Industrial Policy and the Development of Textile Industry in Papua New Guinea

论文总字数：73033字

摘 要

本文将探讨巴布亚新几内亚是否应该根据幼稚产业论来发展纺织产业，有人认为如果政府给予新兴产业以支持和保护，那么完全可以发展该产业。我们所列出的需求条件是十分需要政府的干预。更重要的是，幼稚产业论需要某种市场失灵的形式，比如，学习外部或不完善的金融市场;否则自由市场将提供有效率的结果。即使在这种存在缺陷的情况下，支持的生产补贴的形式是不恰当的政策工具，因为它是不可能解决这些市场失灵。

大多数政府的激励措施，其目的是为纺织行业刺激生产和/或发电能力，可能不达到所期望的结果。审查巴基斯坦和毛里求斯纺织产业的发展壮大，我的结论是需要进一步研究的纺织工业发展成本的决定因素之前，花费更多的资金在生产补贴之中，这很可能是低效和不恰当的政策手段。在某些情况一个国家，一个特定国家的市场不能干预或控制的情况下，需要政府干预外溢的情况影响的知识和信息的传播。从巴基斯坦和毛里求斯的案例中，我们看到两种截然不同的经济体都拥有强大的纺织行业，但他们确有着不同的行业结构和政策方针。我研究的目的是找到最适合于巴布亚新几内亚的最好的政策和设置最好的行业结构。当然，每个国家都有自己的经济禀赋因素影响该国的经济发展。但是，良好的政策和政策的实现是需要积极的配合。政府想要实现本国长期的经济增长。政策和看起来可行的方案在巴布亚新几内亚的实施将被选择，其成长与发展战略也会随之而编制。

Abstract

This paper will explore whether or not Papua New Guinea should develop a Textile Industry based on the infant industry argument, which argues that government Support and protection of nascent industries is acceptable. We outline the very demanding conditions that are necessary for the government intervention to be justified. More importantly, the infant industry argument requires some form of market failure, e.g., learning externalities or imperfect financial markets; otherwise free markets would deliver the efficient outcome. Even in cases where such imperfections exist, support in the form of production subsidies is an inappropriate policy instrument, since it is unlikely to solve these market failures.

Most government incentives, which are aimed at stimulating production of and/or generation capacity for Textile industry, may not achieve the desired outcome. After reviewing development and growth in The Pakistani and Mauritius Textile industry, I come to a conclusion that further research into the determinants of costs of textile Industry development is needed before more money is spent on production subsidies, which are likely to be inefficient and inappropriate policy instruments. There are certain situations in a country where the market of a particular country cannot intervene or control such situations require government interventions situations of spillover effects the distribution of knowledge and information.

From the Case Study between Pakistan and Mauritius we see two very different economies both with robust textile industry but with different industry structure and policy approach. From the research I aim to find the best policies and industry structure and set up .One in which from the research could be best suitable for Papua New Guinea. Off course every country has its own economic endowment factors within the economy of a country that affects the country from within. But sound policy and policy implementation is needed from a proactive government who wants to achieve long term economic growth for its country .Policies and ideas that look viable to implement in Papua new Guinea will be chosen and a growth and development strategy will be compiled.

Key words: Infant Industry, Industrial Policy, Market Externalities, Trade Policy, Economic Development, Economic growth, Papua New Guinea

Contents

Abstract……………………………………………………………………………3-4

Keywords………………………………………………………………………….3

1. Introduction…………………………………………………………………....6--9

2. Literature Review

2.1 Infant Industry Argument …………………………………………..…..9-13

2.2 Industrial Policy…………………………………………………..……..13-16

3. Case Study

3.1 Pakistan: Textile Industry Overview ………………………………….. 16-17

3.2 Mauritius: Textile Industry Overview ………………………………… 18-21

3.3 Textile Industry Policy Comparison ………………………………….. 22

3.4 Textile Industry Data Comparison……………………………….…... 23-24

4. Forecast Development Strategy of a Textile Industry in

Papua New Guinea ……………….…………………………………………...25-26

5. Conclusion ……………………………………………………………………. 27

6. References ……………………………………………………………………...28

7. Acknowledgments ……………………………………………………………….29

1. Introduction

There are more than a hundred developing countries in the world today .All of which are aspiring to achieve sound economic growth for longer periods. The Nobel Laureate Robert Lucas (1988) stated “Once one starts to think about economic growth it is hard to think about anything else.” Senior vice President of the World Bank Justin Lin Yifu adds to that comment by stating “Once you start thinking about growth, it is hard not to focus on the continuous industrial and technological upgrading that is characteristics of sustained economic growth.

The role of industrial policy has become increasingly important as we look at trade as an engine of growth. Industrial policy is seen as sustainable path to economic growth.

This research will explore Industrial policy and the development of a Textile industry in Papua New Guinea .Papua New Guinea also known as PNG is located North of Australia and a part of Oceania. The country is a small developing island nation with a population of 7 million. Papua New Guinea has an Agrarian based economy and also relies heavily on revenues generated from its mineral extractive resources.

Papua New Guinea has always been an Agrarian based economy .With almost 80% of the population living in rural areas on customary land practicing subsistence farming and a way of life. Since the discovery of resources such oil, copper and gold the government has profited from the resource boom and began to rely heavily on the revenues generated from the extractive industry .Since the recourse boom agriculture which is seen by many as the backbone of the economy had been neglected .Neglected in the sense that Agricultural infrastructure and technological upgrading had not been continuous.

For the past few years PNG has enjoyed economic growth and increased activities as result of the development Phase of the LNG Project .Last year the first shipment of LNG from PNG was exported to Japan. Since then the economics activates in the country has slowed down gradually.

As part of the PNG governments plan to achieve ongoing economic growth and development .The Government has come up with an industrial strategy to implement policies that are aimed at increasing Value and Volume of value added products . The polices encourage the development of non mining sectors such as Manufacturing, renewable resources such as agriculture and fisheries and business services to promote economic self sufficiency .These policies focus on creating industries that will create employment and growth in PNG’s economy that can be sustained if after the depletion of its natural resources .

PNG‘s current industry consists of the following sections:

• Fisheries : Between 10% and 20% of the world’s tuna is caught in PNG waters, with catches of up to 580,000 tones per year. Papua New Guinea’s fishery zone is 2.4 million square kilometers and is the largest in the South Pacific. Within the pacific PNG has the most productive fishing zone and has made great advances in onshore processing in recent years. Sustainability of this resource remains a challenge . The largest sector within Papua New Guinea’s fishing industry is the catching and processing of tuna, although inland river fisheries, aquaculture and reef fisheries are also significant. The Pacific Tuna Forum estimates that the value of the annual tuna catch in PNG is about US$1.3 billion, which could double to US$2.7 billion if the industry perused more value-added activities.
• Manufacturing. Papua New Guinea manufactures a wide range of produce, including beer, soap, concrete products, clothing, paper products, matches, ice cream, canned meat, fruit juices, furniture, plywood, and paint. Some manufactured products are being exported, including food and beverages, building materials, handicrafts, household items and furniture, and paints and coatings. : The Industry plays a modest but growing role in PNG, contributing between six and nine per cent to overall GDP, in spite of a small domestic market the manufacturing industry faces challengers with relatively high labor and transport costs including competition from imports.
• Agriculture / Agribusiness: With about 85% of the population living at subsistence level in rural and regional Papua New Guinea, agriculture is the spine of the economy. Agricultural products account for about 18% of Papua New Guinea’s exports and 25% of its GDP, approximately US$3.80 billion. The main export crops are coffee, rubber, palm oil, cocoa, copra, and tea. PNG also has a livestock sector, mainly focused on poultry products.
• Forestry: Papua New Guinea is the second-largest exporter of tropical hardwoods in the world after Malaysia According to International Tropical Timber Organization. 15 million hectares of the country’s 30 million hectares of total landmass considered suitable for forestry development. Of PNG’s total forest area, 1.2 million hectares have been set aside as ‘protection forests’, based mainly on their biological or cultural significance. A further 13.2 million hectares are yet to be classified, while PNG also has around 62,000 to 70,000 hectares of plantation forest. Almost all of PNG’s forests (99%) are owned by customary landowners..PNG currently exports the following Products namely raw log exports, sawn timber, veneer sheets, logs, plywood, processed timer and woodchips. Most raw timber logs are exported to China, which bought 78% of PNG’s forest exports .With regards to value-adding currently, only about 20% of timber is processed in country, for which the main export markets are Australia and New Zealand. However, the PNG Government has established a policy to increase onshore processing to 80% by 2030.
• Tourism: The tourism industry contributed about .5 million to the country’s GDP K369 in 2013 and it forecasts this to rise by 4.3% between 2014 and 2024. Tourism’s ‘total contribution’ to PNG’s 2013 GDP was 2.5 per cent. To help these figures along, the National Government has targeted tourism as a priority area for economic development and for the creation of employment opportunities.
• Mining and Petroleum: This sector contributes almost 40% of the Nations GDP and is by far the most developed sector in the country with downstream processing facilities.
• Infrastructure and transport: As the economy begins to grow so does the need for infrastructure and transportation to facilitate this growth. The governments has Focused on Ports, Highways, and housing. The government is now calling for trade partners and interest foreign companies to engage and invest in infrastructure. Offereing promising incentives to lure foreign investors to partner with the government to venture into this growing sector .
• Services: The service sectors have increased rapidly for the past few years in particular the financial and the mining service sectors. Mining-focused companies in PNG continue to face challenges as the country’s minerals sector struggles to recover from a downturn that has been felt on a global scale. While conditions have been forecast to improve, analysis say that the mining sector will grow by 12% in 2015 as new strategic mining plans take effect. In the Financial Service sector competition among the leading commercial, micro and retail banks in Papua New Guinea is increasing, resulting in acquisitions and an expansion of services. In the biggest news in PNG’s finance sector in the past 12 months, local bank BSP has agreed to buy Westpac of Australia’s banking operations in the smaller Pacific island states of Samoa, Cook Islands, Solomon Islands, Vanuatu and Tonga, for A$125 million. BSP already operates in PNG, Solomon Islands and Fiji, and has a history of growing through acquisition, having bought Habib Bank’s Fiji assets in 2006, the National Bank of Solomon Islands in 2007, and National Bank of Fiji and Colonial Fiji Life Insurance Limited in 2009

Of all the above mining and petroleum is relatively developed compare to the others. The government places a high priority in developing this sector .From the sectors the other Key economic priority industries the government is placing emphasis on are Agriculture (Production and processing, Fisheries, Forestry, tourism/ travel and Manufacturing .Emphasizing value adding exports from these sectors.

This paper aims to answer the question “Should Papua New Guinea develop a textile industry?” .Using the Infant industry argument as the basis expounding further on justifying government interventions through existing market externalities .The infant industry argument requires some form of market failure, e.g., learning externalities or imperfect financial markets; otherwise free markets would deliver the efficient outcome. Even in cases where such imperfections exist, support in the form of production subsidies is an inappropriate policy instrument, since it is unlikely to solve these market failures.

2. Literature Review

2.1 Infant Industry Argument

For the infant industry argument for government protection to be justified, there are some requirements that need to be satisfied:

1. Costs of production in the infant industry should decrease due to economies of scale or learning-by-doing so that it will become competitive over time.
2. Balancing condition is required: future savings in terms of lower costs of production should outweigh costs incurred to make the new technology and/ domestic producer competitive with existing technologies and/foreign producers.
3. Some form of market imperfection is required, since otherwise free markets would deliver an efficient outcome. Learning spillovers, on-the-job training, or capital market imperfections are most often mentioned in this regard.
4. Protection should be temporary, so that special interests into prolonging protection will not be created or will be kept in control

To expound further, even if all assumptions behind the infant industry argument are satisfied, government intervention, in the form of mandates, subsidies, or tariffs, is not necessarily the best policy. Instead, efficient policy should target the source of market failure directly. Several sources of such external effects have been proposed in the literature: knowledge spillovers, on the job training, etc. Mandates, subsidies

And tariffs, which target production, may not be too precise to accomplish this task.

Used in the 19^th century in the United State, Canada, and Australia to justify protection as well as to support import substitution policies in developing countries in the 20th century. Infant industry argument is one of the oldest arguments against free-trade. Its origins can be traced back to the mercantilist paradigm of the 17th century. Alexander Hamilton, the first U.S. Secretary of the Treasury, more explicitly formulated it in 1791 in his famous “Report on Manufacturers,” where he insisted that new

Industries might need support of the government to compete with experienced foreign producers. The same point was made in 1841 by Friedrich List in Germany.

However, the wider academic community did not consider the argument very seriously

Until the works of John Stuart Mill, who, in his highly influential Principles of Political Economy, published in 1848, gave the following statement of the infant industry argument:

“The only case in which, on mere principles of political economy, protecting duties can be defensible, is when they are imposed temporarily (especially in a young and rising nation) in hopes of naturalizing foreign industry. […]The superiority of one country over another in a branch of production often arises only from having begun it sooner. There may be no inherent advantage on one part of disadvantage on the other, but only a present superiority of acquired skill and expertise. A country which has this skill and experience yet to acquire, may in other respects be better adapted to the production than those which were earlier in the field. […] But it cannot be expected that individuals should, at their own risk, or rather to their certain loss, introduce a new manufacture, and bear the burden of carrying it on until the producers have been educated up to the level of those with whom the processes are traditional.

A protecting duty, continued for a reasonable time, will sometimes be the least inconvenient mode in which the nation can tax itself for the support of such an experiment. But protection should be confined to cases in which there is good ground of assurance that the industry which it fosters will after a time be able to dispense with it; nor should the domestic producers ever be allowed to expect that it will be continued to them beyond the time necessary for a fair trial of what they are capable of accomplishing.”

The infant industry argument has been invoked to justify government subsidies and mandates that create a market for “non extractive industries” services and technologies. However, it is important to recognize the stringent conditions that must be met for government protection to be beneficial. In this section we explicitly state those assumptions.

Firstly, as is made clear in the Mill’s citation above, it is assumed that costs per unit of output will go down over time due to learning and increased experience by the firms in the industry. But the infant industry argument must be made on stronger grounds than merely decreasing costs. For example, if costs in the industry are exogenously going down, there is no basis the for infant industry support. Costs should be going down as a result of investment and efforts on the part of the market participants and firms in the given industry.

If there is experience in the particular industry that would help the cost to decrease .In the case were workers have to be trained to gain the necessary expertise for the management to adopt the most efficient practices the cost would increase mostly likely in the case of a completely new industrial process, for researchers to find the best production technique to lower the production costs and compete with foreign producers or with other established technologies in the Free market. However, it is important to distinguish this condition from the economies of scale argument, in which a company’s unit costs go down if it attains a large enough scale of operation. Economies of scale alone, while often mentioned as an argument for government protection, does not constitute a valid case for infant industry protection.

To justify government intervention some kind of market failure or imperfection is required.

Secondly, the following balancing condition needs to be satisfied: the future benefits from reduced costs of production (discounted at an appropriate interest rate) should be higher than the initial costs incurred as the product is produced by a higher-cost domestic producer. Government support of the industry should be temporary, since it is assumed that at some point, the producers in the domestic infant industry will be able to compete with existing, more experienced firms, be it foreign producers of the same good, or producers of the similar and substitutable good who utilize established technologies.

In practice, it is difficult to guarantee that this condition will be satisfied, as protection policies themselves are endogenous. Quite often, protection begets vested interests which have the resources and incentives to lobby for continued government support. As early as 1919, Thomas Carver, in his Principles of Political Economy, noted:

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