421. Botswana’s Enabling Environment for Economic Diversification: Plugging the Holes
- Author:
- Victoria Ndzinge-Anderson
- Publication Date:
- 12-2006
- Content Type:
- Policy Brief
- Institution:
- Botswana Institute for Development Policy Analysis
- Abstract:
- It is widely recognized that economies endowed with natural resources and highly dependent on one or two primary commodities for exports are susceptible to exogenous shocks that can lead to fl uctuations in export earnings. The unpredictable nature of export earnings from primary products, especially when a narrow range of such products is exported, makes it diffi cult for countries to plan and allocate their resources effi ciently, thereby hindering sustainable economic growth and development. This is particularly evident in countries where backward and forward linkages are limited or non-existent within and between resource-based sectors and the rest of the economy. The uncertainty over the stability of future output growth that often characterizes resource-abundant economies can be countered to some extent by economic diversi fi cation, which calls for the broadening of the range of products and services produced for export. This may include broadening the range of primary products exported, so as to reduce dependence on a narrow range of primary export products and avoid the associated vulnerabilities. Diversi fi cation may include increasing the degree of processing of primary products prior to export, which can lead to additional local value added and reduced dependence on primary product markets. More generally, diversi fi cation is usually understood to include the production of a range of industrial and service exports. Depending on the nature of the products, this can be a skilled labourintensive and technology-driven process that transfers growth-enhancing spillover bene fi ts to the rest of the economy and promotes sustainable economic growth. It is generally accepted that the private sector, de fi ned as all economic activities not produced by the public sector, is the most powerful tool for achieving economic diversi fi cation. It induces a spiral effect on foreign and domestic investment, growth, employment, productivity and poverty alleviation. Stimulating economic diversi fi cation through broadening the range of export products requires new investment in a range of activities, which is itself dependent upon the nature of the enabling environment for both domestic and foreign investment. Botswana’s enabling environment for investment was assessed in a Report prepared by BIDPA and World Bank entitled “Diversifying Botswana’s Exports: An Overview” (2005). This Policy Brief presents the main fi ndings of that assessment. It focuses on the achievements, challenges and the way forward for Botswana in providing a business environment conducive for economic diversifi cation. To this end, the Policy Brief also provides a critical overview of what has been achieved so far, and identifi es what remains to be done.
- Topic:
- Economics, Environment, Natural Resources, and Diversification
- Political Geography:
- Africa and Botswana