Structural Transformation in Small Countries: Strategies for Growth and Competitiveness

1. Fostering Structural Change and Enhancing Competitiveness in Small Countries Ludovico ALCORTA Director Research, 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

3. Economic diversification pays

4. Industry as engine of growth

5. Pattern of Structural Transformation … .. 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…

6. … inside manufacturing …

7. But size matters!

8. 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.

9. Where are (selected) SIDS?

10. Priorities for growth (1mn) 10

11. 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

12. Priorities for employment (1mn)

13. 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

14. Priorities for export (1mn)

15. 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)

16. Priorities for growth (5mn) 16

17. 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

18. Priorities for employment (5mn)

19. 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

20. Priorities for export (5mn)

21. 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

22. Thank You!