20 April 2002

World Bank Official Calls For More Open Trade

Says lower barriers would help reduce world poverty

The World Bank's chief economist called on industrialized countries to do more to reduce trade barriers, especially in agriculture and textiles, to help poor countries achieve global goals for reducing poverty by 2015.

Introducing the Bank's World Development Indicators 2002 (WDI) and supplemental Millennium Development Goals 2002 reports April 20 in Washington, Nicholas Stern said rich countries should not wait for World Trade Organization (WTO) negotiations to begin reducing subsidies, tariffs and non-tariff trade barriers.

Stern called the March Financing for Development conference in Monterrey, Mexico, a "turnaround," noting that it reversed a multi-year decline in foreign aid. He said the aid pledged by rich countries at Monterrey must be used "wisely" and be better coordinated by donors. He added that donors should move from thinking about how much they spend on aid to how the aid is used.

He said the $12,000 million in additional aid pledged at Monterrey is a "good step" toward the $50,000 million in added annual aid the Bank estimates is needed to achieve the United Nations' "millennium" poverty reduction goals by the target date. The goals include making significant improvements in education, gender equality, health care, and in overcoming hunger and environmental degradation.

Stern said one-forth to one-third of aid should now be spent on "human development" -- such as education and health care. He noted that the following day the World Bank would introduce a plan to provide all children a primary school education by 2015.

During questioning, Stern said that development does not depend on aid alone but that "aid can be a powerful force" for development, as can foreign investment.

At the same meeting, Shanta Devarajan, chief economist of the Bank's human development network, said developing countries should speed up governance changes so services can be delivered to the people that need them.

He called the millennium goals "multidimensional," not focused just on reducing poverty but also on "aspects of human well-being." For example, an April 20 World Bank press release noted that better basic health care and nutrition increases learning and productivity, "and better education, especially for women, leads to better health outcomes."

Devarajan added that the Bank wants to help countries to develop improved data collection systems "so we can monitor progress" of delivered aid. Data, he said, is a "driver of the development process."

The supplemental report says that the poverty reduction goal could be achieved if per capita income growth accelerated to 3.6 percent annually, twice the rate achieved over the last decade. The report says the goal is possible.

It notes that East Asia, particularly China and India, have made the most progress to reduce poverty during the 1990s. But, it says, in other regions, particularly sub-Saharan Africa, which is affected by low commodity prices and high rates of HIV/AIDS, the number of poor people has increased. Also of concern are parts of Eastern Europe and Central Asia, where infant mortality rates may be rising and school completion rates lagging, according to the release.

The report says little progress is being made against child malnutrition in some regions, and it adds that malnutrition can be reduced with low-cost measures such as nutrition education, food supplementation and fortification, and improving the status of women.

It calls for better management of natural resources to improve water and sanitation standards, which would reduce child mortality.

Following is the text of the World Bank press release:

Many Developing Countries Not on Track to Reach 2015 Poverty Goals

World Bank urges action by both rich and poor countries

Washington, April 20, 2002 -- Despite progress in recent years, both poor and rich countries need to do much more if the international community is to meet its commitment of halving global poverty in all the world's regions by 2015, says a new World Bank report, World Development Indicators 2002.

At the United Nations International Conference on Financing for Development in Monterrey, Mexico, world leaders confirmed their support for the goals of the UN Millennium Declaration, which call for reducing world poverty in all its forms. Current estimates say that brisk economic growth in China and India will enable the world to reach the overall goal of halving global poverty by 2015. But the data in the new study -- which covers all eight of the Millennium Development Goals (MDGs) -- say progress is uneven and that too many regions and countries are falling far short of the goals.

Still, more advances are possible if poor countries improve policies and governance and rich countries expand trade access and increase foreign aid. Policies in developing countries have been improving during the last 15 or 20 years. Rich countries have eased barriers to poor country exports during the last decade but obstacles remain high, particularly in agriculture and textiles. And in the run up to Monterrey, the United States and European Union pledged to increase development assistance significantly during the next few years.

"The past decade has been a good one for opening up markets to goods from poor countries and a bad one for increasing foreign aid flows," said Nicholas Stern, the World Bank's Chief Economist and Senior Vice-President for Development Economics. "Monterrey showed that we have begun to turn the corner on aid. But in the decade ahead, we must push vigorously on trade. We know development can work, yet 1.2 billion people still live on less than $1 a day. The challenge of meeting the Millennium Development Goals reminds us all that we can and must do better."

The MDGs aim to reduce income poverty by 2015 and spur significant improvements in education, gender equality, health care, and in overcoming hunger and environmental degradation. The new study shows that for the poorest countries, many of the goals are far out of reach while even in better-off countries, there may be regions or other sub-groups that lag far behind.

The most-quoted goal calls for reducing the proportion of people living on less than $1 a day to half the 1990 level by 2015, from one in every third person in the developing world to one in every six. The new Bank report shows that reaching that goal is possible in most developing regions if growth in per capita income accelerates to an average of 3.6 percent per year. That growth would be nearly twice the rate achieved over the last decade, but the experience of some countries shows that it is possible. China averaged almost 9 percent annual growth in GDP [gross domestic product] per capita in the 1980s and 1990s. Vietnam saw growth of almost 6 percent in the 1990s, which reduced poverty by more than a third between 1993 and 1998. And in India, faster growth in the last decade helped to reduce substantially the proportion of people living in poverty.

Each goal is important by itself, but they should also be viewed together -- they are mutually reinforcing. Better basic health care and nutrition increases learning and productivity. And better education, especially for women, leads to better health outcomes. The living of many poor people is damaged by environmental degradation. Reducing poverty gives people more resources to pursue better education and health care and a cleaner environment.

"This study is not a final verdict on how countries will perform but it is a warning that many are not on track to reach many of the goals," said Shanta Devarajan, Chief Economist of the World Bank's Human Development Network. "Just because a country is doing well economically does not mean it is in reach of the Millennium Development Goals. Countries need to work to ensure that poor people are included in the benefits of development. Poor people in developing countries urgently need access to quality health care services and education to enable them to fulfill their potential. Now is the time to take action to speed up progress, not 5 to 10 years from now."

Progress By Region

This year's World Development Indicators marks the 25th edition. The reports are based on information from national statistics agencies. Shaida Badiee, Director of the Bank's Development Data Group, called on nations to improve their data reporting so they and the international community are well informed of the challenges and successes of development and can respond.

"We must measure results," said Badiee. "We need good statistics to understand who is benefiting and who is left out. In poor countries, statistical agencies are often under-funded and their work underused. They need training, equipment, and a clear mandate from their governments to produce better, more reliable, and more timely statistics. But the work does not stop there. The international community also plays a role by helping to develop capacity, establishing standards, sharing knowledge, and coordinating the collection and dissemination of international statistics."

The new report shows that prospects of reaching the Millennium Development Goals vary by region. Fast-growing East Asia could reach the poverty goals, with the number of people living in extreme poverty expected to drop by almost 80 percent. Sub-Saharan Africa, meanwhile, remains the biggest concern.

A look at the goals by region:

Overall, East Asia and the Pacific remains a promising region for reaching the MDGs on time. In 1999, there were about 260 million people living on less than $1 a day. That is expected to drop to 59 million in 2015. Benefiting from high economic growth and the highest levels of savings of all the regions in the world (37 percent of GDP in 2000), the region also fares well in gender equality in school and child mortality. On the health side, progress is lagging behind achievements in educational attainments and poverty headcounts and more effort will be needed to achieve the objectives.

Eastern Europe and Central Asia's social indicators at the beginning of the transition were similar to those of Western Europe. Recent data suggest that in several countries the stress of transition has resulted in reversals in those indicators. Of particular concern are countries where infant mortality rates may be rising, school completion rates are lagging and poverty is continuing to rise. While much of Central and Eastern Europe is experiencing robust growth and declining poverty, the Balkans and much of the CIS are confronting deteriorating social circumstances and lower growth.

Latin America and the Caribbean is expected to reduce the number of poor in the region from 77 million in 1999 to 60 million by 2015 if it can maintain a per capita growth rate of 3.6 percent. Regional growth has declined since 1980s and GDP per capita has grown by only 1.7 percent a year since 1990. Although it is a comparatively wealthy region, it also includes two very poor countries (Haiti and Nicaragua) and three of the world's 10 most severely indebted countries (Argentina, Brazil and Mexico), and it suffers from a relatively low overall rates of savings (20 per cent of GDP). Yet the region has the potential to reach many of the MDGs. Its indicators are positive in most categories, most notably gender equality in school. Latin America and the Caribbean is the only region in the world where the literacy rate is higher among girls than boys. Child malnutrition remains a problem in the low-income countries and in poorer regions of some middle-income countries.

Middle East and North Africa has not been successful in achieving sustained growth in the past decade, yet despite this the number of poor is projected to fall slightly from seven million in 1999 to six million by 2015, implying a dramatic decrease in the share of poor in the region's growing population. Though much progress has been made in improving the quality of life of the population including narrowing the gap between male and female outcomes, continuing improvement in social indicators, especially health, remains a future challenge.

South Asia has experienced rapid growth, averaging 5.9 percent a year since 1990, which has helped to reduce poverty substantially. Strong growth in India helped to raise the regional average growth rate in the 1990s; Bangladesh and Sri Lanka also experienced good growth. The ability of the region, especially India, to sustain average growth of 5-6 percent a year will be critical to achieving the poverty reduction targets for 2015. The region has made gains in reducing mortality in children under five since 1990, especially in Bangladesh. At the same time, little progress has been made in reducing malnutrition; today, nearly half of all children under the age of five are malnourished. The resurgence of tuberculosis and the threat of HIV/AIDS are also a cause for concern.

In Sub-Saharan Africa the number of poor is expected to rise from 300 million in 1999 to 345 million people by 2015. To halve poverty by 2015, African economies will need to grow at 7 percent a year on average (about 5 percent in per capita terms), more than twice as fast as the 3.1 percent growth in 2000. Struggling with high rates of HIV/AIDS, malaria and other diseases, Africa remains highly dependent on commodity exports and is still experiencing political and economic instability. HIV/AIDS stands as the leading cause of death in Sub-Saharan Africa, but malaria and tuberculosis are also serious problems. These epidemics present a major public health, economic and social challenge. Africa is the region with the lowest average primary school completion rates but the encouraging news is that some countries, for example Guinea and Eritrea, have made impressive progress after starting from very low levels.

Progress on Millennium Development Goals

Just how many countries reach the Millennium Development Goals depends on whether the progress in the past decade can be sustained or sped up in countries falling behind.

A look at the eight MDGs shows mixed results:

-- Eradicate Extreme Poverty and Hunger: The goal is to reduce the proportion of people living on less than $1 a day to half the 1990 level by 2015 -- from 29 percent of all people in low- and middle-income countries to 14.5 percent. Bank projections show that it is possible to achieve the goal in most regions if growth in per capita income accelerates to an average of 3.6 percent a year -- nearly twice the rate of the last decade.


• Achieve Primary Universal Education: There have been small improvements in all regions in the last decade but progress overall has been too slow to reach the goal by 2015. In 1999, there were still 120 million primary-school-age children not in school, 53 percent of them girls and 74 percent living in South Asia and Sub-Saharan Africa.
  
  
• Promote Gender Equality and Empower Women: Equal access to education is a key step toward greater gender equality but it is not the only one. Progress has been good in some regions, but even if this goal is reached, the world will still fall short of gender equality. Differences persist in legal rights, labor market opportunities, and ability to take part in public life and development decision-making.
  
  
• Reduce Child Mortality: Rapid improvements before 1990 gave hope that mortality rates of children under five could be cut by two-thirds in the following 25 years. But progress slowed almost everywhere in the 1990s, and in parts of Africa infant and child mortality rates rose. Only 37 developing countries are making fast enough progress to meet the goal, while vaccination rates for children have declined.
  
  
• Improve Maternal Health: In 1995, more than 500,000 women died from complications of pregnancy and childbirth, most of them in developing countries, with half in Africa. In Rwanda, there were more than 2,000 deaths for every 100,000 live births, compared to two per 100,000 in Greece. The lack of current data on maternal deaths limits monitoring of trends over time. The Bank study says broader government action is often needed to improve policies that affect the lives of women and the capacity of the health system.
  
  
• Combat HIV/AIDS, malaria and other diseases: With an estimated 40 million people living with HIV/AIDS and 20 million deaths since the disease was first identified, AIDS poses an unprecedented public health, economic, and social challenge. Malaria is endemic in more than 100 countries and territories and affects some 300 million people each year. TB [tuberculosis], meanwhile, is the main cause of deaths from a single infectious agent among adults in developing countries, and has grown rapidly in Eastern Europe and Central Asia, Africa, and Southeast Asia.
  
  
• Ensure Environmental Sustainability: Safe water supplies are important for improving health, especially in children, but the report notes that in many regions, the share of the population with access to an improved water source has declined since 1990. The loss of more than 900,000 square kilometers of forests over the decade also points to unsustainable use of natural resources. Greater understanding of how environmental changes affect poor people is needed to point the way to truly sustainable development.
  
  
• Build a Global Partnership for Development: The building blocks of the new partnership, confirmed at the Monterrey Conference on Financing for Development, are stronger policies and good governance in developing countries; a more open and equitable global trading system; and increased resources through aid and debt reduction for countries working to meet their development goals.

Other Highlights from the WDI 2002

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