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Global Poverty Goals are in Reach, if Action is Taken on Trade and Aid

Extended coverage of IMF/World Bank Spring Meetings

April 14, 2003—Despite the complexities of the current geopolitical situation, there are ongoing challenges that have to do with achieving the Millennium Development Goals, and these were taken up in the final communique of the Development Committee, said its chairman, South African Finance Minister Trevor Manuel yesterday after the meeting’s conclusion.

According to the communique: "Slower economic growth, the war in Iraq, and failure to make more substantive progress on the Doha Development Agenda add to the challenge of implementing the global development agenda. We therefore strongly reaffirmed our commitment to the global effort needed to reduce poverty in developing and transition countries and achieve the MDGs."

In a significant vote of confidence for the effectiveness of World Bank assistance, US Treasury Secretary John Snow yesterday announced that he will request another $100 million in funding to the International Development Association, the World Bank’s concessional lending and grant facility. (Click here for press release.)

Last year the US proposed additional funding as an incentive contribution if IDA satisfactorily initiated work on a results measurement system and had delivered key country diagnostic assessments. According to Secretary Snow, conditions have been met to allow for the additional contribution.

"Aid has never been more effective than it is now," said World Bank Chief Economist Nicholas Stern earlier on Sunday, releasing this year’s  World Development Indicators, even while aid as a function of rich countries’ GDPs has never been lower—about 0.22 percent.

"Agreements and commitments alone will not achieve the Millennium Development Goals," says Stern. "More actions are needed. And more resources. The cost of achieving the goals is likely to run to at least an additional $50 billion a year from rich countries over and above the resources from developing countries themselves. Developing countries have been improving their policies and governance, and rich countries their allocation of aid. The result is that aid is becoming still more productive."

According to the new World Bank report, global poverty can still be cut in half by 2015 if rich countries lower trade barriers and boost foreign aid, and poor countries invest more in the health and education of their citizens.

If rich countries lower their trade barriers, annual growth in developing countries could be boosted by an extra 0.5 percent over the long run—and lift an additional 300 million people out of poverty by 2015. Developing countries also have much to gain by lowering their own trade barriers. Countries that have integrated more with the world trade system have on average enjoyed stronger growth. During the past decade, countries that boosted their trade grew more than three times as fast as those that did not.

"If tariff barriers on goods were eliminated, we would see an increase in world income of around $800 billion per year," Stern estimates.

While trade enables poor countries to export their way out of poverty, it is strong health and education services that give people the tools they need to take advantage of opportunities in the global marketplace.

The Development Committee yesterday called for adequate funding for the Fast Track Initiative on Education For All in the initial seven countries and "to provide the required support to other countries that meet the eligibility criteria." The Committee also asked for measures of progress toward achieving the goal on gender parity in access to primary and secondary education by its September meeting.

The Bank is also being asked to step up work in water and sanitation, and in health and HIV.

But government spending in education and health remain low in many countries. In 2000, public spending on health in low-income countries averaged 1 percent of GDP, compared with 6 percent in high-income countries. Average per capita spending on education was 28 times greater in rich economies than in developing economies.

The new Bank study also points to the need for countries to create sound investment climates that can encourage job creation and spur economic growth. "The case for creating a good investment climate is simple: an economy needs a predictable environment in which people, ideas, and money can work together productively and efficiently," says Stern.

Part of what determines the business environment in a country is the regulation of new entry and countries differ significantly in the obstacles they impose on the entry of new businesses. This year’s World Development Indicators includes a new set of indicators on the business environment. Among the findings: In Mozambique, entrepreneurs wishing to start up a business must complete 16 procedures, a process that takes an average of 214 business days and costs the equivalent of 74 percent of gross national income (GNI) per capita. In Italy, they must complete 13 procedures, wait 62 business days on average, and pay 23 percent of GNI per capita. But Canada requires only 2 procedures, and the process takes only two days and costs about 1 percent of GNI per capita.

The World Development Indicators—a large and detailed collection of data from international and national statistics agencies—tracks the progress by poor countries toward reaching the Millennium Development Goals (MDGs). The goals, agreed by the international community in 2000, aim to reduce income poverty by 2015 and spur big improvements in education, gender equality, health care, and in overcoming hunger and environmental degradation.





Development Committee Chairman and Finance Minister of South Africa Trevor Manuel




Addressing reporters following Sunday's Development Committee Meeting: to the left of Manuel, World Bank Chief Spokesperson Caroline Anstey and World Bank President James Wolfensohn; to the right, IMF First Deputy Managing Director Anne Krueger and Development Committee Executive Secretary Thomas Bernes




World Bank Chief Economist Nick Stern released this year's World Development Indicators at the Spring Meetings



World Development Indicators





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