Infrastructure investment: from productive capacities to domestic capabilities

Transcription

1 Friedrich Ebert Foundation: Boosting Economic Dynamics and Job Creation: The potential of industrial policies Infrastructure investment: from productive capacities to domestic capabilities 5 March 2013 Christoph Ernst, EMP/INVEST, ILO

2 Dynamic Framework of Catching Up Global product and technology space Domestic Capabilities Determine the feasible set of new products and services for diversification; technologies it may adopt Productive Capacities What a country can produce given its existing production factors, infrastructure, technology

3 Inclusive productive transformation Production systems provide important opportunities to learn for workers and firms Pattern and quality of employment shapes learning opportunities and the knowledge structure of labour force (technical, vocational, occupational knowledge) The quality of technological & organisational procedures of domestic enterprises determined by the economic activity they perform, their experience and the opportunity to work closely with advanced firms.

4 Infrastructure: A key sector for development Creation of productive capacities: raising labour productivity and lowering production and transaction costs - economic and social return (public good) Employment creation Employment key in creating human capital (capacities) and employability (capabilities) of workers Employment crucial for income security, poverty reduction, social justice Close link technology employment (also type) Domestic capabilities to facilitate sectoral transformation and diversification: Condition for dynamic catching-up process Capabilities of: enterprises, workers, institutions Linkages with other economic sectors (material, equipment, institutions)

5 Productive capacities: Impact of an improved road at the local level in Kenya Category Traffic Agrobusiness Group activities Life Impacts and benefits Number of bike taxis on the road has increased Time taken to reach the town has become shorter The improved road enabled the motorcyclists increase the fuel mileage The fee of the bike taxe has become cheap The frequency of the visits of the buyers has increased The farmers become able to arrive at the market earlier in the morning The farmers' products command good prices Farmers' planting areas have increased, since most products can be transported and sold Extension officer have visited the village more frequently Number of group members has increased Group became more cohesive & started new self-development projects, e.g. new crops, fish pond and nursery Group started to transfer the Do-nou technology to neigbours Patients could be transported to hospital in time New kindergarten has been built Some people decided to commute to the town near village

6 Infrastructure is highly connected with other economic sectors/value chain High economic and employment multipliers: Direct, indirect, induced Partial Backward Linkages of Activity Account, DySAM, Indonesia 2010

7 The role of Government: Shaping the process Selection of infrastructure projects: Various objectives: Economic, social, environmental, political Question of policy mix and priorities Different options to implement infrastructure projects: Central, district, local Big (domestic, foreign companies), SME s or local contractors Technology choice: combination of labour/capital according to different infrastructure projects (e.g. tertiary roads or highways) Question of employment and learning effect Policies and institutions: Effectiveness and enforcement Stick and carrot approach to steer infrastructure investment in desired direction e.g. procurement rules (conditions), financial incentives in South Africa (mark up for training component) Capacity and capability to implement these investment projects Importance of local finance

8 Cold Ashpalt sealing (mix produced on site) by labour based methods on Gundo Lashu Project, Limpopo Province, South Africa

9 Routine road maintenance with microenterprises in Peru Road works carried out by a microenterprise in Peru

10 Women operating the hydraform block making machine, Gujarat, India

11 The importance of the use of local resources Stick - carrot approach by Government to promote the use of local resources for local knowledge development Local resources: material, equipment, human resources, enterprises, finance Advantages: Income multiplier generated at local level Stronger employment impact (incl. maintenance) More appropriate and better knowledge on local conditions - development Environment Impact Local knowledge is tradable & transferable thus enhancing social capabilities Dynamic learning and development effects Example Somalie: Development of local knowledge and technology using local material, equipment, workforce: sand cement blocks Zimbabwe: Transfer of knowledge to new productive activities: tractors for infrastructure

12 Local equipment in Zimbabwe

13 Sand cement blocks for house construction Somaliland, Somalia

14 Promote direct interaction for building competences What: Competences of workers/firms embodied in procedures = tacit forms of knowledge which only can be acquired in a gradual and incremental process of observation, imitation, and practice Actors: companies, workers, institutional setting (government, finances, etc.) How: Direct interaction between an expert and the learner (apprenticeship or formal learning, joint ventures, joint projects, etc.): big construction companies having partnerships with small local contractors Depends on the capacity of the parties in the joint venture to manage the process efficiently and on the eagerness and capacity of the acceptor to acquire the know-how (Zahlan for Arab countries) Importance of a joint development at all levels: firms, workers, institutions (e.g tracing study in Kenya)

15 C O N C L U S I O N Need for a development strategy creating a virtuous circle Favourable institutional environment There is a technology and policy choice! Fuels the three interrelated processes of transformation: Wider option space and dynamic competences Infrastructure: key sector Domestic capabilities Employment provider Productive capacity Econ. expansion In a dynamic development context, it is much more important to possess the capabilities to produce infrastructure than to possess the infrastructure itself

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