Doing Business 2010

Doing Business 2010 has been released today, and the oft-cited rankings are now publicly available.

The report contains several interesting findings, perhaps the most important of which is that Rwanda has been ranked as the top business reformer - a first for a sub-Saharan African economy (Mauritius retained its top ranking as the African country in which it is easiest to do business). This ranking is based on the number and impact of reforms introduced in the year - through May 2009 - a summary of which may be found here (scroll down for table). The report also finds that:

Two regions were particularly active this year: Eastern Europe and Central Asia and the Middle East and North Africa. In Eastern Europe and Central Asia, 26 of the region’s 27 economies reformed business regulation in at least one area covered by Doing Business. Governments in the Middle East and North Africa are reforming at a similar rate, with 17 of 19 reforming in 2008/09. In both cases, competition among neighbors helped inspire widespread reform.

An overview of the report may be found here; report highlights here; and the complete ranking of all 183 economies here.

Has China de-industrialized other developing countries?

Via VoxEU Jorg Mayer and Adrian Wood say 'yes':

A common concern is that China’s opening to trade has de-industrialised other developing countries. Their labour-intensive manufacturing has been hit by Chinese competition in their home markets – a complaint often heard in Africa and Latin America – and in export markets, while their primary exports have been pulled up by Chinese demand. This mixture of effects is worrying because industrialisation is vital for development, manufacturing provides jobs, and the ownership of natural resources is often highly unequal – so the net impact of China could be both slower growth and greater inequality in the rest of the developing world.

Standard trade theory is consistent with these concerns. The impact of China on other countries can be interpreted in a Heckscher-Ohlin model as occurring through a shift in world average factor endowments. The comparative advantage of a country depends on its endowments not in isolation but relative to the endowments of all other countries involved in trade. This comparator group was altered by China’s emergence from near-autarky, because of its size and distinctive endowment structure, and hence so was the comparative advantage of other countries.

More specifically, China’s opening to trade effectively lowered the world average land/labour ratio and increased the share of workers with a basic education in the world labour force. The relative endowments of other countries were thus shifted in the opposite directions, which tended to move their comparative advantage away from labour-intensive manufacturing, which requires many workers with a basic education but little land. The corresponding increase in comparative advantage for developing countries was in primary production, which uses a lot of land relative to labour.

Mayer and Wood present data depicting average changes in ratios of labor-intensive manufacturing in primary production in the 1980s and 1990s, and the differences between these decades, for output and two sets of export data. From this data it appears that the bulk of China's impact was concentrated in the 1990s. Figures from Kenya, Mauritius and South Africa further show negative differences between output and export ratios, which is consistent with the expected impact of China proffered by standard trade theory.

A new take on the bottom (three) billion

Three billion individuals. That's the approximate number of people that would be scrapped if we were to eliminate the bottom 5% global GDP contributors, the vast majority of which are found in either Africa or Southeast Asia. 81 countries comprise this bottom 5%. Together they represent half of the 192 UN member states and nearly 43% of the world population.

What would the world look like without them? Via Strange Maps we are offered a glimpse:

In reverse order of magnitude the 81 countries are:

Zimbabwe, Burundi, DR Congo, Liberia, Guinea-Bissau, Eritrea, Malawi, Ethiopia, Sierra Leone, Niger, Afghanistan, Togo, Guinea, Uganda, Madagascar, the Central African Republic, Nepal, Myanmar (Burma), Rwanda, Mozambique, East Timor, the Gambia, Bangladesh, Tanzania, Burkina Faso, Mali, Lesotho, Ghana, Haiti, Tajikistan, the Comoros, Cambodia, Laos, Benin, Kenya, Chad, the Solomon Islands, Kyrgyzstan, India, Nicaragua, Uzbekistan, Vietnam, Mauritania, Pakistan, Senegal, Sao Tome and Principe, Ivory Coast, Zambia, the Yemen, Cameroon, Djibouti, Papua New Guinea, Kiribati, Nigeria, Guyana, the Sudan, Bolivia, Moldova, Honduras, the Philippines, Sri Lanka, Mongolia, Bhutan, Egypt, Vanuatu, Tonga, Paraguay, Morocco, Syria, Swaziland, Samoa, Guatemala, Georgia, the Congo, Iraq, Armenia, Jordan, Cape Verde, the Maldives, Fiji and Namibia.

It is equally curious to note which countries are not included among the bottom 5%. Any surprises?

The ties that bind

On his tour through Africa, President Hu Jintao stopped in Mauritius where he spoke at the Chinese Culture Center and emphasized the salience of 'cultural exchanges' between the two countries (and arguably Africa more broadly) in fostering friendly and beneficial relations:

“Learning Chinese will pave the way for better exchanges between Chinese and Mauritian people,” he said.

The Chinese Center in Mauritius is the first of such Chinese ventures (or so the article claims; I hesitate to believe that wholeheartedly). There, eager members can learn Chinese martial arts, dance, and language. Chinese language has also become part of the curricular framework in Mauritius. Goodness: if that doesn't drive home the growing importance of China for Africa, then I don't know what does!

To be perfectly honest, I don't quite know what to think about such overt emphasis on Chinese culture in Africa. On the one hand, it most certainly is useful. Much of the reason that Chinese firms in Africa hire their fellow compatriots is precisely because of the language barrier with locals. Similarly, when they are hired, local workers generally remain confined to manual labor positions with little opportunity for upward mobility. If you can't speak the language then what's the point, right?  Given that Chinese continue to stream into the continent at an astounding rate, a 'cultural exchange' of sort does seem like a logical enterprise. 

Yet two things bother me. First, I haven't heard any African leaders calling for such cultural exchanges. I mean, really calling for them; not just doing so because the Chinese are. I could be wrong and there may well be some who do, but I'm personally not aware of any. For now, the stress on Chinese culture comes from - *gasp* - the Chinese! It wouldn't behoove them to learn about the various African cultures, I suppose? Secondly, is it just me or does all of this ring of colonialism? The imposition of socio-cultural, religious and linguistic structures on an indigenous people? It's all a bit too familiar.

So today's million dollar question: cultural exchanges - friend or foe?