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Industry and Manufacturing

Manufacturing in the Commonwealth

Manufacturing contributes on average 11% of GDP for a Commonwealth country. The sector has the most importance in Commonwealth Asia were its average contribution to an economy is 18% of GDP and the least impact in the Commonwealth Caribbean with contribution for a country around 7%, and Commonwealth Pacific, 8%.

The UK, Canada, India and Australia have the largest manufacturing output in the Commonwealth, US$259bn, US$178, US$238bn and US$113bn respectively. The UK is the birthplace of industrialisation. The UK manufacturing sector has however been in overall decline for a very long time. In a globalised economy, major challenges currently come from emerging or newly industrialised economies in other parts of the world which are able to produce goods more cheaply than the UK. Indeed the sector has increased in significance in the rest of the Commonwealth especially amongst those emerging or newly industrialised economies. Singapore from the 1960s and Malaysia from the 1970s, achieved phenomenal growth through what economists call ‘export-oriented industrialisation’, a policy and process aimed at speeding up the industrialisation process of a country through the exportation of goods. Similarly, economic liberalisation policies and programmes in India since the 1990s have also been credited for the country’s more recent success in the manufacturing sector which has seen the growth of large multibillion dollar conglomerates with great economies of scale*.

In the Caribbean, Trinidad and Tobago has the most active manufacturing sector (19% of GDP) benefitting from a successful petrochemical industry and free-trade zone. In the Pacific, New Zealand is the most dependent on manufacturing (15% of GDP) with most its exports destined for the larger Australian market. As mentioned, Pacific and Caribbean states have relatively and overall the least active manufacturing sectors in the Commonwealth. Smaller markets, relatively high labour costs, no economies of scale, remoteness from major world markets and cheaper manufactured imports are widely seen as major impediments to growth of the sector in these states.

Manufacturing activity averages 12% of GDP for countries in Commonwealth Africa. The countries have, to some extent, naturally harnessed the benefits of a larger market and cheaper labour costs in contrast to their fellow small developing island state counterparts in the Pacific and Caribbean. However the future position of the sector is precarious and growth is limited due to many factors including emphasis of exportation of products much earlier in the production chain with less value-added, institutional challenges, the disbanding of trade quotas with OECD countries and competition from Asia, China especially.

Data is from 2010.

* A larger business is often able to do things more cheaply than a smaller one, other things being equal. Anything that helps save costs if the scale of operations increases is an economy of scale.

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