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Central Asia: Economic Diversification and Sustainable Development

Satrapia project as a model fo sectoral redistribution of added value and employment

Monday 7 November 2016, by Azadeh KHANDANI

Sectoral transformation and diversification, social integration and capital growth are all desirable driving forces for the development of the countries of Central Asia. However, they can not be the mechanical result of the simple rules of the market, and depend on the participation of economic and social actors made possible in a favourable environment.

In general, it is estimated that a country has succeeded in its structural transformation when its population leaves the countryside for the cities and its urban workforce is constantly turning to higher productivity activities. Agricultural employment diminishes as mechanization gains; at the same time, increased production and increased productivity are mutually reinforcing and help the manufacturing sector absorb a growing labour force. Then, once income levels have become higher, industrial jobs are starting to become scarcer. The complementarities between the secondary and tertiary sectors ensure a steady increase in employment and production in the sectors of transport, energy, financial services, education and, as a general rule, provision of public goods.

This transformation of the economy takes place according to a process that depends on geographical location, available resources, market size and institutional context, some combinations of which are more conducive to structural change and to an increase in income. In all dynamic countries, nonetheless, there is a strong link between profits and investment that paves the way for sustainable development.

It will probably be difficult to achieve this in a self-contained economy. For the poorest countries, increased trade and increased access to external markets offer the opportunity to sell surpluses, use underutilized land and underemployed workers to produce labour-intensive goods for export markets, to reduce balance of payments problems and to derive dynamic gains from specialization and economies of scale. While it can provide significant benefits, particularly in the early stages of development, trade is not the solution to all evils. Additional measures need to be taken to ensure that countries are not locked into a production model that, even if they are efficiently exploiting their resources, may not produce the more dynamic productivity gains that would fuel catch-up growth. These measures depend on a series of macroeconomic, structural and technological factors that must be combined in order to establish a strong bond between investment and exports and a more diversified economic structure.

A dynamic investment for export compatible with sustainable growth and development is unlikely to occur spontaneously, even in the presence of the commodity-based export sector or/and the labour-intensive manufacturing sector which are for many developing countries their greatest resource and cost advantages. When it comes to achieving more equitable and sustainable development, the volume of trade is not the only parameter that matters. It appears that most countries have diversified their production and trade structures as they have progressed in the income scale and that this diversification has diminished when, at a high level of development, their economy on services. This form of diversification seems to be closely linked to the improvement of working conditions and the resilience of the economy to external shocks.

Sustainable development strategies also aim, as far as possible, to constantly push back the technological frontier through high-productivity projects that use more advanced technologies and skills and require intensive use of research and development. This often involves investing in higher education or scientific parks, or seeking to attract skilled expatriates in the hope that they will transfer skills through job changes or the creation of small enterprises.

Whatever the level of development, strengthening non-market sectors can also help to ensure sustainable and equitable growth. These sectors include the infrastructure needed to build Satrapia, which can be built through extensive public works programs, and lower productivity activities such as construction, repair and the non-durable consumer goods industries that can create And to train new entrants to the labor market.

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