Export Diversification in Algeria
73
Figure 4.6 Relationship between Number of Products Exported and Doing Business Ranking in Selected Countries (average of all years) 6
number of products exported with RCA>1 (log)
AUT NLD
ESP
ITA SVN TUR
CZE POL CHN
IND GRC BRA IDN HRV UKR ARG NZL AUS FIN MEX URY EGY COL EST PER PAN MAR SGPIRL PAK MYS LVA CHL MDA LKA JOR LBN PHL NOR ALB ZWE DOM GEO PRY KAZ GTM ECU BOL KEN TZA MDG FJI BLR BGD CRI HNDMOZ ARM AZE SLV GHA BHR NPL VEN MNG NIC JAM SYR SEN MUS ISL HTI TJKMLI BLZ SLE ZMB BFA ETH MWIIRNSDN PNG UGA BEN GUY TGO SAU GIN NGA CMR DZA OMN RWA NER DNK JPN CAN THA SWE
ZAF ISR LTU
5
4
3
HUN PRT ROM
GAB WSM
CAF BDI
2 0
50
100
150
200
ease of doing business ranking
Source: Doing Business Indicators database, World Bank 2008b. Note: DZA = Algeria; RCA = revealed comparative advantage. Ease of doing business ranking is the country average rank for all years for which data are available. The number of exported products with a revealed comparative advantage greater than 1 was calculated using 2000 UN Comtrade data.
new export products. This may dull incentives to search for new export activities, but it does not eliminate them, particularly for potential new entrants to the private sector, outsiders, or domestic-focused firms wishing to expand beyond the small domestic market. It is therefore not a convincing explanation for the lack of export diversification in Algeria. A related explanation is that the availability of rents from the oil sector diverts entrepreneurs’ attention from other export activities. When a substantial share of a country’s wealth is allocated by the government, there is always a danger of diverting entrepreneurs from productive activities to competition for government resources (see Baland and François 2000 on rent-seeking because of oil). Obtaining data on this phenomenon is extremely difficult, but it is reasonable that these rents, as with a protected domestic market, may be dulling (but not eliminating) the incentives for private sector investment in new export activities. Beginning in the 1960s, Algeria, like other countries in the region, embarked on an ambitious economic program with strong