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The rise of the Asian Drivers and the implications of Development Strategy

The rise of the Asian Drivers and the implications of Development Strategy. Raphael Kaplinsky Development Policy and Practice, The Open University. China’s growth is not unique. And they may be direct or indirect. The drive to industrialisation.

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The rise of the Asian Drivers and the implications of Development Strategy

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  1. The rise of the Asian Drivers and the implications of Development Strategy Raphael Kaplinsky Development Policy and Practice, The Open University

  2. China’s growth is not unique..

  3. And they may be direct or indirect

  4. The drive to industrialisation • Close association between incomes and industrialisation • The terms of trade favour manufactures

  5. UNIDO World Industrial Development Report 2009

  6. Commodities-manufactures terms of trade

  7. The drive to industrialisation • Close association between incomes and industrialisation • The terms of trade favour manufactures • Manufactures are (relative to agriculture) income elastic and price inelastic • Synthetic substitutes for natural products • Manufacturing embodies rents – agriculture does not • Manufacturing can be labour intensive – primary commodities are very capital intensive

  8. The orthodoxy Manufacturing exports are key: • Competitive effects • Scale effects • Learning effects

  9. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

  10. EU Imports from China Source: Euratex data as reported by Nathan Associates

  11. % of sectors with negative price trends, 1988/9-2000/2001

  12. Commodity Price Movements 1960-2008 Source: UNCTAD All Commodity Price Index, 2000=100

  13. The Rise in Commodity Prices UNCTAD Commodity Price Index 2003-08. (2000=100)

  14. Actual and projected global share of China’s consumption of base metals Source: Macquarie Mining

  15. Source: Macquarie Mining

  16. China’s demand for agricultural commodities • 20% world population, 7% arable land • Biofuels • Industrial inputs • 22% global rubber consumption (2006) • Imports 27mt cotton vs 7mt domestic production(2008) • Pork, other meat and animal feeds • Switch domestically from grains to fruit and vegetables

  17. Global outlook for the agricultural sector, 2007-2016 (OECD/FAO, 2007) • “…structural changes such as increased feedstock demand for biofuel production, and the reduction of surpluses due to past policy reforms, may keep [agricultural product] prices above historic equilibrium levels during the next 10 years…. • Winners are: • Brazil (sugar, oilseeds, meat) • Argentina (cereals and dairy products) • Russia/Ukraine (coarse grains) • East and south east Asia (rice, veg oils, poultry)

  18. The Impact on Africa

  19. Manufacturing for the domestic market • SMEs in Ethiopian shoe industry • 28% bankrupt • 32% downsize • SA Clothing and textiles • Employment fell from 119,000 in 2004 to 87,000 in 2005 • Zambia’s Mulungushi mill • Closure in 2007 with

  20. What happens when Africa exports the same products as China to the USA? (2004-2006)

  21. SSA EXPORTS SA, Lesotho, Swaziland, Madagascar, Kenya, Mauritius Hard commodities Clothing footwear SSA LOSS SSA GAIN Oil exporters, Zambia, SA, DRC, Botswana, Ghana, Gabon, etc CHINA IMPORTS CHINA EXPORTS All SSA Oil Clothing footwear SSA LOSS SSA GAIN Most SSA SSA IMPORTS

  22. GDP Growth (% Change) Slow Down in Global Growth Source: IMF WEO January 2009

  23. The Fall of Commodity Prices UNCTAD Commodity Price Index 2003-08. (2000=100)

  24. What’s in a Price Movement? Commodity Boom: A peak that is much higher than previous peaks. The Cycle: Short Term, 2-4 years; a peak/trough to peak/trough measurement. The Super Cycle: Medium Term, 6-10 years; a prolonged trend rise over a decade. The Structural Break: Long Term; a long-run change in relative prices.

  25. Commodities-manufactures terms of trade: What does the future hold? 2030 2015

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