• Module 3.3: Economic impacts and diversification options
  • Module 3.3.2: Economic diversification assessment
EXAMPLE
Mapping of economic potential and participatory Entrepreneurial Discovery Process in Imereti, Georgia

A qualitative mapping exercise was conducted to identify what industries may have the potential to drive economic transformation in the region, based on their proven or emerging economic strengths and evidence of critical mass. Official statistics were used for both a static (“proven strengths”) and a dynamic (“potential strengths”) analysis. Another component of the mapping was a Patent and Scientific Publication Analysis, to identify patents filed with the National Intellectual Property Center of Georgia and academic publications originating in Georgia nationally, and then in the Imereti region specifically. Interviews with representatives of pre-identified domains for the Imereti region were also conducted.

The mapping exercise identified several areas that might be prioritized for innovation and economic development potential, including: Extraction and production of basic metals and ores; Processing of wood and timber, production of wooden products and furniture; Agrofood industries; and Manufacturing of clothing, leather, footwear and textiles.

Subsequently, an Entrepreneurial Discovery Process was undertaken. This consisted of stakeholder workshops which were used to validate the information obtained from the mapping exercise and to refine the definition of these priority areas. Participants represented both technical and more general management expertise, and included stakeholders from the national government representatives and sector experts, as well as companies, universities and research institutes, local government and civil society organizations which are active in the region.

Beyond validating the analysis, this participatory approach is designed to encourage local market actors to participate proactively in the process of regional innovation policy development. The workshops promote debate between different actors, and participants are invited to identify the needs and innovation potential that should be targeted for support within a Smart Specialisation Strategy.

3.3.1 Economic impact assessment
EXAMPLES

This paper estimates the macroeconomic exposure of different countries to the low-carbon transition. The analysis uses a method to evaluate countries’ external, fiscal and socio-economic exposure, and to consider their capacity to adapt their productive structure. Specifically, using a Hybrid World Input-Output table for 189 countries, it identifies each country’s carbon-intensive industries and estimates its direct and indirect dependence on these industries, including their dependence on these industries for raising foreign currency (external exposure), government revenue (fiscal exposure), and the share of wages and employment (ocio-economic exposure).

Results show that countries present different degrees of exposition in different dimensions, and the degree of exposition varies significantly when indirect impacts are considered. By analysing countries’ capacity to adapt their production structure and resilience factors, the report explores the extent to which countries’  macroeconomic exposure results in vulnerabilities and risks during the green transition process.

This report synthesizes various studies demonstrating different data and research questions related to the assessment of social impacts. It focuses specifically on the impact of the covid19 pandemic on vulnerable groups, households and enterprises in Viet Nam.

The studies, which each utilize survey methods to gather data, include:

  • An assessment of the impact of the pandemic on vulnerable households and enterprises (by UNDP and UNWOMEN). This collected and analyzed information using a telephone survey of vulnerable households and businesses, covering most provinces of the country. It also simulated the COVID-19 impact on income poverty at the national level, by modeling the impact of the estimated income reduction from the survey using data from a recent Viet Nam Household Living Standard Survey.
  • A rapid assessment of the impact of COVID-19 on children and their families, and another rapid assessment of the impact of COVID-19 on people with disabilities (both by UNICEF). The latter surveyed persons with disabilities, using a questionnaire designed with input from government and UN agencies, and covered themes such as: personal status, changes in personal income before and during COVID-19, employment situation, health and socio-economic challenges, and coping mechanisms. The survey was supplemented by phone and face-to-face interviews.
  • A survey on the impact of the pandemic on the incomes of rural households across twelve provinces (by the Institute of Policy and Strategy for Agriculture and Rural Development, and included in a regional analysis for Asia Pacific (IFAD-ADB-IPSARD). This looked explicitly at how rural households responded to the COVID-19 pandemic, focusing on changes in household expenditures, support available from relatives and friends (i.e. informal safety nets), and other coping strategies such as sale of land assets and whether households sought government assistance.
  • A survey of firm(by UNIDO) in various countries, including Viet Nam, to gather information on the impact of COVID-19 and the responses of enterprises.

    The synthesis report summarizes the overall economic impact of COVID-19 in Viet Nam, and estimates losses of income and employment. It particularly focuses on micro and small businesses and vulnerable workers and their families, as well as impacts on specific vulnerable groups, including migrants, people living in remote and underserved areas, ethnic minorities, people with underlying health conditions, and people with disabilities. The report explicitly highlights how the pandemic has deepened existing disparities. It finds, for instance, that vulnerable households and workers have struggled to sustain their livelihoods, and that workers in key sectors like agriculture, aquaculture and construction sectors are less able to change jobs than people in other affected sectors.

    The report provides policy recommendations aimed at mitigating the effects of the crisis on poor and vulnerable people – including strengthening efforts to expand access to health care, closing gaps in social protection systems, stimulating the creation of formal sector employment, and refocusing public investment on sustainable development through renewable energy expansion, universal access to digital technologies and other essential infrastructure to stimulate job creation and productivity growth.

The study estimates national and regional impacts on production, income (GDP), incomes of poor and non-poor households, and employment of World Food Programme (WFP) spending in East Africa. Spending – in this case on food, logistics and other non-food goods and services – can in theory stimulate production and incomes in places which receive support, and these economic benefits can spread through the economy across households, businesses, and localities across the broader region, through secondary pathways such as income, production, and trade spillovers.

The analysis looks at impacts on production, GDP, and employment, as well as impacts on prices and other economic indicators such as changes in the level of wages among skilled and unskilled workers. To do this, it uses economic modeling tools, specifically computable general equilibrium (CGE) modelling, to estimate the broader economic impacts of expenditure in individual countries and the region as a whole. A multi-country CGE model was developed, grounded in the Global Trade Analysis Project (GTAP) framework and using a platform built on top of GTAP called the Environmental Impact and Sustainability Applied General Equilibrium (ENVISAGE) model.

Data challenges are common in many regions, and the report notes several. These include, for instance, a scarcity of economic information on several countries in the region (especially Somalia and South Sudan), as well as difficulties in being able to disaggregate household-level impacts between poor and non-poor households.

Its findings on the economic impacts of spending highlight, among other things, that the benefits of spending programmes vary across the region, depending for example on a country’s overall level of economic stability and productivity, and on its reliance on food imports.

3.3.2 Economic diversification assessment
EXAMPLES

Food and Fibre Gippsland (F&FG), a not for profit organization, partnered with the Latrobe Valley Authority in Victoria, Australia, to deliver the food and fibre stream of the Gippsland Smart Specialisation Strategy (GS3). The GS3 is a dynamic, place-based regional development initiative aiming to build on the region’s key strengths by fostering innovation for long-term, sustainable economic and social advantage.

A key ingredient in the process of developing and implementing the smart specialization strategy has been proactive engagement of stakeholders from across Industry, Government, Education / Research, and Community sectors, inviting them to collaboratively explore innovative industry opportunities for the region. The co-design approach means opportunities are assessed from different viewpoints, are backed by data, and that the priorities identified by the process are locally owned and supported.

The food and fibre stream of the GS3 has identified various innovation opportunities, including in: Advanced Vegetable Processing; Carbon Economies; Circular Economies; Collective Craft Malting; Sustainable Emerging Commodities - Insects & Seaweed; Vertical Farming; and, Industrial Hemp.

The wider smart specialization process for the Latrobe Valley region notes that one of the ways data was collected for this assessment was via a Business Innovation Survey for the region, modelled on the European Community Innovation Survey and adapted to the local context.

A qualitative mapping exercise was conducted to identify what industries may have the potential to drive economic transformation in the region, based on their proven or emerging economic strengths and evidence of critical mass. Official statistics were used for both a static (“proven strengths”) and a dynamic (“potential strengths”) analysis. Another component of the mapping was a Patent and Scientific Publication Analysis, to identify patents filed with the National Intellectual Property Center of Georgia and academic publications originating in Georgia nationally, and then in the Imereti region specifically. Interviews with representatives of pre-identified domains for the Imereti region were also conducted.

The mapping exercise identified several areas that might be prioritized for innovation and economic development potential, including: Extraction and production of basic metals and ores; Processing of wood and timber, production of wooden products and furniture; Agrofood industries; and Manufacturing of clothing, leather, footwear and textiles.

Subsequently, an Entrepreneurial Discovery Process was undertaken. This consisted of stakeholder workshops which were used to validate the information obtained from the mapping exercise and to refine the definition of these priority areas. Participants represented both technical and more general management expertise, and included stakeholders from the national government representatives and sector experts, as well as companies, universities and research institutes, local government and civil society organizations which are active in the region.

Beyond validating the analysis, this participatory approach is designed to encourage local market actors to participate proactively in the process of regional innovation policy development. The workshops promote debate between different actors, and participants are invited to identify the needs and innovation potential that should be targeted for support within a Smart Specialisation Strategy.

3.3.3 Asset repurposing assessment
EXAMPLES

screening tool developed by the North Sea Transition Authority (NSTA) aims to help to maximise the repurposing of oil and gas infrastructure for energy transition projects. Repurposing offers opportunity for oil and gas infrastructure to remain in the marine environment to be used or safeguarded for future use by another industry, such as carbon capture and storage. Repurposing reduces waste and offers time and cost efficiencies to new users. 

Initial analysis by the NSTA has identified more than 100 pipelines which could be suitable for CCS or hydrogen projects. This initial analysis will be verified and updated using data collected through the pilot process and made publicly available where possible.

In the context of South Africa’s intention to phase down coal production and use, CSIR led an exploration of different repurposing and beneficiation options for coal-fired power stations and coal mines in the province of Mpumalanga.

The objective was first to develop a transparent and robust framework for analyzing different repurposing and beneficiation options for power stations and coal mines, and second to use this framework with stakeholders to identify and assess options, or combinations of options, that merit further detailed planning.

For the first task, CSIR explored how several EU nations have assessed, analysed, and chosen repurposing options. The linkages between the coal value chain and other sectors in Mpumalanga was then profiled. The final MCDA framework was developed through engagement with key stakeholders, within and outside government. It explicitly integrates Just Transition principles, covering in decision criteria the societal consequences of repurposing options (the impacts on communities and their livelihoods) alongside the technical, economic and environmental aspects.

Once the framework for assessment was developed, CSIR used it to conduct a detailed multi criteria decision analysis of various repurposing options. These options were sourced from EU experiences with coal transition as well as some solutions proposed locally. They were first screened qualitatively to remove any options that were obviously not feasible in Mpumalanga, and then remaining options scrutinized using the MCDA framework.

The list of international solutions included, for example: coal ash greening cement (from Poland); Geothermal heating and cooling from coal mines (as proposed in the Netherlands); Renewable energy deployment using power station infrastructure; and, Green hydrogen storage development.