**Figure 57: Discoveries and disappearing products in Togo, 1985‐2006**

<!-- Start of picture text --> 25<br>20<br>15<br>10<br>5<br>0<br>‐5<br>‐10<br>‐15<br>‐20<br>Total discoveries Total disappearances Total net discoveries<br><!-- End of picture text --> _Note_ : Based on SITC 3 digit data _Source_ : Authors calculations based on COMTRADE data.

**An alternative definition of “emerging products”, confirming Togo’s innovation activities, can be derived from the idea of RCA, already referred to.** About 20% of Togo’s exports comprising 31 product groups from SITC at 3‐ digit level have been identified only in 2000‐2006 (see Table A 2 in Appendix I). Exports of this group have increased 14.5% between the periods 1992‐96 to 2002‐06. The implied income value of this export basket was 30% above the EXPY for the traditional or “classic” products group.

**Despite these positive developments, we cannot go as far as to say that Togo is steadily moving to close the gap with the technology frontier.** The contribution of discoveries to exports remain relatively low and Togo’s growth prospects are highly dependent on its traditional products as judged by the strong correlation observed between the growth rate of real GDP and the evolution of its Terms of Trade explained above. And, as Figure 12 above shows, the share of Togo on world exports is on a declining trend. On the other hand, we cannot argue that self‐ discovery is the current binding constraint to growth in Togo.

# **_6.9.2 Coordination Failures_**

**Turning to the second type of market failures, one would easily suspect coordination activities in Togo to be a constraint as the very existence of successful special economic zones indicates what could happen if those types of constraints are removed.** The Free Zone in Togo has, as argued, shown to be successful but the benefits of the zone is not directly related to overcoming coordination failures but rather a package of lower cost and less cumbersome business regulations (see Box 4 above). The zone is not a geographical area with surrounding infrastructure (even though most of the firms are located in Lomé), do not have special middlemen or marketing services, no government intervention in terms of input markets, no research or product development program, no advisory services, no special credit treatment, etc.

**Moreover, Togo is a relatively densely populated, small country where internal coordination is expected to be less of a constraint compared to other countries ‐ but external coordination is more important.** This has however been acknowledged by the government that has acted, not least through participation in ECOWAS and WAEMU for regional economic and trade coordination (see Section 5.2). And as mentioned, the West African economic integration efforts are viewed as very successful.

**However, coordination failures are clearly a constraint in the agricultural sector.** The sector is dominated by small holders, technically unsophisticated production focused on risk minimization and self‐consumption. Increased agricultural growth requires a number of support structures, such as road infrastructure, market information mechanisms, research, advisory support, etc. Previous government attempts to provide the farmers with this support structure did not succeed, but this is a symptom of government failures rather than a lack of impact from well implemented market coordination effort. For example, the cotton production increased steadily up until 2003 when it dropped sharply, partly due to a drop in the international price of cotton but also due to mismanagement of the national cotton company SOTOCO. Without an alternative coordination function, cotton production has still not recovered and the problems have spread to other crops that are co‐cultivated with cotton. Another example is the coffee/cacao sector that in terms of downstream impact (marketing, packaging, export, etc) profited from the

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