. GEOGRAPHY AND ECONOMIC COMPOSITION Before addressing the grand strategy and precise tactics of a country, or considering how it organizes...
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GEOGRAPHY AND ECONOMIC COMPOSITION Before addressing the grand strategy and precise tactics of a country, or considering how it organizes its institutions and defines it interests, it is necessary to start with the most basic considerations. Some characteristics of countries, such as their location or geology, can never be changed; other aspects, such as their economic composition, will change only slowly. These are the givens that a country must begin with when devising a TPF, as they each define the nature of the challenges and opportunities that a country faces. 1. Composition of the economy The classic means of describing any economy is to consider the relative importance of its three principal components. These are the primary sector (i.e. agriculture, mining, forestry and fisheries), the secondary sector (i.e. manufacturing and construction) and the tertiary sector (i.e. services). For the present purposes, the distinction between the first and third categories is the starkest. At some risk of oversimplification, economic development might be defined as the process by which countries become progressively less dependent on the primary sector (especially agriculture) while the tertiary sector II. TRADE AND DEVELOPMENT 11 becomes commensurately more prominent. This point can be appreciated from the data in figure 2, which show how the one sector diminishes and the other grows as incomes rise. That same point can be appreciated within different regions, as reported in tables 2 and 3. The least agricultural developing economies are, on average, 7
.2 times richer than the most. Conversely, the most services-intensive economies are 8.1 times richer than the least. Both of these relationships hold true across all three major developing regions and are especially intense in Asia and the Pacific. While all three sectors have contributions to make, no country can properly be considered developed if it does not possess a diverse and competitive services sector. Countries that are excessively dependent upon exports of one commodity, or a narrow range of primary goods, face numerous challenges to their development. Whether it is oil in Algeria, diamonds in Botswana, copper in Zambia, or the canal in Panama, countries do well not to depend too much on any one resource. Policymakers often hope to promote diversification of the economy, both vertically (i.e. moving up the value chain for a given sector) and horizontally
(i.e. promoting the establishment and expansion of entirely new industries that are not unduly dependent on the country’s natural resource bases). Often the next step in processing is obvious, whether that means moving from raw to refined copper (Zambia) or from fruits to fruit juices (Jamaica). The TPF for Rwanda, for example, pointed to several specific steps that could be taken to improve the country’s capacity to move up the coffee value chain. These are all variations on the promotion of infant industries. Like that broad strategy, the relative value of this more specific policy depends on the details. A policy that is properly designed and implemented could well pay dividends, but one that is poorly conceived or badly executed could be wasteful and inefficient.
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