Determinants of manufactured export performance in Namibia

Abstract

The current study looks at the determinants of manufactured exports in Namibia during the period from 1970 through 2009. In line with the international trade and finance literature, the paper focuses on the investment GDP ratio; foreign income; real effective exchange rate; real gross domestic product; consumer price index; and export processing zones to be the key determinants for manufactured exports in Namibia. Due to the nonstationarity of many macro-economic variables, the Johansen Cointegration Procedure is adopted in this study. Most of the results came out as expected. Investment GDP ratio and foreign income have a positive effect on manufactured exports. The results indicate that real effective exchange rate and consumer price index, is negatively related to the manufactured exports in both equations. This implies that exchange appreciation and currency overvaluation exert adverse effects on production for export. Surprisingly, the results indicate that the export processing zones relate negatively to manufactured exports and the coefficient is insignificant in all the equations. The key recommendations from this paper are that there is a need to review the current export processing zone regime with the purpose of identifying new amendments to the framework legislation in order to make the zone more competitive. Thus, there is also a need to relook at various investment incentives that are aimed at promoting manufactured exports with the aim of removing some constraints that might hinder companies in realising full benefits from these regimes.