Meeting the challenge of industrialization will need new thinking both in Africa and among its development partners. Put bluntly, Africa will not succeed in industrializing if the conventional wisdom offered by the international aid community to African governments continues to define their public policies to spur industrial development. One of the unifying themes in the eight SSA country case studies in this volume is the predominant role of donor-driven investment climate reforms. In our view while investment climate reforms are necessary, they need to be re-prioritized and refocused. Urgent action is needed to address Africa’s growing infrastructure and skills gap with the rest of the world.
For most African countries, investment climate reforms alone are unlikely to be enough to overcome the advantages of the world’s existing industrial locations. Drawing from the policy histories of Cambodia and Vietnam and—because these to a great extent reflect a shared approach to industrialization in East Asia—on Asia’s experience more broadly, we identify three new initiatives to address Africa’s industrialization challenge.
• Breaking into export markets will need an ‘export push’ of the type undertaken by Cambodia, Vietnam, and Tunisia: a concerted set of public investments, policy, and institutional reforms focused on increasing the share of industrial exports in GDP. Because governments have limited scope for public investment and public action, the export push needs a government-wide commitment to focus investments and policy actions first on boosting non-traditional exports.
• In Cambodia and Vietnam the export push was accompanied by policies designed to promote the formation of industrial clusters. Spatial industrial policies are complementary to both the export push and capability building. African governments can foster export-oriented industrial agglomerations by concentrating investment in high-quality institutions, social services, and infrastructure in a limited physical area such as an export processing zone (EPZ)—an industrial agglomeration designed to serve the global market—but African governments have not yet succeeded in doing so. (p.viii)
• Cambodia, Vietnam, and Tunisia each recognized that policies and institutions for attracting foreign direct investment (FDI) are a key tool in capability building. The institutional design of successful FDI agencies is well known. The SSA countries that we studied had all created institutions intended to attract FDI, but we did not find any examples of high-level government commitment to the promotion of FDI, and implementation has not achieved best practice. Building better investment promotion institutions is essential.
Finally, perhaps the single most important insight to emerge from the country studies in this book is that any one of the above initiatives taken in isolation is likely to fail. Two decades of piecemeal reforms have not succeeded in pushing a single low-income African country over the threshold above which industrial growth becomes—as it has been in Vietnam—explosive. Africa will learn to compete only once donors and policy makers accept the need for a comprehensive strategy for industrial development.
Carol Newman, John Page, John Rand, Abebe Shimeles,
Måns Söderbom, and Finn Tarp