Harnessing the EAC Market to Drive Industrial Competitiveness and Growth
Using historical data and benchmarking methodologies, the first EAC Industrial Competitiveness Report, provides a powerful tool in contextualizing the industrial performance of the region as a whole and Partner States as individual entities, identifying the main development patterns and assessing them in view of targets set in the EAC Industrialization Policy and Strategy 2012-2032.
The report shows although in absolute terms the EAC’s industrial performance as measured by Manufacturing Value Added (MVA) and manufacturing trade growth rates remains well above the global average, in relative terms it falls short of some of the targets set in its Industrialization policy, below similar regional economic communities in Sub-Saharan Africa such as ECOWAS, and more strikingly registered some signs of slowdown in recent years.
The report illustrates that MVA growth has slowed down in recent years, from 5.3% between 2005 and 2010, to 4.6% between 2010 and 2015, thus falling short of the 10-15% annual growth rate mentioned in the EAC Industrialisation Policy and Strategy and below the SSA average.
Looking at manufacturing trade data. The excellent trend observed between 2000 and 2005 with manufactured exports per capita increasing at 22.5% per annum proved to be unsustainable in the long term, slowing down to 1.7% per annum between 2010 and 2014, as it was mainly driven by sectors that experience strong fluctuations in demand and price, such as base metals (manganese ore/concentrate), heavy petroleum and base metal waste. More importantly, the growth rates registered so far for the EAC manufacturing sector cannot impress a sufficient acceleration to achieve the structural change targets set in the regional and in most national industrial policies and overarching development plans.
As MVA is growing slower than GDP, the share of manufacturing in GDP has in fact been contracting from 9.8% in 2000 to 8.4% in 2015, thus not leading to the desired structural change towards manufacturing, falling short again of the regional target of 25% by 2032. This performance is in part due to, and has translated also into weak backward and forward linkages among manufacturing sectors and with the other non-manufacturing sectors of the economy, where the largest benefits from manufacturing expansion are targeted.
The above should call for renewed efforts to boost the manufacturing sector in the region and in Partner States and should not discourage the latest emphasis placed by many Partner States in this important common endeavour.
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