Fridays Academy: Health, Poverty Reduction and Economic Growth (II)

The unacceptably high mortality rates in the least developed countries can be improved by the control of communicable diseases and enhancing maternal and child health. HIV/AIDS, malaria, tuberculosis (TB), childhood infectious diseases, maternal and prenatal conditions, micronutrient deficiencies and tobacco-related illnesses represent the main causes of (avoidable) deaths in low-income countries (CMH, 2001).  Widespread disease also stunts the exploitation of arable land, migration and trade. Bad health stymies job productivity and an individual’s ability to learn and to grow intellectually, physically and emotionally. Through all these channels, ill health pushes the poor deeper into poverty.  If disease was controlled so that individuals could reap longer and healthier lives, the pressure to have many children would abate and families could invest more in the health of each child. These improvements in health would in turn translate into higher incomes, higher economic growth and reduced (and more sustainable) population growth.
A healthy individual is more likely to be more productive than an unhealthy one. Better health increases per capita income through at least three channels. These are:

•  
  • altering decisions about spending and saving over an individual’s life-cycle;
  • encouraging foreign direct investment; and
  • increasing the incentives for investing in education.

An individual is less likely to save for retirement when mortality rates are high. Falling mortality rates in many developing countries has opened up new incentives to save that impact dramatically, at least before populations begin to age, on national saving rates. The impetus from the national savings rates boosts investment rates and increases per capita income.  Foreign investors are more likely to shun environments in which the labor force suffers from a high disease burden. Whole industries in agriculture, mining, manufacturing and tourism suffer from a lack of investment when disease is prevalent. Moreover, infrastructure projects suffer from a lack of investment also in high disease environments. Furthermore, endemic disease, such as river blindness, prevents individuals from exploiting land and other natural resources. Reduced mortality rates also make investment in education more appealing, as healthier children have higher rates of school attendance and higher cognitive abilities.  A number of studies have shown the positive effect of health and nutrition on school attendance and cognitive ability (Balasz et al. (1986), Pollitt (1997, 2001), Bhargava (1997), Kremer and Miguel (1999)).      
 

Exhibit below examines the vicious cycle that can be set in motion when bad health leads to further impoverishment and further ill-health. Poor health reduces GDP per capita by reducing labor productivity from reduced investment in physical capital, reduced access to natural resources and the global economy and reduced schooling and impaired cognitive capacity.  GDP per capita is also lowered by a reduced labor force stemming from high mortality due to adult illness and malnutrition and early retirement.  The higher dependency ratio stemming from the reduced labor force and higher fertility and child mortality directly feeds into lower GDP per capita.  The HIV/AIDS epidemic in Sub-Saharan Africa has already begun to impact on higher levels of adult mortality.  The effect of HIV/AIDS on GDP per capita could eventually follow the pattern described by the exhibit below with consequent adverse effects for investment, education, and saving for retirement. 

Health’s Links to GDP

              Source:     Bloom, Canning and Jamison, 2005

Source: World Bank Poverty and Growth Program

Barack Obama will double US Aid

In a speech to the Chicago Council on Global Affairs, Barack Obama pledged to double US aid by 2012, if elected President.

For the last twenty years, U.S. foreign aid funding has done little more than keep pace with inflation.  Doubling our foreign assistance spending by 2012 will help meet the challenge laid out by Tony Blair at the 2005 G-8 conference at Gleneagles, and it will help push the rest of the developed world to invest in security and opportunity.  As we have seen recently with large increases in funding for our AIDS programs, we have the capacity to make sure this funding makes a real difference.

John Edwards also made his Global Poverty Proposal recently.

Hillary?

(Via Owen, Steve Radelet also writes about it at the CGD)
Source: World Bank Poverty and Growth Program

Dani Rodrik’s blog

Dani Rodrik has entered the blogosphere with a promise of unconventional thoughts on economic development and globalization.

That’s great news. Welcome!

(Via Trade Diversion)
Source: World Bank Poverty and Growth Program

Migration and remittances: leaving in order to live

We have blogged about migrant remittances in the past, from an economic point of view.

The New York Times magazine includes this week an excellent article on remittances that looks at the personal stories behind migration and at its costs and benefits. Jason DeParle’s article focuses on the Philippines, a country with 10 percent of its population living abroad and where remittances make up 14 percent of its GDP.

With about one Filipino worker in seven abroad at any given time, migration is to the Philippines what cars once were to Detroit: its civil religion. A million Overseas Filipino Workers — O.F.W.’s — left last year, enough to fill six 747s a day. Nearly half the country’s 10-to-12-year-olds say they have thought about whether to go. Television novellas plumb the migrants’ loneliness. Politicians court their votes. Real estate salesmen bury them in condominium brochures. Drive by the Central Bank during the holiday season, and you will find a high-rise graph of the year’s remittances strung up in Christmas lights.

Across the archipelago, stories of rags to riches compete with stories of rags to rags. New malls define the landscape; so do left-behind kids. Gain and loss are so thoroughly joined that the logo of the migrant welfare agency shows the sun doing battle with the rain. Local idiom stresses the uncertainty of the migrant’s lot. An O.F.W. does not say he is off to make his fortune. He says, “I am going to try my luck.

More information on remittances at the World Bank website.
Source: World Bank Poverty and Growth Program

Satellite monitoring to protect forests

By Bilal Hassan
THE Punjab government has decided to launch a green Punjab programme through public-private joint venture to safeguard and promote forestry in the province. It is a welcome move for environmentalists and for sustainability of agriculture. The provincial government intend to plant 20 million trees on 100,000 acres in the coming three years.To protect forests, penalty on tree theft has been increased five times of tree value or one year imprisonment. It means if the value of tree is Rs1,000, the penalty would be Rs5,000.

Under the Rs4.5 billion Green Punjab Programme, satellite monitoring would be introduced to protect forests. The objective of the programme is to bring 25 per cent area of the province under forests. New species of plants would be introduced with the cooperation of Spain and France. To add to this, plantation of teak tress would also be carried out.

In this context, it is essential to visualise different types, extent, importance, problems and management of various forests in the country.

Sustainability of agriculture is linked with forests since trees control soil erosion, regulate water supply, keep climate moderate, stabilise canal embankments and prolong the lives of dams and reservoirs.

Besides these benefits, forests are a valuable source of various products and by-products including timber, charcoal, firewood, pulp, tannin, lignin, cellulose and wax. Wood and timber constitute raw material for wood-related industries. Wood is also used in manufacturing of agricultural implements. Livelihood of hundreds of thousands of people is linked with such industries.

Our country is a land of great diversity but short of forests.Less than five per cent of its total area is under forests, which is very low as compared with other Asian countries. In India, Japan, Sri-Lanka, Philippines, Korea, Bhutan and Brunei, natural forest area ranges from 24.2 to 90.4 per cent of the total land mass.

Our total forest area is around four million hectares. Province-wise forest areas are about 0.51 million hectares, 1.33 million hectares, 0.84 million hectares and 1.36 million hectares in Punjab, NWFP, Sindh and Balochistan, respectively. The state forests contribute only 14 per cent of timber and 10 per cent of fuel wood whereas farmland contributes 46 per cent of timber and 90 per cent of fuel wood requirements. Forest’s share in the gross domestic product (GDP) is extremely low compared to other sub-sectors of agriculture.

Various important forests include moist and dry temperate coniferous, scrub, tropical thorn, riverian, juniper, mangrove, irrigated and farm forests scattered from northern mountainous to southern delta regions. These forests differ with respect to occurrence, environmental conditions, composition, management and economic importance.

Moist temperate forests: These forests are located in Azad Jammu and Kashmir, Murree, parts of districts of Abottabad, Swat, Mansehra, including some tribal areas of Malakand and Hazara.

Important timber vegetation comprises deodar, fir, partal and kail. These forests yield precious timber used for multiple purposes. Other type of vegetation includes oak, popular and horse chestnut as broad-leaved tress.

The management of these forests is carried out for the protection of Mangla and Tarbela watersheds and to regulate clean supply of water to rivers. Important problems are illegal and excessive cutting of trees.

Dry temperate forests: Dry temperate forests are found in the northern Areas of Diamir, Chitral and Dir, tribal areas of Waziristan and northern Balochistan of Loralai and Zhob.

Important trees found in these forests are Chilgoza, pine, pencil juniper and deodar. Pencil juniper is the most important quality timber that is used in making pencils. Excessive cutting by local people and poor germination ability of seeds are the problems confronting these forests.

The scrub forests: These forests are located in the Pothwar region, the foothills of Murree and the NWFP hills. Vegetation is open, bushy and branchy including Kahu and Phulai. The small timber obtained from Kahu and Phulai is used in manufacturing of handicrafts, handles of hand tools and rural cots. Trees protect the watersheds of Tarbela and Mangla dams. Excessive cutting of trees by local people has inflicted a lot of damage to these forests

Tropical thorn forests: These forests survive under drought-like conditions. Technically, trees are called Xerophytes like karir, sarkand, van, kikar, jand and farash. Deep and extensive roots, small and a few leaves, a few number of stomata on and under the leaves, short life-span, shedding of leaves during dry season and thick bark are the characteristics features that help the plant to survive under drought conditions. Though the forests offer lush green sites for grazing of livestock and protection of wildlife they are vanishing due to rapid industrialisation, urbanisation, and road construction and over cutting of trees.

Irrigated forests: Irrigated forests are most important. Primarily, the irrigated forests were managed for provision of wood for making coal but after discovery of coal, the objective changed to producing quality timber for making furniture and sports goods. But shortage of water for irrigation, slow growth species, loss of wood by pilferage, diseases, insects, pests and weeds are factors exercising adverse effects on the productivity of these forests. Farm forestry has got much attention of the forests due synergistic effects of trees on farm crops.

Riverian forests: These forests are located on both banks of the Indus—-eastern and western banks. These are rapidly vanishing in Sindh due to significant reduction in the annual discharge of Indus in the lower Indus region. These forests are called riverian forests and comprise vegetation like kikar, jand, farash and Bahn. The trees of Punjab riverian forests include shisham and mulberry which are also exposed to illegal cutting. Medium size timber wood obtained from the forests is used in furniture, building material and sports goods. These trees strengthen rivers and canal embankments.

Mangrove forests: Located on the Indus delta originally consisted of highly salt tolerant species such as Avicennia marina, Avicennia officinalis, ceriops tagal and Aegiceras corniculatum but large number of these species failed to survive due to changing of deltaic conditions over the years. Only Avicennia marina is the surviving species in the delta region.

These forests are good feeding, breeding and nursery grounds for prawns, shrimps, fish etc. Equally these are good habitat for snakes, birds and mammals. The trees have the importance of arresting erosion, storm damage and wave action by acting as buffers and catching alluvial materials.

Over exploitation, pollution and changes in water quality, excessive cutting for fuel wood and fodder, solid industrial and domestic wastes and oil spills have resulted in reduction of area under mangrove forests. Area of these forests has reduced from 263,000 hectare in 1978 to 158,500 hectare in 1990. There is a need of a comprehensive programme to educate local people about the value of mangroves to prevent cutting for fuel.

Management of these forests requires planting tree material containing characteristics like extensive root system, broad genetic base and ability of withstanding harsh climate, browsing, trampling and uprooting in the forests to ensure continuous supply of timber. To boost forest productivity, it is necessary to undertake certain cultural operations such as weeding, staking, pruning, thinning etc from time to time. Irrigation along with occasional fertilisation is crucial to get desired results. Lastly, removal of old trees and plantation of new sapling is pre-requisite to maintain healthy forest crop.

Source: DAWN Business and Economic Review

Expanding South-South trade

Expanding South-South trade

By Hussain H. Zaidi
On the basis of the economic grouping of trade partners, global trade can be classified into three categories: among developed countries or north-north trade, between developed countries on one hand and developing countries on the other also called North-South trade, and among developing countries or South-South trade. It is the third category of the trade that this write-up is concerned with.

Traditionally developing countries have looked to developed countries as markets for their exports and source of their imports. The reasons for North-South trade are not difficult to see. One is the theory of comparative advantage, according to which countries export goods which they can produce more efficiently and import goods which they either cannot produce or produce only at a cost higher than that of importing them. Developed countries have found it convenient to specialise in the production of capital intensive manufactured goods and import primary goods or labour intensive manufactured goods from developing countries.

A second reason is unilateral preferential tariff treatment that developed countries have offered to imports originating in developing countries. Three, many developing countries until quite recently followed inward-looking, import substitution development and trade policies, which made it difficult for exports originating in other developing countries to have access to their markets.

Though to date developing countries prefer to trade with developed countries, South-South trade is one on the rise. The trend and pattern of South-South trade are summed up as follows:

• During 1970-80 South-South trade accounted for nearly 23 per cent of total merchandise exports of developing countries. The share increased to 30 during 1980-90, 39 per cent during 1990-2000 and 41 per cent during 2000-2003. Thus during last three decades, the share of South-South trade in developing countries’ total exports has gone up by 79 per cent.

• Increase in South-South trade in developing countries’ total exports has occurred in case of both primary and manufactured products. The increase in case of primary products is 87 from 21.2 per cent during 1970-80 to 39.65 per cent during 2000-03. The increase in case of manufactures is 21.44 per cent from 34.5 per cent during 1970-80 to 41.9 per cent during 2000-03. This shows that South-South trade has shown greater dynamism in case of export of primary products than export of manufactures.

• During 1970-80 South-South trade accounted for 26 per cent of total merchandise imports of developing countries. The share increased to 32 during 1980-90, 38 per cent during 1990-2000 and 44 per cent during 2000-2003. Thus during last three decades, the South-South trade in developing countries’ total imports has gone up by 68 per cent.

• Increase in South-South trade in developing countries’ total imports has occurred in case of only manufactured products, as the share of South-South trade in developing countries total import of primary products remains almost the same: 56 per cent during 1970-80 and 55.85 per cent during 2000-03. The share in case of manufactures has more than tripled from 11.6 pc during 1970-80 to 39.8.9 per cent during 2000-03. Why has there been such huge increase in import of manufactures among developing countries?

• According to UNCTAD, this is due to increased production sharing within East Asia—economically and commercially the strongest region among developing countries—resulting in a triangular trade pattern. The pattern works like this. Relatively more advanced countries like South Korea instead of exporting industrial products directly to developed countries export intermediate products to relatively less advanced developing countries from where the finished products are exported to developed countries.

• A deeper look into the composition of South-South trade reveals that electronics are the largest and the most dynamic trading products. Their percentage share in South-South trade has nearly quadrupled from 8.1 per cent in 1980 to 31.1 per cent in 2003, which can be explained by the triangular trade pattern. Mining products are the next most traded products (18.5 per cent) followed by agricultural products (13 per cent). Low technology products make up 9.6 per cent of South-South trade; however their share has gone down from 47 per cent in 1980. Labour intensive products constitute only 5.6 per cent of South-South trade; their share has more than doubled from 1.8 per cent in 1980.

What are the major reasons for the increase in South-South trade? To begin with, in case of several developing countries, there has been a fundamental shift from import substitution to export-led growth trade and development strategies leading to more liberal trade regimes thus widening the scope of South-South trade.

Second, bilateral and regional preferential trading arrangements involving developing countries have proliferated. Though most of these arrangements have yet to come of age, a few of them like Association of South East Asian Nations (Asean) have been a resounding success.

Third, a country’s trade reflects its economic performance. Developing countries like China which have registered strong economic performance during last one and half decade have much to do with increase in South-South trade.

Finally, as relatively more advanced developing countries have moved towards capital intensive value added exports, demand has increased for export of primary goods and labour intensive manufactured goods from other developing countries.

Despite strides in South-South trade, the major players have been the bigger and relatively more advanced countries. According to UNCTAD, the top 10 exporters in south -south trade in 2003 were: China (19.7), Hong Kong (14.2), South Korea (11.1), Singapore (9.4), Taiwan (9.3), Malaysia (6), Thailand (4.1), India (3.4), Brazil (3.3), and Indonesia (3.1). These countries together account for 83.5 per cent of exports in South-South trade.

South-South trade is important for various reasons. First, economic slowdown in developed countries have reduced demand for imports including those from developing countries.

In the absence of surge in demand for imports in fast growing developing countries like China and India, exports from other developing countries would suffer. Two, though developed countries have significantly reduced tariffs, especially on industrial products, the same have been replaced with non-tariff barriers like health and safety standards, which in many cases for several developing countries are difficult to comply with.

Even there continue to be high tariffs in the markets of developed countries for products of export interest to developing countries, such as textile and clothing. Finally, continued dependence on developed country markets exposes developing countries to possible pressure that links improved market access to rapid liberalisation of trade, financial and investment regimes and better protection of intellectual property rights, which may be neither possible nor desirable for many developing countries.

Source: The Dawn Business and Economic Review, http://dawn.com/2007/04/23/ebr16.htm

Fridays Academy: Health, Poverty Reduction and Economic Growth

Health, Poverty Reduction and Economic Growth

The opportunity to receive basic health care is a critical component of personal development as well as a key factor for economic progress (Sen, 1999) and is a basic human right that is protected by international law.  Yet for millions of the world’s poor this basic right remains out of reach. Developing countries account for 90 percent of the world’s disease burden (Gottret and Schieber, 2006). Roughly, 16 million deaths in 1998 were directly attributable to communicable diseases such as HIV/AIDS, malaria, tuberculosis, and maternal and prenatal conditions, childhood infections, tobacco-related illnesses and nutritional deficiencies (WHO, 2006).  Almost 11 million children under age 5, mostly in developing countries died from diseases in 2000—8 million of these were infants, half of whom were just 1-month old or less. Yet the diseases are treatable and technologies exist to prevent deaths.  The cost in terms of economic growth, stability, increasing poverty and pushing the poor further into poverty is increasingly being acknowledged as unjust and being acted upon at the international level.  The international community’s commitment to the Millennium Development Goals, three of which are directly related to health, attest to international acceptance that investment in health is vital to human development and economic growth.  
This and upcoming Fridays we will examine health within a macroeconomic context and the current status of development assistance for health.
Macroeconomics and Health

Placing health within a macroeconomic framework has been a recent phenomenon in developing economies.  Critics of the old structural adjustment facility, the SAF, noted its lack of emphasis on health in programs that targeted macroeconomic adjustment and structural reforms. The increasing emphasis on poverty reduction by the international financial community in recent years has, however, recognized the role of health for economic growth and development. Initiatives such as the PRSP in 1999 and the HIPC Initiative now recognize the importance of health to poverty outcomes in developing economies.  The World Health Organization’s “Commission on Macroeconomics and Health” was set up to analyze the impact of health on development by examining the ways in which investment in health could tackle mass premature death and thereby improve economic development.  Furthermore, the move in recent years to global initiatives tackling health concerns—Global Alliance for Vaccines and Immunizations (GAVI), the Global Fund for AIDS, TB and Malaria—underlies the critical relationship between health, poverty reduction and economic growth.  In addition, as outlined above, health issues occupy three of the Millennium Development Goals and contribute to the achievement of all the others.

The disparity in health indicators among the various country development categories is stark, as shown in the exhibit below.  The population in the least developed countries and in lower-middle income group in which many of the world’s poor live (e.g., India, China) was approximately 3.3 billion in 2003. An individual born in a least developed country can expect to live only to the age of 51 compared to 78 in a high-income country.  The health indicators for Sub-Saharan Africa have worsened dramatically over the study period. Life expectancy at birth has fallen from 51 to 46 years of age and infant mortality deaths before the age of 1 per 1000 live births have increased from 92 to 101. Under five mortality rates have likewise worsened in Sub-Saharan Africa from 151 to 171 per 1000 live births. By contrast, life expectancy has improved or remained constant for the remaining country groupings, as have mortality rates.    

Life Expectancy and Mortality Rates by Country Development Category (1995-2000) and 2003

            Note:      CMH1 data refer to a year between 1995 to 2000
                * data are for 2002Source:   Commission on Macroeconomics and Health, 2001and updated for 2003 (2002*) using World Development Indicators.
Source: World Bank Poverty and Growth Program

Ending Poverty in South Asia: Ideas That Work

The South Asia Region and the Poverty Reduction Group of the World Bank presented today its new publication: Ending Poverty in South Asia: Ideas That Work, edited by Deepa Narayan and Elena Glinskaya.This is a collection of case studies that describe experiences by practitioners in the ground and ideas that have worked reducing poverty in the South Asia region. We can draw lessons from these success stories that could be applicable in other parts of the world.
In the presentation of the book today, Deepa Narayan warned against the temptation to apply literally the same projects in other countries, but mentioned four overall lessons from the book:

• Individuals really make a difference. These success stories always have behind them leaders committed to making a change.

• The mindset about the poor is an issue.  Even while discussing poverty reduction, the poor are often still invisible. The blindness of policy makers and the voiceless of the poor combine to perpetuate this state of things.

• Poor people are not waiting idle. They are entrepreneurs. How to connect poor people to markets is crucial.

• Poor people are generally not organized. When they organize themselves they are heard.

Source: World Bank Poverty and Growth Program

The Ten Commandments of Pro-Poor Growth

According to Mwangi S. Kimenyi in the latest issue of Poverty in Focus, trying to “highlight the importance of thinking about the poor as people rather than mere numbers and getting a better understanding of the economy and the linkages within sectors and regions”.

Pro-poor reform policies should:

1. Target activities which most poor are involved in, and because markets of the poor are generally not well integrated with other formal markets, pro-poor policies must influence markets of the poor directly and should not be based on assumed leakages from other sectors.
2. Focus on improving the functioning of markets where poor people participate.
3. Target low skill, labour intensive economic activities.
4. Seek to reduce market segmentation so that markets for the poor are better integrated in the economy. This means improving on the forward and backward linkages.
5. Ring-fence public expenditures for raising capabilities of the poor.
6. Target those groups that operate outside the markets with the aim of creating markets.
7. Include a food security policy.
8. Include policy initiatives that protect vulnerable populations from large swings in welfare.
9. Include policies that support accumulation of tradable assets by the poor.
10. Include institutional reforms that empower the poor through progressive diffusion of power.

By the same author: 

Economic Reforms and Pro-Poor Growth: Lessons for Africa and other Developing Regions and Economies in Transition
Source: World Bank Poverty and Growth Program

World Development Indicators 2007

World Development Indicators (WDI) 2007 is out.

WDI is the World Bank’s premier annual compilation of data about development. The 2007 WDI includes more than 900 indicators in over 80 tables organized in 6 sections: World View, People, Environment, Economy, States and Markets, and Global Links. 

According to the data, 1 billion people, or 18.4 percent of the population, lived under extreme poverty (less than $1 a day) in 2004. Nothing to celebrate about that figure, except the fact that it has been decreasing, from 1.25 billion in 1990. The rate of people living on $2 a day has been falling too, but 2.6 billion people (almost half of the population in the developing world) were still living below that level in 2004.

Developing countries have averaged a 3.9 percent annual growth in GDP per capita a year since 2000, which contributed to rapidly falling poverty rates in all developing regions over the past few years. Another key factor in the reduction of worldwide poverty rates has been China’s massive poverty reduction between 1990 and 2004. 

The report finds that, in the past decade, poverty reduction was not always or everywhere commensurate with income growth. In some countries and regions, inequality worsened, as poor people did not reap the fruits of economic expansion, because of a lack of job opportunities, limited education or bad health.

Read the full press release

Access the WDI 2007 website

For full time series database access, subscribe to WDI Online
Source: World Bank Poverty and Growth Program