THERE is ample empirical evidence to show that the manufacturing sector plays an important role in growth, particularly when countries are at a relatively low-income level such like Namibia.
With very little double, manufacturing offers the possibility of higher levels of productivity, more rapid productivity growth and greater technical change than agriculture, or below a certain income, many parts of services.
In addition, it can create jobs that offer higher wages due to this higher level of productivity. Hence, there is usually an association between the growth of an economy and the size and growth of its manufacturing sector.
This relationship is typically stronger in low-and lower-middle-income economies than in middle- and high-income economies, since the productivity and employment effects of manufacturing relative to other sectors are expected to be higher at lower income levels.
In addition, there is some evidence that this relationship may have weakened post-1990 in the more globalized world economy, where positive growth effects from manufacturing only operate in economies with relatively high levels of human capital.
In policy terms this means that governments of developing countries particularly our very own here in Namibia needs to consider ways to encourage and support manufacturing activities and prevent a shift of resources from manufacturing to activities such as traditional agriculture or informal services, which offer less economic returns and have less potential for growth.
We must be reminded that structural change is a central feature of economic development and as economies evolve, the manufacturing industry plays a key role.
However, development is increasingly not only about raising income because the form growth takes also matters. Issues of inclusion (with as many as possible benefiting from the proceeds of growth) and sustainability (with growth minimizing the environmental impact) have become crucial.
The concept of industrial structure is often elusive as income level, country-specific conditions, technological change and policies all play a role in structural change. Insights into the ebb and flow of different sectors and industries within the manufacturing sector along a country’s development path are crucial, as they give rise to new opportunities and challenges for the country in question
The manufacturing sector has always been a key driver of economic growth for developing countries. At an early stage of development, manufacturing development can open a window for countries to pursue strong and inclusive growth.
The competitive wage levels of low-income countries give them a distinct advantage in developing labour-intensive industries, which can generate a large number of formal jobs for both women and men. Successful development of labour-intensive industries sets the foundation for industrialization, as increased exports, revenues and consumption boost investments in education, infrastructure, and research and development.
This can foster the development of higher valued and more technologically sophisticated industries. Such structural change ensures sustained and rapid industrial development, even after the loss of labour-cost advantage.
Confidente. Lifting the Lid. Copyright © 2015