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UNCTAD. Economic Resilience Conference Islands and Small States Institute, Malta: 23-25 April 2007. UNCTAD's approach to developing productive capacities in LDCs and SIDS. Habib Ouane, Director, Division for Africa, Least Developed Countries and Special Programmes UNCTAD. - PowerPoint PPT Presentation
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Habib Ouane,Habib Ouane,Director, Division for Africa,Director, Division for Africa,
Least Developed Countries and Special ProgrammesLeast Developed Countries and Special ProgrammesUNCTADUNCTAD
http://www.unctad.org/ UNCTAD
Economic Resilience ConferenceEconomic Resilience Conference
Islands and Small States Institute,Islands and Small States Institute,
Malta: 23-25 April 2007Malta: 23-25 April 2007
UNCTAD's approach toUNCTAD's approach todeveloping productive capacitiesdeveloping productive capacities
in LDCs and SIDSin LDCs and SIDS
UNCTADhttp://www.unctad.org/
Economic resilience and Economic resilience and vulnerability of SIDSvulnerability of SIDS
United Nations: UNDESA, UNCTAD United Nations: UNDESA, UNCTAD work for over 20 yearswork for over 20 years
Barbados Programme of Action 1994Barbados Programme of Action 1994
Mauritius Strategy 2005Mauritius Strategy 2005
Malta International Workshops Malta International Workshops 2004-20072004-2007
Conceptual and policy work in international fora on SIDS
UNCTADhttp://www.unctad.org/
Outline of PresentationOutline of Presentation
Economic resilience and Economic resilience and vulnerability of SIDS and the vulnerability of SIDS and the vision of UNCTADvision of UNCTAD
Developing productive Developing productive capacitiescapacities
International policy initiativesInternational policy initiatives
UNCTADhttp://www.unctad.org/
Economic resilience and Economic resilience and vulnerability of SIDSvulnerability of SIDS
small size => scarce natural and human resources, small size => scarce natural and human resources, diseconomies of scalediseconomies of scale
remoteness from large markets => high transport costsremoteness from large markets => high transport costs
high degree of openness high degree of openness
• dependence on strategic importsdependence on strategic imports
• strong export concentrationstrong export concentration
susceptibility to natural disasters exacerbated by susceptibility to natural disasters exacerbated by climate change and sea level riseclimate change and sea level rise
Vulnerability of SIDS: Exposure to adverse external shocks beyond countries' domestic control and structural handicaps:
Resilience: countries' ability to economically cope with its inherent vulnerability
UNCTADhttp://www.unctad.org/
The vision of UNCTADThe vision of UNCTAD
Singapore paradox: inherently economically vulnerable small state that manages to cope with its inherent vulnerability through deliberate economic development policies
=> remains the exception=> remains the exception
Key to resilience-building => Developing productive capacities
UNCTADhttp://www.unctad.org/
The vision of UNCTADThe vision of UNCTAD
=> devoted to LDCs, but most elements and recommendations also valid for most SIDS:
common economic features between SIDS and LDCs
10 SIDS are LDCs
The Least Developed Countries Report 2006:Developing Productive Capacities
UNCTADhttp://www.unctad.org/
The vision of UNCTADThe vision of UNCTAD
UNCTAD8
UNCTAD
http://www.unctad.org/
1.1. low incomelow income=> under $900 per capita=> under $900 per capita
2.2. weak human assetsweak human assets=> measured through a composite Human => measured through a composite Human Assets Index Assets Index
3.3. economic vulnerabilityeconomic vulnerability=> measured through a composite Economic => measured through a composite Economic Vulnerability Index, composed of:Vulnerability Index, composed of:
a.a. instability of agricultural productioninstability of agricultural production
b.b. instability of exports of goods and servicesinstability of exports of goods and services
c.c. diversification from traditional economic diversification from traditional economic activitiesactivities
d.d. merchandise export concentrationmerchandise export concentration
e.e. economic smallness economic smallness
Economic characteristics of LDCs
The vision of UNCTADThe vision of UNCTAD
UNCTAD9
UNCTAD
What are productive capacities?
http://www.unctad.org/
1.1. Productive resources – natural resources, Productive resources – natural resources, human resources, financial capital, human resources, financial capital, physical capital.physical capital.
2.2. Entrepreneurial capabilities – core Entrepreneurial capabilities – core competences; technological capabilities.competences; technological capabilities.
3.3. Production linkages – exchange of goods Production linkages – exchange of goods and services; flows of information; and services; flows of information; human and financial resource flows – human and financial resource flows – between sectors and between between sectors and between enterprises.enterprises.
Developing productive capacities: Developing productive capacities: ConceptConcept
UNCTAD10
UNCTAD
What is required to develop productive capacities?
http://www.unctad.org/
Capital accumulationCapital accumulation
Structural changeStructural change
Technological learningTechnological learning
Developing productive capacities: Developing productive capacities: Driving processesDriving processes
UNCTAD11
UNCTAD
http://www.unctad.org/
Institutions: Institutions: Weak domestic private sector and domestic financial and knowledge systems.
Demand Demand constraints.
Weak physical infrastructure. infrastructure.
Developing productive capacities: Developing productive capacities: ConstraintsConstraints
What are the key constraints and policy priorities?
These are country-specific but the Report identifies three broad areas which are likely to applicable in most countries:
UNCTAD12
UNCTAD
http://www.unctad.org/
Weak development of formal sector SMEs, particularly medium-sized domestic enterprises, as typically informal sector enterprises do not develop into formal sector firms and small firms do not grow into large firms.
Investment climate reforms (to reduce red tape and costs of doing business) are not enough in a context of radical firm and structural heterogeneity.
Need to foster the development of domestic medium-sized firms and production linkages
Need to develop the domestic financial system
Disarticulation between traditional and modern knowledge systems; modern knowledge systems (universities, national research institutes, etc.) are not functioning as an integrated system, not demand-driven, not well-integrated internationally.
Develop national technology learning strategies to increase access to/effective use of foreign technology.
Developing productive capacities: Developing productive capacities: InstitutionsInstitutions
UNCTAD13
UNCTAD
http://www.unctad.org/
Need to address dynamics of domestic demand as well as international competitiveness and access to international markets.
Sluggish domestic demand must be identified as a central deficiency of the investment climate.
The demand-side contribution of exports has been seriously reduced by declining terms of trade and currecy depreciation.
For exports – focus on upgrading the export structure towards more dynamic products.
Developing productive capacities: Developing productive capacities: DemandDemand
UNCTAD14
UNCTAD
http://www.unctad.org/
Trade-related infrastructure alone is not enough (export growth but not economy-wide poverty reduction)
Best approach is a "joined-up" approach to infrastructure investment three elements:
1. Rural infrastructure (vital for agrarian commercialization and prodcutiviy growth and development of off-farm activities).
2. Large-scale national infrastructure (enables structural transformation, exercise of entrpreneurial capabilities and developemnt of production linakges).
3. Cross-border infrastructure (for regional trade)
Closing the electricity divide is as significant for economic growth and poverty reduction as closing the digital divide.
Developing productive capacities: Developing productive capacities: InfrastructureInfrastructure
UNCTAD15
UNCTAD
http://www.unctad.org/
Developing productive capacities: Developing productive capacities: Conclusion: The paradigm shift required Conclusion: The paradigm shift required
TO
Production
Employment
Ingredients
Supply and Demand
Tradables and Non-tradables
Private Domestic Investment plus FDI
Development State
Focusing on the development and utilization of productive capacities requires a paradigm shift in national and international policy
FROM
Integration/Exchange
Consumption
Framework
Supply-side
Tradables
FDI
Welfare State
UNCTAD16
UNCTAD
http://www.unctad.org/
Increase share of aid for in-country programmes and direct support for programmes run by LDC governments.
Re-balance the sectoral composition of aid towards production.
Advance beyond trade preferences.
International policy innovation to support the development and full utilization of productive capacities in the LDCs.
International initiatives International initiatives Recommendaitons for actionRecommendaitons for action
in favour of LDCsin favour of LDCs
UNCTAD17
UNCTAD
http://www.unctad.org/
Support in formulating national strategies to secure "smooth transition" modalities in anticipation of the loss of concessionary treatment due to likely graduation from the LDC category => Cape Verde, Maldives, Samoa, Vanuatu
Technical cooperation on trade-related and investment-related policy matters => Cape Verde, São Tomé and Príncipe, St. Lucia, Samoa, Papua New Guinea, Vanuatu
Ad Hoc Expert Group Meeting on Structurally Weak, Vulnerable and Small Economies (Geneva, 25 June 2007)
International initiatives:International initiatives:UNCTAD's work on SIDSUNCTAD's work on SIDSand vulnerable economiesand vulnerable economies
UNCTAD18
UNCTAD
http://www.unctad.org/
Thank youThank you