 Let me begin by introducing the important academic footnote that goes on every journal article, which is any remaining Errors or omissions from this study are solely the responsible of John Page and Finntarp So let me talk a little bit about some of the overview ideas that are coming out of this project The first is that as you know Africa has grown pretty rapidly since 2000 in fact Happily so but manufacturing hasn't been a driver of the structural transformation that we see as That has occurred there as it happened in other regions And this has led some some observers to take the view that the growth prospects for Africa is somewhat dim In fact our argument is somewhat different We argue in fact that the changes in global the global economy together with the different economic structure of Africa itself Mean that the region is not likely to replicate the manufacturing led growth of East Asia But these same changes in the global economy are likely to lead to new opportunities for the region Which if realized with positive policies can have much of the same effect One of the opportunities we think is developing what we call industries without smokestacks I'll talk about what those activities are in a minute, but while nor not formally manufacturing in some cases They have many of the characteristics of That would power productivity growth and could lead to a return to or a continuation of high growth rate So as I mentioned The question is can the high growth that we've seen since 2000 and by the way, it's not exceptionally high growth We're talking about two two and a half percent per capita income over the period 2000 to 2010 Let's say and then from 2010 to 2015 prospects have dimmed a little bit or growth rates have fallen slightly Under that particularly because of the impact of the oil exporting economies and the following commodity prices that have come There has been a bit of a pickup in recent years and particularly in the non-resource Exporting countries we find a continuation of pretty high growth But there's reasons to be pessimistic and that perhaps is spelled out most clearly by by this quote from Danny Roderick He wrote in 2014. There is a genuine question about whether Africa's growth can be sustained I come down on the pessimistic side due to what I think are the poor prospects for industrialization and by industrialization he means manufacturing Why is manufacturing important? Well, it is important employees large numbers of unskilled people It has relatively high productivity potential because of scale economies and innovations in process and products create opportunities For productivity improvement the kind of monkeys and trees argument that Ricardo Hausman has put forward And why is trade in manufacturing important? Manufacturing as a leading growth and internet really growth sector in international trade And trade is also necessary to achieve higher economies of scale particularly on the export side Do you think about an economy the size of Rwanda's basically has a GDP the size of the city of Nottingham, England? And so in order to be efficient Affirms have to export in order to reach scale and similarly trade means that they have access to imports and technology at Lower cost so trade is exceedingly important to the development of manufacturing and finally trade is really important for Allowing economies to specialize on the one hand specialized in production But also to diversify their consumption through through imports. So that's why trade and manufacturers is important Well, let's take a look at the Roderick pessimism indeed industry is not a leading growth in Africa and Historically we've seen that in other countries particularly in Asia. It's played a pretty dramatic point this take this graph shows the share of manufacturing in GDP value added in 2016 just as a snapshot and if you did the same picture by the way in 2008 it would look pretty much the same those circled countries are the East Asia countries they're really doing extremely well in manufacturing and they have very high shares of Manufacturing GDP on the other hand if you look at Africa you see that some of its fastest growing countries in fact are Located below the line. They're not growing very rapidly at all That is the share of manufacturing is served GDP has not been dominant Similarly, if you looked at the share of GDP Manufacturing in GDP over time this shows it from 1960 to 2016 you'd see a number of things the first is that the Africa share of Global manufacturing, which is what this graph shows is smaller today than it was in the 1980s in fact manufacturing share of GDP in 1980 was something close to 13% of GDP it is now subsequently fallen to on the order of 9% of GDP Per capita manufactured exports are only about 10% of developing country average And today in Africa share of global of manufacturing GDP is less than half the average of all developing countries If we look at where The peak of that curve is across countries. We see that the peak share of manufacturing is a share of GDP Increasing and then beginning to fall has actually peaked at a much lower levels of GDP than What we see for high-income countries those blue dots on the right are high-income countries share when they peaked and that would have been several decades ago middle-income countries of the green countries and then the the orange and yellow countries are those where Manufacturing has already peaked and begun to decline as a share of GDP. So this clearly is a challenge for for the region We'd argue that changes in the global economy of the world. That is the global economy make me reliance on manufacturing a la East Asia a Difficult path to follow at least in lockstep Why do we say this? Well first of all manufacturing is a GDP is falling at all levels of per capita income This graph shows manufacturing of GDP on average over the four decades 1980 to 2010 with a log of GDP per capita on the x-axis as you can see Each decade has shown a fall in manufacturing share across across the world. There's several reasons for this Most importantly perhaps is the rapid growth of the service sector everywhere But that also is associated with issues That are bound up with manufacturing itself companies have begun to outsource Certain activities into specialized parts of the service sector. So for example Advertising is frequently outsourced to a particular agency and that's beginning to show up in this statistic Simultaneously what shows up in this graph are the emergence of the large tech companies Amazon for example Reaching trillion dollar capitalization Apple similarly Very large company only a portion of what they do Certainly not in the case of Amazon but in the case of Apple is actually associated with manufacturing in fact most much of the manufacturing That Apple does is done elsewhere a second change in the global economy that I think alters the Opportunities for African manufactured Manufacturing is the emergence of China this graph to me is utterly astounding if you look on the right-hand side This is the share of global manufacturing value added and Over this over this period and you see that As a share of the global manufacturing value added the high-income share in the space of 1994 to 2015 has fallen from maybe 80 percent down to on the order of about 50 percent I mean, this is astounding development. Where is that going? Well, it's going largely to China I'm delighted by the way that Justin Lin is here because he knows of course China and this whole picture very very well what we see is Manufacturing moving to China and becoming very efficient in The global in global markets other regions have not expanded so rapidly other countries in East Asia have done Have gotten a share of that market. So they're very important as well Europe has not seen quite the Europe and Central Asia has sort of been about the same Same levels Latin America likewise is not changing on the right-hand side Africa has barely registered as a blip in this process But what this means is that the nature of the global market has changed considerably from the epic and when Japan and Korea entered the global market My third change that we point to I think is the emergence of global value chains and the opportunities for trade in tasks that is segments of the production process move around the world and increasingly the process of globalization has created the opportunities and Necessity of joining global value chains if we look at for example, Vietnam over on the right-hand side We see that their participation in global value change is extraordinarily high. It's some 35% here Using the average share of foreign value added in exports over the period 2008 to 2012 If on the other hand you look at the countries arrayed to the left of this graph the African countries You see that most fall below even the average for low-income countries participation in global value chains. That is there is a Necessity in fact for countries that want to participate in the global marketplace Via manufacturing to hook up with global value chains in a way that may not have existed before These same forces however that are changing and creating a new opportunities for Africa Or how we're creating difficulties for Africa to get into the international market also creating new opportunities? I mentioned the trade and task segmentation of global value chains make production for export Suddenly accessible in ways that it might not have been before more over the services which are Rapidly expanding in developing countries as they are in rich countries are a more dynamic sector of global trade Thirdly scale barriers and services markets are more are virtually negligible or or or absent So Africa can get into this market at an early stage doesn't take to you can set up a consulting operation in Your neighboring country as we have seen let's say the company of laterite do from moving from Rwanda to Uganda in Ethiopia There's no there's no scale barriers to do that Similarly, there's another opportunity of course is as wage wages rise in China The Chinese are looking for new locations for their manufacturing plants The question is will Africa be a destination and we've seen in some countries particularly Ethiopia that That they in fact are moving there These factors Suggest that together with falling transportation and communication costs there are opportunities And one of the opportunities where we were interested in exploring is what we call industries without smokestacks So let's take a look at that here. What we're talking about is the fact that technology and transportation costs allow for the new entrance into new areas where many of the These activities share some of the same characteristics of manufacturing What are we talking about for example horticulture or agro processing or food processing? Tourism other forms of tradeable surpluses such as information and communication many of these like manufacturing Employee large numbers of unskilled workers. They have relatively higher productivity potential in which innovation can lead to new and ongoing Opportunities if differently articulated by the way is between firms and between sectors and these sectors are also a growing segment of international trade If just to give you some readout of some of the examples that we see from the come out of the book and its case studies Take the example of horticulture And we'll get a little bit more From both the presentation it'll follow Here but on agriculture what we see is that exports have nearly doubled of horticulture exports as a share of Sub-Saharan African agricultural exports between 1990 and 2014 Horticulture exports are up in Ethiopia, Senegal, Ghana and South Africa to name a few and they're generally outperforming other forms of exports Agro processing is another area. It's grown to 35 percent of Sub-Saharan African exports Although this is still low Relative to potential and I'm sure that the presentation that will follow will go into this in some degree tourism amounts to An estimated 3% of Sub-Saharan Africa GDP in South Africa This is in South Africa reaches 680,000 jobs or 36 percent of the entire food and beverage industry According to the case study that we have in Tanzania tourism accounts for directly or indirectly 14% of GDP and 3% of employment In Rwanda tourism at 22% has expanded 22% annually last decade and is now the largest earner of foreign exchange in Rwanda Which is in the center of Africa I Should say quickly that the numbers on tourism. I think are underdeveloped We really need to do much more work in looking at the actual Consequences because I think the numbers we get at the border every time you fill out one of those little cards We even do it electronically now. It's not very clear This gets tabulated correctly and certainly in in many countries around the world Business services also are beginning to be important Kenya. For example, as you know has pioneered mobile money That's really revolutionizing cross-border financial flows call centers I Had the opportunity to go through Ken call for example in Nairobi at one point and it is a Fundamentally dramatic thing that these people have done these expats that came out from the diaspora came back to open up an Enterprise originally with a small number of people and now they're employing in the hundreds Mobile money subscription just to give you an indication of how fast things have grown rose tenfold between 2011 to reach virtually Half of the population in Rwanda by 2014 and now of course gone much grown much faster the opportunities in mobile money I think we're just beginning to to explore in Senegal. There was a little different story actually It's mirrored by by events in Botswana as well that because of the the backbone infrastructure being a Monopoly The industry which began very well and call call centers actually didn't progress very well, but what did happen that we see coming out of the The case studies is that the software that was designed for some use in some of this. I think I began to sell a cell abroad Finally transportation services are becoming very important with new investments in ports roads and air facilities I should mention that there's pretty there's some sharp risks with this The risks are that You can get excessive investments in public infrastructure We've seen in air transport now the state state enterprise airlines coming in we have a nice chapter in the book on this Which tends to lead to Overinvestment in in the industry and declining profitability across the sector all of Africa's air transport is about equal to the three airports in Washington DC and An annual basis of traffic health just just to link it we see over investment in some of the other sectors as well other concerns include tax incentives monopoly positions are used to encourage entry and Trade reducing beggar thy neighbor policies through industry. This is something we might come back to Industry set without smokestack indeed have become much more important We did a little calculation where we could put together for 33 countries The the data set for the most countries that we could put together from 2002 to 2015 and what we see is that the industries without smokestack sectors if we want to call them that grew at least as fast as traditional sectors in two-thirds of the countries and Faster in half of the countries. I should mention there's a lot of variation around these lines not everybody as I mentioned half the countries didn't grow faster, but This this is a phenomena that in fact is far reaching in Africa when we're nearly two-thirds of the countries can Take advantage of this opportunities and this happens at both ends of the scale even at small countries as well as large countries a Second point here that's important that comes out of the study is the importance of regional integration in part because these regional integration offers the opportunity to become springboards into global manufacturing and to regional development take a look at this graph the top graph shows the value of exports in Sub-Saharan Africa Bissector from 1998 to 2013 of all exports and what you see is that manufacturers share share of that is While increasing in absolute terms is still the smaller portion of this However, if you look at what happening at the regional level and just look at intra regional trade you see a much sharper pattern of manufactured exports coming out as a consequence of Regional exports and intra regional trade just to give you a number in Rwanda for example some 70 percent of non-traditional exports Generally go to the DRC and to other countries in the region Similarly this regional integration offers new opportunities in the what we'll call the IWIS sectors trade and services We've seen the opportunities emerging from cross-border trade and finance. I hope Luis will talk about this a little bit More importantly intra industry competition in differentiated products is going to be terribly important for driving economies of scale and creating bigger Enterprises for that to happen countries within a region have to allow that competition To occur because it's only that way you can drive productivity within sectors Where the book goes through some policies? I won't have time because John is flashing me these cards over there to Go into these in details, but we the book goes through global policies country level policies and regional policies Let me say a point just about global policies. I think the interests of developing countries in the multilateral trade negotiations are reaching are becoming acutely apparent with the unraveling of the multilateral system that's being induced by the ill-considered policy of the United States I think the smaller countries in the world have a new interest in multilateralism and particularly the African countries They're going to have to work particularly with the bricks because the bricks will have access in the multilateral system in making the WTO a success we see this in the TPP discussions It has been amazing to me to watch the 11 countries in the discussion of the Trans-Pacific Partnership Alliance Come together and form a new regional agreement without the United States And I think this is a terribly important development at the multilateral level at the country level There's also of course need policies and these will be definitive and Ultimately in shaping the success or failure of Africa's efforts in both the Iowa sectors and traditional manufacturing Here the industrial policy story is really important again. I mentioned Justin Lynn on this in this in this venue I think what's what's important and what's critical is to think about industrial policies that are pro-competitive That encourage entry rather than policies which are restrictionist and impede entry because the outcomes are entirely different In historical experience and we can talk about that Finally a regional integration is being very is very important interconnecting infrastructure creates the opportunity for countries to have access To Ethiopia's very low power that will come out of the low-cost power that will come out of the new dams that they're putting in place This will be very important for the countries that are trying to manufacture because manufacturing costs at 20 cents a kilowatt hour Are simply too high to allow? African manufacturers to be competitive at the global level So what's our conclusion one I think Africa indeed can create its new growth me miracle But its form was likely to be much different than East Asia relying more on productivity improvements in agriculture natural resource Yes, that's important within sector Productivity importance are as more as important as moving resources out of agriculture into the other sectors And industries without smokestacks will be important Secondly policies should not focus obsessively on manufacturing or ignore manufacturing key growth keys to growth will be policies that promote higher productivity activities and exports in both services and in manufacturing and Finally regional integration will assume an ever-greater importance as a source of demand for exports So policy coordination to lower the cost of trading Foster region-wide competition and in court courage open regionalism will be of great import. Thank you