After five years in Indonesia, my family and I have left this wonderful country and moved to Kenya. The last five years have been excellent years for Indonesia. The economy stabilized, growth resumed and services started to improve, although modestly and not in all areas. Indonesia still remains an underrated country, but this may change. Indonesia has only mildly been affected by the global crisis.
|This is my last week in the World Bank, after working at the institution for 20 years, the last five as country director for China and Mongolia.|
Imagine how the new Indonesia would prosper if everyone had affordable health insurance, every child completed secondary education and highways were in place connecting Indonesia’s three biggest cities: Jakarta, Surabaya and Medan.
The Food Aid Information System from the World Food Programme tracks data on food aid flows since 1988.
This somewhat provocative question was the title of a conference hosted by Oxford and Standard Charter this week in London. My answer was: "No, not tomorrow; but yes, eventually – especially if China continues to vigorously pursue economic reform."
The reason that China cannot be the engine of global growth tomorrow is straight-forward. For the last decade an awful lot of the final demand in the world has come from the U.S. That era is over for the time being as U.S. households now concentrate on rebuilding their savings. No one country can fill the gap left by the slowdown in U.S. consumption: Japan, Germany, and China together have less consumption than the U.S., so no one of them can replace the U.S. as the major source of demand in the world. It's not realistic to expect China to play that role. But we are probably moving into a more multi-polar period in which there is more balanced growth in all of the major economies.
|The Hebei province produces one-quarter of China's steel, and has felt sharply the country's slowdown in investment during the financial crisis.|
In the last decade, conditional cash transfer (CCT) programs are probably the key social policy innovation around the world and in the East Asia and Pacific region. The targeted programs offer money to poor households on the condition they make pre-specified investments in the human capital of children. Typically, this involves school enrollment and attendance, and basic preventive health activities such as periodic checkups, growth monitoring, and vaccinations for young children.
|China’s stimulus package, announced this week, focuses on more than just building up the industrial and export capacity. Some investments will also be in housing, schools, and health facilities.|
China announced a massive stimulus package of 4 trillion Yuan (US$570 billion) this week, to aid its ailing economy. The move was quickly welcomed by World Bank President Robert Zoellick: "China is well positioned given its current account surplus and budget position to have fiscal expansion," said the World Bank chief at a news conference. "I am delighted that China decided not only to undertake these steps, but to announce it before the G20 summit," he added.
Basically, I think that the package is very good. It is not as big as it looks at first glance, but then the economy is not as bad as many people think. Real retail sales for October came in at 17 percent growth rate, down trivially from 18 percent in September. Exports in October were up 19.2 percent over the year before. There is definitely evidence of a slowing economy, but nothing too dramatic has happened so far. Worrying signs, such as a sharp drop in growth of electricity demand in October, suggest that heavy industry is slowing. And imports for processing have slowed to a 2-3 percent growth rate, indicating that processing exports will slow down sharply. We have said for some time that China needed to be ready with a stimulus package toward the end of 2008 as global conditions would likely lead to a slowdown, and that time has come. I see the current move as precautionary, in light of some worrisome signals, rather than as reactive to a highly deteriorated situation (as suggested in some of the Western press coverage).
|In some villages in Laos, a household of six people live on US$320 a year, living with whatever means their environment offers them.|
A Water and Sanitation Program report we released last month, called Economic Impact of Sanitation in Indonesia (pdf), makes that case for that country. The report says that the economic costs of poor hygiene and sanitation in Indonesia reached an estimated US$6.3 billion, or 2.3 percent of GDP in 2006.