About the East African Community. Partner States - Burundi, Kenya, Rwanda, Tanzania & Uganda
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1 EAC INDUSTRIALIZATION STRATEGY: Role of Industry/Academia Linkages for development of Competitive Regional Industrial Value Chains By Jennifer Gache Senior Industrial Engineer EAC 25 October, 2012 About the East African Community Partner States - Burundi, Kenya, Rwanda, Tanzania & Uganda Vision - A prosperous, competitive, secure and politically united East Africa. Mission - To widen and deepen economic, political, social and cultural integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investment. 2 1
2 The Neighbourhood East Africa Total population estimated at million Has a common market of 135 million people with an estimated USD 79.2 billion GDP and average GDP per capita of $685 (EAC Secretariat; 2011) Member of the EAC-COMESA-SADC Tripartite Free Trade Area (EAC leading the preparation of the concept note of the industrial pillar); Estimated GDP of USD 624 billion COMESA comprises 20 member States with a population of over 400 million. The Southern African Development Community (SADC) is now composed of 13 Member States A Comparative View of Economic Situation in EAC 25 October,
3 GDP per capita income of major industrializing countries (2000s) Malaysia Korea 16, Chile China Ghana S. Africa Kenya EAC 6,334 5,185 3,746 2, Benchmarking EAC and Africa's Development with the rest of Africa: Africa's development growing fast after East and South Asia 10 8 Annual real GDP growth rate (%) Years Africa East and South Asia Western Asia Latin America and the Caribbean World Developed economies Developing countries 6 3
4 Africa's economic growth rebounded from the financial and economic crises Africa grew at 4.7% in 2010, up from 2.3 per cent in Growth factors included: Rising commodity prices and exports Increasing domestic demand in many countries Increased FDI in extractive industries and aid flows Return of Tourism, etc More diversified exports - manufactures, trade services and tourism Africa Oil-exporting countries Oil-importing countries East Africa continues to show tremendous growth but.. Subregional growth in 2013: East Africa (5.8%), West Africa (6.5%), North Africa (5.4%), Central Africa (4.3%) and Southern Africa (4.2%). But..growth has not translated into strong jobs growth and poverty reduction. Unemployment persists among the youth and the vast majority are in vulnerable work in low productive informal activities Low productivity in these informal sectors undermine their ability to create decent jobs-a sound and robust industrial base could revere the situation and create high skilled employment North Africa West Africa Central Africa East Africa Southern Africa Africa 8 4
5 EACs Structural Transformation Imperatives in Higher Education Technology and Innovation Well-educated, enlightened and healthy human resources is a key imperative for growth Required for efficient production, knowledge transfer and technological adaptation and innovation Foundation for ensuring interaction, collaboration and partnering with foreign investors maximizing linkages and spill overs for domestic economies Ensures that migration plays its role in knowledge transfer and technological adaptation from global to local economyand vice versa -Indices that provide key imperative of quality human resources include-enrolment rates in tertiary, secondary and primary, literacy rate and infant mortality rates 9 Evolution of GDP Structure in the Region Source: UNIDO;
6 East Africa s Structural Transformation Imperatives contd. Agriculture share of GDP to reduce to at least single digit S. Africa China Malaysia Korea Chile Ghana Kenya EAC WHY INDUSTRIALIZATION? 12 6
7 ? Unemploym ent Reduced interest for Local and FDI in manufacturing etc Low per Capita Income EAC DEVELOPMENT VISION High Demand for Social Support Less Funding for Development Programs Poor infrastructure and support for investment THE INDUSTRIALIZATION STRATEGY 25 October,
8 EAC INDUSTRIALIZATION POLICY AND STRATEGY ( ) Approved in November 2011, currently under implementation Theme: Structural Transformation of the Manufacturing Sector through High Value Addition and Product Diversification Based on Comparative and Competitive Advantages of the Region. The strategy focuses on the Manufacturing sector in the region, covering all the five EAC member states. Mining and construction not included. See United Nations International Standard Industrial Classification (ISIC) Codes, Rev.3.1 Based on Partner States comparative and competitive advantage. Status of Industrialization in EAC Region Presently, the contribution of the industrial base in the EAC region is estimated at about 19.2 percent of GDP, of which, only 8.9 percent is generated by manufacturing (UNIDO; 2011). Based on an assumed GDP growth rate of 6 percent, the rate of industrial growth needs to be 11.7% to achieve a Manufacturing GDP contribution of 25 percent within 20 years. This goal is achievable provided there is sufficient commitment from the Partner States to adequately implement their current proposed strategies. 16 8
9 Key Guiding Principles Equitable knowledge-sharing /equitable sharing of tax benefits Strengthening and exploiting policy synergies with other sectoral policy instruments; Promoting a strategic dialogue between the public and private sector Strategy to be pursued with due regard to relevant national, regional, and international standards Strengthening industrial linkages between large and micro, small and medium enterprises (MSMEs): nationally and regionally and globally. Human resource development. Creating and strengthening the region s capacity for innovation and effective application of science and technology in industry A market-led approach with clear and transparent rules and processes for strategic and focused Government intervention in critical areas such as correction of market failures, provision of public goods 17 Key Strategic Interventions to enhance Industrialization Promotion and development of strategic regional Industry Value Chainsforward backward and forward linkages with the rest of the economy thereby increasing employment and quality of jobs Supporting the development of local entrepreneurship and SME promotions Enhance capacity for policy design, implementation and management Strengthen capacity for data analysis and industrial information dissemination systems Promote and strengthen regional infrastructure initiatives in energy, transport, ICT, and other sectors Enhance the role of private sector in defining and implementing the regions competitiveness agenda Promoting Research and Development, Technology and Innovation Capabilities and Sustainable Industrial Development in the region 18 9
10 EAC STRATEGIC REGIONAL INDUSTRIES VALUE CHAINS 19 Attractiveness and Strategic Feasibility of a Targeted Industry (Using UNIDO s Assessment Framework) Six strategic Industries prioritised: 1. Agro-processing 2. Fertilisers and agrochemicals 3. Pharmaceuticals; 4. Petro-chemicals and gas 5. Iron-ore and other mineral processing; 6. Energy and bio-fuels. 10
11 What then is the Role of Industry and Academia in the Development of the Regional industrial Value Chains Innovation and intensive use of science and technology can enhance the efficiency of the value chains. In NIC of East Asia, technological advancement has been a key driving force accounting for the major part of productivity growth. Half or more students in fast growing economies e.g. China, Korea are enrolled in tertiary institutions enrolled in science, engineering, technology and business disciplines. In Africa its a fifth. A third are are in social sciences, slightly less in education (Gyimah Brempong and Ondiege 2011). The result is the graduates in Africa go unemployed while African countries continues to face shortage of labour. There is a need to upgrade regional technological capacity and restructure the existing tertiary education system via curriculum reform, funding mechanisms and incentives for innovation and high performance. 21 Specific Policy Targets on Development of EC Regional Value Chains and Promoting Research and Development, Technology and Innovation 22 11
12 Overview of Specific Policy Targets and Programmes Specific Policy Target One: Diversifying the manufacturing base and raising local value add from of 8.62 percent to 40 percent in 2032 Programme One: Promoting Development and Investment in Strategic Regional Industries within sectors in which the region has potential comparative advantage Description of Actions:» Mapping of the strategic regional industries value chains (value chain study) to, among others, identify supply and demand gaps, bottlenecks and constraints facing the value chains, and assess technology, market access and investment needs and prepare investment promotion plans» Develop feasible and bankable investment projects within the framework for the development of Strategic Regional Industries» Establish a regional enterprises (industry) promotion and award scheme to stimulate investment into the Strategic Regional Industries» Establish a Centre for the Development of Strategic Regional enterprises/industry (CDSRE). The Centre will administer the regional enterprises promotion and award scheme (REPAS); and undertake comprehensive and innovative investment campaigns; among others 23 Overview of Specific Policy Targets and Programmes Specific Policy Target Three: Promoting Research and Development, Technology and Innovation Capabilities and Sustainable Industrial Development in the region Programme One: Enhancing the capabilities and capacity of national R&D institutions to meet the needs of science, technology and innovation (STI) in the manufacturing sector Description of Activities:» Carryout a survey on the region s Science, technology and innovation infrastructure and prepare an intervention strategy (technological readiness assessment)» Identify R&D centres that can serve as regional centres of excellence» Review Partner States Intellectual Property Rights (IPR) regimes and establish/strengthen IPR protection infrastructure and capabilities for the region.» Establish regional research, technology and innovation networks to foster joint projects, conferences, trade fairs, and exchange programmes among CEO of RTOs) within the triple helix framework.» Establish a regional innovation grant scheme to support collaborative STI 24 12
13 Overview of Specific Policy Targets and Programmes Specific Policy Target Three: Promoting Research and Development, Technology and Innovation Capabilities and Sustainable Industrial Development in the region Programme Two: Enhance National and Regional awareness on the importance of science, technology and innovation in the operations of the Private Sector Description of Activities:» Organize study tours (regional and South to South R&D institutional) for best practice sharing and bench marking as a foundation for active collaboration.» Establish a regional match making scheme (technology brokerage) involving local and international technology suppliers, private sector and R&D institutions.» Create a networking R&D interactive web portal for real time dissemination and exchange of STI information» Develop an STI marketing strategy that articulates the role and outputs of STI using print and electronic media.» Prepare a catalogue of successful industrial innovation stories in the region, which can be replicated 25 Overview of Specific Policy Targets and Programmes Specific Policy Target Three: Promoting Research and Development, Technology and Innovation Capabilities and Sustainable Industrial Development in the region Programme Three: Promotion of Sustainable Industrialization and Environment Management Description of Activities:» Develop a regional programme on Resource Efficient and Cleaner Production (RECP) to assist in compliance with environmental laws and regulations and improve enterprise competitiveness.» Facilitate SMEs with adoption of relevant international certification (ISO 9000, ISO 14000) and occupational health and safety (OHS) schemes for sustainable industrial development.» Harmonization of industry related environmental regulations, procedures, standards, and other requirements» Upgrade the capacity of R&D institutions to offer technical support towards sustainable industrial development 26 13
14 Jennifer Gache, Senior Industrial Engineer, 27 14
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