The United Nations Conference on Trade and Development (Unctad) on February 8 launched its new Productive Capacities Index (PCI), which measures countries’ capacity to achieve social and economic transformation and helps them track their ability to achieve the Sustainable Development Goals (SDG).

The new tool will help developing countries improve their development policies, reduce poverty and build economic resilience to negative shocks, such as from as the coronavirus pandemic, which has devastated economies across the world.

The PCI is an online portal with publications, manuals, resources and tools that allow policymakers to measure their countries’ performance in achieving their national development goals, as well as their ability to meet the SDGs.

Productive capacities help countries avoid the trap of focusing on a few ingredients of production – such as machinery and equipment, physical infrastructure, human resource development, technological capabilities – as ‘magic bullets’ for economic growth and poverty reduction.

They equip countries to foster structural economic transformation, which, in turn, helps reduce poverty and accelerates progress towards achieving the SDGs.

Unctad defines productive capacities as “the productive resources, entrepreneurial capabilities and production linkages that together determine the capacity of a country to produce goods and services and enable it to grow and develop.”

“As countries fight the coronavirus crisis, their need to build economy-wide productive capacities for inclusive and sustainable growth is greater than ever," emphasised Unctad secretary-general Mukhisa Kituyi.

The PCI tool, which uses data from 193 countries gathered over 18 years, draws attention to the strengths and weaknesses of countries’ past policies, processes and actions, and then suggests a roadmap for future policy actions and interventions under each component.

DEVELOPING PRODUCTIVE CAPACITY
The tool provides an overview of how far productive capacities have been developed or not in each country, enabling policymakers to trace their development performance over time, as well as compare it with other countries.

The index scores a country’s performance on productive capacities on a scale of 1 to 100, assessing the effectiveness of policies and strategies as well as existing gaps and limitations. It can help governments formulate and implement their policies better and benchmark their achievements.

A country’s overall level of productive capacities, as well as performance across the eight components of the PCI, are markers of its strengths, weaknesses and possible future growth patterns.

The PCI identifies key areas that developing countries should focus on to boost their productive capacities and achieve long-term, sustainable and inclusive growth.

Policymakers in these countries can use the tool to make evidence-based decisions about appropriate policies and strategies.

“The PCI is a practical guide and diagnostic tool to inform trade and development policy choices at the national level,” said Unctad division for Africa and least developed countries director Paul Akiwumi.

Sectoral or thematic priorities for building productive capacities should be determined by each country’s national development strategy and country-specific conditions.

“There is no universal blueprint to foster the development of productive capacities and structural economic transformation. Policies should be homegrown and based on country-specific constraints, opportunities and comparative advantages.

"Concerted efforts must be made to support countries in developing and building new productive capacities and using their existing ones fully," said Akiwumi.

Not surprisingly, developed countries and industrialised economies are the top performers in aggregate PCI and category specific scores, except in natural capital, added Kituyi.

Africa’s leading performers are Mauritius, ranked forty-sixth in the world, followed by South Africa in seventy-fourth position and Tunisia in eighty-fifth position.

Many developing countries, particularly the world’s poorest nations and landlocked ones, lag in all components of the PCI, except natural capital, largely owing to their overdependence on the export of primary commodities and limited production in a few sectors.

There are notable gaps in key aspects of productive capacities, including structural change, institutions, energy, information and communication technology and human capital, concluded Kituyi.