Diversification
The process of structural transformationStructural transformation or change can be broadly defined as the reallocation of economic activity across three broad sectors, agriculture, manufacturing and services, which accompanies the process of economic growth (Kuznets, 1966). It usually refers to the transfer or shift of production factors — especially labour, capital and land — away from activities and sectors with low productivity to those with higher productivity, which are typically different in location, organization and technology (UNCTAD, 2006); (Rodrik, 2013). – reallocation of production factors from low-productivity, labour-intensive, and polluting activities to higher-productivity, skill-intensive, and sustainable ones (UNCTAD, 2025) – is central to enhancing productivity and incomes to mitigate vulnerability to market shocks. With no sign of further industrialization in Africa and LDCsLeast developed countries and stalled progress in manufacturing in most vulnerable economies, coupled with challenges in their digitalization, the role of digital technologies becomes even more important in diversifying economies and building resilient systems that are open, inclusive, and secure and benefit everyone. “Transforming the economies through diversification” is a critical element for inclusive prosperity (UNCTAD, 2021).
The two sections of this chapter discuss these issues drawing on SDGSustainable Development Goal indicators and other official statistics:
- Structural transformation to mitigate persistent technology gap
- Digital technologies are key to economic diversification
LDCs not on track to meet their SDG 9.2 target by 2030 in manufacturing value added and employment.
In 2024, the price of a mobile broadband subscription was equivalent to 5% of per capita GNI in LDCs.
References
- Kuznets S (1966). Modern Economic Growth. Yale University Press. New Haven.
- Rodrik D (2013). Unconditional convergence in manufacturing. Quarterly Journal of Economics. 128(1):165–204.
- UNCTAD (2006). The Least Developed Countries Report 2006: Developing Productive Capacities. United Nations publication. Sales No. E.06.II.D.9. New York and Geneva.
- UNCTAD (2021). The Bridgetown Covenant: From inequality and vulnerability to prosperity for all. TD/541/Add.2. Virtual Barbados. 3-7 October. Available at https://unctad.org/publication/bridgetown-covenant (accessed 30 May 2025).
- UNCTAD (2025). Shaping the future. Driving economic transformation for equitable, inclusive and sustainable development. Report of the Secretary-General of UNCTAD to the sixteenth session of the Conference.