Commercial policy and its effects on manufacturing industry in less developed countries: a case study of Sudan 1966-1976.

Abstract

This thesis attempts to examine the effects of the trade and payments regime prevalent in the Sudan between 1966 - 1976 on her domestic manufacturing industry. For this purpose, we employ two widely used methods, namely, the Effective Rate of Protection (ERP), and the Domestic Resource Cost (MC). Literature on both methods is reviewed and uses, implications, and empirical findings are discussed. A brief description of the structure of Sudanese economy is provided and the objectives and components of commercial policy are set out. Particular emphasis is laid on the effects of these policies on exports and imports. Export composition and performance are analysed and it is shown that the policy pursued harboured a strong anti-export bias which adversly affected export performance. As regards imports, considerable attention is paid to the. description and evaluation of the complex system operated. It is suggested that while the system might have helped to reduce immediate pressure on the balance of payments, this achievement was not without cost. Before effective rates of protection are computed and their results evaluated, industrial policy, objectives and instruments are spelt out and assessed. Computed ERPs are then shown to have wide inter-sectoral and inter-industrial variations. It is suggested that this might indicate a lack of consistent criteria in tariff setting. Furthermore, both nominal and effective rates of protection are shown to be associated with resource shifts through time. The results, however, did not lend support to the claim (of ERP theory) that ERPs are better predictors of resource movements than nominal rates. Finally, DRCs are estimated. Results reveal that they vary between industries and between firms, in the same industry. Hypotheses to help explain such variations are then formulated and tested. It is suggested that although inefficiency in factor use and underutilization of capacity go far in explaining observed variations, other factors e. g. poor infrastructural services and foreign exchange allocation methods may also be important.