Structural transformation and its role in reducing poverty

The report highlights the role of structural transformation in reducing poverty in the Asia-Pacific least developing countries, landlocked developing countries and small island developing states, collectively referred to as “countries with special needs”. While the countries with special needs in Asia and Pacific have made considerable development gains in recent decades, two in five people still live on income below $3.20 a day, which is the standard poverty line for lower-middle income countries. Poverty is high in many countries as real wages remain low. In part, this is because a transition to service has bypassed the relatively higher-productive, employment-generating dynamism of the manufacturing sector in many countries. Also, little progress has taken place in within-sector upgrading in the agriculture sector, failing to facilitate value added activities in rural areas. Increasing productive employment is therefore critical to increase real wages and thus facilitate reduction in levels of poverty. Indeed, realizing the socioeconomic-related aspects of the Sustainable Development Goals is dependent on the ability of countries with special needs to provide decent employment through structural transformation. This report examines the link between structural transformation and poverty reduction and puts forward relevant policy considerations to align structural transformation and poverty reduction, highlighting the importance of targeted industrial policies and rural development.