Economic Policy and Manufacturing Performance in Developing Countries

Economic Policy and Manufacturing Performance in Developing Countries

Edited by Oliver Morrissey and Michael Tribe

This book considers the impact of economic reforms on manufacturing performance and explores policy options for promoting manufacturing. Using country-specific case studies spanning Africa, South Asia, South East Asia and Latin America, the authors examine the evidence for and against both trade liberalisation and government support policy.

Chapter 3: Firm-level capability building in less developed countries

Wise Mainga

Subjects: development studies, development economics, economics and finance, development economics, industrial economics

Extract

Wise Mainga* 1 INTRODUCTION Since the late 1980s, most African countries have undertaken efforts to restructure their economies. Most reforms had to be undertaken after decades of economic decline. In some of the countries, the economic crises1 had produced some degree of consensus that was needed to pursue wide-ranging restructuring reform packages. In countries like Zambia and South Africa,2 relatively rapid and wide-ranging trade liberalisation policies were adopted as one means of revamping the manufacturing sector. The effects of Structural Adjustment Programmes (SAPs) on the manufacturing sector in countries of Sub-Saharan Africa (SSA) have proved to be very controversial, however. One view is that the across-the-board rapid liberalisation of foreign trade has not been conducive to industrial restructuring and upgrading. Not only has rapid exposure to foreign competition led to unavoidable destruction of inefficient high cost manufacturing, it has also resulted in wasteful deindustrialisation of accumulated capital stock that may have been viable in the medium term (Lall, 1995; Stein, 1992).3 Some proponents of this view have urged that some of the liberalisation efforts have been too fast and have not provided enough time for firms to modernise and upgrade their competitive capabilities (Lall and Wangwe, 1998; Riddell, 1990). This view emphasises the need to address simultaneously the complex process of strengthening the technological competence of firms. The design, pace and implementation of SAPs must take account of such complexity. The opposing view – which is often seen to be enshrined in most SAPs – assumes that manufacturing firms...

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