The Bank of Namibia every year, since 1998, hosts a one-day Symposium. The aim of this Symposium is to bring together experts in the field of economics (internationally and locally) to exchange views on various issues pertaining to the Namibian economy. The theme for this year’s Annual Symposium is:
Theme:
Escaping the Middle – Income Trap: A Perspective from Namibia
The term ‘middle income trap’ captures a situation where a middle-income country can no longer compete internationally in standardized, labour intensive commodities. This is because wages are relatively too high, but it can also not compete in higher value-added activities on a broad enough scale because productivity is relatively too low. The result is slow growth and less potential for rising living standards for more people. The transition to high-income levels then seemingly becomes unattainable. According to World Bank estimates, only 13 of 101 middle-income economies in 1960 had become high-income economies by 2008. Growth slowdowns coincide with the point where the pool of transferrable unskilled labour is exhausted so that productivity growth due to shifting additional workers to industry from agriculture and from technology catch-up is diminishing. International competitiveness is eroded and output and growth slow.
A comprehensive innovation-focused strategy with strategic active policies is the only way to escape the middle-income trap. Insufficient development of domestic productive capabilities is at the heart of the predicament for middle income countries—and comprehensive advancement of domestic innovation capabilities is the basis for moving forward. The first stage of growth from low to middle income is input driven based on abundant labour supply and high rates of investment.
The disappointing growth record of Namibia since 2016 has given rise to the notion that Namibia might be in a middle-income trap. GDP growth rates had been on an upward trajectory over a number of years, averaging 3.5 percent between 1990 and 1999, then increasing to 4.3 percent between 2000 and 2009. During 2010 - 2015, average growth rate was 5.7 percent, mainly due to an expansionary fiscal policy and the construction of large mines. However, since 2016, real GDP contracted as the temporary stimulus from the construction of mines and public sector infrastructure dissipated, and government undertook a significant fiscal adjustment to stabilize public debt dynamics. Could this slow growth be due to structural challenges or is the country in a middle-income trap?
It is against this background that it is envisaged that the symposium will provide a platform to understand the notion of middle-income trap with reference to Namibia and to devise strategies and policy options to exit to become an industrialized state in line with Vision 2030.
The following topics will be the heart of this year’s symposium:
1: Is Namibia in a middle – income trap? This paper highlights the Namibian economy patterns since its independence to current position using the middle-income trap criteria and definitions. The aim of the paper is to ascertain if Namibia is indeed in a trap, or in danger of falling into one.
2: Escaping the middle – Income trap: International Experiences: This paper will review cases from countries that have successfully moved out of the middle-income trap, especially the Latin and Asian economies. This paper will draw on the experience of this countries and provide appropriate policy recommendations for Namibia.
3: Improving Business Climates and Escaping the middle – income trap: Strategies and Policy options for Namibia: This paper will offer implementable policies and strategies that could improve Namibia’s business environment and increase the inflow of investment. Empirical evidence suggests that economies that are close to or in the middle - income trap could become stagnant and stop growing if they do not improve the quality of their institutions. The private sector is the main driver of development, but the governments establish the climate in which businesses operate. This paper will also provide innovative, targeted policies that the government should do to improve the business climate thereby increasing growth through investment.