Senior Editorial Correspondent of Jambo Africa Online, FRANCOIS FOUCHE, puts together a collage of news titbits from across the world impacting on business in Africa…

Putting public investment to work

For countries on the path to recovery, reviving economic activity is a major priority. And what better way to support a come-back than by creating jobs. New IMF staff research shows that when governments spend on infrastructure, they create many new jobs.

Drawing on a 19-year dataset of over 5,600 construction companies from 27 advanced economies and 14 emerging market economies, the authors uses an innovative approach to measure the direct employment effect of $1 million of infrastructure spending by country income group and sector – electricity, roads, schools, hospitals, and water and sanitation. Because there is no data available for low-income developing countries, they estimates the employment impact by extrapolating from advanced economies and emerging market economies.

The chart below shows average estimates, by sector, of the number of jobs that additional investments create along the supply chain. The amount of job creation depends on labour mobility – how easy it is to move across companies within sectors – and labour intensity – defined as the labour effects down the supply chain in a sector. For example, in an emerging market economy with high labour mobility and high labour intensity, around 35 jobs are created in water and sanitation per $1 million of additional investment. In a country with low labour mobility and low labour intensity, that number falls to around 8.

In advanced economies, $1 million of spending can generate an average of 3 jobs in schools and hospitals and over 6 jobs in the energy sector, assuming intermediate labour mobility and labour intensity levels. In low-income developing countries, the estimates are much larger and range from 16 jobs in roads to 30 jobs in water and sanitation. Put differently, each unit of public infrastructure investment creates more direct jobs in electricity in high-income countries and more jobs in water and sanitation in low-income countries.

The benefits of investing in renewables and innovation

The impact could be higher for green investment, in part because many jobs in renewables do not require much education beyond high school and have low barriers to entry. Per $1 million invested, around 5–10 jobs could be created in green electricity, 2–12 jobs in efficient new buildings like schools and hospitals, and 5–14 in green water and sanitation through efficient agricultural pumps and recycling.

Investment in research and development can also create jobs—though mostly, if not exclusively—for high-skilled workers. Despite it being a much smaller component of public investment—mostly to government institutions and higher education—around 4 jobs are created in R&D per $1 million invested.

These results indicate that public spending on infrastructure can make a meaningful contribution to job creation. Overall, 1% of global GDP in public investment spending can create more than 7 million jobs worldwide through direct employment effects alone.

This article first appeared here.


UK Exports with the EU again above pre-Brexit levels

UK exports of goods to the EU were above pre-Brexit levels for a second month in June, half a year after the country severed trade ties with the bloc.

Total exports of goods, excluding precious metals, fell 2% in June, driven by a 5% slump in exports to non-EU countries, mainly because of declines in medicinal and pharmaceutical products and cars.

All trade flows recorded double-digit growth compared with a year ago, with imports from non-EU countries (35%) and exports to the EU (29%) rising at the fastest rate.

Exports of live animals, meat and dairy products to the EU grew in June compared to a year before. 

UK producers in the food and agriculture industries have been facing the burden of checks and regulations the bloc put forth.

Exports of fish and shellfish, another key exporting industry, increased 17%, while exports of iron and steel jumped 61% from the year before.

*Monitoring the shifting composition of UK trade with the EU and the rest of the world will be key to gauging the success of the government’s ‘Global Britain’ project.

Brexit’s impact on the UK economy will take a long time to materialise fully.

Despite a torrid start to the year, UK exports to Europe have largely recovered, but are still lagging the wider rebound in global trade. UK businesses are adapting to the new processes.



China exports more sophisticated products despite the US trade war

The technological level of China’s exports increased through the trade war with the U.S., according to a new ranking, which predicts the Chinese economy will grow faster than India’s over the next decade.

China ranked 16th globally when judged by the complexity of its exports in 2019, moving up three places ahead of countries including Ireland since the onset of the trade war in 2018, according to a new study by Harvard University’s Growth Lab.

The index measures the diversity and technological sophistication of goods exported by a country as well as the volume of exports. The U.S. ranked 11th, with the gap between the world’s two largest economies more than halving over the past decade.

The data show China was able to increase its ranking despite U.S. tariffs by exporting to other regions, said Tim Cheston, senior research manager at the Growth Lab.

“There was an adept move by China to diversify its export destinations for electronics to Europe and elsewhere,” he said.

Data covering the coronavirus pandemic is not yet available, but it may have further boosted the country’s ranking due to a surge in China’s exports. The 2019 data was recently updated.

“There are signs that China will continue to gain market share in sectors because it was able to keep production going,” Cheston added.

A high ranking doesn’t guarantee fast economic growth: Japan has topped the ranking for 19 successive years, while posting sluggish growth. Rather, the gap between a country’s export sophistication and its current level of GDP per capita is the strongest predictor of a country’s future economic expansion, according to the Growth Lab.

China’s export performance contrasts with its almost equally populous but less well-off neighbor India, whose ranking in 2019 was 43rd despite the government’s “Make in India” push.

“In the past few years we’ve seen India fall off, its generally stagnated when it’s come to export development,” Cheston said. 

That suggests that when it comes to economic growth “China will outpace India over the next 10 years,” he said.

As China has moved ahead of more developed countries in the ranking, it faces greater challenges in maintaining its progress.

Chinese exports “are now at the level of having nearly filled all known areas of global products,” said Cheston. 

“China must now move from taking know-how from across the world into true innovation, that is going to be a major challenge.”

Source: Bloomberg. The article first appeared here.