Growth-promoting structural change explains much of Africa's recent growth boom, especially in Ethiopia, Malawi, Senegal and Tanzania. In these countries, however, structural change has not been accompanied by labor productivity growth in the nonagricultural sectors. In fact, the expansion of services and manufacturing has typically been accompanied by low or negative productivity growth in these same sectors. As the expansion of modern sector economic activities, particularly manufacturing, is at the core of African countries' growth strategies, the following research questions become particularly urgent and relevant: what is the potential for Africa's modern sectors to contribute to rapid and sustainable economic growth? Are there alternatives to the East Asian model for achieving this kind of growth in Africa?
Indeed, Ethiopia has been promoting a mdoel of industrialization akin to that of East Asia; its policies have been designed to promote labour-intensive garments and footwear for overseas export and participation in global value chains (GVCs). By contrast, Tanzania exports resource-intensive manufactured goods dominated by agro-processing and other material-intensive commodities, including construction materials and plastic products. Moreover, Tanzanian manufacturing exports target African regional markets. To the best of our knowledge these alternative models of industrialization have not been analysed, let alone documented. Thus, this project aims to address a set of specific questions that are designed to fill this gap and shed light on the prospects for industrialization in Afirca. First, how has a reliance on GVCs played out in the Ethiopian context, and what should we expect going forward? Second, how has a reliance on resource-intensive manufactured products played out in the Tanzanian context, and what should we expect going forward? Third, to what extent are firms engaged in exporting linked to domestic markets and how does this vary accorduing to the model of industrialization? Fourth, what are the long-term implications of these alternative strategies of industrialization for sustained productivity and employment growth in Ethiopia and Tanzania? Are there lessons to be drawn from these cases for the rest of Sub-Saharan Africa?
To effectively address the research questions and ensure maximum policy impact, a macro-micro integrated approach that combines quantitativate and qualitative methods is employed. Qualitative methods include an intensive review of the literature and relevant policy documents of the two countries, as well as interviews with relevant public and private sector stakeholders. Quantitative methods are applied both to macro and micro datasets. At the same time, one of the major contributions of this projects is the construction of a longitudinal firm datasets. Like in other African countries, scarce and often unreliable data pose a major constraints to effective research in Ethiopia and Tanzania. The researchers will work with annual industrial surveys in both countries, in close collaboration with the Central Statistical Agency (CSA) in Ethiopia and the National Bureau of Statistics (NBS) in Tanzania, to construct panel data sets that can be used in empirical analyses. The resulting datasets will be owned by CSA and NBS, but a guarantee is in place that will make these data available for other researchers to use.
The principal beneficiaries of this research are national governments, the private sector (especially exporting firms), international development organizations and donors, and the wider academic community. The governments in both Ethiopia and Tanzania are eager to learn more about which aspects of their industrial strategies have been most effective, and how they can be improved. Governments in other African countries actively pursuing industrialization will also benefit greatly from insights into alternative routes to industrialization. In the international development sphere, there has been renewed focus on the issue of industrial policy and whether states should take an active or passive role in promoting industrialization. Furthermore, there is significant focus on the dynamics of spillovers from FDI and foreign trade.
