INCLUSIVE GROWTH AND THE MDGs:

1
INCLUSIVE GROWTH AND THE MDGs THE ASIAN
EXPERIENCE
By Hafiz A. Pasha
2
THE MDGs

• GOAL 1 Eradicate extreme poverty and hunger
• GOAL 2 Achieve universal primary education
• GOAL 3 Promote gender equality and empower
  women
• GOAL 4 Reduce child mortality
• GOAL 5 Improve maternal health
• GOAL 6 Combat HIV/AIDs, malaria and other
  diseases
• GOAL 7 Ensure environmental sustainability
• GOAL 8 Develop a global partnership for
  development
• 18 Targets

3
SGs MID-POINT GLOBAL MDG REPORT 2007

• Some gains, but mixed record
• Benefits of growth have been unequally shared
• MDGs Achievable with
• Inclusive economic growth
• Sound governance
• Increased public investment
• Decent work
• MDG-Based National Development Strategies
• Adequate financing with Global Partnership for
  Development

4
What is Asias Progress on MDGs?

• East Asia is generally on-track South Asia
  behind on many goals
• Progress uneven among goals less progress on
  health and environmental sustainability
• LDCs, LLDCs and SIDs mostly off-track
• Within well-performing countries, particular
  regions/groups falling behind

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Asias Progress on MDGs
Maternal Mortality CO2 Emissions Water Supply
Rural Infant Mortality Malnutrition Sanitation
Rural Primary Enrollment Forest Cover
1Poverty HIV Prevalence Gender Primary Gender
Secondary Source UNESCAP

• Least Progress
• Most Progress

6
Asias Progress on MDGs

• 334 Million people taken out of poverty
  three-fourths in China
• Currently about 600 Million poor 120 Million in
  LDCs 330 Million in LICs 150 Million in MICs

Below 1 PPP Poverty Line Source MDG Report
2007
7
Asias Progress on MDGs
Source MDG Report 2007
8
The LDCs of Asia-Pacific

• 14 LDCs Afghanistan, Bangladesh, Bhutan,
  Cambodia, Kiribati, Lao PDR, Maldives, Myanmar,
  Samoa, Solomon Islands, Timor Leste, Tuvalu,
  Vanautu
• 4 LDCs are landlocked and 6 are small island
  states
• 5 LDCs are in South Asia, 4 in East Asia and 5 in
  the Pacific
• Population of 258 million 37 of global
  population of LDCs.
• Average per capita income is 513
• 4 LDCs are classified as severely indebted
• Average exports as of GDP is 21, below other
  LDCs
• Textile quota enabled rapid export growth of many
  Asian LDCs.

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Asian LDCs Have Made Less Progress
Includes Central Asian Republics. All countries
of Asia Pacific for which data is available
Source UNESCAP
10
ASIA-PACIFIC HAS EXPERIENCED RAPID GROWTH
Source World Bank
11
BUT IN THE ABSENCE OF INCLUSIVE GROWTH IN
ASIA-PACIFIC

• Inequality has increased among countries
• Inequality has increased within countries

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INEQUALITY INCREASED AMONG COUNTRIES IN
ASIA-PACIFIC
INEQUALITY HAS INCREASED AMONG COUNTRIES IN
ASIA-PACIFIC
Divergence of Growth
1980 1990 2000
2005 Source World Bank
13
INEQUALITY HAS INCREASED AMONG COUNTRIES IN
ASIA-PACIFIC
Ratio of Income of Top 5 of Regional Population
to Income of Bottom 5
Source World Bank
14
Inequality has increased within countries in Asia
Source UNDP
15
The rich-poor gap has increased rapidly with
growing inequality within countries
Source World Bank
16
MDGs Poverty Incidence Trends amongst Asian LDCs
Asian LDCs Current Poverty trends Versus MDG
Target, 1990--2015

1990 2000
2015
17
THE POVERTY-GROWTH ELASTICITY IS LOW IN
ASIA-PACIFIC

• With unchanged inequality, the poverty-growth
  elasticity would be around 2.0 (Ravallion)
• 168 million more people would have been taken
  out of poverty if inequality had not worsened

18
REGIONAL INEQUALITY IS HIGH WITHIN COUNTRIES
Source Shankar Shah (2003)
19
Reasons for Less Inclusive Growth Within Countries

• Failure of rural development after 1980s,
  especially in recent years in South Asia
• Low employment growth, especially of unskilled
  workers, after 1980s, due to globalization
• Low investment in human development, especially
  in South Asia

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The Sectoral Composition of Growth
Source World Bank
21
Growth of Employment in Asia Pacific

• Unemployment rates have increased generally,
  despite rapid economic growth

Source World Bank
22
Factors Influencing Employment Intensity of Growth

• Incentive structure influencing relative factor
  use (example tax holidays to promote FDI which
  is usually capital technology intensive low
  real interest rate)
• Capital deepening in the face of labour shortage
  (example Malaysia since the 1990s)
• Difficulties faced by labour intensive industries
  (e.g. lack of access to credit by small
  enterprises)

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Explanations for Increasing Skill Premium

• Skill based technological change
• FDI Out-sourcing of parts of value added chain
  labor intensive by investing country standards
  but capital-intensive for recipient country
  Example electronics and office machines in
  China.
• Transitional Unemployment of unskilled workers
  following trade liberalization. Example layoffs
  by public enterprises in China with WTO entry.
• Need for quality control and upgrading raises
  demand for automation and skills of exporting
  enterprises.

Source Goldberg Pavnick, March. 2007, JEL
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UNDERINVESTMENT IN HUMAN DEVELOPMENT IN ASIA
1991 Source UNDP (2006)
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TARGET GROUPS FOR MORE INCLUSIVE GROWTH

• Women
• Youth
• Landless and small farmers
• Self-employed in informal sector
• Unskilled and casual workers
• Migrant households
• Minorities and indigenous people
• Aged and disabled
• People in remote locations and backward areas

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Aid Flows into Asia-Pacific

• Total ODA to Asia-Pacific of 12.6 Billion in
  2005, doubling from level in 2000
• Per capita Aid is 15 of that of Africa
• Total ODA to Asian LDCs of 5 Billion, up from
  1.9 Billion in 2000
• No Asian LDC has benefited from the HIPC
  initiative
• For MDGs to be achieved LDCs will require
  doubling or trebling of Aid
• Issue of absorptive capacity (Dutch Disease)

Source OECD-DAC
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POLICY AREAS FOR INCLUSIVE GROWTH AMONG COUNTRIES
FOR ACHIEVING MDGS

• Technical Assistance for preparation of MDG-Based
  Development Strategies
• Special and Differential Treatment of exports by
  Asian LDCs to large developing countries (like
  China) and developed countries
• Integrated Framework and Aid for Trade (for
  removing supply side constraints)
• Higher Aid flows to LDCs, LLDCs and SIDs
• South-South Cooperation
• Asian emerging donors (China, Korea, Malaysia,
  etc.) focus on Asian LDCs

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POLICY AREAS FOR INCLUSIVE GROWTH WITHIN
COUNTRIES FOR ACHIEVING MDGS

• Promotion of Rural Development
• Small Farms
• Off-Farm Employment
• Policies for Employment Generation
• Labor Intensive Sectors
• Choice of Technology
• Labor Market
• Skill Development
• SMEs

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POLICY AREAS FOR INCLUSIVE GROWTH WITHIN
COUNTRIES FOR ACHIEVING MDGS

• Public Investment Allocations
• Quick Impact Projects
• Rural Infrastructure
• Human Development
• Backward Areas
• Macroeconomic Policies
• Fiscal Space for Public Investment
• Monetary Policy (Real Interest Rate, Credit)
• Trade Policies
• Level, pace and sequencing of Trade
  Liberalisation

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POLICY AREAS FOR INCLUSIVE GROWTH
POLICY AREAS FOR INCLUSIVE GROWTH WITHIN
COUNTRIES FOR ACHIEVING MDGS

• Delivery of Services
• Improvements in Governance (including
  decentralisation, accountability, empowerment)
• Social Safety Nets
• Food and Nutrition
• Employment Guarantee
• Conditional Cash Transfers
• Social Protection
• Social Development
• Gender Equality
• Access to Health Education Services