BRIEF

Industry Solutions

March 31, 2015


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Context

For the past three decades, economic growth, with strong contributions from the private sector, has been the main driver of poverty reduction around the world. The experience of China, Vietnam, and other high-growth countries dramatically demonstrates how enhanced competitiveness can help develop dynamic and resilient economies. These economies improve the earnings of the less well-off by creating more, better-paying jobs. They also converge with advanced economies by achieving productivity gains.

Governments and the private sector around the world are actively seeking more effective ways of improving competitiveness in sectors—one of key elements of successful growth strategies. Part of the World Bank Group’s competitive sectors work focuses on sector- or industry-specific policies and growth, including agribusiness, tourism, and manufacturing. It also addresses spatial growth and investment strategies, such as supporting the development and management of special economic zones, fostering growth poles, clusters, linkages from anchor investments, and supporting city competitiveness strategies.

Strategy

Agribusiness

Fully 63 percent of the world’s poor work in agriculture and almost 80 percent live in rural areas. Despite the predicted movement of some 200 million poor people from rural to urban spaces over the next 15 years, projected population growth implies that the absolute numbers of rural poor will not change dramatically. As efforts by countries to raise agricultural productivity gain momentum, opportunities are emerging to increase off-the-farm employment in agribusiness. It is increasingly important that developing countries seize these opportunities.

The World Bank Group supports governments and the private sector in exploring and enabling market opportunities in agribusiness. We help clients establish or increase access to profitable product markets and provide them with growth-enhancing skills. Our diagnostics help map the constraints to competitiveness and private sector investment and integration along agribusiness value chains. This information often leads to investments directed at agricultural productivity or wider policy reforms at the sub-national, national or regional level. Our advisory and financing support helps governments expand market opportunities and enable private initiatives in agribusiness through improved competitiveness and market integration.

Tourism

Tourism has evolved into a diverse and sophisticated sector. It is recognized as one of the most economically significant in the world, accounting for 9 percent of global GDP, 5 percent of total investment, and 1 out of every 11 jobs. In less developed countries, tourism is often identified as one of the key economic drivers of growth. Job creation through tourism can be particularly significant, as it is a labor-intensive industry employing a high share of youth and women. Tourism often occurs in remote locations with limited employment opportunities in other fields, magnifying its impact on the poor and marginalized.

The Bank Group works in partnership with governments and the private sector to assist at critical stages along the tourism development process. We provide detailed industry diagnostics and rapid assessment, help countries develop integrated solutions that build competitiveness, and provide financing and technical advice to implement those solutions.

Manufacturing

Over the last 65 years, of the 13 countries that sustained high growth for 25 years or more, 10 did so through manufacturing-led growth. Over the next 10 years, global demand for manufactured goods is expected to grow, with demand from developing countries as a significant driver. This trend offers opportunities for developing economies to develop their manufacturing base, serve international markets, and satisfy domestic demand.

The WBG supports client governments and the private sector in increasing growth, employment opportunities, inclusiveness, and productivity in their manufacturing sectors by addressing the fundamental drivers of competitiveness. Our support to manufacturing includes in-depth diagnostics and integrated solutions, as well as sector- and firm-level interventions delivered through technical assistance, financing, or both.

Spatial Growth

In addition to its work on sector- and industry-specific policies and growth, the WBG helps client governments design spatial growth strategies that will lead to greater levels of investment, create jobs, and provide efficiencies to industry through shared infrastructure.

In recent years, a number of countries have experimented with various strategies to correct market and governance failures within and across industries. One approach is to work with spatial strategies such as growth poles, growth corridors, and special economic zones (SEZs). A spatial approach allows for better coordination and a focus on specific investments and policy reforms that will maximize private sector investment. It can involve shared infrastructure and services geared toward specific industries, the coordination of reforms at different levels, and readily available convening power to bring together public and private sector actors. When implemented correctly, spatial tools can lead to increased private sector investment directed to areas of excellence and higher productivity in select industries that, with proper linkages, will result in positive spillovers to the broader economy.

We help countries custom-design spatial growth strategies that will lead to greater levels of sustainable investment and job creation. Our clients are usually heads of line ministries, such as industry, commerce, and public works, SEZ authorities, and investment promotion agencies. We help countries identify the spatial growth tools available, select the best tool and optimize implementation of the chosen approaches.

Results

  • A food safety and regulatory reform advisory project in Ukraine supported the government’s reform of inspections and registration requirements across the agribusiness sector, resulting in estimated private sector savings of $15 million annually. Similar support to the grains value chain through certification reform yielded an estimated $63.3 million in annual cost savings and leaner, more competitive value chains.

  • In Madagascar, a project aims to help develop the Atsimo-Andrefana and Diana regions as competitive tourism destinations through airport public-private partnerships with International Finance Corporation (IFC). Strategies include air transport liberalization, concession systems for protected areas, capacity building in marketing and destination management at national and regional levels, and a substantial public sector investment program in roads, water, and sanitation.

  • Efforts to increase foreign direct investment in manufacturing within the Northeast Frontier States of Brazil were accelerated by Bank Group assistance. A partnership with the national investment promotion agency, APEX, resulted in over $900 million in new investments in the states of Para & Pernambuco. WBG support that helped drive this new investment included identification of subsectors with high potential for foreign direct investment.

  • In Bangladesh, the World Bank Group helped address the country’s scarcity of industrial land by assisting with the drafting of a complete regulatory and institutional framework enabling the formation of new, private special economic zones (SEZs). This framework has now been enacted, and the first two SEZs have been licensed. As a result of the World Bank Group-funded labor counselor program, labor standard compliance among export processing zone (EPZ) companies has risen from 30 percent in 2005 to 93 percent today. The SEZs have also been able to generate investments while lowering greenhouse gas emissions.

  • In the City of Johannesburg, South Africa, we provided detailed analysis of the structure of Johannesburg’s economy, both in terms of overall economic activity and sub-regions of the city. Based on this analysis we identified industries with a comparative advantage and potential for future growth, detailed for each sub-region. This has paved the way for a comprehensive economic development strategy and investment framework for Johannesburg.