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Delivered by Armida Salsiah Alisjahbana

11 September 2019

Distinguished Academics and Scholars,
Colleagues and friends,
Ladies and gentlemen,

It is my pleasure to welcome all of you in the UNU WIDER- UN ESCAP Conference on “Transforming economies – for better jobs”. It is good to be back in this familiar environment. It is a rare moment. Our warm welcome to all of you. 

Traditional theory for Transforming economies for growth and development has largely focused on structural transformation, which is to describe a change in the composition and distribution of economic activities from agriculture to industry and then modern services. 

Currently, technological revolutions, especially robotization of production and introduction of artificial intelligence, are rapidly transforming the economic structure and interlinkages, and reshaping the prospects for jobs markets in the fast-changing mode of globalization. 

Against this backdrop, we need to redefine our approach to structural transformation, and to productivity enhancing jobs-rich inclusive growth. 

Let me highlight three key challenges that I hope will stimulate your discussions:

First, productivity growth has been ‘uneven’. Evidence suggests that a gradual increase in productivity has occurred over the past decades. Due to an expansion of existing industries, including extractive sectors, has taken place more than structural upgradation of the higher value-addition production, especially services sector. 

Production structure in many countries are still based on labour intensive sectors, with a limited improvement in productive capacity. Also, labour force participation into advanced, high-productivity and more skill-intensive sectors, which could produce high-value added and sophisticated products is lagging. 

Certainly, in Asia-Pacific region, there has been successful country examples including the East Asian economies and several emerging middle-income countries. 

Second, economic growth has not been ‘inclusive’. Economic growth is also not adequately poverty-reducing, inclusive and jobs-rich. Many developing countries are experiencing high-persistent poverty and growing inequality due to large presence of unskilled labour, low-value added production sectors and depressed wages. 

With the rise in labour migration from the rural to the urban areas, the urban areas have experienced growing incidence of informality, urban poverty and slum-dwellers in several developing countries.

In many parts of the Asia-Pacific region, countries have witnessed improvement in households’ incomes in rural areas and successful modernization of the agricultural sector. As a result, it has promoted sustainability across the entire value chain and enabled sustainable food systems, especially for smallholders and other vulnerable communities, while impacting poverty and inequality reducing efforts. 

Third, business-as-usual approach of structural transformation is ‘not-compatible’ to environmental sustainability. For example, the dominance of fossil fuel in energy mix for the industrialization process has resulted in a grey economy, not a green economy. Over the past decades, rapid pace of economic growth has been accompanied by surges in carbon emissions, pollution, and a drawdown on earth’s finite resources. 

It’s well known that several developing countries have followed a so-called ‘pollute first and clean up later’ pathways for development. Now, this is neither viable nor desirable in the pursuit of sustainable development. 

In our Asia-Pacific, many developing countries are committed to promote environmental sustainability and green jobs. Evidence shows that leapfrogging to harness modern services or niche sectors and transition towards the decarbonization of economy can bypass the industrialization stage. 

Let me turn to three policy priorities in transforming economies for better jobs. 

First, focus on productivity-enhancing policies. Policies to an overall boost in productivity levels is required to structurally upgrading along the high value-added and skill-intensive sectors. Integrated policy package should be considered with emphasis on macroeconomic, financial, industrial and active labour market policies. Taking actions in fostering science, technology and innovation (STI) and investments in improving infrastructure is therefore a key policy response to transform economies. 

In the case of the least developed countries, special economic zones (SEZs) in alignment with national development strategies, can be considered to attract foreign direct investment (FDI) and to build a manufacturing base that absorbs labour from the low-value added agricultural sector.

Second, focus on poverty-reducing policies. Adopt policies to structurally upgrade production sectors from low-productivity, low-wage sectors to high-productivity high-wage sectors for reducing poverty. An example would be on sustainable rural development and climate-smart agricultural transformation. 

Strengthening urban planning and financing strategies can ensure sustainable cities and human settlement, and the important use of innovation to create new technology-led services sectors jobs. 

Enabling public investment in education to improve skill-sets and vocational training opportunities is a prerequisite for inclusive growth, with special emphasis on youth and women. 

Third, focus on planet-saving policies. There is a need to develop more ambitious and cohesive plans for greater renewable energy use and improved energy efficiency, SDG7, to support the transformation of current economic production processes. 

Ensuring a policy paradigm shift in the way we produce and industrialize is essential for environmental sustainability, and better jobs. 

In view of this, the private sector needs to turn its investment focus from conventional, high carbon energy systems to renewable energy-based systems, which can be significant driver for creating cleaner and climate-smart growth. And, currently an overall need to encourage nature-based solutions to mitigate and adapt to the impact of climate change. 

To conclude, I would like to underscore that importance of investments in building resilience to implement targeted interventions in our economies, especially for the poorest and most vulnerable groups. 

We can’t assume anymore that traditional ‘structural transformation policy measures’ is adequate to support our economies and save future generations in a sustainable manner. 

Thank you for your attention. I wish you a very successful conference.

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