[PDF] - Based on: MPDD Working Paper WP/12/04: Strategies for Structural PDF Document

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Strategies for Structural Transformation in Countries in South and South-West Asia

Bangkok, 6 September 2012

Clovis Freire Economic Affairs Officer Macroeconomic Policy and Development Division (MPDD) Economic and Social Commission for Asia and the Pacific (ESCAP)

Based on:

MPDD Working Paper WP/12/04:

Strategies for Structural Transformation in Countries in South and South-West Asia

ESCAP Expert Group Meeting on

Inclusive Development and Regional Cooperation in South and South-West Asia, held in New Delhi, 30-31 July 2012

SSWA: Afghanistan, Bangladesh,

Bhutan, India, Iran (Islamic Republic of), Maldives, Nepal, Pakistan, Sri Lanka, and Turkey

Note: references are listed in the in

the paper

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Content

Introduction – structural transformation in

SSWA

Development, diversification and

productive capacities

Methodology and data
Opportunities for diversification
The role of the State

SSW A - Little progress in structural transform ation in the past 4 0 years

Source: Author based on data from the World Bank.

Share of South and South-West subregion on global production, trade and technology (percentage)

Indicator 1970 1980 1990 2000 2008 2009 2010 Population 21.31 22.41 23.84 25.09 25.80 25.87 25.95 Rural population 26.53 27.85 30.15 32.66 34.62 34.84 35.06 GDP 4.27 3.83 3.10 3.09 4.29 4.59 4.48 Manufacturing, value added 3.68 2.86 2.91 2.78 3.74 4.00 4.49 High-technology exports

0.17

0.29 0.56 0.83 0.76 Receipts of royalty and license fees

0.01

0.10 0.10 0.11 0.07 Scientific and technical journal articles

2.23

2.44 4.44 4.66

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Developm ent is associated w ith diversification

( I mbs and Wacziarg, 2003; Carrere et all, 2007; ESCAP, 2011)

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

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 (Millions US$) Diversification (number of products exported)

More diversified countries face low er com petition

(ESCAP, 2011; Hausmann and Hidalgo, 2010)

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

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Theoretical framework

(Hausmann and Hidalgo, 2010)

Products require

specific combinations

f capabilities to be

produced

Countries have some

capabilities but not

thers
Countries will produce

goods as long as they have all the required capabilities

Source: Hidalgo and Hausmann (2009)

Method of reflections

Hidalgo and Hausmann (2009). The building blocks of economic complexity.

Source: Hidalgo and Hausmann (2009)

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Product complexity

2 4 6 8 2 4 6 8 2 4 6 8

4
2

2

Maldives Bangladesh Japan Percent Product complexity (global average=0, sd=1)

Abdon and others (2010): Major exporters of more complex products are high-income countries and major exporters of less complex products are low-income countries ESCAP (2012): Rich countries export products with a wide range

f complexity

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

Product complexity by industry

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Food and live animals

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Beverages and tobacco

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Crude materials, inedible, except fuels

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Mineral fuels, lubricants and related materials

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Animal and vegetable oils, fats and waxes

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Chemicals and related products

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Manufactured goods classified chiefly by materials

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Machinery and transport equipment

2 4 6 8 10 12 Percent

4
3
2
1

1 2 3 4 How common is the product-mix (Number of countries that export the product)

Miscellaneous manufactured articles Source: Freire, 2012.

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Path dependency

C. A. Hidalgo, B.

Klinger,A.-L. Barabási,R. Hausmann (2007). The Product Space Conditions the Development

f Nations.

Source: Hidalgo, C.A., and others (2007)

What a country produces today affects what it will be able to produce tomorrow

Source: ESCAP (2011).

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Pakistan

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

1990 2000 2009

Lin (2012), with Celestin Monga
Six-step procedure to identify

and facilitate growth

Governments in developing

countries to “identify the list of tradable goods and services that have been produced for about 20 years in dynamically growing countries with similar endowment structures and a per capita income that is about 100% higher than their own.”

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Hausmann (2012)
better method to identify the

potential industries for diversification is by using the product space and measures of product complexity.

MPDD WP 12/01 uses similar

method to identify potential products for diversification in least developed countries taking into consideration the higher export

pportunities.

Methodology identify the

pportunities for countries in SSW A
Identify the products that are more

complex and that are nearby in the product space to the existing product-mix

f the countries
Calculate product complexity using Method of

reflections

Map the structure of the product space
Analyze price incentives (export, import

substitution)

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Data

Trade data

disaggregated at 6-digit level of HS 2002

Products are also

differentiated based on their unit value

43,293 products

in 2010

Source: Author based on data from COMTRADE.

code = 6-digit (HS) + 1digit (quantity unit code) + 1 digit (unit value range)

Map of potential new products

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

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Map of potential new products

Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE). 20 23 6 8 16 26 24 8 25 8 9 25 20 7 20 7 21 25 22 18 24 5 14 18 21 10 23 8 13 24 18 23 6 7 24 22 23 26 8 6 14 23 23 9 30 7 8 23 25 9 26 8 8 24 21 20 21 11 8 19 Afghanistan Bangladesh Bhutan India Iran (Islamic Republic of) Maldives Nepal Pakistan Sri Lanka Turkey

BASE METALS CHEMICALS MACHINERY & ELECTRICAL EQUIP. MISCELLANEOUS MANUFACTURING OPTICAL, PHOTO, WATCHES, MUSICAL INSTR. PLASTIC & RUBBER TEXTILES OTHER

Top five industries w ith higher percentage of potential new products

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

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Dem and Effects

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

Dem and Effects

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

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Dem and Effects

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

Dem and Effects

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

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Dem and Effects

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

The Role of Governm ent

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Facilitate the creation of new private sector activities that increase the productive capacity of the economy by supporting of both the emulation and innovation strategies. Balance depends on the level of diversification.

Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE). AFG BGD BTN IND IRN MDV NPL PAK LKA TUR

500 1,000 1,500 2,000 2,500 5,000 10,000 15,000 20,000

Number of existing products

Number of potential new products (above 80% probability)

Percentage of new products w ith above country’s average product com plexity

Source: Author based on data from the United Nations Commodity Trade Statistics Database (COMTRADE). AFG BGD BTN IND IRN MDV NPL PAK LKA TUR

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Number of existing products

Percentage of potential new products with above country's average complexity

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

TUR LKA PAK NPL MDV IRN IND BTN BGD AFG

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Number of existing products

Share of export opportunities of potential new products with above country's average complexity

Effect of im port substitution opportunities

n the incentives for diversification

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

AFG BTN IND IRN MDV NPL PAK LKA TUR

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

Number of existing products

Share of import substitution opportunities of potential new products with above country's average complexity

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The role of the State

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

AFG BTN IND IRN MDV NPL PAK LKA TUR

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of export opportunities of potential new products with above country's average complexity Share of import substitution opportunities of potential new products with above country's average complexity (1) Import substitution: Laissez faire Export: strategic diversification (3) Import substitution: strategic diversification Export: strategic diversification (2) Import substitution: Laissez faire Export: Laissez faire (4) Import substitution: strategic diversification Export: Laissez faire

Thank you W W W .UNESCAP.ORG

Clovis Freire ( freire@un.org)