Africa now on its way out of poverty All low-income countries have the potential for dynamic economic growth, writes Justin Yifu Lin (The News Today (Bangladesh))

All lowincome countries have the potential for dynamic economic growth. We know this because we have seen it happen repeatedly: a poor, agrarian economy transforms itself into a middle or even high income urban economy in one or two generations.
The key is to capture the window of opportunity for industrialisation arising from the relocation of light manufacturing from higherincome countries.
That was true in the nineteenth and twentieth centuries, and it remains true today. Japan seized its opportunity in the years following World War II, using labourintensive industries, such as textiles and simple electronics, to drive its economy until rising labour costs eroded its comparative advantage in those sectors. That shift then allowed other low income Asian economies South Korea, Taiwan, Hong Kong, Singapore, and to some extent Malaysia and Thailand to follow in Japan’s footsteps.
China, of course, is the region’s most recent traveller along this welltrodden path. After more than three decades of breakneck economic growth, it has transformed itself from one of the poorest countries on earth to the world’s largest economy.
And now that China, too, is beginning to lose its comparative advantage in labourintensive industries, other developing countries especially in Africa are set to take its place. Indeed, ever since the Industrial Revolution, the rise of light manufacturing has driven a dramatic rise in national income.
The United Kingdom’s economic transformation started with textiles. In Belgium, France, Sweden, Denmark, Italy, and Switzerland, light manufacturing led the way. Similarly, in the United States, cities like Boston, Baltimore, and Philadelphia became centres for producing textiles, garments, and shoes. Until recently, few believed that Africa, too, could become a centre for modern manufacturing.
But, with the right policies, there is no reason why African countries could not follow a similar trajectory. Consider landlocked Ethiopia, which only ten years ago seemed to be an especially bad bet. But then the country built an industrial park near Addis Ababa and invited the Chinese shoemaker Huajian to open a factory there. Huajian opened its doors in January 2012 with two production lines and some 600 workers.
By the end of the year, it had employed 2,000 Ethiopians and doubled the country’s exports of leather shoes.
Today, the company has 3,500 workers in Ethiopia producing more than two million shoes a year. In 2013, spurred by Huajian’s success, the Ethiopian government created a new industrial park, with space for 22 factory units. Within three months, all of them had been leased by exportoriented companies from Turkey, Korea, Taiwan, China, and elsewhere.
The World Bank has provided $250 million to support the continued construction of these industrial parks. The Ethiopian success story is just the start. As investors learn more about Africa, they will increasingly see what it has to offer. Indeed, the cost of labour in Africa is competitive enough that Ethiopia could attract companies from countries as poor as Bangladesh. Africa has a surplus of agricultural labour and too few other jobs.
As foreign firms launch operations in the labour intensive sectors in which Africa has a comparative advantage, they will train the local workforce.
Some workers will become managers. They will become familiar with the technology and learn how to maintain consistent quality in the production line. They will establish contacts with international buyers and investors. And, eventually, some of them will be able to raise capital and start firms of their own export companies owned and operated by Africans. A carefully focused export strategy is crucial. The international development community and many African governments want to work toward regional integration, linking the markets of 55 African countries.