Senegalese Manufacturing Competitiveness: A Sectoral Analysis Of Relative Costs And Prices

Document Type

Article

Publication Date

1-1-2007

Published In

African Integration Review

Abstract

In this paper, we seek to understand the effects of international competitiveness on export performance in Senegal at the industry level over 1974-1998. To this end, we have calculated two indices of competitiveness in manufacturing, namely: relative unit labor costs (RULC) and relative producer prices (RELPR). For these indices, we compare the Senegalese experience to those of developing and transition countries in four other regions: Africa, Asia, South America, and Eastern/Central Europe. Our econometric results reveal that both indicators have a significant effect on sectoral exports, with RULC having a greater and more robust effect than RELPR. Our indicators show that Senegalese international competitiveness has substantially deteriorated over time, with respect to all the comparison regions. The 1994 devaluation of the CFA franc temporarily restored competitiveness, but the situation rapidly deteriorated again within a few years. There are several reasons for the deterioration prior to 1994: the exchange rate, relative wages in dollar terms and relative productivity all contributed. Senegalese relative wages, measured in dollars, rose on average 1.9 percent annually between 1974 and 1993, while Senegalese productivity fell on average 3.7 percent annually during the same period. The consequences have been disastrous for Senegalese competitiveness. Raising productivity growth relative to wages would appear to be the best and most sustainable way of improving Senegalese international competitiveness which would contribute to the raising of the national living standards.

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