Development Strategies:     Middle-income countries’      challenges and answersCosta Rica,31 July 2012           Mario Pe...
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth: challenges and threats
The four-speed world in the 1990s    Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting W...
The four-speed world in the 2000s    Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting W...
Shifting Wealth                           China                                                                     India ...
The rise of China in global supply chainsas a dominant supplier Major trade partners for Asia’s intermediate exports in go...
Shifting wealth: poverty reduction              SW is moving South = less poverty
Shifting Wealth:New resources for development                   Greater fiscal space in the 2000s vis-à-vis the 1990s     ...
Shifting Wealth: New “Emerging Partners”           Africa’s Trade with the Emerging Partners in 2011                      ...
Shifting Wealth: Industrialization      Africa’s exports of manufactured products100       Billion USD                    ...
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth: challenges and threats
A success story?•   A lower-middle income country•   Average 5% annual growth rate since 1990•   Nearly 100% primary enrol...
Tunisia  Source: OECD/AfDB/UNECA (2010), African Economic Outlook.
Growth in life satisfaction andincome do not necessarily coincide   Sources: Authors‘ calculation based on Gallup World Po...
Middle Income Trap                                                                                                        ...
•.     Shifting Wealth: Smoothed Growth                    Smoothed annual growth rates, 1980-2010                        ...
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth challenges and threats             Product...
Catching up in labour productivityKorea, 1970-2009
Productivity:Low levels & low growth   Source: OECD Development Centre
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth challenges and threats             Product...
Inequalities remain Gini coefficients before and after taxes and transfers in Latin American countries    Source: OCDE (20...
Labour and social cohesion:Increase in labour disputes in China                                      800                  ...
Labour markets:      Reforming labour institutions (China)  Reponses: increase in minimum wages…                          ...
Africa’s young population is growingbut jobs are not keeping up                                  250                      ...
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth challenges and threats            Producti...
Outline 1   Shifting Wealth: an unprecedented opportunity? 2   Shifting Wealth challenges and threats           Productiv...
Tax Revenue: OECD vs LAC                Total tax revenues as percentage of GDP, 1990-2009                    Difference (...
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2. Impulsando el desarrollo a través de la atracción de IED en los sectores de alta tecnología y conocimiento: Desafíos y opciones de políticas públicas para Costa Rica – Expositores José Ramón Perea y Annalisa Primi, Economistas del Centro de D

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  • If a country’s intermediate exports (in both goods and services) to a particular partner country exceed a given threshold percentage of that country’s total intermediate exports (15% or 20% in our exercise), we consider such a trade node as a dominant link.
  • Contrary to preconceptions,African manufactured exports have roughly doubled over the last 10 years.Importantly, there has been a the shift in destination for African manufactured goods from traditional to emerging partners. Emerging partners other than China take more diversified imports from African countries than traditional partners, and increasingly so.In 2000, Africa exported 3.9% of such products to China.By 2009, these shares had risen to 4.5%. In 2000, Africa exported 14.3% of such products to other emerging partners.By 2009, these shares had risen to 34.4%.By contrast, the share of manufactured goods in Africa’s exports to the EU and the US has actually decreased since 2000.Clearly, all African countries have all not suddenly begun producing sophisticated manufactured products, although some countries do.Yet, our experts pick up a slowly but surely increasing level of sophistication in Africa’s manufactured exports, and especially to emerging partners, in fact.While some sub-sectors are clearly suffering from competition from emerging partners,overall there is no evidence that Africa has been de-industrializing following the rise of emerging partners in Africa.On the contrary, mass consumption goods from emerging partners lift the living standards of the nascent African middle-class.They also supply Africa with production goods that are adapted to the productive conditions of developing countries.Emerging partners are also helping to close the infrastructure gap.
  • Average annual growth rate (1990-2010) = 4.78% Average annual inflation rate (2000-2010)= 3.35% [60% of budget dedicated to social sectors:]
  • In developing countries, e.g. Latin America, although ex-ante inequality is not that different from the OECD, fiscal policy does not redistribute. This is mainly due to: Low fiscal revenues Less progressive taxes and expendituresMore resources, better spent Increasing fiscal revenues is possibleIncreasing the efficiency of public spendingEstablishing a social contract between citizens and the stateTowards better quality services
  • Note:Cases accepted refer to labor dispute cases accepted by different levels of labor dispute arbitration institutionsOne of many ways in which rapid growth can disrupt the social order is via labour markets. The workplace is key in distributing the fruits of growth and that distribution has been increasingly against workers since the 1990s – the share of value added going to labour is on a decreasing trend in almost every region [flat in Eastern Europe]In China this process translated into an exponentially increasing number of labour disputes. The link with growth? This coincided with the end of surplus labour – the “Lewis turning point” . Before that, wages were kept low as new migrant labour could be found easily; after wages have to be bid up in manufacturing to attract workers, which resulted in wage increases throughout the economy, especially since 2005. However, this (as the data on disputes show) was not done without strife. [NB: The jump in 2008 corresponds to the enactment of the Labour Contract Law which gives migrant workers a much wider set of rights, including that of having labour contracts and therefore appealing to their fulfillment at arbitration courts.]Source: Cai and Wang (2011) on the basis of National Bureau of Statistics, China Labor Statistical Yearbook (various years), China Statistics Press.
  • In Labour markets, what has been the response in China? In part, strengthening labour market institutions through increases in minimum wages and wider use of collective bargaining.Minimum wages have been an important and contentious issue in many of the events of 2011 – they were one of the key demands in Tahrir square. Experiences such as that of Brazil show that they can be very effective in raising living standards. However, there are also dangers of adverse effects in labour outcomes if the evolution is too quick.(although collective bargaining remains rather weak and tripartite institutions function quite differently across the country – 94 million workers covered by collective contracts in 2009 is only 12% of the workforce).In part, strengthening rights for the most deprived workers (migrant workers). The latter led to a massive reduction in informality as many formerly informal migrant workers received contracts. However, as long as the hokou system creates two classes of workers, it is hard to imagine a cohesive society and smooth labour relations.
  • (MAKE IT FOR LUSOPHONE COUNTRIES)Why an AEO on Youth Employment?1.) Africa’s youth population is growing and better educatedWith almost 200 million people aged between 15 and 24, Africa has the youngest population in the world. And it keeps growing rapidly. Africa is the youngest region in the world, providing reservoirs of change, progress and social dynamism. The youth population in Africa is expected to double by 2045. Based on current trends, 59% of 20-24 year olds will have had secondary education in 2030, compared to 42% today. Although significant quality gaps remain, these trends offer an unrivalled opportunity for economic and social development if the talents of this swiftly increasing reservoir of human capital are harnessed and channelled towards the productive sectors of the economy. However, they could also present a significant risk and threat to social cohesion and political stability if Africa fails to create sufficient economic and employment opportunities to support decent living conditions for this group.2.) Labour markets are particularly difficult for young people. Young people are more likely to be unemployed or in working poverty than adults. They are also more vulnerable to economic downturns as young workers are the first ones to loose their jobs in a crisis and face difficulties to enter the labour market without work experience Although they constitute around two fifths of the continent’s working age population, they make up three fifths of the total unemployed. This phenomenon is not specific to Africa. Youth-specific challenges such as school-to-work transition are evident everywhere. However, in African MICs, the ratio of youth-to-adult unemployment is often higher than in other parts of the world. 3.) The employment outlook is challenging – growth has not translated into enough jobsAs we can see in the graph, growth in Africa was not entirely job less, but it was not very inclusive either. Jobs for young people have been created but not enough given population growth. What stands out is that the high growth of the 2000s did not come with a stronger job creation trend than the much weaker growth of the 1990s. At the current trend employment creation cannot absorb the growing labour force. The existing private and public employment capacity is simply too small. With 10 to12 million young people entering the African labour market every year, job growth must be much stronger to make a dent in the number of unemployed and discouraged youth.
  • 2. Impulsando el desarrollo a través de la atracción de IED en los sectores de alta tecnología y conocimiento: Desafíos y opciones de políticas públicas para Costa Rica – Expositores José Ramón Perea y Annalisa Primi, Economistas del Centro de D

    1. 1. Development Strategies: Middle-income countries’ challenges and answersCosta Rica,31 July 2012 Mario Pezzini DirectorOECD Development Centre
    2. 2. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth: challenges and threats
    3. 3. The four-speed world in the 1990s Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth
    4. 4. The four-speed world in the 2000s Source: OECD Development Centre, Perspectives on Global Development 2010 - Shifting Wealth
    5. 5. Shifting Wealth China India % of world GDP % of world GDP14% 14%12% 12%10% 10%8% 8%6% 6%4% 4%2% 2%0% 0% 1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010 Market Exchange Rate PPP Exchange Rate Market Exchange Rate PPP Exchange Rate
    6. 6. The rise of China in global supply chainsas a dominant supplier Major trade partners for Asia’s intermediate exports in goods and services Source: OECD Input-Output Database, March 2010; IDE-JETRO Asian International Input-Output Database 2006; OECD Bilateral Trade Database, March 2010; OECD Trade in Services, January 2010.
    7. 7. Shifting wealth: poverty reduction SW is moving South = less poverty
    8. 8. Shifting Wealth:New resources for development Greater fiscal space in the 2000s vis-à-vis the 1990s Fiscal revenue to GDP ratio (%) Source: Authors’ calculations based on World Bank (2011)
    9. 9. Shifting Wealth: New “Emerging Partners” Africa’s Trade with the Emerging Partners in 2011 US$ billion and % of Total China 19.5% • Countries outside ($171 bn) OECD DAC in 2000 Turkey 1.7% ($14.5 bn) Korea, Rep. 2.8% whose economic ($25 bn) relations with Africa have risen fast over the decade • China, India, Korea, Brazil and Turkey India 3.5% are leading the pack Brazil 3.2% ($31 bn) ($27.6 bn) Other Eps 8.8 % ($ 77.5 bn) 9
    10. 10. Shifting Wealth: Industrialization Africa’s exports of manufactured products100 Billion USD EU25 80 USA 60 Other Traditional 40 Partners Other Emerging 20 Partners China 0 20… 20… 19… 19… 19… 19… 19… 20… 20… 20… 20… 20… 20… 20… 20… 10
    11. 11. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth: challenges and threats
    12. 12. A success story?• A lower-middle income country• Average 5% annual growth rate since 1990• Nearly 100% primary enrolment in 2008• 80% health care coverage• ‘Prudent public debt management’ (42.8% of GDP in 2009)• 3% fiscal deficit• Inflation at approx. 3% in the 2000s
    13. 13. Tunisia Source: OECD/AfDB/UNECA (2010), African Economic Outlook.
    14. 14. Growth in life satisfaction andincome do not necessarily coincide Sources: Authors‘ calculation based on Gallup World Poll (2010) and World Bank (2010)
    15. 15. Middle Income Trap Transitions from Middle-Income to Advanced-Country Levels 27 GDP/cap_PPP, at current international dollars, thousands 2004 2007 2000 2005 25 2004 2004 2004 1994 1996 1998 2005 2001 1998 1997 2008 2005 23 21 19 17 15 1987 1986 1994 1997 1989 1998 1995 1994 2000 1988 1995 1988 1993 1993 1999 1991 13 Singapore Spain Slovenia Cyprus Finland Ireland Korea Portugal Israel Iceland Hong Kong, China Czech Republic Sweden New Zealand Chinese Taipei Greece Start of transition period End of transition period Eichengreen: 2015 at $ 17,000/cap_PPP)
    16. 16. •. Shifting Wealth: Smoothed Growth Smoothed annual growth rates, 1980-2010 (Hodrick-Prescott filter) 7% 6% 5% 4% 3% 2% 1% 0% 1980 1985 1990 1995 2000 2005 2010 Low income Middle income OECD members Source: DEV calculation based on WDI data
    17. 17. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity
    18. 18. Catching up in labour productivityKorea, 1970-2009
    19. 19. Productivity:Low levels & low growth Source: OECD Development Centre
    20. 20. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion
    21. 21. Inequalities remain Gini coefficients before and after taxes and transfers in Latin American countries Source: OCDE (2008a) for OECD countries excluding LAC, OECD (2008b) for Argentina, Brazil Colombia and Peru.
    22. 22. Labour and social cohesion:Increase in labour disputes in China 800 600 Number of Labor Dispute Cases (thousand) 400 200 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Cai and Wang (2011)
    23. 23. Labour markets: Reforming labour institutions (China) Reponses: increase in minimum wages… …and wider use of collective bargaining Average minimum wage in Chinese cities Thousand Number of collective contracts (left axis) Million (1999 = 100) 1 000 Number of employees covered (right axis) 100300 900 90250 800 80 700 70200 600 60150 500 50100 400 40 300 30 50 200 20 0 100 10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0 1998 1999 2000 2001 2002 2009 Source: Authors’ calculations based on Du and Pan (2009) and CASS. Source: Cai and Wang (2011).
    24. 24. Africa’s young population is growingbut jobs are not keeping up 250 1,000 Young (15-24) People, Million GDP, Billion (2005 PPP int. $) 900 200 800 700 150 600 500 100 400 300 50 200 100 0 0 Youth Population Youth Employment GDP (right axis)
    25. 25. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion  Environment
    26. 26. Outline 1 Shifting Wealth: an unprecedented opportunity? 2 Shifting Wealth challenges and threats  Productivity  Social Cohesion  Environment  Fiscal Revenue
    27. 27. Tax Revenue: OECD vs LAC Total tax revenues as percentage of GDP, 1990-2009 Difference (A-B) Selected LAC¹ (A) OECD (34)² (B) 40 35 30 25 20 15 10 5 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

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