us to better understand the relations among the studied variables and which provide us with better results, particularly the dynamic one. The main conclusion we reach is that specialization in natural resources has a negative effect on growth. However, this effect is somewhat mitigated by the orientation towards China. Moreover, despite some slight progress in regional integration among CEMAC countries, weak interregional trade has failed to contribute to economic growth in the area. These findings raise many challenges for CEMAC countries to improve their integration in international trade. The first on is to build efficient sector policies to capture and better allocate foreign capitals, since FDI seems to affect positively their economic growth. Also, CEMAC countries need to identify ways to improve trade complementarities among them and thus protect themselves from various crises like those of recent years, such as food shortages and the financial debacle. They need also to develop common development and trade strategies based on good global economic governance. The efficient trade coordination between CEMAC countries will allow them to better benefit from trade with emerging partners, like China.

Keywords: Regional integration, Natural resources, International trade, CEMAC JEL Classification: F, O, Q

1presenter

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Abstract No: 2

Trade Openness and Economic Growth: Evidence from Mauritius

Jeevita Matadeen Mauritius [email protected]

Jay S Matadeen University of Mauritius [email protected]

Boopen Seetanah University of Mauritius [email protected]

The idea that international trade is an engine of economic growth dates from long back, and even now an overwhelming body of literature affirms a strong and positive link between trade liberalization and . However, most of these studies focused on developed countries. Indeed, while literature from developing countries are scant, those from Small Islands Developing States (SIDS), like Mauritius are almost nonexistent. The long-held belief of an underlying positive association between trade liberalization and growth has prompted trade liberalization to be a prominent component of policy advice in many developing countries. Nevertheless, despite the shift towards greater openness in developing countries, recent evidence suggest that the benefits of trade reforms have either not been as high as expected, or response across countries have been varied - with some benefiting, and others losing from the trade reform. Taking into account the diverging response of trade liberalization in different countries, and the absence of such a scrutiny in a SIDS like Mauritius, the need to rigorously analyze the link between openness and economic development has become unavoidably crucial in the island. This paper endeavors to innovatively scrutinize the relationship between trade liberalization and economic growth in Mauritius, using bi-annual data for the period 1989-2009, through a Vector Error Correction Model (VECM). The stationary properties and order of integration of the data are tested using the Augmented Dickey-Fuller (ADF) test on all the time series data. The variables are stationary at first differences, and so Johansen co-integration tests are then employed to determine whether the variables are co-integrated. In order to examine both the long run and short run relationships between trade liberalization and economic growth, the VECM is then constructed. Finally, the direction of causality between openness and economic growth is determined by applying Granger-Causality tests.

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Abstract No: 3

Do Domestic Firms Learn to Export From Foreign-Owned Firms? Evidence from Kenya

Bethuel Kinyanjui Kinuthia University of Nairobi, Kenya [email protected]

Attracting foreign direct investment (FDI) inflows has been a major concern of most governments in developing countries. The rationale for this is that FDI is believed to bring many benefits to the host countries in terms of productivity, employment, technology among others. This paper investigates the existence of export spillovers in Kenya for the period 2000-2005 using firm level panel data. More specifically export spillovers in the manufacturing and the channels of of such spillovers are analysed. Using a linear probability fixed effects model, the results show that foreign owned firms positively affects domestic firms’ decision to export through the demonstration effects. However, the results show evidence of negative spillovers through the competition effects. Positive export spillovers are concentrated in domestic firms with high levels of exports. There is also evidence of self selection, where only the most productive firms venture into the export market. Hence, policies aimed at encouraging firms increase their export levels as well as productivity will increase domestic firms‟ participation in the export market.

Keywords: foreign firms, domestic firms, export spillovers, Kenya

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Abstract No: 4

What Drives Africa’s Export Diversification?

Dick Nuwamanya Kamuganga1 The Graduate Institute, Geneva, Switzerland [email protected].

This paper uses HS 6 digit level data on Africa’s trade flows to establish new and confirm existing stylized facts on Africa’s export diversification patterns. Based on Helpman, Melitz and Rubinstein (2008) theoretical and empirical framework on determinants of bilateral trade flows, the paper empirically attempts to answer the following question: What drives Africa’s export diversification i.e., product and market diversification? I utilize information from Africa’s trade matrix to test the role of: (i) transport costs and geography; (ii) economic size; (iii) regional trade agreements; (iv) unilateral trade preferences; (v) tariffs; (vi) financial development; and (vii) institutional and governance quality on promoting or hampering Africa export diversification into new products and new markets. First, potential tradable products are not exported from Africa and the incidence of “zero exports” in its trade matrix is strongly and positively correlated with: (i) distance as proxy for transport costs, (ii) differences in economic size between the African exporter and importing country; and (iii) quality of institutions and governance. Second, I find that lowest priced goods are leading goods on extensive margin but only in intra- African markets (basic manufactured products, and beverages etc) i.e., Africa exports more products to poor nations and very few concentrated products to rich nations (especially, minerals, basic metals, wood and oil products). Third, I find negligible effects of unilateral trade preferences in increasing the range of products African beneficiaries export on the extensive margin. I find that trade diversification patterns in Africa, therefore, are driven by: (i) transport costs and geography; (ii) Intra-African trade barriers; (iii) quality of products; (iv) income of the trading partner; and (v) financial development. The key policy implications are: first, if African exports have to penetrate distant markets in rich countries, they have to invest in moving up the value chain; Second, Africa could do more on diversifying its exports by bringing down the barriers to intra-regional trade; third, the findings suggest a revision of unilateral trade preferences to enhance increase in range of goods exported by the beneficiary countries; and fourth, African countries need to focus on improving quality of institutions supporting international trade as well as improve on financial development supporting export activities.

Keywords: Extensive Margin of trade, Firm Heterogeneity Models, unilateral trade preferences & regional trade agreements JEL classification: F1, F13, F14, F15

1PhD Candidate, International Economics, Graduate Institute of International and , Pavillion Rigot, office R13, Avenue de la Paix 11A, 1202 Geneva. Email: [email protected]. Tel:+41788642348.

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Abstract No: 5

Global Financial Crisis and Stock Market integration: A study on the impact of the Global Financial Crisis on the level of Financial Integration between the US and Indian Stock Market

Srinivasa Rao Gangadharan Faculty, Institute for Financial Management and (IFMR) Tamil Nadu, INDIA [email protected]

Chirackel Ahammed Yoonus Full – time Research Scholar Institute for Financial Management and Research (IFMR) [email protected],

This paper is to examine the impact of the Global Financial Crisis on the level of financial integration between the US (S & P 500) and the Indian stock market (CNX S & P Nifty) indices. Using the daily returns of the two indices from March 2005 to November 2010, we have classified our analysis into four periods - Pre-Crisis, Crisis, Post-Crisis and the Whole period. This paper looks into the existence of co-integration between the two indices in the above periods with the help of the Johansen Co-integration analysis. We use Vector Autoregression (VAR) Model to examine the dynamic relationship, since there doesn’t exist any co-integrating relationship between the two indices. The output of the model is justified with the help of Variance Decomposition Analysis (VDC). We have also cross examined the above analysis with another equally powerful US Stock Index (DOW Jones) to clarify the skepticism that the results are not unique to a particular US Index. The paper finds that there is no co-integration between the two indices in all the four periods. The dynamic relationship reveals that the return from the US Stock market indices in the post crisis period was influenced not only by its own previous day’s return but also by the previous day’s return of the Indian Stock market indices. The VDC analysis justifies this outcome. The paper identifies that Global Financial Crisis has endorsed India a safe place to invest as witnessed by the resumption of investment by the FIIs in the Post-Crisis period.

Keywords: Global Financial Crisis, Co-integration, Stationarity, Akaike Information Criteria, Vector Auto Regression (VAR) Model, Variance Decomposition Analysis (VDC).

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Abstract No: 6

Predicting the Impact of a Euro Currency Crisis on Exports Level in Mauritius: A Panel Gravity Model

Boodeo Nem Middlesex University, Mauritius [email protected]

Takesh Lukho University of Mauritius [email protected]

A major cause for concern lately has been the Euro-zone crisis. The inherent instability in some of the European countries like Greece and Portugal has initiated prompt response from the European Authorities. However, the risk of an economic crisis remains imminent, unless members have crafted a dedicated mechanism to deal with upsurges of such nature. This paper explores the potential spillover effects of a Euro-currency crisis on the export sector of Mauritius. Given that European markets take up about 70% of our traditional exports (like sugar, textile and apparel), uncertainties about the future of the Euro is at the detriment of higher exports towards the Euro zone. Pressure of the Greek- debt and failure of the Portuguese economy might lead, at some point in time, to a depreciation of the Euro, which will subsequently cause a plunge in Mauritian exports towards the Euro zone. However, given that the exact level of depreciation is yet to be known, a scenario based analysis is presented in this paper, with experiments of a 2%, 5%, 10% and 12% decrease in the value of the Euro over a year. To model this, the standard gravity model of trade is enhanced to include dynamics in the form of an autoregressive distributed lag (ARDL) of order 2. Pooled Panel OLS regression is used and the experiment outputs are presented in the form of impulse response functions. Data on Mauritian exports to was extracted from UN Comtrade at a one-digit S.I.T.C level for the years 2000-2010. The paper also provides some policy recommendations for the Mauritian export sector with regard to the Euro zone crisis.

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Abstract No: 7

Trade and Finance – Post-Crisis Regulatory Reforms and the Future of Developing Nations

Priya Nandita Pooran Lauterpacht Centre [email protected]

Prior to the global economic crisis, the need for significant reforms in multi-lateral organizations including in the area of quota reforms was already acknowledged and progress under-way in this area in response to the changes in the . The onset of the global financial crisis in 2008 has changed the policy agenda as well as the challenges facing developing nations. This requires review of the policy considerations in this area. Not only does the crisis raise further issues as a result of the inter-linkages in the global economy but it has brought into focus new challenges resulting from globalization and further need to address the differences in impact and response for developing nations. This in turn has produced a wide-ranging reform agenda including reviews of institutional effectiveness and policy and provided the impetus for further reforms. Yet, there remains a need to address the impact of the reform agenda on a range of countries – BRIC’s and developing nations. The paper shall address these issues and shall answer the question: How does the changing policy and economic governance framework following the global economic crisis affect the path towards development for developing countries, change the priorities identified and what choice of further reforms would best promote sustainable and long-term development at national, regional and international levels. It shall also address the question of the changes needed in the area of regionalism in order to provide an effective response to globalization and as a way of advancing development and growth for developing countries in a post-crisis era.

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Abstract No: 8

How Regional and Global Development Banks Responded To the Financial Crisis?

Stephen Kingah UN University Institute on Comparative Regional Integration Studies [email protected]

Aliya Salimzhuarova Freibourg University

The resolved in one of its Working Groups in 2008 to address issues of reform in regional and multilateral development banks. This was partly in recognition that some of the rules pertaining to the structure and financing of these institutions needed reform to appositely reflect and deal with the current global economic challenges. The paper presents some of the responses that were used by 14 global, regional and sub regional development banks to address problems of re-capitalization in client states. The approaches of the regional banks are juxtaposed with those of the World Bank. It is argued that greater coordination between the regional banks and the World Bank, seminal indications of which have been observed of late should be fostered. The rules that govern these banks are ripe for reform that better reflects the importance of keener coordination. The regional and sub-regional development banks treated include: African Development Bank; ; Inter American Development Bank; European Bank for Reconstruction and Development; ; Islamic Development Bank; Eurasian Development Bank; Development Bank of Southern Africa; East African Development Bank; Caribbean Development Bank; West African Development Bank, the Central African Development Bank and . The paper is relevant because it considers how the actions of development banks impact on in client countries. Problems of re-capitalization surfaced in many client countries. Such problems impacted investments in trade, tourism, and agriculture. It is argued that greater mutual interaction between the banks is vital. The founding rules can be adapted to reflect the need for such exchange and coordination, the latter task of which the World Bank could discharge.

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Abstract No: 9

Multi-Country and Product Evidence on Trade Costs and Comparative Advantage

David Greenaway University of Nottingham, United Kingdom

Danny McGowan

Chris Milner University of Nottingham, United Kingdom [email protected]

This paper investigates whether differences across countries in overall country specific trade costs affect comparative advantage and the commodity composition of trade in similar fashion to international differences in factor endowments. Industry export shares across up to 71 countries and 158 manufacturing industries for five year periods from 1972 to 1992 are shown to be greater in factor-intensive industries for countries well endowed with those factors (physical and ) and in trade cost sensitive industries for countries with relatively low national trade costs; these relationships being more evident in exporting to global markets than in exporting to local or regional markets.

Key words: Trade costs, comparative advantage JEL Classification: F11, F14

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Abstract No: 10

Does International Trade Induce or Deter Debt Repayment Capacity of Developing Countries? : Looking through the Lens of the US Subprime Crisis

Indranarain Ramlall University of Mauritius [email protected]

This paper develops a credit risk model that focuses on the repayment capacity of developing countries in the world with specific focus given to international trade. The research is innovative and timely, chiefly following the adverse effects of the US subprime crisis on debt states of countries in the world. Alternatively stated, such a study is considered to be of paramount significance to sieve out as to whether international trade acts as an inducement or a deterrence to the debt repayment capacity of developing countries. Should a positive effect prevail, this implies that international trade does assist countries in their endeavour to generate positive effects. Otherwise, this would be symptomatic to international trade being mere resource misallocations. Hence, important policy implications are expected to be derived from this study. To derive richer results, dynamic panel data methodology is employed, let alone a pooled estimation approach to disentangle to adverse effects of the world’s worst financial/economic/debt crisis on the repayment capacity of the developing countries.

Keywords: Credit Risk Model, International Trade, Developing Countries

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Abstract No: 11

Export Diversification and Economic Growth. Case Study of a Developing Country: Mauritius

Sanjay Matadeen Middlesex University, Mauritius [email protected]

Conventional trade suggest that a country should specialize in the production of goods and services in which it has a comparative advantage. Modern trade however contends that international trade need to be accommodated with modern industrial characteristics ; the features of which are increasing returns to scale(IRS) and imperfect competition( Helpman and Krugman,1985) .A country cannot solely depend on particular industrial activities and should be more proactive to offset national factor disadvantages (Arip et al, 2010).

Export diversification has been a recurrent topic in . There is a belief that it is correlated with an acceleration of growth for developing countries (Lederman and Maloney, 2003 and Herzer and Nowak-Lehmann, 2006). High export specialization implies high sensitivity to sector-specific shocks leading to high volatility of export revenues affecting the import capability of the country and resulting in underinvestment when investors are risk adverse (Dawe, 1996 and Bleaney and Greenaway, 2001).

If consumers are assumed to have a preference for variety then lower export diversification will also imply lower export volumes (Funke and Ruhwedel, 2001). Moreover ,high concentration limits productivity growth since it leads to neither an increase in the efficiency in which inputs are used (Feenstra and Kee, 2004), nor learning by exporting (Al-Marhubi , 2000 and Agosin , 2007).Furthermore , the Prebish- Singer thesis ( Prebish 1950 , Singer 1950) argues that vertical export diversification from primary products to manufactures is very important as primary goods generally exhibit a declining terms of trade.1

Imbs and Wazziarg (2003) in a seminal contribution found a U-shape pattern between domestic sectoral concentration and per capita income across countries .Countries at first diversify and then specialize as they move to higher levels of income.

In Mauritius, assessment of the impact of export diversification on economic growth has received limited attention. This paper will address this issue by analyzing the link between export diversification and economic growth. Also, the findings of this study will serve to guide government’s future policy actions on the export diversification as well as assist other developing counties.

1 See Herzer and Nowak -Lehmann (2006)

12

Using time series economics, the paper will seek to study the relationship between export diversification and economic growth in Mauritius over the period 1980-2010. The Auto –Regressive Distributed Lag (ARDL) bound approach to cointegration and an augmented Solow Growth model will be used to quantify the effects of export concentration indexes on economic growth. Several concentration indexes will be tested to check the robustness of the model. Data sources will include exports statistics from the UN COMTRADE database extracted from WITS, data from the World Bank Indicators and the Central Statistical Office (CSO) of Mauritius.

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Abstract No: 12

Leveraging On Trade Opportunities with Non-Traditional Partners: The GCC-Malaysia Perspective

Evelyn S. Devadason University of Malaya, Malaysia [email protected]

Ahmad Zubaidi Baharumshah University Putra, Malaysia

Thirunaukarasu Subramaniam University of Malaya, Malaysia

Though the Gulf Cooperation Council (GCC) is not a traditional trading partner of Malaysia, trade connectivity with the region has expanded over the recent years, culminating to the GCC-Malaysia agreement that was sealed in January 2011. The framework agreement allows for both parties to explore and leverage on areas of huge potential in trade and investment to set the stage for the eventual finalizing of a free trade agreement. Latest estimates indicate that trade between the GCC and Malaysia reached USD11 billion in 2010 (MATRADE, 2011). Notwithstanding that, the GCC still remains an insignificant trading partner of Malaysia (see also Abu-Hussin, 2010; EIU, 2011). However, networking with this is of tremendous importance to the small but highly trade dependent Malaysia, as the recent economic global downturn has exposed the vulnerabilities of the country’s over-reliance on traditional partners such as the , Europe and Japan. In pursuit of trade diversification, it has now become the Malaysian national policy (BNM, 2010; NEAC, 2010) to orientate international trading strategies towards West Asian markets, particularly with the GCC.

In this respect, it is timely to take stock of the trends, prospects and policy challenges for this emerging GCC-Malaysia trade pact. The paper first examines analytically GCC- Malaysia trade patterns spanning the period 1980-2010. Thereafter, the econometric exercise seeks to estimate determinants of bilateral trading relationships and compare speed of adjustments across broad industrial product groups and with individual GCC states within the context of the GCC-Malaysia trade. Finally, the paper assesses the possibility of the (UAE) and/or , being at the forefront of the growth and trade developments with Malaysia, emerging as the ‘core’ player(s) in increasing trade connectivity between the GCC region and Malaysia.

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Abstract No: 13

Reality check for the SADC, EAC and COMESA Tripartite Free Trade Area: Problems and Prospects

Amos Saurombe University of South Africa [email protected]

On 12 June 2011 the Heads of State and Government representing members states of the three regional economic communities (RECs) of the East Africa Community (EAC), the Common Market for East and Southern Africa (COMESA) and the Southern African Development Community (SADC) signed an agreement to launch the negotiations that will lead to the establishment of a Tripartite FTA consisting of all threes RECS. This has been hailed as a major milestone not only for the three RECs involved but also for the whole African continent whose efforts through the had long regarded the three RECs as building blocs towards the ultimate establishment of the African Economic Community (AEC). In this regard the Tripartite FTA is therefore a step in the right direction for African continental integration. However a lot of work will have to be done before the FTA is realised. The work includes reduction of tariffs and non tariff barriers from Cape to Cairo. The cost of doing business on the continent is still a major stumbling block because of the poor status of , railways and communication lines. Many African countries still jealously protect their sovereignty especially when regional institutions endeavor to exercise the powers necessary to ensure respect for community law. In short the tripartite FTA will require a harmonised legal framework that gives effect to the objectives for deeper integration in the region. This paper is an attempt to unpack the kind of challenges expected in the negotiation and establishment of the Tripartite FTA. Furthermore it is critically important to determine Africa's preparedness for this kind of venture. Ultimately the paper will demonstrate that the cost of non integration far outweighs the cost of integration. For that reason the paper will conclude with a number of recommendations on how to attain the objectives of the tripartite FTA.

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Abstract No: 14

Pulled Along Or Pushed Aside: Do Small Countries In Regional Negotiating Groups Gain From Trade Agreements?

Alisa DiCaprio UNU-WIDER, Finland [email protected]

As the Doha Round has struggled, bilateral trade agreements have become the vehicle of choice to move the trade regime forward. In the early days of the WTO, such agreements were largely between countries at similar levels of development, either among regional neighbours or bilaterally. But recently, GATT Article XXIV agreements have taken on a new characteristic – in many of today's negotiations, one of the negotiating parties is a regional bloc rather than a single country.1 At first glance, the popularity of bilateral liberalization might be expected to have a net positive impact on development.2 This can come from increased trade flows, harmonization of standards regimes, technical assistance, and decreased frequency of trade disputes. While it has been shown that these gains often come at the expense of domestic policy space (DiCaprio and Trommer, 2010), there is not yet definitive evidence that this will balance the positive outcomes in the long run. However, these estimates are based on a bilateral agreement between two countries. It is unclear that an overall positive impact will result when one of the negotiating partners is a regional bloc. The complicating factor is that most regional agreements have one or several members that take the lead both in the design of the regional institutions and subsequently in the choice of negotiating partners for the region.3 Their role in institutional design has been shown to result in uneven benefits from regional integration either on purpose (Moncarz et al, 2009) or by virtue of their comparative advantage (Venables, 2001). But the impact of their choice of partners has largely been overlooked. Since leading countries design regional integration agreements to fit their interests, we might expect that trade agreements between their regional bloc and another country will also favour their country-specific preferences at the expense of other countries in the region. To treat this question we explore the extent to which positive developmental outcomes can be expected by the smallest members of regional blocs4 that have negotiated bilateral trade agreements and

1This is true across continents. All of the African regional groups are negotiating at least with the EU and SACU has launched (and stopped) negotiations with China and the United States; ASEAN has negotiated partnerships with China, India, Japan, , and ; MERCOSUR has negotiated partnerships with , and . 2This is also recognized in the DDA which states that negotiations will "take into account the developmental aspects of regional trade agreements" (paragraph 29). 3Antiekewicz and Whalley (2006) refer to them as "large population, rapidly-growing, non-OECD economies."For example, South Africa in SADC, and in MERCOSUR, India in SAFTA. 4This class of countries would include countries like in ASEAN, or in MERCOSUR, or Mauritius in SADC.

16 what features of the new region-to-country trade agreements are most likely to provide them. In particular, we ask – are these members being pulled along with the region to gain positive trade outcomes they would not be able to accomplish on their own; or do benefits largely bypass them in favour of the larger countries as they also assume the negative impacts of the tariff reductions and other rules?

The answers to these questions are particularly salient for developing countries involved in the DDA negotiations over regional trade agreements. DDA has recognized that RTAs can be developmental and that the rules in the WTO need to be revisited. But any revisions need to be applicable for the range of possible design choices. This paper seeks to contribute both to the literature on the relationship between trade agreements and economic development, and also to the policy debate about the redesign of WTO rules on trade agreements.

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Abstract No: 15

Regional Trade Integrations: A Comparative Study of African RTAs

Vinesh Sannassee University of Mauritius [email protected]

Boopen Seetanah University of Mauritius [email protected]

Verena Tandrayen-Ragoobur University of Mauritius [email protected]

The objective of this study is to analyse the effect of regional trade agreements on African trade. We focus on three regional trading groups namely EAC, COMESA and SADC and examine whether their effects on African trade differ. Second, the differential impacts are discussed in terms of the problems and challenges that limit RTAs’ trade benefits and potentials. Our methodology firstly rests on the application of the gravity model for 37 countries within the EAC, COMESA and SADC from 1996 to 2009 to model whether the three regional economic communities are trade creating or trade diverting. Further, in line with our second objective, a first survey of various institutions in the region including different Secretariats, Government Agencies, Investment Promotion Agencies as well as Private Consultancy firms was administered to gauge the characteristics, performance, obstacles and remedies thereto of selected African RTAs, namely SADC, COMESA and EAC. A second questionnaire was also administered to firms operating in countries which are members to one or more of the RTAs under investigation. The main aim in the present cause was to gauge the benefits and/or potential benefits, presently being drawn and/or to be had by the firms. In addition, the firms were also queried as to the obstacles or impediments which were inhibiting their firms’ performance (through an open-ended question). Finally, the firms’ respondents were also requested to reason through the potential benefits which may accrue to their firms as a result of the proposed tripartite regional grouping between SADC, COMESA and EAC member countries.

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Abstract No: 16

An Estimation of the Trade Effects of the East African Community (EAC) Customs Union Agreement

Steven Buigut American University, Dubai [email protected]

The East African Community (EAC) integration effort started with the signing of the “Agreement for the Establishment of the Permanent Tripartite Commission for East African Co-operation” in 1993. Since then, EAC has advanced its integration agenda rapidly. The community signed a customs union treaty in 2004, which was progressively implemented over a five year period from 2005. This research basically attempts to answer the question whether the implementation of the customs union has helped improve intra region trade () and if this trade is coming at the expense of non-members (trade diversion). The objective of the study therefore is to estimate the trade effects (trade creation and trade diversion) of the customs union agreement. This is done in a panel data frame that controls for country pair, importer- year and exporter-year fixed effects. Real bilateral import data is obtained from the IMFs Direction of Trade Statistics (DOTs), covering the years 1996 -2009 (14 years), for seventy one (71) potential trading partners for the EAC countries from Africa, Western Europe, Eastern Europe, North and South America. The results suggests a positive effect from the customs union (increased intra-EAC trade), but with some trade diversion in imports and exports (decrease in regional imports from outside, and decrease in regional exports outside the bloc).

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Abstract No: 17

The Impact of International Trade and Maladministration of Energy on the Environment Causing Climate Change in Mauritius

Didier Michel University of Mauritius [email protected]

Climate change in Mauritius is no more a myth but a reality. This can be seen by the way that our ecosystem is evolving. Unpredictable heavy rain, unbearable temperature, erosion of our , drastic reduction of in our lagoons, this list is not exhaustive but it clearly shows that climate change is affecting our lives. Is globalisation to be blamed for those changes? The objective of this paper is firstly to analyse the impact of international trade on the environment in Mauritius. Mauritius is a point reference in the African region and to the rest of the world for it has been able to adapt itself to fit into the international economic trend. To be able to do so changes have had to be made, this article will look at whether those changes have been and will still be beneficial for the country. If not, are there solutions to the issue of climate change? The second objective of this paper is to analyse the maladministration of energy in Mauritius which is also contributing to climate change. One example is Mare Chicose the landfill where it is estimated that solid waste produced in Mauritius is about 380, 000 tonnes per year and is expected to reach 418, 000 tonnes in 2014. This is due to the rapid and urbanisation during the past decade. In order to avoid degradation of our environment solutions have to found, this paper will propose solutions.

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Abstract No: 18

Cross-Border Pollution and Integrated Reforms of Trade and Environmental Tax Policies in Large Economies

Nikos Tsakiris University of Ioannina [email protected]

Michael S. Michael University of [email protected]

Panos Hatzipanayotou Athens University of Economics and Business [email protected]

In the presence of cross-border pollution between two large open economies, which set their trade and environmental taxes non-cooperatively, we examine the optimal adjustments (i) in Nash emission taxes when, say due to trade liberalization, countries must reduce their Nash tariffs and export taxes, and (ii) in Nash trade taxes when, say due to international environmental agreements, countries must change their Nash emission taxes. It is shown, among other things, that due to trade liberalization not all countries adjust in the same way their Nash emission taxes. That is, in the present context, freer trade leads some countries to adopt laxer while others stricter environmental tax policies.

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Abstract No: 19

A Dynamic Econometric Study of Aggregate Output, Energy and Exports in Mauritius – Implications for Climate Policy

Riad Sultan University of Mauritius [email protected]

The Intergovernmental Panel on Climate Change clearly states in its report of 2007 that global warming is unequivocal. Changes in climatic conditions are expected as greenhouse gases accumulate and fossil energy consumption is among the important sources of greenhouse gases. Developing countries have also initiated strategies to boost exports to reap the benefit of exports led economies. However, exports and economic growth are linked within an economic and social context where energy consumption is essential. This study attempts to examine empirically dynamic causal relationships between aggregate output, energy consumption, exports, capital and labour in the case of Mauritius using the time series data for the period 1970-2010. An augmented neo-classical aggregate production model is used incorporating exports with a view of testing the exports-GDP nexus and the energy-GDP nexus in addition to a supplementary hypothesis between exports and energy consumption. This research tests the interrelationships between the variables using the bounds testing to cointegration procedure and the Johansen cointegration test. The cointegration tests results will indicate whether there exists a long-run relationship between the variables in which the dependent variable is aggregate output. Within this study, an augmented form of Granger causality analysis is conducted amongst the variables to identify potential long run and short run causality. The long-run relationship of aggregate output, energy consumption, exports, capital and labour equation is also checked for the parameter stability. The results also provide some important policy recommendations especially for and climate change policy.

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Abstract No: 20

Mineral Depletion, Fuel Imports and Development Sustainability In the Energy Scarce Country Fiji over 1970-2006

Hong Chen University of South Pacific,Fiji [email protected]

Baljeet Singh University of South Pacific,Fiji [email protected]

This paper investigates the relationship between mineral exploitation, energy consumption and development sustainability in Fiji. Apart from domestic and external demands for minerals, energy consumption in Fiji has also been included to model mineral exploitation. This is due to the fact that, with no sources, Fiji has to import fuel from overseas to produce energy which nowadays becomes a vital factor of production, and pay huge fuel bills at the expense of other resources including minerals. Therefore, at the first stage of this analysis the paper attempts to identify the correlation between mineral depletion, domestic demand, external demand and demand for paying fuel import bills. On top of that, given domestic demand proves to be a significant contributor to mineral depletion in Fiji, investigation of development sustainability is further carried out by looking at environment and human capital’s response to economic activities.

Keywords: mining, mineral depletion, energy, development sustainability, domestic demand, external demand, fuel import bills, carbon emission,

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Abstract No: 21

The Impact of Tourism on Non Tourism Sectors of the Economy

Ramesh Durbarry University of Technology, Mauritius [email protected]

The contributions that tourism have on an economy are well documented in terms of job creation, foreign exchange, taxes and income, among others. While most studies are descriptive in nature, very few studies, with the exception of the scanty ones using the computable general equilibrium models, have been able to assess the contribution that tourism has on other sectors of the economy. Very often destinations are challenged to the real impact of tourism on other sectors and to whether sectoral linkages exist for spillover effects. Using panel data, this study attempts to explore the impact that tourism has on non-tourism sectors by making use of a simple growth model. The of this study is that it uses a dynamic panel data to shed light on short run and long run impacts, if any, of tourism on the non-tourism sectors.

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Abstract No: 22

Les Introductions en bourse à la Bourse Régionale des Valeurs Mobilière(BRVM) : Théories et Analyse du cas des sociétés non cotées du Bénin.

Léon Konan N’DRI Université de Cocody, France [email protected]

René Babarindé ADEROMOU Université d’Abomey-Calavi, France [email protected]

This research analyzes the initial public offering of companies. Our objective is to determine the factors which block the initial public offering of Benin companies. The approach followed to argue this research led us, in a first part, to justify our theoretical location and to develop our hypotheses of . This first stage directed us to the existing literature. We built an argumentation around the factors of perception of the BRVM, of motivation and hesitation of the Managers of the unlisted companies of our sample. The crossed analysis of three factors allows us to notice a correlation between perception factors and motivation. More the factors of hesitation surpass those of the motivations. The influence of the factor culture on the decision to be quoted in the BRVM was revealing. It emerges from our research that when the hesitations surpass the motivations, the decision of initial public offering is influenced.

Keywords: Initial public offering, BRVM, Benin Companies.

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Abstract No: 23

The Evolution Of Cross – Border Higher Education within the WTO/ GATS: The Case of Mauritius

Kesseven Padachi University of Technology, Mauritius [email protected]

A. Mohamudally Boolaky University of Technology, Mauritius [email protected]

The General Agreement on Trade in Services (GATS) is the first international legal trade agreement established following rounds of international trade negotiations by members of the World Trade Organisation (WTO) whose objective is to liberalise and regulate social services, including education, by trade rules. Mauritius was among the 69 signatories to the GATS in 1997 although there are no specific commitments that have been made.

Education in Mauritius, has contributed largely in the country’s success, since its accession to . Furthermore, over the past decade, and in view of meeting new challenges, the Mauritian economic landscape has been gearing towards a configuration where knowledge industry emerges as a growth pole for our economy. The traditional form of cross border flow in has been for students to migrate to other countries such as UK, India, Australia, France and more recently South Africa and South East Asian Countries. This has been the tendency till the late 1990s and it has gained momentum with globalization. However, increasingly students are taking advantage of the new option – that is seeking higher education offered by a foreign university without leaving their home country

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Abstract No: 24

Flow of Global Capital in the Post Globalized India and Its Impact on Economic Growth

Raj S. Dhankar University of Delhi, India [email protected]

During the last four decades the network of economic links binding nations has become very strong. World trade has grown faster than GDP. Foreign investments have increased rapidly. International financial markets have expanded enormously in their scale and in their diversity of instruments. New technologies have revolutionized international communications and altered the long-standing patterns of production and employment. The progressive liberalization of trade policies negotiated during the consecutive rounds of trade talks has lowered tariffs and stimulated trade, which has been reinforced by increase in private capital flows. Measuring the degree of economic integration among countries by international trade and FDI flows and stocks, it is found that for the world as whole, the ratio of the FDI stock (inward and outward) to GDP has increased steadily since 1980. The ratio of world FDI flows (inflows and outflows) to GDP has also risen but not steadily. The ratio of world trade (imports to exports) to world GDP has remained relatively constant during the same period. Thus, during the two decades, the global integration seems to have proceeded faster through foreign direct investment than through trade. During the past decade, the pattern of capital inflows into developing countries and economies in transition has changed. Unlike most of the 1980s, when financial flows to developing countries and economies in transition were strongly depressed because of external debt crisis, since the 1990s it has been characterized by more than tripling of the inflow of financial resources into these countries. The increase in net aggregate resource inflows has been accompanied by substantial changes in their structure also. The most striking structural change is that virtually all growth in financial flows has come from private sources. Another significant change has been the shift from bank to non-bank debt financing. Equity financing is the other large and growing private source of finance for developing countries and economies in transition. Portfolio equity flows, negligible before 1990 grown significantly. There has been significant increase in FDI flows to developing countries and in their share in world FDI over the past two decades. However, the bulk of FDI stock originates from and is located in developed countries. Among the developing countries six largest host countries in 2010 are: China, India, (China), Brazil, Argentina and . India started globalizing in the early 1990s, and since then it has witnessed huge growth in global capital flow. Realizing the important contribution that private foreign investment can make to economic development, India has introduced many policy reforms to attract them, especially so, since 1991. Restrictive investment regimes have been liberalized. In addition, various types of incentives are being offered to attract foreign direct investment. Greater attention is also being paid to making the macro-economic environment more conducive to foreign investors. Provision of infrastructure and other

27 support services is being targeted. Financial sector reforms are being undertaken to facilitate financial flows to various forms. The changes introduced through the industrial Policy Statement of 1991 and other reforms include, the abolition of industrial licensing system except in a few strategic sectors, the introduction of FEMA in place of FERA, the automatic approval of FDI under powers delegated to the Reserve Bank of India, the opening up of areas like mining, power generation and telecommunications, insurance, defense, print media and very recently retail sector earlier closed to FDI, the trade liberalizations and tariff reduction and the rupee convertibility on current account. While the policy is said to be “continuing with change”, the measures introduced since 1991 are sharp departures from the past. The current Indian policy in terms of openness does not rank much below those of other major FDI seeking countries. The scheme of automatic approval of foreign equity up to 50% in the listed priority sector is a unique feature of the Indian policy. In fact, from the policy perspective, India scores over China which has been attracting a major share of the total FDI flows into the developing world. China’s FDI policy is more selective in terms of the types and sectors and restrictive with all FDI proposals having to get prior approval on a case by case basis without any specific rules and guidelines. In contrast, Indian policy is more transparent, rendering entry and operation of FDI generally in a market determined environment. Nonetheless, Indian policies are regarded as relatively less favorable. There are some specific aspects, (e.g. lack of transparency in the approval of FIPB/SIA cases, regulations at the levels of state government for accessing operating facilities and rates of taxes and tariffs especially with regard to corporate taxation, capital gains tax and customs duty) which need detailed review and revisions for rendering the Indian environment relatively more competitive for FDI inflows than before. Statistical profile of foreign investment shows that the trends in FDI inflows and technology transfer moves in tune with the nature of policy phases. Among the four identifiable policy phases since 1948, (Phase I – 1948 to 1966, Phase II-1967 to 1979, Phase III-1980 to 1990), the current phase, i.e. post 1990s engineered the highest growth in foreign collaborations, quantum of investment inflow and the technology transfer. It is further concluded that the era of post globalization has led to the following: I. The composition of net capital flows shows that non-debt-creating flows have increased form 6% in the eighties to 67% during the last two decades.

II. The share of debt creating flows has declined from 94% to 37%. External Commercial Borrowings have been the highest contributor to debt creating flows.

III. There has been accretion of exchange reserves on account of foreign investment to the extent of 71%.

IV. Among the total FDI inflow during the post-liberalization period, FDI through SIA route has been the most important channel in India.

V. The liberalization policy of the government seems to have improved the investment climate of the country for foreign investors so far as the approvals for foreign collaboration agreements are concerned. However, the actual inflow of

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foreign direct investment in India compared with approvals, shows that only 52% of the approved amount has flown in India from 1991-2010. The post- approval hassles, setting up of Foreign Investment Promotion Council in place of Indian Investment Centre, ambiguous agenda of state governments on foreign investment, overestimating Indian market, not-competitive Indian banks, political instability and lack of interaction with gap between impressive foreign investment approvals and sluggish actual foreign direct investment inflows.

VI. Largest amount of FDI flows is from Mauritius, which has a share of 18.1% in actual FDI inflow during 1991-2010. It is estimated that apart from double treaty, protected cell legislation could also be responsible for this increased inflow. USA, Japan, Germany and UK are other important originating countries.

VII. Regression analysis results show that there is a direct link between global capital flow and economic growth in India. Foreign Institutional Investors are the primary source of portfolio investment in India. However, the Indian stock market has not benefited through FII investment significantly. BSE Sensitive Index is moderately correlated with FII investment and is positively correlated with GDP. This implies that market development depends on the economic growth of India and not significantly on the portfolio investment by FIIs. Instead investments influence the share price movements and create volatility in equity market. The theoretical analysis suggests that policy liberalization is very necessary but not a sufficient determinant of FDI and other determinants have to come into play for investment to flow into the country. India legs other countries in the emerging markets universe. Latin America and China both consistently attracts Foreign Direct Investments (FDI) flows that are ten times bigger than India. India, with its status as one of the fifth largest economies in the world in purchasing power parity (PPP) terms and homes to one sixth of humanity, can easily tap five to ten times the current level of inflows just by implementing the right policies and creating the right environment. This target has to be viewed not against the context of current level of international flows to India, but against what India can achieve, if it manages to exploit even a small part of its immense economic potential. India can also build on its significant non-resident Indian base to attract international capital. This opportunity can be specifically exploited by floating several dual-resident schemes that unshackle NRI investments into India with relatively relaxed repatriation benefits. FDI flows continue to be the most desired form of external inflows-they are long term and less volatile. The only class of external flows to the emerging markets that have not reversed and are sustained even today are FDI flows. FDI flows are bring several benefits to the destination country, in terms of : i. Capital at globally competitive costs, ii. Technological know-how, iii. Global standards for quality, iv. Innovation, design, production, marketing, and management techniques, v. Higher standards of labour and total factor productivity, and vi. Increased competition that prompts the local firms to move towards global levels of efficiency.

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India has to urgently take well-thought out and decisive measures to effectively complete for global capital flows and to correct a situation in which economies of much lower consequence and potential are racing far ahead of India. The attractiveness of India as a destination for FDI, can be enhanced by streamlining procedures, removing bureaucratic hurdles and by taking other steps that will improve returns of direct investments in India. The perceived hurdles in India often relate to: i. Poorly defined policies, ii. Multi-layered bureaucratic structures, iii. Perceptions of iv. Delays inherent in the Indian judicial and administrative systems. v. Difficulties relating to the restructuring of businesses, vi. Lack of flexibility in restructuring manpower, and vii. Lack of a pragmatic exit policy for companies. India can no longer afford to live in an island with respect to issues that concern the business and investment community. The competition for global investment capital is intense. India must act decisively to correct this anomaly in which economies of much lower consequence and significance in terms of economic, market, and business potential are able to attract much larger flows,

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Abstract No: 25

Investment Opportunities in Indian Micro Small and Medium Enterprises Sector

Sushil Muhnot Small Industries Development Bank of India [email protected]

The Micro, Small and Medium Enterprise (MSME) sector has emerged as a strong pillar of Indian economy. Indian MSMEs have, since the opening up of the economy, undergone significant transformation to become a dynamic and versatile set of enterprises comprising a vital segment of fast-growing Indian economy. Their adaptability, resilience and ability to make cost-effective products and services, with a high degree of flexibility have made them a force to reckon with at the domestic and international levels.

The contributions of the MSME sector have been significant in terms of industrial output and exports of the country. MSMEs in India contribute more than 45% of industrial manufacturing and generate around 32% of the nation’s total exports. The sector is also the second largest source of employment. The MSMEs offer a unique win-win proposition for a country like India. They not only enable creation of jobs at lower capital costs relative to other sectors, but also require smaller capital investment and effectively utilize local resources and talent.

Since the introduction of economic reforms and enactment of the MSMED Act 2006, the Indian MSME Sector has undergone several structural changes. Based on the results of the Fourth Census of MSMEs in 2006-07, the number of MSMEs was estimated at 26.1 million, employment at 59.73 million persons, manufacturing over 8000 products and 72% and 28% of the MSMEs are manufacturing enterprises and service enterprises respectively. In terms of size of the enterprise, 94.67% are micro enterprises, 5.05% are small enterprises and the rest 0.25% are medium enterprises.

Known as the nursery-beds of innovation and entrepreneurship, the inherent and intrinsic competitive advantages of MSMEs are globally established. This burgeoning sector in India is already an instrumental vehicle of instilling efficiency in our economy. The MSMEs in India are a dynamic and versatile set of enterprises forming a major segment of the Economy. These enterprises have the ability to make cost-effective, low volume products and services with a high degree of flexibility.

Exports have played a very important role in enhancing contribution of MSMEs to Indian economy, with an average annual growth rate of over 20% in rupee terms since FY 1991-92. In a span of over three decades, i.e. from FY 1973-74 to FY 2006-07, exports from MSME sector has increased by more than 514 times. The percentage share of exports by MSME sector in India’s overall exports has increased from 15.58% in FY 1973-74 to 31.06% in FY 2006-07. Comparison of efficiency of this sector vis-à-vis the efficiency of the overall manufacturing sector as reflected by the data available from Annual Survey of India (ASI) reveals that the MSME sector is better employment 31 generating sector. The organized industrial sector requires an investment of US $13,200 to generate employment to one person, whereas the MSME sector generates employment at investment US $ 10,000 per person.

The Indian MSMEs also enjoy comparative advantage over some of their larger counterparts in terms of higher capital productivity, greater resilience, adaptability and more importantly, a greater spirit of entrepreneurship. If one looks beyond the political boundary, Indian MSMEs have been marching strongly over their counterparts in other countries on many fronts, if not all. An attempt has been made to draw a modest comparison between MSMEs in India and China. Drawing a parallel between the two emergent players in the international economy, the Global Competitiveness Index 2009 lists the advantages of Indian economy spanning over diverse range of indicators, such as, stronger institutional foundations, higher degree of business sophistications, superior efficiency of the labour and goods markets, better education and training and swifter technological readiness. Drawing a parallel, one can presumably identify some areas where Indian MSMEs excel the Chinese ones, such as, Good Corporate Governance, low -labour cost, the ease of access and availability of latest technology to India’s manufacturers, mostly in the MSME sector, etc. In the area of business sophistication, Indian MSMEs are gaining in terms of local supplier quantity and quality, value chain breadth and sophistication in production processes.

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Abstract No: 26

The Challenge Of The Double Bottom Line: What Can Microfinance Investment Vehicles Learn From The SRI World?

Ludovic Urgeghe1 Université de Mons, Belgium [email protected]

The Microfinance Investment Vehicles industry is today at a bottleneck. In a context of a damaged reputation due to recent crises, the whole field of microfinance and especially the investment vehicles, funded by public money and by socially inclined investors, have to demonstrate and justify their commitment to social returns. We use a conceptual framework of impediments to SRI (Juravle and Lewis, 2008) to identify the main impediments to the integration of social performance as a decision criterion for microfinance investments, by analyzing qualitative interviews of 9 microfinance fund managers. To the best of our knowledge, this is the first study to apply this framework to microfinance. The overall finding is that while social performance is recognized by respondents to be an important topic for the industry, fund managers still don’t give a strong role to social criteria in investment decisions. We argue that this is linked to a number of major impediments such as the tendency to believe that microfinance is social per se, the lack of standardization in social performance tools and also a loose regulation regarding social reporting.

1 The author would like to thank the Association of the Luxembourg Fund Industry for funding and supporting this research, in particular Tomas Seale, Jean-Luc Neyens, and Laetitia Hamon. The author would also like to thank LuxFlag for their help in contacting the participants to the study.

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Abstract No: 27

FDI, Trade and Growth, a Causal Link?

Mayang Pramadhani

Rakesh Bissoondeeal Aston University [email protected]

Nigel Driffield [email protected]

This paper examines the causal relationships between inward direct investment, growth and trade in for the period 1990 – 2004. We seek to establish whether there were strong/weak positive or negative associations between the presence of multinational enterprises and Indonesian exports and imports activity and to determine the causal links between the variables. We show that there are indeed causal links between FDI and trade, and that these are sensitive to growth effects, something that is generally ignored in the literature.

Keywords, FDI exporting, growth, causality JEL F21, F14, O11

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Abstract No: 28

FDI and Spillovers Efficiency

Sheereen Fauzel University of Mauritius [email protected]

Policy makers in developing and transition economies place attracting FDI high on their agenda, expecting FDI inflows to bring needed capital, new technologies, marketing techniques and management skills. All of these potential benefits of FDI are viewed as important; however particular emphasis is placed on the contribution of FDI to increasing productivity and competitiveness of the domestic industry as an external effect of the latter in the host country. It has been noted in the literature that different types of spillovers may provide important benefits for the countries which host them. To examine the effect of FDI, an industry level panel data covering selected manufacturing firms in Latin America and Asia is being used. The empirical results show that the presence of FDI does benefit local firms but the effect differs between groups of industries. A positive and more statistically significant spillover in industries with low technology gap is analysed as compared to that of a high technology gap.

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Abstract No: 29

Examining the Role of Foreign Direct Investment in Jordan’s Economic Development

Zu'bi M.F. Al-Zu'bi University of Jordan [email protected]

Purpose – This paper aims to investigate the role of the Foreign Direct Investment in Jordan’s Economic development by looking at the , human capital, Labour, and domestic investment. Design/methodology/approach – The Study uses the panel data model across Jordan’s 12 governorates between the years 2000-2010. Data was collected from several Jordanian public sources (Ministry of Industry and Trade, Statistics Bureau, and Ministry of Finance), and then analysed using different statistical models. Findings – The results reveal a significant positive effect between Foreign direct Investment and Economic Growth, however the dimensions of Technology transfer and Human capital showed weak contribution to the growth of the Economy from the Foreign Direct investment Inflows. Research limitations/implications – The results reveal that Foreign direct Investment between the years 2000 -2010 contributed to the growth of the GDP, however the important effects of human capital development in terms of skilled labour, Technology transfer, knowledge transfer acquisition of technical Know-How methods, productivity spill-overs and externalities did not materialize . These results suggest that FDI companies have, as yet, had little effect on the overall economic sector which signals that their aggregate effect on the economic growth is limited only to the increase in the stock of capital. The findings of this study provide new information about the role that FDI have played in economic development in Jordan. However, further studies could expand the conclusions reached here by having in-depth analysis into the different practices of the FDI companies in Jordan. Nevertheless, these results have important implications for policy makers as well as investors and, as they highlight the importance of putting in place measures to ensure the anticipated benefits of FDI which will lead to greater economic growth. In that context, this paper adds valuable insight into economic development in Jordan, specifically, the different dimensions added and their effects in the last 10 year.

Keywords: Foreign Direct Investment, Jordan, Economic Growth

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Abstract No: 30

Foreign Direct Investment and Export Performance of the Ugandan Manufacturing Sector: Empirical Evidence

Justine Nannyonjo Bank of , Kampala [email protected]

Uganda has attracted increasing amounts of Foreign Direct Investment (FDI) over the last decade. FDI flows to Uganda stood at US$ 654.4 million in 2009/10, up drastically from 2001/02, when investment was US$150 million. FDI accounted for an average of 5% of GDP over the last five years. Attraction of the FDI has been mainly attributed to economic reforms of the 1990s and subsequent favourable macroeconomic management. There has been a long debate on whether FDI is a means of stimulating export performance of the host countries. A widely shared view is that FDI promotes exports of host countries through: augmenting domestic capital for exports, facilitating the transfer of technology and new products for exports, facilitating access to new and large foreign markets, and transferring knowledge to the local . On the opposite, it is also acknowledged that FDI can have an adverse impact on growth if it crowds out domestic investment. Therefore, from a policy point of view, it might be that not only the total amount of investment matters, but also the way it is distributed between domestic and foreign capital.

While there are several theoretical treatments of the link between FDI and exports, there is limited empirical analysis of this link on the African economies. The objective of the proposed study is to estimate the potential effects of FDI inflows on export performance in Uganda over the period 2006-2009, focusing on the manufacturing sector which has been one of the major recipients of FDI and is a major contributor to GDP, exports and employment. The major hypothesis of the study is that FDI has had a positive impact on Ugandan export performance over the period 2006-2009.

To capture and isolate the basics of the FDI-export link, we shall treat FDI as an additional factor to the conventional framework in which the country’s export performance is determined by factor endowments and scale economies. An export function will be specified such that the volume of exports of an industry (X) is a function of several factors: foreign capital Cf (FDI), domestic capital Cd in the industry, the wage rate (W), scale economies (SE), factor intensity (D) and export prices (P). It is assumed that foreign and domestic capital positively affects export performance through their impact on the capability and competitiveness of an industry. A negative link is expected between exports and labour costs as proposed by the conventional factor proportion model, while a positive link is expected between scale economies and exports. In addition, the model will include some control (macro) variables which affect all industries at a given point in time but vary through time e.g. inflation. Firm level panel annual data on the manufacturing sector covering the period 2006 to 2009 will be used in the analysis. The data will be obtained from 3 surveys of 2010, 2009 and 2008 jointly carried out by Bank of Uganda (BOU), Uganda Investment Authority (UIA) and Uganda Bureau of Statistics (UBOS). 37

The paper will be organised in 5 sections. Section one will provide an introduction to the developments FDI inflows in Uganda and export performance of the Ugandan manufacturing sector. Section 2 will provide a theoretical framework of the impact of FDI on exports. Description of the data and the empirical model will be presented in Section 3. Estimation results will be discussed in Section 4, and concluding remarks with policy implications will be given in Section 5.

Key words: Foreign Direct Investment, Export performance, Ugandan Manufacturing sector.

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Abstract No: 31

Factors that Contribute to Declining Trade Share and Comparative Advantage of Processed and Agricultural Products in the SADC Region.

Mmatlou Kalaba University of Pretoria, South Africa [email protected]

Johann Kirsten

The Southern African Development Community (SADC) as well as African countries in general are facing new challenges of realising the pre-recession economic performance. This is in addition to the normal challenges of reducing food insecurity and poverty, and to continue improving the living standards of their citizens. Agriculture, in particular processed products is at the centre of most of the activities that have high likelihood of making most contribution. This is due to its involvement with many people in rural areas, linkages with the rest of sectors of the economy and its utilisation of unskilled labour force. Therefore a thriving agricultural sector has a potential to have more than any other sector. In the proposed paper, the trade patterns of agricultural and processed products will be evaluated in order to determine factors that influence trade in SADC.

SADC as a region and most individual countries have comparative advantage in agriculture. This is based on the fact that the share of agricultural trade in the region is higher than share of agriculture in world trade. However, there are concerns that over time some of the SADC member countries and the region as a whole have been losing comparative advantage in agriculture. Such advantage in processed and high value agriculture products is either low or limited. The situation challenges and limits the sector’s potential to contribute further towards the economic growth and development. This will imply that potential gains from trade as result of low and declining comparative advantage are not being fully realised, at worst they are declining over time.

To evaluate comparative advantage in agriculture and processed products in SADC and individual member states, we will use the Balassa revealed comparative advantage method. Furthermore we will use the gravity model to determine the factors influencing trade in the region. The model will be augmented with additional variables that will capture trade policy, regional integration and trade facilitation. We hope our results show extend the contribution by factors such as infrastructure, corruption, trade facilitation and others on regional trade in agriculture than processed products. We also hope that regional integration variables will enable us to assess the likely impact of the proposed tripartite free trade agreement.

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Abstract No: 32

The Asian Eye on African Trade and Investment: A Panel VAR Approach

Verena Tandrayen-Ragoobur University of Mauritius [email protected]

Harshana Kasseeah University of Mauritius [email protected]

Brinda Sooreea-Bheemul University of Mauritius [email protected]

China and India’s newfound interest in trade and investment with Africa presents a significant opportunity for growth and integration of the Sub-Saharan continent into the global economy. These two emerging economic “giants” of Asia are at the centre of the explosion of African-Asian trade and investment, a striking hallmark of the new trend in South-South commercial relations. China and India each have rapidly modernizing industries and burgeoning middle classes with rising and purchasing power. These two societies are demanding not only natural resource-extractive commodities, agricultural goods such as , and other traditional African exports, but also diversified, nontraditional exports such as processed commodities, light manufactured products, household consumer goods, food, and tourism. It is thus important to observe the nature and contribution of FDI and trade from China and India into Africa. This paper attempts to study the impact of China and India through the vector of trade and FDI on African growth. First, we establish the recent evolution of the pattern and performance of trade and investment flows between Africa and Asia, especially China and India and analyse the factors that have induced such changes in the bilateral trade and investment flows between the two continents. Second, we investigate the inter linkage effects between trade, FDI and growth across 48 Sub Saharan African nations from 1960 to 2010 using a panel vector autoregressive approach. Last, we examine the specific effects of Indian and Chinese investment and trade on growth potential of these countries. We focus on the complementary and competitive effects that Chinese and Indian FDI and trade may have on African trade, investment and growth aspects.

Keywords: Trade, FDI, Growth, Panel VAR, Africa JEL Classification: F14, F21, F43, C23, O55

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Abstract No: 33

The Rise of China: A New Fear of Trade Competition for Mauritius?

Baboo M. Nowbutsing University of Mauritius [email protected]

Sonalisingh Ramsohok University of Mauritius [email protected]

The relationship between China and Mauritius date back to centuries due to the Chinese in Mauritius. The rise of China in the global economy has raised several questions. China is investing massively in several nations. The question remains whether it is for mutual benefits or the Chinese quest for world dominance. China is the second top importing partner of Mauritius. However, the main export destinations of Mauritius remain Europe and USA. This paper addresses the impact of the emergence of China on the Mauritian economy. Using two indexes of trade competition, it is found that both countries have similar export structure. We presume that it will be impossible for Mauritius to compete with China mainly because of the latter’s cheap labour advantage and natural resources availability. Further, we found that while Mauritius is consolidating its revealed comparative advantage (RCA) in its two top exporting products, China RCAs is increasing in those products where that of Mauritius is decreasing. Finally, we found that an increase in real GDP per capita will have a positive impact on Mauritius and there is no relationship between the two countries openness.

Keywords: Trade Competition & Trade Structure JEL: F10

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Abstract No: 34

Zoning In on Special Export Zones in Mauritius

Vanessa Tang University of KwaZulu-Natal, South Africa [email protected].

Export Zones with special benefits for firms that situate there have been established throughout the world in various forms. In Africa, as globalization increases, the idea of establishing such Special Economic Zones (SEZs) has become increasingly popular as a policy tool for diversification and export-oriented growth. However, SEZs have reportedly provided host economies with limited economic benefits. The establishment of SEZs in Mauritius is one of Mauritius' most significant steps towards export diversification, and an important part of its integration into the global economy. Against this background, this paper aims at making a dual contribution by first, examining the Mauritian diversification policy experience, and second, investigates using firm-level survey data whether firms operating in Mauritius’ SEZs are associated with larger economic benefits for the local economy than those outside.

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Abstract No: 35

No Chinese Jackets Required: Clothing Quotas, Consumer Prices and Import Quality in South Africa

Lawrence Edwards University of Cape Town [email protected]

Tasha Naughtin University of the Witwatersrand [email protected]

Neil Rankin [email protected]

On the 1st January 2007, in an attempt to reduce Chinese imports and job losses in this sector, South Africa imposed quantitative restrictions (quotas) on selected clothing and textile imports from China. Trade theory predicts that binding quotas should drive up domestic prices by limiting quantity from lower cost international producers. There may also be composition issues as importers shift to more expensive varieties whose relative price has increased by less. Empirical studies on other countries have shown that the direct consequences of quantitative restrictions include price increases in restricted categories, quality shifts, higher profits and lower domestic welfare. This paper investigates what the impact of the imposition and later removal of these quotas were on domestic prices, volume and per-unit prices of imports, and the origin of imports. The paper is novel in that it uses two sources of data. The first is a dataset of prices that consumers actually pay. The second is disaggregated trade data of volumes, values, per-unit prices and the origin of imports. We use a difference-in-differences methodology to compare changes among restricted goods against other similar goods. Our findings indicate no significant differences in prices that consumers pay between restricted and non-restricted goods. We investigate three possible explanations for this. First, that retailers used the quota as an opportunity to increase prices across all similar products. Second, that South African producers were able to increase production to replace Chinese products. Third, that importers shifted to other low-cost producers and that imported Chinese goods increased in quality. We find evidence of substitution by other low cost producers, increase in quality upgrading in imported Chinese goods and quality downgrading for goods imported from SADC, and Indonesia.

Keywords: Consumer prices; Quotas; South Africa; Quality upgrading

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Abstract No: 36

What Drives Intra-African Export Survival and Export Depth?

Dick Nuwamanya Kamuganga Graduate Institute, Geneva [email protected]

This paper investigates determinants of intra-Africa regional export survival and export depth. The objective of the paper is twofold: first, to establish whether or not intra- African export relationships at product level are short lived reflecting stylized facts in empirical literature on trade duration. Second, to study what determines a typical African country exporter keeps continuously exporting to its neighbours once it has already entered into export market at product level while others fail.

I use COMTRADE dataset at HS 6 digit level mirrored trade flows for 53 African countries from the period 1975-2009. I construct the duration of export relationship as the number of consecutive years with non-zero product level exports for each pair of trading partners while differentiating between old exports as those in export relationship that started before the regional trade agreement coming into force and new exports as those in trade relationships started after the regional trade agreement came into force.

I use discrete time survival analysis controlling for among other things unobserved exporter-market-product heterogeneity in product level export flow data. I begin by conducting a thorough descriptive analysis of the duration of the intra-African export relationships. Thereafter I perform a regression analysis using discrete-time duration models with proper controls for unobserved heterogeneity.

I conduct this analysis for 11 major intra-African regional trading blocks namely: Common Market for Eastern and Southern Africa (COMESA); Southern Africa Development Community (SADC); South Africa Customs Union (SACU); West Africa and Economic and Monetary Union (UEMOA); Economic Community of West Africa States (ECOWAS); Central Africa Customs and Economic Union (UDEAC); Economic Community of Central Africa States (ECCAS); East Africa Community (EAC); Economic and Monetary Community of Central Africa (CEMAC); Economic Community of the Countries of the Great Lakes (CEPGL); and Indian Ocean Commission). I look for evidence whether there are specific and significant differences across these regions and why.

Preliminary results are: (i) export survival in intra-Africa export relationships increases with similarity in level of development, economic size of the exporter and negatively with income differences of the trading partners; (ii) highly diversified African exporters (with higher product and market/partner diversification), exporters of consumption goods, have long lasting export relationships; (iii) majority of intra-African export relationships exist just for a few, often only one to three years; (iv) export relationship survival probability is affected by exporter characteristics, product type and number of exporters of the product in the destination market; (v) specifically, duration of

44 exporting a product to a regional market is longer for products from countries that are economically large, geographically close to each other; (vi) products exports that survival over time, are also exported across destinations signifying learning by exporting or sequential exporting for intra-regional exporters; and (vii) intra-regional preferential agreements have a positive effect on new products survival and increasing both their volume and number of export relationships for intra-regional FTA members relative to non-members i.e., intra-regional export relationships face a much lower hazard rate than their exports to non-members.

My preliminary conclusions are that intra-African trade relationships are indeed very short lived, the median duration is merely one year, and almost 70 percent of all spells cease during the first year of service. The novel policy implication for these findings is that there is a case for learning-by-doing for intra-African export survival i.e., experience with exporting the same product to other markets or different products to the same market are found to strongly increase the chance of intra-Africa export relationship survival. A better understanding of such learning effects could significantly improve the effectiveness of export promotion strategies in Africa and also rapid removal of intra-African trade barriers.

I contribute to literature on intra-African export performance in two ways: (i) this is the first paper to study factors that drive intra-Africa export relationship survival to the best of my knowledge; and (ii) the paper provides a great deal of insights on favourable conditions for Africa learning to export first by beginning to export to itself successfully before it begins to export to the rest of the world.

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Abstract No: 37

India’s Demand-driven Food Inflation: A General Equilibrium Investigation

Jayatilleka S Bandara Griffith University, Australia [email protected]

Ernesto Valenzuela The University of Adelaide, Australia [email protected]

The food price inflation in India displays patterns that are different from global trends in recent years. Therefore, understanding the nature and causes of food inflation in India and placing it in the context of the global food inflation is important in order to design policy relevant interventions. There are a number of important reasons for why the food inflation in India is important. Firstly, India’s economy is growing at a fast pace with a rapidly growing middle class that is exerting pressure on the Indian government to take actions to contain the . Second, India is a net food exporter and it is the second biggest producer of some food items such as rice, wheat, groundnuts, sugarcane and some vegetables and fruits. Therefore, its agricultural trade policies have important implications on food inflation in other countries. Finally, India is home to about 45 per cent of the world’s poor, with high levels of and micronutrient deficiency. Understanding underlying factors of food inflation in India is also important in terms of food price rises and food security. The deputy governor of the Reserve Bank of India, Gokarn, has presented the demand driven food inflation explanation using the diversification of food demand in a convincing manner recently. In his speech to celebrate the 75th birthday of Professor Kirit Parikh in 2009, Gokarn qualitatively demonstrated, the change in income distribution and income levels that has taken place in India in recent years leading to the demand for protein based food items like pulses, eggs, milk and milk products and meat products. In recent years prices of these items have increased at higher rates than that of products, since supply of protein based products has been stagnated. Naturally, the new emerging Indian middle class is trying to follow the Western-type diets and increasing demand for protein-based products as highlighted by Gokarn. This new hypothesis of food inflation led by an increase in demand for protein based food items warrant further quantitative investigations. The main objective of this paper is, therefore, to test the demand-driven food inflation hypothesis further within a general equilibrium framework. Computable General Equilibrium (CGE) models are ideal tools to achieve the above objective. The Global Trade Analysis Project (GTAP) model has been the most commonly used global CGE model to analyse the effects of various trade related issues in recent years. In this study we use the GTAP-AGR version. It is a variant of the GTAP model which is specifically focusing on agricultural sectors with a number of modifications.

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Abstract No: 38

Testing the J-Curve Hypothesis between South Africa and Its Six Major Trading Partners

T.M. Mokoena South African Reserve Bank, South Africa [email protected]

Eliphas Ndou South African Reserve Bank, South Africa [email protected]

Kgalalelo Setou South African Reserve Bank, South Africa [email protected]

The aim of this paper is to test whether or not the J-curve exists between South Africa and its six major trading partners on manufactured goods: the Euro Area, United States of America (US), China, United kingdom (UK), Japan and Switzerland. The J-curve theory explains how the trade balance of a country is likely to respond to changes in exchange rate movements both in the short run and in the long run. According to Magee (1973), in the short run, exchange rate depreciation may appear to have a perverse effect on the trade balance because contracts that are concluded at old exchange rates dominate the short run response of the trade balance. Over time, however, new trade contracts at relatively competitive prices prove to have a favourable impact on trade volumes, thus improving the trade balance. This phenomenon Magee termed the J-curve. The paper adopts a model by Hsig and Sergi (2010) and expresses the bilateral trade balance between each of the foreign partners and South Africa as a function of real exchange rate, real output in South Africa and real output in the foreign country using data from the first quarter of 1998 to the fouth quarter of 2010. The Vector Error Correction Model (VECM) is applied to estimate the short run relationship, and the cointegrating equation, estimates the long run relationship. Preliminary results indicate the existence of the J-curve between South Africa and some of its main trading partners like the US and the UK.

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Abstract No: 39

High Growth Firms: What Makes You Tick? – A Cross-country Panel Investigation

Jun Du Aston University, United Kingdom [email protected].

Yama Temouri Aston University, United Kingdom [email protected]

In this paper we investigate the characteristics and growth determinants of high growth firms (HGFs) from 31 countries in developed as well as developing countries for the period 1997 to 2009. We find robust evidence that internationalising activities are not only important determinants of a firm’s likelihood of being a high growth performer, but also in terms of affecting growth in revenue, employment and in some cases labour productivity. In addition, we find firm age, size, cash flow, intangible assets, the macroeconomic environment, industrial sector characteristics, and country-specific aspects important in explaining high growth performance.

The phenomenon of High Growth Firms (HGFs) 1 has been increasingly prominent on the policy agenda of many countries in the last decade. Consequently, the empirical literature of high growth firms has expanded considerably in the recent decades and now covers many countries, and addresses many issues, such as entrepreneurship, firm demography, and firm dynamics for job creation and economic growth (see Henrekson and Johansson 2010 for a review). It is not surprising therefore that a sizable amount of research has now been devoted to understanding the determinants and effects of HGFs. When investigating the determinants of HGFs, most research has focused on the implications of firm growth characteristics on the incidence of HGFs. However, a neglected, but potentially important aspect of HGFs is the extent of their international activities. In this regard, new trade theory has uncovered the heterogeneous nature of firms which manifests itself in performance differences based on the level of internationalisation into foreign markets (Melitz, 2003).

The purpose of this paper is to explore the nexus between the HGF and the economic trade/growth literature on which Melitz (2003) is based. Our underlying hypothesis is to explore whether international activities promote firm performance to achieve high growth. To the best of our knowledge, this issue has not been previously addressed in the context of HGFs, particularly in a cross-country panel data setting. In particular, we seek to contribute to the literature in a number of ways.

1Also known in the literature as Gazelles, Gorillas and exceptionally performing firms.

48

Firstly, while there is a body of research that seeks to examine the characteristics of HGFs, it is not often that this research considers a wider spectrum of firm performance measures in more detail. It is important not to view firm characteristics as a narrow concept based only on employment or turnover, but to analyse its multiple components separately, because each may have different effects. Three growth measures are considered for this purpose: sales growth, employment growth and labour productivity growth, which are important growth channels which differ intrinsically.

Secondly, whereas the literature has in some detail investigated the probability of a firm becoming a high growth firm, we incorporate whether a firm’s international activities play a significant role in determining HGFs. We analyse how firm characteristics and international activities may affect their growth rates, with a particular attention on the mediating effects through high growth channels.

Thirdly, calculating and comparing the statistics of HGFs across countries is difficult, as is previously recognized (Hoffmann and Junge, 2006) This paper thus benefits from having not only a time series element to the data, but also a comparable cross sectional dimension in the analysis, both in terms of heterogeneity between firms and across countries.

Finally, our data also allow us to identify the firms that experience mergers and acquisition (M&A) activities during the period in which high growth performance is examined. Therefore it is possible to make robustness checks on the contribution of internationalisation to firm performance that may be due purely to external growth channels through M&A activities.

To achieve these objectives, we use commercially available datasets (Orbis and Zephyr) to draw on a large sample of firms covering 31 countries. Controlling for selectivity bias in ownership, we analyse in detail the differential impact of various components of firm performance that determine HGFs. Our analysis contains two parts, where the first part investigates the probability of a firm becoming a high growth performer, and the second part investigates to what extent firm internationalising activities affect firm growth through three measures of growth channels.

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Abstract No: 40

Financial Globalisation and International Financial Integration: Analysis of Impact of Financial Integration on Economic Activity, Trade Openness and Macroeconomic Volatility in Africa

Gabriel Mougani African Development Bank, [email protected]

In this paper, we review some of the macroeconomic impacts of the financial globalisation and international financial integration of African countries. It is acknowledged that financial globalisation and international financial integration affect several aspects of economic performance, particularly increase in the investment rate, technology transfers, trade openness, development of the domestic financial system and long-term economic growth. Similarly, financial globalisation is recognized as a potential source of macroeconomic instability. The results of empirical analysis show that the impact of external capital flows on growth seems to depend mainly on the initial conditions and policies implemented in the country under consideration to stabilize foreign investment, boost domestic investment, productivity, trade, development of the domestic financial system and other actions aimed at stimulating growth and reducing poverty. The analysis also shows that financial instability was particularly severe as from the 90s, whereas many developing countries (including African countries) had only recently liberalized their capital accounts. The instability was more pronounced in the case of portfolio investments than in foreign direct investments because of the longer-term relationship established by the latter. Similarly, trends in official capital flows were less unstable than in private capital flows. Finally, the most severe instability of capital flows observed in financially more “open” countries was accompanied by greater macroeconomic instability.

Key words: Financial Globalisation, International financial integration, External capital flows, Economic activity, volatility, Africa. JEL Classification: F21, F36, F40

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Abstract No: 41

Trade and Financial Openness, Institutional Quality, and Financial Development in Sub-Sahara Africa (SSA)

P. Asiama Johnson1 West African Institute for Financial and Economic Management (WAIFEM) [email protected]

Mobolaji Hakeem2 Fountain University, Nigeria [email protected]

The paper explores the impact of trade and financial openness as well as quality of institutions on financial development in sub-Sahara Africa using dynamic panel data methods. The panel model specifications were estimated with three different measures of financial development - private credit, broad money and liquid liability as a ratio of GDP. The paper also tested the Rajan-Zingales’ hypothesis of contemporaneous openness. For all the financial development indicators, there is limited evidence that trade and financial openness boosts financial development. In the case of private sector credit as a measure of financial development, there is absolute evidence that trade openness is both positive and statistically significant. There is also, evidence that weak institutional quality impacts negatively on financial sector development in the region. Finally, there is limited support for the Rajan-Zingales hypothesis.

Keywords: Openness, Economic development, Panel Data Methods, Rajan- Zingales hypothesis JEL Classification: G21, G15, 016 and 055

1Primary Speaker and Corresponding Author. He is Director, Macroeconomic Management Department, West African Institute for Financial and Economic Management (WAIFEM) 2 Senior Lecturer, Fountain University, Osogbo, Osun State, Nigeria.

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Abstract No: 42

Payment by Letter of Credit (LC) In International Trade: Disputes on Fraud Exception with special reference to Malaysia

Rosmawani Che Hashim1 University of Malaya, Malaysia [email protected]

Fraud in international trade is not a new phenomenon. The problem is most rampant in the area involving method of payment especially by letter of credit (LC). The survival of fraud in LC will not only disturb the LC flow but it will end up as a to the whole transaction. Letter of credit (LC) is one of the methods of payment which commonly used in international trade. The obligation of the bank to make payment is independent from the underlying sale contract between buyer and seller. As long as the seller can present the documents which are strictly complying with LC requirements, the bank is obliged to pay except if documents presented by seller are fraudulent. Fraud is recognised as the main exception which destroys LC autonomous nature and terminates the payment obligation under LC.2 Having been recognised as an exception to the principle of autonomy in LC transaction, the situations where fraud exception can be invoked are still perplexing, albeit a number of studies were initiated to clarify this issue.3 This paper aims to clarify fraud issues in LC transaction with special reference to Malaysian scenario. It begins with the general outline of nature and background of LC fraud. Furthermore, discussion focuses on the provisions of fraud exception outlined in the Uniform Custom and Practice fro Documentary Cerdit (UCP) and as discussed in case-law. Due attention is given to the Malaysian scenario relating to fraud in LC which covers legal framework, modus operandi and standard of proof as decided by Malaysian case-law. The finding established that only fraud on documents can set aside the payment obligation under LC. On the other hand, fraud on the goods is irrelevant and only invalidates the sale contract between buyer and seller and does not affect the banks’ obligation to pay under LC contract of payment. The existence of fraud in LC transaction must be proved with strong and cogent evidence whereas suspicion or mere allegations are not qualified to invoke the fraud exception

Keywords: Letter of credit, principle of autonomy, fraud exception.

1 Faculty of Business and Accountacy, University of Malaya, 50603 Kuala Kumpur. Tel: +60379673995 Fax: +60379673801

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Abstract No: 43

The Impact Of The REPAs-EU Negotiations On The SADC Configuration And Trade Protocol: Integration-Disintegration, Stumbling Blocks Or A Glimpse Of Hope For A Developing Africa?

R.P.Gunputh 1 University of Mauritius [email protected]

The aim of this paper is not to deal with trade preferences between EU-ACP or to comment on views or suggestions, which have already been discussed during the Maputo Conference, held in April 2008. It goes beyond together with an aim and an objective: it is focused mainly on the new REPAs-EU, tries to forecast impacts, which may be beneficial or detrimental for the ACP, and the SADC2 is no way an exception. The Integration-Disintegration process and its impacts may be obstacles to fostering trade through a public-private dialogue but the author pledged for suggestions, measures and recommendations to enhance a global competitiveness hub and to reduce poverty with special reference to the SADC configuration. Through a contextual approach, this article deals with one important aspect of regional trade law: some probable impacts of the REPAs negotiations on the SADC configuration and Trade Protocol after a series of agreements.

Key words: REPAs, SADC, GATT, Cotonou Agreement and WTO, Non-State Actors (NSA), Disaster Mitigation Programme, Strategies3

1R.P. GUNPUTH is Head of Law Department, Associate Professor of Law at the University of Mauritius. He holds a Double PhD (Public Law -Univ. René Descartes, France and Private Law -Univ. Reunion) and a DEA in International Economic Law for Developing Countries (Univ. Paris V René Descartes). Post-doc in Public Law (Université Paris X Nanterre) and PGCE in Higher Education (University of Mauritius) 2The SADC Treaty was adopted in 1992 and entered into force in 1993, and was altered by the 2001 Agreement Amending the Treaty of SADC. 3R.P.GUNPUTH (2008): Alarm Bell Around the Cat’s Neck, University of Mauritius Research Journal, Special Edition

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Abstract No: 44

Globalisation and Human Rights in Africa: Implications for Trade and Investment

John C Mubangizi University of KwaZulu-Natal, South Africa [email protected]

A lot has been said and written about the benefits of globalization and its positive contribution to economic growth and development worldwide. Critics, however, disagree and point to the impoverishment and devastation caused by globalization particularly in poor countries. The debate goes on; it’s a never-ending polemic. But while the jury is still out on the pros and cons of globalization, there is no doubting the various implications that globalization has had and continues to have on human rights on the African continent. This paper explores such implications in the specific context of trade and investment. In so doing the paper focuses on the adverse effects of globalization on the protection of human rights in Africa and the consequent implications for trade and investment. The paper will also explore and outline the international legal framework relevant to human rights on the one hand and trade and investment on the other, with a view to highlighting the disparity and lack of integration between the two.

A discussion on the effects of globalization on human rights and the resultant implications for trade and investment in Africa would be incomplete if it didn’t take into account Africa’s unique and peculiar challenges such as poverty, , cultural traditions, low levels of education and political and civil strife. The paper will highlight these challenges before making suggestions on a suitable balance between globalization, human rights and trade and investment. Fundamental to this balance, the paper will conclude, is a human rights-based approach towards trade and investment and the realization that if the balance is right, human rights can be good for trade and investment and vice-versa.

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Abstract No: 45

Globalisation: An Evaluation of the Prospects and Challenges and the Call for a Global Mind Transformation

Namratta B. Becceea University of Mauritius [email protected]

His Holiness Swami Paramananda

Much has been written on globalisation on its pros and cons, means such as communication, transportation and trade have been developed so as to come up with the best recipe for the integration of economies, so as to increase material wealth, goods and services - the globalisation of production, markets, competition, technology, and corporations and industries. With the flux of time, the means are becoming more sophisticated, spelling interesting prospects for the furtherance of a global village. For the economic aspect, it is a global marketplace or call it a single world market, comprising of international commodity markets, labor markets, and capital markets. Developed economies are integrating with less developed economies.

However, the challenges have increased more than proportionately, and the world problems are becoming more magnified. Indeed, as at today’s date we are at crossroads. Climate change, financial and economic crises, social crises, labour market issues and poverty, agricultural and food crises, barriers to trade and so on impact on the global economy. We are now questioning ourselves on whether the flattening of barriers between countries is beneficial to the world and to what extent countries should be liberal.

The world is now more prone to systemic risk in all spheres; it does not take long for a snow ball effect to happen – right now there is increasing concern over a possible debt crisis in Europe and fear of a contagion. Since we have unprecedented sophisticated technology aiding in enhanced trade and investment, wherein are the problems? These problems have first appeared at the micro level and have amplified and multiplied to become major disturbances at the global economic level. The answer to this question has been given in the Preamble of the UNESCO constitution “That since wars begin in the minds of men, it is in the minds of men that the defences of peace must be constructed” – the root to the problems is in the mind of the individual. Therefore, to tackle these problems, there should be a priori a change in mindset, a radical and sustainable transformation of the individual who is at present influenced by negativities such as greed, fear, overconfidence, is corrupted and selfish. The result of these negativities is for example the global financial and economic crises, which have aggravated into social crises.

This study investigates the prospects and challenges of the creation of a global village and ultimately proposes a Global Mind Transformation, which is possible only through a holistic approach to education, namely Self-Education – which will bring about the transformation of the individual at the physical, emotional and psychological fronts.

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Abstract No: 46

Can Trade Liberalisation Reduce Regional Disparity and Bring Long-term Peace and Stability in Post-War Sri Lanka?

Athula Naranpanawa Griffith University, Australia [email protected]

Jayathileka S Bandara Griffith University, Australia [email protected]

There is a large body of literature on the link between trade liberalisation, growth and poverty. However, less attention has been paid on the relationship between trade and regional disparities or spatial disparities, although it is important to consider this link in evaluating trade liberalisation. There are disparities and frictions between regions in many developing countries, particularly in South Asia. It may not be possible to achieve long-term growth, peace, harmony and political stability in these countries unless different geographical regions share the gains from trade liberalisation in an equitable manner. In spite of the importance of this issue, particularly for developing countries, there are hardly any empirical studies on this topic, with few exceptions.

Sri Lanka having ended its three decades-long civil war in 2009 makes an ideal case in point to explore the regional impact of trade liberalisation in the context of reconciliation, reconstruction and long-term political stability. In 1977, Sri Lanka introduced a radical policy package moving from an import-substitution protectionist trade policy regime towards a more open export-led trade policy regime. In the initial phase of economic liberalisation, significant policy reforms were introduced such as trade liberalisation, promotion of foreign investments, interest rate reforms, limiting public sector involvement in the economy and exchange rate realignment. However, due to the civil conflict that escalated since 1983, some regions, particularly the war affected Northern and Eastern provinces of the country, were deprived of gaining the benefits of economic liberalisation. In these regions, foreign as well as inter-regional trade were severely hampered by the conflict and on the same token the foreign investment was largely restrained. However, after ending the civil war in 2009, with the effort of post- war reconstruction, these regions are increasingly being exposed to trade, which could be considered as a new wave of internal and external trade liberalisation in these war affected regions. The main objective of this study is therefore to identify and quantify the regional impacts of trade liberalisation, particularly in the war affected regions and to understand to what extent the trade reforms contribute to the post-war recovery process and long-term political stability in Sri Lanka. In order to achieve this objective, we develop the first single-country multi-regional computable general equilibrium model for the Sri Lankan economy.

The use of single country or global CGE models has been very popular among policy analysts in developing countries including Sri Lanka in evaluating the gains from trade liberalisation at National level. However, these single country and global CGE models

56 have not been able to capture the regional effects of trade liberalisation. The “top-down” or “bottom-up” CGE models are ideal tools in evaluating such effects. There are only limited examples of using regional CGE models in developing countries. Although there is a long tradition in applying CGE models to analyse policy issues in Sri Lanka (see Bandara, 1991 and Naranpanawa, 2005 for details), none of the previous studies have carried out a comprehensive CGE modelling to capture the regional impact of trade policy reforms in Sri Lanka. The novelty and the main contribution of this study has, therefore, been the development of a multi-regional computable general equilibrium (CGE) model of the Sri Lankan economy to examine the link between trade liberalisation, regional disparity, peace and long-term stability within the context of post-war development. The preliminary results suggest that, in the short run, trade liberalisation is having a relatively smaller positive impact on the war affected North and Eastern regions, while showing a large benefit is accruing to the Western province, which is the main region where industrial and service activities are located. In contrast, the long run results suggest that the regional economies of war affected regions such as the Northern and the Eastern provinces are substantially stimulated with the expansion of export oriented manufacturing industries in those regions.

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Abstract No: 47

Investment Climate and Technical Inefficiency in Vietnamese Manufacturing: Firm-level Panel Data Evidence

Dinh Long Pham Germany Pham_long @economics.uni-kiel.de

This paper identifies the constraints of investment climate on Vietnamese manufacturing technical efficiency. It indicates that, for a particular country, time- varying inefficiency panel data model is better than pooling one-step stochastic frontier analysis in considering the whole manufacturing or industry specific technical efficiency impact of investment climate. With more specific evidence from the unique and latest investment climate surveys data in Vietnam, it is possible to link our empirical work to the recent literature that has put the investment climate at the center of economic performance. The study shows that a good quality of infrastructure and finance, an investment-friendly and transparent environment, a safe society encourage firms‟ technical efficiency. The impacts of investment climate on firms‟ technical inefficiency are robust to various kinds of classifications. The results also highlight that foreign firms attain improvement in production efficiency over time compared to domestic firms and large firms as well as foreign firms get benefit from their export in term of technical efficiency. However, no strong evidence supports for technical efficiency improvement in Vietnamese firms after this country became an official ’s member in early 2007.

Keywords: Firm-level inefficiency, Investment climate, time-varying inefficiency model, Economic integration, Vietnamese manufacturing JEL: C23, D24, F15, O14

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Abstract No: 48

Investigating the Effects of Foreign Direct Investments on Mass Customization Capability in Jordan

Zu’bi M.F. Al-Zu’bi University of Jordan [email protected]

Mass customization has proved to be the most promising manufacturing paradigm of the past few decades, but its requirements for advanced technologies and skilled personnel has restricted its widespread adoption in many developing countries. This can mean that countries like Jordan, in which only a small minority of manufacturing firms possess mass customization ability, struggle to compete with foreign companies for the market, both at home and abroad. Developing the capability of Jordan-based companies to offer mass customized goods will therefore have broad-reaching economic and social effects. In the literature, foreign direct investment has been hailed as the best tool for the transfer of technology from the developed world into the developing world. This paper aims to investigate the effects of foreign direct investment on economic growth in Jordan by examining the aspect of technology transfer in the manufacturing sector. This study compares foreign direct investment companies to private sector companies by exploring transfer of knowledge taking place with relation to the development of mass customization capability. Survey data was collected from two hundred and forty-two Jordanian manufacturers from across the industries, and then analysed using factor analyses and hierarchical set-wise regression. The results reveal that FDI companies operating between the years 2000 -2010 exhibited a high level of mass customization capability, whereas companies from the Jordanian private sector demonstrated only very low mass customization capability. These results suggest that FDI companies have, as yet, had little effect on the overall manufacturing sector which signals that their aggregate effect on the economic growth is not as anticipated. The findings of this study provide new information about the role that FDI have played in economic development in Jordan. It can be argued that FDIs contributes marginally to the transfer of knowledge to their Jordanian counterparts. However, this study is limited to Jordanian manufacturing companies, and explores only one of several aspects of economic development-technology transfer; further studies could expand the conclusions reached here. Nevertheless, these results have important implications for policy makers as well as manufacturers and, as they highlight the importance of putting in place measures to ensure the transfer of knowledge which will lead to greater economic growth. In that context, this paper adds valuable insight into economic development in Jordan, specifically, the transfer of knowledge, which has never before been investigate

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Abstract No: 49

On the Determinants of Foreign Capital Flows: Evidence from an African Economy

N Beghum

Vinesh Sannassee University of Mauritius [email protected]

Boopen Seetanah University of Mauritius [email protected]

Matthew John Lamport University of Mauritius [email protected]

This paper supplements the relatively scarce evidences from the African continent and investigates the determinants of FDI using dynamic time series analysis for the period 1976-2009. Results from the analysis shows that, consistent with theoretical underpinnings gross domestic product, domestic investment, real exchange rate, productivity and openness are all important in explaining the FDI flows in Mauritius. The interesting findings resides in the existence of long-run and short-run relationships as implied by the statistical significance of the coefficients of differenced explanatory variables and the lagged error correction term (ECT) respectively. Causality analysis indicates the presence of varying relationships and impulse response and variance decomposition analysis validates the overall results as well.

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Abstract No: 50

Africa’s Endemic Dependency on Foreign Aid: A Dilemma for the Continent

Richard Ilorah University of Limpopo, South Africa [email protected]

The endemic nature of Africa’s dependency on foreign aid seems to support the popular view that the continent is incapable of an existence free from aid. Budgets by Africans for national and continental projects are planned based on expected aid inflows, the implication being that these projects often fail because, among other reasons, aid often fails to materialize or is misused. On the other hand, Africa’s access to aid, in the first place, is argued to discourage proper implementation of the region’s growth initiatives. Countries on the continent make a mockery of integration initiatives despite the dismally low intra-trade in the region. These countries also neglect the need to develop proper domestic institutions for revenue collection. Often, many countries, especially those occupying strategic positions or those endowed with vital raw materials, use threats of domestic instability, sub-regional conflicts or even full-blown wars to try to coerce donors into releasing aid uninterruptedly. Using historical data, this study shows that foreign aid to Africa has not led to any significant sustainable growth in the region but has, at best, provided short-term reliefs to few poverty-stricken countries and, at worst, prolonged bad regimes, pushing recipient countries deeper into . The study concludes that Africa needs trade rather than aid.

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Abstract No: 51

Strategic Policy Responses to Aid and Investment Flows: Growth and Development in ECOWAS

Richard Simson

Vanessa Tang University of KwaZulu-Natal, South Africa [email protected]

There is always the suspicion that aid and direct investment is fungible and thus can find its ways into uses other than for which it was originally intended. Recently, this suspicion has proved well-founded given strong incidence of divergence of funds from donor countries (largely Northern) and that the devolving of donor resources seems to foster rather than prevent conflict. Receiving countries are aware of these conflict developments and have responded. An excellent regional example of this is the Economic Community of West African States (ECOWAS) who in their stated community goals wishes to encourage aid and investment and at the same time aim to ensure that certain pre-conditions for the successful use of these resources are met. This policy response of ECOWAS is of interest as it then begs the question: which countries in ECOWAS have therefore experienced economic growth and is this growth linked to general development indicators serving as a proxy for the policy induced improvement in the needed precursors for the positive use of domestic and foreign resources? To this end, the paper examines the economic conditions in ECOWAS for a typical year using a cross-sectional study with an appropriate measure of aid and investment to assess the impact of the strategic policy stance of ECOWAS to aid and investment flows to member countries.

JEL Classification: O15, O19 and O43 Keywords: Aid, Growth and ECOWAS

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Abstract No: 52

Country of Origin Attitudes in Mauritius and Its Implications for Investment and Trade

Rooma Roshnee Ramsaran-Fowdar Central Queensland University, Australia [email protected]

Sooraj Fowdar Central Queensland University, Australia [email protected]

As a consequence of globalization and free trade, the Mauritian market is now flooded with foreign products. The purpose of this paper is to investigate consumer attitudes in Mauritius towards local and foreign products against a background of increasing prevalence of foreign products with different countries of origin. Two hundred and four consumers were interviewed over a two-month period through a structured questionnaire administered through personal and telephone interviews. Attitudes towards products categorised as domestically produced and foreign produced, which was further divided into developed and developing countries foreign products were measured by seven-point semantic differential scales. The findings revealed that the quality, design, branding, packaging, status and esteem, and value for money associated with developed countries foreign products and price and value for money associated with developing countries foreign products were perceived to be superior to local brands. These findings have serious implications for importers of foreign products, local manufacturers and potential investors in the Mauritian market.

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Abstract No: 53

Trade Liberalization Policy: Is It Working for Jordan?

Taleb Awad University of Jordan [email protected]

Jordan has followed a policy of trade liberalization and active economic integration during the last three decades. Although it has clearly succeeded in expanding the size foreign trade, it is less obvious whether this trade expansion has positively reflected in term of real economic growth. The main objective of the study is to evaluate the impact of such policy of trade liberalization on real economic growth. A sample of annual data covering the period 1970-2009 is used in the estimation. The relationship between trade openness and real economic growth is evaluated at both the aggregate and sectoral levels. The study utilized different econometric techniques including Granger causality, static and dynamic regression analysis to achieve its objective. The results of econometric analysis indicate to the existence of both static and dynamic positive effects of trade openness on overall real economic growth. It also provides evidence supports the existence of positive and significant effect of trade openness on the per-capita output of both industrial and construction sectors.

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Abstract No: 54

Exchange Rate Volatility and Macroeconomic Performance in Small Island Developing States

Virendra Polodoo Dolberg Asset Finance Limited, Mauritius [email protected]

Kesseven Padachi University of Technology, Mauritius [email protected]

Boopen Seetanah University of Mauritius [email protected]

Following the floating of the US dollar in 1973, liberalization of capital flows and the associated intensification of cross-border financial transactions during the last three decades, we saw the emergence of important volatility and uncertainty in exchange rates. This has raised eyebrows among policy makers and researchers as regards the impact of exchange rate movements on macroeconomic performance in Small Island Developing States (SIDS) as these economies pursue an export led growth strategy and rely significantly on exports for their survival. Despite various studies conducted as regards the effects of exchange rate volatility on macroeconomic performance, studies carried out for SIDS are scarce. Taking a sample of 15 SIDS, the present study closes a significant gap in the literature by analysing econometrically the impact of exchange rate volatility on major macroeconomic variables, viz economic growth, external trade, inflation and foreign direct investment on the SIDS. To achieve this aim, we employ data spanning the period 1990 to 2010 as well as dynamic panel data analysis-Generalised Method of Moments (GMM). The results indicate that exchange rate volatility negatively impacts on the economy of the countries studied and raises questions about the performance of the SIDS and what might be done to ensure stability and reduce vulnerabilities in these economies.

Keywords: Exchange Rate Volatility, Macroeconomy, Small Island Developing States, GMM.

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Abstract No: 55

The Impact of Exchange Rate Volatility on Bilateral Trade Flows Between Mauritius and USA

Dineshwar Ramdhony University of Mauritius [email protected]

P.Ramphul

This paper investigates the effect of exchange rate volatility on bilateral trade flows between the US and Mauritius. Cointegration techniques and error-correction models are used to estimate the short run and long run relationships respectively. Standard deviation of the percentage change in real exchange rates is used as a measure of exchange rate volatility and annual data for the period 1978 to 2008 is used. Overall, the results unfortunately show no evidence of any effect of exchange rate volatility on trade. On the other hand, the findings reveal that real exchange rate, real domestic income and real investment have a major impact on exports. Finally, the results demonstrate that real exchange rate and real foreign income have a major bearing on imports.

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Abstract No: 56

Phasing Out of the MFA: Impact on Women Workers in the Mauritian EPZ Sector

Verena Tandrayen-Ragoobur University of Mauritius [email protected]

Anisha Ayrga [email protected]

The phasing out of the Multi-Fibre Agreement (MFA) in 2005 herald the end of protectionism in the and usher in tremendous opportunities and uncertainties for the textile industries in developing countries. The expiry of the MFA has led to the closure of several textile factories in Africa and with it job losses. This paper first compares the welfare impact of the MFA on Mauritius relatively to the other ACP countries. Second, we assess the effect on women garment workers in particular, for the Mauritian economy. We analyse their living conditions before and post MFA and also examine the contribution of cash compensation and training in improving their living status. Our sample covers 160 working women who have been directly affected by the end of the MFA. Field work was also carried out at the Consolidated Fabrics Limited which employs around 600 workers and is among one of the largest textile factories in Mauritius. Our results reveal that the phasing out of the MFA has been bitter for women workers in the textile factories as they have lost their jobs and found themselves trapped in poverty. In addition, we provide evidence that the cash compensation and training have not been effective in improving their living conditions.

Keywords: Trade reforms, Gender, Poverty, and Developing countries

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Abstract No: 57

Raising the Role of Women in International Trade: A Developing Country’s Perspective

Nicolas Ragodoo University of Mauritius [email protected]

The primary aim of this work is to examine the main constraints presently being faced by women engaged in trade at international level, and operating in the context of a rapidly developing island economy. Identifying those barriers is essential so as to be in a position to take the necessary measures in order to provide women with a fair opportunity of participating in the primarily male-dominated international trade environment.

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Abstract No: 58

MNC Legitimacy and Labour CSR: A Case Study

Richard Croucher Middlesex University, United Kingdom R. [email protected]

MNC’s seek, and prioritise maintaining, their legitimacy in host countries. We demonstrate through an in-depth case study how a major MNC (Anglo-American plc) was able to derive sizeable benefits for itself and a substantial segment of its African employees through partnership with a Global Union Federation (GUF). It enhanced its legitimacy in the face of ‘resource nationalism’ while simultaneously reducing its costs and establishing itself as a major CSR player in the mining industry. For the GUF, (the International of Chemical, Energy, Mineworkers’ and General Unions [ICEM]), both it and some affiliated national trade unions improved their positions.

We examine the ICEM-initiated partnership between itself and Anglo-American (A-A) which greatly improved HIV-AIDS testing and treatment rates in A-A’s West African mines. It analyses the conditions under which this was successful and details results in Africa. It demonstrates how partners also derived benefits in Colombia.

The theoretical contribution is twofold. First, the study illustrates how unions can help raise FDI legitimacy, a role not envisaged by neo-classical economic frameworks, which conceptualize them as deterrents to FDI. Second, it shows how, contrary to previous assessments, a GUF may itself take a significant initiative, and act as more than a mere union co-ordinating body. GUFs are emerging and only poorly-understood institutional players in FDI and, by extension, globalization. The policy implication is that the legitimacy-raising and welfare-producing capacities they demonstrate should be recognized and integrated into IFI and WTO thinking on FDI.

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Abstract No: 59

Assessing Cultural Adaptation Competencies at Senior Executive Level: The Case of Expatriates in Mauritius

Anita Ramgutty-Wong University of Mauritius [email protected]

Indra Dusoye University of Mauritius [email protected]

The effective management and development of at all levels of an organisation is the key to global competitiveness and survival. Globalisation has boosted Human Resource Management from being a supportive function to being a more strategic and globally-relevant one, and global assignments play a strategic role along multiple dimensions. Thus, global leaders must understand the significance of cultural acceptance, flexibility and adaptability across cultures. In today’s global village, the extent to which managerial and strategic activities are successful across boundaries will largely depend on the manager’s ability to understand and balance other cultures’ values and practices. Mauritius, on the same trend of globalised business, has been increasingly opening doors to MNCs who often settle with a significant number of expatriates at seniormost level of their management. The island also welcomes key talent from all over the world to fill senior positions whose profiles often do no local skills and competencies. This trend towards an increase presence of expatriates at executive level therefore demands that a study be undertaken to investigate the adaptability of expatriate managers to the Mauritian culture, on the premise that the success or performance, of expatriates in management is largely accountable to the global competencies of these managers, and such competencies are hinged on the general ability to adapt culturally to the local scene. Despite nearly two decades of corporate globalization efforts, many organizations still struggle to find managers who are comfortable and effective in the increasingly global economy. Most suffer both from a lack of cultural awareness when dealing with employees and partners overseas and insufficient experience in managing increasingly complex processes. Expatriate failures represent human capital loss especially if the individual skills, knowledge and experience are important to the firm and scarce in the internal and external labour markets. With reference to a study done by Tung (1998) with 409 expatriates on assignment to 51 countries around the world, majority of expatriates took six to twelve months to feel comfortable living in a new cultural setting. Research also suggests that cross-cultural maladjustment of expatriates and their families were the most common reasons for the premature termination of foreign assignments (Tung, 1981).The rationale of this research is based on globalisation dynamics of “glocal” action as well as cross-cultural issues intrinsic to Mauritius. The paper provides an account of success and challenge stories in cultural adaptability and inadaptability by expatriates. The methodology is based on the case method and data is gathered through in-depth interviews of a sample of expatriates working in senior management positions in Mauritius.

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The four categories of predictors (Caliguiri and Cascio, 1998) of expatriate performance are used as the general conceptual framework, as follows:

1) Individual characteristics (language skills, technical skills, open-minded personality); 2) Family (supportive and well-adjusted spouse and children) 3) Organisation (support from headquarters and maintaining psychological contract), and 4) Host nationals’ attitudes towards the expatriate.

The methodology adopted in this study is supported by the framework mentioned above, with the objective of mapping findings from each individual respondent against (a) generic or universal cultural adaptability benchmarks, and attributing her/him a score, and (b) an acceptable Mauritian benchmark, arrived at after consultations with a cross-section of experienced and knowledgeable key respondents. Data for each of the four categories of predictors are then correlated with scores on the Mauritian benchmark, ultimately analysed and ranked into most explanatory to least explanatory. It is hoped that such an approach would yield enough explanatory causality that would enable the proposition of a new framework of cultural adaptability especially suited to the Mauritian culture, to be employed in pre-assignment preparation as well as cultural training of executives being selected for assignments in Mauritius.

Keywords: Mauritius; Expatriates; Cultural Adaptation; Globalisation.

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Abstract No: 60

Local Government’s Role in Trade for Food Security in South Africa

Betty C Mubangizi University of KwaZulu-Natal, South Africa [email protected]

While the objective of food security is central to development goals in all countries, the State can contribute to food insecurity through inappropriate policies and strategies. Indeed, South Africa’s dark history is fraught with State policies that directly and indirectly contributed (and continue to contribute) to food insecurity. However, the State is also best positioned to promote and to implement policies and strategies that incrementally promote food security in society. In particular, local government as the decentralised State can play the critical role of promting food security and the agriculture for development agenda. By bringing government closer to the people, local government can promote food security policy-making and implementation processes that are more responsive to the needs of the people. Local government can correct government failures in agriculture by, among others, ensuring greater access to local information and by mobilising local for policy reinforcement. More importantly, it can play a crucial role in promoting trade to improve inputs of food production on one hand and trade that will improve distribution and increase access to food items on the other. In South Africa, local government has the constitutional mandate to manage and control abattoirs and fresh produce. In this regard municipal markets have traditionally played the crucial functions of bringing in produce from various producers, setting a fair price, and ensuring a stable distribution of fresh produce for the consumers. In the face of globalisation, a declining role of municipal markets in the big towns is imminent. However there is need to explore the role of local government in small (mainly) rural towns in which emerging producers are also well placed to supply the burgeoning informal settlement food market, where vegetables are a staple diet. This paper examines the role of local government in trade for food security in South Africa and contributes to the debate on advocating for a combination of locally - coordinated domestic food production with food imports.

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Abstract No: 61

Market Competition in Export Cash Crops and Farm Income

Nicolás M. Depetris Chauvin African Center for Economic Transformation, Universidad de Buenos Aires & OxCarre [email protected]

Guido G. Porto Universidad de La Plata

In this paper, we study how the internal structure of export markets and the level of competition affect poverty and welfare in remote rural areas in Africa. In Sub-Saharan Africa, is a widespread phenomenon. While most produce for home consumption, some are engaged in high-value export agriculture. Here, we focus on export crops such as , cotton, cocoa, and . For many African countries, these crops, which are typically produced by smallholders, are a major source of export revenue. In consequence, changes in export prices and in the conditions faced in export markets (both internally and externally) can play a big role in shaping poverty in the region. Traditionally, the literature has focused on how external conditions affect poverty, for example by addressing whether agricultural subsidies in the developed world affect world prices and how this in turn affects farm-gate prices. Our objective in this paper is to explore domestic factors. In particular, we investigate the role played by the structure of competition in export agriculture supply chains.

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Abstract No: 62

Why Are Quality Matters Essential in Agricultural Markets? The Case of Rice Marketing in Madagascar

Tiana Rakotondramanitra Paris Ouest Nanterre La Défense University [email protected]

Context In recent years, agricultural policies in developing countries are focused on the promotion of green revolution and to respectively increase agricultural production and to better integrate small producers into the market system. Thereby not only food self-sufficiency would be achieved but exports would grow as well. How to promote the development of agribusiness where semi- dominates? How can small producers, who are the main suppliers of agricultural products, meet quality standards imposed by importing countries?

Purpose To address this challenge of agribusiness development in semi-subsistence agriculture context, the proposed communication deals with domestic markets functioning, and particularly with exchange principles of agricultural products. With special attention given to the qualitative dimension of the latter, we show theoretically that perceptions of quality product by market stakeholders greatly influence exchange principles on markets, with the help of a market theory based on French “Economics of Conventions” (Favereau, 2002) and New Economic (White, 2002). Thus, small producers in those developing countries have a different view of agricultural products quality from stakeholders in the agri-business, which could provide an explanation of the agribusiness difficulty to evolve in semi-subsistence agriculture context. The area study here is the rice sector in Madagascar. In recent years rice production is increasing without development of rice exports, with public authorities promoting agri- business model. Moreover, the country remains dependent on regular rice imports to meet local demand for rice, which is not satisfied by local supply. The proposed communication is to analyze empirically the current situation on rice, using a "quality" approach. Specifically, it examines exchange principles of paddy rice, on the one hand, and of white rice, on the other hand, to highlight a strong link between "common perception" of quality and exchange principles of these two different products in rice sector.

Originality The proposed approach seems original because it focuses on this largely neglected quality notion in favor of price notion. Issues around the quality dimension of products on developing countries markets also appear unmanageable. Indeed, how to discuss about "quality" dimension, where agricultural production is not quantitatively sufficient. Nevertheless, these two aspects can not be separated because the "quality" dimension is essential in determining prices in a market, both locally, but also and above all internationally.

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At the end of the communication, recommendations are addressed to public authorities concerning the way of treating “quality” dimension on domestic markets. Indeed, for a more successful participation of developing countries in globalization, via international trade, domestic markets should have already considered this dimension of exchanged products. The main idea we want to convey here is the need to further attention to the quality dimension in the markets, not only to the price dimension. A better consideration of the quality dimension would lead to general questionings on a better payment system based on quality, that we claim as a necessary condition for markets to be viable.

Keywords: Agricultural Markets and Marketing, Heterodox Approach, Economic Sociology. JEL codes: Q13, B5, Z13.

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Abstract No: 63

The Changing Agri-Food Export Composition: - Strategic Options For Sanitary and Phytosanitary (SPS) Compliance in Mauritius

Harris Neeliah MRC,Mauritius [email protected]

Shalini Neeliah Ministry of Agro-Industry and Food Security Mauritius [email protected]

Agri-food export from developing countries has historically been dominated by a limited number of traditional commodities, with coffee, tea, sugar, tobacco, rubber and cotton accounting for more than 60% of the total agricultural exports from such countries in the . This picture has considerably evolved over the last four decades, with a sustained growth in higher-value agri-food exports such as and horticultural products from developing countries. This change in agri-food export composition has been attributed to a series of drivers. However such high-value agri-food products are of higher risk than their traditional counterparts and their increased trade has thus generally served to highlight the divergent abilities of exporting developing countries and those required by importing markets. The ability of exporters to adhere to such food safety requirements determines their ability to compete in such markets. Mauritius is progressively developing its high-value agri-food export, gradually branching out of depending solely on sugar as its main agricultural export. But like any developing countries, Mauritius in accessing high-value markets, is also confronted with challenges associated with SPS issues. This paper analyses how the Mauritian agri-food export has evolved over the last decades and proposes strategies to explore how Mauritius could comply with SPS requirements prevailing in markets so as to maintain and expand its agri food exports.

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