Structural transformation in Asia's landlocked developing countries

Asia’s landlocked developing countries (LLDCs) are a heterogeneous group that differ in various dimensions, including development needs. For instance, some countries have transformed from a centrally-planned, state-command model to a market based one; many are resource dependent and have very concentrated production structures; four of them belong to the group of least developed countries (LDCs). Asia-Pacific Countries with Special Needs Development Report: Structural Transformation and its Role in Reducing Poverty provides an in-depth analysis on policy options for LLDCs. It highlights that for resource-based economies the process must involve economic diversification away from extractive industries, as the natural resource dependence exposes them to external shocks and macroeconomic imbalances; in least developed landlocked countries a shift of employment from agriculture to manufacturing must take place to increase productivity and reduce poverty. Industrialization is of paramount importance as a thriving labour-intensive manufacturing base is best at generating productive employment. More productive employment means higher remuneration, which in turns means less poverty. In some particular cases, the shift from agriculture to services might indeed be the only direction possible, if factors such as small size of an economy, limit opportunities to develop a manufacturing base. In general, this process however should be discouraged, as it inhibits the creation of productive jobs and slows the pace of poverty reduction. This is because employment in the manufacturing sector can be several times more productive than in services, particularly informal services. Hence the shift towards manufacturing allows for greater reduction in poverty.