A Good Potential in Light Manufacturing
and into manufacturing. Even in wealthy countries where the share of manufacturing in output and employment has been stagnant or declining, there is evidence that, relative to nonmanufacturing sectors, manufacturing involves more production links with other sectors and the transfer of more production skills. Most African countries have identified potential sources of growth through Poverty Reduction Strategy Papers or equivalent documents. However, the sectors have generally been selected without a cohesive methodology. This chapter argues that, for countries that have chosen a systematic focus on manufacturing as a development strategy, there is a clear case for governments, cooperating closely with the private sector, to pay particular attention to the light manufacturing sectors, including agribusiness, in which their countries could compete. The private sector should lead in the identification of products, while the government plays a supporting role.
Identifying Opportunities in Light Manufacturing For existing products, revealed comparative advantage (RCA) and the domestic resource cost (DRC) can be used to pinpoint industries in which increased production could accelerate industrialization (box 1.1). We have calculated the DRC for each product on which we have a value chain analysis, and we have identified the relevant constraints and the measures to remove these constraints. For new products, latent comparative advantage, identified using the growth identification and facilitation framework, can pinpoint industries that are likely to be consistent with a country’s comparative advantage (Lin and Monga 2011). The framework postulates that, while a country’s endowments, including its infrastructure, are given at a specific time and determine its comparative advantage, endowments change over time in a rapidly growing country. Thus, the comparative advantage of a successful country is dynamic (Grossman and Helpman 1991; Krugman 1987; Lin and Chang 2009). Some of a successful country’s dynamically growing industries will lose their comparative advantage as the economy’s endowment structure upgrades. These sunset industries will then become the sunrise industries of countries that have lower income levels and less capital-intensive endowments, and that will therefore have a latent comparative advantage in the industries.
The Potential for Light Manufacturing in Africa For most Sub-Saharan African countries, light manufacturing is an attractive choice in the effort to capitalize on human and natural resource endowments and generate more employment and more well paying jobs for the many low-skilled laborers in the informal sector. While the technological complexity of Light Manufacturing in Tanzania • http://dx.doi.org/10.1596/978-1-4648-0032-0
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