Can governments invent policies for developing an industry?

It’s not a bad rule of thumb that they can’t. 

Most businesses struggle to create a successful ten or fifteen year strategy: it’s hard to see how the disciplines of politics or public service can create such strategies.

This month in The Source we report on three different approaches:

• -          Morocco. Where the government and the main garment trade association think they can create 250,000 new jobs in a modestly successful, but share-losing, existing industry by 2025 by someone investing €3 bn or so (that’s $15,000 a job).
• -          Algeria. Where a reasonably successful Turkish garment and textile business thinks it can create  10,000 new jobs in a country with no real garment or textile industry by investing about $800 mn of its own money in a project very like its own setup at home, or one it’s developed in Egypt with local partners (that’s $80,000 a job)
• -          Nigeria. Where the government believes it can get its current textile mills to double their share of the Nigerian market by a series of measures designed to get businesses to invest themselves.

Morocco sounds extraordinarily heroic (British civil servant-speak for “impossibly optimistic”). But there are no details about how they’re going to get all this investment: just a list of businesses they’d like investment in. Of all the Arab countries, Morocco has had the most painless last decade or two – but there’s still no huge queue of people wanting to invest in Arab textile or garment making.

Algeria has been exceptionally horrid almost since independence, and has almost no record of nurturing serious manufacturing industry. So with 38 million people it’s one of the biggest countries in the world with next to no history of garment making – which makes the proposal by Tayab from Turkey to build a jeans factory sound credible – and its ambitions suitably modest. It’s not our job to second-guess a business’s long term prospects: but Tayab’s done what it’s proposing to do in Algeria before elsewhere in the Muslim world, and more than once. This project sounds like a business doing what it’s there for, and a government just facilitating it

Nigeria’s is a more honest plan. For all sorts of reasons, Nigeria used to have the biggest textile workforce in sub-Saharan Africa, and now has next to nothing. Its Western-style clothing comes from the market in second hand European or American charity donations – a business known in Nigeria as Okrika.  Its traditional clothing comes from imported, mostly Chinese, fabric. Nigeria’s Minister for Industry, Olusegun Aganga, believes Nigerian mills account for about 12% of the fabric used in the country, and wants to get that up to 25% by 2020.

He believes his job is:

• -          To see that the government has money to lend real businesses, and gets to lend it.
• -          To encourage a spot of protectionism (or “working through the Standards Organisation of Nigeria to reduce the dumping of sub-standard goods into the country”, which means creating rules that make life difficult for foreign exporters)
• -          To make sure there’s an adequate power supply: a challenge neither the Indian nor the Pakistani governments seem interested in rising to)

His plan also has the usual guff about “attracting strong brands to set up local manufacturing operation”, which is the kind of thing politicians love. But there’s none of that “encourage local designers” nonsense most developing country politicians love to play with.

Now in most global brands’ and retailers long term strategies, there’s a huge gap where the Tricky Twenty-one are: the 21 poor countries with populations over 20 million, little formal retailing, but a huge number of people (more between them than the EU and US combined). Nigeria’s 170 million people make it the second biggest of this group, and it beggars belief that its garment trade consists almost entirely of Western hand me downs or traditional dress made from fabric woven in China.

We’ve even fewer qualifications in second-guessing Aganga’s competence as a politician than we have in predicting Tayab’s ability to create a garment industry in Algeria (number 10 in our Tricky Twenty-one). So we can’t predict the likelihood of getting money lent more or less sensibly and honestly to real businesses, or achieving his objective that “10 industrial cities in the country have at least 18 hours of uninterrupted power supply by the first quarter of next year”.

But at least he’s saying the right things. Which is more than most governments do