In the last decade there has been increasing interest in aiding the economies of developing countries by expanding local processing of primary products. This report presents the findings of a joint research project based on six case studies of individual products of interest to a braod spectrum of developing countries. The Commonwealth Secretariat investigated cocoa, coconut oil, natural rubber, and tea, while the World Bank investigated bauxite and tropical hardwood. Each case study addressed three important questions: (i) what factors are most influential in determining the particular location of the various processing chains; (ii) what gains and losses might result from the initiation or expansion of local processing; and (iii) can selected policy measures lead to an efficient shift in the location of the processing activities so that a greater share of the value added would accrue to developing country suppliers. Each study concluded with an assessment of this issue and provided some policy recommendations.

This paper reports findings from a literature survey to learn about the performance of infant industries in less developed countries. Remarkably little direct evidence was uncovered about the costs and benefits of developing these industries. But the findings indicate that infant firms have experienced relatively slow productivity growth. Thus many infants started some time ago apparently have so far failed to achieve international competitiveness. The findings suggest tentative conclusions about the causes of the failure. Insufficient productivity growth to achieve and maintain competitiveness seems to reflect the absence of sustained efforts to acquire and use the capabilities necessary for continuous technological change. Far more than stemming from experience alone, these capabilities appear to increase to needed levels only through consciously allocating resources to acquire them.