sectors that are only on the verge of becoming successful as they do not figure in the policy makers’ mindsets. There would hence be a bias towards already established sectors, missing the potentially large growth potential in non-traditional sectors.

2. _Lowering the costs of backbone services._ Of great importance in today’s globalized economy is that domestic firms have access to efficiently produced critical backbone services inputs. Firms that have to pay more than their competitors for energy, telecommunications, customs services, transport and logistics, finance and security will find it hard to compete in both the domestic and overseas markets. Competition and regulatory oversight in these services industries lie at the heart of the policy challenge. In many developing countries lack of infrastructure is a critical constraint on the availability and cost of backbone services. Other critical services are those related to education and training that are necessary to ensure supply of the type of labor required by the more productive expanding sectors in the economy and to foster a process by which value is increasingly added to the products and services produced in the country.

3. _Pro-active policies to support trade._ It is important to address a range of market and government failures that tend to afflict countries as they seek to expand exports and growth. In many cases these constraints to competitiveness require specific interventions and institutions. These are likely to include export and investment promotion agencies, standards bodies, agencies to support innovation and clustering. In addition, governments will need to address the political economy constraints to reform and to limit the costs of adjustment, especially when they fall disproportionately on particular groups. In general, such a strategy will be more effective if focused on protecting workers rather than protecting jobs (World Bank _Global Economic Prospects_ 2007). This means that effective safety nets for those workers losing their jobs due to increased competition should be put in place. In tackling government failures and weak capacity for policy formulation and implementation, an effective mechanism can be to establish an empowered and dedicated trade and competitiveness policy unit within government that brings together stakeholders and coordinates policies on export processing zones, duty refund schemes, and other initiatives. It is important that these initiatives are brought together within a strategy for competitiveness rather than as a series of ad hoc interventions. In isolation these agencies tend to be rather weak and ineffective, and by potentially duplicating efforts will most likely waste scarce skilled resources.

Export diversification is a critical element in achieving high and sustained growth in commodity dependent countries in Africa. This framework for competitiveness will be appropriate for supporting diversification. Brenton, Newfarmer and Walkenhorst (2007) show that the global economy offers a range of opportunities for diversification: from new products, from raising the quality of existing goods, from increasing the penetration of overseas markets for existing exports and by exploiting possibilities to export services. Successful diversification by definition requires that resources move into new activities and are not bottled up in old low productivity operations. This necessitates a neutral set of incentives. Export diversification will tend to increase the importance of activities that require the more intensive use of backbone services than traditional activities. Exports of services rely heavily on the use of other services as inputs. For example, 14