Uganda Growth Forum Thematic Session 1: Industry

1. Uganda Growth ForumThematic Session 1: Industry 14th Sep 2017Helen HAI CEO, Made in Africa Initiative

3. “Economically, acolonialpossessionmeanstothehomecountrysimplyaprivilegedmarketwhenceitwilldrawtherawmaterialsitneeds,dumplingitsownmanufacturesinreturn.Economicpolicyisreducedtorudimentaryproceduresofgatheringcropsandbarteringthem.Moreover,bystrictlyimposingonitscolonialdependencytheexclusiveconsumptionofitsmanufacturedproducts,themetropolispreventsanyeffortstouseormanufacturelocalrawmaterialsonthespot,andanycontactwiththerestoftheworld.Thecolonyisforbiddentoestablishanyindustry,toimproveitselfbyeconomicprogress,toriseabovethestageofproducingrawmaterials,ortodobusinesswiththeneighboringterritoriesforitsownenrichmentacrossthecustomsbarrierserectedbythemetropolitanpower” ---AlbertSarrant(1872-1962),theColonialMinisterforFrance (73rdPrime Minister of France)from1920scapturedthestructureandintentofthecolonialeconomy

4. Flying Geese and Development Success • To become a dynamically growing high-income country is a dream shared by all developing countries. After WWII, every country in the developing world adopted various efforts to pursue industrialization andmodernization • The results aredisappointing • among nearly 200 developing economies, only two have moved from low-income to high-income. China may become the third one by2025 • Among 101 middle-income economies in 1960,only • thirteen had become high-income by2008 • Job Creation is the Key for Poverty Reduction • A key for the few successful catching economies is that their governments played a facilitating role to capture the window of opportunities arising from the relocation of light manufacturing in the world to jumpstart their industrialization and structural transformation • Japan in the post WWII • The four East Asian Tigers in the 1960s • China in the 1980s

5. The Rise of China and the Opportunity for Africa • The GDP per capita in China in 1978 is US$154, less than 1/3 of the average in Sub-Saharan African Countries • China’s growth since then has been a miracle. Annual GDP growth averaged 9.8% over the 35 years, and more than 680 million people has escaped poverty. • China has absorbed the surplus labor. The wage increase in China will induce China to move up the industrial ladder from the labor-intensive industries to more capital-intensive industries. • Compared with 9.7m manufacturing job relocating from Japan and 2.3m in Korea in 1980, this round of job relocation from china is far more sophisticated: 85 million manufacturing jobs! China’s upgrading to higher industries will leave a huge space for MANY low-income developing countries to enter a labor-intensive industrialization development phase. • To capture this opportunity, the government in Africa needs to play a proactive facilitating role, and successful examples will bring inspiration, experience and confidence to the continent.

6. What Can Be Learned FromHistory? • Historical evidences show that successful countries in their catching-up stage all used industrial policies to facilitate their industrial upgrading and their industrial policies targeted industries existing in dynamically growing countries with a similar endowment structure and moderately higher per capitaincome: • Britain targeted the Netherlands’ wool textile industries in the 16th and 17th centuries; its per capita GDP was about 70% of theNetherlands’. • Germany, France, and the USA targeted Britain’s industries in the late 19th century; their per capita incomes were about 60% to 75% ofBritain’s. • In Meiji restoration, Japan targeted Prussia’s industries; its per capita GDP was about 40% of Prussia’s. In the 1960s, Japan targeted the USA’s industries; its per capita GDP was about 40% of theUSA’s. • In the 1960s-80s, Korea, Taiwan, Hong Kong, and Singapore targeted Japan’s industries; their per capita incomes were about 30% ofJapan’s. • In the 1970s, Mauritius targeted Hong Kong’s textile and garment industries; its percapita • income was about 50% of HongKong’s. • In the 1980s, Ireland targeted information, electronic, chemical and pharmaceutical industries in the USA; its per capita income was about 45% of theUSA’s. • In the 1990s, Costa Rica targeted the memory chip packaging and testing industry; its per capita GDP was about 40% of Taiwan’s, which was the main economy in thissector. • 19

7. Does this idea work inAfrica?

8. Mauritius achieved the same successby capturing the window ofopportunity 25,000 Per Capita GDP in 1990 InternationalDollar 20,000 Africa China 15,000 S. Korea Taiwan,China 10,000 Mauritius 5,000 0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

9. Shoe Factory in Ethiopia in Year 2013

10. The story of Felix

12. Garment Factory in Rwanda in Year 2015

13. Spillover effect: How did we support Regional Integration and Africa Local Entrepreneurs: https://www.youtube.com/watch?v=9p-uA1TBLaw

14. Reality: Doing Manufacturing in Africa

15. Made in Africa Initiative From What to How • We aim help Africa capture the window of opportunity for industrialization arising from the pending relocation of light manufacturing from China and other emerging market economies. • By capturing this opportunity, Africa will achieve sustainable, dynamic, and inclusive growth. • What Africa needs now is success stories to provide the aspiration, confidence, and experience for realizing its potential for industrialization and shared prosperity. The Made in Africa Initiative hopes to create such successes in African countries.

16. Main Challenges & Pragmatic approach: To capture this opportunity, African countries must overcome three major challenges. They lack technological knowhow about how to produce high-quality goods at a competitive price in the global market by using their abundant labor and resources. They lack the confidence of international buyers in the ability of African manufacturers to deliver goods on time and with the consistent quality specified in contracts. They lack the infrastructure and business environment to reduce the transaction costs for reaching international markets. How can African country best overcome those challenges: First, the government must adopt an active investment promotion strategy to attract existing export-oriented light manufacturing firms that have the technological knowhow and confidence of international buyers in China and other emerging market economies. Second, the government must use its limited resources and implementation capacity strategically to establish industrial parks and special economic zones with adequate infrastructure and a good business environment that helps investors reduce their transaction costs.

17. Practical Guide: Four pillar strategy • Bridging the gap in information • Help export-oriented light manufacturing enterprises in China and other emerging market economies to understand Africa’s advantages and to set up production in Africa. • Engage with policymakers, development agencies, businesses communities, and other key stakeholders: globally, regionally, and nationally to share the vision and the approach for capturing Africa’s window of opportunity to industrialize. 
 • 2. Advocating triangle collaboration and connecting the dots • Advocate a win-win cooperation among prospective investors, international retailers in Europe and the United States, and African countries with comparative advantages in abundant supplies of labor and raw materials • Work with international organizations and world leaders in the global supply chain to connect the dots of triangle collaboration (manufacturing capability, global retail market, and African comparative advantages).

18. Four pillar strategy • 3. Supporting African countries to identify their comparative advantages to develop their own development approach, and knowledge transfer on industrial zone development • Share successes and failures of past industrialization efforts and support African countries in developing an approach to development that is green, inclusive, sustainable, and environmentally friendly • Knowledge transfer on industrial zone development: Improvements in “hard” and “soft” infrastructure to reduce transaction costs • 4. Working with government to build quick key success examples - Work with national leaders to develop a pragmatic approach for generating quick successes in industrial development. • - Bring prospective investors who have the manufacturing knowhow to visit the country, facilitate early stage investment negotiations with the government, and ensure successful investments and implementation to turn the country’s opportunities into reality. • Identify policy constraints through the first movers’ operations, and advise the government on further reforms to attract more international and domestic manufacturing investment. 


19. 30 Years back……………….. Sheraton Hotel in Ethiopia Beijing Hotel in China Year 2011 Year 1981

20. Italwaysseemsimpossibleuntilit’sdone. ----NelsonMandela Thanksforyourattention !