Impact
Learning to Compete project presented to the Board of Executive Directors of the World Bank

On 20^th July 2015, John Page, Brookings Institution Senior Fellow and UNU-WIDER Non-resident Senior Research Fellow, spoke to the Board of Executive Directors (1) of the World Bank Group about the joint African Development Bank, Brookings Institution and UNU-WIDER research project Learning to Compete (L2C) (2). Page was invited as part of the Board’s ‘Distinguished Speakers Series’; a series which brings global thinkers on economic development— such as Montek Ahluwalia, Abhijit Banerjee, Ricardo Hausmann and Jeffery Sachs—to speak, in the words of World Bank Vice President and Corporate Secretary Mahmood Mohieldin, ‘on the most pressing development challenges of our times’.

Industrialization in Africa

Page began by saying that L2C was undertaken to answer three questions. Why is there so little industry in Africa? Does it matter? What can be done about it? These questions he argued are important ones for the World Bank, given its long history of engagement with Africa. He began by pointing out that Africa’s experience with industrialization over the past forty years has been disappointing. Industrial growth across the continent has lagged behind overall GDP growth, slowing structural transformation. Despite the manufacturing boom in developing countries over the past forty years, the average share of manufacturing in GDP in sub-Saharan Africa is 10%, unchanged from the 1970s. Does it matter? Page argued that, despite the region’s 20-year record of growth, it does. L2C shows that industrialization, including through growth of tradable services and agro-based industries, is critical to solving three of the region’s major problems: creating good jobs, accelerating the pace of poverty reduction, and sustaining long-term growth.

In the second half of his remarks Page turned to the first and third of the questions he posed: why there is so little industry and what to do about it. Africa’s failure to industrialize, Page noted, is partly due to bad luck. When Africa emerged from structural adjustment around the turn of the century, it found itself competing with China. But the failure to industrialize is also due to bad policy. Today, African economies have a window of opportunity to break into global markets in industry. Helping them seize this opportunity, Page said, demands new thinking from the World Bank and the aid community more broadly.

Drivers of productivity

L2C identifies four key drivers of firm-level productivity and industrial growth—infrastructure, human capital and institutions; exports; firm capabilities; and agglomerations. Of these, the Bank and other donors have focused on only one—infrastructure, human capital and institutions—in short on the ‘investment climate’. And, he noted, guided by the World Bank Doing Business surveys, the investment climate agenda has concentrated mainly on reform of regulations and institutions. Donor support for infrastructure and post-primary education has been declining as a share of total aid for 20 years.

Three policy objectives

For most countries, improving the investment climate alone will not offset the advantages of the world’s existing industrial locations. Despite nearly 15 years of investment climate reforms, Page pointed out, African industry has not taken off. L2C research provides the basis for a new industrialization strategy for Africa. This new approach emphasizes three objectives that have been largely absent from the Bank’s policy agenda: creating an effective export-push for industry; building firm capabilities and supporting the growth of industrial clusters. In concluding, Page urged the Executive Directors to give greater emphasis in investment climate analysis and operations to export-oriented infrastructure and skills development, and to challenge Bank staff to develop new initiatives to boost non-traditional exports, build firm capabilities and upgrade the performance of Africa’s Special Economic Zones.

(1) The Executive Directors represent the countries that own the World Bank. They play a central role in decisions on Bank operations and in shaping its approach to development policy. Twenty-three of the twenty-five constituencies on the Board were represented by their Executive Director or Alternate Executive Director, including the four Executive Directors representing the Bank’s African member countries. An additional twenty-five Alternate Executive Directors and Senior Advisors made up the remaining participants. The setting was informal and designed to promote a frank exchange of views.

(2) Learning to Compete involved national and international research teams over a period of four years. The project sponsored eleven detailed country studies of industrial policies and outcomes—eight from sub-Saharan Africa, one from North Africa, and two from emerging Asia—and twenty quantitative and qualitative studies of the drivers of firm-level productivity. The results of that research are available as Brookings Learning to Compete Working Papers (www.brookings.edu/about/projects/africa-growth/learning-to-compete) and as WIDER Working Papers (www.wider.unu.edu/research/current-programme/en_GB/L2C-2010/). They will also appear in two forthcoming books, Made in Africa: Learning to Compete in Industry (Brookings Institution Press), and Manufacturing Transformation: Comparative Studies of Industrial Development in Africa and Emerging Asia (Oxford University Press).