Proximity And Horizontal Policies The Backbone Of Export Diversification

The lack of a clear link between general economic fundamentals and export diversification indicators in the literature has fueled the believe that industrial policies are an absolute requisite to diversify exports. This paper, however, does find a strong statistical connection between horizontal policies and diversification by making two novel changes to traditional methodologies: using export categories that lead to diversification (for example, manufactures) as dependent variables, and using a gravity-equation regression setting. Proximity to other economies explains about a third of cross-country heterogeneity in targeted exports, and four fifths together with horizontal policies. Australia, Chile, and New Zealand emerge as new role models for diversification policies.

We identify key factors, from large set of potential determinants, that explain the variation in export diversification across countries and over time using Bayesian Model Averaging (BMA), which addresses model uncertainty and ranks factors in order of importance vis-a-vis their explanatory power. Our analysis suggests, in order to diversify, policy makers should prioritize human capital accumulation and reduce barriers to trade. Other policy areas include improving quality of institutions and developing the financial sector. For commodity exporters reducing barriers to trade is the most important driver of diversification, followed by improving education outcomes at the secondary level and financial sector development.

Largely because of its vast copper reserves, Chile’s exports are highly concentrated on this low complexity product and this is often cited as a major drawback of its economic policy framework. However, its exogenous copper abundance conceals the country’s success in developing non-mineral and complex exports. This achievement is remarkable considering its remoteness from the large international economic centers, which limits its integration to global value chains. As suggested in this paper, this accomplishment reflects Chile’s strength in policy areas that foster non-mineral exports (including complex exports), making the country a role model in export diversification and complexity policies among emerging market countries.

Selected Issues

This selected issue paper investigates the drivers of diversification and explores the potential for fostering diversification in Niger with a focus on horizontal policies. The empirical results from panel regressions indicate that reforms to enhance human capital and the quality of infrastructure, to promote digitalization, to remove barriers to trade and improve governance are likely to yield the largest gains in terms of diversification for Niger.

Guatemala: Selected Issues

This book explores the various issues that characterise the African mining sector, drawing examples from different African countries and regional organisations. Although there is a massive literature on the subject, some issues have been neglected, including the crucial role of digitalisation and technological advancement in resolving the environmental and social challenges faced in Artisanal and Small-Scale Mining (ASM), deep-sea mining, mining contract negotiations and modernising mining laws to reflect the increasing role of critical minerals, to mention but a few. Therefore, the book unpacks the critical issues associated with the mining sector, explicitly reflecting on the practical solutions needed to address the challenges in the African mining sector. This book uniquely analyses and adds flavour to international mining’s fundamental concepts by describing a simulated annealing-based approach appropriate for complex mining projects in Africa. Book contributors comprise of academics from different universities including professors, practitioners, government policymakers, NGO executives and a variety of different experts. This multidisciplinary book will be of interest to African policymakers, governments, academics, industry professionals, energy and mining institutions, international organisations, universities across the globe and companies.

The Kenyan economy remains resilient amid a confluence of global, regional, environmental, and domestic political risks. These factors, including costly and uncertain international bond market access for frontier market economies in an environment of “higher for longer” global interest rates, are adding to Kenya’s balance of payments and fiscal financing needs despite policy efforts to sustain domestic and external balances. The authorities’ EFF/ECF-supported program, approved in April 2021 and extended by 10 months in July 2023 to April 2025, continues to evolve to address the emerging challenges, including to restore market confidence while incorporating additional policy actions to reduce debt vulnerabilities, a key objective of the program. The program also endeavors to bolster Kenya’s medium-term prospects by enhancing fiscal risk management, strengthening external buffers, and improving the governance framework.