Driving Structural Change in Developing Countries

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Developing countries, especially in sub-Saharan Africa, face the dilemma of technological change which presents both opportunities and challenges, say experts who examined “Trends, Opportunities, Challenges and Policies for Inclusive Growth” at the ongoing IMF/World Bank annual meetings.

Professor Dani Rodrik of Harvard University says the path to structural change for most developing countries would be different from the ones experienced by the advanced states; which reallocated resources from agriculture into manufacturing and then, services, hence some countries are undergoing ‘servicelization’ and not industrialization.

As some developing countries reallocate resources into services, Rodrik notes agriculture shrinks. However, productivity of services also declines.

Public investment and business optimism, he believes, is driving demand-induced structural change in some countries such as India and Ethiopia. He warned developing countries that build export-oriented industrial policies on the need to scale down growth prospects because returns from tradable may be less than domestic demand.

Highlighting the success recorded in fostering inclusive growth in the last 25 years, Carolina Sanchez, Senior Director of Poverty and Equity Global Practice at the World Bank, says over one billion people were lifted out of poverty, especially in Asia, noting that global inequality has declined due to growth convergence.

New technologies will alter the process of structural transformation in developing countries just as manufacturing sector, she adds, as ii will not contribute to output as it did when the advanced countries were industrialising.

For Professor MthuliNcube of Oxford University, engendering structural transformation is beyond technological change and demographic dividend but emphasized the need to build an ecosystem of policies that address skills, infrastructure and productivity gaps.

By Osaze Omoragbon

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