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DDD "what would it take to achieve the #MDGs by 2015?"

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DDD "what would it take to achieve the #MDGs by 2015?"

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DDD "what would it take to achieve the #MDGs by 2015?"

  1. 1. 4th DAC Development Debate What would it take to achieve the MDGs by 2015?Can we still Achievethe Millennium Development Goals?FROM COSTS TO POLICIES An OECD Development Centre study Jean Philippe Stijns, Ph.D., Economist OECD Development Centre
  2. 2. Motivation The paper sizes the additional development resources • that are needed •And that are potentially available to attain the MDG’s in developing countries 2015 deadline is rapidly approaching, and progress remains to be made Growing demand for data on domestic resources available for development, and how they compare to other flows (See AEO 2010- 2011). Cf. Los Cabos report of the G20 working group on development. MDG’s too often thought of as Millennium “Donor” Goals. Revisit MDG costing exercises from early 2000s & extend to scope for domestic tax collection.
  3. 3. Outline1 Why revisit the cost of achieving the MDGs?2 How much would it cost?3 How to pay for the MDGs?4 What policy implications can we derive?
  4. 4. 1. Basis of cost estimates 6 out of 8 goals  Poverty reduction target  Halve the proportion of people living on <$1.25/day  Education target(s)  Achieved if net enrolment ratio reaches 100%  Health related target(s)  WHO : Multiple health related targets are met if a level of total expenditure for health exceeds 60 USD per capita
  5. 5. 1. Costing MDGs Direct transfers addressing MDG’s Top-Down assuming unchanged quality of growth Growth Dev’t Poverty Poverty Health Educ. Health Educ. Poverty, Education and Health Bottom-UP are addressed through economic growth assuming unchanged income distribution. Source: Atisophon et al. (2011) – OECD DEV WP #306
  6. 6. 1. Limitations(real & imagined)1. MDGs were conceived to be met at the global level.  Is it unfair to benchmark all countries the same way?  Or is it good to apply some gently pressure?  But what is the accountability and ownership dynamic?2. The causal MDG achievement & development is questionable  Some goals are outputs: e.g. school enrolment; but how about quality?  Some goals are impacts: e.g. mortality / prevalence but how enabling is the environment?3. Development financing is not the same as ODA  Yet, some countries are still highly dependent on aid (30-50% of revenues);  Yet (more) efficient taxes don’t always translate in (more) efficient expenditure. Cf. Global Forum on Development.4. How reliable are the estimates?  There are intersections between the MDGs.  Conversely, there are serious capacity bottleneck issues.  Even the bottom-up approach assumes constant quality of growth…
  7. 7. 2. The Big Number 2009 USD billion 20 Low-income countries with financing gap Total 62.1 59.2 121.3 79 Low-and middle income countries with service provision expenditures* But nothing in the making of these numbers imply that this gap necessarily needs to be completely addressed by ODA…Source: Authors’ calculations
  8. 8. 2. Top-Down vs. Bottom-Up 160 2009 USD billion 140 140 120 Bottom Up 100 79 80 62 60 Top Down 40 33 34 20 6 0 Upper-middle income Lower-middle income Low incomeSource: Authors’ calculations
  9. 9. 2. Top-Down vs. Bottom-Up 180 170 2009 USD billion 160 140 120 100 89 80 60 36 40 26 20 6 9 10 2 0.5 1 4 0.1 0 East Asia & South Asia* Middle East & Europe & Sub-Saharan Latin America Pacific North Africa Central Asia Africa & Caribbean Bottom Up Top DownSource: Authors’ calculations
  10. 10. 3. Needs vs. Means160 2009 USD billion140120100 80 60 40 20 0 Low income Lower middle income Upper middle income Financing Gap Existing Development Resources Bottom-Up CostsSource: Authors’ calculations
  11. 11. 3. Development Resources 500 2008 USD billion 450 400 350 300 250 200 150 100 50 0 Private capital flows Net grants by private voluntary organisations Other official flows ODANote: Net OOF flows were negative in 2000-01, 2004 and 2006-07.Source: Authors’ calculations based on DOEC-DAC figures
  12. 12. 3. Potential Tax Increases 5.0% % of 2009 USD 70 GDP billion 4.5% 60 4.0% 3.5% 50 Total Potential Tax Increase 3.0% 40 2.5% 2.0% 30 Average Potential 1.5% 20 Tax Increase as a 1.0% Share of GDP 10 0.5% 0.0% 0 Low-income Lower Upper middle- middle- income incomeSource: Authors’ calculations
  13. 13. 3. Potential Tax Revenues (2)40 36353025 23201510 5 2 2 0 1 0 East Asia & Pacific & Central Asia Middle East & North South Asia Europe Latin America & Caribbean Africa Sub-Saharan AfricaSource: Authors’ calculations
  14. 14. 4.Putting it all together160 Top-Down Costs140 Bottom-Up Costs120 FDI100 Remittances 80 ODA 60 Tax revenues 40 Additional Tax 20 Potential 0 Low income Lower middle income Upper middle incomeSource: Authors’ calculations
  15. 15. 4.Policy Implications • It’s at least as much about political will and policies than about financing. • Need for a major upgrade in the quality of public policies and institutions: • Policy coherence and aid effectiveness; • Tax collection, public expenditure and investment climate.
  16. 16. 4.Policy Implications • In upper middle-income countries: the goals are affordable (with political will and smart policy design) but: • Political will and policy reforms will be needed • And thus space for policy dialogue and capacity building • In low-income countries: donor countries should deliver on their aid commitments while the momentum for tax reforms is sustained.
  17. 17. 4.Policy Implications • More than ever, private capital, development co- operation among countries of the South, remittances from migrants and private donations will need to complement aid. • Ensure that all these resources and domestic policies contribute to sustainable, inclusive growth and to social development.
  18. 18. 4. So what’s next? Post-2015  Do the high costs of MDG achievement offer any guidance on what monitoring of international development objectives should be like after 2015?  Is development “achieved” after overcoming the extreme poverty embodied in the eight MDG’s?  What is the balance between country-relevant objectives and internationally comparable goals?  Should enabling a growth environment be prioritized?  Should tackling inequality or improving the quality of public expenditure instead be the main focus of reform?  Should instead it be aid effectiveness and capacity building?
  19. 19. THANK YOU Благодаря за вашето внимание (bg) Ďakujeme za pozornosť (sk) Dhanyavaad (in hindi) Dikkatiniz icin tesekkurler (tr) Gracias por su atención (es) Grazie per la Loro attenzione (it) Merci de votre attention (fr) Neengal Gavanithadharku Nandri (in tamil) Σας εσταριστώ πολύ για την προσοτή σας (gr) Спасибо за ваше внимание (ru) Tack för er uppmärksamhet (se) Thank you for your attention (uk, us) Vielen Dank für Ihre Aufmerksamkeit (de) 귀하의 관심에 대해 대단히 감사합니다 (kr) Ačiū už dėmesį (lt) (ar)
  20. 20. Background: the MDGs UN Millennium Declaration (8 Sept 2000):adopts 8 goals to measure development progress 1990 – 2015. Goals are the broad objectives envisioned by member states in theMillennium declaration.Targets quantify how the goal can be achieved. Indicators allow the monitoring of progress towards reaching the targetsand achieving the goals. The paper sizes the additional development resources that are needed in developing countries to attain the MDG’s
  21. 21. 5.Methodological Annex Incomes Categories (annual income per habitant – 2010)  Upper-middle income: USD 3 976 – 12 275  Lower-middle income: USD 1 006 – 3 975  Low income: USD 1 005 or lessSource: OECD Development Centre based on World Bank data
  22. 22. 5.Methodological Annex Reducing poverty through growth: Top-Down for MDG 1 We calculate growth in mean income needed to halve the 1990 headcount ratio. Poor Headcount ratio = f( mean income, poverty line, Lorenz0.25 curve parameters) 1990 2015 Since the per capita growth rate y = I/Y*1/ICOR – p 0.2 target and I =sY + additional resources + OF we can solve for additional resources as shown on the slide, using the y derived from the first step.0.15 Where I is investment, Y is GDP, p is population growth, s is the savings rate, OF is other flows, and 0.1 ICOR is the incremental capital output ratio (which we calculate as the sum of all investment 1990-2015 divided by the change in output between 2016 and 1990).0.05 ICOR is the inverse of the marginal productivity of capital– the higher it is the less productive investment is. 0 $0.00 Source: Authors’ calculations Additional resources = (y + p) * Y * ICOR – s*Y - OF
  23. 23. 5.Methodological Annex Reducing poverty through redistribution: Bottom-Up for MDG 1 We can use the Poverty Gap (mean proportionate shortfall of the poor’s income from the poverty line) For those countries which aren’t on track to achieve the target growth rates: we calculate the poverty gap for 2015 using growth as predicted by the IMF WEO as a baseline. This is compared to the Poverty Gap that would obtain if the target growth rates are achieved instead. The difference between these two ratios multiplied times the poverty line (1.25 USD day, or 38 USD per month, or $456 per year) and then times the population of the entire country gives the aggregate transfer to the poor needed to eliminate poverty.
  24. 24. 5.Methodological Annex Calculating Expenditure to Meet Education-related Goals (MDGs 2 & 3) NER Pessimistic 100 Universal completion of primary education can be restated as reaching a NER equal to 100%. 90 For the funding gap, we first estimate the baseline spending on education. 80 We estimate the spending that is needed to be spent to achieve the universal enrolment in primary 70 education. The funding gap, which is equal to the difference 60 between the two estimates, is calculated. 2009 2010 2011 2012 2013 2014 2015 100 For the baseline scenarios: 2 assumptions are Optimistic assumed. 90  NERs remain constant at their 2009 level. 80 (pessimistic) 70  NERs grow linearly following the preceding decade trend. (optimistic) 60 2009 2010 2011 2012 2013 2014 2015Source: Authors’ calculations Baseline
  25. 25. 5.Methodological Annex Achieve health related MDGs Estimation strategy:  According to WHO study, “the money needed to reach the health related MDGs in 49 low-income countries, suggest that, on average (un-weighted), these countries will need to spend a little more than USD 60 per capita by 2015.  Projected per capita expenditure for health based on historical data and estimated the yearly financial gap between the required linear trends to reach per capita 60 USD expenditure by 2015.  These costs per inhabitant are multiplied by population projections coming from the United Nations’ World Population Prospects, the 2010 Revision (United Nations, Population Division). Our baseline is a constant scenario, where initial per capita expenditure for health in 2009 remains constant.
  26. 26. 5.Methodological Annex Estimating the Scope for Scaling-up Domestic Resources Mobilisation The scale-up of domestic resource mobilisation is explained by an adoption from the techniques used by Piancastelli (2001) and Bird et al. (2004; 2008). To calculate “tax effort” in developing countries, we use this index to compare predicted tax revenues to actual tax revenues and to estimate how much extra tax revenue may be collected if a country improves tax collection. Empirically, taxes as a share of GDP can be shown to depend on the economy’s level of development, on the share of the economy that is formal or industrialised and on the openness of the economy to trade.  Generally, higher levels of development and higher levels of openness coincide with higher levels of tax collection.
  27. 27. ODA vs. Private Capital Flows0.9% ODA, other official flows and net grants by % GDP of DAC0.8% private voluntary organisations member Countries0.7% Private capital flows0.6%0.5%0.4%0.3%0.2%0.1%0.0%Source: Authors’ calculations based on OECD-DAC
  28. 28. How Much for poverty? 0.2 Middle East & Upper-middle 0.1 North Africa income 0.6 Europe & Central Lower-middle Asia 2.4 2.3 income Latin America & 4.2 Caribbean Low income Sub-Saharan Africa 62 130 170 140 78 1.9 8.5 10 89
  29. 29. How Much for Health? Health needs (MDGs 4-6) measures by Income Group The Big Picture and Region (2009 USD bn) 0 Most of the extra spending on health will be needed in sub-Saharan Africa and South Asia. in order to cut child Upper-middle income mortality by two thirds, reduce the 28.8 Lower-middle income maternal mortality ratio by three 30.1 Low income quarters and halt AIDS, malaria and other major diseases. The highest costs are associated with health (MDGs 4-6) in low- and lower- 0.2 Middle East & North middle 0 Africa countries, USD 59 billion, and, in terms 0.2 Europe & Central Asia of regions in South 4.3 Asia, USD 35 billion, and in sub- 19.5 East Asia & Pacific Saharan Africa, USD 20 billion. Latin America & Caribbean South Asia 34.8 Sub-Saharan Africa
  30. 30. How Much for Education? Education needs (MDGs 2-3) measures by The Big Picture Income Group and Region (2009 USD bn) Upper-middle 1.1 income Although overall school attendance has increased over the past decade, it will still Lower-middle income cost up to USD 8.8 billion to achieve 2.2 universal primary education by 2015. Low income 5.5 The region which requires the highest increase in spending compared to baseline expenditure is Latin America and the Caribbean because of the high cost per Middle East & North 0.4 student in the region. Africa Europe & Central Asia 1 The most challenging rate of increase in 2.3 East Asia & Pacific baseline expenditure that is required is with Sub-Saharan Africa, 22.3%, while middle- 1.3 Latin America & income countries have the largest Caribbean expenditure shortfall, USD 7.7 billion in 1 South Asia total. 2.9 Sub-Saharan AfricaSource: Authors’ calculations

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