GLOBAL ECONOMIC DIVERSIFICATION INDEX
Government leaders and policymakers around the world are faced with new and pressing challenges, from the rapid and widespread digitisation transforming global economies – which has been accelerated by the advent of the Fourth Industrial Revolution – to mounting environmental pressures, geopolitical realignments, and the deeply disruptive outbreak of the COVID-19 pandemic. These challenges call for urgent and innovative solutions and an agile economy that can withstand sudden shifts and dramatic turns – and that agility requires economic diversification.
With that in mind, the Mohammed Bin Rashid School of Government (MBRSG) launched the Global Economic Diversification Index (EDI) to assess the level of economic diversification in countries around the world and rank them based on their status and progress. It aims to understand the nature of economic diversification and the factors that directly or indirectly impact a country’s overall level of diversification. The Index prioritises objectivity and accuracy and, as such, is based solely on quantitative measures. It aims to provides a quantitative benchmark and rank countries’ economic diversification efforts.
The EDI offers an overview and summary of a country’s economic diversification performance, which allows for comparing scores between countries. It helps identify the level and scope of economic diversification of a given country by assessing three elements: Production & Output Diversification, Trade Diversification, and Government Revenue Diversification.
The annual Index and Report are being published for first time in 2020 and will be reviewed and updated every year to keep track of the progress countries make in their diversification efforts. We believe the Index has been launched at the right time, given the growing economic pressures, sharp decline in oil and commodity prices, and the tremendous challenges brought on by the recent COVID-19 pandemic.
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Why the EDI? A Data-driven Contribution to Economic Diversification Policies
There is global consensus that economies relying heavily on exploiting their natural resources and primary commodities see less sustainable growth. Their production and exports remain largely concentrated in sectors with limited opportunities for growth and lower prospects for implementing advanced technologies. Economic diversification must be an integral part of all national strategies; a diverse economy is more resilient to external economic shocks and better suited for longer-term economic growth.
However, measuring the level of diversification of a country’s economy remains a challenge. The EDI aims to fill this gap by advancing a broader definition of economic diversification that covers three related dimensions: production, trade, and government revenue.
Many countries have been embracing economic diversification as a key element in their economic development policies and plans, but many developing nations around the world have found it challenging to do.
As such, economic diversification efforts are and should be tied to structural transformations in these countries’ economies, and to this end, the indicators and sub-indicators used in the EDI shed new light on the structural gaps that stand in the way of economic diversification efforts of developing and commodity-dependent countries.