According to the OECD’s latest Global Outlook on Financing for Sustainable Development, developing countries are facing a shortfall of USD 1.7 trillion in the financing they would need this year to keep them on track for the 2030 Sustainable Development Goals (SDGs), as governments and investors grapple with the health, economic and social impacts of the COVID-19 crisis.
The report says developing countries are set to see a USD 700 billion drop in external private finance in 2020 and a gap of USD 1 trillion in public spending on coronavirus recovery measures compared to what is being spent in advanced economies, where governments have a greater capacity to borrow. The drop in private finance comes from a fall in portfolio investments, foreign direct investment and a decline in remittances sent home by migrant workers.
“Financing for sustainable development is at risk of collapse when it is needed more than ever. COVID-19 is erasing years of development progress and causing major setbacks to all sources of finance for developing countries under stress, many of which entered the crisis with already severe structural impediments,” said OECD Secretary-General Angel Gurría, presenting the report at a high-level meeting of the OECD’s Development Assistance Committee. “With COVID-19 already reversing development advances and many challenges still ahead, it is urgent that we redesign global finance to incentivise sustainable investment and step up our efforts to help developing countries recover from the crisis in an inclusive, resilient and sustainable manner.”
The projected USD 1.7 trillion shortfall for 2020 adds to an existing gap of USD 2.5 trillion in annual financing for developing countries towards achieving the 17 SDGs by 2030. Meanwhile, 90 out of 122 developing countries are now in economic recession as the virus hurts sectors like tourism, manufacturing and commodities. The pandemic also risks putting pressure on flows of development aid from advanced to developing economies.
At USD 379 trillion, global financial assets are at their highest value since before the global financial crisis, yet 80% of these assets are held in advanced economies and a lack of universally accepted criteria means that little is known about their sustainable development and climate impact, the report says. Just 20% of financial assets are held in developing countries, where more than 80% of people on the planet live. According to the report, reallocating just 1.1% of the total assets held by banks, institutional investors or asset managers – USD 4.2 trillion – would be sufficient to fill the gap in SDG financing.
Fixing the inefficiencies in financial and taxation systems that enable money to drain away from developing countries through tax evasion and avoidance and high remittance transfer fees (which averaged 7% over 2017-19) would help to improve the geographic distribution of assets. The report also calls for better incentives to guide financing, increased transparency and accountability of finance flows, and a systemic solution to developing country debt to avert liquidity problems, ensure access to capital markets and preserve banking stability. Building on the Global Outlook’s findings, the OECD is working with the United Nations to design a framework to improve alignment of global finance with the SDGs.
COVID-19’s impact on wages is only just getting started
Global pressure on wages from COVID-19 will not stop with the arrival of a vaccine, the head of the International Labour Organization (ILO) warned on Wednesday, coinciding with a major report showing how the pandemic had slowed or reversed a trend of rising wages across the world, hitting women workers and the low-paid hardest.
“It’s going to be a long road back and I think it’s going to be turbulent and it’s going to be hard”, said ILO Director-General Guy Ryder, as he announced the findings of the ILO’s flagship Global Wage Report, which is published every two years.
Except for China, which was bouncing back remarkably quickly, most of the world would take a considerable period of time to get back to where it was before the pandemic, which had dealt an “extraordinary blow” to the world of work almost overnight.
“The aftermath is going to be long-lasting and there is a great deal, I think, of turbulence and uncertainty,” Mr. Ryder said. “We have to face up to the reality, at least a strong likelihood that… as wage subsidies and government interventions are reduced, as they will be over time, that we are likely to face continued downward pressure on wages.”
But he added that it was unlikely and in many ways undesirable that the world should simply try to return to how it was before the coronavirus struck.
“This pandemic has revealed in a very cruel way, I have to say, a lot of the structural vulnerabilities, precariousness, that is baked into the current world of work. And we need to take the opportunity – it’s almost indecent isn’t it, to speak of opportunity arising out of this mega global tragedy of the pandemic? – but we do have to extract from it, the types of opportunities that allow us to think about some of the fundamentals of the global economy and how we can, in the bounce back process, make it function better.”
The Global Wage Report showed how the pandemic has put pressure on wages, widening the gap between top earners and low-wage workers, with women and the low-paid bearing the brunt.
After four years when wages grew on average, by 0.4-0.9 per cent annually in advanced G20 economies and 3.5-4.5 per cent in emerging G20 economies, wage growth slowed or reversed in two-thirds of countries for which recent data was available.
Low-wage job disaster in the US
But the figures only reflect wages for those who have jobs, and in some countries, such as the United States, so many low-paid workers had lost their jobs that average wages appeared to have risen, a misleading picture.
The damage could have been worse if governments and central banks had not stepped in to dissuade companies from laying off workers during the pandemic lockdowns, the ILO report said. It said such measures had allowed millions of wage earners to retain all or part of their incomes, in contrast to the impact of the global financial crisis a decade ago.
‘Constructive social dialogue’
But for economies to start returning towards sustained and balanced growth, incomes and aggregate demand would need to be supported and enterprises would have to remain successful and sustainable.
“Constructive social dialogue will be key to success in achieving this goal”, the ILO report said.
COVID-19 crisis highlights widening regional disparities in healthcare and the economy
The impact of the COVID-19 crisis on people and economies has highlighted widening regional disparities in access to healthcare and economic growth and persistent disparities in digitalisation over the past decade, according to a new OECD report.
Regions and Cities at a Glance 2020 says that at the onset of the pandemic, some regions were less well prepared to face the health emergency. With 10 beds for every 1000 inhabitants, regions close to metropolitan areas have almost twice as many beds as remote regions. Over the last decades, most regions in OECD countries have seen a significant reduction in the number of hospital beds available per inhabitant, with an average decline of 6% since 2000 and of 22% in remote areas.
The health impact of COVID-19 has been particularly hard in some areas within countries. For example, in some regions of Colombia, Italy and Spain, the number of deaths between February and June 2020 was at least 50% higher than the average over the same period in the 2 previous years.
Morbidity rates that make some places more vulnerable to health crises than others also vary widely. In some regions in Mexico, Chile and the United States, close to 40% or more of the population is obese, posing a higher risk in terms of fatal diseases. For example, due to higher obesity levels, in Mississippi the average likelihood to suffer severe symptoms if infected with COVID-19 is roughly 23% higher than in Colorado.
People living in large cities and capitals were also more able to quickly shift to remote working. Many rural areas still suffer from a lack of access to high-speed broadband, a lower share of jobs amenable to remote working and a less well-educated workforce. One in three households in rural areas does not have access to high-speed broadband, on average. Overall, only 7 out of 26 countries have succeeded in ensuring access to high-speed connection to more than 80% of households in rural regions. And in some regions in Italy, Portugal and Turkey, 25% or more of the population does not use the Internet or does not have a computer.
Some regions were also struggling economically before the crisis. After a period of decline in the early 2000s, gaps in GDP per capita across small regions in the OECD area have increased, reflecting a long-standing process of concentration of population and economic activities in metropolitan areas.
The evolution of regional economic disparities remains very heterogeneous across countries. Contrary to the OECD-wide trend, one-half of OECD countries experienced an increase in the gap between their richest and poorest regions. Trends in regional productivity follow similar patterns. Since 2008, only one-third of OECD countries have experienced an increase in productivity in all regions.
With more than 100 indicators, Regions and Cities at a Glance 2020 combines official statistics with new, modelled indicators based on less conventional data sources, analysing trends in health, well-being, economic growth, employment and the environment, as well as regions and cities’ preparedness to face global crises and adapt to megatrends.
Cash flow the biggest problem facing business during COVID-19 crisis
A new report on the impact of the COVID-19 pandemic on businesses shows that their greatest challenges have been insufficient cash flow to maintain staff and operations, supplier disruptions and access to raw materials.
With businesses already undergoing significant competitive pressure prior to the crisis, government restrictions, health challenges and the economic fall-out brought by COVID-19 further set back many enterprises.
Interrupted cash flow was the greatest problem, the survey found. More than 85 per cent reported the pandemic had a high or medium financial impact on their operations. Only a third said they had sufficient funding for recovery. Micro and small enterprises (those with 99 employees or fewer) were worst affected.
The survey, carried out by Employers and Business Membership Organizations (EBMOs), involved more than 4,500 enterprises in 45 countries worldwide. EBMOs gathered data from their enterprise members between March and June 2020. The businesses were asked about operational continuity, financial health, and their workforce.
At that time, 78 per cent of those surveyed reported that they had changed their operations to protect them from COVID-19, but three-quarters were able to continue operating in some form despite measures arising from government restrictions. Eighty-five per cent had already implemented measures to protect staff from the virus.
Nearly 80 per cent said they planned to retain their staff – larger companies were more likely to say this. However, around a quarter reported that they anticipated losing more than 40 per cent of their staff.
Looking into the future, preparing for unforeseen circumstances and mitigating risks associated with a disruption of business operations is needed. Fewer than half the enterprises surveyed had a business continuity plan (BCP) when the pandemic hit, with micro and small businesses the least likely to have made such preparations. Additionally, only 26 per cent of the enterprises who responded said they were fully insured and 54 per cent had no coverage at all. Medium-sized enterprises, (those with 100 to 250 employees), were most likely to have full or partial coverage.
Strengthening government support measures for enterprises are also vital for their recovery. Four out of ten enterprises said they had no funding to support business recovery while two-thirds said funding was insufficient. Of the sectors analysed, the tourism and hospitality sector, followed by retail and sales, were most likely to report funding issues.
The report production was facilitated by EBMOs who collected and shared the survey data with the Bureau for Employers’ Activities (ACT/EMP) at the International Labour Organization. ACT/EMP is a specialized unit within the ILO Secretariat that maintains close and direct relations with employers’ constituents.
Climate Action: It’s time to make peace with nature
The UN Secretary-General, António Guterres, has described the fight against the climate crisis as the top priority for the 21st...
Africa: A Rising Star in the New Economic Order
The African continent has been on top of the agenda of the policymakers in all periods. From the historical aspect,...
The Relevance of International Relations Theory in Community Policing
Community policing in general refers to adopting such measures by law enforcement agencies specifically police where closer ties between the...
Biden’s Opportunity To Reset Relatons With The Muslim World Begins In Istanbul
When President Obama delivered his famous speech at Cairo University in June of 2009, it was an historic moment. The...
Critical India: The Real Story
In recent months, there has been an unprecedented barrage of criticism, innuendos and verbal onslaught on the Modi-led Indian government....
The State of Civil Society in Belarus and Armenia: Challenges and Opportunities
A vibrant civil society has long been thought to be a crucial instrument for political change in countries in transition...
UN commission reclassifies cannabis, no longer considered risky narcotic
The UN Commission on Narcotic Drugs (CND) took a number of decisions on Wednesday, leading to changes in the way...
Europe3 days ago
Greece and UAE’s Strategic Cooperation: A New Regional Equilibrium in the Making
Economy3 days ago
The Question Of Prosperity
Americas2 days ago
“Living On Mountains”: Antecedents of a Dignified and Secure World Order
Reports3 days ago
COVID-19 crisis highlights widening regional disparities in healthcare and the economy
Middle East3 days ago
Assassination of top Iranian Nuclear Scientist: A big Tragedy
Economy2 days ago
Portugal’s crisis management: “Economic patriotism” should not be tied to ideological beliefs
Middle East2 days ago
The Muslim world’s changing dynamics: Pakistan struggles to retain its footing
Americas2 days ago
A Dangerous Interregnum