building productive capacity in the ldcs - un escap unescap - clovis freire.pdf · 140 150 0 2,000...

Promoting Productive Capacity Development in the LDCs

Asia-Pacific Regional Workshop on Graduation Strategies from the Least Developed Country Category as part of the Implementation of the Istanbul

Programme of Action for the LDCs

4 December 2013, Siem Reap, Cambodia

Clovis Freire

Economic and Social Commission for Asia and the Pacific (ESCAP)

Change of paradigm

Before IPoA

• Focus on exchange (static view)

• Given what we produce today, how to improve

welfare through trade?

After IPoA

• Focus on production and employment

(dynamic view)

• How to foster new economic activities and create

productive jobs given the existing production base

and market incentives?

Take home message

LDCs need to build productive

capacities to benefit from globalization,

increase resilience, sustain growth as

well as poverty eradication, achieve

structural transformation, and

generates full and productive

employment and decent work for all

The underlying structure of an economy is a

network of non-tradable productive capacities

Productive

capacities

Economic

activities: jobs

• Infrastructure

• Methods

• Processes

• Entrepreneurial

capabilities

• Production linkages

• Goods

• Services

IDN

SGPCHNIND

WSM

MDV

THA TURHKG

LAO

MACGEO

VUT

VNM

KOR

KIR

MNG

MYS

SLB

UZB

BTN

FSM

PLW

PHLPAK

TJK

AZE

KGZ

ARM

TUV

PNG

BGD

FJI

TON

RUS

TLS

JPN

KAZ

LKA

KHM

MHL

AFG

TKM y = 15.596x0.5162

R2 = 0.8064

10

100

1,000

10,000

100,000

10 100 1,000 10,000 100,000 1,000,000 10,000,000 100,000,000

GDP (Milliion US$)

Diversification (number of

products exported)

Higher GDP is associated with diversification

Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE) and from the World Bank’s World Development Indicators. (2009 data)

WSM

VUT

VNM

TUR

TLS

THA

SLB

SGP

RUS

PHL

PAK

NZL

NPL

MYS

MNP

MMR

MDV

LKA

LAO

KIR

KHM

IRN

IDN

HKG

BTN

BGD

AUS

AFG

TUV

JPN

USA

CHNINDKOR

40

50

60

70

80

90

100

110

120

130

140

150

0 2,000 4,000 6,000 8,000 10,000

Diversification (Number of products)

Ho

w c

om

mo

n a

re t

he

pro

du

cts

ex

po

rte

d

(Nu

mb

er

of

co

un

trie

s e

xp

ort

ing

sim

ila

r p

rod

uc

ts)

0

Diversified

countries

producing

common products

Non-diversified

countries

producing

common products

Diversified

countries

producing

uncommon

products

Non-diversified

countries

producing

uncommon

products

Mean=91.4

Mean=1,868

More diversified countries face lower competition

Source: ESCAP (2011), Economic and Social Survey 2011.

Palau

Tuvalu

Kiribati

Marshall Islands

Northern Mariana Islands

Micronesia, Fed. Sts.

Timor-Leste

Tonga

Vanuatu

Cook Islands

Samoa

Solomon Islands

Bhutan

Niue

Nauru

Turkmenistan

Guam

Maldives

French Polynesia

American Samoa

Tajikistan

New Caledonia

Papua New Guinea

Brunei Darussalam

Mongolia

Kyrgyzstan

Lao PDR

Azerbaijan

Armenia

Myanmar

Uzbekistan

Fiji

Cambodia

Sub-Saharan Africa

Kazakhstan

Georgia

Afghanistan

Macao SAR, China

Nepal

Bangladesh

Korea, Dem. Rep.

LAC

Sri Lanka

Iran, Islamic Rep.

ESCAP

Pakistan

Viet Nam

Philippines

Indonesia

New Zealand

Malaysia

Russian Federation

Turkey

Thailand

Hong Kong SAR, China

Singapore

Korea, Rep.

India

Eu15

China

Australia

Japan

United States

-2 -1 0 1 2 3 4 5 6

Productive Capacity (Distance to the mean)

ESCAP Index of productive capacity

Source: Freire (2011). Productive Capacities in Asia and the Pacific. MPDD Working Papers, WP/11/17.

• Most LDCs are at the tail-end

of the index of productive

capacities; below the global

average

• LDCs remain specialized in

few and less sophisticated

products

• International environment has

not facilitated diversification

and increase in productive

capacities of LDCs

Source: Author based on Freire (2011). Productive Capacities in Asia and the Pacific. MPDD Working Papers, WP/11/17.

-0.65

-0.60

-0.55

-0.50

-0.45

-0.40

-0.35

-0.30

1991 1994 1997 2000 2003 2006 2009

Pro

du

cti

ve

ca

pac

ity (

dis

tan

ce

to

th

e m

ea

n)

Bangladesh

Nepal

Lao PDR

Cambodia

Myanmar

Maldives

Bhutan, Samoa, Vanuatu,Solomon

Isl., Timor-Leste, Kiribati, Tuvalu

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

1984 1987 1990 1993 1996 1999 2002 2005 2008

Pro

du

cti

ve

ca

pa

cit

y (

dis

tan

ce

to

th

e m

ea

n)

Viet Nam

Latvia

Estonia

Lithuania

LDCs in

Asia-Pacific

Few countries increased their productive capacities when starting from LDCs’ levels

Source: ESCAP (2011), Economic and Social Survey 2011.

Increasing diversification and reducing competition

Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

0

20

40

60

80

100

120

Diversification,

Number of products

exported (LHS)

Competition faced, index ( average

global competition=100, no

competition = 0) (RHS)

180

3860

107

79

Take home message

LDCs build productive capacities

facilitating the emergence of new

economic activities that produce new

and more productive goods and services

CHALLENGE: SHIFT IN PRICES OF COMMODITIES AND MANUFACTURES

Breaking historical trend, commodities are booming since 2000

Source: Author based on data from the World Bank.

0

200

400

600

800

1000

1200

1400

0

20

40

60

80

100

120

140

160

180

200

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Metals & Minerals

Beverages

Food

Raw Materials

Energy (right axis)

Annual price Annual prices indices, real 2005 US dollar terms (1960=100)

Shifting prices of commodities and manufactures

BangladeshPakistan

JapanKorea, Rep.

TongaPhilippines

Sri LankaSamoa

ChinaCambodia

Korea, Dem. Rep.Northern Mariana Islands

NepalKiribati

French PolynesiaVanuatu

GuamMacao SAR, China

SingaporeTajikistan

Micronesia, Fed. Sts.Maldives

FijiSolomon Islands

TurkeyThailandVietnam

Hong Kong SAR, ChinaPalau

AfghanistanKyrgyzstanMalaysia

Marshall IslandsLao PDR

ArmeniaIndia

MyanmarNew Zealand

IndonesiaGeorgia

American SamoaUzbekistanBhutan

Papua New GuineaAustralia

MongoliaIran, Islamic Rep.Azerbaijan

KazakhstanRussian Federation

Brunei DarussalamTurkmenistan

-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16

imports > exports

exports > imports

Annual growth of net barter terms

of trade 2000-2008 (per cent)

Commodities

Manufactures

Top 3 exports

Source: ESCAP Economic and Social Survey of Asia and the Pacific 2012.

Commodity boom is not unprecedented

0%

10%

20%

30%

40%

50%

60%

70%

1820 1837 1857 1877 1897 1917 1937 1957 1977 1997

Core

Asia including China

China

Share of World's GDP in

1990 international dollars

Periphery excluding Asia

interpolation

Source: Author based on data from Maddison, 2009.

The great income divergence

0

5,000

10,000

15,000

20,000

25,000

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000

Core

ChinaPeriphery

Asia

GDP per capita in 1990 international dollars

Source: Author based on data from Maddison, 2009.

Effect of shift in prices

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

specialize in fewer products produce more of the same diversify


OPPORTUNITIES FOR BUILDING PRODUCTIVE CAPACITIES

Opportunities for diversification


0 500 1000 1500 2000 2500 3000 3500 4000

Kiribati

Tuvalu

Timor-Leste

Bhutan

Vanuatu

Solomon Islands

Samoa

Lao PDR

Myanmar

Afghanistan

Cambodia

Nepal

Bangladesh

Existing products Potential new products with higher productivity

Export opportunities


79

12

9

8

54

11

13

9

56

55

76

11

10

9

57

78

10

9

10

57

78

9

8

9

60

86

11

9

9

57

11

12

9

67

55

Afghanistan Bangladesh Bhutan Cambodia

Lao PDR Myanmar Nepal

Electrical, electronic equipment Iron and steel

Machinery & mech appliance etc Optical, photo, technical, medical, etc apparatus

Organic chemicals Plastics and articles thereof

Sum of others with smaller shares

Export opportunities in agro-industries


8

17

15

31

17

12 16

17

1828

7

14 17

19

21

13

13

17

9

22

2510

14

208

34

826

16

8 14

15

2319

11

17

Kiribati Samoa Solomon Islands

Timor-Leste Tuvalu Vanuatu

Animal,vegetable fats and oils, cleavage products, etc Cereal, flour, starch, milk preparations and products

Cocoa and cocoa preparations Dairy products, eggs, honey, edible animal product nes

Edible vegetables and certain roots and tubers Meat and edible meat offal

Meat, fish and seafood food preparations nes Sugars and sugar confectionery

Vegetable, fruit, nut, etc food preparations Sum of others with smaller shares

Export opportunity


3 44

4

5

7

8

9

1010

37

Rubber and articles thereof Articles of iron or steel

Miscellaneous chemical products Organic chemicals

Paper & paperboard, articles of pulp, paper and board Electrical, electronic equipment

Iron and steel Optical, photo, technical, medical, etc apparatus

Machinery & mech appliance etc Plastics and articles thereof

Sum of others with smaller shares

Cambodia

Sample of list of potential new products for diversification with high

export opportunities - Cambodia


(HS code 6-digit) Description, price range

Export

opportun

ity (U$

Million)

Top markets (U$ Million)

top1 top2 top3 top4 top5 top6 top7 top8 top9

top1

0

(390319) Polystyrene other than expansible, in primary forms, $1-2 44.25212

CN

30.3

UA

2.7

BY

1.6 IL 1.3

KR

1.3

VN

1.3

EG

.9

PT

.9

DO

.7

HU

.7

(390320) Styrene-acrylonitrile (SAN) copolymers, in primary forms, $1-3 13.85478

CN

8.6 HK .8 KR .7

EG

.6

ES

.5

RU

.5 IN .3

PL

.3

SG

.2

NL

.2

(390330) Acrylonitrile-butadiene-styrene (ABS) copolymers, in primary

forms, $0-2 22.76941

CN

4.2 IT 4 IE 2

TR

1.8

NG

1.6

IN

1.2

AT

1.1

DK

.9

BE

.8 IR .8

(390330) Acrylonitrile-butadiene-styrene (ABS) copolymers, in primary

forms, $2-3 37.11908

DE

5.7

BR

3.8

SK

3.4

MX

3.3

TH

3.2

IN

2.8

MY

2.5

PL

2.4

JP

1.9

RU

1.6

(390390) Polymers of styrene, in primary forms (excl. of 3903.11-3903.30),

$0-1 17.26442

GB

3.4

CA

2.5

FR

2.4 CL .9

AR

.7

UA

.6

CN

.6

RU

.5

KR

.4

AU

.4

(390390) Polymers of styrene, in primary forms (excl. of 3903.11-3903.30),

$1-3 29.65704

DE

6.1 CN 5

US

2.8

JP

2.2 UA 2

TH

1.8

SE

1.4

VN

1.2

PT

.9 IN .9

(390410) Poly(vinyl chloride), not mixed with any oth. subs., in primary

forms, $1-1 44.34544

BR

14.6

UA

9.4

IN

3.7

RU

3.6

MA

1.4

BY

1.4

BH

.9

NG

.9

RO

.7

GR

.7

(390421) Poly(vinyl chloride), non-plasticised, in primary forms (excl. of

3904.10), $0-1 23.66221

IN

14.9

FR

3.6

MX

2.6 CZ .4 AT .4

DZ

.3

CO

.3 IT .2

US

.2

EG

.1

(390421) Poly(vinyl chloride), non-plasticised, in primary forms (excl. of

3904.10), $1-2 9.895069

UA

2.3

SA

1.2

IN

1.1 BE .9

RU

.8

BR

.7

BY

.5

AR

.3

SE

.3

EG

.2

(390422) Poly(vinyl chloride), plasticised, in primary forms (excl. of

3904.10), $0-1 10.37963

DE

2.6

PL

1.2 IN 1 UA .8

BR

.7

VN

.5

SG

.5

DZ

.4 FI .3

TH

.2

(390422) Poly(vinyl chloride), plasticised, in primary forms (excl. of

3904.10), $1-3 16.36703

MX

2.5

UA

1.6

HK

1.4

BE

1.4

RU

1.2

EG

.8

SG

.8

CZ

.8

BR

.6

CL

.5

(390599) Polymers of vinyl acetate/of oth. vinyl esters, in primary forms,

n.e.s. in ..., $0-4 11.88182

BR

3.1

CN

3.1

CA

1.2 IN .9

GB

.8

TR

.6

NL

.5

AT

.3

MX

.3

BE

.1

(390610) Poly(methyl methacrylate), in primary forms, $2-17 12.8207

CN

5.9

EG

2.3

PL

1.2

KR

1.2

BE

.4

RU

.3

AU

.2 IL .2

BR

.1

US

.1

(390690) Acrylic polymers other than poly(methyl methacrylate), in

primary forms, $4-9 18.26171

NL

6.5

KR

3.4

EG

2.4

IN

1.2

CN

1.1 IR 1

TR

.8

TH

.2

CA

.2

PL

.2

Import replacement opportunity


2 3 34

4

5

5

8

1219

35

Electrical, electronic equipment Raw hides and skins (other than furskins) and leather

Optical, photo, technical, medical, etc apparatus Special woven or tufted fabric, lace, tapestry etc

Plastics and articles thereof Impregnated, coated or laminated textile fabric

Machinery & mech appliance etc Articles of iron or steel

Aluminium and articles thereof Sum of others with smaller shares

Manmade staple fibres

Cambodia

Sample of list of potential new products for diversification with high import replacement

opportunities - Cambodia

(HS code 6-digit) Description, price range

Import replacementt

opportunity (U$

Million)

(551599) Woven fabrics of synth. staple fibres, n.e.s., $6-30 76.752724

(760612) Plates, sheets & strip, rect. (incl. square), of a thkns. >0.2mm, of alumin ..., $3-6 34.305922

(551529) Woven fabrics of acrylic/modacrylic staple fibres, other than that mixed ma ..., $9-29 27.514079

(730120) Welded angles, shapes & sections of iron/steel, $1-9 18.023877

(590320) Textile fabrics impregnated/coated/covered/laminated with polyurethane othe ..., $0-10 13.81723

(411510) Composition leather with a basis of leather/leather fibre, in slabs/sheets/ ..., $4-27 9.152358

(844859) Parts & accessories of the machines of 84.47/of their auxiliary mach. (excl ..., $20-179 8.203415

(900110) Optical fibres, optical fibre bundles & cables (excl. of 85.44), $0-56 6.448329

(580429) Mechanically made lace in the piece/in strips/in motifs, other than fabrics ..., $9-65 6.362488

(310590) Mineral/chem. fertilisers cont. 2/3 of the fertilising elements nitrogen, p ..., $0-0 4.876296

(700529) Float glass & surface ground/polished glass, non-wired (excl. of 7005.10), ..., $4-7 3.817506

(854790) Insulating fittings for electrical machines/appls./equip.(excl. of 85.46, 8 ..., $0-10 3.662182

(520419) Cotton sewing thread, not put up for retail sale (excl. of 5204.11), $3-26 3.629976

(580631) Narrow woven fabrics (excl. of 5806.10 & 5806.20), other than gds. of 58.07 ..., $10-37 3.070819

(390421) Poly(vinyl chloride), non-plasticised, in primary forms (excl. of 3904.10), $1-2 2.60176

(721070) Flat-rolled prods. of iron/non-alloy steel, of a width of 600mm/more, paint ..., $0-1 2.379834

(281511) Sodium hydroxide (caustic soda), solid, $0-3 2.348977

(691090) Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water clos ..., $45-45 1.870276

(843710) Machines for cleaning/sorting/grading seed/grain/dried leguminous vegetable ..., $5047-30750 1.868753

(560129) Wadding; oth. arts. of wadding other than of cotton/man-made fibres, $3-13 1.840974

(730820) Towers & lattice masts of iron/steel, $2-8 1.836965

(853530) Isolating switches & make-&-break switches, for a voltage >1000V, $14-59 1.813044

(740710) Bars, rods & profiles, of ref. copper, $0-7 1.809495

(845150) Machines for reeling/unreeling/folding/cutting/pinking textile fabrics, $5600-31311 1.726952

(210112) Preparations with a basis of extracts/essences/concs. of coffee/with a basi ..., $3-12 1.713437

(480255) Paper & paperboard, not cont. fibres obt. by a mech./chemi-mech. process... ..., $0-0 1.635419

(731823) Rivets of iron/steel, $4-22 1.616533

(560122) Wadding; oth. arts. of wadding, of man-made fibres, $0-5 1.581045


Role of Government

AFG

ALB

DZA

ARG

ARM

ABW

AUS

AUT

AZE

BHS

BHR

BRB

BLR

BEL

BLZBMUBTN

BOL

BIH

BWA

BRA

BGR

BFABDI

KHM

CMRCAN

CPV

CHL

CHN

COL

CRI

CIV

HRV

CYPCZE

DNK

DMA

DOM

ECU EGY

SLV

EST

ETH

FIN

FRA

PYF

GEO

DEU

GHA

GRC

GTM

GUY

HKG

HUN

ISL

IND

IRN

IRL

ISR

ITA

JAM

JPN

JOR

KEN

KGZ

LVA

LBN

LTU

LUX

MAC

MDG

MWI

MYS

MDVMLI

MLT

MRT

MUS

MEX

MNE

MAR

MOZ

NPL

NLD

NCL

NZL

NIC

NER

NGA

NOR

OMN

PAK

PAN

PRY

PER

PHL

POLPRT

QATKOR

MDA

ROU

RUS

VCTWSM

SAU

SEN

SRB

SGP

SVK

SVN

ZAF

ESP

LKA

SUR

SWE

CHE THA

TGO

TON

TTO

TUN

TUR

UGA

UKR

GBR

TZA

USA

VEN

ZMB

ZWE

010

20

30

40

50

60

70

80

90

10

0

Sha

re o

f im

po

rt r

ep

lace

men

t op

po

rtu

nitie

s w

ith

ab

ove

avera

ge

co

mple

xity (

%)

0 10 20 30 40 50 60 70 80 90 100Share of export oportunities withabove average complexity (%)

Laissez-faire: import substitution

Strategic: exports

Strategic: import substitution

Laissez-faire: exports

Laissez-faire

Strategic


Need to balance the short-term gains from exploiting

their current comparative advantages in low-skill

industries with the long-term need to foster new

economic activities

Reduce their reliance on a few labour-intensive

manufactures and diversify

Build productive capacities by diversifying economic

structure beyond existing range of products in

favour of complex and high-value adding products

Combined efforts of a development State and the

private sector with a supportive role played by

development partners to strategically identify a

diversification path

Thank you

WWW.UNESCAP.ORGClovis Freire

([email protected])

building productive capacity in the ldcs - un escap unescap - clovis freire.pdf · 140 150 0 2,000...

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