UNCTAD launches new index to measure economic potential

The United Nations Conference on Trade and Development (UNCTAD) has launched a new-generation Productive Capacities Index (PCI) to help countries make more accurate diagnostics and measurements of their economic performance.

The Index launched on June 20 measures countries’ abilities to produce goods and deliver services, which are critical for international trade and global production value chains.

The index can help diagnose the areas where countries may be leading or falling behind, spotlighting where policies are working and where corrective efforts are needed, UNCTAD said.

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.”

The PCI suggests a roadmap for future policy actions and interventions under each of its eight components: human capital, natural capital, ICT, energy, structural change, transport, institutions, and the private sector.

Stronger productive capacities in these areas can help countries move towards long-term national development goals and achieve international targets like the Sustainable Development Goals.

Out of 100, the Philippines has an overall index of 43.8, scoring lowest in transport and highest in structural change.

In transport, the country scored just 22.6. Transport—defined as the capillarity of roads and railways network, and air connectivity—measures the capability of a system to take people or goods from one place to another.

The country registered 39.6 in natural capital and 39.7 in human capital. Natural capital estimates the availability of extractive and agricultural resources, while human capital captures the education, skills and health conditions possessed by population.

On ICT, the country recorded 47.1 on the Index. ICT estimates the accessibility and integration of communication systems within the population.

The institutions component measures political stability and efficiency through success in fighting criminality, corruption and terrorism, and safeguarding of citizens’ freedom of expression and association. Here, the Philippines scored 48.5.

In terms of energy, the country’s index was 53.9. This category measures the availability, sustainability and efficiency of power sources.

Meanwhile, for the private sector component, the Philippines logged 54.4. Private sector is defined by the ease of cross-border trade, which includes time and monetary costs to export and import, and the support to business in terms of domestic credit, velocity of contract enforcement and time required to start a business.

The country registered 57.2 for structural change, which refers to the movement of labor and other productive resources from low-productivity to high-productivity economic activities.

The Philippines’ 43.8 overall index gives it a ranking of seventh place among the ASEAN member countries, indicating a significant room for improvement.

Singapore has the highest overall PCI with 52.5, followed by Malaysia with 52.1, Thailand with 51.6, Brunei with 51.0, Vietnam with 46.9, Indonesia with 46.7, Lao PDR with 36.0, Cambodia with 35.9, and Myanmar with 31.8.

Among major Asian countries, South Korea booked an overall index of 63.0, Hong Kong 61.9, China 60.6, Japan 57.4, and India 45.3.

The PCI covers 194 economies for the period 2000-2022. It shows that developed economies have higher productive capacity scores, with economies such as Denmark, Australia and the United States leading the pack with an average score of 70 out of 100 on the composite index.

The PCI is available through a dedicated online portal (https://pci.unctad.org) with publications, manuals, resources and tools. It provides a better measure of development than other traditional benchmarks such as gross domestic product, said UNCTAD.

“For governments, the PCI is a powerful and practical tool to track progress over time and forge informed policies to plug development gaps,” it added.

UNCTAD Secretary-General Rebeca Grynspan said: “No nation has ever developed without building the required productive capacities, which are key to enabling countries to achieve sustained economic growth with accelerated poverty reduction, economic diversification and job creation.”

Close Menu