Development Crucial To Global Well-being

Development Crucial To Global Well-being

Although the world economy is showing signs of recovery, many developing countries are still dealing with economic dif fi culties brought on by the fi nancial crisis. As a result, global poverty reduction is facing major challenges, and promoting the development of these countries has become a pressing issue, wrote Yang Jiemian,President of the Shanghai Institutes for International Studies, in a recent article inPeople’s Daily. Edited excerpts follow:

Although the global economy is recovering from the financial crisis,the degree of the recovery is uncertain, as the foundation of the recovery remains fragile and is not proceeding uniformly around the world.

The situation is worse in developing countries. On one hand, their source of capital is dramatically reduced. In developing countries, the foreign direct investment (FDI), as a percentage of GDP, is projected to drop from 3.9 percent in 2007 to 2.8-3 percent. And in sub-Saharan African, East European, Central Asian and Latin American countries, where the FDI accounts for as much as 20 percent of total investment, the impacts of the fi nancial crisis are particularly severe.

On the other hand, their exports are facing a big challenge, given plummeting demands in major markets. In 2009, total exports of developing countries dropped 22 percent,according to WTO statistics. And the World Bank said that in 2009, although the GDP of developing countries had a positive growth rate, that growth rate dropped to 1.2 percent, much lower than the potential rate of 3 percent. In African countries, the economic growth rate dropped to 2.5 percent from 6 percent from 2006-08. The GDP of countries in Central and Eastern Europe and Central Asia, which were hardest hit by the crisis,decreased an estimated 6.2 percent.

The fi nancial crisis makes reducing global poverty difficult, and it has become tougher to achieve the UN Millennium Development Goals. In 2009, the global market demand for products from the 43 least developed countries dropped 5-10 percent, according to the World Bank. Overseas remittances could fall 5-7 percent. In many tourism-dependent countries,tourism revenues decreased 8 percent.

In 2009, 30,000 to 50,000 additional children may have died of malnutrition in Africa,and 1 billion people around the globe were considered to be in chronic hunger. By the end of 2010, 64 million more people will fall into extreme poverty due to the fi nancial crisis. The development problem has become a top concern for the international community.

Addressing imbalances

Without the economic growth of developing countries, the world economy cannot realize strong, sustainable and balanced growth.

The development of these countries serves as a catalyst for strong growth in the world economy. Prior to the fi nancial crisis, China,India, Brazil and other emerging economies maintained continuous and high-speed growth.Their contributions to world economic growth demonstrated their global signi fi cance.

The status of developing countries continues to rise in the world economy. Whether their individual economies can enjoy rapid growth will determine the future direction of the world economy. According to the Organization for Economic Cooperation and Development (OECD), based on purchasing power parity, the total GDP of non-OECD countries accounted for 40 percent of the world’s total in 2009. It is projected to be 49 percent in 2009 and 57 percent in 2015.

In addition, strengthening economic and trade relationships among developing countries will present opportunities for robust world economic growth. From 1990 to 2008, the world’s trade volume increased four times. But the trade volume among developing countries increased 20 times, showing the potential of South-South cooperation. With increasing openness among developing countries, South-South cooperation will become a new driving force for world economic growth.

(Left)HEALTH MATTERS:A nurse treats a boy in a Mogadishu hospital on July 27. Maternal care in Somalia and many other African nations remains poor

The financial crisis makes reducing global poverty difficult, and it has become tougher to achieve the UN Millennium Development Goals

The rise of developing countries would also help to mitigate the risks associated with relying solely on developed countries to propel world economic growth. This would ensure the sustainable development of the world economy.

After the international financial crisis broke out, leading developed economies, including the United States, Europe and Japan,went into serious recessions. This was paired with major shakeups in the international fi nancial market. China and other large developing countries managed to maintain rapid growth and helped stabilize the international fi nancial market with practical actions. Their efforts were integral in preventing the world economy from falling into a massive depression, similar to the one in the 1930s.

What’s more, a few major developed countries have long kept a low savings rate.Their excessive reliance on credit-supported consumption to maintain economic growth led to high fiscal deficits and soaring debts.As a result, when faced with weak private investment and consumption, the room for macroeconomic stimulus policies is quite limited. In developing countries, however,the savings rate is quite high. These countries can advance economic recovery through investment in infrastructure and research and development.

DEVELOPMENT ASSISTANCE:A bulldozer works at the ground-breaking ceremony for the restoration of Cambodia’s National Road No. 62 in Kampong Thom Province on January 27. The project was funded by a concessional loan from the Chinese Government

When it comes to balanced growth for the world economy, the world community should be most concerned with the development of these developing countries. The world economy’s most fundamental imbalance is seen in contrasting levels of development. Although China, India, Brazil and other countries have taken great economic strides in recent years,they are still far behind developed countries.

The international community is obligated to address imbalances in the world economy by helping developing countries boost their development. And in the long term, balanced development of all countries provides an ultimate solution to problems such as current account and international investment imbalances.

Institutional support

As the global economy recovers from the crisis, the Group of 20 (G20) is entering a new stage in which it will place equal emphasis on growth and development.

In dealing with development issues, the G20 has distinct advantages. Its members are mainly developed countries, emerging economies and developing countries with a relatively high degree of industrialization.Their combined GDP accounts for 85 percent of the world’s total. Although it is a powerful group, the G20 cannot neglect the well-being of other developing nations, which account for more than 85 percent of the world’s countries.

The G20 has an obligation to provide political motivation, economic resources and institutional guarantees for the solution of the development problem. The G20, which includes the world’s major donor countries, is able to channel more fi nancial, technological and human assistance to developing countries.

Its summit in Toronto in June successfully promoted capital investment in development by the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank and other multilateral development banks.Their fi nancial support to developing countries will increase from $37 billion to $71 billion per year.

What’s more, in light of the huge challenge African countries face in economic and social development, the G20 advocated an increase in fi nancial support for the African Development Bank. With the support of the G20, the African Development Bank’s capital will record a 200-percent increase and its annual lending will be tripled.

Investment areas will extend to infrastructure construction, personnel training and the development of the private sector.

In addition, the G20 can further its efforts to adopt special trade measures in favor of developing countries, including trade fi nancing, trade facilitation and traderelated assistance.