Displaying items by tag: Industrial Policy

Industrial development and climate change mitigation have historically been opposed to each other. This is reflected in the industrial and climate change policy frameworks in South Africa. As a result of these two opposing frameworks and the disruptive and complex nature of the necessary transition to a low-carbon economy, the emergence of a climate change regime is seen as a threat and a risk to industrial development. Without immediate and ambitious action, the dichotomy between industrial development and climate change mitigation is moreover due to amplify. This raises the need to overcome the limited prism of analysis focused on incompatibility. This policy brief aims to contribute to filling the gap by investigating the interplay between industrial and climate change policies, the compatibility of the two frameworks and the options to manage the transition. This policy brief first argues that South Africa’s institutional arrangement and policy vision for industrial development and climate change are mainly mutually beneficial and provide an opportunity for a holistic approach. Second, the necessity for South Africa to position the country on short-term trade-offs associated with the cost of the transition is put forward. Third, the need for a strategic discovery and policy impact assessment process is ascertained.

Session 3: Regional manufacturing and industrial policy 2

Special economic zones (SEZs) emerged internationally as a policy to support industrial development in particular by providing for the introduction of targeted incentives and infrastructure. Internationally, despite their name, they are often effectively delinked from specific geographic areas in order to achieve these aims. This is especially useful where government wants to extend incentives to specific activities that lie outside designated zones, and where – as in South Africa – neither the provision of infrastructure nor spatial re-organisation of the economy are central aims of the SEZ programme.

The Renewable Energy Independent Power Producer Programme (REIPPP) was established to encourage new entry into the market.

The Regulatory Entities Capacity Building project review of the renewable energy sector includes:

• Assessing the problems and difficulties in implementing South Africa's first option for the expansion of renewable energy through feed-in tariffs (REFITs), initiated by the Department of Energy, and its abandonment by the government.
• Assessing, with the assistance of the National Treasury's Public-Private Partnership Unit, the motivations for opting to pursue competitive bids tenders through the REIPPP instead of the REFIT system.
• Assessing the outcomes of the competitive bidding process as a regulatory mechanism with reference to its impact on market entry, expansion of capacity, investment, pricing and linkages to industrial policy and job creation.
• Explore NESRA's role in this process.

The South African Ports Regulator, established in terms of the National Ports Act 12 of 2005 is a relatively new institution. Time taken to establish the institution has meant it has only recently begun to be effective. Over the past three years it has flexed its regulatory muscle with significant revisions to the tariff book and pricing proposed by the National Ports Authority. Studies have been conducted on the tariff adjustments and the stakeholder submissions to the Ports Regulator. However, limited work has been done on the effectiveness of the regulator.

TIPS’s assessment the regulation of ports in South Africa includes:

• Reviewing the role of the regulator, linking this to the broad policy framework and economic development priorities of the government.
• Assessing the work of the regulator, including through looking at case studies of ports regulation in other jurisdictions.
• Considering the role of the regulator in contributing to the efficient and cost-effective operation of the ports, including the impact of the ports on the broader economy.
• Considering the role of ports in attracting investment and supporting the growth of service sectors related to port operations such as ship repair, boat building and servicing the offshore oil and gas sector.
• Considering the regulator looking at more than pricing, and going broader into the terms of access and quality of service of South African ports.
• Looking at international experiences in Australia, India and South America.

Ports Regulation: Are we achieving the objectives of the Ports Act? Comparisons with Ports Regulators from India, Australia and elsewhere (19 November 2013). Presentation by Dr Sheila Farrell, Imperial College London:

This paper forms part of a broader research project TIPS has been involved in around common regional industrial policies. It looks at three examples of regional integration: the Association of Southeast Asian Nations (ASEAN), the European Union and Mercosur. The focus is on understanding the drivers and motivation for regional integration in different parts of the world. It looks into how integration was supported and directed, and specifically how these blocs deal with issues of common industrial policies. It aims to assist in understanding the supply and demand for deepening regional integration and how integration options and approaches can be designed to respond to highly specific contextual circumstances.

The absence of growth in intra-SADC trade in industrial products since the tariff phase-downs were initiated prompted by the ratification of the SADC Protocol on Trade in 2000 continues to generate interest amongst policymakers and other stakeholders as it appears that removal of market access constraint alone is not a sufficient panacea. While the paper observes that failure to make the factors of production such as labour, capital, enterprises and technology fully mobile across the region has contributed to continued supply side constraints, it is the failure to implement industry specific measures arising from an industrial policy that is the primary reason for poor industrial sector response to market opportunities in the region. Through a review of trade and industrial policies in the EU, ASEAN, NAFTA, MERCOSUR and SADC, the paper makes observations that could be lessons for SACU as it develops its industrial policy.

Countries in Southern Africa have only recently begun considering the possibility of jointly developing comprehensive industrial policies under the auspices of regional integration bodies such as the Southern African Customs Union (SACU). Regional co-operation in industrial policy design and implementation has the potential to both identify and capitalise on the productive synergies that exist between states, and to enhance the integrated performance of industrial sectors across borders.

Author: William S. Mbuta

The Zambian economy has undergone profound reforms in the last two decades. It has transited to a market economy from the previously centrally planned economy. As part of the economy-wide reforms, the country's industrial and trade policies have also been re-oriented to suit the needs of the market-oriented economy. This paper therefore reviews the evolution of Zambia's industrial and trade policies from 1964, when the country gained independence, to 2009. This period is divided into two: the first period being before the reforms in 1991, and the second period being 1991 – 2009.

The paper focuses on the conduct of trade and industrial policies in Malawi, their linkages and impacts on the performance of the trade and industry sectors. The study establishes that Malawi has gone through three stages of trade and industrial policy. From focusing on the production and trade of a few agricultural commodities during the colonial era, the authorities shifted, in the post-independence era to industrialise through import substitution policies. Following poor economic performance in the late 1970s and early 1980s, Government adopted economic liberalisation policies under the Structural Adjustment Programmes (SAPs) which, in fact, caused manufacturing activities to decline during the SAPs period. Substantial policy reforms ensued aimed at enhancing the performance of trade and industry. Government has adopted and applied a range of policy measures aimed at boosting investment and export incentives and regional integration and miscellaneous trade agreements were pursued to expand the market. In spite of steps towards a favourable policy environment, little progress has been made in particular areas such as that of the diversification of exports.

This paper looks at the nature and extent of linkages between trade and industrial policies in Zimbabwe. The paper establishes that the trade and industrial policies are interlinked in Zimbabwe. The study indicates that trade policy is one of the implementation strategies of the industrial policy - further illustrated in this paper specifically using the example of the clothing and textile industry. The policies are strongly linked in that one focuses on production capacities and the other provides a platform for the exchange of the goods produced. Also, the paper highlights the fact that the two policies are dependent on regional integration.

The paper recommends that the country needs to create a conducive macroeconomic environment for the economic agencies. It is critical to restore and increase the country’s normal capacity utilisation and other sectoral linkages such as the agriculture, mining, tourism and construction which have been under severe stress in the past ten years. The paper suggests that while a strong focus has been placed on priority industries, the country must also give priority to other products.

This paper aims to establish the links between the industrial policy and the trade policy in Botswana. The paper finds that after gaining independence the Botswana government has deliberately targeted industrialisation as a strategy to overcome the high concentration of economic activities and welfare of the country centred on diamonds. The strategy aimed at creating an enabling environment for the establishment, growth and development of particular types of firms through financial support. The government also centered trade policy in negotiating for preferences for Botswana's products whilst securing import requirements at competitive prices. There is evidence, nevertheless, that the formulation of trade policy, such as tariff policy, was largely disengaged from Botswana's industrial policy considerations. Commitments under SACU and SADC affect Botswana government's use of trade policy for own purposes.. Partly combined moreover with the cession of industrial policy to South Africa for most of the pre- and post-independence period, the study generally concludes that the link between the Industrial policy and trade policy has been weak.

This paper argues that perspectives characterizing the trajectory of China's economic reforms as “reversing course” are misleading by not recognizing the current stage of Chinese industrial development and the policy initiatives adopted to steer the country towards widely-stated national objectives. As such, the paper aims to contribute to the growing analysis of lessons learned from China's development experience by highlighting the evolving nature of institutional mechanisms and policy instruments in banking and finance, industry and technology to promote learning and to deepen independent national productive capacities as part of a concerted “big push” by domestic firms up the economic value chain in strategic sectors.

The paper begins by first analyzing the key lessons learned (positive and negative) from China outlined by three recent World Bank working papers, before addressing the key oversight of these works, in setting out China's institutional 'toolbox' of policy instruments behind its ambitious, yet evolving, WTO-tailored industrial policy strategy.

South Africa has a peculiar industrial structure given its factor endowments:

production is capital intensive in sectors and concentrated in capital intensive sectors despite an abundance of unskilled labour. Part of the reason for this phenomenon lies in the development process of South African industry: it grew around the mining sector and its core sectors remain close to the minerals endowment up until today.
A possible explanation for this path dependent development is the existence of forward and backward linkages between sectors that drive
industrial development. We use an SVAR approach with realistic identification assumptions from input-output relations 'following a paper by
Abeysinghe and Forbes (2005)' to estimate the effect of linkages between sectors on sectoral growth performance.

South Africa has a peculiar industrial structure given its factor endowments: production is capital intensive in sectors and concentrated in capital intensive sectors despite an abundance of unskilled labour. Part of the reason for this phenomenon lies in the development process of South African industry: it grew around the mining sector and its core sectors remain close to the minerals endowment up until today.

A possible explanation for this path dependent development is the existence of forward and backward linkages between sectors that drive industrial development. We use an SVAR approach with realistic identification assumptions from input-output relations - following a paper by Abeysinghe and Forbes from 2005 that analysed trade linkages between Asian countries - to estimate the effect of linkages between sectors on sectoral growth performance. Impulse response analysis allows us to estimate the impact of a shock in one sector on other sectors of the economy and therefore points toward the 'pulling power' of various sectors of the South African economy.

Industrial Development Zones (IDZs) have been and still are important vehicles used by developing countries to facilitate investments, create jobs and boost exports. The attractiveness of IDZs is characterized primarily by their association with the adjacent location of an airport or port, good basic infrastructure and duty-free imports of production-related raw materials and inputs to enhance the key export oriented focus of the zones.

In South Africa, the establishment of IDZs is a recent phenomenon intended to attract investment, increase exports and the competitiveness of South African products. Currently the country houses four IDZs in Port Elizabeth (Coega IDZ), East London (ELIDZ), Richards Bay (RBIDZ) and Gauteng (OR Tambo International Airport). In addition, further sites have been identified and already some are being developed.

The proliferation of IDZs in the country has led to increased interest in the subject. To date the lacklustre investment in the country's industrial development zones and their failure to meet their ambitious goals have attracted mixed reviews regarding the international competitiveness of South African IDZs.

Against this background, this paper therefore aims to contribute to the ongoing IDZ debate. It discusses the economic rationale for IDZs in South Africa, reviews the context in which an IDZ policy is being promoted in the country and then evaluates South African IDZs' economic performance. Accordingly of added value, this paper also reviews the types of incentives offered by Southern African countries in attracting investments in their development zones.

The future direction of South African industrial policy is the subject of vigorous and healthy debate. The outcome is important for the country's economic development. This study is an attempt to contribute to these discussions through an overview of and some questions about the economic impacts of South Africa's post apartheid trade and industrial policy. It comprises two main parts. These parts can be read independently.

The first part reviews some key themes in international policy discussions and draws lessons from the recent experiences of other developing countries. The second and largest part of the report reviews South Africa's industrial policy over the past decade. While not comprehensive, the range of policies examined is sufficient to dismiss the claim made by some that South Africa has not had an industrial policy. In fact, whether by intention or not, South Africa has experimented with a very wide range of policies that have had a direct impact on the path and success of its industrial development.

This review raises some serious questions about the economic impacts of South Africa's industrial policies and of some future alternatives that are now under discussion. Despite the intensity of and broad interest in the debate, there appears to have been very little serious economic analysis of past policies or of future plans. Basic assumptions about the effectiveness of sector-specific interventions, for instance, appear to be poorly founded. Many policies have impacts that are at variance with stated intentions. International experience is drawn upon with great selectivity to support particular views about preferred policy directions.

The real questions facing South Africa are not whether South Africa does or should have an industrial policy. They are not about whether there should be more or less government intervention. The most important questions are pragmatic and not ideological they are about what works and does not work in South Africa and why.

The paper presents significant new insights for Policy Makers, Practitioners, Educators, and Researchers into the socio-economy of agglomerated SMEs in developing country context. Using mixed methods of inquiry and concurrent triangulation approach this paper profiles the socio-economy of the internationally competitive textile industry cluster of Faisalabad in Pakistan to establish the validity of the concept of clusters in the context of developing economies and seeks new insights into the phenomenon. The paper also investigates the impact of clustering on the performance, governance, organization and entrepreneurial management practices of the constituent SMEs. The methods employed for research include analysis of secondary data, survey of the textile firms and in-depth semi-structured interviews.

Key learning points of the research are:

1. Cost reductions and information spillovers facilitated by the community ties and the shared local identities were the dominant type of advantages for the agglomerated firms. They largely arose at the level of transactions in goods and services, and to a lesser extent in the transformation of inputs into output. Vertical cooperation, rather than horizontal, was mostly prevalent in the cluster.

2. In the emergence phase of the cluster factor (input) conditions were more dominant. After three decades of growth, however, extensive co-location of related and supporting industries became, and remains, the dominant factor in the success of the industry in the region.

3. The developing economy cluster lacked strong institutions and infrastructure. Selfreliance of the entrepreneurs and the collective action, however, mitigated the aspects of the lack of cluster specific public goods. The Government's initiative and development efforts were mostly passive but still the national industrial policies were instrumental in spurring explosive growth of the small weavers in the region.

4. The paper also provides new insights on the role of the traders in the functioning of the cluster. They helped the small enterprises to overcome the growth constraints and had supported them to compete in distant markets, nationally and abroad. The clustered SMEs are also different from non-clustered firms in terms of average size, governance, human resource practices, marketing efforts, financing, and operations management.