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June 2000 Insights Issue #33
Back to Insights #33
Land vs labour
Diverging paths of export growth
What can Africa and South Asia sell most of in world
markets over the next few decades? A country's exports are powerfully
influenced by its resources, especially natural and human. Goods made
from abundant resources are exported, whilst goods produced from scarce,
and therefore more costly, resources are imported. Levels of education
and ratios of people to land vary widely among regions which causes
variation in the composition of their exports (Figure 1). There is a
particularly striking difference between the world's two poorest
regions, which is likely to persist into the future: Africa exports
mainly unprocessed primary products, whilst South Asia exports mainly
labour-intensive manufactures.
Figure 1: Regional export composition 1990
Africa: making better use of abundant land
Africa's exports are concentrated on unprocessed primary
products because of its unique mixture of little education and abundant
natural resources (placing it in the lower right corner of Figure 2).
Some African nations have different resources and about a third could be
significant exporters of manufactures - a potential as yet largely
unrealised. Even in the future, however, with better education,
infrastructure and policies, the share of manufactures in exports will
stay far lower in Africa than in Asia, which has fewer natural
resources.
What Africa needs to do is not change the composition
of its exports but raise their now extremely low levels, and break out
of its low-trade low-skill rut. Rapid growth of primary exports and
rising levels of education could take it down the development path of
natural-resource-abundant America. To achieve this, African countries,
with the help of the developed world, need to:
- maintain stable macroeconomic policies, increase
investment in infrastructure and schooling, encourage investment and
expand international business contacts
- develop the specialised research and training
needed to expand agricultural and mineral output and sales, which
will stimulate the demand for skilled workers.
Developed countries can also help by opening up their
markets to African agricultural products, while another source of demand
for Africa’s primary exports will be from continued rapid growth in
the land-scarce countries of Asia.
Figure 2: Regional resource
combinations 1960-1990 (at 5 year intervals)
South Asia: making better use of abundant labour
Compared to other developing regions and relative to its supply
of labour, South Asia is short both of skills - because literacy rates
are low - and of land, placing it in the lower left corner of Figure 2.
This gives it a comparative advantage in labour-intensive manufactures
such as garments and shoes whose production requires little skill or
land. The region has a profitable sideline in software services, which
in 1999 accounted for over 10 percent of India’s exports. However, as
long as South Asia’s levels of education stay below those of most
other regions, it will remain an exporter mainly of labour-intensive
goods and services. Exports are now low - less in total than Thai
exports. There is thus much scope for expansion.
- This opportunity will be enhanced by the
phasing-out by 2005 of the Multi-Fibre Arrangement which for decades
has imposed quotas on exports of garments to developed countries.
South Asia could thus capture a large share of the huge global
garment market, earning foreign exchange to finance the imports it
needs for modernisation, and creating many millions of jobs for
unskilled workers, as happened in East Asia.
- To take advantage of this opportunity, however,
big improvements will be needed in the region’s transport
infrastructure, from ports to rural roads, along with streamlining
of the administrative procedures for exporting, importing and
foreign investment.
Africa and South Asia have in common low levels of
income, education and exports, but they differ in the extent of their
natural resources. Their prospects and strategies for export growth will
thus take them down different paths.
Contributor(s): Adrian Wood
Further information:
Adrian Wood
Institute of Development Studies
University of Sussex
Falmer
Brighton BN1 9RE
UK
Tel: +44 (0)1273 678777
Fax: +44 (0)1273 691647
Email: adrianw@ids.ac.uk
Institute of Development Studies
Other related links:
Search
Eldis for sources on trade
Trade
and Enterprise Research Programme, Institute of Development Studies UK
See also:
Awakening the other giant: trade and human resources in India, mimeo,
Institute of Development Studies, Brighton, by A. Wood with M.
Calandrino (2000).
South Asia’s
export structure in a comparative perspective IDS Working Paper 91,
Institute of Development Studies, Brighton by J. Mayer and A. Wood
(1999).
Africa’s export
structure in a comparative perspective mimeo, Institute of
Development Studies, Brighton, by A. Wood and J. Mayer (1999). |
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