Mainstreaming ISID in national policies and programs

6th LDC Ministerial Conference 2015:Operationalizing ISID for LDCs: “the

path to graduation and beyond”November 26-27, 2015

Moazam Mahmood, Deputy DirectorVeronika ZhirnovaResearch Department

International Labour Organisation

Third wobble in global growth: Eurozone at risk of low growth, with deficit in aggregate demand persisting. Weakening

growth in Emerging EconomiesThe global growth projection for developed economies including the European Union is flat at 2 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015p 2016p 2017p 2018p 2019p 2020p

-10

-5

0

5

10

15

20

GDP growth rate (%), by regions 2005-2020World Advanced economiesEuro area Emerging market and developing economiesEmerging and developing Asia Emerging and developing EuropeLatin America and the Caribbean Middle East and North AfricaSub-Saharan Africa BrazilChina India

GDP

grow

th ra

te (

%)

International Monetary Fund, World Economic Outlook Database, October 2015p- projection

GDP growth rate in 2015 (%):World: 3.1 LAC: -0.3AEs: 2.0 Brazil: -3.0Eurozone: 1.5 China: 6.8EEs: 4.0 India: 7.3

End of commodities super cycle: GDP growth in LDCs vulnerable to commodity price fluctuations

GDP Growth in LDCs and the evolution of commodity price index

Source: ILO Staff calculations based on the International Monetary Fund, World Economic Outlook Database, April 2014.* For crude oil and metal price indices the data is taken for the 3 quarter of 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013p 2014p 2015p

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0

50

100

150

200

250

LDCsAfrican LDCsAsian LDCsIsland LDCsMetal price IndexCrude Oil (Petroleum) price index

Annu

al G

DP g

row

th ra

tes (

%)

Com

mod

ity p

rice

inde

x

LDC budgets also vulnerable to commodity prices:

Change in budget balances due to fall in commodity prices

Country Main Export

WEO 2014Budget Balance

(% of GDP) Estimates

WEO 2015Budget Balance

(% of GDP) Estimates

Difference between 2014 and 2015 projections in

GDP pp for 2016

2016 2016 2016Angola Oil -4.11 -1.40 2.71Benin Metals -1.02 -3.55 -2.53Bhutan Metals -1.55 -1.54 0.01Central African Republic Metals -7.73 -3.40 4.34Chad Oil 0.34 -0.88 -1.22Congo Dr. Oil 6.69 -2.56 -9.25Equatorial Guinea Oil -1.28 -3.18 -1.89Ethiopia Foods -2.86 -2.79 0.07Guinea Metals -2.78 -3.32 -0.55Guinea-Bissau Foods -2.33 -2.30 0.03Lao P.D.R. Metals -4.42 -6.04 -1.62Liberia Metals -6.29 -6.90 -0.61Madagascar Metals -2.85 -2.76 0.08Malawi Foods -1.01 -3.21 -2.20Mauritania Metals 0.66 -4.72 -5.38Mozambique Metals -6.61 -5.14 1.47Myanmar Foods -4.83 -4.67 0.16Niger Metals -4.14 -5.34 -1.20Rwanda Metals -1.40 -3.06 -1.66Sierra Leone Metals -3.58 -5.23 -1.65Sudan Oil -1.83 -1.30 0.52Tanzania Metals -3.98 -3.90 0.08Togo Metals -3.44 -6.01 -2.57Uganda Oil -2.63 -4.19 -1.56Yemen Oil -4.74 -9.19 -4.45Zambia Metals -3.54 -6.48 -2.94

Source: ILO – UN-DESA model, 2015

Global employment has not recovered from the impact of the crisis

ILO: Unemployment increased by 2mil in 2015 compared to a year earlier, 20% of job seeker concentrated in Developed economies and 20% in East Asia.

Source: ILO - Trends Econometric Models, January 2015

Middle East

2007 2008 2009 2010 2011 2012 2013 2014 2015p 2016p 2017p 2018p 2019p0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

Total unemployment (thousands) by regions, 2007-2019p

170mil (5.5%)Youth 11.7%

197mil(6.1%)Youth 12.9%

201mil (5.9%)Youth 13.0%

210mil (5.8%)Youth 13.1%

Developed econonomies & EU

Centr & South-East. Europe & CISEast Asia

South East Asia & PacificSouth Asia

Lat Am & CaribMiddle East

North AfricaSub-Saharan Africa

203mil (5.9%)Youth 13.1%

GDP growth

Pickup to higher trend GDP growth in early 2000s, drop due to crisis

Annual real GDP growth rates2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p 2013p 2014p 2015p 1990-2000 2000-2007 2007-2015p

LDCs 6.0 6.3 5.4 5.9 7.8 7.9 7.7 8.6 6.8 5.0 6.0 4.8 5.7 5.7 6.2 6.3 4.1 7.1 5.8African LDCs 5.5 6.9 5.7 5.5 8.9 8.1 8.5 9.6 7.9 4.1 5.8 4.9 5.2 5.5 6.2 6.2 3.5 7.6 5.7Asian LDCs 6.9 5.8 5.4 6.7 6.9 7.8 7.2 7.4 5.3 5.9 6.4 4.3 6.4 5.8 6.1 6.4 5.3 6.7 5.8Island LDCs 1.7 2.5 -1.6 0.3 -1.1 4.7 -0.1 7.2 8.2 7.8 4.0 9.4 6.5 6.5 7.0 6.9 0.9 1.7 7.0WORLD 4.7 2.3 2.8 3.8 5.1 4.7 5.2 5.3 2.7 -0.4 5.2 3.9 3.2 3.0 3.6 3.9 3.2 4.2 3.1

p = projectionSource: ILO Staff calculations based on the International Monetary Fund, World Economic Outlook Database, April 2014.

Average annual growth rates

The surge and the slump in GDP growth are explained largely by sectoral growth in industry, led by commodities, less so by manufacturing,

Annual growth rate by sectors, period average

Source: World Bank, World Development Indicators 2015.

2000-2007 2007-2013 2000-2007 2007-2013 2000-2007 2007-2013 2000-2007 2007-2013

LDCs 3.5 4.4 9.8 5.9 7.7 9.5 7.1 4.5

African LDCs 3.7 4.0 11.9 4.7 8.2 10.1 7.9 3.3

Asian LDCs 3.0 5.3 6.2 8.3 7.3 8.9 6.1 8.5

Island LDCs 2.3 3.4 9.8 5.9 -1.6 7.0 4.3 3.3

Agriculture, value added Industry, value added Manufacture, value added Services, value added

Structure of merchandise exports in LDCs

2000 2007 2012 2000 2007 2012 2000 2007 2012 2000 2007 2012 2000 2007 2012 2000 2007 2012

LDCs 24,150 127,825 203,683 10.8 7.5 7.8 23.1 18.6 22.3 38.5 37.2 22.1 20.1 20.0 26.6 7.4 16.4 20.4

African LDCs 8,777 94,810 146,649 16.9 10.0 10.5 36.1 23.9 29.4 17.5 30.8 12.5 17.3 12.8 17.7 11.9 22.2 28.7

Asian LDCs 14,877 32,141 55,513 1.0 0.7 1.3 1.9 3.5 4.6 72.3 55.3 45.6 24.7 40.2 48.4 0.1 0.2 0.1

Island LDCs 496 874 1,521 13.3 1.6 2.4 78.9 65.6 85.6 0.0 0.1 0.2 7.3 8.4 8.8 0.0 0.0 1.3

Merchandise Exports (current US$, millions)

% of merchandise exportsAgricultural raw

materials exportsFood exports Fuel exports

Manufactures exports

Ores and metals exports

The volatility in GDP growth comes from the high reliance on exporting commodities rather than manufactures

Merchandise exports in LDCs, 2000 – 2012Average growth

rate

Average growth

rate 2000 2007 2012 2000-2007 2008 2009 2010 2011 2012 2007-2012

LDCs 47,051 69,734 73,890 5.8 11.2 -21.7 19.3 12.6 -9.4 1.2

African LDCs 22,564 43,362 42,862 9.8 16.9 -27.8 19.5 11.5 -12.1 -0.2

Asian LDCs 23,477 25,644 30,109 1.3 2.2 -10.5 19.6 13.5 -5.4 3.3

Island LDCs 1,009 727 918 -4.6 11.2 -21.7 19.3 12.6 -9.4 4.8

Merchandise Exports (constant 2005 US$, in millions)

Growth rate from preceding year

Source: ILO calculations based on World Bank, World Development Indicators 2015.

Source: ILO calculations based on World Bank, World Development Indicators 2015.

The volatility in LDC growth comes from a regional pattern favouring commodity exports over manufacturing, particularly in African LDCs, leading to weaker industrialisation in the region

Value-added sectoral shares of GDP in LDCs, by region, 2000-2013

Source: ILO calculations based on World Bank, World Development Indicators 2015.Note: Calculations of aggregates are based on the countries for which the full data series are available. For African LDCs Chad, Djibouti, Eritrea, Madagascar, Niger, Somalia and South Sudan not included. Mali manufacturing data missing from 2008 to 2012. For Asian LDCs Myanmar not included. For Islands LDCs Comoros, Guinea-Bissau, Haiti, Kiribati, Sao Tome and Principe and Solomon Islands not included.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Agriculture 26.0 25.5 24.2 23.4 22.4 21.9 21.0 20.2 19.8 19.9 19.6 19.0 18.9 17.0 -5.8 -3.2

Industry 25.9 26.3 26.8 27.2 28.1 28.8 29.4 30.4 30.0 29.6 29.5 29.0 27.0 24.4 4.5 -6.0

Manufacturing 9.1 9.0 8.7 8.8 8.9 8.8 8.9 9.1 9.1 9.1 9.2 9.4 8.7 9.4 0.0 0.3

Services 37.8 36.7 35.1 34.7 33.8 32.9 32.8 32.3 32.3 31.9 31.8 31.4 26.4 31.4 -5.5 -0.9

Agriculture 26.3 25.8 25.0 24.0 23.0 22.4 21.4 20.2 20.0 20.1 19.9 19.1 19.2 17.1 -6.1 -3.1

Industry 23.7 24.3 25.9 26.4 27.7 28.8 29.4 31.0 30.5 30.1 29.6 28.3 25.2 24.7 7.3 -6.3

Manufacturing 6.5 6.3 6.3 6.3 6.3 6.2 6.1 6.4 6.4 6.5 6.5 6.6 5.2 7.2 -0.1 0.9

Services 32.1 31.6 31.5 32.0 31.8 31.8 32.6 33.0 33.8 34.0 34.7 34.7 28.0 37.2 0.9 4.3

Agriculture 25.5 25.0 22.7 22.3 21.2 20.9 20.4 20.1 19.5 19.6 19.0 18.9 18.4 16.7 -5.4 -3.4

Industry 30.0 30.1 28.5 28.7 28.8 29.1 29.5 29.3 29.2 28.7 29.6 30.4 30.5 24.0 -0.7 -5.4

Manufacturing 13.8 13.9 13.2 13.3 13.5 13.7 14.2 14.5 14.5 14.2 14.4 15.1 15.3 13.5 0.7 -1.0

Services 48.1 45.8 41.3 39.2 37.1 34.9 32.9 30.9 29.2 27.6 25.9 24.9 23.5 20.6 -17.3 -10.3

Agriculture 24.4 22.8 25.2 25.2 25.9 25.3 25.8 23.6 21.6 20.9 19.8 16.8 16.7 22.7 -0.8 -0.9

Industry 14.9 12.8 11.4 10.2 9.4 9.2 8.9 9.7 13.3 16.6 16.7 17.8 3.9 7.6 -5.2 -2.1

Manufacturing 4.2 4.2 3.6 3.5 3.6 3.5 3.9 3.1 2.8 3.1 3.9 3.4 1.8 3.1 -1.1 0.0

Services 53.0 57.1 56.0 57.0 58.0 58.6 59.7 58.8 56.9 57.0 58.1 58.4 23.3 40.3 5.8 -18.5

Change 2007-2013

LDCs

African LDCs

Asian LDCs

Island LDCs

Change 2000-2007

Industry-led GDP growth in LDCs did not result in concomitant employment growth in industry, but more in services

Additional indicators of the labour market include the working poor, vulnerable employment, and wage and salary employment. These show improvement, but from very weak starting points in African and

Asian LDCs. Again Asian LDCs fared slightly better

Source: ILO – Trends Econometric Models, April 2014

Source: April 2014 update of the model in: Kapsos, S. and E. Bourmpoula (2013). Employment and Economic Class in the Developing World. ILO Research Paper No 6; ILO - Trends Econometric Models, April 2014.

Agriculture

Industry ServicesAgricult

ureIndustry Services

Agriculture

Industry ServicesAgricult

ureIndustry Services

Agriculture

Industry Services

LDCs 71.1 7.6 21.2 64.4 9.6 26.0 61.4 11.3 27.3 -6.8 2.0 4.8 -2.9 1.7 1.3African LDCs 76.0 5.1 18.8 71.7 6.4 21.9 68.3 7.6 24.1 -4.4 1.3 3.1 -3.4 1.2 2.2Asian LDCs 65.2 10.9 23.9 54.5 14.2 31.4 51.4 17.0 31.6 -10.8 3.3 7.5 -3.1 2.9 0.2Island LDCs 53.5 10.2 36.4 50.8 10.3 38.8 45.4 11.6 43.0 -2.7 0.2 2.5 -5.4 1.3 4.1

2000 2015p2007 Change 2007-2015pChange 2000-2007

Total US$2 (PPP) Working Poor (millions)2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p 2013p 2014p 2015p

LDCs 219 223 227 230 231 232 232 232 233 236 238 239 240 242 242 241African LDCs 124 127 131 134 136 137 138 140 142 145 148 150 152 154 155 156Asian LDCs 93 93 94 94 93 91 91 90 89 88 88 87 86 85 84 83Island LDCs 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

Share of Working Poor in total employment, US$2 (PPP) (%)2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p 2013p 2014p 2015p

LDCs 85 84 83 82 80 77 76 74 72 71 70 68 67 65 63 62African LDCs 85 84 84 84 82 80 78 77 75 75 73 72 71 70 68 66Asian LDCs 85 83 82 79 77 74 72 70 68 66 65 63 61 59 57 55Island LDCs 65 64 63 62 61 60 59 57 56 55 53 52 51 50 48 45

The share of vulnerable workers steadily decreased during the past decade, but still remains at high levels.

Source: ILO – Trends Econometric Models, April 2014

Wage and

salaried

workers

EmployersOwn-account

workers

Contributing

family

workers

Wage and

salaried

workers

EmployersOwn-account

workers

Contributing

family

workers

Wage and

salaried

workers

EmployersOwn-account

workers

Contributing

family

workers

LDCs 14.2 1.0 49.1 35.6 18.2 1.3 53.0 27.5 3.9 0.2 3.9 -8.1African LDCs 12.5 1.1 53.8 32.5 15.9 1.5 53.5 29.1 3.4 0.4 -0.3 -3.5Asian LDCs 15.4 0.8 43.4 40.5 20.6 0.8 52.9 25.7 5.2 0.0 9.6 -14.8Island LDCs 46.8 3.4 34.3 15.4 46.6 3.6 35.1 14.8 -0.3 0.1 0.8 -0.6

Change 2000-2015p2015p2000

Share of vulnerable employment in total employment (%) - Total2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p 2014p 2015p

LDCs 84.7 85.1 84.6 84.3 84.1 84.1 83.6 83.2 82.8 82.7 82.2 81.9 81.7 81.1 80.8 80.6African LDCs 86.4 86.4 85.8 85.2 84.9 85.0 84.7 84.3 84.2 84.3 83.8 83.5 83.6 83.0 82.8 82.6Asian LDCs 83.8 84.7 84.3 84.1 84.2 84.0 83.2 82.8 81.9 81.6 81.0 80.6 80.0 79.3 79.0 78.6Island LDCs 49.7 49.9 49.9 50.5 51.0 51.3 50.9 50.9 50.9 50.6 51.3 50.9 50.7 50.4 50.2 49.9

Share of vulnerable employment in total employment (%) - Male2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p 2014p 2015p

LDCs 79.5 81.1 80.4 79.8 79.4 79.3 78.7 78.3 77.8 77.7 77.1 76.7 76.5 75.9 75.6 75.3African LDCs 80.8 81.0 80.0 79.2 78.7 78.9 78.5 78.0 77.8 78.0 77.4 77.1 77.2 76.6 76.4 76.1Asian LDCs 79.0 82.3 81.8 81.6 81.2 80.9 79.9 79.5 78.6 78.3 77.5 77.1 76.5 75.8 75.4 74.9Island LDCs 50.5 50.6 50.5 51.2 51.7 52.3 51.7 51.8 51.6 51.2 51.9 51.8 51.4 51.0 50.7 50.4

Share of vulnerable employment in total employment (%) - Female2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p 2014p 2015p

LDCs 91.5 90.4 90.1 89.9 90.1 90.1 89.8 89.4 89.0 88.9 88.6 88.4 88.1 87.6 87.3 87.1African LDCs 92.9 92.8 92.5 92.3 92.0 92.2 92.0 91.6 91.5 91.5 91.2 91.1 91.1 90.4 90.3 90.1Asian LDCs 91.0 88.3 88.0 87.9 88.7 88.5 87.9 87.4 86.6 86.3 85.9 85.4 84.8 84.3 83.9 83.6Island LDCs 48.8 49.1 49.2 49.6 50.1 50.1 49.7 49.8 49.9 49.8 50.6 49.9 49.9 49.6 49.5 49.3

GDP growth (average annual growth, 2000-2014) and per capital income (2014) in LDCs

Source: Calculation based on World Bank, World Development Indicators 2015.

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 60000

1

2

3

4

5

6

7

8

9

10

Afghanistan

Angola

Bangladesh

Benin

Bhutan

Burkina Faso

Burundi

Cambodia

Chad

Comoros

Congo, Dem. Rep.

Djibouti

Eritrea

Ethiopia

Gambia, The

GuineaGuinea-Bissau

HaitiKiribati

Lao PDR

Lesotho

Liberia

Madagascar

MalawiMali

Mauritania

Mozambique

Nepal

Niger

Rwanda

Sao Tome and Principe

Senegal

Sierra Leone

Solomon Islands

Sudan

Tanzania

Timor-Leste

Togo

Tuvalu

Uganda

VanuatuYemen, Rep.

Zambia

Low incomeLow growthX %: 25∆X %: 3Ind %: 19∆ Ind %: -0.5Manu %:8∆ Manu %:-0.3

High incomeLow growthX %: 30∆X %: 3Ind %: 18∆ Ind %: -1.4Manu %:8∆ Manu %:0.7

Low incomeHigh growthX %: 22∆X %: 8Ind %: 18∆ Ind %: -2Manu %:6∆ Manu %:-3

High incomeHigh growthX %: 43∆X %: 10Ind %: 34∆ Ind %: 6Manu %:10∆ Manu %:1

Low incomeLow growthX %: 25∆X %: 3Ind %: 19∆ Ind %: -0.5Manu %:8∆ Manu %:-0.3

High incomeLow growthX %: 30∆X %: 3Ind %: 18∆ Ind %: -1.4Manu %:8∆ Manu %:0.7

Low incomeHigh growthX %: 22∆X %: 8Ind %: 18∆ Ind %: -2Manu %:6∆ Manu %:-3

High incomeHigh growthX %: 43∆X %: 10Ind %: 34∆ Ind %: 6Manu %:10∆ Manu %:1

Productive transformation and the role of education in LDCs

Characteristics of the different country groups. Manufacturing is constrained by years of schooling.

AYS Avg. manuf. value added

Group characteristics

AYS Non-schooled Primary Secondary Polarized“missing middle”

Group 1 2.8 7.8 <4.5 High Low Low <20% NoGroup 2 3.8 7.6 <4.5 High Very Low High >20% YesGroup 3 5.7 12.0 >4.5 Low High Varies NoGroup 4 5.2 9.2 >4.5 Low High Varies Yes

Africa’s infrastructure deficit

Normalized units Sub-Saharan African LDCs Other LDCsPaved road density (note 1) 31 134Total road density (note 1) 137 211Mainline density (note 2) 10 78Mobile density (note 2) 55 76Internet density (note 2) 2 3Generation capacity (note 3) 37 326Electricity coverage (note 4) 16 41Improved water (note 4) 60 72Improved sanitation (note 4) 34 51

Source: Yepes et al. (2008), in Foster, V.; Briceño-Garmendia (2010).Notes: 1: in kilometres per kilometre squared; 2: in lines per thousand population; 3: in megawatts per million population; 4: electricity, water and sanitation coverage are in percentage of population.

Social protection for older women and men in LDC, 2000 and 2010-12 Active contributors to an old age pension (% of working age) and Old-age

pensioners (% of population above statutory pensionable age)

Source: ILO research Department based on ILO social protection database and World of Work Report 2014 Developing with jobs.

Policy implications for growth and employment

• Export and sectoral diversification is needed from commodities to manufacturing to improve employment and decent work outcomes

• The necessary condition, but certainly not the sufficient condition is to increase investment in manufacturing and agriculture to raise productivity, competitiveness, employment and incomes.

• The high incidence of the working poor, the high incidence of vulnerable workers, the persistently high preponderance of women amongst the vulnerable workers, and the high ratios of youth-to-adult unemployment, all call for an increase in private and public investment. Both raise aggregate demand and employment. This requires substantial improvements in the enabling environment for enterprises and investment, in particular for SMEs.

Policy recommendations. Productive transformation and education

• Increase the level of education and reduce the share of the population without schooling in order to enable productive transformation.

• Transform the educational structure in the labour force in a balanced manner in order to enlarge the option space for sustained diversification into low- and medium-technology manufacturing.

• Promote diversification into new technologies and higher value-added manufacturing for increased productivity, and higher opportunities to accumulate capabilities in new techno-economic paradigms.

• Design learning strategies by combining incentives and compulsion with support measures, and targeting learning-intensive sectors in addition to sectors with comparative advantages.

• Develop the potential of informal apprenticeship systems and strengthen the institutional capabilities to provide training for advanced technologies, and improved quality and effective training in order to promote productive transformation in the crafts sector and informal economy.

Policy recommendations. Social security

• LDCs should step up their efforts to extend social protection to larger groups of the population.

• National social protection strategies should aim at achieving a coordinated approach to combine contributory and non-contributory programmes to realize the human right to social security, including a minimum level of income security and effective access to health care.

• The establishment of national social protection floors in LDCs should be based on a detailed assessment of gaps and needs for social protection, of existing fiscal space, and ways of ensuring sufficient fiscal space in the future.

• Resource-rich LDCs should explore better ways to channel some of the proceeds of their commodity exports into investments in social protection.