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3/16/2015 Building productive capacities in the Asia-Pacific LDCs: the role of economic diversification HIGH-LEVEL ASIA-PACIFIC POLICY DIALOGUE ON THE IMPLEMENTION OF THE ISTANBUL PROGRAMME OF ACTION FOR THE LEAST DEVELOPED COUNTRIES FOR THE DECADE 2011-2020 4-6 March 2015 Siem Reap, Cambodia Clovis Freire Economic Affairs Officer Macroeconomic Policy and Development Division (MPDD) Economic and Social Commission for Asia and the Pacific (ESCAP) Outline Progress of Asia-Pacific LDCs in building their productive capacities Need for strategic diversification Policy recommendations to accelerate progress 1 3/16/2015 Productive capacities of Asia-Pacific LDCs have on average increased but remain low Share of Asia-Pacific LDCs in global trade and production Source: ESCAP, based on trade data from World Bank. Note: Three-year averages in the period 2005-2013. Economic diversification: Mix picture, half of Asia-Pacific LDCs have increased diversification and value addition Source: ESCAP, based on trade data from UN COMTRADE. Note: Three-year averages in the period 2005-2013. 2 3/16/2015 Progress in ICT led by mobile telephony, and less in terms of Internet connectivity (c) significantly increase access to telecommunication services and strive to provide 100 per cent access to the Internet by 2020 Source: ESCAP, based on trade data from UN COMTRADE. Note: Three-year averages in the period 2005-2013. Energy supply has increased but LDCs are still behind regional average in per capita terms (d) strive to increase total primary energy supply per capita to the same level as other developing countries (e) significantly increase the share of electricity generation through renewable energy sources by 2020 (f) enhance capacities in energy production, trade and distribution with the aim of ensuring access to energy for all by 2030 Source: ESCAP based on data from International Energy Agency (IEA) accessed at the ESCAP Online Database.. 3 3/16/2015 Transport: potential for greater use of regional transport networks • Progress in transport facilitation • Considerable efforts on improving land transport connectivity with neighbouring countries • Efforts on improving and upgrading domestic road and rail networks • Potential for greater utilization of regional transport networks through the development of intermodal facilities such as dry ports Source: ESCAP, based on trade data from UN COMTRADE. Note: Three-year averages in the period 2005-2013. Diversification is associated with higher GDP Source: ESCAP, based on trade data from UN COMTRADE. Year 2013. 4 3/16/2015 And the more diversified the economy the lower the competition for its products it faces in global markets Source: ESCAP, based on trade data from UN COMTRADE. But what a country produces today affects what it can produce tomorrow Dense network of diversification paths Example of diversification paths with limited opportunities for further diversification Source: ESCAP, based on trade data from UN COMTRADE. 5 3/16/2015 The more developed the country, the greater the complexity in terms of productive capacities required to produce Short-term gains Development $ Source: ESCAP, based on trade data from UN COMTRADE. Effect of demand: Prices of commodities and manufactures Source: ESCAP based on data from World Bank Commodity Markets, Annual world prices of commodities and indices. 6 3/16/2015 Price shifts for manufactures and commodities have created incentives away from diversification Boom is not unprecedented and is driven by the rise of Asia 7 3/16/2015 Potential new sectors for diversification with higher share of export opportunities Source: ESCAP, based on trade data from UN COMTRADE. Trade links with European and North American markets continue advantageous. Asian-Pacific, at the same time, offer about one quarter of the export opportunities for potential new sectors Source: ESCAP, based on trade data from UN COMTRADE. 8 3/16/2015 Within the region, East Asia and South-East Asia presents over 70% of the export opportunities Source: ESCAP, based on trade data from UN COMTRADE. Policy Recommendations A stable, investment-friendly and competitive macroeconomic policy framework Industrial policy Domestic resource mobilization • Exchange rate policy • Favorable credit conditions • Macroeconomic stability • • • • Infant industry Infrastructure development Fiscal policy FDI • Finance in support of private investment for new sectors • Domestic supply of long-term capital • Tax reform 9 3/16/2015 Thank you www. unescap.org 10