Transcript The Concept of Inclusive Growth

‘IBSA and Inclusive Growth’
Structure of the presentation
• Part I: IBSA
– IBSA background
– IBSA in the present
– IBSA achievements and challenges
• Part II: Inclusive Growth
– The concept of Inclusive Growth
– How to achieve Inclusive Growth?
– The measurement of Inclusive Growth
• Part III: IBSA and Inclusive Growth
– IBSA and trends in Inclusive Growth
– IBSA current efforts for promoting Inclusive Growth
– Issues which need to be further discussed: How Inclusive
is Inclusive Growth?
Part I
IBSA: ‘A unique model of
trans-national cooperation’
The World Development Report 2008
IBSA background
• Origins of IBSA:
– India, Brazil and South Africa share important economic and
political attributes, being large democracies very active in the
global scale
– Given their status as developing countries, they share
common development challenges
– As a result, in June 2003, the IBSA Dialogue Forum was
created and was formalized with the adoption of the Brasilia
Declaration in June 2003
IBSA background
- IBSA mainly perceived as a political initiative to
elevate the concerns of developing countries on the
global agenda. Imperative issues:
- The reform of the UN Security Council
- Balance the multilateral trade system in the framework of
the WTO Doha round
- Besides political cooperation:
- Commercial and technological exchange covering several
sectors
- Strong focus on Social development and poverty
eradication through IBSA Fund
IBSA as an unprecedented South-South alliance
• Previous South-South initiatives not successful because of:
– Lack of resources, institutional weaknesses, excessively large and
amorphous memberships
• But in IBSA:
– Group of like-minded countries which share very similar
interests, skills and needs
– It brings together three of the largest and fastest growing
economies in the world
– IBSA should also be differentiated from BRIC
IBSA in the present
Cooperation in IBSA is being built on 4 pillars:
1) Political Forums and Coordination:
- UN Security Council Reform
- Trade
2) Sectoral Cooperation, through 16 Working Groups:
- Agriculture
- Science & Technology
- Trade
3) IBSA fund for the Alleviation of Poverty and Hunger:
- Agriculture Project in Guinea-Bissau
- Waste Disposal in Haiti
- Infrastructure in Cape Verde
- Other projects in Burundi, Palestine and Cambodia.
4) Other Forums:
- Academic Forum
- Businessmen’s Forum
-
IBSA achievements
• Convergence of key areas is what makes IBSA so powerful
• IBSA’s Working Groups have had mixed results: The
Science and Technology Working Group has been the most
successful
• IBSA Development Fund has been successful
• Among the forums, the Business Forum stands out
• Although there has been some progress in social and
economic cooperation, IBSA’s success is political
coordination, specially within the framework of WTO
negotiations
IBSA challenges
1) Producing a Coordinated Plan of Action and a Greater
Strategic Focus
2) Achieving a Comprehensive Economic Partnership
•
•
•
Trade Facilitation
Agriculture Cooperation
Other Potential Areas for Future Cooperation:
•
Energy, Manufacturing and Services, R&D, Commodities
3) Expanding the Development Fund
4) Integrating Social Development Strategies
Part II. INCLUSIVE GROWTH
“If we cannot make globalization work for all,
in the end it will work for none.”
Kofi Annan
The Concept of Inclusive Growth
Definition: A growth process that ensures equal
access to opportunities for all segments of society
regardless of their individual circumstances.
Thus, inclusive growth is about providing the poor
with a starting point that can enable them to enjoy
the fruitfulness of economic growth.
How to achieve inclusive growth?
Growth accelerators
strategies for growth
+
Equalizing accelerators
which make the growth more equitable and
thus, more inclusive
Source: World Bank Development Policy Review
Achieving inclusive growth
Core strategy to make growth inclusive:
Eliminating circumstance-based inequalities in order to
ensure equality of opportunity
• How?
– Productive Employment
– Capacity Enhancement
– Social Protection
+ without forgetting Growth Accelerators
Inclusive Growth vs. Pro-poor Growth
(Ravallion and Chen, 2003)
• Relative definition of pro-poor growth: incomes of the
poor grow faster than those of the population as a whole
and thus, poverty and inequality are reduced
• Absolute definition of pro-poor growth: incomes of the
poor increase as an economy is experiencing growth and
thus, poverty is reduced, but not necessarily does
inequality
• In consequence, Inclusive Growth is in line with the
absolute definition of pro-poor growth, but not
necessarily the relative definition:
– The incomes of the poor increase with growth but not
necessarily faster than the rest of the population.
– The important point is that everybody is experiencing growth
Measuring Inclusive Growth
• Most studies measure whether a growth process is inclusive by
analyzing income growth among the whole population
• However, we believe it is not correct to just look at income
distribution to assess whether a growth process is inclusive or not
• Inclusive growth is about ensuring equality of opportunities
• Increase in incomes is a necessary condition for inclusive growth, but
not a sufficient one: while income of the poor might increase with
growth, equality of opportunity might not
• The essential condition for growth to be inclusive is to ensure that
there are equality of opportunities among the population
Measuring Inclusive Growth : Ali and Son
Part III: IBSA and Inclusive Growth
IBSA and IG: trends
- All three countries have recognized the
inequitable distribution of the gains of
globalization and growth and the need to adopt
inclusive growth policies
- They have affirmed in repeated occasions their
commitment to pursuing policies for inclusive
growth.
- Although their strong commitment to inclusive
growth, they are in different stages
Inclusive Growth in INDIA: trends
- It has shown a clear commitment to inclusive growth
policies over the years
- Huge increase in expenditure on social services
- From 2000 to 2005, about 47 million work opportunities were
created
- However, India’s big challenge still remains widespread
growth
- An unprecedented 6.5 annual GDP growth hasn’t brought about
even 1% point of annual reduction in poverty
- In consequence, although the efforts and the
improvements in some indicators, India’s growth hasn’t
been inclusive
Inclusive Growth in SOUTH AFRICA: trends
• Since 1993:
– Growth averaged about 3% from 1994-2004 and
has reached 5% in 2005.
– Employment creation
– But…
• Income inequalities have increased since 1993
• Employment remains high (26%)
• Poverty persists at acute levels
– South African Growth hasn’t been inclusive
High inequality persists in South Africa
Source: AGISA 2006
Inclusive Growth in BRAZIL: trends
• Brazil’s growth pattern can be defined as inclusive
– Gini coefficient has been declining in the last decade as well as
poverty
– Growth of the income of the poor has been higher than the
growth of the income of the rich
• Reasons for decline in income inequality:
– More equitable access to education
– Increasing integration of labor markets
– Increasing generosity of contributory and non-contributory
government transfers
• Bolsa Familia as a key program for reducing inequality and
extreme poverty
Income Inequality in Brazil falling but Remains High
• Assessment of inclusive growth by looking at
poverty and inequality dimensions instead of
access to opportunities
• Although these studies can be indicative, in
order to assess with exactitude the
inclusiveness of IBSA’s economies, access to
opportunities over time needs to be explored
Current efforts for the promotion of Inclusive
Growth: INDIA
a)
Anti-poverty and Employment generation policies:
i.
The National Rural Employment Guarantee Act (NREGA)
ii.
SGSY: to encourage self-employment for the rural poor
iii. SJSRY: employment to the urban unemployed or underemployed
poor
b) Rural infrastructure development:
i.
Bharat Nirman: basic infrastructure in rural areas
ii.
Total Sanitation Campaign
c) Education : RMSA scheme to enhance secondary education
d) Health:
i.
National Rural Health Mission (NRHM): health services in rural areas
ii.
JSY: Aimed at lowering MMR
Current efforts for the promotion of
Inclusive Growth: BRAZIL
a)
Bolsa Familia: Brazilian’s main conditional cash transfer program
b)
Structural initiatives prior to the crisis:
i.
ii.
iii.
iv.
c)
Income transfers
Minimum Wage
Industrial policy
Investment expenditure
New structural initiatives during the crisis
i.
ii.
Change in the personal income tax system
New housing program: Minha Casa, Minha Vida
Current efforts for the promotion of
Inclusive Growth: SOUTH AFRICA
a)
Second Economy Initiative
•
b)
Expanded Public Work Program (EPWP): to deal with high rates of
unemployment
Education and Skills Development
•
c)
Joint Initiative on Priority Skills Acquisition: addresses the shortage of
skills in the economy
Infrastructure Investment
•
d)
Access to basic services such as potable water, sanitation, electricity,
housing.
Industrial Policies
•
Increases productivity by adressing counstraints to growth in specific
sectors
IBSA and Inclusive Growth: Conclusions
• IBSA countries are strongly committed to
implement Inclusive Growth Policies
• But evidence shows us that there is still a long
way to go
• Hopefully, current efforts on social policies
taken by IBSA governments will bring growth
processes which are inclusive in the near
future
Food for Thought:
How Inclusive is Inclusive Growth?
• A growth whic increases opportunities for everybody but more for
the rich is still an inclusive growth process?
• How do we measure equality of opportunities? Many papers
measure equality of outcomes to assess whether growth has been
inclusive (e.g. poverty rates, inequality) but to which extend does
equality of outcomes reflect equality of opportunities?
• Greater consensus is needed for the definition and measurement of
inclusive growth
• What do we prefer – inclusive growth or pro-poor growth?