Shifting Wealth: Economic and Social

Challenges

A Regional Comparison

UNESCAPFebruary 2015

Mario Pezzini, Director, OECD Development Centre

1

I. Shifting Wealth

II. Economic and social challenges

III. Perspectives from Africa and Latin America

I. Shifting Wealth

II. Economic and social challenges

III. Perspectives from Africa and Latin America

I. SHIFTING WEALTH

Shifting Wealth is reshaping the world economy

Source: Perspectives on Global Development 2010: Shifting Wealth, author’s calculations based on World Bank Data 2009

Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map.

The “Three Speed World” in the 1990s

Source: Perspectives on Global Development 2010: Shifting Wealth, author’s calculations based on World Bank Data 2009

Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map.

The “Three Speed World” in the 2000s

Shifting weight of global economic activity is continuing …

6

Source: Authors’ calculations based on World Bank (2014), World Development Indicators (database) http://data.worldbank.org/data‐catalog/world‐development‐indicators.

Share of GDP in PPP terms

0

10

20

30

40

50

60

70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Brazil China India Indonesia

Russian Federation South Africa OECD Non‐OECD

%

Changing the global geography of production

World top 20 manufacturers, 2010Country share in total world manufacturing value added

0

5

10

15

20

25

30% 1990 2000 2010

China is the main driver, but other countries are also contributing

Source: OECD (2013), Perspectives on Global Development 2013 -Shifting up a Gear: Industrial Policies in a Changing World, OECD, Paris.

Shifting Wealth – Shifting Partners: South-South Partnership

Top 15 destinations of Chinese FDI, 2003-12Number of jobs created by Chinese FDI projects in the

recipient country

Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map. Source: OECD (2013), Perspectives on Global Development 2013 -Shifting up a Gear: Industrial Policies in a Changing World, OECD, Paris.

OECD Development Centre, calculations based on UN COMTRADE (database), via http://wits.worldbank.org/wits/.

Africa's emerging trading partners(average 2009-11)

% of the Total Trade, Billion USD

China44%

India16%Brazil

7%

Korea, Rep.6%

Turkey4%

Oth.EPs23%

Africa's trade flows with it's emerging parteners(average 2010-12) % of the Total

Shifting Partners: China is leading trade with Africa

050

100150200250300350400Billion USD

Africa's Trade flows with selected partners 2000-2012 (in Billion USD) EU27

China

IND+BRA+KOR+TUR+RUSUSA

Intra-African

II. Economic and social challenges

Many upper middle-income countries are not on course of convergence

11

Source: Authors’ calculations based on World Bank (2013), World Development Indicators (database)

ZAR

KEN

ARM

BTN

CMR

GEO

IND

IDN

MDA

MNG

NGA STPSEN

LKA

UKR

VNM

DZA

AGO

AZE

BLR

BRA

BGR

CHNCOL DOM

GRD

HUN

IRQ

KAZMYSMEXPLW

PAN

PER

ROM

SYC

ZAFLCA THA

TON

TUN

TUR

TKM

0.00

5.00

10.00

15.00

0.00 5.00 10.00 15.00

Low‐income Lower middle‐income Upper middle‐income High‐income

Averageannu

al GDP

 growth neede

d from

 201

2 to 205

0 to re

ach 

OEC

D pe

r capita

 average in 205

0

Average annual GDP growth 2000‐12

%

%

RUS

Although increases in production and innovation capabilities have beenmade,  many developing countries are still lacking behind OECD average

China

India

Indonesia

Malaysia

Russian Federation

Thailand

Argentina

Brazil

Costa RicaKenya

MoroccoSouth Africa

France

Germany

JapanKorea

United Kingdom

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0 10 20 30 40 50 60 70 80 90 100

R&D invesm

ent (% of G

DP), 2009

R&D investment financed by the private sector (%), 2009

OECD Average = 2.3 %

Singapore

United States

Intensity in R&D investment and private sector contribution, 2009 Targeting resources to specific scientific and technological areas (new materials, biotechnology and clean energy vehicles; healthcare, etc.).

Pubic procurement for innovation (e.g. Brazil, China, India and South Africa) 

Attracting more knowledge‐intensive FDI (e.g. Brazil, Costa Rica, Malaysia, Morocco)

Promoting start‐ups (Brazil,   Colombia, Peru)Promoting cluster development (e.g. Brazil, Chile, India)

Source: OECD (2013), Perspectives on Global Development 2013 -Shifting up a Gear: Industrial Policies in a Changing World, OECD, Paris.

Source: OECD Development Centre based on Kharas (2010).

By 2030, 80% of the world’s middle classes will be living in developing economies

Note: « Middle classes »: People living between 10 and 100 USD PPP a day.

The rise of new “middle classes” & growing social challenges

A success story?

• A lower‐middle income country• Average 5% annual growth rate since 1990• Nearly 100% primary enrolment  in 2008• 80% health care coverage• ‘Prudent public debt management’ (42.8% of GDP in 2009) • 3%  fiscal deficit • Inflation at approx. 3%  in the 2000s

Source: OECD/AfDB/UNECA (2010), African Economic Outlook.

Tunisia

Social norms and institutions: Drivers of gender inequality with huge impact on social and economic performances

00.10.20.30.40.50.60.70.8

Civil Liberties

DiscriminatoryFamily Code

RestrictedPhysicalIntegrity

RestrictedResources

and…

Son BiasEAPECALACMENASASSA

Source: OECD Development Centre’s Social Institutions and Gender Index (SIGI) 2012

Discrimination against women by region

III.   Perspectives from Africa and Latin America

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Africa

External Financial Flows – FDI is picking up

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-50

0

50

100

150

200

250

% G

DP

Cur

rent

USD

,bill

ion

Remittances

OfficialDevelopmentAssistance

Portfolioinvestments

Foreign directinvestments

% GDP

Source: African Economic Outlook 2014, OECD Publishing 2014

While GDP is growing, jobs for the young population are not

20

01002003004005006007008009001,000

0

50

100

150

200

25019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

10

GD

P, B

illio

n (2

005

PPP

int.

$)

Youn

g (1

5-24

) Peo

ple,

Mill

ion

Youth Population Youth Employment GDP (right axis)

Source: African Economic Outlook 2012, OECD Publishing 2012

Africa could have made more of the resource boom

21

10% 11% 12%

5%

11%9%

0%

2%

4%

6%

8%

10%

12%

14%

Mining Energy Agriculture

Africa's share of global resource assets19952005

Source: Authors' calculations based on data from World Bank (2012), The Changing Wealth of Nations, World Bank, Washington, DC.

For example:

In mining: spending on exploration in Africa has remained below $5 per square kilometre;

whereas in Canada, Australia and Latin America the average is $65 per square kilometre.

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Africa’s share of trade in intermediate goods is small but growing

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Share of globa

l intermed

iate im

ports

OECD countries Non‐OECD countries African countries

2.2%1.4%

Source: African Economic Outlook 2014, OECD Publishing 2014

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Latin America & the Caribbean

25

The economic slowdown in Latin Americacontinues

GDP growth: Latin America and the Caribbean vs OECD (annual %)

Source: OECD(2014), OECD Economic Outlook, Vol. 2014/1, OECD Publishing. CEPALSTAT and " Preliminary Overview of the Economies of Latin America and the Caribbean 2014 " (CEPAL, 2014)

Policies can make a difference for inequality

Gini coefficients before and after taxes and transfers in Latin American countries

Source: OCDE (2008a) for OECD countries excluding LAC, OECD (2008b) for Argentina, Brazil Colombia and Peru.

New resources for development

Greater fiscal space in the 2000s vis-à-vis the 1990s

Fiscal revenue to GDP ratio (%)

Source: Authors’ calculations based on World Bank (2011).

28

0102030405060708090

100

Panel A. Pre-primary and Primary

Pre-primary (net rate, %) Primary (net rate, %)

0102030405060708090

100

Panel B. Secondary and Tertiary

Secondary (net rate, %) Tert iary (gross rate, %)

Enrolment rates by level of education (%), circa 2012

Education: Enrolment rates increasedBut efforts are needed in pre-primary and tertiary

education

Source: UNESCO Institute for Statistics (UIS) database.

29

High school student performance and equity (PISA 2012)

Source: based on OCDE/PISA 2012.

Education: Latin America lags behind in terms of performance and equity

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Percent of firms identifying an inadequately educated workforce as a major constraint

Latin America particularly affected by skills deficit

Source: Enterprise Surveys (2012), World Bank, Washington DC.

Regional Economic Outlooks-

LEO 2015: Education and Skills for Development

2009:  Fiscal Policy for Development 2010: Migration for Development2011: Middle Classes2012: Transforming the State for Development2013: SMEs Policies for Structural Change2014: Logistics and Infrastructure for Development

SAEO 2015 : Strengthening Institutional Capacity2010: Transport Infrastructure and regional integration2011/2: Green Growth2013: Narrowing Developing Gaps 2014: Middle Income Trap

AEO  AEO 2015: Spatial Inclusion 

(…)2010: Public Resource Mobilisation & Aid2011: Emerging Partners2012: Promoting Youth Employment 2013: Structural Transformation & Natural Resources2014: Global Value Chains and Africa’s Industrialisation

identifying economic and social challenges and suggesting innovative policy solutions to the region’s policy makers

THANK YOU

Mario Pezzini, Director OECD Development Centre

www.oecd.org/dev

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