Recipients And Contributors: The Duel Role Of Middle-income Countries by J. A. Alonso, J. Glennie, A. Sumner

1. S A W A D B I N S H A H I D ( P A R V E Z )
RECIPIENTS AND CONTRIBUTORS: THE DUEL ROLE OF
MIDDLE-INCOME COUNTRIES
Masters of Development Studies
DS 501: Development Studies: Theories and Approaches
Professor Dr. Taiabur Rahman

2. The Palgrave Handbook of International Development contained
the article (2016): “Recipients And Contributors: The Duel
Role Of Middle-income Countries” by
 J. A. Alonso
University of London , Spain
 J. Glennie
Universidad Complutense de Madrid , Spain
 A. Sumner
Save the Children, and Kings College , London
RECIPIENTS AND CONTRIBUTORS: THE DUEL ROLE OF
MIDDLE-INCOME COUNTRIES
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3. MIDDLE INCOME COUNTRIES (MICs)
 MICs are a diverse group by size, population and income
level
 Five of the world’s seven billion people or 73% of the
world’s poor people living in MICs.
 MICs also represent about one-third of global GDP and are
major engines of global growth
 MICs have dual role. They act as both recipients and
contributors. International community needs support of
MICs to achieve global development
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4. MIDDLE INCOME COUNTRIES
 The World Bank classified every economy as low, lower-middle, upper-
middle and high income countries.
 The basis for this classification is GNI per capita because it is considered to
be the single best indicator of economic progress.
 They are defined with a GNI per capita between $1,006 and $3,955; and
upper middle-income economies - those with a GNI per capita between
$3,956 and $12,235. (WB, Mar 27, 2018)
In this article, MICs classified as
Thresholds Lower middle
income
Upper middle
income
Middle
income
High
income
GNI per capita, Atlas
method (US$)
1913 6977 4383 38,182
GDP per capita (US$) 1221 4315 2731 31,373
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5. COUNTRY INCOME GROUPS
Low income - 31
Lower middle income - 51
Upper middle income - 53
High income: non OECD - 48
High income: OECD - 32
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6. ‘TRAPS’ AND ‘GAPS’: A NEED ANALYSIS
 Authors identified two Challenges for
Middle Income Countries (MICs)
 ‘Traps’ and
 ‘Gaps’
 Traps are mutually reinforcing
blocking factors what countries faced
in their economic development
progress
 To overcome the traps, need financial
support but not necessary
 ‘Gaps’ means those constraints which require large financial
investments to overcome
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7. KEY CAUSES OF THE MIC TRAPS
 When countries rise up the income
ladder, they often lose their competitive
advantage because they faced difficulty to
compete
 in the low-wage manufacture markets due to
rising wages either
 in high value-added market due to limited
skill
 As a result, newly industrialized economies
such as South Africa and Brazil have
not left their 'middle-income range’ for
decades
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8. MIC TRAPS
Technical and Productive
change: Unskilled Labor
Environmental and
energy challenges:
Greenhouse emission
Macroeconomic stability
and integration into
international financial
markets: Debt Traps
Institutional change:
Complex institutions may
require for governance
Authors identified 4 areas of Blocking forces as MIC traps
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9. STRATEGIES TO HELP AVOID MIC TRAPS
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10. MIC GAPS: AN OVERVIEW
 When countries per capita income increases they face ‘MIC gaps’
 MDGs and SDGs estimates about financial gaps depends on both assumptions
about future trend of global economy and ambitions of international
community setting objectives
 Less ambitious objectives will result in smaller financial gaps
 MDGs focused on halving extreme poverty which reduced emphasis on other
aspects:
 Non Extreme Poverty and
 Sustainable Infrastructure;
 Both aspects crucially affect the dimension of the MIC financial gap
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11. MIC GAPS REVIEWED IN STUDY
Mr. Edward and Mr. Sumner (2014) said in their study that
 Majority of global poverty between $1.25
and $2/day is located in MICs
 If current inequality tend continue, they
will continue two third of poverty by 2030
 Estimates of ending $1.25 and $2 poverty
need small proportion of global GDP and
$10 poverty would take 20% of global
GDP
 Fig.: Proportion (%) of global poverty (at
$1.25, $2, and $10/day) in MICs, 2010
and projections for 2030
85%
78%
70%
$1.25
$2
$10
48%
59%
77%
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12. TACKLING OF MIC GAPS
 The post-2015 development framework suggests to develop five sectors
 Education
 Health
 Water and sanitation
 Sustainable energy
 Food security/nutrition/agriculture
 Require investment in infrastructure that has to be green
 Climate finance is needed in MICs to respond to climate change
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13. MICS AS RECIPIENTS: THE ROLE OF DEVELOPMENT
COOPERATION IN MICS
 As countries climb the income ladder more funds become
available domestically or from international private sources, so
countries will rely less on external aid.
 But the fact that countries may not need aid as much as before
does not mean that it may not still be a very important
contribution to development in terms of both the pace with which
development objectives are achieved and the depth of success
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14. THERE IS NO UNIVERSAL PANACEA: COUNTRY
CONTEXT MATTERS
 Some MICs still require large-scale financial transfers to
reduce poverty or to build green infrastructure
 Other require less financial aid but demand technical
support and exchange
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15. DEVELOPMENT COOPERATION AND MIC TRAPS:
AN INCENTIVES BASED APPROACH
 International support can help overcome MIC traps more
by accompanyment than large scale funding
 However money is usually needed to facilitate such a
process and catalytic injections of funding can generate
substantial change
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16. SIX KEY ROLES FOR INCENTIVISING FINANCIAL
COOPERATION
First, Aid can encourage improvements in policies. Like
progressive policies whether in human rights, domestic resource
mobilisation
Second, supporting non-governmental actors
Third, have a role for leveraging and adding value to private
finance
Fourth, Promoting both individual and institutional capacity
development
Fiftht, the role of aid should be providing risk coverage against
external shocks
Finally sixth role of development cooperation is supporting
innovative initiatives in economic and social policies
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17. CRITICAL SUPPORT FOR DEVELOPMENT BUDGETS
 The quality of the money is more important than its quantity
 But many MICs have significant gaps in public budgets to
reduce/end poverty and achieve a more sustainable path to
development
 Some MICs have enough room to improve their taxation system
but other face serious consequences
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18. BUDGET CONSTRAINTS
 Many MICs have relatively small taxable population
 For example, just 5% of Indonesia’s population live
above $10/day according to national socioeconomic
survey 2014
 Other factors like strength of the informal economy,
the weakness of institutions and weakness of tax
adm9inistration also responsible for less tax
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19.  In such context, domestic taxation is not necessarily
sufficient to deal with poverty.
 Most anti poverty and infrastructure spending in the
developing world is financed by domestic budgets
supported by a mix of private sector finance , ODA,
multilateral development bank loan and loan from
emerging economies.
 Private finance will be crucial in filling the renewable
energy financing
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DEVELOPMENT BUDGET

20.  The climate finance negotiations have already recognized the principle that
developed countries should contribute considerable funds to green
developing country infrastructure very much including MICs to encourage a
shift towards low-carbon and climate resilient technologies
 In short MICs can make good use of international public funds, whether to
respond to traps (quality of funding) or gaps (quantity) to complement
domestic finance ( public and private) and international private finance.
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DEVELOPMENT BUDGET

21. MICS AS CONTRIBUTORS: SUPPORTING THE CONTRIBUTIONS
OF MICS TO INTERNATIONAL DEVELOPMENT
 Development cooperation not only means the support MICs
to overcome the constraints it should also back their efforts
to participate in the development agenda both regionally
and globally.
 Traditional donors should back participate in cooperation
through four particular dimensions
 South–South Cooperation (SSC),
 Contribution to international public goods,
 Regional cooperation and integration,
 Policy coherence and global rules and governance.

22. SSC

23. SOUTH–SOUTH COOPERATION
 SSC is the exchange of resources, technology and knowledge between
developing countries, also known as countries of the Global South.
 This concept of South-South cooperation formally emerged as a
universal principle during the 1970s .
 According to OECD and DAC, the key contributor to SSC
 Saudi Arabia = $ 3.4 billion
 China = $ 2 billion
 Turky = $ 968 million

24. ROLE OF SOUTH–SOUTH COOPERATION
Improving the
information
system for
better
accountability
and
transparency
Encouraging
the
involvement
of NCOs and
civil society
and private
sector
Establishing
learning
mechanism
through more
intense practice
Diversifying
modalities of
cooperation

25. REGIONAL AND GLOBAL PUBLIC GOODS
Regional and global public goods is crucial for promoting
material progress and reducing instability and international
risks.
For example
 MICs are responsible for 54 % of the CO 2emissions in the world,
and 65 % of rainforests, the ‘lungs’ of the planet are located in MICs.
 large group of MICs of islands and coastal areas are most affected by
under-provision of public goods due to climate change.

26. REGIONAL PERSPECTIVE
 The stability and economic growth of such economies is
therefore a regional factor.
 Inter-MIC cooperation can be found in the strengthening of
regional development banks.
 Arab and Islamic countries (Islamic Development Bank, Arab Bank for
Economic Development in Africa, among others)
 Latin America and the Caribbean region (Andean Development
Corporation, Caribbean Development Bank).
 South and Central Asia (ADB, AIIB)

27. POLICY COHERENCE, GLOBAL RULES,
AND GOVERNANCE
 MICs are deeply integrated in international development
process and policy.
 They are highly vulnerable to the faults in the MIC Traps
and Gaps of existing global rules.
 The are not only affected by the externalities but also by the
MIC as richest and biggest countries,
 Monitoring policy coherence could be carried out at
regional level, as a part of SSC, in order to maintain
ownership of the surveillance process.

28. END NOTE AND RECOMMENDATION
 MICs still face considerable structural deficits and vulnerabilities that
affect their development process.
 MICs need the support of the international community and the
international community needs MICs to succeed if global development
goals are to be met.
 Despite the diversity of the MICs category there are a number of ‘MIC
traps’ and ‘MIC gaps’ facing these countries as their per capita income
increases.
 Policy support and implementation may remain key part to reach
sustainable and equitable growth.

29. ANYTHING ELSE!