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Economic diversification in Asian LLDCs

Prospects and challenges

image of Economic diversification in Asian LLDCs
This report on Economic Diversification of Asian LLDCs: Challenges and Prospects will address economic diversification and its impact on structural transformation, building productive capacities, job creation and enhancing competitiveness of LLDCs in Asia. The primary objective of the report is to discuss the prospects and challenges for economic diversification in Asian LLDCs. The panel will discuss examples of concrete opportunities for economic diversification in these countries that would contribute to structural transformation, building productive capacities and job creation. The panel will also discuss the challenges posed by high and volatile commodity prices, which create incentives away from diversification. The 12 Asian landlocked developing countries (LLDCs) share the common challenge of remoteness and isolation from international markets, without direct access to trade by sea, which increases substantially their trade costs. Higher costs reduce the competitiveness of the Asian LLDCs and hinder their ability to harness trade to promote their economic growth and structural transformation. They also create incentives to these countries to specialize in high bulk primary commodities with relative inelastic demand to the trade costs.

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Policy recommendations

As discussed in the previous sections, economic diversification requires strategic policies by Asian LLDCs. The implementation of such strategic diversification involves the selective promotion of new economic activities over traditional ones through the use of targeted industrial, infrastructure, trade, investment and private sector development policies. The analysis of empirical evidence, as presented in this report, can be used in the process of identification of strategic direction of diversification. It could serve as a public good that could be made available to the private sector. It reduces the cost of discovery of potential successful new economic activities by informing entrepreneurs of the new products that require productive capacities similar to those already available in the country.

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