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Info Service on UN Sustainable Development (Feb21/02) Geneva, 9 Feb (Kanaga Raja) – The United Nations Conference on Trade and Development (UNCTAD) on 8 February launched a new tool, the Productive Capacities Index (PCI), aimed at supporting developing countries in “understanding the status of their productive capacity” and how it can be improved. According to UNCTAD, the Productive Capacities Index (PCI) is an online portal with publications, manuals, resources and tools that allow policymakers to measure their countries’ performance in achieving their national development goals, as well as their ability to meet the UN Sustainable Development Goals (SDGs). UNCTAD defines productive capacities as “the productive resources, entrepreneurial capabilities and production linkages that together determine the capacity of a country to produce goods and services and enable it to grow and develop.” According to UNCTAD, the PCI provides an overview of how far productive capacities have been developed or not in each country, enabling policymakers to trace their development performance over time, as well as compare it with other countries. The PCI covers 193 economies for the period 2000-2018, and comprises 46 indicators mapped across eight categories, namely, energy, human capital, Information and Communication Technology (ICT), institutions, natural capital, the private sector, structural change and transport. According to UNCTAD, the PCI scores a country’s performance on productive capacities on a scale of 1 to 100, assessing the effectiveness of policies and strategies as well as existing gaps and limitations. At a virtual media briefing on 8 February, Dr Mukhisa Kituyi, the outgoing Secretary-General of UNCTAD, said that under the current circumstances when the world is not only looking at the post-COVID-19 economic recovery, but is also fearing an unequal recovery and unequal momentum to build back, and even the uncertain possibilities of building back better, that “we look at what are the underpinning considerations that can give many of the developing countries, particularly the LDCs a fighting chance of recovering better.” “And for us, the centrality of the confluence of productive competencies, sound linkages and the entrepreneurial capabilities is more important today than it has ever been before,” he said. He said a step further in this work is to develop a tool that can be used by member states not only to talk about productive capacity but to identify policy areas of weakness and potential improvement to monitor progress in building productive capacity. “And this is where the UNCTAD Productive Capacities Index comes in,” said Dr Kituyi. Paul Akiwumi, Director of the UNCTAD Division for Africa, Least Developed Countries (LDCs) and Special Programmes, said building productive capacity is the engine of growth to achieve the Sustainable Development Goals (SDGs) and national development programmes. What is unique about this is that there are so many facets involved in dealing with productive capacity, he added. “This index is so important because it is a multi-dimensional index and it has a unique ability to capture key drivers and enabling factors that foster productive capacity, and is not a uni-sectoral index,” he said. What is important about the index is that it has the capability to measure the ability of countries to achieve their development aspirations, he emphasized. Noting that the PCI is composed of eight categories and 46 indicators, Mr Akiwumi said these categories and indicators were chosen for their relevance, specifically with regard to the concept of productive capacity, and secondly, due to the availability of consistent data. The index being launched today covers 193 countries from the year 2000 to 2018 and allows policy makers to specifically assess how productive capacity is being developed in a country and also allows them to benchmark country performance over time or across countries, he added. It also allows them to monitor the effectiveness of past policies and most importantly therefore to be able to improve policies in the future. Referring to the PCI scores, he said that developing countries lag behind developed countries in all categories except natural capital. This is further evidence that the export of primary commodities is not the way to move in the future, he said, adding that commodity-dependent economies have the lowest PCI scores. The difference between the developed and developing countries is most significant when one looks at the components of structural change, human capital, energy, institutions and ICT, said Mr Akiwumi. The index will point to specific areas where countries can re-evaluate their policies to either improve them, to ensure that they implement them, or to develop new policies, he added. According to an accompanying UNCTAD study, titled “UNCTAD Productive Capacities Index: Focus on Landlocked Developing Countries” and posted on the PCI portal, the overall objective in developing the Index was to support the formulation and implementation of holistic, coherent and evidence-based policymaking in developing countries. The Index is designed with the aim of improving the quality of trade and development policies by placing the fostering of productive capacities and structural transformation at their centre, it said. In particular, it assists in the identification of economy-wide gaps and limitations that hinder efforts to foster productive capacities and structural transformation. The Index also serves as a consistent and comprehensive tool for tracking progress towards national and global development targets and goals, including the Sustainable Development Goals, said the UNCTAD study. There is growing recognition of the importance of productive capacities in the development process, it added. It said fostering productive capacities is a critical pre-requisite for achieving structural transformation, inclusive economic growth and sustainable development and is essential for building socioeconomic resilience, to withstand the negative consequences of external shocks. Yet there is no simple and uniform universal blueprint that enables developing countries to address persistent and emerging development-related challenges. Therefore, there is a need to design country-specific development policies and strategies based on national socioeconomic circumstances, resource bases, institutional capabilities and overall local conditions, it said. Measuring and bench-marking productive capacity indicators by using the multi-dimensional global Productive Capacities Index is indispensable, because it provides national policymakers, development partners and other stakeholders, including private sector actors, with the knowledge of how much productive capacities have been developed, said the UNCTAD study. UNCTAD added that it also draws attention to the strengths and weaknesses of past policies, processes and actions, that, in combination with the state of national productive capacities, can suggest a road map for future policy actions and interventions, as well as effective responses to emerging crises. According to the study, this is the first comprehensive attempt to measure productive capacities in all economies and construct a multi-dimensional global index. The starting point was to map data sources and collate data for 106 indicators across eight categories, namely, energy, human capital, ICTs, institutions, natural capital, the private sector, structural change and transport. The data were subsequently analyzed and the number of indicators was first reduced to 58 and then to 46, after adjusting for dimensionality, data consistency, complementarity and the outcomes of detailed peer review processes. The scores for each category were aggregated and synthesised to provide an overall Productive Capacities Index score for each of the 193 economies. Overall, the Index summarizes the state of productive capacities in economies worldwide by computing scores that range from 0 to 100, said UNCTAD. According to UNCTAD, the Index suggests that it is primarily the productive capacities related to energy, human capital, ICTs, institutions and structural change that underlie the differences in scores between economies and groups. UNCTAD said that addressing the related gaps and underlying challenges can help in resilience-building in structurally weak economies, to address persistent development-related challenges such as widespread poverty and allow for quick and effective responses to emergencies such as the COVID-19 pandemic. The study also noted that there is a strong, positive correlation between the Index score and GDP per capita, confirming a clear association between productive capacities and the level of economic development. Policy makers are encouraged to use the Index to identify and evaluate the strengths and weaknesses of the productive capacities in their economies and to formulate policies and strategies for the effective building of productive capacities, it said. Development partners and other national stakeholders, such as private sector and civil society actors, can also contribute to national efforts to address the gaps and limitations identified by the Index, it added. Building on the Index, the study assessed the level of productive capacities in 193 economies in the period 2000-2018, allowing for cross-country and regional comparisons to help draw out policy lessons from successful experiences on how to best foster productive capacities and structural transformation. It found that as expected, developed economies in North America, namely, Canada and the United States, have high scores, of 50.51 and 42.30, respectively, followed by Europe, with a median score of 41.27. Among developing economies, the highest median score is that of Latin America (32.14), followed by Oceania (31.67), Asia (31.18) and Africa (23.84). It noted that the median score of East Asia is 40.00, that is, close to the median score of developed economies. The median scores of South Asia and West Asia are 28.48 and 33.94, respectively. Similarly, in Africa, the median score of northern Africa is 29.39 and the median score of sub-Saharan Africa is 23.63. Overall, economies or regions that have lower Index scores are generally characterized by under-development, high poverty and unemployment levels and significant vulnerabilities to negative external shocks, including those related to the COVID-19 pandemic, said the study. At the individual economy level, a significant result is the high Index score (40.00) and rank (33) of China. The score and rank of Hong Kong (China) are 45.81 and 8 and the score and rank of Macao (China) are 39.46 and 36. The simple average of the score of China is about 41.76. It said China is among the best performing economies in terms of productive capacities in structural change and transport. India ranks noticeably higher on the Index (112) compared with its position in terms of GDP per capita (121). According to UNCTAD, in Asia, the highest-performing economies are Hong Kong-China at eighth position in the PCI’s global ranking, followed by Korea and Singapore, ranked 11th and 13th respectively. In Latin America, the best performers are Chile, ranked 50th globally, followed by Uruguay (53) and Costa Rica (57). In the Caribbean, the top economies are Bermuda, ranked 16th globally, Barbados (40th) and Trinidad and Tobago (48th). In Africa, the leading performers are Mauritius, ranked 46th in the world, followed by South Africa (74th) and Tunisia (85th), said UNCTAD. Many developing countries, particularly the world’s poorest nations and landlocked ones, lag in all components of the PCI, except natural capital, largely due to their over-dependence on the export of primary commodities and limited production in a few sectors, it added. (The UNCTAD PCI portal can be accessed at: https://unctad.org/topic/least-developed-countries/productive-capacities-index)
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