1. The rise of the Asian Drivers and the implications of Development Strategy Raphael Kaplinsky Development Policy and Practice, The Open University

2. China’s growth is not unique..

4. VectorsDirectIndirect Trade Complementary Competitive Production and FDI DirectIndirect Complementary Competitive Finance DirectIndirect Complementary Competitive Governance DirectIndirect Complementary Competitive Migration DirectIndirect Complementary Competitive And they may be direct or indirect

5. The drive to industrialisation Close association between incomes and industrialisation The terms of trade favour manufactures

6. UNIDO World Industrial Development Report 2009

7. Commodities-manufactures terms of trade

8. The drive to industrialisation Close association between incomes and industrialisation The terms of trade favour manufactures Manufactures are (relative to agriculture) income elastic and price inelastic Synthetic substitutes for natural products Manufacturing embodies rents – agriculture does not Manufacturing can be labour intensive – primary commodities are very capital intensive

9. The orthodoxy Manufacturing exports are key: Competitive effects Scale effects Learning effects

10. Distribution of MVA Share of the World Share of developing countries By Income198519952005198519952005 S. and E. Asia4.112.919.729.259.569.4 of which: China1.45.19.810.223.634.7 Latin America6.76.96.446.931.522.6 Sub-Saharan Africa1.00.3 7.11.31.0

11. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

12. EU Imports from China 1 st Q 2005/1 st Q 2004China Market Share in EU-25 Imports Volumes %Price %1 Q 2004 %1 Q 2005 % T-shirts164-26717 Pullovers534-47638 Men’s trousers413-16635 Blouses186-24622 Women’s coats184-18610 Bras139-153049 Socks and pantyhose 63-223054 Linen and ramie yarns 5112745 Linen fabrics25711045 Source: Euratex data as reported by Nathan Associates

13. % of sectors with negative price trends, 1988/9-2000/2001

14. Commodity Price Movements 1960-2008 Source: UNCTAD All Commodity Price Index, 2000=100

15. The Rise in Commodity Prices Early 2003 Mid 2008 % Change Food100269169 Ores & Metals89392340 Oil90470422 All100300200 UNCTAD Commodity Price Index 2003-08. (2000=100)

16. Actual and projected global share of China’s consumption of base metals Source: Macquarie Mining

19. China’s demand for agricultural commodities 20% world population, 7% arable land Biofuels Industrial inputs 22% global rubber consumption (2006) Imports 27mt cotton vs 7mt domestic production(2008) Pork, other meat and animal feeds Switch domestically from grains to fruit and vegetables

20.  “… structural changes such as increased feedstock demand for biofuel production, and the reduction of surpluses due to past policy reforms, may keep [agricultural product] prices above historic equilibrium levels during the next 10 years….  Winners are:  Brazil (sugar, oilseeds, meat)  Argentina (cereals and dairy products)  Russia/Ukraine (coarse grains)  East and south east Asia (rice, veg oils, poultry) Global outlook for the agricultural sector, 2007-2016 (OECD/FAO, 2007)

21. The Impact on Africa

22. Manufacturing for the domestic market SMEs in Ethiopian shoe industry –28% bankrupt –32% downsize SA Clothing and textiles –Employment fell from 119,000 in 2004 to 87,000 in 2005 Zambia’s Mulungushi mill –Closure in 2007 with

23. What happens when Africa exports the same products as China to the USA? (2004-2006) Exports fromValue of Country’s exports Value of China’s exports AGOA-2685 Kenya-5113 Lesotho-15171 Madagascar-26108 Mauritius-48104 SA-5389 Swazi-24136

26. SSA EXPORTS SSA IMPORTS CHINA IMPORTS CHINA EXPORTS SSA GAIN SSA LOSS Clothing footwear Hard commodities Clothing footwear Oil All SSA SA, Lesotho, Swaziland, Madagascar, Kenya, Mauritius Most SSA Oil exporters, Zambia, SA, DRC, Botswana, Ghana, Gabon, etc

27. Slow Down in Global Growth GDP Growth (% Change) Source: IMF WEO January 2009

28. The Fall of Commodity Prices Mid 2008 End 2008 % Change Food269184-32 Ores & Metals392207-47 Oil470147-69 All300185-38 UNCTAD Commodity Price Index 2003-08. (2000=100)

29. What’s in a Price Movement? Commodity Boom: A peak that is much higher than previous peaks. The Cycle: Short Term, 2-4 years; a peak/trough to peak/trough measurement. The Super Cycle: Medium Term, 6-10 years; a prolonged trend rise over a decade. The Structural Break: Long Term; a long-run change in relative prices.

30. Commodities-manufactures terms of trade: What does the future hold? 2015 2030