Agenda

  Overview of RPED Business Strategy    RPED Contributions     RPED Business Strategy 

Four key sets of activities are envisioned for the new RPED agenda—Investment Climate Assessments (ICAs) for individual countries (the core product), cross country sector work, regional surveys and operational activities. We aim to build on existing research, and to mainstream our data collection and analysis into the Bank’s operational and research agenda. We believe that the RPED Investment Climate Assessments will serve to fill a critical information gap. Systematic exercises in data collection and analysis will help the Bank to understand the problems on the ground and to design and implement effective policies with regard to the private sector.

The following are some key questions that the RPED ICAs try to address:

Private Sector Development

• What are the various links in the supply chain and where are the points of weakness?
• What are the distributional implications of changes in production such as the supermarket revolution? In particular, how do these changes affect small producers?
• What are the backward and forward linkages for a typical manufacturing firm?
• In particular, what are the linkages between agricultural producers and firms in the agro-processing/ agri-business sectors? Given the enormous importance and size of the agricultural sector in Africa, this is a particularly important issue to consider.

Finance

• Are firms in sub-Saharan Africa credit constrained? Does their inability to raise capital affect their production decisions? Are firms able to borrow internationally and does that affect outcomes?
• To what extent can supplier credit substitute for financial institution debt?
• What are the key factors that affect access to capital and how does this vary by country and firm size?

Technology and Investment

• How does economic and/or political uncertainty affect investment?
• How do trading relations affect technology diffusion? What determines firms’ decisions to adopt new technologies?
• Does foreign ownership matter and if so, in what ways are foreign firms different than locally owned firms?

Labor and Human Resources

• What influences a firm's decisions to invest in training its workers?
• What is the impact of labor regulations on hiring, growth, and technology decisions of firms?
• What are some of the determinants of earnings and how do these vary by country and by firm size?

Government Regulation

• How – if at all -- do government assistance programs improve productivity, labor practices, and/or investment decisions?
• How do government regulations (permits, hiring practices, etc.) affect firm behavior?
• How do government policies affect firm location?
• What is the quality of government services and how do these services impact transactions costs?
• Business Groups and Associations
• Does firm proximity promote agglomeration economies?
• Does firm location affect profitability?
• Does membership in a (formal or informal) network increase efficiency through the following means: Guaranteeing contract enforcement, obtaining information, protecting special interests, sharing risk, and/or coordinating activities?

HIV/AIDS

There are several issues related to HIV/AIDS which the RPED team is interested in exploring:

• What is the impact of HIV/AIDS and vector-borne diseases on worker productivity and the performance of the firm?
• What is the risk of HIV/AIDS in the workforces of African firms and how does it vary by sector, size, location, etc? ("Risk" here incorporates experience with the disease so far.)
• What are the types and magnitudes of costs that HIV/AIDS imposes on and in particular what is the impact of HIV/AIDS on firm productivity?
• What actions are companies taking to manage the impact of HIV/AIDS among employees and at what cost, have the actions been successful, and what has led some firms to act while others have not? (This will include looking at the role of government policy and regulations in determining firm responses.)

Needless to say, having time series data, so that we can track changes in the epidemic, its impacts, and the response of firms, will greatly increase the value of this research. As part of issue the research on response, we will develop a couple of questions aimed at understanding how government policy affects firms' decisions about HIV/AIDS. There is also scope for doing detailed field work. Having a team spend two or more full days at 2 or 3 firms per country might strengthen the overall results of the surveys and help overcome some of the limitations inherent in larger firm surveys.

There are other issues of interest that may be addressed with firm survey data. One issue is whether geography matters. In other words, do firms in locations along coastlines perform better than firms that are located inland? Or do firms in some countries perform better than others because of certain geographic variables or physical ecology? Another set of issues that the RPED surveys may be able to tackle is the issue of sourcing for production in China. Many countries in Asia play the crucial role of providing inputs to China; it would be very useful to think about a similar role for sub-Saharan Africa further down the road.

Country-Level Investment Climate Assessments

RPED has carried out at least three rounds of surveys in each of seven countries in sub-Saharan Africa , as well as one round in Mozambique and Nigeria. The RPED questionnaire is particularly suited to the African context and perhaps to other regions at relatively early stages of industrialization. RPED surveys have yet to be exploited fully in terms of cross-country comparisons. In particular, it will be useful to look at where countries in sub-Saharan Africa lie on a production possibility frontier, relative to each other, as well as to other developing countries.

Another goal in this proposed three-year business plan is to gather time series data systematically. So far, repeat surveys have been carried out in a somewhat ad hoc manner. Time series data is essential in order to truly understand the dynamics of the private sector. In particular, we need to better understand firm evolution, firm entry and exit and firm growth. Repeat surveys will also build local capacity, which is discussed in further detail below. Given the Bank’s operational priorities, countries to be surveyed (or re-surveyed) in the next few years are Kenya, Uganda, Tanzania, Madagascar, Mozambique, Zambia, Senegal, Mali, Malawi, Cameroon, Cote d’Ivoire, Ghana, Niger and Sri Lanka.

RPED will also put greater effort into the sampling of firms. Due to the skewed distribution of firms in Africa, a stratified random sample is probably best to capture the dynamics of firms of varying sizes. At the same time, we must also pay attention to comparability between the RPED and other firm-level data. We need to strike a balance between generating Africa-specific data and data that is useful for purposes of comparison with other regions and surveys. In particular, we need to be able to do some benchmarking and making the RPED data comparable in this regard will be truly beneficial. To this end, we must also focus on a few key sectors in all countries surveyed.

Finally, data from worker interviews can be linked to the Bank's work on poverty reduction using household data. This has so far not occurred with RPED and we would like to explore this idea further. To carry out this exercise, we would need to sample workers from firms and then survey worker households using the same team of enumerators. There is expertise within the Bank in this regard that we can draw upon. Linking firms and households will lead to a very rich set of data which we can use to test hypotheses regarding labor supply, consumption etc.

Cross Country Sector Work

Cross-country analysis at the sector level will also yield valuable information regarding African competitiveness in relation to other parts of the world. This type of work is of enormous relevance to the Bank’s operational agenda as well. For example, it may be useful to conduct a detailed study of the textiles and garments sector across several countries in sub-Saharan Africa. This sector is crucial to development and has several backward and forward linkages associated with it that need to be fully explored. This type of sector work is of interest to operational and research work, as well as to agencies other than the Bank. A detailed cross-country sector study in textiles and garments would look at the backward linkages to agriculture, including policies towards cotton and other fibers, as well as the production of cotton fiber and garments, marketing and distribution of products, sources of credit at various points in the supply chain, labor productivity, and shipping and other transportation infrastructure. It would be useful to look at supply relationships, particularly with small firms. Also, in order to understand how buyers source garments and textiles, we need to collect accurate data for each of the links in the supply chain and be able to compare the data from Africa with data from other developing countries, particularly in Asia and the Caribbean. A detailed garments and textiles study will also enable us to see if and how Sub-Saharan Africa is benefiting from the Africa Growth and Opportunity Act.

Cross country sector work is also useful in terms of understanding the decision process surrounding the sourcing of goods. The garments sector provides a useful starting point in this regard. The technology used in garments production is fairly standard worldwide. Also, sourcing in this sector is highly mobile; buyers pick firms and countries that are the most competitive in terms of cost. It would be interesting to look at the role of institutional factors such as market access agreements, tax laws, investment incentives, and labor force quality in determining the choice of buyers in the textiles and garments sector.

Another interesting sector to look at in Africa is agro-processing. This is one of the most significant manufacturing activities in Africa, with links back to thousands of small-scale farmers and producers of raw materials. A cross-country analysis of the determinants of productivity and growth in the agro-processing sector would help us understand the linkages to the agricultural sector and would help in the design of better policies for the agricultural sector. Agro-processing is a key sector for job generation; it can be very employment-intensive particularly in rural areas. Agro-processing can also be an important source of foreign exchange; some countries in sub-Saharan Africa are producing canned and processed goods for export to Europe as well as to regional markets. Another very interesting issue is the supermarket revolution and its effects on small versus large suppliers. A further understanding of these trends is needed, in order to foster growth in agriculture and agro-processing in the region.

Regional Surveys

RPED is well-situated to carry out regional surveys, in the SADC, ECOWAS and COMESA zones. Regional surveys would involve simultaneous surveys in multiple countries, with new modules focusing on the dynamics and impact of regionalization, the determinants of competitiveness, regional cooperation, and trade. Regional surveys can focus on comparative analysis, particularly the impact of macroeconomic policies on competitiveness, the impact of geography on firm behavior, and issues such as energy-sharing which are related to regional integration. Cross-country issues such as labor migration are also important. For regional surveys, the core instrument must be the same across countries but modules concerning regional issues can be added while certain questions can be country-specific. Regional markets in sub-Saharan Africa are of increasing importance, particularly if they are anchored by large economies. The scope of regional demand needs to be better understood, and efforts to conduct regional surveys will help in this regard. It is understood that conducting this type of regional work requires a massive organizational effort, but we also believe that this is well worth the time and resources.

Private Sector Development and Other Operational Activities

RPED has the capacity to implement short surveys to a limited number of firms for purposes of projects related to Africa Private Sector Development (AFTPS) operations, trade facilitation etc. These surveys are not a substitute for the full-blown surveys but are useful in terms of a quick assessment to assist PSD and other operational activity. Surveys can also be modified to look at specific markets such as cut flowers, tourism, non-traditional exports etc. Finally, RPED can develop instruments to look at supply chains, as well as specific issues surrounding firm and industry competitiveness that are of importance to AFTPS. It is one of the central goals of RPED to become more user-friendly to operational activities in the Africa Region and beyond. The PSD/RPED linkage would entail participation of PSD specialists in the design, implementation and subsequent analysis of surveys and other RPED projects. The PSD/RPED linkage is crucial to the integration of issues of policy interest into the RPED agenda.

RPED can continue to play a role in conducting project evaluations. RPED has already carried out an operational assessment of the Technology Diffusion Scheme in Mauritius. This assessment showed that the TDS project was not as successful as it was hoped and gave suggestions on how to improve matching grants projects in the future. There are other matching grants schemes that should be evaluated, including projects in Madagascar, Mozambique, and other countries. Evaluations are not limited to matching grants schemes. They are necessary for any type of project, including assessing the impact of infrastructure improvements, financial sector reforms and privatization. RPED has established capacity in this regard and can continue to carry out this activity.