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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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Asian landlocked developing countries

The Asian LLDCs form a heterogeneous group of countries in terms of economic size and stage of socioeconomic development. The group comprises less populous countries, such as Bhutan with 754,000 people, and those with mid-sized populations, such as Afghanistan (30 million), Nepal (27 million) and Uzbekistan (29 million) (see table 1). The size of the economies also varies remarkably within the group, from $1.8 billion in Bhutan to $202 billion in Kazakhstan. Afghanistan, Kyrgyzstan, the Lao People’s Democratic Republic, Nepal and Tajikistan have lower income per capita, below $3,000 in PPP terms, while Armenia ($7,374), Azerbaijan ($8,860) and Kazakhstan ($12,360) are middle-income countries. More than half the populations of those three countries and Mongolia live in urban areas. The other eight countries have a larger share of rural population, varying from 63% in Bhutan and the Lao People’s Democratic Republic to 76% in Afghanistan. Life expectancy at birth exceeds 60 years of age for all Asian LLDCs, ranging from 61 years in Afghanistan to 75 years in Armenia. The adult literacy rate is high, more than 99% of the population aged 15 and older for all countries for which data are available, except in Nepal (54.7%). Health indicators, however, are more heterogeneous, as indicated by the under-5 mortality rate measured by the number of deaths of such young children per 1,000 live births, which varies from 98 in Afghanistan to 16 in Armenia.

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