1

Fostering Structural Change and Enhancing

Competitiveness in Small CountriesLudovico ALCORTA

DirectorResearch, Statistics and Industrial Policy Branch

UNIDO

2

Structural Change and Industrialization

• The structural transformation of economies is profoundly interconnected with their growth and to social development– Static effect of shifting labour/capital from lower

to higher value added sectors– Dynamic effects as an outcome of capital

accumulation, division of labour, economies of scale and technological progress

– Spillover effects through backward and forward linkages

Economic diversification pays

3

Industry as engine of growth

4

Pattern of Structural Transformation …

5

.. over the last 50 years the economic structure in countries changed …

.. but since some grew faster than other the change is more visible with GDP per capita on the horizontal axis…

… inside manufacturing …

6

But size matters!

7

Structural transformation and development strategies in Small

Countries • Identification of sunrise (and sunset

manufacturing sectors …• … based on patterns specific to small

countries …• … based on analysis of economic

growth, employment and exports …• … at different income levels.

8

Where are (selected) SIDS?

9

GDP per capita (US$ 2005 PPP)

Population

Jamaica 7,083 2900000Dominican Republic 8,651 9400000Suriname 7,378 567000Samoa 3,952 195000Fiji 4,201 858000Papua New Guinea 2,363 7000000Tonga 4,315 103000Timor-Leste 1,393 1200000Cabo Verde 3,616 512000Mauritius 12,733 1260000

Priorities for growth (1mn)

1010

A few points to reflect on• Fish and vegetable oil processing will soon

exhaust their growth potential, while sugar holds a better prospect

• Manufacturing of vehicles emerges as a solid bet for small countries

• The transition to the machinery for metallurgy sector is medium-term sunrise industry, whose development ought to be nurtured

11

Priorities for employment (1mn)

12

A few points to reflect on:• There is a lasting employment generating

potential of watches (at lower income levels) and of steam generators (at higher one)

• Manufacturing of pasta maintains its (lower) employment potential across the income range

• The employment dividends of man-made fibers and motor vehicles (strong engines of growth across the income spectrum) emerges at higher income levels

13

Priorities for export (1mn)

14

A few points to reflect on• Coke oven products (at lower income

lelvels) and veg. oils (at higher ones) hold good prospects for export growth (despite their low employment and growth potential)

• The export potential of sugar manufacturing is kept across the income spectrum

• Motor vehicles combine growth and export potential (although the latter fades at higher income levels)

15

Priorities for growth (5mn)

1616

A few points to reflect on• Fish and vegetable oil processing gradually

exhaust their growth potential• Manufacturing of machinery for metallurgy

emerges as a solid bet for small countries across the income range

• The transition to tanks and containers sector is medium-term sunrise industry, whose development ought to be nurtured

17

Priorities for employment (5mn)

18

A few points to reflect on:• There is a lasting employment generating

potential of ropes/nets and finishing of textiles (not matched by equal growth potential)

• Machineries for metallurgy display their dividends for employment at lower income levels than for growth

• The employment dividends of primary plastic and synthetic rubber are solid and increase as countries grow richer

19

Priorities for export (5mn)

20

A few points to reflect on• The potential for vegetable oils is stronger

in terms of exports that overall growth dynamics

• Furnaces and ceramic products appear to have good export potential at lower income levels, which however fades away as countries grow

• Limited overlap between the sectors with export potential and the ones that can enhance employment

21

Thank You!

22