FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.Textile industry, Foreign investments, Exports, Manufacturing exports, FDI spillover, Sub-Saharan Africa, Kenya

Political crisis and suspension of duty-free access in Madagascar : assessment of impacts on the garment industry

The export-oriented garment industry in Madagascar has displayed robust growth, thus both contributing to the economy and creating formal employment opportunities. However, it experienced a critical situation after the political turmoil that occurred in 2009. Our investigation using the trade data demonstrates that suspension of duty-free access to the US market (AGOA) resulting from the turmoil had a greater impact on exports, 64%–78% reduction, than the turmoil itself. Our original factory-level data demonstrates that AGOA suspension increased the probability of closure by 57.8% for the factories supplying exclusively to US market, and reduced 6405 jobs for low-skilled positions during the post turmoil period. The factory-level adverse impacts are much less than those on export value at the industry level because of the maintained duty-free access to EU, which has provided an alternative market. It suggests that if EU also had cancelled duty-free access, adverse impacts would have been enormous. Given the general pattern of comparative advantage in low-income countries, unplanned cancellation of duty-free access for them hurts labor-intensive industries and low-skilled workers

International Competitiveness of Manufacturing Firms in sub-Saharan Africa

As the success of East Asian countries has shown, labor-intensive industry is recognized to lead economic growth in the early stages of development, utilizing relatively low labor costs. This same growth process has already started in South and South East Asian LDCs since the mid-1990s. However, the manufacturing sector in sub-Saharan Africa has been underdeveloped and manufacturing exports, in particular labour-intensive goods, have stagnated. This paper investigates the international competitiveness of the African manufacturing sector and its determinants through an analytical survey of empirical studies and a comparison with Asian low income countries. Empirical evidences indicate that primary factors of competitiveness, namely productivity, labour cost and exchange rate are unfavorable in sub-Saharan Africa. Representative arguments attribute the weak competitiveness to problems in the business environment, factor endowment, and the exchange rate. However, careful review shows that labour cost is beyond the range explained by endowment and misalignment of exchange rates have been reduced in Africa. Moreover, comparison with Asian low income countries which have competitiveness in labour-intensive goods shows no difference in the quality of business environment, while the labour cost is significantly lower than sub-Saharan African countries. Although results should be considered tentative, high labour cost beyond endowment and conservative investment behavior emerge as important factors for the weak competitiveness in sub-Saharan Africa when controlling income level

Clothing Export from sub-Saharan Africa : Impact on Poverty and Potential for Growth

Increases in clothing exports after 2000 signaled the first incidence of large-scale manufacturing exports from sub-Saharan Africa. Using firm-level information, this paper explores the potential of clothing exports for poverty reduction and further growth as seen in other low income countries. It shows that the garment exporting industries in Kenya and Madagascar have contributed poverty reduction in the short term by providing mass employment for female and less educated workers with wages beyond the poverty line. However, the long-term impact is not certain. High production costs and limited development of local firms weaken potential for further growth in the competitive world market. Upgrading of the market and improvement of efficiency are required to remain competitive for African industries, and governmental support for local participation are needed to facilitate technology transfer

FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

FDI in the garment sector has been the single case of large-scale manufacturinginvestment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms\u27 behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits

Youth employment under economic growth in urban Africa : school-to-work transitions in Ghana and Kenya

The employment of youth has been a central concern in developing regions, where populations are young and growing rapidly. After the decade of economic growth, however, changes in youth employment in sub-Saharan Africa are not investigated. Focusing on school-to-work transitions, this paper compares employment performance between the senior cohort who entered into the labor market before the growth period and the younger cohorts who entered after, using data from several existing surveys in urban Ghana and Kenya. It demonstrates that the first job for young graduates is less likely vulnerable employment in Ghana and is in the industries with higher formality in the both countries. In mid-career, with experience of 2–10 years, the young cohorts earned as high as the senior cohort despite shorter experience. We found that the quality of the first job is positively associated with formality and earnings in mid-career. Young urban workers are better off on average

Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms

It has been argued that poor productive performance is one of critical sources of stagnation of the African manufacturing sector, but firm-level empirical supports are limited. Using the inter-regional firm data of the garment industry, technical efficiency and its contribution to competitiveness measured as unit costs were compared between Kenyan and Bangladeshi firms. Our estimates indicated that there is no significant gap in the average technical efficiency of the two industries despite conservative estimation, although unit costs greatly differ between the two industries. Higher unit cost in Kenyan firms mainly stems from high labour cost, while impact of inefficiency is quite small. Productivity accounts little for the stagnation of garment industry in several African countries

Part I. Meridian-Scanning Photometric System for Proton Auroras and Electron Auroras (Constitution of Proton Aurora and Electron Aurora Substorms) (AERONOMY)

A meridian scanning photometric system was designed for the simultaneous observation of the dynamic behavior of the proton and electron auroras with high time resolution. The hydrogen Balmer-beta (H_β) was selected as a typical emission line from proton auroras, whereas N_2+ 4278 Å, OI 5577 Å and OI 6300 Å emissions were selected for electron auroras. The H_β photometer has a so-called tilting filter to measure rapid space-time variations of faint proton auroras free from the contamination of strong electron auroras. The observations were carried out from March to October 1970 at Syowa Station (corrected geomagnetic lat. -66.7°, long. 72.5°) in Antarctica. From the records of the meridian scanning photometers, spatial distributitions of auroral luminosity along the geomagnetic meridian were displayed as a function of local time, and the iso-intensity contour lines were drawn. These space-time diagrams of auroral luminosity were shown to be very useful for the quantitative study of the dynamic behavior of auroras. Using auroral space-time diagrams, the constitution of the proton and electron aurora substorms was described in detail. During the growth phase of a magnetospheric substorm, the emission zone of the proton aurora moves equatorward with a speed of 100-200m/sec, accompanying the development of the asymmetric ring current and the positive H bay in the evening region. The equatorward movement and the growth of the asymmetric ring current were explained by an earthward movement of the ring current protons due to the intensification of the magnetospheric convection and the subsequent energization of protons through the betatron and Fermi acceleration processes. At the onset of the expansion phase, the quiet arcs suddenly brighten in the pre-midnight region, and the electron aurora bulge rapidly expands poleward and westward, whereas in the post-midnight region, the emission zone of proton auroras rapidly expands poleward and eastward with a large increase in luminosity. Proton auroras are absent in the leading edge of the expanding electron aurora bulge, while breakup-type electron auroras (arcs or bands) are not observed in the expanding proton aurora bulge. Therefore, it is suggested that there is a mechanism which accelerates electrons along the geomagnetic field lines from the magnetosphere down to the ionosphere in the pre-midnight region and protons in the postmidnight region. After the onset of the expansion phase, the luminosity of the proton aurora greatly increases, and simultaneously the emission zone expands equatorward in the evening region, accompanying the development of the asymmetric partial ring current and the positive bay. These features can be interpreted by means of the proton injection into the trapping region due to the magnetic collapse in the tail, and the subsequent westward and earthward drift. From the relationship between the movement of the proton auroras and the geomagnetic variation, it is suggested that the positive bay in the evening hours is induced by the eastward current concentrated along the emission zone of proton auroras. The enhancement of the ionospheric conductivity due to the precipitating protons required to excite the observed proton aurora luminosity is estimated to be sufficient for the concentration of the eastward current. A close relationship between the proton aurora and the IPDP event was also observed, indicating proton pitch-angle diffusion due to the ion cyclotron waves