Sustainable Structural Transformation

Bartholomew Armah

Policy and Planning Coordinator

UN Transition Team

Outline

• Structural transformation in the context of sustainable development

• The UN approach to structural transformation

• Recent socio-economic and environmental trends and trade-offs in structural transformation

• Policy sequencing and structural transformation

Structural Transformation and Sustainable development• Traditional definitions of ST have focused on productivity with little

emphasis on inclusion and sustainability• Definitions emphasize: • A relative decline in the sectoral shares of low-productivity agriculture and

low value-added extractive activities; • a relative increase in manufacturing and high-productivity services; • a decline in the relative share of agricultural employment in GDP; • increasing rural-to-urban migration that stimulates the process of

urbanisation; • and the rise of a modern industrial and service economy.• In Africa the shift has been from agriculture to not necessarily high

productivity services

Sustaining Structural Transformation – the new UN approach• Explicitly takes into account inclusion and environmental

sustainability

• Economic transformation comprises long lasting fundamental changes in the economy that raise the overall productivity level while ensuring adequate quantity and quality of employment, equitable distribution of income and wealth, and access to quality public services, and protection of and respect for environment

• Addressing the social and environmental consequences of policies should not be viewed as an afterthought to the economic growth process.

Trade-offs• Few developed countries have been successful in simultaneously

achieving rapid, green, and inclusive growth.• Some studies [e.g., Dastidar (2012)] found that where structural change is

characterized by a transition from agriculture to industry, inequality did not increase in developing countries.

• On the other hand, inequality was found to rise in developing countries experiencing an agriculture-service transformation. In the latter case, the increase in inequality rises with when initial levels of inequality exceed the average.

• Studies [Qizilbash, 2010] find that countries that perform well in indicators of well-being and poverty had the highest levels of environmental degradation

• Sweden and Denmark rank 39th in Carbon Dioxide emissions

Territorial emissions in Metric tons of CO₂

0

2000

4000

6000

8000

10000

12000

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

EU28 China United States of America India Indonesia

Positive growth trends in Africa

-4

-2

0

2

4

6

8

102

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

Advanced economies Emerging market and developing economies Sub-Saharan Africa World

But evidence of de-industrialization in Africa

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Manufacturing value Added (% of GDP)

Sub-Saharan Africa East Asia & Pacific World

0

5

10

15

20

25

30

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Employment in industry % of total

Sub-Saharan Africa East Asia & Pacific World

And growth not associated with rising opportunities for decent work

Vulnerable Employment % of Total Wage and salaried workers % of Total

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sub-Saharan Africa East Asia & Pacific World

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sub-Saharan Africa East Asia & Pacific World

Perspectives on policy sequencing

• How can we ensure that positive changes along social and environmental dimensions reinforce economic transformation?

Prioritizing social inclusion interventions catalyzes inclusive structural transformation in Africa

Direct Social Environmental Total

Economic 1.09 -1.75 0.81 0.15

Direct ST impact Economic Social Total

Environmental -0.19 1.71 -1.25 0.27

Direct ST impact Economic Environmental Total Effect

Social 0.02 2.79 -2.37 0.44

Parting thoughts• Sequencing matters: Structural transformation measures should be

informed by efforts to assess the likely effects of policy interactions on inclusion and sustainable development

• Reflect the environmental dimension in indicators of decent work:

• The Decent Work Agenda currently combines access to full and productive employment with rights at work, social protection and the promotion of social dialogue

• But decent work should also be about the environment impacts of ones occupation

• Domestic job creation may not always be consistent with free trade in the short run

Ongoing projects in Africa – glimpses of industrial development• Ethiopia’s flagship Hawassa Industrial Park is a 300-hectare industrial park, which is

focused on textile and garment production and is expected to create about 60,000 jobs when fully operational.

• The park has state-of-the-art infrastructure and facilities, which will be mostly powered by renewable energy, making it the first sustainable textile and apparel industrial park in Africa.

• The Derba-Midroc Cement Project a $350 million integrated cement plant project which is uses local limestone deposit of 165 million tons

• The government banned cement imports on 27 March 2012 to protect upcoming domestic cement production.

• It is helping to meet 100% of the country’s cement needs and exporting to nearby countries.

• The plant resulted in a 75% drop in the price of cement and a reduction of cement import dependency.

• The project created about 2,000 jobs during construction and presently employs 739 permanent workers of which 17% are females.