Final thesis

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  • ii

    THE IMPACT OF FISHERIES SOCIO-ECONOMIC CONTRIBUTION ON POVERTY

    REDUCTION IN NAMIBIA

    BY

    RAUNA MUKUMANGENI

    12293438

    A DISSERTATION SUBMITTED TO THE WESTMINSTER BUSINESS SCHOOL,

    UNIVERSITY OF WESTMINSTER

    FOR THE DEGREE OF

    MA IN INTERNATIONAL ECONOMIC POLICY AND ANALYSIS

    SUPERVISOR: DR. SHEIKH SELIM

    AUGUST 2013

  • iii

    ACKNOWLEDGEMENTS

    My most sincere gratitude goes to the Almighty Father for none of this would be possible

    without his guidance and protection.

    Other thanks extend to & to whom I say remain blessed:

    My supervisor Dr. Sheikh Selim for his absolute guidance, assistance, prompt responses

    and valuable expert advice on economic growth.

    Mr. S. I. Savva, I shall forever remain indebted to you.

    Panduleni Kadhila-Amoomo, for being the brother I never had. No words I can say shall

    ever fit to describe.

    My beloved twosome, husband Luis Miguel and daughter Maria for the love and

    understanding. A year away is too long.

    My dear parents, you did not only give life to me, even at this mature age you still ensure

    I persevere through it with ease. You are truly amazing.

    The rest of my family especially the Kashaka family, for all that matters.

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    ABSTRACT

    Poverty is a problem facing Namibia. Economic growth might be the solution. Given the

    importance of economic growth, it is necessary to analyse its determining factors. The fisheries

    sector is one of the most important sectors in Namibia and so is its economic growth. The

    purpose of the study is to investigate if economic growth, with particular emphasis of the

    fisheries sector, has impacted on poverty reduction during the period of 1990-2011. A

    neoclassical model framework as an important tool in economic growth analysis is used to

    analyse the determinants of Namibias fisheries economic growth and its effect on the countrys

    economic growth. Additionally, the countrys economic growth is analysed. Estimated factors

    are initial GDP, gross fixed capital formation, fisheries growth, general government expenditure

    and unemployment. Conditional convergence is found for the fisheries sector and for the

    economy. Namibias economic growth in 1990-2011 is mostly explained by initial GDP and

    unemployment. The study finds that the fisheries sector growth is negatively correlated with the

    countrys economic growth. Results of the fisheries sector imply that there is a negative

    relationship between initial GDP and the sectors growth. Additionally, the sectors

    unemployment is positively correlated with its economic growth. Furthermore the results do not

    find enough evidence to suggest that the fisheries sector impacts on poverty reduction. The

    results are important for policy formulation; that employment is created and initial GDP is

    lowered to ensure enhancement of Namibias economic growth. An enhanced economic growth

    presents great potential for poverty reduction.

    Key words: Namibia, economic growth, per capita GDP, neoclassical model, poverty, resource

    rent, conditional convergence

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    ABBREVIATIONS

    BON BANK OF NAMIBIA

    GDP GROSS DOMESTIC PRODUCT

    HDI HUMAN DEVELOPMENT INDEX

    MFMR MINISTRY OF FISHERIES AND MARINE RESOURCES

    MOF MINISTRY OF FINANCE

    NPC NATIONAL PLANNING COMMISSION

    NSA NATIONAL STATISTICS AGENCY

    R&D RESEARCH AND DEVELOPMENT

    TAC TOTAL ALLOWABLE CATCH

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    Table of Contents

    ACKNOWLEDGEMENTS ......................................................................................................................... iii

    ABSTRACT ................................................................................................................................................. iv

    ABBREVIATIONS ...................................................................................................................................... v

    CHAPTER 1 ................................................................................................................................................. 1

    INTRODUCTION ........................................................................................................................................ 1

    CHAPTER 2 ................................................................................................................................................. 3

    CONTEXT & RATIONALE ........................................................................................................................ 3

    CHAPTER 3 ............................................................................................................................................... 11

    LITERATURE REVIEW ........................................................................................................................... 11

    CHAPTER 4 ............................................................................................................................................... 16

    METHODOLOGY ..................................................................................................................................... 16

    4.1 MODEL SPECIFICATION .............................................................................................................. 16

    4.2 DATA ............................................................................................................................................... 17

    4.3 METHODS ....................................................................................................................................... 22

    CHAPTER 5 ............................................................................................................................................... 23

    RESULTS AND ANALYSIS ..................................................................................................................... 23

    CHAPTER 6 ............................................................................................................................................... 37

    CONCLUSIONS AND RECOMMENDATIONS ..................................................................................... 37

    REFERENCES ........................................................................................................................................... 43

    APPENDICES ............................................................................................................................................ 51

  • 1

    CHAPTER 1

    INTRODUCTION

    1. INTRODUCTION

    Poverty is a major problem facing Namibia. This study attempts to investigate the impact of

    economic growth on poverty reduction in Namibia during 1990-2011. Similarly, the study

    attempts to find empirical evidence on the determinants of economic growth in Namibia during

    the period 1990-2011 using the neoclassical framework borrowed from the pioneer work of

    Barro and Sala-i-Martin (2004). In view of the country being natural resources endowed, in

    particular the fisheries sector as one of the main pillars of the Namibian economy, the sectors

    economic growth is investigated. The purpose of the study is to investigate if economic growth,

    with particular emphasis of the fisheries sector, impacts on poverty reduction. In order to

    effectively investigate the fisheries sector impact on poverty, the sectors economic growth and

    the countrys economic growth are investigated to find the relationship, if any, between the

    respective economic growth and initial per capita GDP, gross fixed capital formation, fisheries

    per capita GDP, general government expenditure and unemployment. The study tests three

    hypotheses that correlate gross fixed capital formation, unemployment and initial per capita GDP

    on economic growth.

    The country is involved in efforts to increase economic growth and fight against poverty

    (MOF, 2012). The issue of economic growth is important because it is a major factor in reducing

    poverty. Barro and Sala-i-Martin (2004) underlined economic growth as possibly the one single

    factor that influences income levels of individuals and advocate for the understanding of its

    determining factors to solve economic related problems such as poverty.

    Poverty is a phenomenon that faces many third world countries and Namibia is no exception.

    According to NSA (2012), approximately 20% of the population in Namibia is poor and 14% is

    severely poor and 19% of households are poor. Globally however, the total number of poor

    people, as a result of economic growth, has reduced during the past three decades (World Bank,

    2008).

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    Combating poverty is high on the agenda of many governments including the Namibian

    government and the international community. Its eradication is the number one goal on the list

    of Millennium Development Goals of the Millennium Declaration adopted by the United Nations

    General Assembly on September 8, 2000 (Cypher and Dietz, 2009). The government has

    outlined how it is to address poverty, job creation and economic growth in its Fourth National

    Development Plan and Vision 2030 (NPC, 2012). Despite the governments attempt to deal with

    poverty, the problem persists (UNDP, 2007) and aggressive policy interventions are therefore

    needed. Economic growth can be the engine to reduce poverty, and s