New policies needed for inclusive growth

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The Philippines and other developing East Asia and Pacific countries need to adopt new policy approaches to achieve inclusive growth, the World Bank said.

In the “Riding the Wave: An East Asian Miracle for the 21st Century” report released on Monday, the World Bank said that inclusive growth, or one that reduces poverty while providing upward mobility and economic security for all, would require going beyond the “growth with equity” model.

Prospects for upward mobility are increasingly elusive in developing East Asia and Pacific countries, the Washington-based multilateral lender said, reflecting a sense that income and wealth are becoming more concentrated while access to basic social services remains limited and often of poor quality.

It noted that achieving economic security for all had become more difficult, particularly as the region faces newer challenges such as rapid aging, less certain growth prospects and greater urbanization.


Inequality is a growing concern for citizens across the region, it said, with over half of the opinion that income differences in their countries are too large.

“It’s a historic achievement that nearly a billion people in East Asia moved out of extreme poverty in just one generation,” said Victoria Kwakwa, World Bank vice-president for East Asia and the Pacific.

“But for the region to sustain inclusive growth, countries will need to address the challenges of fully eliminating extreme poverty, enhancing the prospects for economic mobility, and assuring economic security for all,” she added.

According to the report, the region has transformed from being comprised of mostly poor states in the 1980s to a group of middle-income countries made up of varying economic classes.

By 2015, almost two-thirds of the region’s population were either economically secure or middle class — up from 20 percent in 2002.

It said the share of the extreme and moderate poor had fallen dramatically, from almost half the population in 2002 to less than an eighth in 2015.

But the percentage of individuals vulnerable to falling back into poverty — those who live on $3.10 to $5.50 a day — remained constant between 2002 and 2015 at about a quarter of the population.

Recommendations

The World Bank recommended that policies for inclusive growth need to recognize and address varying constraints faced by different economic classes.

Policies for the remaining extreme poor need to ease barriers to accessing economic opportunities, and also sustain broad-based growth, to help them move up the income ladder.

Meanwhile, access to services such as healthcare and infrastructure, as well as mechanisms to manage risks, will need to be improved to help the economically vulnerable, it said.

The lender pointed out that the priority for the economically secure and the middle class is to improve the provision and quality of public services such as housing, water and sanitation.

It said three pillars can underpin the policy agenda and the first –fostering economic mobility – requires closing gaps in access to jobs and services, improving the quality of jobs, and promoting financial inclusion.

The second pillar — providing greater economic security — includes bolstering social assistance systems, expanding social insurance and increasing resilience to shocks.

Strengthening institutions is the third pillar and this includes progressive taxation policies to raise resources and improvements in the effectiveness of inclusive spending programs.

Better management of rapid aging and urbanization as well as enhancing competition will also help, the World Bank said.

“The policy agenda for inclusive growth can constitute a new social contract for governments across the region,” said Sudhir Shetty, World Bank chief economist for the East Asia and Pacific region.

“Its elements would address the needs of each economic class while remaining fiscally responsible and raising revenues in an efficient and equitable manner,” Shetty added.

In the Philippines, strategies for inclusive growth are laid out in the Philippine Development Plan 2017-2022.

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