Research focus for Phase III: Drivers of Competitiveness and Strategies for Economic Diversification for Developing Countries

Specific topics for studies under this theme include (but are not limited to) the following:

• Identifying and supporting the development of new and dynamic sectors:
  Much work remains to be done on determining products and firms with a comparative / competitive advantage, in particular in light of the changed global economic outlook and consumption patterns.
  1. Where a country already exports a product to the world but does not have a significant share in a particular market, firms may be restricted by the existence of Non-Tariff Measures or the lack of a preferential trading regime to fully reach their export potential. Policymakers can benefit from research to guide their negotiation and regulation strategies.
  2. Similarly, a high volume of imports of a product by a country suggest that there is strong demand and that economies of scale would exist if the country were able to manufacture the product themselves. One strategy in this connection is for the country to seek to attract FDI inflows for these sectors, in particular relating to innovative production using advanced technology and research & development.
• Dynamics of firm, especially SMEs’ entry and exit and their impact on job creation:
  The importance of firm entry and exit as determinants of market performance is well recognized. Despite this wide recognition, the actual patterns of firm entry and exit in the region’s economies are not well understood and warrant further study, including through firm level primary data collection. In addition, recent studies suggest that the vulnerability of employment and high rate of employment in the informal sectors in many countries in Asia and the Pacific contribute to the high savings rate in Asia and the lack of national consumption. Further research is required to assess the quality of jobs created for example in the ready-made-garment sectors to determine the linkages between export, labour and social policies and to optimize policymaking.
• Innovation, technology and competitiveness:
  Some studies suggest that while many Asian economies have increased their overall level of exports over the past decade, this increase is due to a very large extent to the increase in total world trade, whereas their competitiveness in world markets remained stagnant or declined. There is broad consensus over the fact that countries must increase both productivity and skill/technology content to “move up the value chain” and ensure long-term competitiveness and growth. More research is required to determine how policymakers can promote firms’ investment in skill and technology upgrades in their production processes which will ensure higher returns in the future.
• Economic diversification and low-carbon growth:
  The increasing global attention and funding invested in climate change mitigation and adaptation provides an opportunity for developing countries to invest away from “dirty” sectors (such as logging and mining of certain raw materials like coal) and into cleaner sectors and thereby simultaneously achieving a broader export diversification. More research is required in particular in LDCs to identify polluting sectors, realistic alternative economic sectors, and sources of financing and funding to achieve a reorientation.
• The role of developing countries’ SMEs in production networks and how to increase their job-creating potential:
  It is well understood that the “factory Asia” phenomenon is based to a large extent on regional and global value chains. What is less well examined is the extent to which these value chains are dominated by multinational corporation networks, national corporations and/or SMEs, and on what basis they trade (arm’s length principle or intra-corporate). Furthermore, what is the impact of this composition on both margins and on the quality and quantity of jobs? Case studies of key products’ value chains could provide insights into these questions, as well as explore the differentiated gender impacts of value chains (both those dominated by multinationals and by national companies) on employment opportunities and wages. ILO has pioneered the research in the area of the gender implications of value chains, and much more research in the area is needed.
• Balancing sources of growth:
  The growth of many developing countries over the past few decades, including the Asian Tigers and China, has demonstrated the impressive impact that increased exports can have on overall growth and poverty-reduction. What is less well understood is what policies maximize the trickle-down effect of export-led growth. Should policymakers focus on promoting the creation of decent jobs (including through standard-setting such as minimum wage and labour standards laws), or should they focus on maximizing their market share abroad to increase government revenues and then implement redistributive policies?
• Development of new theoretical frameworks for empirical study of determinants of economic diversification:
  While a significant amount of research has been conducted over decades in the area of determinants of diversification, new innovative research is needed in particular to adequately address the circumstances of least developed countries, whose circumstances may not adequately be addressed by “classical” trade theories.

ARTNeT researchers have also been given opportunity to collaborate in implementation of the ESCAP project “Trade Facilitation for Poverty Reduction: Building Capacity for the Implementation of Pro-Poor Trade Facilitation Policies and Measures in Developing Asian Countries” funded by the Government of China. The project aims to increase capacity of officials and other stakeholders in least developed and other developing countries members of ESCAP to implement trade facilitation measures contributing to poverty reduction.

A regional study under topic “Trade Facilitation for Poverty Reduction in Developing Asian Countries” was initiated at a consultative research meeting in March 2012 and seven papers have been selected covering Bangladesh, China, India, Indonesia, Sri Lanka, Thailand, and Viet Nam. The purpose of the regional study is to provide in-depth analysis of experiences in implementation of trade facilitation measures contributing to poverty reduction.

ARTNeT Research Programme Phase II (2008-2010)
ARTNeT Research Programme Phase I (2005-2007)