Despite East Asia's established position in global manufacturing activity, low-income countries in Africa and South Asia still have opportunities to break into world markets and reduce poverty through smart industrialization, according to the Industrial Development Report 2009 released here on Monday by the UN Industrial Development Organization (UNIDO).
Industrial development and export of manufacturing offered new opportunities to low income countries in Africa and South Asia, referred to in the report as the "bottom billion".
New entrants to manufacturing, however, would face huge pressure since they were no longer merely competing with high-wage and technologically-advanced countries of the Organization for Economic Cooperation and Development (OECD). They also had to compete with East Asian countries, including China, which had the economies of scale that made them competitive against new entrants.
"One prospect is that there may be no room for new entrants into global manufacturing because East Asia is firmly established and is also able to reap economies of scale from its clusters while still maintaining low wages," it said.
But the report maintained that the future could be better than suggested for three reasons. The global shift to trade in tasks, rising production costs in China and supportive policies by developed countries would help low-income countries to participate in global manufacturing competition.
The report suggested low-income countries should make components and specialise in specific tasks that could build expertise and supplement market share, rather than in the entire range of tasks needed to produce a product.
New entrants should "integrate into global markets through new niches that are created in the trade flows of tasks or components," according to the report.
For instance, countries could specialize in making an individual component of a whole product, such as buttons, rather than the entire garment, as was done by the city of Qiaotou in China. Qiaotou Town, in eastern Chinese booming city of Wenzhou, is responsible for about 65 percent of the world's production of buttons, said the report.
It also said the Chinese economy was likely to encounter rising costs in manufacturing production, which would partly result from higher wages. China could play a major role in facilitating the participation of low-income countries in the shift from products to tasks in a mutually beneficial South-South cooperation framework, it added.
The report also urged developed countries to support late industrializers through trade and aid policies.
It said sustainable industrial development required poor countries to make appropriate policies, and they should take measures to lower production costs of export goods, set up special economic zones to support industrial clusters and facilitate regional integration.
The 2009 report was first released this February in Vienna, Austria, where the UNIDO is based. Since then, the UNIDO had been making a worldwide tour of presentations to disseminate information of the report.
(Xinhua News Agency April 28, 2009)
