Friday, June 25, 2010
World Bank: RECOVERY AT THE CROSSROADS: ROLE AND IMPLICATIONS FOR DEVELOPING COUNTRIES [24 June 2010]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
RECOVERY AT THE CROSSROADS: ROLE AND IMPLICATIONS FOR DEVELOPING COUNTRIES [24 June 2010]
[full-text, 15 pages]
Leaders of the G20 are meeting in Canada at a critical juncture. While the global economy shows signs of recovery, it is still fragile and uneven and we are transitioning toward a more mature phase, in which growth increasingly depends on private investment, and policy impetus including fiscal stimulus is waning. Excess capacity, high unemployment, ongoing household and banking-sector restructuring, weak capital flows and persistent financing gaps will also be important factors determining the shape, pace and sustainability of the recovery. Fiscal sustainability concerns in high-income Europe pose additional challenges to an already complex situation. At the same time, policymakers face the challenge of helping to foster sustainable growth in both developed and developing countries.
Low-income countries (LICs) and lower middle-income countries (LMICs) are particularly vulnerable to a weak and uneven global recovery, as they remain heavily dependent on commodity exports, remittances, FDI and ODA. The ability of these countries to maintain core development spending in the face of a slow recovery is uncertain as fiscal buffers have been drawn down over the past two years. A scarcity of resources to mount appropriate policy responses can jeopardize years of progress in combating poverty, undermining progress toward the Millennium Development Goals (MDGs). Large portions of the populations in many LICs, particularly in Africa, remain clustered around the poverty line and even mild downturns or weak recovery can have costly and long-lasting effects on human welfare, as families with few alternative employment opportunities and little or no access to credit are forced to reduce food intake, even for very young children, and pull children out of school.
Yet the global economy has also changed in ways that demand a fundamental rethinking. Developing country performance is increasingly important to the global economy. Supporting developing countries is not about giving handouts. It is an investment in sustainable global growth. Developing countries offer abundant opportunities for high-return investments (such as in critical infrastructure that removes bottlenecks to growth) that can create new sources of growth in global demand. Developing countries now contribute about half of global growth. And every dollar spent on investment goods in developing countries can yield 35 cents worth of demand for capital goods produced in high-income countries, precisely the kind of high-value goods that generate well-paying jobs. South-South trade is also expanding, now accounting for one-third of global trade.
Promoting multiple growth poles in developing countries can make an important contribution to the structural rebalancing of global growth so necessary for its sustainability. And the potential to contribute to global growth and rebalancing is not limited to rapidly growing emerging markets. Better policies have improved growth performance and opportunities in many LICs, including in Sub-Saharan Africa, which experienced average annual growth of six percent in the five years preceding the crisis. These countries offer attractive opportunities for investment, not just destinations for aid.
More financing is only part of the answer. Improvements in �soft infrastructure‖�in governance, regulation, cost recovery�in developing countries is a core part of the agenda, as are sustained investments in human capital. Stronger results orientation and improved decisions on strategic allocation and the management of resources are also essential.
Press Release 24 June 2010
G20 Should Support a Pro-Growth Agenda for Developing Countries-- World Bank
Developing countries increasingly important drivers for global economy
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