What the exit of China from Labour –Intensive Light Manufacturing could mean for Nigeria – Prof. Oramah

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By Franklin Alli

 

RELATED to the foregoing is the exit of China from Labour –Intensive Light Manufacturing due to rising labour costs.  Africa imports US$43 billion light manufactures from China; as China shifts focus, these goods have to be supplied by somebody.   Nigeria, indeed, the entire African continent will have themselves to blame if these projected supplies are brought from outside the continent over the next fifteen years.”

Prof. Benedict Okey Oramah, President /Board Chairman, African Export-Import Bank (Afreximbank), gave this advice in his speech “From Commodities to a Global Manufacturing Hub: The Road Ahead for Nigeria.”

Prof. Oramah, who was the guest lecturer at the 47th annual general meeting of Manufacturers Association of Nigeria (MAN), therefore, proposed to the government of the country to consider the adoption of Chinese Model of Industrialization which focuses on ‘Labour Intensive Light Manufacturing Industrial Policy’.

In his narration of how China emerged the second largest economy in the world and the largest exporters of so many goods, he said that under the African Continental Free Trade Area (AfCFTA) environment, Nigerian manufacturers should see opportunities of light manufacturing, and selling to the Continent’s 1. 2 billion markets, citing its creative industry.

“There are middle class in Nigeria and Africa and rapid urbanization will expand demands for manufactured goods.  It is projected that the population of Nigeria will reach 264 million by 2030. This will spurs demand for consumer goods and a host of other light manufacturers.  It is the manufacturing industries that will supply these items.”

He noted that almost after 60 years of independence, Africa remains the continent with lowest manufacturing outputs despite an abundance of resources; it’s also little wonder why Africa is a continent that trades the least with itself despite the strong relationships between interregional trade and industrial development and economic progress.

“To bring prosperity to Africa, we have to move away from commodities, we have to unlock manufacturing. This, however, requires that we bring down the borders and most importantly, that we reverse, reengineer the colonial strategy I alluded to earlier,” he said.

China places commerce above politics; they needed the world, especially the US markets.

How China attains world manufacturing hub 40 years ago 

First, China pursued exports-lead industrialization but with Chinese flavours.  They maintained a depreciated exchange rate that made export of manufacturing profitable and therefore encourage foreign direct investments, FDI.   At the same time, they also protect certain aspects of their economy and restricted investments in the heavy industries and infrastructure to state-owned enterprises.

Second, China realized that it needed to develop its infrastructure to be as cost effective as possible but they realized that limited resources could not allow them to develop infrastructures, so they adopted using restricted geographic areas  as centers for manufacturing, drawing from the spheres of  the Asian Tigers. So, right from Shenzhen Special Economic Zones and Industrial Parks, soon proliferated in all the states, providing locations for first class and affordable infrastructures where industries can locate and produce competitively for the global market.

Third, China deeply promoted foreign direct investment, fdi, using incentives to attract investors to industrial parks and special economic zones, SEZs. FDI rose rapidly from $1.95billion in 1995 to $37.9 billion in 2000, to $134 billion in 2017.  The SEZs contributed 22% to China economy, FDI 43% and 60% of its exports.  They also created about 30 million jobs.

Fourth, China places commerce above politics; they needed the world, especially the US markets.   China didn’t hesitate to push to join the World Trade Organization, WTO, making it possible for it to qualify for exporting to US and other major markets.

Last, finance was also crucial to the success that China achieved.  Available data confirms the foregoing:  At the point of China’s emergence in industrialization in 1980s, credit to the private sector was relatively high reaching 156% of GDP, compared to 15% for Nigeria today. And in early 1990s, China created what is called policy banks to support industrialization and trade. They created China Export-Import Bank, China Development Bank and Agricultural Development Bank of China.  These policy banks became sources of long-term financing that bolstered China’s development of infrastructures and Trade.

 

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