ENGINEERING FOR DEVELOPMENT

(First Draft)

E J Jefferies

March 1969

CONTENTS

PART 1 THE WORLD DEVELOPMENT PROGRAMME

Chapter 1 Introduction
Chapter 2 Closing the Gap
Chapter 3 Resistance to Change
Chapter 4 International Technical Assistance

PART II AN ENGINEERING APPROACH TO A PLAN FOR A COUNTRY

Chapter 5 Outline of the Approach
Chapter 6 Setting the Problem
Chapter 7 Basic, Concepts, Terms and Definitions
Chapter 8 Background Data Available
Chapter 9 The Starting Point for a Case Study
Chapter 10 Preliminary Calculations
Chapter 11 Patterns of Economic Growth
Chapter 12 Development Plan for Year 1
Chapter 13 Development Plan for Year 2
Chapter 14 Development Plan for Year 3
Chapter 15 Review of Changes During the Three Years
Chapter 16 The Control of Development
Chapter 17 Financing the Development

PART III THE IMPLICATIONS OF RAPID GROWTH

Chapter 18 Economic Growth and Technological Changes in Rural Communities
Chapter 19 The Influence of Agriculture on Industrial Development
Chapter 20 The Role of Manufacturing Industry
Chapter 21 The Contribution of Industrial Engineering to a Solution

PART IV DESIGNING FOR BALANCE IN DEVELOPMENT

Chapter 22 The Prediction of New Manufacturing Capacity Requirements by Product Group
Chapter 23 The Productivity of Labour
Chapter 24 The Growth of Productivity
Chapter 25 The Calculation of Appropriate Levels of Productivity in New Plants

CHAPTER 22

THE PREDICTION OF REQUIREMENTS OF NEW MANUFACTURING

CAPACITY BY PRODUCT GROUPS

"Normal" Level of Production

We are now in a position to estimate from Graphs 1 to 3 what will be a "normal" size, in terms of Value Added (see Chapter 6 for definition), for the manufacture of a given group of products in a given economy. This estimate indicates the local production for that group which has already been found possible, on the average, in a large number of economies throughout the world. It should be noted that this estimated level of local production already includes the impact of "normal" imports and exports for the group, acting on the local demand as determined by local purchasing power. It is not an estimate of total demand for products within a particular group, nor of consumption. However, from the factory planner’s point of view it is of more direct use than an estimate of demand since it indicate the probable magnitude of local manufacture which can be fitted into the economy without unbalancing it, without any need to attempt to calculate probable levels of imports and exports.

No account need be taken at this point in our calculations of the actual size of existing production of the group of products in question. Nor is it necessary to make laborious studies of past import statistics nor to set up market surveys or consumer demand enquiries to determine trends. By determining the "normal" size of production for the group under two sets of the economy: (a) now, and (b) as expected or planned for some future year, and subtracting the first result from the second, we arrive at a "normal" amount of additional local production capacity which the economy can be expected to find a use for. This is precisely the figure which governments, investors and industrial engineers need as a basis for planning.

It is to be noted that by this method, adding a "normal" increment to the existing capacity, the total capacity arrived at for the selected year in the future will be nearer to the "normal" for that year, whether the existing capacity is above or below the "normal" for the present year. If the "Historical" method has been used, starting from the present capacity and past growth rates, the predicted figure for the required total capacity in the future would automatically have been further removed from the "normal".

Of course, before investment decisions based on the predictions are finalised, the entrepreneur will consider all the special factors which he can see and allow for them. This is standard practice and it is not to be suggested that it can be abandoned.

Example

The method of using the graphs can best be illustrated by an actual example. Assuming that:

Find the probable increase in Value Added per annum in the manufacture of textiles in five years time.

Calculations

Population is now 5.35 millions; in five years time it will be 5.35 x 1.025⁵ = 6 millions.

Per capita GDP is now US $135; in five years time it will be 135 x 1.05⁵ = US $172.

Step 1

On Graph 1 (population three million), from US $135 on the horizontal scale, go vertically to line marked "23" (for textiles) and thence horizontally to "per capita Value Added". Result: $0.98 per capita, per annum.

Step 2

Repeat on Graph 2 (population thirty million). Result: $2.35 per capita, per annum.

Step 3

Draw a line on Graph 4 from $0.98 at three million to $2.35 at thirty million and read off the intersection with 5.35 m. Result: $1.25 per capita, per annum.

Step 4

Multiply by population of 5.35 million. Result: $6.7 m per annum Value Added.

This is the indicated "normal" size of the product group "Textiles" under present-day conditions, i.e. a population of 5.35 million and a per capita GDP of $135.

We now repeat these calculations for the conditions foreseeable in five years time, i.e. a population of six million and a per capita GDP of $172, as follows:

•  
• Repeat the first two steps using $172 per capita GDP. Result: (1) $1.40 per capita per annum, (2) $3.40 per capita per annum.
•  
• Repeat Step 3 using these two values and six million population. Result: $1.82 per capita per annum.
•  
• Multiply by population of six million. Result: $10.9 m per annum Value Added.

This is the indicated "normal" size of the product group "Textiles" under the foreseen conditions in five years time and shows that during the next five years this group’s annual Value Added can be expected to grow by $(10.9 - 6.7) m = $4.2 m.

Hence, as a guideline, it can be assumed that investment in additional production capacity having a net output of $4.2 m a year will be reasonable. This assumes, of course, that the existing production capacity is currently being operated at full rate; if there is any "slack" which can be taken up, due allowance must be made for this. (NOTE: this example is continued later in the examination of allowable increases in the productivity of labour.)

Special Cases

There are, of course, special cases distinguishable of countries in which a single large scale exploitation of mineral wealth, together with perhaps some processing of the crude product, leads to a high per capita GDP without this being accompanied by the general development of agriculture, services and manufactures. The most obvious examples are the petroleum producing and exporting countries.

In such countries, the lack of impact on general development is most probably to be found in the very high level of technology, scale of operations and productivity of labour necessarily employed, which leaves such a wide gap above other technological and productivity levels that there is no interaction between them. This excludes all but a very small fraction of the population from sharing except indirectly and passively in the benefits of the operation.

The methods of forecasting the pattern of manufactures describe cannot be used directly in such a case, since the economy is not a single entity; it is in effect two economies side by side. However it is possible to disentangle these two economies and treat them separately, to arrive at a forecast of manufacturing activities other than those associated with mining (oil).

The following procedure is suggested for use whenever the contribution of Mining to GDP is greater than say 10%: