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David Malpass: Development in a Time of Upheaval

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World Bank Group President David Malpass today called our current era of high inequality and reversals in global development progress a “time of upheaval,” and he outlined steps to help boost economic growth, shorten the crisis, resume development, and lay a strong foundation for a future that is more prosperous and better prepared for global disasters like COVID19.

Reversals in development threaten people’s lives, jobs, livelihoods, and sustenance. In many places around the world, poverty is rising, living standards and literacy rates are falling, and past gains on gender equality, nutrition and health are sliding backwards. For some countries, the debt burden was unsustainable before the crisis and is getting worse. Rather than gaining ground, the poor are being left behind in a global tragedy of inequality. This drastic narrowing of economic and social progress is creating a time of upheaval in economics, politics and geopolitical relationships.”

Speaking in Khartoum as the first Bank Group President to visit Sudan in nearly 40 years, Malpass noted recent progress the country has achieved. “Over the past few years, you have made a tremendous effort to put people on a forward path, amid very adverse conditions. Two years ago, Sudan’s transitional government inherited a deeply damaged economy and society that had suffered decades of conflict and isolation. Even as the people resolved to break with the past, Sudan faced extraordinary headwinds: from the COVID-19 pandemic, from a locust plague, from unprecedented floods, and an inflow of refugees escaping conflict from across the border.”

“Yet the country pressed forward with bold reforms, re-engaging with the international community, clearing World Bank arrears with the help of a U.S. bridge loan, and in June reaching the decision point for the Heavily Indebted Poor Countries – or HIPC – initiative…While there is much work ahead, I commend the Sudanese authorities, civil and military, for their efforts and achievements in working together toward a better future. It’s critical to avoid political slippages because there is no development without peace and stability. I would also like to acknowledge the remarkable resilience of the Sudanese people – your drive to build a better Sudan despite the challenges is truly inspiring.”

Malpass noted the global pandemic has taken massive toll on poverty: “The COVID-19 crisis has resulted in increased poverty rates again after decades of steady decline. It has pushed nearly 100 million people into extreme poverty, with several hundred million more becoming poor, many of them in middle-income countries.”

He noted that while a turnaround is possible, risks remain. He recalled how  the deadly Spanish Flu of 1918-20 was followed by extremely rapid economic growth – but also by wider inequality, and dangerous financial vulnerabilities that culminated in the prolonged Great Depression.

Malpass posed a question for the international community: What should we do to boost growth that is inclusive, broad-based, and sustainable and avoid a lost decade for development? “First, we need a stronger focus on the key priorities, with clarity on how we approach and measure them…And second, we need much bigger scale to achieve impact.”

Malpass noted four areas in which determined action should make a difference: achieving economic stability; leveraging the digital revolution; making development greener and more sustainable; and investing in people.

Achieve economic stability

Malpass noted that many developing countries made extraordinary efforts to support their people and keep economic activity going during the pandemic. “Many have gone beyond what they could afford, especially as debt in developing economies was at record highs when the pandemic hit.”

When the debt service suspension initiative – or DSSI – expires at the end of this year, low-income countries that resume debt service payments will see their fiscal space shrink to purchase vaccines and finance other priority expenditures, Malpass said. “It’s time to pursue a gradual and people-oriented fiscal consolidation and restructure unsustainable debt.  Enhanced and accelerated implementation of the G20’s Common Framework will be critical on this front.”

Malpass called for greater global cooperation, including private sector participation, to provide debt relief to the world’s poorest countries and fund growth-enhancing investments. “In Sudan, for example, global cooperation that included the U.S., France and the UK helped the country clear its arrears with the World Bank, IMF and other IFIs, making possible more than $50 billion in debt relief in what will be the largest HIPC initiative ever.”

In addition to better debt management, Malpass said countries have to eliminate wasteful public expenditures, make service delivery more efficient, and reallocate public resources to their most productive uses. “This is also a time for proactive debt management to reprofile payments while international interest rates remain low. There need to be concrete steps to improve the transparency of debt contracts, increase accountability and ensure decisions draw on comprehensive information. Lower-income countries need to prioritize concessional financing and avoid the high interest rate financing that has become increasingly problematic. Focusing this agenda for each country and measuring the progress will be critical.”

Leverage the digital revolution

The faster adoption of digital solutions can radically expand access to finance and create new economic opportunities, Malpass said, noting that digital solutions can increase competition in product markets and enable people to sell services online, connecting them to national and global markets. “Supporting this transformation requires many actions at scale: investing in digital infrastructure, eliminating monopolies in the telecom sector, providing national IDs, and creating an enabling regulatory environment.”

“The digital revolution can also transform the public sector. For example, it allows a radical rethink of safety nets systems. Across the world we are seeing programs move from in-kind and cash delivery to digital delivery, direct to people’s bank accounts or visible on their phones. Similarly, in both the formal and informal sectors, new payment systems enable daily purchases through phones, using QR codes and other technologies. Kenya and many other African countries have extensive experience on this,” said Malpass.

Make development greener and more sustainable

Malpass noted that the international community is strongly committed to slowing the increase in atmospheric carbon and to reducing climate impacts on the most vulnerable. “A key step is to stop the creation of new coal-fired plants, decommission existing ones, and substitute them with cleaner sources of electricity. We should support countries in a “just” transition, which includes taking care of the workers affected.”

“This is also the time to reinvigorate often-stalled power sector reforms. Energy subsidies are expensive and distortive, while removing them needs to be done in ways that solve underlying inefficiencies and increase access. Aiming for clean, affordable energy requires competition in electricity generation and distribution, as well as a truly independent regulator…Transportation is another major source of emissions. With more urbanization expected in developing countries, infrastructure and design of cities can make an enormous difference. Instead of sprawling metropoles where commuters spend hours on the road, governments can aim for more compact cities with efficient and clean public transportation systems.

In the climate change efforts, both mitigation and adaptation, and the development effort more broadly, we need to prioritize and focus efforts for the largest impact per dollar spent and look for solutions that are rapidly scalable.”

Invest in people

Malpass highlighted the importance of investing in people’s long-term health and education – the human capital agenda. “Strengthening education and health systems takes more than just providing budgetary resources in an efficient and prioritized way. For example, aligning incentives for teachers and health care providers – public or private – with the needs of the people they serve is important. And finding scalable solutions to enhance health care and improve the quality of education, including through distance learning, is also critical. 

“Nowhere is human capital accumulation more important than in conflict-affected countries, where most poor people live today. Assisting refugees and host communities is a key priority. Security is essential, but soldiers can’t win the battle of development. Change is more likely to come from small victories won across millions of households over time.”

Malpass noted the role the World Bank Group can play. “The World Bank Group is uniquely endowed and positioned to support countries with the four priorities I have outlined — through finance and know-how for governments, while mobilizing the private sector. We have unmatched experience working with countries, using technical experts across all the key sectors.”

Combat reversals in development

“This unprecedented crisis has set in motion a time of upheaval. The many choices in coming years will determine whether developing countries suffer a lost decade or can usher in rapid growth and economic transformation,” said Malpass.

To succeed requires the active participation of the public and private sectors across countries, civil societies and foundations, indeed the whole international community working together. These efforts require leaders to be ambitious for the prosperity of people. And they require focus and scale throughout our development work.”

Development

Vaccination, Jobs, and Social Assistance are All Key to Reducing Poverty in Central Asia

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As the pace of economic recovery picks up, countries in Central Asia have an opportunity to return to pre-pandemic levels of poverty reduction – if they put in place the right policies. This was the overall message shared by World Bank economists today at a regional online event “Overcoming the Pandemic and Ending Poverty in Central Asia”.

In the early 2000s, Central Asian countries were among the world’s best performers in poverty reduction. Starting in 2009, however, the pace of progress began to slow and even stagnated in some of the countries. The COVID-19 pandemic impacted a region already struggling to generate inclusive growth and end extreme poverty. Now in the second year of the pandemic, poverty rates in Central Asia are falling again, but with high inflation and low vaccination rates, the poor and the most vulnerable continue to suffer from food insecurity, uncertainty, and limited employment opportunities, especially for women.

“Central Asia is recovering from the first shocks of the pandemic, albeit in uneven ways,” said Will Seitz, World Bank Senior Economist in Central Asia. “Migration and remittances, key drivers of poverty reduction in the Kyrgyz Republic, Tajikistan, and Uzbekistan, are quickly returning to 2019 levels. Labor markets are also recovering, and work disruptions are much less common. However, the region is yet to get on a stable poverty reduction path.”

Among policy priorities to reduce poverty, the World Bank is focused on three key areas: widespread vaccination, increasing employment and wages, and strengthening social assistance programs to support the most vulnerable. To support labor market recovery, the World Bank economists outlined short-term and medium-term measures, including the need to invest in green jobs and encouraging the creation and growth of firms.

It was also stressed that employment alone will not address all drivers of poverty, and strong safety nets are essential to protect the most vulnerable. Compared with other middle-income countries, Central Asian governments typically provide smaller shares of their populations with social assistance.

“Along with ensuring fair, broad access to effective and safe COVID-19 vaccines, Central Asian countries need to urgently address vaccination hesitancy, as it threatens to slow down the recovery,” said Tatiana Proskuryakova, World Bank Regional Director for Central Asia. “For every million people vaccinated, global GDP recovers on average nearly $8 billion. We are expecting advanced economies with relatively high vaccination rates to demonstrate much better growth rates than developing economies with low vaccination rates.”

Among the main reasons behind vaccine hesitancy in Central Asian countries are worries about vaccine contraindication and safety. While people with pre-existing health conditions in other countries are usually prioritized for vaccination, in the Central Asia region they are more likely to be hesitant to get vaccinated. Providing the public with accurate information on the safety of vaccines and encouraging people with pre-existing health conditions to be vaccinated may help address hesitancy issues.

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Development

Vietnam’s Development Agenda Receives Additional Boost

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Vietnam’s push to enhance competitiveness, reduce its carbon footprint, and improve lives and livelihoods has been given a boost with the approval of an AUD 5 million grant by the Australian Government.

This grant represents additional funding to the ongoing Australia – Bank Partnership in Vietnam (ABP), which focuses on a wide range of policy areas designed to support the country’s development agenda.

“The COVID-19 pandemic continues to have a significant impact on Vietnam’s reform agenda and exacerbate inequalities, which are more pronounced and harder to close for ethnic minorities, for women and for other marginalized groups. Responding to this, Australia’s extended collaboration with the World Bank will continue to support Vietnam’s quick economic recovery and help achieve its development goals,” said Australia’s Ambassador to Vietnam HE Robyn Mudie.

The ABP will continue its work on gender equality and the sustainable development of the Mekong Delta. In addition, it will also help address new priorities set out in the country’s recently adopted Socio-Economic Development Strategy and Socio-Economic Development Plan, including the transition to a low carbon economy, social equity and inclusion, and innovation-driven growth.

“The ABP will continue providing high-quality advisory work, enabling Vietnamese policymakers to pursue substantive reforms,” said Carolyn Turk, World Bank Country Director for Vietnam. “These reforms are needed both for recovery from the economic costs of COVID, but also to set a solid basis for the pathway to higher income status.”

The ABP was established in 2017 with an initial funding amount of AUD 25 million. During the COVID-19 pandemic, the ABP responded quickly and provided an additional AUD 5 million to support Vietnam to respond to, and recover from, the pandemic. The program leverages expertise from Australia and the World Bank Group to support the Government of Vietnam in strengthening its development policies and programs.

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Development

Cotton sustains more than 100 million families worldwide

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Women workers clean cotton in Multan city in Pakistan. © FAO/Aamir Qureshi

A single metric tonne of cotton provides jobs for five people on average, often in some of the world’s most impoverished regions; that adds up around 100 million families across the globe. 

To recognize these and other contributions, the United Nations is marking World Cotton Day, this Thursday. 

Cotton is an important means of livelihood for millions of smallholders and attracts export revenues to some of the poorest countries. This makes the sector a key contributor to reaching the 2030 Agenda for Sustainable Development. 

For the UN, this natural fabric “represents so much more than just a commodity”, it is “a life-changing product.” 

Important source 

Cotton is a major source of income for many rural laborers, including women. With this World Day, the UN wants to raise awareness of the critical role that cotton plays in economic development, international trade and poverty alleviation. 

The initiative also wants to highlight the importance of sustained, inclusive and sustainable economic growth, full and productive employment, and decent work for all. 

Resilient and multipurpose 

As a crop resistant to climatic changes, cotton can be planted in dry and arid zones. It occupies just 2.1 per cent of the world’s arable land, but it meets 27 per cent of the world’s textile needs. 

Around 80 per cent of cotton is used in the clothing industry, 15 per cent in home furnishings and the remaining 5 per cent mostly accounts for non-woven applications, such as filters and padding. 

Almost nothing from cotton is wasted. In addition to textiles and apparel, food products can be derived from it, such as edible oil and animal feed from the seed. 

Other uses have been developed recently, like using cotton-based filaments in 3D printers, because they conduct heat well, become stronger when wet, and are more scalable than materials like wood. 

The ‘Cotton Four’ 

The idea for the World Day was born in 2019, when four cotton producers in sub-Saharan Africa – Benin, Burkina Faso, Chad and Mali, known as the Cotton Four -proposed a celebration on October 7, to the World Trade Organization

With the UN officially recognizing the date, it became an opportunity to create awareness of the need of market access from least developed countries, to foster sustainable trade policies and to enable developing countries to benefit more from every step of the value chain. 

For years, UN agencies have worked towards this goal. 

For instance, since 2003, the International Trade Centre (ITC) and the World Trade Organization have helped the Cotton Four to improve production local processing capacity, as well as to discuss the trade reforms needed to address high trade barriers.  

Another UN agency, FAO, has long offered developing countries technical and policy support. One example is the +Cotton project, a cooperation initiative with Brazil that helps Latin American producers with innovative farming methods.

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