Overall, the level of protection accorded to the incumbent firms in these sectors, in the form of customs duties and _de facto_ monopsony, is too high, especially for sugar and vegetable oil. Lowering these levels of protection is the best way to bring consumer prices down, and will substantially obviate the need for price controls, which are difficult to administer and set at appropriate levels. Furthermore, discretionary and non-transparent customs practices that manipulate the level of protection through variations in import valuations rather than announced changes in statutory protection should be eliminated to maintain a level playing field and avoid corruption.

If world prices spike the government can consider temporary reductions in import duties and VAT rates. To boost competitiveness rather than protect rents, governments should replace protection with targeted assistance to overcome the most binding constraints and improving the business climate. In the case of sugar, this may mean expansion, or mechanization of harvesting, without, however, providing subsidies or privileged access to land and water to CSS relative to other users, notably horticultural producers. In the case of peanuts, processors need to work more closely with farmers, providing assistance to improve yields and quality, in return for guaranteed access to their harvest through contracts. In the case of bread, the production and use of local grains should be promoted, building on recent research to promote the production of composite flour and the marketing of breads using local grains.

More generally, these battles over rents are a side-show to the deeper issues of reducing poverty and raising incomes. To raise incomes, labor-intensive economic growth is required. Growth in turn depends on developing a competitive economy that can export goods and services that other countries’ consumers want to buy. Senegal’s past performance has been disappointing. Traditional exports are in trouble and export diversification remains limited, with little dynamism in labor-intensive sectors that could promote equitable growth. Rather than protecting import-competing industries, Senegalese policy should focus on export competitiveness. Industries with export potential include edible groundnuts, fishing, tourism, horticulture, mining, telecommunications and possibly light manufacturing. Senegal needs to make more progress in resolving long-standing obstacles to competitiveness identified more than a decade ago (Golub and Mbaye 2002): corruption and red tape; poor public services, notably electricity; and adversarial relations between workers and employers.<sup>35</sup> The government has recently embarked on an ambitious program to improve the business climate which will need to be sustained in the coming years. Its new Plan Senegal Emergent, with its focus on exporting industries, holds promise for the future, but will require a shift in focus from the vested interests of the past to a new generation of entrepreneurs.

The following table summarizes the public policy objectives, the current set of policies, and recommended changes.

> 35 Similar constraints were documented in the 2009 Investment Climate Assessment by the World Bank.

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