• Tuesday, July 23, 2024
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Vietnam, Bangladesh, Ethiopia point way for manufacturing in Nigeria

Five important ways smart manufacturing enables the circular economy

Nigeria can take lessons from other countries like Vietnam, Bangladesh and Ethiopia, whose industrial success has helped in bridging income gaps, lifting many out of poverty and ensuring a certain level of inclusive economic growth.

The lessons, which are global integration, domestic liberalisation and investing in people and infrastructure, especially in the power sector and connectivity, are important for industrial growth.

Vietnam, Bangladesh and Ethiopia all have a large young population and are developing economies like Nigeria.

Unlike Africa’s most populous nation, whose dependence on oil revenues has yet to improve the lives of its citizens, Vietnam, Bangladesh and Ethiopia have leveraged their non-oil resources (people) by creating low-skilled jobs in the manufacturing sector.

“Low-wage manufacturing has a better chance of generating the type of jobs people need than a primary commodity type of transformation,” Haroon Bhorat, a professor of economics at the University of Cape Town, South Africa, said.

He said without this, it would be difficult to create jobs, even if the high oil price in Nigeria translated to five or six percent growth. “This is cyclical growth; what is important is structural growth.”

The manufacturing sector relies heavily on low-skilled physical labour, making it one of the largest job producers. It usually makes significant contributions to economic development such as productivity gains and job creation for low-skilled workers.

According to the National Bureau of Statistics (NBS), the manufacturing sector in Nigeria comprises oil refining, cement, food, beverages, tobacco, textile, apparel, footwear, wood and wood products, pulp paper, and paper products.

The sector also has chemical and pharmaceutical products, non-metallic products, plastic and rubber products; electrical and electronic, basic metal and iron and steel, motor vehicles, and assembly among other manufacturing.

But the country’s manufacturing sector is still lagging behind when it comes to factories and industries. This situation limits the sector’s ability to take advantage of the African Continental Free Trade Area agreement through which most locally manufactured goods exported within Africa enjoy free tariff.

According to the NBS, activities in the sector declined to 2.45 percent in 2022 from 3.35 percent in the previous year, showing that less jobs have been created.

The sector has been adversely affected by the escalation in the Consumer Price Index, continuous erosion in naira value and difficulty in accessing foreign exchange, high cost of energy, persisting insecurity and the consequences of lingering Russia-Ukraine war, according to the Manufacturers Association of Nigeria (MAN).

“These issues among others are principally responsible for the difficult operating environment and its declining implication on manufacturing activities,” MAN said.

How Vietnam, Bangladesh and Ethiopia are achieving industrial success

Bangladesh

Bangladesh was one of the poorest countries in the world after gaining independence in 1971. But that status has changed, thanks to its ready-made garment (RMG) industry, which has made the South Asian country one of the world’s largest garment exporters, with the industry accounting for 84 percent of its exports.

According to a World Bank document, the country has more than halved the percentage of people living under the $1.90 poverty line since 1991. By 2030, Bangladesh wants to establish itself as a middle-income country.

In the eighties, the labour-intensive garment sector developed slowly when NuroolQuader Khan, who was the first secretary of Bangladesh, and a pioneer of the country’s export-oriented ready-made garment industry sent 130 trainees to South Korea to learn how to produce ready-made garments.

“The RMG industry is a mainstay of Bangladesh’s economic success story. The sector’s rapid growth and modernization over the past decade — as well as the strides it has made in improving conditions for the country’s approximately four million garment workers,” McKinney & Company said in a recent article.

According to the Exports Promotion Bureau of Bangladesh, ready-made garment exports stood at $27.42 billion for the July-January 2022-23 period compared to $23.9 billion in the year prior.

It said the country beat its export target for the period, which was estimated at $26.2 billion. Its minimum wage of $95 per month has allowed global brands like H&M, Target, and Marks, and Spencer to set up garment factories.

Apart from the garment industry, the pharmaceutical industry is also said to be prosperous as export earnings from the industry have increased eleven times in the last decade.

Padmashree Gehl Sampath, a researcher at the United Nations University Institute for New Technologies, said Bangladesh’s pharmaceutical sector today is one of the success cases, having registered phenomenal growth rates over the past decade.

She said: “Local firms cater to 97 percent of the local market estimated to be just above $2.5 billion in 2018, and are seeking to gradually expand into more rigorous production segments including vaccines and active pharmaceutical ingredient production.

“In the past decade, an expanding local consumer market, new governmental incentives and economic growth patterns of the country have all helped the sector.”

Vietnam

Vietnam, which is also a South Asian country like Bangladesh, is well known for being a hub for manufacturing operations due to its low costs of doing business and progressive taxation policies for foreign companies, as well as benefits for companies who utilise green energy or have plans for incorporating it.

The country also has policies to support foreign direct investment promotion and a greater focus on establishing a liberal neutral environment.

“Vietnam has been a development success story. Economic reforms since the launch of Đổi Mới in 1986, coupled with beneficial global trends, have helped propel Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation,” the World Bank said.

It added that between 2002 and 2021, Gross Domestic Product per capita increased 3.6 times, reaching almost $3,700. Poverty rates ($3.65/day, 2017 purchasing power parity) declined from 14 percent in 2010 to 3.8 percent in 2020.

Ethiopia

Ethiopia is on course to be the next hub for manufacturing and exports in Africa. The second-most populous country in Africa, with over 115 million people, is faced with youth unemployment estimated at more than 50 percent.

This pushed the government of Ethiopia to set up several special economic zones – industrial parks – to encourage foreign direct investment into the manufacturing sector and thus promote exports and job creation.

The country’s Growth and Transformation Plan II, which reflects an ambitious, export oriented industrialisation strategy inspired by the success of East Asian economies, is foreseen as support for achieving lower middle-income status by 2025.

“While agriculture has been key to the success of the Ethiopian development model, rapid transformation of the national economy from an agriculture-based to an industrialized one is central to the current government’s vision,” it said.

The manufacturing sector is also very important to other countries. As a result of fear of loss of jobs due to the COVID-19 pandemic, the United Kingdom and Germany set up a landmark $6.5 million fund aimed at saving thousands of jobs in the sector.

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