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Mar 16, 2011

Focus on labour intensive industry, World Bank economist urges


South Africa must use its unemployed to its advantage and develop labour intensive industries, the World Bank's chief economist said on Wednesday.

"South Africa is a labour abundant country. You have so many new young people coming into the job market," Justin Yifu Lin said during a lecture at the University of Johannesburg's Soweto campus.

"This is your comparative advantage. If the labour force are competitive, you can accumulate capital faster and you can gradually move to more capital intensive industries."

Lin said building up labour intensive industries would have a number of economic spinoffs, such as narrowing the income gap between rich and poor.

"There will be more jobs for the poor and the wage rate will increase when the economy upgrades to more capital intensive industries."

Lin said a resource rich country such as South Africa should follow its comparative advantages in developing resource intensive industries, including extraction, forestry, and agriculture.

"Should South African develop labour intensive manufacturing industries? The answer is yes, because most labour forces are in agriculture or are unemployed and are poor.

"Labour intensive industries provide jobs, can be competitive and can pave the basis for continuous upgrading to higher value added industries."

Lin said South Africa could learn from the Finnish cellphone company, Nokia, which started out as a labour intensive logging company.

"Nokia diversified to rubber boots and later to the assembly of household electronics... and finally it became a world leader in mobile phones."

Edited by: Sapa
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