To build on its socio-economic progress, Colombia needs to fast track its productive transformation, according to the OECD’s Production Transformation Policy Review (PTPR) of Colombia, released today at a presentation hosted by Colombia’s National Planning Department (DNP).
The PTPR provides timely recommendations on how Colombia can advance on its path towards prosperity on a topic that is among the priorities of the National Development Plan 2018-2022.
The PTPR was produced by the Development Centre of the Organisation for Economic Co-operation and Development (OECD) in collaboration with the United Nations Economic Commission for Latin America and the Caribbean (ECLAC); the United Nations Conference on Trade and Development (UNCTAD); and the United Nations Industrial Development Organization (UNIDO).
Following a peace deal in 2016, Colombia is back on stage after more than five decades of conflict. Between 2000 and 2017, GDP per capita doubled, and the economy grew at an annual average of 4.3%, double the rate of growth of Latin America. The poverty rate declined from 50% to 28% in the same period.
Simultaneously, investors’ confidence has grown, placing Colombia in the spotlight for global investors. In 2017, Colombia’s inward stock of foreign direct investment reached 59% of GDP, ranking amongst the highest in the Latin America and Caribbean region and above the OECD average of 48%.
However, the PTPR signals that despite the progress achieved over the past 20 years, Colombia’s economy still suffers from structural weaknesses that are hampering future advances.
Colombia’s economy remains increasingly reliant on natural resources. In 2017, primary production and mining accounted for 80% of exports, 10% more than in 1991. And despite a relatively long tradition of manufacturing, the sector is becoming less relevant and less competitive. Productivity has not increased enough for Colombia to catch up with more advanced economies. Economic opportunities continue to be limited to a few territories.
In the OECD, Colombia suffers from the second-highest labour productivity gap between regions, after Mexico. In addition, there is still insufficient investment in innovation. Investment in research and development (R&D) in Colombia is 0.25% of GDP, which is 15 times less than the OECD average and well below the top R&D investing country in the region, Brazil (1.2%).
The PTPR confirms that Colombia has implemented reforms since 2006 to address its structural weaknesses and fast-track economic transformation. Colombia has strengthened its institutions, establishing, for example, the National Metrology Institute in 2011 and the Ministry of Science, Technology and Innovation in 2019.
The country has also improved financing for innovation and regional development by earmarking 10% of the national royalties’ system from mining to finance innovation projects in all its regions. The Production Development Policy (PDP) 2016–2025, drawn up by the DNP in co-operation with several ministries and agencies, represents a step forward by setting up a consultative process with all regions in the country to define priorities for increasing exports and productivity.
The PTPR provides a detailed analysis of the PDP’s assets and weaknesses. It identifies three game changers for Colombia to become a competitive and innovative nation that offers new opportunities for all territories and people:
Strengthening the government’s planning and anticipatory capacities to shape the future. Colombia could update its planning structure by creating new incentives to achieve a shared commitment to budget allocation and policy implementation.
Tapping the productivity potential of all regions. This requires a two-track approach: simplifying red tape and improving the communication infrastructure. At the same time, Colombia needs to invest in fostering export diversification and innovation, and to shift from technology adoption to creation.
Activating mechanisms to benefit more from trade and investment. To achieve export diversification, Colombia could look at deepening and benefiting more from regional integration and at improving its participation in global value chains, notably by increasing coordination between industrial development, trade and investment policies. Colombia could also strengthen its trade policy by taking advantage of technology transfers and technical co-operation.
According to the PTPR, Colombia is well-positioned to move forward. The country can leverage both established and credible planning capacities and a set of well-established private sector institutions to help mobilize private sector investment for innovation and competitiveness.
Asia and Pacific on course to miss all Sustainable Development Goals
Unless progress is accelerated, Asia and the Pacific are on course to miss all of the 17 Goals of the UN’s 2030 Agenda for Sustainable Development, the Executive Secretary of the UN regional commission for Asia and the Pacific (ESCAP), told UN News at the Organization’s Headquarters on Wednesday.
Under-Secretary-General Armida Salsiah Alisjahbana was in New York to take part in the High-Level Political Forum on Sustainable Development, the main UN platform for monitoring the progress that countries are making towards the Agenda, which is the UN’s blueprint for ending poverty and preserving the planet.
ESCAP’s latest Sustainable Development Goals Progress Report shows that, when it comes to some of the Goals, the region is actually going backwards. These are the goals related to access to clean water and sanitation (Goal 6), decent work and economic growth (Goal 8), and responsible consumption and production (Goal 11).
There are, said Ms. Alisjahbana, several reasons for this: “There is water scarcity, because of the pressure of urbanization, and the management of natural resources and the environment are making the situation worse. As for moving towards sustainable consumption, that has to do with behaviour and lifestyle. With increasing wealth you consume more, but what you consume is something that is actually not sustainable.
Governments, said the head of ESCAP, must ultimately be responsible for investments in sustainable development. Investing in basic infrastructure costs money, but there is a considerable multiplier effect, that has a positive effect on the economy. Countries with smaller financial resources should look at raising money through fiscal reforms rather than looking for aid, and risking becoming dependent, she added.
The Progress Report complains about a lack of data, an important point because, says Ms. Alisjahbana, without the correct data you can’t track progress, or evaluate the best actions to take going forward. Improved data must go hand in hand with improved capacity for analysing data, which means national statistical offices, and SDG monitoring.
Despite the many challenges facing the region’s efforts to achieve the Goals, Ms. Alisjahbana remains optimistic. The situation, she believes, can be turned around, through better cooperation, as well as the abundant talent and expertise found in the region.
Asia and Pacific Growth Steady Amid Global Trade Tensions
Developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions, according to a new Asian Development Bank (ADB) report released today.
In a supplement to its Asian Development Outlook (ADO), ADB maintains growth forecasts for developing Asia at 5.7% in 2019 and 5.6% in 2020—unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9% growth in 2018. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook has been revised down from 6.2% to 6.1% in 2019 and maintained at that rate in 2020.
Deepening trade tension between the People’s Republic of China (PRC) and the United States (US) remains the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume.
“Even as the trade conflict continues, the region is set to maintain strong but moderating growth,” said ADB Chief Economist Mr. Yasuyuki Sawada. “However, until the world’s two largest economies reach agreement, uncertainty will continue to weigh on the regional outlook.”
The growth outlook for East Asia in 2019 has been revised down to 5.6% because of slower than expected activity in the Republic of Korea. The subregion’s growth outlook of 5.5% for 2020 is unchanged from April. Growth for the subregion’s largest economy, the PRC, is also unchanged, with forecasts of 6.3% in 2019 and 6.1% in 2020, as policy support offsets softening growth in domestic and external demand.
In South Asia, the economic outlook is robust, with growth projected at 6.6% in 2019 and 6.7% in 2020, albeit lower than forecast in April. The growth outlook for India has been cut to 7.0% in 2019 and 7.2% in 2020 because the fiscal 2018 outturn fell short.
The outlook for Southeast Asia has been downgraded slightly to 4.8% in 2019 and 4.9% in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up to 4.3% on account of an improved outlook for Kazakhstan. Central Asia’s growth outlook of 4.2% for 2020 is unchanged from April. The growth outlook in the Pacific—3.5% in 2019 and 3.2% in 2020—is unchanged, as the subregion continues to rebound from the effects of Cyclone Gita and an earthquake in Papua New Guinea, the subregion’s largest economy.
The major industrial economies have had slight revisions to their growth forecasts, with the US revised up to 2.6% for 2019 and the Euro area revised down to 1.3%. The growth outlook for Japan is unchanged at 0.8% in 2019 and 0.6% in 2020.
Developing Asia’s inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestic factors, such as the continuing outbreak of African swine fever in several Asian economies, which is expected to drive up pork prices in the PRC.
How to measure blockchain’s value in four steps
To help organizations identify the value of blockchain technology and build a corresponding business case, the World Economic Forum, the International Organization for Public-Private Cooperation, has released the Blockchain Value Framework as part of the white paper, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits.
Co-designed with Accenture, the Blockchain Value Framework is the second in a series of white papers for organizations to better understand that blockchain technology is a tool deployed to achieve a specific purpose, not a goal in itself. This new framework provides organizations with the tools to begin measuring blockchain’s value, including key questions to consider. It is the first visual roadmap of its kind and is based on a global survey of 550 individuals across 13 industries, including automotive, banking and retail, public-sector leaders, chief executive officers and an analysis of 79 blockchain projects.
“In our last paper, we stressed that blockchain deployment is not the end goal,” said Sheila Warren, Head of Blockchain at the World Economic Forum. “We wanted to get beyond the hype. This new framework is for those business leaders that have figured out blockchain is the right solution for a specific problem, but don’t know what to do next.”
“Organizations need to make business decisions and investments with confidence and that requires proof of the value-add and an analysis of why, or why not, they should consider something new,” said David Treat, Managing Director and Global Blockchain Lead at Accenture. “Through this new framework, we aim to educate businesses and challenge them to rethink their current business models, relationships between ecosystem partners, customers and their investments in technology. The path to blockchain adoption starts here with evaluating the technical and strategic priorities and aligning them with investments in innovation.”
The framework starts with questions on blockchain’s role and desired impact. Assessing potential pain points and areas for opportunity without thinking about the technology is essential. Next is to examine the three key dimensions of blockchain’s role alongside its capabilities. The roadmap can assist organizations in moving from current-state assessment to future blockchain opportunity, and to identify where the value will be created and delivered. Cost savings, increased revenue and improved customer experience are all possible business case results.
According to the global survey conducted in conjunction with the new framework, 51% of survey respondents identified “missing out on developing new products/services” as the number one expectation if they do not invest in blockchain technology in the near future. The other two most common answers were missing out on speed/efficiency gains (23%) and missing out on cost savings (15%). The interviews highlighted the potential of the technology to simplify and optimize complete value chains through the sharing of simplified real-time data with increased efficiency. However, the paper also cautions businesses to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in the Blockchain Beyond the Hype white paper, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue.
In nine of the industries surveyed, the full traceability and integrity of the data were the top two potential advantages of using blockchain technology. Most of the industries surveyed could benefit from smart contracts and automation provided by blockchain. Surprisingly, few organizations selected “new business products or services” as one of the benefits. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities.
“We may be moving beyond the hype, but blockchain isn’t going away. Central banks are experimenting with digital currencies and supply chain networks are piloting blockchain policies. We are also seeing companies like Facebook and Starbucks entering the blockchain and cryptocurrency space. This means practical use cases of the technology will become more widespread,” Warren said. “A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters.”
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