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Primary Commodity Dependence and Africa's Future (2002)
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| Venue: | in Annual Bank Conference on Development Economics, Proceedings 2002, edited by B. Pleskovic and |
| Citations: | 29 - 2 self |
BibTeX
@INPROCEEDINGS{Collier02primarycommodity,
author = {Paul Collier and World Bank},
title = {Primary Commodity Dependence and Africa's Future},
booktitle = {in Annual Bank Conference on Development Economics, Proceedings 2002, edited by B. Pleskovic and},
year = {2002},
pages = {29--30},
publisher = {World}
}
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Abstract
Until recently virtually all developing countries were heavily dependent upon exports of primary commodities. Globally, this gave rise to three severe problems. First, because commodity prices are highly volatile, countries had to cope with large shocks, both positive and negative. Evidence suggests that the largest of these shocks were poorly managed, with negative shocks causing substantial contractions in output. Second, for various reasons, the rents generated by primary commodites have been associated with poor governance. Third, primary commodity dependence is associated with a substantially higher risk of civil war. Given these problems, diversification seems desirable, and indeed on average over the past two decades developing countries have massively diversified their exports so that such dependence is a thing of the past. Africa has not experienced this diversification and remains heavily dependent upon primary commodities. Does this indicate that Africa has an immutable comparative advantage in primary commodities? The paper argues that Africa's current comparative advantage in primary commodities is often due, not to its intrinsic endowments or locatio n, but to a poor investment climate that is policy-related. This most handicaps those activities that are intensive in transactions. Globally, manufacturing and agricultural processing have a high share of non- factor costs in total costs compared to agriculture, natural resource extraction and services. It discusses how it may be feasible to lower these costs in a coordinated way, through EPZs and so become competitive in manufacturing. However, for the next decade, even if Africa embarks upon effective diversification, ir will have to live with primary commodity dependence. Hence, there is an urgent task of ...
Keyphrases
primary commodity dependence primary commodity intrinsic endowment immutable comparative advantage poor governance current comparative advantage high share severe problem substantial contraction negative shock primary commodites effective diversification next decade agricultural processing commodity price poor investment climate large shock natural resource extraction coordinated way civil war total cost urgent task various reason non factor cost
