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Trade

Economic diversification: A priority for action, now more than ever

Cecile Fruman's picture

The global economy is stagnating, and uncertainty about its future is rising. These trends weigh heavily on countries that depend on the production and export of a small range of products, or that sell products in only a few overseas markets.  Prices of the minerals and other basic commodities that dominate the exports of many poor countries have also declined sharply. All of this points up the need for diversification strategies that can deliver sustained, job intensive and inclusive growth.

The World Bank Group’s Trade & Competitiveness Global Practice (T&C), a joint practice of the World Bank and International Finance Corporation (IFC), is working with a growing roster of client countries eager to achieve greater economic diversification. This is a worthy goal regardless of economic conditions, but especially so now, as developing countries with sector-dependent economies face mounting pressures.

Chile is an example of a diversified economy, exporting more than 2,800 distinct products to more than 120 different countries. Zambia, a country similarly endowed with copper resources, exports just over 700 products — one-fourth of Chile’s export basket — and these go to just 80 countries. Other low-income countries have similarly limited diversified economies. The Lao People’s Democratic Republic and Malawi, for example, export around 550 and 310 products, respectively. Larger countries that export oil, such as Nigeria (780 products) and Kazakhstan (540 products), have failed to substantially expand the range of products they produce and export.


AJG Simoes, CA Hidalgo. The Economic Complexity Observatory: An Analytical Tool for Understanding the Dynamics of Economic Development. Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence. (2011)
http://atlas.media.mit.edu/en/profile/country/chl/#Exports

While the sluggish global economy is creating economic problems for traditional exports, other economic trends offer new routes and opportunities for poor countries to diversify. The trend toward the spatial splitting up of production across wide geographic areas, and the emergence and growth of regional and global value chains, offer new ways for developing countries to export tasks, services and other activities. Value chains offer developing countries a path out of the trap of having to specialize in whole industries, with all of the cost and risk that such a strategy entails.

From open data to a collaborative community – looking ahead with TCdata360

Prasanna Lal Das's picture
TCdata360: Your Source for Open Trade and Competitiveness Data


It’s now been about a month since the Trade & Competitiveness Global Practice of the World Bank Group launched TCdata360, our new platform for open trade and competitiveness data from the Bank and external sources. The initial response has been overwhelmingly positive, and it has included a mixture of the anticipated and the unexpected.

Egypt has been the most popular country page during this period, the indicator on the number of days to start a business has been the second most visited page (though it seems to be ceding its spot to the page on venture capital availability) and we have been struck by the number of people that have searched for information on countries that have laws against sexual harassment in the work place (it’s steadily been one of the top 10 most visited pages on the site). Our data stories have attracted attention as well, especially in social media and there has been consistent interest in the API.

The question now is: Where should we take TCdata360 from here? How does a platform grow after the initial excitement around its release has dissipated? How can you or your organization contribute to the growth of the platform?

Here are a few of our ideas at the moment:
 
  • More data – we have a growing inventory of new datasets.
  • Better user experience – we are tweaking several things, while keeping what people like (which is most of the site).
  • More analytics – we have experimented with Datascoper, a tool to uncover hidden patterns in data, but work remains to make these tools more usable and meaningful.
  • Better engagement with our users – we want to show off your work on the site. Tell us about the insightful work you do using our data; we will share it with all our users. And we are all ears about your ideas for other ways to collaborate.
  • Continue contributing to the open data community – we plan to offer data literacy and other support; stay tuned for greater emphasis on applied data; we are working to make this and other data truly useful in an applied sense to governments, the private sector, and others.
  • Better linkages with the open source world – we built the site on open source and want to share our work with the community; we are constantly looking for tools that we can either integrate into the site or that we should be using. Tell us about them.


Help us improve our list – write us at [email protected] or tweet us at #TCdata360.

Things to do with Trade and Competitiveness Data… thank you API

Alberto Sanchez Rodelgo's picture

Who are Spain's neighbors? Is Canada closer to Spain than Portugal? What about Estonia or Greece? The answer? Depends on the data you are looking at!

Earlier this week I crunched data based on a selected list of indicators from the new Open Trade and Competitiveness platform from the World Bank (TCdata360) and found some interesting trends[1]. In 2009 Spain was closer to economies like Estonia, Belgium, France and Canada while 6 years later in 2015, Spain's closest neighbors were Greece and Portugal. How and when did this shift happen?

Other trends I spotted using the same data? It seems the Sub-Saharan region ranks the lowest in Ease of Doing Business, that in 2007 Israel held the record for R&D expenditure as % of GDP, while in the same year Malta topped FDI net inflows as % GDP, and that the largest annual GDP growth in the last 20 years occurred in Equatorial Guinea in 1997.

Figure 1: Dots represent values for an economy at a given point in time for years 1996 to 2016 overlaying their box-plot distributions. Colors correspond to geographical regions.

Trade has been a global force for less poverty and higher incomes

Ana Revenga's picture

On a grassy coastal plain near Sendai, Japan, stands a symbol of survival.

The four-story school house was the tallest building in the neighborhood of 980 homes, where children once played and went to school but now mostly consists of the remnants of concrete housing foundations. In Japan’s March 11, 2011 disaster, more than 300 people made it onto the roof of Arahama Elementary and survived the massive tsunami that hit Japan’s shores. School and community evacuation drills and preparedness saved lives that day, Principal Takao Kawamura said.

The school’s experience resonated at the Sendai Dialogue on October 10—where leaders, disaster and development experts debated how to better prepare for disasters in an increasingly risky world, where disasters have doubled in 30 years.

Looping in local suppliers rather than forcing out international firms

Anabel Gonzalez's picture



An instructor at the Savar EPZ training center in Dhaka, Bangladesh, helps young women being trained to make shirts. Photo Credit: © Dominic Chavez/The World Bank


Increasing economic prosperity for developing countries is related not only to rising trade, but also – and more important – to transforming the traditional composition of what they produce and export. In the world today, many developing countries strive to diversify away from exporting commodities toward higher-value-added goods and services.

The evolution of trade and investment flows over the last three decades shows that foreign direct investment (FDI) can be a powerful driver of exports, a creator of well-paid new jobs and a crucial source of financing. More important, FDI may become a very rapid and effective engine to promote the transfer of technology, know-how and new business practices, helping to raise productivity and setting a country on the course of convergence. This is particularly the case of efficiency-seeking FDI – that is, FDI that locates productive processes in a country seeking to enhance its ability to better compete in international markets-.
 
The benefits of FDI are further leveraged when local firms can catalyze the presence of foreign investors to connect to global and regional value chains (GVCs). As a result of new international firms investing in a host country, great new opportunities arise for local enterprises to supply the inputs – be it goods or services – that their international counterparts need.

This has been the experience of Bangladesh, where local suppliers have grown in tandem with foreign investors in the garment sector. It is through linkages with international investors that local firms can gradually be lured into producing new goods and services that, until then, were not produced in the host country.  This is how economic diversification and greater value added are generated.

Multinational enterprises (MNEs) and their key partners (Tier 1 suppliers) are generally keen to source locally if a competitive local supplier can be found. However, they are also reluctant to absorb high search-and-find costs, and they will typically not invest in assisting local suppliers with upgrading efforts. Likewise, local firms are generally keen to supply to foreign firms, but are often not ready to make the necessary investments in technology and in processes to meet strict quality standards without a clear line of sight on potential payoff for such investment.

Three factors that have made Singapore a global logistics hub

Yin Yin Lam's picture

Eliminating inequality is integral to the Sustainable Development Goals , from ‘universal access’ to water, to ending poverty ‘everywhere’. Yet in a world where the politics of who gets what is increasingly polarised, leaving no-one behind is fundamentally a political project.

In a recent study with WaterAid in Nepal, for example, we found that in rural areas a combination of poverty, caste, and geography have shut the poorest fifth out of politics. While access to water has increased significantly for others, they are lagging behind.

Every city, country or district has its own political rules, most of which aren’t written down. Yet despite all this complexity, experts working on essential services like water, sanitation, health or education can avoid some common political missteps, wherever they work. Here are four most typical ones:

Searching for New, Better Data to Measure GVCs

Klaus Tilmes's picture


The history of humankind is filled with violence. People have been hurting and killing one another practically since they stood up and walked on two legs. And while each battle claims a unique call-to-arms, at the end of the day, the rallying cries are always strikingly similar. Human beings prefer to remain peaceful, except when their lives or livelihoods are threatened.


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