Challenges, Policy Options, and the Way Forward

Economic Diversification in Selected Asian Landlocked Developing Countries (Bhutan, Kazakhstan, Mongolia, and Turkmenistan)

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The study examines the trade and development challenges facing Asian Landlocked Developing Countries and their prospects for export diversification. It offers recommendations based on the case studies of the selected countries. The report argues that, despite complex trade and development challenges, the countries studied have significant potential to diversify their economies into the production and export of higher-value-added products in several sectors. These include agriculture (including agro-processing), light manufacturing (such as textiles, leather, and leather products), information and communications technology, tourism, and the construction sectors. Using the product-space approach, the report also identifies specific products that hold potential for export expansion and diversification in each country. For instance, agriculture and, to a lesser extent, manufacturing, are promising sectors for diversification, including niche products such as mandarin oranges (Bhutan), cashmere (Mongolia), silk (Turkmenistan), and cereal (Kazakhstan). The rich cultural heritage and varied geography of these countries are also conducive to tourism. In addition, there can be synergies between tourism and improvements in the quality of some local food and manufacturing products. However, a number of improvements in micro- and macro-economic policies and institutions are necessary to realize this potential.




Bhutan is a small, landlocked country in the eastern Himalayas situated between India and China. The country is almost entirely mountainous; the southern border with India is at an elevation of around 300 meters above sea level, and the northern border with China is more than 7,500 meters above sea level (ADB 2013). Limited access to the global market, together with the rugged terrain that constrains infrastructure development, poses a significant challenge to the country’s development and diversification. Tense diplomatic relations with China, moreover, constrain the country’s ability to overcome its reliance on India. India was the destination of 94 per cent of Bhutan’s exports and the origin of 79 per cent of imports in 2012. India also accounted for 93 per cent of net capital inflows in the 2014–2015 fiscal year.


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