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Industries Without Smokestacks OUP CORRECTED PROOF – FINAL, 1/10/2018, Spi OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi Industries without Smokestacks OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi UNU World Institute for Development Economics Research (UNU-WIDER) was established by the United Nations University as its first research and training centre and started work in Helsinki, Finland, in 1985. The mandate of the institute is to undertake applied research and policy analysis on structural changes affecting devel- oping and transitional economies, to provide a forum for the advocacy of policies leading to robust, equitable, and environmentally sustainable growth, and to pro- mote capacity strengthening and training in the field of economic and social policy- making. Its work is carried out by staff researchers and visiting scholars in Helsinki and via networks of collaborating scholars and institutions around the world. United Nations University World Institute for Development Economics Research (UNU-WIDER) Katajanokanlaituri 6B, 00160 Helsinki, Finland www.wider.unu.edu OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi Industries without Smokestacks Industrialization in Africa Reconsidered Edited by Richard S. Newfarmer, John Page, and Finn Tarp A study prepared by the United Nations University World Institute for Development Economics Research (UNU-WIDER) 1 OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi 3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © United Nations University World Institute for Development Economics Research (UNU-WIDER) 2018 UNU-WIDER, Katajanokanlaituri, 6B, 00160 Helsinki, Finland The moral rights of the authors have been asserted First Edition published in 2018 Impression: 1 Some rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, for commercial purposes without the prior permission in writing of Oxford University Press. This is an open access publication. Except where otherwise noted, this work is distributed under the terms of a Creative Commons Attribution-Non Commercial- Share Alike 3.0 IGO licence (CC BY-NC-SA 3.0 IGO), a copy of which is available at https://creativecommons.org/licenses/by-nc-sa/3.0/igo/. Enquiries concerning use outside the terms of the Creative Commons licence should be sent to the Rights Department, Oxford University Press, at the above address or to [email protected]. Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2018947009 ISBN 978–0–19–882188–5 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work. OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi Foreword Structural transformation in Africa is a hot topic. And the reason for this rising concern is clear. The movement of workers from low- to high- productivity employment has contributed far less to growth in Africa than in other fast-growing developing regions. Historically, industry—particularly manufacturing—is the sector which economies have relied on early in the process of structural transformation. However Africa’s experience with industrialization has been disappointing, causing observers to question the durability of its growth prospects. Concurrently, changes in transport costs and IC technology are shifting the boundaries and concept of industry. Manufacturing—‘smokestack industry’—has been understood as the main driver of structural transformation; but today a wide range of services and agro-industrial products have emerged. To look in depth at the emerging developments, the Brookings Institution and UNU-WIDER launched a joint research project entitled Industries without Smokestacks: Implications for Africa’s Industrialization, with the remit of helping African policy makers develop a better understanding of industries without smokestacks and their potential to contribute to growth-enhancing structural change. This book delivers the crystalized and refined results of that entire research project. I am most grateful to the book’s many contributors for their authorship, and to my fellow editors, Richard S. Newfarmer and John Page, for their analytical and editorial skills. The book is an advancement in the field of structural transformation providing essential reading and analyses for economists, pol- icy makers, and scholars of development. UNU-WIDER gratefully acknowledges the support and financial contribu- tions to its research programme by the governments of Finland, Sweden, and the United Kingdom. Without this vital funding our research and policy advisory work would be impossible. Finn Tarp Director, UNU-WIDER May 2018 OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi Contents List of Figures ix List of Tables xi List of Abbreviations xiii Notes on Contributors xv 1. Industries without Smokestacks and Structural Transformation in Africa: Overview 1 Richard S. Newfarmer, John Page, and Finn Tarp 2. New Technologies Create Opportunities 27 Sally Murray 3. Telecommunication and ICT-Based Services Trade 48 Cláudio R. Frischtak 4. Tourism Global Value Chains and Africa 68 Jack Daly and Gary Gereffi 5. Agro-Processing and Horticultural Exports from Africa 90 Emiko Fukase and Will Martin 6. Air Transport in Africa: A Portrait of Capacity and Competition in Various Market Segments 113 Heinrich C. Bofinger 7. How Trucking Services Have Improved and May Contribute to Economic Development: The Case of East Africa 133 Charles Kunaka, Gaël Raballand, and Mike Fitzmaurice 8. Trade in Services: Opening Markets to Create Opportunities 151 Bernard Hoekman 9. Industries without Smokestacks: Implications for Ethiopia’s Industrialization 170 Mulu Gebreeyesus 10. The Agro-Processing Industry and its Potential for Structural Transformation of the Ghanaian Economy 191 Nkechi S. Owoo and Monica P. Lambon-Quayefio OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi Contents 11. Prospects for Information and Communications Technology- Enabled Services in Kenya: The Case of the Mobile Money Transfer Industry 213 Dianah Ngui and Peter Kimuyu 12. Industries without Smokestacks: Mozambique Country Case Study 232 António S. Cruz and Fausto J. Mafambissa 13. Senegal: A Service Economy in Need of an Export Boost 254 E. Philip English 14. Understanding and Characterizing the Services Sector in South Africa: An Overview 275 Haroon Bhorat, Christopher Rooney, and François Steenkamp 15. Employment and Productivity Growth in Tanzania’s Service Sector 296 Mia Ellis, Margaret McMillan, and Jed Silver 16. Rwanda: From Devastation to Services-First Transformation 316 Kasim Munyegera Ggombe and Richard S. Newfarmer 17. Industries without Smokestacks in Uganda and Rwanda 341 John Spray and Sebastian Wolf 18. Regional Opportunities in East Africa 364 Stephen Karingi, Ottavia Pesce, and Lily Sommer 19. Integration Along the Abuja Road Map: A Progress Report 387 Jaime de Melo, Mariem Nouar, and Jean-Marc Solleder 20. Widening the Options: Implications for Public Policy 411 Richard S. Newfarmer, John Page, and Finn Tarp Index 433 viii OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi List of Figures 1.1. Has Africa’s manufacturing peaked too soon? 5 1.2. Manufacturing as a share of GDP on average declines over four decades 8 1.3. The changing relationship between manufacturing and services 10 1.4. IWSS sectors become more important in African non-mineral exports 20 1.5. The IWSS exports outstripped other non-mineral exports in most of SSA 21 3.1. ICT Development Index (IDI) by region compared with the global average, 2016 50 3.2. The moving connectivity frontier, 2008–14, selected developed economies 58 3.3. The moving connectivity frontier, 2008–14, selected developing economies 58 5.1. Export shares from sub-Saharan Africa 93 5.2. Shares of agricultural exports 95 5.3. Processed agricultural exports in total agricultural exports vs per capita income, 2011 100 6.1. Global aircraft positions over continents and oceans, 9 July 2016 115 6.2. Global aircraft positions over continental Africa, 9 July 2016 116 6.3. Number of international airport pairs served on multi-stop flights in sub-Saharan Africa, and the share of total international routes and seats 121 6.4. Percentage of routes by market concentration, all travel with Africa, and total number of routes 123 6.5. Percentage of routes by market concentration, intercontinental with sub-Saharan Africa, and the total number of routes 124 6.6. Sub-Saharan Africa, and total number of routes 125 6.7. Percentage of routes by market concentration, international travel between North and sub-Saharan Africa, and the total number of routes 125 6.8. Percentage of routes by market concentration, domestic travel within sub-Saharan Africa, and total number of routes 126 7.1. Road transport share of different destinations out of Dar es Salaam, 2015 137 7.2. Composition of logistics cost savings as a result of EATTFP 140 7.3. Percentage of use of GPS fleet management according to fleet size 143 7.4. Time spent at Malaba border post before and after reform 144 OUP CORRECTED PROOF – FINAL, 1/10/2018, SPi List of Figures A7.1. LPI scores in 2016 149 8.1. Services Trade Restrictiveness Index, 2009 156 9.1. Contribution of the different sectors to Ethiopia’s real GDP growth 175 9.2. The purpose of tourists’ travel to Ethiopia, 2011–14 178 14.1. Correlation between sectoral productivity and change in employment shares in South Africa, 2000–14 279 14.2. Trend in growth of goods and services exports in South Africa, 1994–2014 284 14.3.
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