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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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
OPPORTUNITIES FOR BUILDING PRODUCTIVE CAPACITIES
Opportunities for diversification
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
(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, $4-9 18.26171
NL
6.5
KR
3.4
EG
2.4
IN
1.2
CN
1.1 IR 1
TR
.8
TH
.2
CA
.2
PL
.2
Import replacement opportunity
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
2 3 34
4
5
5
8
1219
35
Electrical, electronic equipment Raw hides and skins (other than furskins) and leather
Optical, photo, technical, medical, etc apparatus Special woven or tufted fabric, lace, tapestry etc
Plastics and articles thereof Impregnated, coated or laminated textile fabric
Machinery & mech appliance etc Articles of iron or steel
Aluminium and articles thereof Sum of others with smaller shares
Manmade staple fibres
Cambodia
Sample of list of potential new products for diversification with high import replacement
opportunities - Cambodia
(HS code 6-digit) Description, price range
Import replacementt
opportunity (U$
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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
Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE).
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