MPDD Seminar Series 6 October 2011, ESCAP Productive Capacities in Asia and the Pacific

Transcription

1 MPDD Seminar Series 6 October 2011, ESCAP Productive Capacities in Asia and the Pacific Clovis Freire Economic Affairs Officer Macroeconomic Policy and Development Division (MPDD) Economic and Social Commission for Asia and the Pacific (ESCAP)

2 Main Messages 1. Poorer countries need to build productive capacities to benefit from region s dynamism, by producing new and more sophisticated goods 2. Need of strategic diversification through the combined efforts of the State and the private sector with a supportive role played by development partners

3 Outline Stylized facts Taking stock of the productive capacity The experience of transformers of productive capacity and LDC graduating countries Intraregional trade as training ground for increasing productive capacity Strategy and policy framework

4 Definitions Productive Capacities Set of capabilities available in a country to produce and market its total output (ESCAP, 2011) Combination of productive resources, entrepreneurial capabilities and production linkages which together determine the capacity of a country to produce a progressively wider range of goods and services and enable it to grow and develop (UNCTAD, 2006)

5 Stylized facts Economic development is associated with diversification, not specialization Imbs and Wacziarg 2003, Klinger and Lederman 2004, Carrere et all 2007

6 Stylized facts Simultaneous diversification within and across product categories

7 Stylized facts As countries diversify, they produce more exclusive products

8 Stylized facts Increasing diversification and competition..it takes all the running you can do, to keep in the same place (Lewis Carroll)

9 Stylized facts What a country produces matters for further diversification (Hausmann and Klinger 2006) Products are connected to each other based on the likelihood of both being exported by a country

10 Bangladesh

11 Demand side of the product space The higher the mountain, the higher the demand Firms looking to branch out Closely related product may offer lower incentives Combined efforts of the state and private sector to jump from A to C

12 Measuring productive capacity Bipartite network as result of tripartite network

13 Methodology Empirical approach Method of reflections - methodology proposed by Hidalgo and Hausmann (2009) products require specific combinations of capabilities to be produced countries have some capabilities but not others countries will produce goods as long as they have all the required capabilities (Hausmann and Hidalgo, 2010)

14 Measuring productive capacity Productive capacity index function of diversification of the country and the commonality of its product-mix Assumptions The higher the diversification, the higher the number of productive capacity The higher the commonality of the products, the lower the productive capacity Measures of diversification (method of reflections) K0 number of products that the country produces K1 number of countries that produces the product K2 - average number of products produced by the countries that produce similar product-mix K3 average number of countries that produce the products produced by countries that produce similar product-mix Continues. PCAP=(K0*K2*..*K18)/(K1*K3* *K19)

15 Data Trade data disaggregated at 5-digit level of the Standard International Trade Classification (SITC) rev.2 ( ) Diversification across-product: the number of different categories of products that a country exports Products are also differentiated based on their unit value Diversification within-product: Number of products of different price per category of product

16 Association between productive capacity and GDP 31 USA 29 CHN JPN ln GDP PLW FSM MHL KIR BTN SLB WSM VUT TON TKM PNG TJK MDV LAO KGZ MNGFJI UZB AZE KHM BGD KAZ MAC NPL GEO IRN PAK LKA KOR IND AUS RUS TUR IDN HKG THA MYS SGP PHL VNM NZL y = 0.071x x countries, R 2 = ln PCAP

17 Association between productive capacity and GDP controlling for population size 30 JPN CHN USA ln GDP MAC BGD LKA AUS TUR HKG IDN IRN THA SGP MYS PAK PHL NZL VNM IND MDV BTN SLB WSM VUT TON PNG LAO FJI MNG KHM NPL y = x - 2E-06 R 2 = countries Predicted

18 Productive capacity Fat tail distribution - USA has the higher productive capacity - EU15 also high - ESCAP, LAC, Sub- Saharan Africa are below world s average ESCAP Iran, Islamic Rep. Sri Lanka LAC Korea, Dem. Rep. Bangladesh Nepal Macao SAR, China Afghanistan Georgia Kazakhstan Sub-Saharan Africa Cambodia Fiji Uzbekistan Myanmar Armenia Azerbaijan Lao PDR Kyrgyzstan Mongolia Brunei Darussalam Papua New Guinea New Caledonia Tajikistan American Samoa French Polynesia Maldives Guam Turkmenistan Nauru Niue Bhutan Solomon Islands Samoa Cook Islands Vanuatu Tonga Timor-Leste Micronesia, Fed. Sts. Northern Mariana Islands Marshall Islands Kiribati Tuvalu Palau Australia China Eu15 India Korea, Rep. Singapore Hong Kong SAR, China Thailand Turkey Russian Federation Malaysia New Zealand Indonesia Philippines Viet Nam Pakistan Japan United States Productive Capacity (Distance to the mean)

19 LDCs have lagged behind Productive capacity index USA Cambodia, Myanmar, Lao PDR, Maldives, Solomon Islands, Samoa, Bhutan, Vanuatu, Timor-Leste, Kiribati, Tuvalu Australia EU15 Japan China India Republic of Korea Thailand Malaysia Indonesia Philippines Viet Nam world's average Bangladesh Nepal

20 Convergence in the middle, divergence in the rest 7.0 y=x Productive capacity in 2009 (Distance to the mean) CHN IND KOR BRA ZAF FIN SGP HKG THA NOR TUR MYS IRL NZL IDN PHL ESP AUS CAN AUT DNK BEL SWE NLD ITA FRA CHE JPN DEU GBR USA Productive capacity in 1984 (Distance to the mean)

21 0.3 Few countries transformed themselves when stating from lower levels of productive capacity Lithuania Viet Nam Productive capacity (distance to the mean) Estonia Latvia -0.5 LDCs in Asia-Pacific

22 Viet Nam

23 Product complexity (K5) function of the diversification of countries that produce the product and the ubiquity of their productmix Rich countries export products of a large range of complexity Percent Percent Japan How common is the product-mix (Number of countries that export the product) Bangladesh How common is the product-mix (Number of countries that export the product)

24 Complexity of Viet Nam s product mix,

25 Percent Product complexity by industry Food and live animals How common is the product-mix (Number of countries that export the product) Percent Beverages and tobacco How common is the product-mix (Number of countries that export the product) Percent Crude materials, inedible, except fuels How common is the product-mix (Number of countries that export the product) Percent Mineral fuels, lubricants and related materials How common is the product-mix (Number of countries that export the product) Percent Animal and vegetable oils, fats and waxes How common is the product-mix (Number of countries that export the product) Percent Chemicals and related products How common is the product-mix (Number of countries that export the product) Percent Manufactured goods classified chiefly by materials How common is the product-mix (Number of countries that export the product) Percent Machinery and transport equipment How common is the product-mix (Number of countries that export the product) Percent Miscellaneous manufactured articles How common is the product-mix (Number of countries that export the product)

26 Diversification required to graduate from least developed country status, 2009

27 The evolution of productive capacity of countries that have graduated ( ) Productive capacity (distance to the mean) Cape Verde Botswana LDCs in Asia-Pacific Less populated LDCs in Asia- Pacific

28 Intraregional trade and the productive capacity Directed only to Asia-Pacific Directed only to non Asia-Pacific Directed both to Asia-Pacific and Non-Asia Pacific

29 Asia-Pacific intraregional trade as training ground for countries to increase their productive capacities Niue New Zealand Kazakhstan Bangladesh Mongolia Guam Nepal Cambodia Turkey Tonga Micronesia, Fed. Sts. Kyrgyzstan Philippines Brunei Darussalam Turkmenistan Malaysia Singapore Tuvalu Hong Kong SAR, China American Samoa Russian Federation Pakistan Viet Nam Indonesia Nauru Australia Bhutan Tajikistan New Caledonia Thailand Samoa Iran, Islamic Rep. Papua New Guinea Korea, Rep. Maldives Sri Lanka Lao PDR Palau Fiji Macao SAR, China Marshall Islands Azerbaijan Uzbekistan Myanmar Solomon Islands Korea, Dem. Rep. Kiribati French Polynesia Japan China India Georgia Armenia Cook Islands Vanuatu Afghanistan Timor-Leste Northern Mariana Islands Difference between average product complexity of new products directed to inside and to outside the region (2009 trade data - unit of measurement is the standard deviation of the distribution of product complexity)

30 Potential new products related to those already produced by Asia-Pacific least developed countries

31 Strategy for Increasing Productive Capacities in the Least Developed Countries

32 Policy Agenda NATIONAL POLICY FRAMEWORK Stable investment-friendly macroeconomic policy framework Industrial policy and infrastructure development Domestic resource mobilization Technological upgrading SUPPORTIVE GLOBAL PARTNERSHIP Financing for development: FDI and ODA Market access and aid for trade South-South, triangular and regional cooperation

33 Thank you Clovis Freire