Friday, May 15, 2009

Export woes

Why do you see "Made in China" and "Made in Guatemala" and "Made in Sri Lanka" on everything you buy in the US, but never, for example, "Made in Nigeria?" Everyone knows that export manufacturing is all about cheap labor costs, and as I learned in this great World Bank report, Africa Can Compete, labor costs in Africa are the cheapest in the world, even adjusted for productivity. Which makes sense, since 14 of the world's 15 poorest countries are in Africa (the other is Yemen).

So what's going on? Why doesn't some good capitalist open a trinket or t-shirt factory in Lagos and put some of these out-of-work street vendors to work? This woman might like a more stable income:

As the report details, many of the reasons its so difficult to export goods from Africa are what I would call chicken-and-egg issues. For example, the import/export business relies on payment by letters of credit, but African banks take forever to issue them because they are not used to doing it. If there was more export trade, banks would improve their letter-of-credit efficiency, encouraging still more export.

But most of it can be pinned on inept African governments. A lack of paved roads means that, during the rainy season, some exporters have to ship their goods by air, which is much more expensive. Transaction fees are often excessive -- port loading fees in Cote d'Ivoire are ten times what they are in Tawain. Finally, African governments have not done a good job of marketing themselves. This article about the 2009 Abuja (Nigeria) Trade Fair will give you some idea why U.S. and European importers would rather just buy from Asia.


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