A Conceptual Framework for Export Diversification and Sustainable Growth Part II. PREM Week Vandana Chandra and Israel Osorio Rodarte April 27, 2010

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A Conceptual Framework for Export Diversification and Sustainable Growth Part II PREM Week Vandana Chandra and Israel Osorio Rodarte April 27, 2010 1

GNI in Burkina Faso compared to other landlocked, natural resource based comparators 2580 2080 Income per capita (Current US $) 1580 1080 580 80 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Guatemala Kyrgyz Republic Lao PDR Nepal Nicaragua Burkina Faso Paraguay Sri Lanka 2

Figure 5.2: Income Potential (EXPY) of Burkina Faso s exports (EXPY) has remained low relative to landlocked and cotton exporters outside Sub-Saharan Africa 5000 EXPY (cosntant 2000 $) 4500 4000 3500 EXPY 3000 2500 2000 1500 1000 500 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Benin Burkina Faso Bangladesh Guatemala Lao PDR Paraguay Nicaragua Mali

Natural resources: neither curse not destiny - case of landlocked countries (per capita GNI,US$ Atlas method) 1962-69 1970-79 1980-89 1991-99 2000-03 2004 2005 2006 2007 Burkina Faso 86 148 270 269 250 340 400 420 430 Landlocked (LL), cotton Nepal 65 99 165 205 232.5 270 300 320 340 LL, leather, beans Lao PDR 378 302 320 420 450 500 580 LL, coffee, wood Kyrgyz Republic 388 298 400 450 500 590 LL, cotton, gold, tobacco Uzbekistan 605 515 460 530 610 730 Landlocked Turkmenistan 850 686 650 LL, nuts, tobacco, cotton Mongolia 1474 579 475 690 810 1000 1290 LL, wool, wood,minerals Bolivia 490 851 867 953 960 1020 1110 1260 LL, petroleum, tin Paraguay 1569 1185 1080 1230 1410 1670 LL,cotton, soya beans, wood Cambodia 286 305 380 440 490 540 Sya beans, wood, rubber Senegal 250 366 548 591 485 640 740 760 820 Groundnuts, seafood,min. Nicaragua 224 484 670 467 738 820 890 930 980 Coffee, cotton, bananas Sri Lanka 154 234 371 664 875 1070 1200 1350 1540 Tea, rubber Guatemala 294 611 1101 1328 1700 1930 2080 2250 2440 Cotton, coffee, sugar Burkina Faso 86 148 270 269 250 340 400 420 430 Landlocked, cotton Burundi 63 109 231 165 100 90 90 100 110 Landlocked, coffee Malawi 58 116 168 186 155 220 220 230 250 Landlocked, tobacco Rwanda 44 112 284 274 218 210 250 280 320 Landlocked, coffee Uganda 283 243 240 250 270 300 340 Landlocked, cotton, coffee Mali 70 144 241 293 270 390 450 460 500 Cotton Benin 114 193 319 328 340 450 510 530 570 Cotton Zambia 270 483 443 356 323 410 500 640 800 Landlocked, copper 4

Our framework: A classification of Burkina Faso s exports by Revealed Comparative Advantage (table 1) CLASSICS prodcuts in which BF s RCA in the earlier period was high and in recent period continues to remain high. Implication its strong, maintain it 1980-84: RCA = 1 2001-05: RCA = 1 DISAPPEARANCES prodcuts in which BF s RCA in the earlier period was high but in recent period is low. Implication declining competitiveness, leave them alone. 1980-84: RCA = 1 2001-05: RCA = 0 MARGINALS products in which BF did not and does not have a RCA Implication observe and let them grow 1980-84: RCA = 0 2001-05: RCA = 0 EMERGING CHAMPIONS products in which BF s RCA was low in the earlier period but high in recent period. Implication build on these new discoveries and nascent products. 1980-84: RCA = 0 2001-05: RCA = 1

A classification of Burkina Faso s exports by Revealed Comparative Advantage and PRODY (table 2) (a) The Classics (b) Disappearances RCA 80-84 = 1 SHARE SHARE RCA 80-84 = 1 SHARE SHARE PRODY RCA 00-04 = 1 80-84 00-06 RCA 00-04 = 0 80-84 00-06 PRODY Cotton uncarded 32.1 62.3 1,500 Gold 2.3 1.2 5,716 Sesame seeds 4.0 3.9 1,179 Oil cake & residues 2.6 0.3 5,718 Leather 0.9 1.5 2,159 Sheep and lamb skins 2.1-4,956 Other Vegetables 4.0 1.3 5,477 Basketwork, wickerwork 0.2-7,789 (c) Emerging Champions (d) Marginals RCA 80-84 = 0 SHARE SHARE PRODY RCA 80-84 = 0 SHARE SHARE PRODY RCA 00-04 = 1 80-84 00-06 RCA 00-04 = 0 80-84 00-06 Sugar - 3.4 4,516 Cotton seeds - 0.9 2,473 Cigarretes - 3.2 12,204 Cotton yarn - 0.8 4,262 Sheep/lamb skin leather 0.1 1.7 2,526 Bovine animals 3.4 0.1 4,391 Cotton seed oil - 0.8 3,173 Work of Art 0.2 0.2 8,542

A classification of Burkina Faso s exports thinking at the industry level Classics: are Burkina Faso s traditional exports and the group is formed by 6 product categories. It includes some fresh or chilled vegetables; fresh fruits, sesame seeds, oil seeds and oleaginous fruits; not carded cotton; and leather of other hides or skins. They tend to have low PRODYs but the highest densities for Burkina Faso. Disappearances: includes 4 categories of bovine, goat, sheep, and lamb skins; basketwork; and notably gold. Hides and skins exports to Europe have declined systematically. Gold was one major product exported by Burkina Faso whose production declined. Now gold mining has a promising recovery. Emerging champions, High PRODY products but small in number (only 15) and export values. Some reversals in exports during 2005-06 suggest the existence of constraints in the economic environment that prevents them from scaling up. Cotton seed oil, soap, horticultural products, some low tech manufactures, and two leather and skin products.

A classification of Burkina Faso s exports by Revealed Comparative Advantage, tech code, PRODY and share detailed (table 4) Table 9.1: Options for export diversification in Burkina Faso PRODUCT DESCRIPTION TECH DENSITY SHARE SHARE SHARE SHARE Type CODE PRODY (00-04) 00-06 80-84 90-94 00-04 05-06 Fruit,fresh or dried, n.e.s. PP 5,187 0.154 2.0 1.5 0.9 2.0 Classic Other fresh or chilled vegetables PP 5,477 0.153 4.0 5.8 1.5 0.7 Classic Leather of other hides or skins LT1 2,156 0.156 0.9 2.2 1.8 0.9 Classic Cotton seed oil RB1 3,173 0.145 - - 1.1 0.1 Emerging Champion Fixed vegetable oils,n.e.s RB1 5,377 0.140 0.9 0.4 0.2 0.2 Emerging Champion Sugars,beet and cane,raw,solid LT1 4,516 0.182 - - 4.2 1.4 Emerging Champion Sugar confectionery and other sugar RB1 8,772 0.127 0.0 0.0 0.2 0.0 Emerging Champion Vegetable products,roots & tubers,f PP 4,789 0.158 0.2 0.0 0.3 0.3 Emerging Champion Plants,seeds,fruit used in perfumer PP 3,622 0.156 0.1 0.0 0.1 0.1 Emerging Champion Buckwheat,millet,canary seed,grain PP 5,009 0.131 0.0 0.1 0.3 0.1 Emerging Champion Maize (corn),unmilled PP 6,430 0.129 0.3-1.5 0.1 Emerging Champion Sheep and lamb skin leather LT1 2,526 0.162 0.1 0.2 2.2 0.6 Emerging Champion Bones,horns,ivory,hooves,claws,cora PP 4,419 0.145 0.0 0.0 0.1 0.0 Emerging Champion Sacks and bags,of textile materials LT1 5,209 0.146 0.0 0.0 0.1 0.0 Emerging Champion Manufactures of wood for domestic/d RB1 5,919 0.141 0.0 0.1 0.2 0.1 Emerging Champion Household appliances,decorative art LT2 8,725 0.113 0.0 0.0 0.0 0.0 Emerging Champion Other musical instruments; not 898. LT3 3,843 0.106 0.0 0.0 0.1 0.0 Emerging Champion Cigarettes RB1 12,204 0.118 - - 4.0 1.0 Emerging Champion Soap;organic surface-active product MT2 5,409 0.150 0.0 0.1 0.2 0.0 Emerging Champion Gold,non-monetary RB2 5,716 0.144 2.3 16.9 1.2 1.2 Emerging Champion

Policy Implications - What can this framework tell us of incomeenhancing export possibilities in Burkina Faso? Part 1 1. GOOD NEWS: there are alternative growth paths. 2. What our framework shows: That Burkina Faso s traditional or Classic export products are mostly low PRODY. That there are some Disappearing exports. Some are high PRODY. We don t know why they are disappearing. We need more information. There is a long list of Marginal products. We should be reluctant to suggest they might be good products. We need more information. There is a set of high PRODY Emerging Champions which seems attractive. We don t know why they have not scaled up and what is holding them back. We need more information. MOST importantly, we do not know whether Burkina Faso has the technological capabilities and inputs to produce the Emerging Champions. We need more information.

Are we ready to comment on Burkina Faso s industrial policy yet? NO We should feel comfortable noting the sophistication of the Classics, Disappearances, Marginals and Emerging Champions as identified by our framework. BUT We are not ready to endorse any product or industrial policy. We need to do more homework. Possible tools: Value Chain analyses, feasibility studies. There is no substitute to market research. 10

Burkina Faso Product Space Classics Emerging Champions Disappearances Marginals

Burkina Faso Classics Cotton (other than linters),not car Fruit,fresh or dried, n.e.s. Sesame (sesamum)seeds Leather of other hides or skins Product Space Other fresh or chilled vegetables Oil seeds and oleaginous fruit. n.e Classics Emerging Champions Disappearances Marginals

Burkina Faso Emerging Champions Sheep and lamb skin leather Product Space Fixed vegetable oils,n.e.s Maize (corn),unmilled Sacks and bags,of textile materials Manufactures of wood for domestic/d Sugars,beet and cane,raw,solid Vegetable products,roo ts & tubers, Buckwheat,millet,can ary seed,grain Cotton seed oil Cigarettes Sugar confectionery and other sugar Natural rubber latex; nat.rubber & Plants,seeds,fruit used in perfumer Other musical instruments; not 898. Household appliances,decorative art Soap;organic surface-active product Classics Emerging Champions Disappearances Marginals

Burkina Faso Classics & Emerging Champions Cotton (other than linters),not car Fruit,fresh or dried, n.e.s. Sheep and lamb skin leather Sesame (sesamum)seeds Leather of other hides or skins Fixed vegetable oils,n.e.s Product Space Other fresh or chilled vegetables Maize (corn),unmilled Sacks and bags,of textile materials Manufactures of wood for domestic/d Sugars,beet and cane,raw,solid Vegetable products,roo ts & tubers, Oil seeds and oleaginous fruit. n.e Buckwheat,millet,can ary seed,grain Cotton seed oil Cigarettes Sugar confectionery and other sugar Natural rubber latex; nat.rubber & Plants,seeds,fruit used in perfumer Other musical instruments; not 898. Household appliances,decorative art Soap;organic surface-active product Classics Emerging Champions Disappearances Marginals

Burkina Faso Disappearances Sheep & lamb skins with wool on,raw Goat & kid skins,raw (fresh,salted, Oil-cake & other residues (except d Sheep & lamb skins without the wool Product Space Basketwork,wic kerwork etc. of plait Gold,nonmonetary Bovine & equine hides (other than c Classics Emerging Champions Disappearances Marginals

Burkina Faso Marginals Tobacco,wholl y or partly stripped Tobacco,not stripped Milk & cream,fresh,not concentrated Milk & cream,preserve d,concentrated Sheep and goats, live Other Building and materials of monumental animal stone not f origin, Sheep's or lambs'wool,degre ased,in Anim./veget.oils & fats,wholly/part Shellac,seed lac,stick lac,resins,g Groundnuts (peanuts),green,wh ether Cotton seeds Works of art,collectors pieces & an Product Space Beans,peas,lentils & other legumino Gypsum,plasters, limestone flux & ca Other fresh,chilled,frozen meat or Bran,sharps & other residues derive Rice semi-milled or wholly milled, Spices (except pepper and pimento) Rice in the husk or husked,but not Other wheat (including spelt) and m Calf skins,raw (fresh,salted,d ried, Seeds,fruit & spores,nes,of a kind Animals of the bovine species,incl. Cotton waste (including pulled or g Cotton yarn Poultry,dead & edible offals ex.liv Classics Emerging Champions Disappearances Marginals

Table 1-5: Candidates to Economic Diversification outside the Cotton Sector Product Space Methodology Sectoral Analysis Cereals, vegetables and other plants/seeds Maize (corn), unmilled*** Traditional cereals (sorghum, millet, maize) Buckwheat, millet, canary seed, grains*** Rice Fruit, fresh or dried* Onions Other fresh or chilled vegetables* Tomatoes Vegetable products, roots and tubers** Green beans Plants, seeds, fruits used in perfumes** Cowpeas Sesame**** Mangoes Shea nuts Animals/meat and other animal products Short-cycle species (poultry, sheep and goats) Cattle/Beef Milk Leather, hides, skins and bones/horns Leather of other hides and skins* Hides and skins Sheep and lamb skin leather** Bones, horns, ivory, hooves, claws** Processed products Cotton seed oil** Fixed vegetable oils** Sugar, beet and cane, raw, solid ** Sugar confectionery and other sugar*** Sacks and bags of textile material** Manufactures of wood*** Household appliances, decorative art*** Other musical instruments*** Cigarettes*** Soap, organic surface-active products** Gold, non-monetary** 17