Africa is growing fast but transforming slowly. This is the message of the 2014 African Transformation Report, launched last week by the African Center for Economic Transformation (ACET). The report addresses a worry on the minds of many: in spite of impressive growth, the structure of most sub-Saharan African economies has evolved little in the past 40 years, with a poorly diversified export base, limited industrialization and technological progress, and a large informal economy whose economic potential remains mostly overlooked. In many African economies, manufacturing—the sector that has led rapid development in East Asia—is declining as a share of GDP. The worry is that without a major transformation Africa’s recent growth may soon run out of steam. The report argues that for growth to continue, Africa needs to invest in “DEPTH”–diversification, export competitiveness, productivity, and technological upgrading, all for the purposes of human well-being.
Many people have the misconception that my field -- global development -- is just about do-gooders and charities helping the poor. To be sure, many charitable groups are doing generous, laudable work. But global development extends far beyond charity and has a greater impact on the global economy than most people think.
Strong economic growth in developing countries became an engine for the global economy after the 2008-09 financial crisis, accounting for roughly 50 percent of all global growth. In addition, fully half of the United States’ exports now go to emerging markets and developing economies.
Global economic development can be good for your bottom line. Our focus is on helping more than a billion poor people lift themselves out of extreme poverty and on boosting the incomes of the poorest 40 percent in developing countries. To do that, we need to find economic growth strategies that help all segments of society in emerging markets -- reaching even fragile states striving to put years of conflict behind them and to create good jobs for their people.
The question I ask my team all the time is, what’s our plan? Increasingly scarce public funding isn’t enough to get the job done. We need to attract private sector investment that creates jobs. Ninety percent of all jobs in the developing world are created by the private sector. If we have high aspirations for the poor and vulnerable, there is no argument: We need the private sector to flourish, even in the poorest countries.
What does it take to make reforms work in small island countries?
At the end of June 2013, twelve Caribbean countries presented a roadmap for growth in three areas -logistics and connectivity, investment climate, skills and productivity- to a broad audience of private sector representatives, international development institutions, regional organization, civil society and media. That event culminated a 7-month long phase during which policy-making was not the result of close-doors meetings, but a process of intense negotiation, consultations, and consensus building among all actors of each Caribbean country’s societies. All of which was documented in real time and in a transparent fashion by each government. Yes, business was not “business as usual”.
Reforms priorities were agreed and a calendar for implementation brushed on a power point slide in the wonderful framework of five stars Bahamian hotel…After the workshop lights, projects and microphones shut down, many of us went home with a familiar sound in our ears: and now what? Was it another “talkshop”?
- economic growth
- world bank
- caribbean growth forum
- Social Development
- Information and Communication Technologies
- Global Economy
- Financial Sector
- Latin America & Caribbean
- Virgin Islands, British
- Trinidad and Tobago
- St. Vincent and the Grenadines
- St. Lucia
- St. Kitts and Nevis
- St. Helena
- Dominican Republic
- Bahamas, The
- Antigua and Barbuda
In a report released today, Connecting to Compete 2014: Trade Logistics in the Global Economy, we summarize the results of the Logistics Performance Index (LPI), and examine some of the factors behind different countries’ performance. The index and report, which have been produced about every two years since 2007, rank countries on a number of dimensions of trade, including customs performance, infrastructure quality, and timeliness of shipments.
Nowadays the importance of efficient supply chains for trade integration is recognized globally. Most sources of friction in the global economy—trade costs—are attributable to logistics bottlenecks. These might be physical deficiencies, red tape, especially at borders, or a lack of quality services. The LPI has greatly helped the realization that policy does matter for efficient logistics, and is widely referred to as a guide by policy-makers, including in rich countries such as those in the EU. It has contributed to creating a dynamic of reforms in many developing countries where the Bank has logistics-oriented programs. We are just back from Georgia and Indonesia, and our team is currently in Rabat, Morocco, where we are promoting projects to integrate supply chains of the Maghreb.
The Western Balkans Case
The Western Balkans have a lot going for them: ideal location next to the world’s largest economic bloc, a well-educated workforce, relatively low wages and decent infrastructure. FDI and investors should be rushing in … but are they?
Southeast Europe is the next frontier of EU expansion and includes six countries: Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. These countries have a lot in common and an equal amount of differences. They are all relatively small open economies, with a growth strategy premised on deeper international integration. Some, especially Macedonia, are more advanced in attracting international investors but as a whole, the region seems to be stuck in a classical Middle Income Trap: they are too rich to compete on low-cost manufacturing but are too poor to be global innovators. After a strong recovery following war and conflicts in the 1990s, the growth momentum has stalled over the last five years and the region has been particularly vulnerable to external shocks.
The World Bank’s latest Quarterly Economic Brief for the MENA region warns that short term prospects for many countries in the region are poor. For reasons related to ongoing political turmoil, these countries face high fiscal and current account deficits and are not undertaking structural reforms that could make things better in the medium run. On the other hand, one part of the region, the hydrocarbon-rich members of the Gulf Cooperation Council (GCC), faces a much rosier short term economic outlook. This is of some consolation because the GCC economies account for almost half the region’s GDP and have a significant impact on some neighboring economies (including Egypt, Jordan and Yemen) through financial transfers related to remittances, tourism, foreign investment and aid.
Inequality is back in the news. In his 2014 State of the Union address, U. S. President Obama lamented that, “after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.” At the global scale, Oxfam is making the same point, noting in a recent report that the richest 85 people in the world own the same amount of wealth as the 3.5 billion bottom half of the Earth's population. Perhaps more surprising, the rich and powerful CEOs jetting to Davos earlier this year seemed to finally get it: capitalism cannot survive if income and wealth become concentrated in too few hands. Fighting inequality would therefore not only be the morally correct thing to do, it would also be smart economics. And this is what a recent Staff Discussion Note from the IMF suggests: “inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required in the face of shocks, and thus tends to reduce the pace and durability of growth.”