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China and Commodities: Does A Southern Engine of Growth Lead to Disruptive Development?. IDC Seminar; 23 rd September 2009 Raphie Kaplinsky  Masuma Farooki Julia Tijaja Anne Terheggen  Vuyo Mjimba Zeferino Teka . The Drive to Industrialisation.

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china and commodities does a southern engine of growth lead to disruptive development

China and Commodities: Does A Southern Engine of Growth Lead to Disruptive Development?

IDC Seminar; 23rd September 2009

Raphie Kaplinsky  Masuma Farooki

Julia Tijaja Anne Terheggen 

Vuyo Mjimba Zeferino Teka

the drive to industrialisation
The Drive to Industrialisation
  • Close association between incomes and industrialisation
  • The terms of trade favour manufactures
the drive to industrialisation5
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
a southern driver of growth
A Southern Driver of Growth
  • China: The Large Country Impact
    • Volume of Demand
    • International Sourcing
  • China: The Developing Country Impact
    • Resource Intensive Growth
    • Years to maturity
a southern driver of growth8
A Southern Driver of Growth

% Share of Costs of Minerals/Extractive Sector in Industrial Production and Per Capita Income (PPP). 2004

Source: Author’s calculations from GTAP and World Development Indicators.

a southern driver of growth9
A Southern Driver of Growth

Changing Traditional Relationships:

  • Income Elasticity of Demand for Commodities
    • Resource Intensive Growth and Higher Elasticity
  • Commodity Price Volatility
    • Active Financial Interests and Dampening of Fluctuations
  • The Mining Industry
    • Supply Inelasticity and Super Cycles
outline
Outline
  • The Thai Cassava Value Chains
  • Restructuring of Markets
  • Implications
the thai cassava vc simplified
The Thai Cassava VC (simplified)

Roots

Chips

Native starch

Modified starch

Pellets

Ethanol

Food

Non food

Feed

thai dried cassava exports fre
Thai Dried Cassava Exports (FRE)

Calculated from TTTA Annual Report 2003 to 2008

implications
Implications
  • A New Market Option
  • Change in Nature of Demand
implication 1 a new market option
Implication 1: A New Market Option
  • Cushion impact from shrinking EU market

BUT

  • Hamper pellet market diversification
  • Disrupt growth of Thai chips users
  • Restrict input into Higher Value Subsectors
implication 2 demand changes
Implication 2: Demand Changes
  • Change in Quality Specifications
  • Change in Standard Certification
  • Change in Value Added >
export unit price by sub sector
Export unit price (by Sub-sector)

Calculated from TTTA Annual Report 2003 to 2008

background
Background
  • Gabon:
    • High GDP p.c. (USD 9,969) but poor social indicators
    • Exports: oil (84.4%), timber (8.3%), manganese (3.1%)
    • Oil-dependent, little economic diversification
slide20

Background

  • Timber Industry:
    • Export-orientated industry with focus on logs (okoumé)
    • Among the top ten producers and exporters globally
    • Traditionally towards EU, now to China

Source: own calculations based on FAO ForesSTAT extracted June 2009

slide21

Background

  • Timber Industry:
    • State-controlled concession system
    • State ‘intervention’

= Forest Code

Source: World Resources Institute: Interactive Forest Atlas for Gabon (2009)

relegation of eu standards
Relegation of EU-Standards
  • Buyer-specific Standards (CSFs)
    • Stage of processing, species variety, quality, volume, product specifications, and price
  • International Standards
    • Fewer applications and these less important (phytosanitary certificate)
  • Private Standards
    • No requirements of environmental production methods and adherence of national legislation
restructuring of domestic industry
Restructuring of Domestic Industry
  • Change of Ownership of Productive Assets
    • Influx of Chinese & Malaysian (Chinese descent) companies and traders
    • In addition to and replacing EU and Gabonese owned companies

Source: World Resources Institute: Interactive Forest Atlas for Gabon (2009)

slide24

Restructuring of Domestic Industry

  • Activities
    • Increase of intensive + extensive margin
    • Management ‘style’
    • Easy cash vs. value-added ‘hurdle’
    • Certification vs. lack of skills + capital
    • Slow change of attitude
  • Clash of (political) Interests at Given Opacity
    • Gabon vs. EU vs. China
making the most of commodities mmcp programme
Making the Most of Commodities (MMCP Programme)
  • The Resource Curse
    • Dutch Disease
    • Corruption
    • Violence
  • Sachs-Warner
  • But US, Canada, Australia experience
ou and uct programme
OU and UCT Programme
  • Sectors
    • Copper, diamonds, gold, offshore-oil, oil, LNG,support service sector, infrastructure
  • Countries
    • Algeria, Angola, Botswana, Nigeria, Tanzania, South Africa, Zambia,
core mmcp hypotheses linkages affected by
Core MMCP Hypotheses: Linkages affected by
  • Ownership
  • Employment spillovers
  • National Systems of Innovation
  • Regional links
  • Infrastructure
  • Policy
slide29
The Nature And Determinants Of Linkages In A Remote Minerals Commodity Sector:A Case Study Of Gold Mining In Tanzania.

Vuyo Mjimba

gold prices trend 1960 2008
Gold Prices Trend 1960-2008

Source: FinFacts 2009

the scene
The Scene
  • Poverty
  • Royalties and Taxes
  • Ownership
  • Globalization

Canada

Australia

South Africa

Tanzania

theories
Theories
  • Value Chain
  • Outsourcing
  • The NSI
  • The Resources Curse Thesis
themes

Impact of firm strategy on upstream and down stream linkages.

Themes
  • Firms Strategies
  • The Local Economy

Impact of the local economy on linkages

questions

Spillovers between gold mining industry, upstream/downstream suppliers and the wider economy

Questions
  • Spillovers
  • Policy

Impact of policy regime upstream and downstream linkages

slide35
Maintenance and Repair Services Market in Offshore Oil and Gas Upstream Industry on the West African Coast:The Chain of Labour and Rents

Zeferino Teka

key issues
KEY ISSUES

Structure of the Market

  • Power & Governance Structure of the Market
  • Mapping out the value chain
  • Identify LEAD firms
  • Rules of participation
key issues39
KEY ISSUES

Determinants of Rent, Division of Labour, & Entry Barriers

2. Procurement & Outsourcing

  • Criteria & incentive for outsourcing
  • Ownership
  • Inputs sourcing: local & foreign distribution
  • Types of contracts & distribution
key issues40
KEY ISSUES

Status of Dynamic & Technological Capabilities

3. Upgrading & Learning

  • Form of chain governance
  • Absorptive capacity
  • Upgrading strategy
  • Knowledge producers & brokers
key issues41
KEY ISSUES

Context Determinants

4. NSI Trajectory

  • Macro Policy
  • Meso (horizontal) Policy
  • Micro Policy
key issues42
KEY ISSUES

Backward & Forward Linkages

5. Spillovers

  • Skills & Technology
  • Labour
  • Capital
  • Infrastructure