World Development Report 1983 World Economic Recession and Prospects for Recovery Management in Development World Development Indicators World Development Report 1983 Published for The World Bank Oxford University Press Oxford University Press NEW YORK OXFORD LONDON GLASGOW TORONTO MELBOURNE WELLINGTON HONG KONG TOKYO KUALA LUMPUR SINGAPORE JAKARTA DELHI BOMBAY CALCUTTA MADRAS KARACHI NAIROBI DAR ES SALAAM CAPE TOWN © 1983 by the International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W., Washington, D.C. 20433 U.S.A. First printing July 1983 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Manufactured in the United States of America. The denominations, the classifications, the boundaries, and the colors used in maps in World Development Report do not imply on the part of The World Bank and its affiliates any judgment on the legal or other status of any territory, or any endorsement or acceptance of any boundary. The world map on the cover is based on the ecjuirectangular projection, which is attributed to the Greek astronomer-philosopher Anaximander about 550 B.C. ISBN 0-19-520431-X cloth ISBN 0-19-520432-8 paperback ISSN 0163-5085 The Library of Congress has cataloged this serial publication as follows: World development report. 1978 [New York] Oxford University Press. v. 27 cm. annual. Published for The World Bank. 1. Underdeveloped areas-Periodicals. 2. Economic development Periodicals. I. International Bank for Reconstruction and Development. HC59.7.W659 330.91724 78-67086 Foreword This Report is the sixth in an annual series as- resources. The stress on efficiency in Part II of this sessing development issues. Part I reviews recent Report should not be seen as signaling any change trends in the international economy and their im- in the Bank's focus on poverty issues. plications for the developing countries. As in pre- Governments everywhere must wrestle with vious years, Part II is devoted to a special topic; difficult management problems as they seek to this year the focus is on the management and fulfill their heavy and varied responsibilities. To institutional aspects of development. ease this burden, many countries have found it The early recovery in the world economy fore- advantageous to give managers within the public seen in last year's World Development Report did not sector greater autonomy over operational deci- materialize. The recession has lasted longer than sions, to involve local communities in the design expected and has set back global development more and implementation of service delivery programs, decisively than at any time since the Great Depres- and to use prices and market mechanisms more sion. The indications of an upturn are now firmer, in place of administrative interventions. At the but the international financial system remains se- same time, successful measures to overcome skill verely strained and protectionism continues to be shortages and strengthen public services have in- an ominous threat. cluded making training more job related, building Part I examines how alternative policies may more effective career development systems, and affect the future prospects for recovery. The Re- linking incentives more closely to performance. port concludes that the present financial crisis is Good economic management depends, first and manageable, provided concerted efforts are made foremost, on the adoption of policies that stimu- both nationally and internationally. It is essential late enterprise and efficiency, but it depends also for the industrial countries to maintain the mo- on the quality of the public sector institutions re- mentum of their recovery, to promote freer trade, sponsible for executing these policies and for pro- and to ensure growth in capital flows. Equally viding public services. Developing countries' gov- important, developing countries must for their part ernments typically have had to work in very difficult continue their efforts to adjust their economies to conditions, beset by shortages. It is all the more the new external circumstances and thereby regain remarkable that so much should have been accom- the confidence of their creditors. plished over the past thirty years in building up The interdependence of the global economy has systems of government. The Report draws on this become strikingly evident over the past three years. experience to identify common problems and pos- Not only does recession in the industrialized coun- sible ways of addressing them. tries lead to stagnant export markets and lower This Report tackles a difficult and important capital flows for the Third World; retrenchment in subject not previously broached so directly by the the developing countries also means less employ- Bank. It is a staff report and the judgments ex- ment in the developed countries. The recession pressed in it do not necessarily reflect the views has badly hurt all countries, though self-evidently of our Board of Directors or the governments they the poor are less able to withstand the shock. But represent. As in previous years, the Report in- the ability of different countries to cope with the cludes updated World Development Indicators, current difficulties has varied greatly. This Report which set out selected social and economic data seeks to learn from those significant differences in for more than a hundred countries. country performance. Even with optimistic assumptions about sus- tained growth in the industrialized countries over the next decade, limited capital flows and trade growth are likely to be serious constraints to de- veloping-country growth. Raising living standards and combatting poverty in the developing coun- tries will depend more than ever on achieving greater efficiency in the use of human and material A. W. Clausen 111 This Report was prepared by a team led by Pierre Landell-Mills and comprising Ramgopal Agar- wala, Richard Heaver, Dominique Lallement, Geoffrey Lamb, Selcuk Ozgediz, and Mary Shirley, assisted in particular by Engin Civan, Rahul Khullar, Leonie Menezes, Manon Muller, Hossein Partoazam, Joost Polak, and Paramjit Sachdeva. The Economic Analysis and Projections Department, under the direction of Helen Hughes, prepared the material on which Part I is based and supplied data for the whole Report. The work was carried out under the general direction of Anne 0. Krueger, with Peter Wright as senior adviser and Rupert Pennant-Rea as principal editor. With respect to Part II, the team would like to acknowledge the considerable assistance provided by the staff of the Development Administration Division of the United Nations, International Center for Public Enterprises, International Labour Organisation, International Monetary Fund, and Sec- retariat of the Development Assistance Committee of the OECD. In addition to Bank staff and those who prepared background papers (listed in the Bibliography), many others made helpful comments or contributions. Among these were Jose Abueva, Pierre Amouyel, John Armstrong, Michael Bentil, Rodrigo Botero, Peter Bowden, Robert Chambers, Kenneth Davey, Reginald Green, Metin Heper, Leroy Jones, Christopher Joubert, Mahn Jae Kim, David Korten, Melody Mason, Gabriel Mignot, Jon Morris, David Murray, Bernard Schaffer, Amartya Sen. Frank Sherwood, Arthur Turner, and Peter Wilenski. However, none of the above is responsible for the views expressed in the Report. The authors would also like to thank the many other contributors and reviewers and the production and support staffespecially Rhoda Blade-Charest, Banjonglak Duangrat, Jaunianne Fawkes, Christine Houle, Carlina Jones, and Gerry Quinn. iv Contents Definitions ix Glossary of acronyms and initials x Overview 1 The 1980-82 recession 1 International collaboration 3 National development efforts 4 Part I World Economic Recession and Prospects for Recovery 7 2 The prolonged recession 7 The delayed recovery 8 International trade 9 Capital flows 16 Financing deficits in the recession 18 International debt 20 The impact of the recession on developing countries 23 3 The outlook for developing countries 27 Growth in industrial countries 27 Energy 28 Trade 29 Workers' remittances 31 The resource gap 32 Implications of the Low case 34 The possibilities for faster growth 36 Domestic determinants of developing-country growth 37 Conclusions 39 Part II Management in Development 41 4 The search for efficiency 41 The analysis of efficiency 41 The potential for greater efficiency 43 The framework for improving efficiency 46 5 The role of the state 47 Public spending 47 The state as producer 48 The state as regulator 52 Conclusions 56 6 Pricing for efficiency 57 Price distortions 57 Linkages among distortions 59 Price distortions and growth 60 7 National economic management 64 Macroeconomic policies and adjustment 64 Economic management and planning 66 Managing in uncertain times 69 Improving links between planning, budgeting, and evaluation 70 Improving management information 71 V 8 Managing state-owned enterprises 74 The growing fiscal burden 74 The nature of SOEs 75 Defining objectives 76 Control without interference 78 Institutional links between government and enterprise 78 Holding managers accountable for results 81 Liquidation 85 Divestiture 85 Agenda for reform 86 9 Project and program management 88 Managing physical development 88 Managing people-centered development 92 Managing multiagency programs 96 Some lessons learned: a summary 99 10 Managing the public service 101 Availability and distribution of skills 101 Public service training 106 Personnel policies and management 109 A concluding note: the cultural dimension 113 11 Reorienting government 115 The historical and political context 115 Managing administrative change 116 Economizing on management 117 Making bureaucracies responsive 123 Conclusions 124 12 Concluding themes 125 Technical appendix 128 Historical data 128 Projections 129 Bibliographical note 131 World Development Indicators 135 Text tables 1.1 Key indicators, 1973-82 1 2.1 Growth of GDP, 1960-82 7 2.2 Exports of developing countries, 1965-82 10 2.3 Trade prices in current dollars, 1965-82 10 2.4 Terms of trade of developing countries, 1973-82 13 2.5 Share of developing-country exports in the consumption of selected agricultural products in industrial countries, 1970-80 13 2.6 Share of developing-country exports in the consumption of manufactured goods in industrial countries, 1970-80 14 2.7 Share of developing-country exports in the consumption of selected manufactured goods in industrial countries, 1970-80 14 2.8 Share of industrial-country exports to developing countries, 1973 and 1980 15 2.9 Flows of workers' remittances to developing countries, 1970-82 15 2.10 Net liabilities of selected developing countries, end-December 1982 18 2.11 ODA flows from major donor groups, 1970-81 18 2.12 Developing countries' balance of payments, 1970-82 19 2.13 Developing countries' current account balance, excluding official transfers, 1970-82 19 2.14 Debt service ratios for all developing countries, 1970-82 21 3.1 Past and projected growth of GDP, 1960-95 27 vi 3.2 Commercial primary energy production and consumption by country group, 1970-95 30 3.3 Past and projected growth of export volumes, 1965-95 31 3.4 Exports of developing countries, 1980-95 31 3.5 Past and projected increases in trade prices, 1970-95 31 3.6 Workers' remittances to developing countries, 1980-95 32 3.7 The financing of current deficits for all developing countries, 1982-95 33 3.8 Past and projected indicators of domestic performance, 1960-95 38 5.1 Cost of public services as a share of GDP 48 5.2 Investment by SOEs as a percentage of gross fixed capital formation in selected countries 49 6.1 Indices of price distortions and various components of growth in the 1970s 60 Text figures 1.1 GDP growth rates, 1965-82 2 2.1 Two periods of recession in industrial countries, 1974-75 and 1980-82 8 2.2 Petroleum prices, 1972-83 8 2.3 Interest rates, real and nominal, 1970-82 9 2.4 Export earnings of developing countries, 1965 and 1980 10 2.5 Composite commodity price index, 1948-82 11 2.6 World prices for selected commodities, 1960-82 11 2.7 Balance of payments financing of all developing countries, 1970 and 1982 16 2.8 Capital flows to developing countries, 1982 16 2.9 Current account financing of all developing countries, 1970-82 20 2.10 Debt and debt service ratio of all developing countries, 1970-82 20 2.11 Growth of debt and exports, 1970-83 21 3.1 Global energy consumption, 1970-95 29 3.2 Real GDP growth of industrial countries and export volume growth of developing countries, 1966-82 29 3.3 Price index of selected commodities, 1982-95 32 3.4 Debt and exports of all developing countries, 1970-95 35 4.1 Growth, investment, and return on investment, 1960-70 and 1970-80 43 5.1 Central government revenue, 1960-80 47 5.2 Government expenditure by category, 1980 48 5.3 Central government expenditure by sector 49 5.4 State-owned enterprises' share of GDP by sector 50 5.5 State-owned enterprises' share of value added in manufacturing 51 5.6 Nonfinancial state-owned enterprises' share of GDP 51 6.1 Price distortions and growth in the 1970s 62 8.1 Net claims on the budget of nonfinancial state-owned enterprises 75 8.2 Growth of nonfinancial state-owned enterprises 76 9.1 Number of cities with populations of more than one million, 1960-2000 97 Boxes 2.1 Insuring international investment 17 2.2 Restructuring developing countries' debts 22 3.1 The implications of a 15 percent across-the-board increase in protection in industrial countries 36 4.1 The concept of efficient pricing 42 4,2 Irrigation design and management 45 4.3 The costs of poor road maintenance 45 5.1 Bus services: the comparative advantage of private operators 52 5.2 Management contracts for water supply in the Ivory Coast 53 5.3 The search for efficiency in China: the rural production responsibility system 54 5.4 Reform of the Turkish fertilizer industry 55 6.1 Price distortions and growth: a statistical analysis 63 7.1 Liberalization in Sri Lanka 66 vii 7.2 Japan: thematic plans and guiding visions 67 7.3 The Republic of Korea: flexible policies and strong planning 68 7.4 Brazil: flexibility and pragmatism in managing industrialization 69 7.5 Government watchdogs: tracking bureaucratic effectiveness 72 7.6 The management information revolution 73 8.1 Conflicting objectives: the Ghana Cocoa Marketing Board 77 8.2 Autonomy, accountability, and incentives: KTDA 78 8.3 Contracts between the state and its enterprises: the experience of France and Senegal 79 8.4 The control of state-owned enterprises in Brazil 80 8.5 Ethiopian Telecommunications Authority 80 8.6 Performance evaluation in Pakistan 82 8.7 TANESCO: a study in institutionbuilding 85 9.1 PUSRI: a long-term strategy for management development 89 9.2 Contracting maintenance to the private sector 90 9.3 Backing decentralization with authority and resources 91 9.4 NIA: learning a participatory approach to irrigation development 93 9.5 The Training and Visit System of agricultural extension 94 9.6 Field staff incentives: private profit versus public service 95 9.7 Housing for the poor: tapping local initiative in San Salvador 96 9.8 Project management units: integration in isolation 98 9.9 Integrated rural development in Colombia 99 10.1 Trends in public service employment 102 10.2 Technical cooperation in development 104 10.3 Brain drain: who gains? 105 10.4 High returns to secondary education 106 10.5 Malaysia's INTAN: training that works 108 10.6 Improving the relevance of training 109 10.7 Personnel reform in Bangladesh: persistence pays 110 10.8 Volunteer executive services: a new form of technical cooperation 113 11.1 Institutional development in industrialized countries 116 11.2 Corruption 117 11.3 Experiences with comprehensive administrative reform 118 11.4 Thailand's approach to institutional reform 119 11.5 Tunisia's rural development program 121 11.6 Decentralization in a socialist economy: Hungary 122 Definitions The principal country groups used in the text of East European nonmarket economies include the this Report and in the World Development Indi- following countries: Albania, Bulgaria, Czechoslo- cators are defined as follows: vakia, German Democratic Republic, Hungary, Developing countries are divided into: low-in- Poland, Romania, and USSR. This group is some- come economies, with 1981 gross national product times referred to as nonmarket economies. (GNP) per person of less than $410; and middle- income economies, with 1981 GNP per person of $410 Economic and demographic terms are defined in the or more. Middle-income countries are also divided technical notes to the World Development Indi- into oil exporters and oil importers, identified below. cators. Middle-income oil exporters comprise Algeria, Official Development Assistance. The data on Of- Angola, Congo, Ecuador, Egypt, Gabon, Indone- ficial Development Assistance in Table 18 of the sia, Islamic Republic of Iran, Iraq, Malaysia, Mex- World Development Indicators, in Table 2.11, and ico, Nigeria, Peru, Syria, Trinidad and Tobago, in Box 10.2 are not comparable with the ODA data Tunisia, and Venezuela. in Table 2.12 and in Chapter 3. The former are Middle-income oil importers comprise all other based on the OECD Development Assistance middle-income developing countries not classified Committee (DAC) definitions which show dis- as oil exporters. bursements of all types by donor countries. The High-income oil exporters (not included in de- latter show grants and concessional loans received veloping countries) comprise Bahrain, Brunei, Ku- by the developing countries as reflected in their wait, Libya, Oman, Qatar, Saudi Arabia, and the balance of payments. The principal differences are United Arab Emirates. that the DAC definitions cover technical assistance Least developed countries include Afghanistan, and contributions to multilateral institutions, in- Bangladesh, Benin, Bhutan, Botswana, Burundi, cluding paid-in capital. The data on ODA receipts Cape Verde, Central African Republic, Chad, generally exclude these two, and in the case of Comoros, Djibouti, Equatorial Guinea, Ethiopia, the multilateral institutions include only the dis- the Gambia, Guinea, Guinea Bissau, Laos, Le- bursement of concessional loans. sotho, Malawi, Maldives, Mali, Nepal, Niger, Billion is 1,000 million. Rwanda, Samoa, Sao Tome and Principe, Sierra Tons are metric tons (t), equal to 1,000 kilograms Leone, Somalia, Sudan, Tanzania, Togo, Uganda, (kg) or 2,204.6 pounds. Upper Volta, Yemen Arab Republic, and the Peo- Growth rates are in real terms unless otherwise ple's Democratic Republic of Yemen. stated. Industrial market economies are the members of Dollars are US dollars unless otherwise speci- the Organisation for Economic Co-operation and fied. Development (OECD, identified in the Glossary) All tables and figures are based on World Bank apart from Greece, Portugal, and Turkey, which data unless otherwise specified. Growth rates for are included among the middle-income develop- spans of years in tables cover the period from the ing economies. This group is commonly referred end of the base year to the end of the last year to in the text as industrial economies or industrial given. countries. ix Glossary of Acronyms and Initials CMEA Council for Mutual Economic Assistance. OECD The Organisation for Economic Co- DAC The Development Assistance Committee of operation and Development members are Australia, the OECD (see below) comprises Australia, Austria, Austria, Belgium, Canada, Denmark, Finland, Belgium, Canada, Denmark, Finland, France, France, Federal Republic of Germany, Greece, Federal Republic of Germany, Italy, Japan, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Sweden, Netherlands, New Zealand, Norway, Portugal, Switzerland, United Kingdom, United States, and Spain, Sweden, Switzerland, Turkey, United Commission of the European Communities. Kingdom, and United States. EEC The European Economic Community OPEC The Organization of Petroleum Exporting comprises Belgium, Denmark, France, Federal Countries comprises Algeria, Ecuador, Gabon, Republic of Germany, Greece, Ireland, Italy, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Luxembourg, Netherlands, and United Kingdom. Saudi Arabia, United Arab Emirates, and GATT General Agreement on Tariffs and Trade. Venezuela. IDA International Development Association. SOE State-owned enterprise. ILO International Labour Organisation. UNCTAD United Nations Conference on Trade IMF International Monetary Fund. and Development. NGO Nongovernment organization. UNDP United Nations Development Programme. ODA Official development assistance. USAID Agency for International Development, US Department of State. 1 Overview The recession that has afflicted the world economy their development efforts, and how these might since 1980 seems at last to be easing. But the eco- be improved. Chapter 12 sets out concluding themes nomic conditions of many developing countries which should be read in conjunction with this have worsened since the last World Development overview. Report was published. Many middle-income coun- tries have faced a greater liquidity crisis than was The 1980-82 recession expected, brought on by high interest rates and reduced demand for exports. Low-income coun- The recession of the past three years was no sim- tries dependent on the export of raw materials ple repetition of the mid-1970s (see Table 1.1). have suffered from historically low commodity Following the jump in oil prices in 1973, GDP prices in real terms. growth rates in the industrial economies fell sharply The developing countries' present difficulties are for two years and then recovered rapidly in 1976, the culmination of events dating back a decade or although in the three subsequent years growth more. They are a consequence partly of conditions was still well below the average for the 1960s. In in the industrial market economies and partly of contrast, growth rates were initially less depressed their own policies. Part I of this Report underlines by the 1979 rise in oil prices, but subsequently the increased interdependence of all countries failed to match the recovery seen after 1975. The brought about by the increase in trade and capital second recession was shallower than the first, but flows, and looks ahead to how the world economy it has lasted longer since industrialized countries might evolve during the next decade. Part II dis- tightened monetary controls to bring down infla- cusses how developing countries have managed tion. As a result, unemployment in the industrial TABLE 1.1 Key indicators, 1973-82 (percent) Indicator 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 World trade growth (volume)b 12.5 4.0 -4.0 11.5 4.5 5.0 6.5 1.5 0.0 -2.0 Industrial countries GDP growth 6.3 0.6 -0.7 5.1 3.6 3.9 3.2 1.3 1.0 -0.2 Unemployment 3.4 3.7 5.5 5.5 5.4 5.1 5.0 5.6 6.5 8.0 Inflation rate 7.7 11.6 10.2 7.3 7.4 7.3 7.3 8.8 8.6 7.5 Developing countries Oil importers GDP growth 6.5 5.3 4.0 5.3 5.6 6.6 4.2 5.0 2.2 2.0 Debt service ratioc 12.6 11.4 13.3 12.6 12.7 15.7 14.7 13.9 16.6 21.5 Oil exportersd GDP growth 9.1 7.2 3.7 8.2 4.8 2.4 1.2 -1.3 1.5 1.9 Debt service ratio 12.2 6.7 7.8 8.4 11.1 14.9 15.5 13.0 15.7 19.1 Estimated. IMF data for 1973 to 1981; GATT data for 1982. Service on medium- and long-term debt as a percentage of exports of goods and services. Excludes China. 1 countries, which stayed high at about 5 percent commercial debt, and so were not much affected after the first recession, has since climbed to more by high interest rates. They have also made im- than 8 percent. pressive progress in agriculture; India's low GDP Developing countries are directly affected by growth in 1982 was largely due to the failure of fluctuations in the industrial world (see Figure 1.1). the monsoon. Overall their growth rates have been higher, but Low-income countries in Africa, being more de- even those that have grown fastest have not been pendent on primary commodity exports, have suf- able to avoid the cyclical influence of industrial fered badly from the world recession. Their per countries. They have also been affected by high capita income has continued to fall, and there is interest rates. Both effects were powerful in the now a real possibility that it will be lower by the end of the 1980s than it was in 1960. To prevent this happening will require policy reforms by many African governments, a recovery of commodity FIGURE 1.1 prices, and a large expansion of international aid GDP growth rates, 1965-82 to the region. Annual percentage change All developing countries will find the difficulties S of the past few years greatly eased by a recovery in the world economy. Since January 1983 there have been encouraging signs that recovery is under way. In addition: Nominal interest rates have fallen well below their peak, reached in 1981. Taking account of the foreign exchange holdings of developing coun- tries, each percentage point off Eurodollar interest rates saves them over $2 billion net in interest payments in a full year. The ratio of debt service to export earnings is expected to fall from a peak of 20.7 percent in 1982 to below 17 in 1984. -2 Oil prices have come down, partly in response 1965 70 75 80 to the recession, but also because of conservation measures. For net oil-importing developing coun- tries every dollar off the price of a barrel of oil reduces their import bill by approximately $2 billion early 1980smany developing countries have been in a full year. Some oil exporters have overborrowed squeezed between stagnating foreign exchange and are now seriously strapped for foreign ex- earnings and soaring interest payments on their change. However, they should benefit if, as seems debt. likely, oil prices harden again in the medium term. Developing countries have reacted to these pres- (This subject is discussed in Chapter 3.) sures in different ways. Those middle-income It would be premature to assume that the in- countries that had adopted outward-oriented trade dustrial countries will achieve sustained and steady policiesmainly in East Asiahave managed to growth such as they experienced in the 1950s and maintain the momentum of export expansion and 1960s. Continued rapid growth in the early 1970s avoid serious new debt problems. But some coun- was checked by the recession of 1974-75, and the tries, including several in Latin America that had subsequent recovery in 1976-79 was not sustained. borrowed heavily and adjusted less (or inappro- For the present, inflation has been curbed, but priately) during the 1970s, have been hit by the interest rates and exchange rates continue to fluc- high interest rates and have had to deflate in re- tuate widely, reflecting (and often contributing to) sponse to a liquidity crisis. In Latin America as a a pervading sense of uncertainty. Industry and whole, according to preliminary estimates, GDP agriculture have been slow to adjust to new pat- fell by 3.6 percent between 1980 and 1982. terns of comparative advantage. The objective of The two largest low-income countriesChina the industrial countries must be continued recov- and Indiahave come through the current reces- ery with restructuring, but as yet there are too few sion with encouraging resilience. They were not signs that underlying structural problems are being so heavily dependent on foreign trade, had little adequately tackled. 2 International collaboration Nevertheless, as Chapter 2 illustrates, protec- tionism has not prevented a substantial growth in Development is a long-term proposition; its im- trade. Developing countries increased the volume petus is maintained by policies that must be both of their exports by an average 5.1 percent a year directed at fundamental change and viable in the in 1970-80 (for manufactures alone, the growth short term. In the 1960s developing countries as rate was 15.9 percent a year). Also, their market a group made considerable progress in raising pro- share of manufactured goods consumed in indus- ductivity and real incomes, and in improving so- trial economies has increased from 1.7 percent in cial indicators such as literacy and life expectancy. 1970 to 3.4 percent in 1980. But the danger lies in Progress continued into the 1970s, but more slowly the future. Although gains in price and efficiency as countries encountered short-term economic dif- from freer international trade are still widely ap- ficulties. Since 1980 short-term problems have been preciated, developing countries are often victims on a larger scale and now threaten the develop- of short-sighted government action. The political ment strategies of numerous countries. challenge is first to halt and then to reverse the The requirements of a far-sighted recovery strat- drift toward protectionism. The ministerial meet- egy come, in part only, from policy reforms intro- ing of GATT held in November 1982 set the stage duced by the developing countries themselves. for liberalization. Greater participation by devel- Others are the responsibility of the international oping countries in GATT would help strengthen community, and particularly of the industrialized its role as the most appropriate forum for contin- countries. ued negotiations to reduce trade barriers. The crisis of the past few years has highlighted the bonds that join the economies of the devel- Debt and capital flows oped and developing countries. The most publi- cized bondsthe financial links between banks in Capital markets have become highly integrated over the industrialized countries and borrowers in de- the quarter century since currency convertibility veloping countrieswere once the least visible. was established. While this integration has many Yet they in turn are intertwined with international merits, a sharp rise in international interest rates trade: borrowing countries can service their debts can turn an acceptable debt service burden for a only if they earn enough foreign exchange from developing country into a debt crisis. exporting. These truisms would hardly be worth Viewed globally, the world debt situation is repeating were it not that government policies often manageable, though recent difficulties require close seem to defy them. international cooperation to achieve a sustained recovery in international trade and to assist those borrowers facing acute debt servicing problems. Trade and protectionism Such problems can have one of two causesshort- age of liquidity or genuine insolvency. The first Protectionist sentiments have been growing in the arises when a borrower is temporarily unable to industrial countries. The main reasons have been earn or borrow enough foreign exchange to meet an implacable rise in unemployment and the fi- its debt service payments, often because interest nancial difficulties of companies that are no longer rates are themselves unexpectedly high. Insol- internationally competitive. The temptation to seek vency has far more serious and permanent con- relief by import controls has been considerable, at notations: a borrower simply does not have the times irresistible. Among many measures to pro- resources to service its debt, even though it makes tect ailing industries, governments have erected a maximum use of available resources. formidable set of controls against the textile ex- The debt problems of most major developing ports of developing countries. The Multifibre Ar- countries are caused by illiquidity, not by insol- rangement, covering as much as 15 percent of de- vency. Sustained high interest rates alone may veloping-country manufactured exports, is the most convert a liquidity problem into a solvency prob- extreme example of trade restriction since govern- lem. A recovery in world demand, lower interest ments started to undo the protectionism that con- rates, and determined restructuring of their own tributed to the depression of the 1930s. In other economies will restore the ability of developing industries, too, the exports of developing coun- countries to service their debts. In the meantime, tries have faced new (particularly nontariff) trade they need continued inflows of capital to ease their barriers. liquidity shortage. 3 That need has been recognized by several ini- role of the state, stresses the importance of ap- tiatives taken over the past year. Central banks propriate incentives (especially prices) to foster de- have cooperated to provide emergency loans to velopment, and discusses the institutional ar- some countries, notably through the Bank for In- rangements needed to formulate a consistent ternational Settlements. The International Mone- development strategy and carry it out. The Report tary Fund's resources have been substantially ex- draws on country experience to identify ways of panded. During 1982 the debts of twelve developing making state-owned enterprises and project man- countries were rescheduled and thirteen others agement more efficient, and, more generally, im- were under negotiation in the first quarter of 1983. proving the performance of the bureaucracy. But the ad hoc debt rescheduling characteristic This stress on efficiency is compatible with ef- of the past is no solution for countries with deep- forts to assist the poor, although in times of fi- seated problems. Close collaboration by creditor nancial stringency governments often cut pro- governments, commercial banks, and the inter- grams for the poor. Well-designed programs to national financial institutions is needed to facil- improve management of public projects, reduce itate long-term adjustments to restore financial inflationary budget deficits, make bureaucracies viability. more responsive, limit nonessential activities, and While steps are being taken to ease the debt share the management burden with the private difficulties of the main middle-income borrowers, sector so that vital public services are performed too little has been done to assist the low-income wellall these complement efforts to assist the countries seriously affected by the 1980-82 reces- poor. Today's difficult economic situation requires sion. They depend on official aid for 84 percent more than ever a critical appraisal of those well- of their foreign capital inflows, so their capacity intentioned initiatives that have gone awrythe to import and to invest is directly affected by the costly subsidy that mainly benefits the better off, aid programs of the industrialized countries. Aid or the state enterprise that employs a bloated labor as a proportion of the GNP of DAC members was force at relatively high wages. To raise the stand- no higher in 1981-82 (0.37 percent) than in the ard of living of the very poor, scarce resources late 1960s. In real terms official development as- must be carefully targeted as well as efficiently sistance from all sources, including members of managed. OPEC and the CMEA, rose by 5.7 percent a year in the 1970s. Concessional aid for Africa would Role of the state need to rise at about double this rate over the next ten years if the per capita income of the low-in- The boundary between the state and the private come African countries is to rise by 2 percent a sector is never clear-cut and varies widely from yeara very modest target. country to country. For this reason, it is mislead- ing to discuss efficiency in terms of ownership. National development efforts What matters more is creating the conditions that encourage efficiency in both private and public The benefits of international cooperation can do sector activities. Such an environment is largely no more than supplement the efforts of the de- determined by governments, not simply in the veloping countries themselves. Earlier World De- way they affect the private sector through legis- velopment Reports have reviewed cross-country ex- lative and fiscal measures but also by the way they perience in selected sectors to identify policies that manage their own affairs. promote development. This year Part II of the Re- State-owned enterprises are an obvious example port takes a wider perspective, exploring manage- of how a government's approach to management ment issues that cut across all sectors. The under- can influence the whole economy. Both developed lying concern is the search for greater efficiency and developing countries are keen to find ways in the pursuit of governments' social and eco- to make state enterprises more efficient. The more nomic objectives. The current economic slowdown successful initiatives have been those which de- makes the task more urgent, as well as more fined unambiguous and attainable objectives, gave difficult. a wide measure of freedom to managers to meet Too often development is discussed only in terms those objectives, and developed performance in- of policies, without regard to the institutions and dicators that enabled government to monitor prog- people who decide and execute them. This Report ress. seeks to redress the imbalance. It examines the The state's role as employerin many devel- 4 oping countries, the largest employer in the mod- have the advantage of detailed knowledge not ern sectoralso influences the whole economy. possessed by those at the center. Decentralizing Most developing countries have abundant un- is a way to increase the responsiveness of govern- skilled labor combined with a shortage of skilled ment to those it serves and can involve those out- workers. The results are political pressure to over- side governmentcommunity organizations, for staff the public sector at the lower grades, which examplewhose active support is often necessary is inefficient and expensive, and fierce competition in promoting development. It can also take the between the public and private sectors at the top. form of subcontracting, with some public services Experience has shown that the public sector can provided by private operators. keep competent staff only by offering pay and Decentralizing is not solely a matter of involving other benefits that do not lag much behind the a wider range of people in discharging the re- private sector and by offering a premium to key sponsibilities of the public sector. Governments, specialists. including socialist governments, can also make A third area in which governments can improve greater use of markets and prices, since they avoid their own administrative arrangements is in the the heavy administrative requirements of central- making of economic policy. Current structural ad- ized planning controls. While greater reliance on justment problems underline the need for greater markets may appear to carry risks, many govern- attention to policy analysis. Planning has been ex- ments have learned that their own interventions cessively concerned with producing detailed, long- can easily misfire. The costs of market failure need term blueprints for development, to the neglect of to be balanced against those of bureaucratic fail- both policy analysis and the preparation of public ure. The practical advantage of relying more on investment programs. The process of planning markets is that the public sector can then concen- formulating a development strategy, analyzing trate on improvements in those activities for which policy, and assessing investment optionsmatters market solutions are inappropriate. more than the plans themselves. However, the willingness to use prices to allo- Many countries still lack the close links among cate resources is on its own not enough. Govern- policy analysis, investment analysis, and budget- ments also need to ensure that prices really do ing needed to define and carry out a development reflect relative scarcities. Relative prices changed strategy. They also need more timely and reliable rapidly during the 1970s, partly because of floating feedback, which can be obtained by better moni- currencies and two sharp increases in the cost of toring of the economy. Selective tracking of gov- oil. Many countries failed to adjust their domestic ernment activities is the key, whether through data prices to these international changes, so price dis- collection, auditing, or project evaluation. In par- tortions assumed serious proportions. Cross-coun- ticular, more of the resources of central statistical try analysis for 1970-80 reveals that the best eco- offices should be devoted to assembling essential nomic performances tend to be closely associated data on national accounts and other information with the lowest price distortions (the details are relevant for policy analysis. given in Chapter 6). However, countries that have Even when governments have effective meth- tried to correct price distortions have seldom found ods for managing state-owned enterprises, their it easy. To obtain good results, adjustment pro- own employees, and the formulation of economic grams must be tailored to the circumstances of policy, they can still find themselves overstretched individual countries and managed with close at- by the range of responsibilities they have as- tention to timing, pace, and scope. sumed. Administrative capacity is limited in every country; in some developing countries it is the Political commitment scarcest resource of all. Reducing the burden on senior administrators is therefore a precondition The underlying assumption of this Report is that for greater efficiency, and much can be achieved all governments of developing countries, what- by decentralizingboth within the public sector ever their political complexion and their concern and to groups outside it. for equity, do attach priority to economic and so- cial development. Governments nevertheless vary Burden-sharing greatly in the commitment of their political lead- ership to improving the condition of the people Day-to-day decisions can be devolved to those who and encouraging their active participation in the are responsible for carrying them out, and who development process. When political leaders are 5 recognized for their integrity, vision, and concern in pursuit of these objectives must depend on the for the public welfare, these qualities can be re- nature of the political system, but the morale of flected in the ethos and performance of the public the labor force will always be a critical factor. service and will have a profound effect on all sec- The economic fluctuations of the 1970s, and their lions of society. But if corruption is rife, public culmination in the recession of 1980-82, have bureaucracy is likely to become demoralized and underscored the uncertainty of the economic en- self-serving. vironment in which farmers, businesses, and gov- Perhaps the most important task of national eco- ernments have to operate. Readiness to take risks nomic management is to enlist the skills and ener- and show flexibility in responding to unforeseen gies of the population at large in raising the pro- events are therefore essential ingredients of suc- ductivity of capital and labor. The routes followed cessful management. 6 Part I World Economic Recession and Prospects for Recovery 2 The prolonged recession The world economy had another difficult year in policies pursued in the 1970s by individual coun- 1982. Few countries managed to improve on their tries. previous year's growth, and more than twenty The growth of developing countries depends on experienced declines in output. The recession that steadily expanding trade and capital inflows, both had started in 1980 thus continued for a third year, of which are closely related to the level of world making it the longest since the depression of the economic activity. This chapter first highlights the 1930s. Even those developing countries with ex- dominant influence of the industrialized countries cellent growth records had to struggle for modest on the length of the recession. It then examines gains in the face of depressed export markets and how successful developing countries have been in high debt servicing costs. expanding their market share in developed econo- Some countries were less badly affected than mies and in increasing trade among themselves. others (see Table 2.1). As a group, Asian coun- It also analyzes how movements in commodity tries-which account for two-thirds of the popu- prices have changed the developing countries' terms lation of the developing world-increased their of trade, and summarizes trends in workers' re- per capita incomes in each of the three years of mittances. The chapter then describes how devel- the 1980-82 recession. By contrast, Latin American oping countries have financed their deficits-with- and low-income African countries suffered de- out serious strains until 1980, but with considerable clines in per capita incomes, although some among difficulty since then. It looks in detail at the state them were exceptions. These variations in per- of international indebtedness, and concludes by formance can mostly be explained by the different reviewing variations in economic performance TABLE 2.1 Growth of GDP, 1960-82 1980 CDP Average annual percentage growth (billions of Country group dollars) 1960-73 1973-79 1980 1981 1982a All developing countries 2,231 6.0 5.1 3.0 2.0 1.9 Low-income 544 4.5 5.1 6.1 3.7 3.7 Asia 492 4.6 5.6 6.6 4.1 3.9 China 283 5.5 6.3 6.8 3.0 4.0 India 159 3.6 4.4 6.6 5.6 2.8 Africa 52 3.5 1.5 1.2 0.1 0.8 Middle-income oil importersb 920 6.3 5.5 4.2 1.1 1.1 East Asia and Pacific 204 8.2 8.5 3.6 6.9 4.2 Middle East and North Africa 28 5.2 2.9 4.7 0.1 2.7 Sub-Saharan Africab 43 5.5 3.7 4.0 3.7 4.0 Southern Europe 201 6.7 5.0 1.5 2.4 2.2 Latin America and Caribbean 444 5.6 4.9 5.7 2.4 -1.2 Middle-income oil exporters 687 7.0 4.8 -1.3 1.5 1.9 High-income oil exporters 221 10.7 7.5 7.5 -1.8 -11.7 Industrial countries 7,395 5.0 2.8 1.3 1.0 -0.2 a. Estimated. b. Does not include South Africa. 7 among the developing countries. A discussion of FIGURE 2.2 the various sources of the historical data is to be Petroleum prices, 1972-83 found in the Technical appendix. Dollars per barrel 35 The delayed recovery 30 Over the past ten years, the industrial market economies have experienced two recessions sep- 25 arated by a four-year period of modest growth. 20 The first recession, in 1974-75, was sharper than the opening years of the second (1980-81), but was 15 followed by a swift recovery in 1976. In 1982 the rebound never came; in fact, GDP fell by 0.2 per- 10 cent (see Figure 2.1). '----I,, The contrast between the recovery of the mid- 1970s and the continuing recession of the early Constant prices (1972 dollars) 0 1980s has its roots in the policies adopted by the governments of the largest industrial countries. In 1972 74 76 78 80 82 the 1970s these governments reflated their econo- mies out of recession by a conventional combi- nation of fiscal and monetary expansion. By the end of the decade they were dissatisfied with the during the four years of growth after 1975. results. Inflation, though below its 1974 peak, re- All these factors, combined with a second surge mained stubbornly high. Interest rates had shown in oil prices in 1979-80 (see Figure 2.2), prompted a secular tendency to rise, weakening financial most governments to change their policies. As a confidence and discouraging investment. Many priority they put greater emphasis on reducing structural flaws had become apparent, having de- dependence on imported oil. Energy intensity veloped almost unnoticed during decades of rapid the amount of energy required to produce a dollar growth. Some industries had failed to adopt new of real GDPhas fallen by 2.5 percent a year since technology and to keep their cost structures com- the 1979-80 rise in oil prices, compared with a petitive with producers in the more advanced de- decline of only 1.7 percent a year after the 1973- veloping countries. Labor markets had grown in- 74 surge. Oil production in non-OPEC countries creasingly rigid, so that real wages had resisted also increased substantially, by almost 50 percent the fall implied by the productivity slowdown and between 1973 and 1982. As a result, OPEC's share terms of trade losses in the 1970s. Partly in con- of internationally traded crude oil fell from 87 per- sequence, unemployment rates fell only slightly cent to about 65 percent. These changes were the consequence of policies initiated in the mid-1970s and then pursued with FIGURE 2.1 increased vigor after 1979. In other areas, how- Two periods of recession in industrial countries, ever, government policies in the industrial coun- 1974-75 and 1980-82 tries marked a definite break with the past. In GDP growth rate (percent) particular, their monetary stance became more re- strictive, which has helped bring inflation down sharply. Having risen by 10.6 percent in 1980, con- sumer prices (measured by the deflator for private consumption) in the major OECD countries rose by 8.9 percent in 1981, by 6.8 percent in 1982, and at an annual rate of 6.0 percent in the first quarter of 1983. Since increasing monetary restraint was accom- panied by continuing large fiscal deficits, short- term interest rates remained high. In real terms, adjusting for the rate of inflation in the United States, they have risen steadily since the middle 8 of 1977. If the export prices of developing coun- FIGURE 2.3 tries are used as a deflator, the fluctuations are Interest rates, real and nominal, 1970-82 even more marked and the recent increase has Average annual percentage rate been dramatic (see Figure 2.3). The high level of 20 real interest rates was a major reason the recession Nominal of 1980-82 lasted longer than that of 1974-75. Cor- Eurodollar rate' 10 porate finances in the industrialized countries came under considerable pressure, leading to heavy \,/ A-I- destocking and investment plans being delayed or 0 even canceled. Companies also reduced their work f'-s \ jReal rate, \ forces, so that unemployment rose steeply: from 10 5.0 percent of the labor force in 1979, it increased \'- to 5.6 percent in 1980, 6.5 percent in 1981, and 8.0 \ I percent in 1982. 20 --...............__.__I................. !Real rate, By the end of 1982 the pace of destocking was starting to slow. Helped by the marked fall in 30 ca I all developing countries' inflation rates, monetary growth in most indus- trialized countries turned positive in real terms. 1970 72 74 76 78 80 82 Oil prices were falling, encouraging expectations a. Eurodollar rate is the average daily quotation on three-month deposits. that inflation would fall even further. All these Sources World Bank; IMF, International Financial Statistics, 1982. factors have helped improve business confidence, and there are signs that 1983 will show an upturn developing countries became an increasingly im- in output. Whether the current positive trends will portant market for the developed countries. be sustained in the medium term is hard to pre- During the 1970s the export growth of the de- dict; possible scenarios and their implications for veloping countries slowed down even more than the world economy are discussed in Chapter 3. that of the industrial countries, largely as a result As stressed in Chapter 1, the links between the of declining oil exports. The volume of total ex- industrialized world and the developing countries ports of the oil producers fell by half a percent a are close and pervasive. Growth has been faster year from 1973 to 1980. But both low-income coun- in the developing countries during most of the tries and middle-income oil importers expanded past ten years, yet they have not been able to their exports by 8 percent a year. From 1977 on escape the cyclical pull of the industrialized econo- China was particularly successful in boosting its mies. This pull is exerted principally through in- non-oil exports, accounting for the fast export ternational trade and capital flows. growth of the low-income Asian countries. Low- income African countries, however, barely man- International trade aged to increase the volume of their exports during this period. The rapid economic growth of 1950-73 was accom- After 1979, the recession hit world trade: exports panied by even faster growth in international trade. grew by only 1.5 percent in 1980, stagnated in In the peak period from 1965 to 1973, when world 1981, and declined by an estimated 2.0 percent in GNP grew at about 6 percent a year, trade in goods 1982. Trade in fuels was largely responsible, falling and services grew at more than 8.5 percent a year. by more than 16 percent between 1979 and 1982. Reductions in barriers to trade and capital move- Other categories also slowed down markedly, with ments stimulated productivity and income growth, exports of manufactures growing just under 2 per- making it easier for governments to reduce re- cent a year. Among developing countries, only a strictions still further. handful managed to increase their exports, mainly After 1973 slower growth in the industrial in manufactures. By improving productivity and economies was accompanied by slower growth in quality, they were able to increase their price com- international trade. The average annual growth in petitiveness and diversify into new products. the volume of world exports of fuels fell from 9.0 percent in 1965-73 to 0.5 percent in 1973-80, and Developing-country exports of manufactures from 10.7 percent to 6.1 percent. Overall, growth in exports slowed to about 5 per- For developing countries as a group, exports of cent a year in 1973-80. But at the same time the both fuel and manufactures have increased in im- 9 FIGURE 2.4 income oil importers, the share declined from 60 Export earnings of developing countries, 1965 and 1980 percent in 1965 to 36 percent in 1980. Developing countries can no longer be caricatured as exporters (percent) .Nonfactor services of primary products and importers of manufac- Manufactures tures. Some have even become significant export- ers of capital goods, accounting in all for about 6 I . Agriculture Fuels Metals and minerals' percent of the world's total. These changes should not obscure the fact that for many developing countries-particularly the poorest-primary products still dominate their ex- ports. Many countries are highly dependent on one export commodity: coffee still represents al- most 90 percent of Burundi's recorded exports and more than 50 percent of Colombia's. Other ex- 1965 1980 amples include cocoa in Ghana (70 percent), sugar $44 billionr $498 billionb in Mauritius (more than 65 percent), and copper Excluding gold. in Zambia (more than 70 percent). Current prices. Commodity prices The decline in nonfuel commodity prices of im- portance to developing countries, which began at portance over many years (see Table 2.2). The share the end of 1980, continued into 1982 (see Table of agricultural commodities in their total merchan- 2.3). This trend was finally reversed in December dise exports declined from 50 percent in 1965 to 1982. At their lowest point, nominal prices of these 23 percent in 1980 (Figure 2.4). Even for the low- commodities had fallen to their 1978 level. But in TABLE 2.2 Exports of developing countries, 1965-82 A r'erage ann oaf percentage change Value 1980 at constant 1980 prices (billions of dollars) 1965-7.3 1973-80 I 980-82' Total merchandise5 434 7.9 3.4 -0.5 Nonfuel primary products 126 4.6 5.9 0.6 Fuels 163 8.0 -1.8 -5.1 Manufactures 130 15.6 12.4 4.1 Nonfactor services 78 11.3 9.4 2.6 Goods and nonfactor services 512 8.2 4.2 0.0 Estimated. Includes gold TABI.E 2.3 Trade prices in current dollars, 1965-82 (Iut',n,ct a,,nual percentage tIaPlgl') 1965-7.3 1973-80 1981 1982 World export pricesh 5.7 13.7 -2.2 -4.0 Nonfue! primary products 7.0 6.6 -7.0 -12.0 Fuels 7.5 32.8 12.5 -3.8 Manufactures 5.1 11.0 -4.8 -2.1 Industrial countries' GDP deflator 6.1 9.9 -0.7 0.9 Estimated. Goods and nonfactor services. Sources: World Bank; IMF, lttterttattotial rzeancaI Stat rdtcs, 1982. 10 FIGURE 2.5 FIGURE 2.6 Composite commodity price index, 1948-82 World prices for selected commodities, 1960-82 Index (1977-79 average = 100) 150 Dollars per ton 100 Phosphate rock 80 60 Iron ore 40 -..-.,.--- /-.- -.--. S. 20 -I Bauxit 0 1960 62 64 66 68 70 72 74 76 78 80 82 Dollars per kilo 70 1950 55 60 65 70 75 80 The graph shows non-oil commodity prices as measured by the price of manufactures imported by developing countries. The commodities are coffee, cocoa, tea, maize, rice, wheat, sorghum, soybeans, groundnuts, palm oil, coconut oil, copra, groundnut oil, soybean meal, sugar, beef, bananas, oranges, cotton, jute, rubber, tobacco, logs, copper, tin, nickel, baux- ite, aluminum, iron ore, manganese ore, lead, zinc, and phos- phate rock. 0 1960 62 64 66 68 70 72 74 76 78 80 82 Dollars per kilo real termsafter adjusting for the rise in prices of manufactures imported by developing countries 3 commodity prices in US dollars were lower in 1982 A than at any time since World War II (see Figure 2.5). Cotton / \\ I\ \ Food prices fell mostby 30 percent (in nominal 2 -. / I -V....... \ terms) between 1980 and 1982and nonfood ag- N '.__, / " , p. N, ricultural commodities by 24 percent, while metal 1 Rubber 'N ,' \ ,' N and mineral prices declined by 17 percent. The Sugar worst affected commodities were sugar (down 71 percent), rice (down 39 percent), cocoa (down 33 0 percent), and the fats and oils group, which de- 1960 62 64 66 68 70 72 74 76 78 80 82 clined by about 23 percent on average (see Figure Thousand dollars per ton 2.6). The adverse impact of this fall in prices on coun- tries exporting primary commodities was miti- 15 --S gated in two ways. First, part of the trade in pri- mary commodities is governed by long-term 10 AS - __ SS_ Tin _I /\/ # bilateral agreements at prices unaffected by short- term price movements in the free market. Second, for developing countries heavily reliant on imports 5 ---------------Nicke1' of food products (accounting for about 13 percent of total nonfuel merchandise imports of develop- ing countries), the low prices of grains and fats 1960 62 64 66 68 70 72 74 76 78 80 -82 and oils have partly offset their loss of purchasing Prices are in constant 1981 dollars. power. For Africa this effect was small. Notwithstanding these mitigating factors, the fall 11 in commodity prices in 1980-82 was devastating. stocks in producing countries which, given future It had several causes. The prolonged recession in production and consumption prospects, will not the industrial countries greatly reduced demand, be easily reduced. while high interest rates made the holding of stocks The recession, in conjunction with the high level costly. On the supply side, the past three harvests of energy prices and environmental issues, has have generally been excellent. Record or near-re- forced industrial countries to limit their processing cord crops have been harvested in North America of minerals. For example, high electricity prices (wheat, coarse grains, soybeans, and cotton), South have forced the Japanese government to ration- America (grains and soybeans), and Western Eu- alize its aluminum industry, while economic and rope (particularly sugar). Grain supplies have been environmental factors may result in plant closures so plentiful that the Soviet Union's four consec- in the lead and zinc industries. The European com- utive poor grain harvests have had little impact munity is considering reducing its zinc-smelting on prices. Supplies of tropical beverages, espe- capacity. Pollution problems have caused the clo- cially coffee and cocoa, have also been abundant. sure of significant copper-smelting capacity in the The 1976-77 price peaks for beverages led to con- United States. These changes may mean oppor- siderable replanting and new planting, and these tunities for investment in processing minerals in investments have started to increase output. A the developing countries when demand picks up. severe frost in Brazil in 1981 stemmed the fall in coffee prices, but its effect will be only temporary. Terms of trade Since the price elasticities of tropical food prod- The nonfuel primary producers among the devel- ucts are low, the fall in prices has not led to much oping countries suffered a decline in their terms growth in demand; hence, with bountiful har- of trade during the past decade. Except in the case vests, stocks have accumulated. Even with an im- of Africa, the deterioration after the 1979-80 oil provement in economic activity, it will take several price rise was greater than it had been after the years of good income growth or, alternatively, a 1973-74 rise. Nonetheless, although some low- succession of poor harvests, for the historically income African countries benefited from the fall- large stocks of sugar, cocoa, and coffee to clear. ing prices of grain, as a group they suffered by The acreage-reduction programs adopted by the far the sharpest decline in terms of trade after 1979; US government for the 1983-84 crop year will lower this was also the case in the mid-1970s. And all the world supplies of wheat, rice, coarse grains, oil-importing countries benefited from the fall in soybeans, and cotton. The payment-in-kind pro- real oil prices in 1982. gram for wheat and coarse grains is designed to transfer US government-held stocks of grain to When export prices fall in relation to import prices, exporters obtain partial compensation if de- farmers in exchange for leaving their cropland idle. mand for their products expands significantly. This If the implementation of such schemes coincides effect is summarized in the purchasing power of with both a recovery in economic activity and a their exports (see Table 2.4). After both oil shocks, poor harvest, stocks may be quickly run down and foreign exchange earnings from trade continued prices could rise sharply. to improve for all but the low-income African For industrial raw materialssuch as natural fi- countries. For the low-income Asian countries bers, rubber, and metals and mineralsincome considered as a group, the terms of trade gains elasticities are larger than for foodstuffs. Conse- from higher oil prices accruing to China more than quently, reductions in consumption and trade dur- offset the declines experienced by India. ing this recession have been more severe. Some mines have closed down. With reflation, the re- Protectionism covery in prices and consumption of these raw materials is likely to be greater than for foodstuffs. Moves to liberalize trade continued during the During the past two to three years international 1970s, with the implementation first of the Ken- stabilization agreements have been in operation nedy and then of the Tokyo Round of the GATT for five commodities coffee, cocoa, rubber, sugar, negotiations. The Tokyo Round agreement on codes and tin. Of these, only the price of coffee has been of conduct to govern many nontariff barriers was significantly affected, mainly because the export an important new approach to reducing protec- quota scheme of the International Coffee Agree- tionism. The Generalized System of Preferences ment is the most restrictive. However, support of also lowered barriers to trade in developing coun- the coffee price has resulted in a large buildup in tries' products. 12 TABLE 2.4 Terms of trade of developing countries, 1973-82 (1978 100) Change in terms Change in purchasing power of trade (percent)a of exports (percent)5 Developing countries 1973-76 1979-82 1973-76 1979-82 Low-income Asia 12.1 -3.2 58.5 15.7 Africa -15.3 -13.8 -18.7 -3.5 Middle-income Oil importers -9.5 -10.7 4.5 2.5 Oil exporters 59.9 31.8 71.0 11.5 Ratio of export unit value index over import unit value index. Product of terms of trade and export quantum index. Not all trade barriers were reduced, however. As for processed agricultural commodities, devel- The desire to maintain farm incomes in the in- oping countries raised their market share from 3.5 dustrial countries continued to provide a reason percent in 1970 to 3.7 percent in 1980-an average for protecting agriculture. Tariff and riontariff bar- annual growth of only 0.6 percent. This slow growth riers against clothing and textile imports from de- was due in part to disincentives to production in veloping countries also grew. Although some tar- the developing countries. Developing countries iffs on processed primary products were reduced were also squeezed in third markets, as a result in the Tokyo Round, others remained. And sub- of industrial countries' increasing the volume of sidies continued to be used to promote exports of their subsidized agricultural exports such as sugar capital goods. and beef. Recession and sharply rising unemployment after In manufactures trade, the developing countries 1979 prompted an upsurge of protectionist pres- have made more progress. The rapid expansion sure. Restrictions on trade among the industrial of exports of manufactured products from the mid- countries-notably in automobiles, steel, and ag- 1960s would not have been possible without the ricultural products-began to increase. While these increase in their share of industrial-country mar- measures affected relatively few developing coun- kets. Table 2.6 shows that they doubled their share tries, they made protectionism in general more between 1970 and 1980, though at 3.4 percent in respectable. The industrial countries stepped up 1980, it was still only a trivial part of the total. their restrictions against exports from developing Market penetration increased by more than 8 per- countries, sometimes by increasing tariffs, more cent a year between 1970 and 1977, and still man- often by import quotas or "voluntary" agreements aged to grow at 7.6 percent a year in 1977-80 to restrain exports. They also used other means despite the marked increase in barriers against such as restrictive "quality" requirements and health TABLE 2.5 regulations to achieve protectionist ends. Govern- Share of developing-country exports in the ments increased subsidies on capital goods ex- consumption of selected agricultural products ports, which benefited those developing countries in industrial countries, 1970-80 buying the goods, but harmed those who were competing with industrial countries in the capital import penetration goods market. Other kinds of subsidies were also Share in estimated (average annual increased-to foster industries (such as shipbuild- consumption (percent) percentage change) ing), to aid regions, and to encourage ill-defined Product 1970 1980 1970-80 activities such as research and development. Sugar 7.8 3.9 -6.7 The overall impact of the increase in protection- Tobacco 21.1 30.2 3.6 ism is hard to gauge. Barriers imposed by the Beef and veal 2.3 0.9 -9.0 industrial countries were most effective in agri- Wheat 0.9 0.1 -19.3 culture, where the developing countries' share of Rice 1.4 1.9 3.1 the industrial countries' market for basic food- Maize 5.1 1.4 -12.1 Tomatoes 5.3 4.7 -1.2 stuffs declined during the 1970s (see Table 2.5). 13 TABLE 2.6 relative newcomers, such as Malta and Mauritius, Share of developing-country exports also made good progress. in the consumption of manufactured goods The growth of market penetration does not mean in industrial countries, 1970-80 that protection was ineffective. Without trade re- strictions, exports would undoubtedly have grown Share in estimated consumpf ion Average annual faster, even in manufactures. Moreover, the pro- (percent) percentage change tectionist threat must have reduced investment in Country or trading group 1970 1980 1970-77 1977-80 export-oriented activities in many developing countries, increasing supply constraints. Australia 2.1 5.5 14.9 2.9 Protection is also very costly to the protectionist Canada 1.3 2.1 5.5 4.2 countries themselves. They have to pay more for EEC' 2.5 4.6 6.6 7.5 Japan 1.3 2.4 7.8 12.9 goods than they need to, so losing an opportunity Sweden 2.8 3.8 4.0 4.2 to buttress their anti-inflationary efforts. Their United States 1.3 2.9 10.6 5.1 poorest consumers are worst affected, since de- Total 1.7 3.4 8.4 7.6 veloping countries generally specialize in the low- a. European Economic Community. cost goods that take a large part of the spending of the poor. Even minor protectionist measures clothing, textiles, and footwear. The growth of can hamper the restructuring of industrial econo- market penetration continued to rise in a variety mies, postponing the investment in new indus- of other products (see Table 2.7), reflecting rapid tries and companies that is needed to revive growth. diversification in some developing countries' ex- Finally, the more developing countries can in- ports. crease their exports and growth, the bigger the The number of developing countries exporting market they provide for exporters in the industrial manufactures continued to increase throughout the countries. Between 1973 and 1980 the share of 1970s. While northeast Asian countries remained industrial-country exports of merchandise to de- the most rapidly growing exporters of manufac- veloping countries increased from 23 percent to 28 tures, several southeast Asian and Latin American percent (see Table 2.8). The United States, for ex- countries also expanded their manufactured ex- ample, now sells two-fifths of its exports to de- ports considerably in the late 1970s. China's export veloping countries. Buoyant world trade is essen- expansion was mainly in manufactures (at about tial for, as well as reflects, the well-being of the 18 percent a year in 1977-81). A wide range of global economy. TABLE 2.7 Share of developing-country exports in the consumption of selected manufactured goods in industrial countries, 1970-80 Share in estimated Import penetration (average consumption (percent) annual percentage change) Man ufactu red goods 1970 1980 1970-77 1977-80 Food 3.5 3.7 3.4 -5.4 Clothing, textiles, and footwear 3.1 10.5 15.5 9.5 Clothing 4.0 16.3 18.6 9.0 Textiles 2.3 5.4 9.1 9.3 Footwear 2.6 16.3 24.3 8.6 Leather products 6.2 17.3 12.6 8.3 Wood products 1.9 3.6 6.6 8.3 Paper 0.2 0.5 11.2 20.6 Chemicals 2.0 3.8 7.8 11.0 Nonmetallic minerals 0.3 1.1 13.7 15.7 Base metals 3.5 4.1 -0.6 14.0 Machinery 0.4 2.1 20.6 15.9 Cutlery and handtools 0.8 3.3 16.2 13.4 Metal furniture 0.6 1.6 12.2 5.3 Radios, televisions, and the like 1.1 6.7 23.5 13.6 Other 4.0 8.0 7.2 10.9 Total 1.7 3.4 8.4 7.6 14 TABLE 2.8 Share of industrial-country exports to developing countries, 1973 and 1980 Total exports Share to developing countries' (billions of dollars) (billions of dollars) Percentage share Exports 1973 1980 1973 1980 1973 1980 Machinery 141 434 38 149 27 34 Total merchandise 398 1,228 90 339 23 28 a. Includes high-income oil exporters. Trade among developing countries left as the newly industrializing countries moved up market. Regional trade expanded because trade Developing-country exports were increasingly policies stimulated responses to new market op- drawn to industrial countries in the 1950s and 1960s portunities rather than as a result of formal trade because the latter were growing rapidly and were agreements. Trade with the rest of the world also liberalizing trade when others were not. But trade continued to grow fast. Thus, while regional trade among developing countries ("south-south" trade) grew as rapidly in East Asia as it did in Latin accelerated in the 1970s, increasing its share of America, its share of total trade stayed constant their exports from 20 percent in 1973 to 24 percent in the former but rose in the latter. in 1980; the rapid growth of markets in oil-ex- porting countries provided part of the south-south Workers' remittances impetus, as did expansion in the newly industrial- izing countries. Workers' remittances continue to be a significant South-south trade has built up in different forms. source of foreign exchange for labor-exporting In Latin America regional trading arrangements countries. The remittances received by some coun- encouraged trade diversion: relatively capital-in- tries have been more than half the value of their tensive and high-cost goods were traded, rather exports; for a few countries, remittances have been than those exports that reflected the comparative larger than their exports. Even when remittances advantage of Latin American countries. In East have been small in relation to exports, they have Asia, by contrast, regional trade helped to pro- provided a higher standard of living for some fam- mote a more efficient division of production. The ilies. Although the working conditions of migrant newly industrializing countries were expanding workers are sometimes poor, continuing emigra- their demand for raw materials, while starting to tion suggests that the private returns far outweigh export more sophisticated goods and services, some the physical and psychological costs of being away to countries within the region. This created op- from home (see Box 10.3). portunities for the region's primary producers- The middle-income oil importers have been the and for those countries that produced cheap, low- largest recipients of remittances (see Table 2.9). quality manufactures, since they could fill the gap This group includes the traditional labor exporters TABLE 2.9 Flows of workers' remittances to developing countries, 1970-82 Average annual Billions of current dollars percentage growth Country group 1970 1973 1980 1981 1982' 1970-80 1980-82' All developing countries 2.3 6.7 24.0 25.5 27.6 26.4 7.2 Low-income Asia 0.1 0.3 3.0 2.8 3.2 40.5 3.3 Africa 0.1 0.1 0.3 0.4 0.5 na. 29.1 Middle-income Oil importers 1.7 5.5 116.9 18.4 20.0 25.8 8.8 Oil exporters 0.4 0.7 3.8 3.9 3.9 25.3 1.3 na. Not applicable a. Estimated. 15 FIGURE 2.7 grown much more slowly, largely reflecting a Balance of payments financing of all slowdown in activity in labor-importing countries. developing countries, 1970 and 1982 $628 billion Capital flows The growth of developing countries' exports dur- ing the 1970s was slightly exceeded by the growth Total $83 billion in their inflows of medium- and long-term capital. Most significant was the increase in private lend- Exports ing, which rose at an average rate of 22 percent a 23% Other receipts year in 1970-80 and provided about half of total 7 medium- and long-term capital flows during the (percent) ,, 1970 / / 1982 / period. Private direct investment contributed 14 100 /7 / percent of the total, and grew by 19 percent a year. Workers' remittances Official development assistance (ODA) provided 80 Net private transfers 28 percent of the total and expanded by 18 percent Official development assistance a year. The relative importance of these various 60 Direct private investment sources of foreign exchange financing is shown in Official nonconcessional loans Figures 2.7 and 2.8. 40 Commercial medium- and long-term debts 20 Commercial short-term loans Private sources Use of reserves The share of medium- and long-term debt owed by the developing countries to private lenders has doubled since the early 1970s to an estimated 60 The height of the pie charts indicates total receipts of foreign percent in 1982. The share is even higher (more exchange of all developing countries in current dollars. The financing of the resource gap is shown in the bar charts; the than 70 percent) when banks' short-term credit is height of the blocks indicates the share of each component, included; at the end of 1982, short-term credit to- and the numbers show the absolute amount in billions of taled more than $150 billion. The dramatic increase current dollars, in medium- and long-term borrowing reflects the developing countries' progress in building up cred- itworthiness, as well as market developments that in southern Europe (such as Turkey, Yugoslavia, favored a rapid expansion of lending. Private loans and Portugal) whose workers go to northern Eu- rope, as well as some of the countries which ben- efited from sending labor to the oil-surplus states: FIGURE 2.8 Jordan, Republic of Korea, Morocco, Philippines, Capital flows to developing countries, 1982 Sudan, and the Yemens. Remittances to the low- income labor exporters of Asia also increased; al- though the total was small in comparison with the receipts of the middle-income group, it was an important source of their foreign exchange earn- ings. Some oil exporters (for example, Algeria, Middle-income Egypt, Mexico, and Tunisia) also exported labor oil exporters $28.3 billion and their remittance receipts increased by 25 per- cent a year in 1970-80. The traditional labor im- porters in northern Europe hardly increased their Middle-income oil importers immigrant work forces in the 1970s, but the boom $46.3 billion in the Middle East boosted remittances consider- ably between 1973 and 1980. In 1980 remittances Low-income emanating from the industrialized countries economies amounted to about $19 billion, while the high- $10.7 billion income oil exporters are estimated to have paid out about $5 billion. Since then remittances have 16 went almost exclusively to the middle-income The relatively low interest rates during most of the countries. At the end of 1982, more than 70 per- 1970s encouraged this trend, as did restrictions cent of their medium- and long-term debt was placed by a number of host countries on direct owed to private sources, while more than 80 per- investment. Multinational firms could often sub- cent of the debt of low-income countries was still stitute debt for equity flows. In an effort to en- owed to official sources, mostly at concessional courage direct investment, some countries have terms. Some of these countries, either because of set up insurance schemes for foreign investors (see their strong reserve position or because they had Box 2.1). progressed so little toward full creditworthiness, held deposits with the international banking sys- Official sources tem that were greater than their outstanding bor- rowings from it (see Table 2.10). Aid is provided for a variety of reasonspolitical, Some of the expansion of bank lending over the economic, and humanitarianwhich are reflected past decade has substituted for direct investment. in its geographical distribution. About two-thirds Box 2.1 Insuring international investment Twenty-two capital-exporting countries, Assistance to the development of the equal terms and conditions including almost all OECD countries, as host country by promoting investments, Unavailability of national insurance well as India and the Republic of Korea, promotion of the home country's exports to (potential) investors from some capi- have set up national investment insur- or its access to raw materials, as well as tal-exporting countries, in particular, ance schemes. They offer insurance of promotion of mutually advantageous capital surplus OPEC countries, which new investments against noncommercial economic relations, are basic objectives do not operate national schemes. risks abroad to nationals or residents of of the national schemes. While some Since the early 1970s some private in- the insuring country. Eligible invest- schemes concentrate on one or more of surance underwriters have started to is- ments have generally included equity and these targets, others strive, with varying sue policies to cover noncommercial risks quasi-equity; the definition of invest- priorities, to integrate all of them. All for firms operating in developing coun- ments extends increasingly to nonequity schemes operate under the auspices of tries. In the past ten years the capacity forms of international business transac- their respective governments. Most are of private insurers increased signifi- tions such as service and management required, or at least expected, to operate cantly. contracts and profit or production-shar- on a self-sustaining financial basis. The private insurers were successful ing arrangements. In general, coverage According to OECD estimates, as of mainly by making their programs com- is available for three types of political December 1981 the share of total OECD plementary to national insurance risk: expropriation, currency incoverti- investment in developing countries cov- schemes. Despite some disadvantages of bility, and war. Periods of insurance tend ered by national investment insurance private insurancehigher premiums (up to range between fifteen and twenty averaged about 10 percentbut varied to 5 percent) and shorter period of cov- years. While a few schemes offer sepa- between less than 1 percent and 87 per- erage (one to three years)it provided rate coverage for individual types of po- cent. Many of the schemes appear in- coverage that could not be obtained under litical risks, most of them provide only active, with total coverage remaining the national schemes because of their re- for blanket coverage of all risks at a flat under $100 million, and sometimes even strictions (for example, host-country ceil- premium. Premium rates vary among the under $10 million. ing and limitation to new investments schemes, but flat premiums tend to range National investment insurance may be by nationals). between 0.5 percent and 1.5 percent a subject to a number of constraints such To overcome the weaknesses of na- year of the insured amount. as: tional and private insurance programs for As a rule, only investments flowing Inability to achieve a viable spread noncommercial risk, international or into developing countries are eligible. of risk, especially by small home coun- multilateral investment insurance sys- Whereas only one scheme explicitly re- tries tems have been considered repeatedly quires the existence of a bilateral agree- Country or project ceiling, or both since the early 1960s. Thus far only one ment with the host country as a precon- Failure of developmentally valuable regional scheme has been established: the dition for insuring a project, many investments to obtain insurance as a re- Inter-Arab Investment Guarantee Cor- schemes strive to safeguard their expo- suit of home-country-related policy con- poration headquartered in Kuwait, which sure through general bilateral invest- siderations insures investment from Arab member ment protection agreements between Inability to accord coverage to all states in other Arab member states. home and host countries. members of international consortia on 17 TABLE 2.10 overall average has remained at about half that Net liabilities of selected developing countries, level since the early 1970s. Some DAC countries, end-December 1982 notably the Netherlands, Norway, Sweden, and (billions of dollars) Denmark, have met and even exceeded the 0.7 Country Amount Country Amount percent target. Others-particularly the United States-have slipped further below it. ODA flows Brazil 51.77 Cameroon 0.60 Mexico 48.49 Sudan 0.20 from OPEC countries increased rapidly in the first Argentina 16.43 Tanzania 0.06 half of the 1970s but have since stabilized. None- Korea, Rep. of 15.12 Sri Lanka 0.05 theless, the share of ODA in their GNP remains Chile 7.99 Bangladesh -0.10 far higher than in the case of the industrialized Portugal 7.48 Ghana -0.14 countries. ODA in real terms from DAC countries Yugoslavia 7.28 Uruguay -0.15 Nigeria 5.48 Kenya -0.23 declined by 5 percent in 1981, and recovered by Philippines 5.37 Ethiopia -0.23 10 percent in 1982, due in part to deferred dis- Algeria 4.05 Pakistan -0.46 bursements from the previous year. The 1982 fig- Turkey 1.36 India -0.56 ure reflects the appreciation in the dollar which Thailand 1.30 Egypt -1.80 raised both the purchasing power of dollar aid Indonesia 0.97 China -6.64 receipts and the burden of debt denominated in Note: A negative sign denotes a net asset position as reported to the dollars. ODA disbursements by source are set out Bank for International Settlements (BIS). Source: BIS. in Table 2.11. Not all official lending to developing countries qualifies as ODA. Official loans on terms close to of bilateral ODA goes to middle-income countries, market rates-mostly export credits and loans from while virtually all multilateral ODA goes to low- multilateral development banks-have been grow- income countries. Because middle-income coun- ing more rapidly than ODA, rising from 19 to 29 tries have borrowed heavily from private markets, percent of official flows between 1970 and 1980. ODA constitutes only a small fraction of their total While export credits are available to almost all capital inflows-20 percent in 1980. By contrast, countries, loans at near market terms from mul- even though low-income countries receive only 35 tilateral development banks often provide a bridge to 40 percent of total ODA, it has provided more for countries not sufficiently creditworthy for purely than 75 percent of their external capital during the private finance, but able to handle some debt on 1970s. Even among low-income countries, ODA's commercial terms. financial contribution varies widely. In the pop- ulous countries of South Asia, it was equivalent Financing deficits in the recession to only 5 percent of gross domestic investment in 1980, and 15 percent of imports. By contrast, ODA In the early 1980s many countries ran into serious was equivalent to more than 40 percent of invest- balance of payments problems. Recession in the ment in low-income Africa and 20 percent of industrial countries reduced the export earnings imports. of developing countries, while high real interest Although most DAC countries have accepted a rates increased their debt service obligations. Some target for ODA of 0.7 percent of their GNP, their lenders, concerned about the ability of individual borrowers to surmount these difficulties and un- TABLE 2.11 certain about world economic prospects, became ODA flows from major donor groups, 1970-81 less willing than they had been to increase their lending. 1970 1975 1981 The outcome (partly estimated) for all devel- Billions of dollars oping countries in 1982 indicates the extent of the Total ODA 20.0 31.6 37.6 deterioration (see Table 2.12). Source Percent The current account deficit was $118 billion, DAC 88.5 68.4 68.0 the same as in 1981 and more than twice that in OPEC 4.8 27.9 25.9 Nonmarket economies 6.7 3.7 6.1 1980. It was equivalent to 5 percent of GNP and 25 percent of exports of goods and nonfactor serv- Note: The figures reflect disbursements reported by donors and ices. By contrast, in 1975-the previous peak def- therefore differ from net ODA flows given in Table 2.12. (See also under Official Development Assistance in the Definitions.) icit year-deficits were 3.3 percent of GNP and Sources: DAC and UNCTAD. 17.5 percent of exports. 18 TABLE 2.12 Developing countries' balance of payments, 1970-82 (billions of current dollars) 1970 1978 1979 1980 1981 1982a Current account Resource balance -7.2 -28.8 -22.2 -42.3 -91.6 -85.7 Workers' remittances' 1.4 14.2 18.1 19.7 20.8 22.6 Interest payments' -2.7 -16.8 -24.3 -32.9 -41.8 -49.5 Other current transactions -3.5 -4.4 -2.9 -3.4 -6.0 -5.6 Current account balance -12.0 -35.9 -31.3 -58.9 -118.6 -118.2 Financed by net capital flows 12.7 65.1 81.1 81.6 96.6 85.2 Official development assistanced 4.7 16.1 19.6 24.4 23.2 23.9 Official nonconcessional loans 1.1 5.3 7.3 9.8 10.1 11.0 Private loans 4.7 35.1 42.6 35.3 47.7 35.0 Private direct investment 2.2 8.4 11.6 12.1 15.6 15.3 Use of reserves and other capitale -0.7 -29.3 -49.7 -22.8 22.0 33.0 Memorandum items Debt outstanding 69.4 311.7 370.3 424.2 491.6 548.0 Official 34.0 120.4 136.1 157.2 177.6 199.0 Private 35.3 191.3 234.2 267.0 314.0 349.0 Resource gap as percentage of GNP 1.4 1.8 1.2 1.9 4.3 3.7 Current account deficit as percentage of GNP 2.3 2.2 1.6 2.7 5.5 5.0 Net capital flows as percentage of GNP 2.5 4.0 4.3 3.7 4.5 3.6 Debt service as percentage of GNP 1.8 3.2 3.5 3.4 4.1 4.7 Debt service as percentage of exports 13.5 15.4 15.0 13.6 16.3 20.7 Interest payments as percentage of GNP 0.5 5.0 5.5 5.9 2.0 2.1 Deflator 38.4 83.0 91.7 100.0 99.3 98.4 Estimated. Net of remittance payments. Interest payments on medium- and long-term loans. Net official development assistance, defined as net disbursements of concessional official loans plus net official transfers. Other capital includes net short-term borrowing, capital not elsewhere indicated, and errors and omissions. US dollar GDP deflator for industrial countries. TABLE 2.13 Developing countries' current account balance, excluding official transfers, 1970-82 (billions of current dollars) Country group 1970 1978 1979 1980 1981 1982' All developing countries -12.0 -35.9 -31.3 -58.9 -118.5 -118.3 Low-income Asia -0.7 -1.9 -5.4 -11.6 -6.6 -4.2 Africa -0.6 -2.6 -3.0 -3.7 -5,5 -5.5 Middle-income Oil importers -7.5 -21.8 -36.2 -56.2 -67,7 -58.8 Oil exporters -3.2 -9.6 13.3 12.6 -38.7 -49.8 a. Estimated. Export earnings fell for the second consecu- The external deterioration affected different tive year, to a level 7 percent below that of 1980- groups of developing countries in different ways the result of declining dollar prices of exports and (see Table 2.13). For oil importers the high interest stagnant volumes. rates and depressed export markets of 1980-82 came Interest payments on medium- and long-term on top of the 1979-80 rise in oil prices, to which debt rose to nearly $50 billion, 50 percent above most countries had barely started to adjust. Be- their 1980 level. The London Interbank Offer Rate tween 1978 and 1980 their current account deficit (LIBOR) for six-month dollar deposits, which de- rose from $26 billion to $72 billion, even though termines interest payments on the bulk of private they reduced the rate of growth in the volume of bank loans, averaged 16.6 percent in 1981 and 13.5 their imports from an average 7 percent a year in percent in 1982. 1975-79 to only 4 percent in 1980. In 1981 they 19 held the volume of their imports constant, but this FIGURE 2.10 did not stop the deficit from rising to a new peak Debt and debt service ratio of all of almost $80 billion. Exports were falling rapidly developing countries, 1970-82 while interest payments still rose. In 1982 export Debt service ratio' Debt5 earnings fell again; since capital-importing coun- Percent Billions of current dollars tries were unable to increase their borrowing, they 20 15 10 5 0 100 200 300 400 500 had to cut back their merchandise imports. 1970 The oil-exporting developing countries initially 71 benefited from the 1979-80 rise in oil prices. How- 72 ever, as the momentum of expanding imports ran 73 into progressively weakening demand for oil, their 74 current account swung from a surplus of $13 bil- 75 lion in 1980 to large deficits in both 1981 and 1982. 76 Their imports rose $45 billion in current prices 77 between 1980 and 1982, while exports fell $13 bil- 78 lion. That $60 billion swing accounted for the en- 79 tire widening of the current account deficit of all 80 developing countries during the period. Although 81 the oil exporters slowed down the growth in their 82 import volume in 1982, their external deficit, at 7 Debt service payments as a ratio of export earnings. percent of GNP and 28 percent of exports, was Total medium- and long-term debts disbursed and outstanding. clearly in need of correction. In the 1970s medium- and long-term borrowing exceeded current payments needs and resulted in Within this total, long-term private lending, a substantial buildup of foreign exchange reserves. which had expanded to $48 billion in 1981, fell The $80 billion expansion of the combined current back in 1982 to close to the level in 1978. Net account deficits of developing countries between receipts of ODA expanded by 50 percent between 1978 and 1982 was accompanied by notable shifts 1978 and 1980 but have subsequently stagnated, in financing patterns. Medium- and long-term placing severe strains on low-income countries that finance rose 30 percent over this period, but this cannot borrow privately. Net private direct in- increase met only a quarter of the rise in the cur- vestment, which began to accelerate in the late rent account deficit (see Figure 2.9). 1970s, also stalled as growth in developing and industrial countries declined. Most of the extra financing needs since 1980 have therefore been met by both reserve movements and short-term borrowing. FIGURE 2.9 Current account financing of all developing countries, 1970-82 International debt Billions of dollars 100 While the developing countries' medium- and long- term debt increased by 20 percent a year in the 1970s, the resources needed to service the debt 75_ Medium- and long-term! 1 were also growing rapidly. The ratio of privately owned debt to exports, as well as total debt service financing to exports, was no higher in 1980 than it had been in 1970 (see Figure 2.10). Although the average effective interest rate on total developing-country debt increased from 6.3 percent in 1970 to 8.9 per- 25 cent in 1980, this rise was less than the annual Current account increase in the prices of their imports or exports, deficit and less than the inflation rate in the industrialized 0 countries. The real interest rate on debt was there- 1970 72 74 76 78 80 82 fore very low. After 1980 the position changed. Although the 20 rate of growth of debt halved to an estimated 11 TABLE 2.14 percent in 1982, the slowdown in export earnings Debt service ratios for all developing countries, was sharper. As a result, the ratio of debt to ex- 1970-82 ports rose from 76 percent to 104 percent between Country group 1970 1980 1981 198t 1980 and 1982; if short-term debt is included, this ratio exceeded 150 percent. For oil-importing de- All developing countries 13.5 13.6 16.3 20.7 veloping countries, the ratio was far higher than Low-income Asia 13.3 7.9 8.4 10.1 at any time since 1970; for oil exporters, it was no Africa 6.5 8.8 11.6 28.3k lower than it had been before the 1973-74 oil price Middle-income rise (see Figure 2.11). Since a large part of devel- Oil importers 14.0 14.9 18.0 23.0 oping-country debt is denominated in dollars, the East Asia 6.7 7.0 7.6 8.6 appreciation of the dollar in foreign exchange mar- Latin America 13.0 33.3 39.6 53.2 Oil exporters 13.9 13.0 15.7 19.1 kets has added to their debt burden. Boosted by higher interest rates, the ratio of debt Estimated. The sharp rise in 1982 reflects the accumulation of arrears and service obligations to exports rose sharply from does not allow for any reschedulings in 1982. 13.6 percent in 1980 to 20.7 percent in 1982 (see Table 2.14). Although the incidence of lower ex- port earnings, more debt, and higher interest rates have risen by less than three percentage points varied widely among countries, the importance of instead of the seven points it actually did. Of that lower export earnings is indicated by a hypothet- three-point increase, about half would have been ical calculation: had export earnings risen at 10 due to higher debt levels and half to higher in- percent a year in 1980-82 (about half the average terest rates. increase in the 1970s), the debt service ratio would The way developing-country debt evolved dur- ing the 1970s left most borrowers particularly vul- nerable to the pressures of the early 1980s. FIGURE 2.11 Debt was increasingly composed of loans at Growth of debt and exports, 1970-83 variable rates, their share rising from less than 10 Billions of dollars percent in 1970 to more than 40 percent by 1980. 400 Variable rates were initially welcomed by many bankers and borrowers. By eliminating the interest Oil-importing countrie&' 300 rate risk for lenders, variable rates made banks more willing to lend long-term during a period of 200 rising inflation. Variable rates also promised to stabilize real interest rates on long-term debt, if interest rates changed in line with inflation. How- 100 ever, the tightening of monetary policy in major countries in recent years raised real as well as 0 nominal rates. Being more reliant on variable rate 1970 72 74 76 78 80 82 loans, developing countries found that market in- terest rates affected their total interest obligations Billions of dollars 200 (estimate) more quickly than before. (By the same token, they benefited promptly from the interest rate de- Middle-income oil exporters clines in 1982 and early 1983.) 160 , The practice of syndicating loans also helped 12H to boost private financial flows to developing Exports countries, by spreading the risks of such lending 80 among many banks. With heightened uncertainty Debt' about economic prospects, however, banks have 40 had to devote more resources to risk assessment, increasing their costs and discouraging some smaller 0 banks from further lending. Although the quantity 1970 72 74 76 78 80 82 and quality of information available to lenders have Medium- and long-term debt disbursed and outstanding. Includes low-income economies. improved, many are still dissatisfied with it. Facing difficulty in obtaining long-term loans 21 (official as well as private), countries looked in- whole regions or groups. The deteriorating aggre- creasingly to short-term borrowing or to running gate ratios of the past few years understate the down their reserves. These expedients are custom- predicament of a number of countries (including arily adopted to smooth out short-term fluctua- some of the largest debtors), while exaggerating tions in earnings. Their use through the prolonged the problems of others. Genuine difficulty can be downturn of 1980-82 may have permitted a higher measured by the number of countries that have level of imports than would otherwise have been sought formal rescheduling or major refinancing possible, but it has left many countries vulnerable of their debts. Since 1980 more than twenty coun- to further shocks. By increasing their net short- tries have negotiated to reschedule their debta term debt, countries also became more exposed to far higher number than in any comparable period rising interest rates and to sudden withdrawal of (see Box 2.2). Most have rescheduled through the support by commercial banks. Paris Club, the traditional forum for renegotiating While these three factors help explain how debt official debt. They have typically been small, pri- difficulties worsened in the 1980s, those difficul- mary-producing countries that rely heavily on of- ties have affected individual countries rather than ficial sources of finance and that have been hard Box 2.2 Restructuring developing countries' debts Two kinds of institutional arrangements idated portion of the debt may be paid portant role putting together viable debt exist to restructure the two major types during the grace period rather than on restructuring packages with commercial of debt, official and commercial. Debts the original due dates. Moratorium in- banks. to governments and commercial credits terest charges on rescheduled commer- A number of problems, however, con- covered by official guarantees are rene- cial credits are normally set at the rate at tinue to mar the smooth working of debt- gotiated in the Paris Club or in aid con- which new credits are offered. relief procedures. Debt renegotiations sortia; debts to commercial banks are re- Rescheduled commercial bank debt is essentially address liquidity problems. negotiated with committees of bankers. repaid over five to ten years. Debt relief Countries with deep-seated economic Debt restructuring generally takes two agreements with commercial banks nor- difficulties often require debt relief for formseither a repayment of existing mally reschedule principal amounts due. several years in a row: without it, their debt through refinancing arrangements Occasionally some interest arrears are solvency can be impaired. Delays in im- or a rescheduling of existing loans. There consolidated but they are normally paid plementing bilateral agreements under have been substantial refinancings of debt in about half the time allowed for con- the Paris Club are not unusual. This in to commercial banks in the past: for ex- solidated principal. Currently both the turn delays the return of export credit ample, Argentina (1976) and Jamaica Paris Club and commercial banks require insurance and the renewed flow of com- (1979). But the bulk of the more recent the debtor country to have agreed on a mercial credits. Most important, debt re- official and commercial bank debt rene- stabilization program with the IMF. negotiations have not succeeded in gotiations have involved formal resched- A number of countries have recently maintaining the creditworthiness of many ulings. sought and obtained debt relief without countries. In some measure this has been The terms of reschedulings are usually any formal agreement with their banks. due to the overwhelming concern with relatively short. In Paris Club agree- This somewhat confirms the view that liquidity problems to the exclusion of ments, rescheduled debts, which cover mechanisms for debt renegotiations have long-run development issues. Both gov- one to two years of original obligations, become adequately institutionalized. ernment and commercial bank creditors are normally repaid in seven to ten years Furthermore, the most complicated debt need to recognize that, without additional with three to four years' grace. But ex- renegotiationssuch as those with Po- capital to support real adjustment, debt ceptions have been made. Between 80 land and Romaniahave been put in restructuring may not serve the ultimate and 90 percent of eligible maturities are place. In recent negotiations, however, purpose of debt renegotiations, that is, consolidated. Sometimes the nonconsol- the IMF has played an increasingly im- the restoration of creditworthiness. 22 hit by declines in commodity prices. though the productivity of investment has been Several of the largest debtor countries, which relatively high, difficulties arose because of the have relied chiefly on private sources of finance, sharp increase in interest rates and sudden decline have also sought to reschedule their debt. These in short-term capital inflows. In others (such as arrangements have generally been made through Argentina, Bolivia, Jamaica, Madagascar, Nicara- ad hoc committees of creditors, in conjunction with gua, Senegal, and Zaire), the low return on in- programs agreed with the International Monetary vestment has also contributed to debt servicing Fund (IMF). The IMF has made a particular effort problems. to ensure that these arrangements do not result in debt merely being transferred from private to The impact of the recession on developing official creditors, but that additional new private countries loans are also committed. In several major countries with debt servicing There is considerable variation in the impact of the difficulties, such as Brazil and Mexico, the problem international recession on individual countries, but is basically that of liquidity; in these cases, al- there are also broad similarities. Most countries Multilateral debt renegotiations, 1974-83 (millions of current dollars) Country :1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Argentina U 970 U Bolivia *29 408 Brazil U Central African Rep. *55 Chile 509 a216 U Costa Rica 215 U Cuba a Ecuador U 970 Gabon U 105 Ghana 190 Guyana U29 14 India *179 *157 *169 Jamaica a 126 103 Liberia 30 25 *27 Madagascar 142 *103 U Malawi *42 Mexico Nicaragua U582 190 55 Pakistan U 650 U 263 Peru *387 478 *821 Poland U 4600 Rornania 234 1544 Senegal 77 84 Sierra Leone *27 39 Sudan 373 *553 *174 *300 Togo 170 68 92 *181 Turkey *873 a 1223 U 2640 2600 U3100 Uganda 27 *10 Yugoslavia . Zaire *270 *210 *1147 *402 *606 Note:U = Paris Club Renegotiation. = Aid Consortia Renegotiation. U = Commercial Bank Renegotiation. IMF estimates are in italics. A combination of IMF estimates with any of the first three categories is possible in any year. U = Under negotiation. Formal agreement not reached as of January 1983. Sources: World Bank Debtor Reporting System; data compiled by the IMF as of February 1983. 23 have experienced, in varying degrees: 1970s than in the 1960s, and GDP per capita de- Import reductions because of stagnant or clined in many countries from 1973 to 1980. As declining foreign exchange earnings, reduced the World Bank's report Accelerated Development in inflows of external capital, and rising debt service Sub-Saharan Africa noted, inappropriate policies requirements chronic fiscal deficits, farm prices and marketing Falling government revenues due to declining arrangements that deterred production, and ov- economic activity, the stagnation in trade, and the ervalued exchange ratescontributed to slow difficulty of imposing new taxes during a recession growth in the 1970s. These long-standing prob- Cutbacks in investment plans and the slow- lems have been greatly exacerbated by the 1980- down of ongoing projects because of shortages of 82 recession, with falling demand for primary domestic and external funds product exports. To make matters worse, a severe Shortages of funds to finance the operation drought is afflicting not only the Sahel region, but and maintenance of existing facilities. also southern Africa. Drought conditions in 1982 The severity of such problems depended not contributed to a decline in agricultural production. only on economic structure but also on the choices This was not offset by any growth in official de- countries made among the various ways of ad- velopment assistance, which was virtually stag- justing to external shocks: some adjustment paths nant in 1981 and 1982. To cope with their wors- are efficient, others less so. Current account def- ening balance of payments, countries sharply icits can be reduced by slower growth, which cuts curtailed economic activity to reduce imports. the demand for imports, or by switching produc- Many African governments (for example, in Ma- lion to additional exports and efficient import sub- lawi, Mali, and Sudan) have recognized the im- stitutes. Countries with access to external capital portance of adjusting policies, and particularly of could use this capital to help make these structural eliminating the bias against agriculture. Despite adjustments or to help postpone making adjust- the world recession, policy changes have pro- ments. Countries that choose to maintain con- duced encouraging results. For example, Sudan devalued its exchange rate, raised producer prices, sumption levels by reducing investment eventu- ally pay the price of a more difficult adjustment and altered its tax regimeall geared to restoring in later years, or must be willing to accept a longer the incentive for cotton cultivation. Concessionary period of slower growth. Others, which restruc- aid helped finance critical imports for the irrigated ture investment programs, increase domestic sav- cotton sector. The result was a 51 percent increase ing, and give incentives to export may have to in cotton production in 1981-82 followed by a fur- accept slower growth and consumption during the ther 27 percent last year. transition period, but are likely to emerge as In contrast, the low-income countries of South stronger economies in the long run. For the low- and East Asia, notably India and China, were able income or least developed countries, however, the to face the difficulties of the 1970s, and even of choices were more difficult, since consumption the early 1980s, from a stronger position. In part levels were already low and further cuts to main- this was because of the policies they pursued. China, India, and Sri Lanka initiated liberalization tain investment implied particularly severe social and human costs. programs in the second half of the 1970s. Pakistan and Bangladesh adopted structural adjustment Although the world recession sharply curtailed programs in the late 1970s and early 1980s. The growth in most developing countriesin 1980-82 low-income Asian countries have mostly shown their GDP growth rate was less than half the discipline in monetary and fiscal policy and have 1973-80 averagethe low-income economies of Asia also made significant progress in correcting price did much better than those of Africa. Among the distortions and providing appropriate incentives middle-income oil-importing countries, East Asia to encourage efficiency and growth. India, for ex- as a group markedly outperformed Latin America ample, grew by an average of 6.5 percent a year in 1981 and 1982 (see Table 2.1). in 1980-81 and, although growth slowed to 2.8 percent in 1982 due to drought and the prolonged Low-income countries world recession, this increase was still high com- pared with earlier drought years. By adjusting prices The position of the low-income sub-Saharan to reflect economic costs more closely, the gov- African countries continued to deteriorate in ernment helped to promote a rise in public savings 1980-82. Most had fared significantly worse in the in 1981-82, while private savings also grew. Tm- 24 proved efficiency in power and railways allowed had to reduce their imports, and thus their growth, higher capacity utilization in industry. And de- considerably. spite the world recession, exports continued to Long-standing domestic problems added to the grow rapidly in response to export incentives and vulnerability of these economies to recession. Neg- the greater availability of essential imports. ative real interest rates and other financial policies dampened savings and contributed to capital flight. Middle-income oil importers High protection led to inefficient manufacturing industries and limited exports, and fiscal and mon- The recession also affected middle-income oil im- etary policies led to high rates of inflation. The porters in diverse ways. The middle-income coun- immediate result of such policies was the over- tries of Asia saw a deterioration in their terms of valuation of exchange rates and a tendency to im- trade, yet they still performed remarkably well. port too much, export too little, ship capital abroad, The Republic of Korea and the Philippines man- and borrow heavily. During this period many aged to grow by an average of 2 and 4 percent a countries embarked on programs to adjust their year respectively during 1980-82, and Thailand by policies by reducing protectionism, encouraging 6 percent a year. Although the reliance of the newly exports, eliminating price controls, and adjusting industrialized countries of Asia on manufactured exchange rates. While important progress was made exports makes them vulnerable to downturns in in some cases, in others the sequence of policies trade and to protectionism, their manufactured ex- was unfortunate. For example, when the liberali- ports did not decline. By emphasizing efficiency zation of foreign capital inflows preceded trade and competitiveness, and by being relatively cau- liberalization, borrowed capital flowed into inef- tious in their foreign debt and fiscal policies, they ficient activities with low social returns. At the have created an economic resilience that can same time these policy reforms often had little weather difficult conditions. Their relatively low impact on fiscal deficits and inflation. level of price distortions was conducive to better Where policies have been changed, middle-in- resource allocation and use, which permitted re- come oil importers, like the low-income countries, spectable growth of exports and GDP during the have shown that they can reap substantial bene- latest recession. It also meant that the returns on fits, notwithstanding the world recession. For ex- foreign borrowing were higher. ample, Turkey, which initiated a major economic In contrast, from 1980 to 1982 the GDP of mid- reform program in 1980, has made notable prog- dle-income oil importers in Latin America fell by ress. Its GDP grew by more than 4 percent a year almost 2 percent a year. The recent decline in oil in 1981 and 1982, inflation dropped from 107 per- prices has alleviated their import burden, but fall- cent in 1980 to 25 percent in 1982, and an upsurge ing world demand and prices of primary com- in exports, together with modest import demand, modities reduced export earnings. Even more im- brought the current account deficit down from 4 portant, sharply rising interest payments percent of GDP in 1981 to 2 percent in 1982. exacerbated their worsening balance of payments. Their heavy indebtedness made the Latin Amer- Middle-income oil-exporting countries ican economies especially vulnerable to rising in- terest rates and any slowdown in their exports. Paradoxically, some of the countries now facing The size of the external debt of the oil importers the greatest problems are oil exporters, despite the in Latin America is not high in relation to the level marked improvement in their terms of trade over of economic activity, but it is exceedingly high the past decade. Their problems have well estab- compared with their export earnings. In 1981 their lished antecedents in the history of other resource- ratio of debt to GDP was identical to that of other rich economies. A country that is well endowed developing countries (24 percent), but the ratio of with natural resources reaps a rental income from debt to exports was 158 percent compared with 95 their exploitation. Usually the government appro- percent for other developing countries. Further- priates the bulk of the rents in the form of roy- more, more than 50 percent of this debt was at alties, direct profits, or production-sharing fees, variable interest rates compared with 21 percent and such revenues can be used for heavy public for all other developing countries. By 1982 their spending. debt service burden had risen to 53 percent of The oil exporters used their revenues to expand exports compared with 8.6 percent for East Asian development expenditures, putting more funds into oil importers. To service their debt, they therefore social and physical infrastructure than they could 25 otherwise have done. Sometimes, however, they Here, too, there were variations. Some oil ex- overinvested in capital-intensive sectors that con- porters, such as Mexico and Nigeria, had difficulty tributed little to employment, drawing resources servicing their debts when oil revenues fell. Others, out of agriculture and small-scale enterprises. Malaysia and Indonesia, for instance, have main- The erosion of the tax base has been a further tained creditor confidence and access to financial problem for resource-rich countries. With windfall markets. In both countries the accumulated for- gains from oil, it is difficult to persuade taxpayers eign exchange reserves from past oil revenues also that their contributions are necessary for growth. provided a cushion against the decline in export But if the tax base erodes, governments find them- earnings. selves short of revenues when income from oil or Summing up the experience of all developing other resources declines. countries, the past three years underline the im- For all these reasons many middle-income oil portance of incentive-promoting policies. The most exporters have found themselves in difficulty in successful countries have been outward oriented, the 1980s. For example, in Egypt, the fall in rev- and have also emphasized the role of prices and enues from petroleum exports, as well as dimin- markets for improving efficiency, as well as better ished earnings from the Suez Canal, workers' re- management of the public sector. The ability of mittances, and tourism, caused the current account some Latin American countries to withstand ex- deficit to widen to nearly 14 percent of GDP in ternal strains after 1979particularly higher inter- 1982. The fiscal deficit rose to 22 percent of GDP est rates and lower commodity priceswas seri- that same year. ously compromised by their earlier domestic Sometimes capital-intensive investments were policies. For sub-Saharan Africa, the main new further expanded by external borrowing on the factor has been the sharp decline in commodity assumption that revenues would continue to grow. pricesagain, coming on top of continued weak- At the beginning of the recession, as the demand nesses in economic policy and management. for oil was falling, it was tempting to maintain What is needed for sustained world economic public spending by borrowing even more. The Latin growth is concerted action by both the industrial American oil exporters, for example, increased their and the developing countries. The former to help debt by 23.3 percent a year between 1972 and 1981 provide a more stable and favorable external eco- (compared with 19.4 percent for the region's oil nomic environment through steady but noninfla- importers), and by 1981, 70 percent of the debt tionary expansion, a more open trading system, was at variable interest rates (compared with 56 and continued steady growth in both commercial percent for the rest of the region). As interest rates and concessionary capital flows. The latter, by rose and oil revenues fell, these heavily borrowed adopting policies that increase efficiency. These countries found themselves in difficulty. policies are discussed at length in Part II. 26 3 The outlook for developing countries The previous chapter has placed the difficulties of methodology used in elaborating these scenarios the past few years in their historical perspective. is given in the Technical appendix. This chapter looks ahead to the middle of the next The purpose of assessing the outlook as far ahead decade. It concludes that most developing coun- as 1995 is to abstract from cyclical fluctuations and tries should be able to regain their growth mo- concentrate on underlying trends. However, the mentum, but to do so will require a more favorable recession of 1980-82 was so severe that it is bound world environment, coupled with significant ef- to affect statistical averages for several years. In forts by the developing countries themselves to order to avoid distorting the picture, the years to make better use of their resources. Even in those 1995 have been divided into two periods-1980-85 circumstances, the outlook for some of the poorest and 1985-95. countries is somber. Before examining the domestic determinants of In common with previous World Development Re- growth in developing countries, this chapter dis- ports, no attempt has been made to predict the cusses the external factors that affect economic future. This chapter instead provides a consistent performance. These include growth in industrial framework for exploring the links between coun- countries, energy, trade, workers' remittances, and tries and between economic variables, so as to capital flows. The analysis focuses mainly on the illustrate the effects of different policies and events Central case, but indicates policies that would make on the developing countries. To assist this analysis, the High and Low scenarios more likely. three sets of projections-Low, Central, and High growth scenarios-have been prepared through Growth in industrial countries 1995; the results are summarized in Table 3.1. The Central case does not represent the most probable The Central case assumes that GDP in industrial outcome; it is merely the middle set of the three countries will grow at about 3.8 percent a year scenarios that serve to illustrate the likely impact during the recovery period and up to 1990, and of different policies. All three have required judg- thereafter at about 3.5 percent a year. Though gov- mental adjustments, particularly with respect to ernments are likely to proceed cautiously for fear policy changes. A more detailed explanation of the of reigniting inflationary pressures, a rate of growth TABLE 3.1 Past and projected growth of GOP, 1960-95 (average annual percentage change) 1985-95 Country group 1960-73 1973-80 1980-82 1982-85 Low Central High All developing countries 6.0 4.7 1.9 4.4 4.7 5.5 6.2 Low-income Asia 4.6 5.4 4.1 4.5 4.5 4.9 5.3 Africa 3.5 1.4 0.5 2.9 2.7 3.3 3.9 Middle-income Oil importers 6.3 5.2 1.2 4.5 4.4 5.7 6.9 Oil exporters 7.0 3.7 1.7 4.0 5.3 5.7 5.8 Industrial countries 5.1 2.5 0.4 3.0 2.5 3.7 5.0 27 approaching 4 percent following a recession would The slowdown in economic activity is another be modest compared with past industrial-country major cause of the slower rise in energy demand recoveries. Nonetheless it would enable the waste since 1973. Nevertheless, the global demand for and social costs represented by 30 million now energy can be expected to rise again rapidly to- unemployed to be substantially reduced. ward the end of the 1980s. If GDP in the industrial As unemployment declines, in time labor short- countries grows at nearly 4 percent a year and in ages will appear and restrain industrial countries' the developing countries at about 5.5 percent a growth. If present immigration policies remain un- year between 1985 and 1995, world commercial changed, declining population growth rates and energy consumption is likely to rise by about 2.3 other demographic changes will reduce the growth percent a year in 1985-95, compared with 3 per- of the labor force in industrial countries from about cent from 1970 to 1980. For developing countries 1.25 percent a year between 1960 and 1980 to about alone, the growth rate is likely to reach about 4.5 0.7 percent a year in 1985-95. Over the projection percent a year. This projection assumes not only period technical progress is assumed to produce Central case GDP growth, but also further prog- an annual growth in per capita output of about ress in conservation and the production of new 2.8 percent, a level comparable to that of the past energy supplies. two decades. The GDP deflator (in dollars) for the Rising demand for energy would influence the industrialized countries is assumed to average 6.4 course of energy prices. In the short run, energy percent in 1982-95; real short-term interest rates prices could soften considerably in response to low are assumed to average 3 percent over the same demand and the urgent needs of energy exporters period. for revenue; the 1983 price is now forecast to be some 20 percent lower than in 1982. A sustained Energy period of depressed oil prices (and hence energy prices) would almost certainly slow the pace of The links between energy prices, energy demand, energy conservation and affect the production of and economic growth have become complex. other forms of energy. As GDP growth recovers, Progress made so far in conservation has only however, real oil prices will rise, and energy de- scratched the surface of what is technologically mand may be expected to grow more quickly than possible and likely to be economic at higher energy the availability of cheap, incremental supplies. By prices. Conservation is more than the adjustment the mid-1990s the real price of oil is expected to of thermostats, retrofitting, switching to smaller be about 20 percent above its 1981 peak. The Cen- cars, and similar measures, which represent the tral scenario assumes that the oil-price rise in real main efforts undertaken to date. It also implies terms averages 1.6 percent a year between 1982 innovation in design and hence new investment. and 1995. Significant gains can still be made. Despite their conservation efforts, which led to Those gains depend on policies that reduce the a decline in their consumption of oil, the long- energy used per unit of output and induce a shift term dependence of industrial countries on im- from dependence on imported oil at high prices ported oil will not diminish substantially, since to greater use of cheaper alternatives, domestic or their own productionparticularly in the United imported. Such policies include raising energy States and the North Seais also expected to de- prices; taxation and other fiscal incentives; invest- cline gradually. The OPEC countries will therefore ment in domestic supplies of energy; training; and remain the main exporters of petroleum, with OPEC promotional and educational efforts. These meas- prices exerting a strong influence on international ures encourage more energy-efficient processes in energy prices. industry, transport (fuel savings, railway electri- With the price of oil rising over the medium fication), households (improved woodstoves), and term, the future pattern of energy consumption is electric power (loss reduction, use of waste heat, likely to differ markedly from that of the 1970s. and improved load management). Some devel- Oil consumption is expected to grow by less than oping countriesnotably Brazil, China, and the 1 percent a year in 1985-95, contributing only 11 Republic of Koreahave reduced their commercial percent of the increase in global energy consump- energy intensity in recent years and shifted to tion between 1980 and 1995, compared with 43 cheaper substitutes. Other countries have yet to percent during the 1970s. Coal, primary electricity correct their policy stance and develop well- (nuclear and hydroelectric power), and natural gas defined programs for managing energy demand. are expected to compensate for the declining share 28 FIGURE 3.1 ing countries at prevailing (or even somewhat Global energy consumption, 1970-95 lower) oil prices remains profitable, particularly if Millions of barrels the high cost of interruptions in supply is taken 190.6 of oil equivalent into account. Short-term fluctuations in the price 28 5 Primary of oil should neither lead to complacency nor deter electricity countries from pursuing conservation and pro- duction goals. 134.9 38.6 Solid fuels Total Trade 100.7 Natural 6.6 56.0 gas Foreign trade enables developing countries to specialize in production, exploit economies of scale, and increase foreign exchange earnings needed to pay for imports. A good export record also Petroleum strengthens creditworthiness and permits greater access to private loans. As Figure 3.2 shows, the developing countries' exports are directly affected by growth in the industrial countries. They are 1970 1980 1995 also influenced by the level of protectionism in the industrial world. The Central case assumes that industrial countries will institute no new protec- tionist measures between now and 1995. of oil in total energy consumption (see Figure 3.1). The sensitivity of developing-country exports to The industrial countries, as well as some devel- activity in the industrial countries can be illus- oping countries, will turn increasingly to coal to trated by a calculation based on some simplifying meet their energy needs (see Table 3.2). Although assumptions. If GDP in the industrial countries its use tends to be constrained by environmental were to rise by just 5 percent a year between 1982 concerns and high transport costs, the expected and 1984, the oil-importing developing countries slower rise in the production costs of coal will give would increase the value of their exports by 20 to it a competitive edge over other fuels. Of the pro- 30 percent and the volume by about 10 percent. jected increase in global energy demand between 1980 and 1995, coal is expected to supply 35 per- cent, primary electricity 29 percent, and natural FIGURE 3.2 gas 25 percent. Rising project costs have resulted Real GDP growth of industrial countries and export in a sharp reduction of synthetic fuel projects. volume growth of developing countries, 1966-82 Hence nonconventional fuels will play only a mi- nor role during the 1980s and early 1990s. Annual percentage change 15 The prospect of rising real oil prices underlines the urgency of adopting appropriate national ,' Developing countries energy policies. At their heart lie domestic energy / \ Export growth rate prices. They have to signal the real long-run cost 10 of energy to all energy suppliers and users so that the desired structural changes in supply and de- mand, for particular fuels and for energy as a whole, will take place. Further, since the risks and costs of interruptions in supplies and sudden price increases are high for oil-importing developing / Industrial countries GDP growth rate 'I I countries, it is important for them to accelerate the 0 development of their own energy resources. For- tunately, many developing countries, including some oil exporters, have moved or are moving domestic energy prices toward world prices. De- spite the anticipated short-term weakness in the 1966 68 70 72 74 76 78 80 82 oil markets, energy development in the develop- 29 TABLE 3.2 Commercial primary energy production and consumption by country group, 1970-95 (million barrels per day of oil equivalent) 1970 1980 1995 Country group Production Consumption Production Consumption Production Consumption Low-income 5.5 6.0 10.8 11.0 19.1 18.8 Petroleum 0.7 1.3 2.4 2.7 3.8 3.8 Natural gas 0.1 0.1 0.4 0.4 1.3 1.3 Solid fuels 4.4 4.3 7.3 7.2 12.1 11.8 Primary electricity 0.3 0.3 0.7 0.7 1.9 1.9 Middle-income Oil importers 3.4 6.1 5.6 10.8 13.5 22.0 Petroleum 1.1 3.7 1.0 6.2 1.8 9.0 Natural gas 0.2 0.2 0.4 0.4 1.5 1.6 Solid fuels 1.5 1.6 2.6 2.6 5.2 6.4 Primary electricity 0.6 0.6 1.6 1.6 5.0 5.0 Oil exporters 14.6 2.9 16.9 5.1 29.0 11.1 Petroleum 13.6 2.0 15.0 3.6 21.9 5.9 Natural gas 0.7 0.6 1.5 1.1 5.7 3.6 Solid fuels 0.1 0.1 0.1 0.1 0.4 0.6 Primary electricity 0.2 0.2 0.3 0.3 1.0 1.0 High-income oil exporters 11.8 0.7 17.4 1.6 15.7 3.0 Petroleum 11.7 0.6 16.5 0.9 14.2 1.8 Natural gas 0.1 0.1 0.9 0.7 1.5 1.2 Solid fuels 0.0 0.0 0.0 0.0 0.0 0.0 Primary electricity 0.0 0.0 0.0 0.0 0.0 0.0 East European nonmarket economies 22.5 21.2 34.2 32.2 44.1 43.7 Petroleum 7.4 6.5 12.4 11.2 11.9 12.5 Natural gas 3.8 3.8 8.0 7.6 14.6 13.5 Solid fuels 10.6 10.2 12.4 12.0 13.8 13.9 Primary electricity 0.7 0.7 1.4 1.4 3.8 3.8 Industrial countries 43.2 63.1 49.9 74.2 69.1 92.0 Petroleum 12.6 32.1 14.1 36.8 13.5 34.1 Natural gas 13.1 13.0 13.6 14.6 14.0 17.5 Solid fuels 12.8 13.3 14.0 14.6 24.9 23.7 Primary electricity 4.7 4.7 8.2 8.2 16.7 16.7 Welcome though such an improvement would be, cent of their production of machinery, for exam- it would still be muted by comparison with the ple. Increases in the trade of industrial countries mid-1970s. In 1977, after two years of recovery in are therefore likely to be slower in relation to GDP the industrial countries, the oil-importing devel- growth than they have been in the past. oping countries raised the value of their exports Slower growth of industrial countries' trade will 42 percent above their 1975 level, and the volume undoubtedly restrain the growth of developing by 24 percent. countries' exports. Nonetheless, the developing Since the Central case assumes that economic countries are expected to increase their share of growth in the industrial countries will be slower world trade. The low-income countries are pro- in 1985-95 than it was in the 1950s and 1960s, it jected to maintain the same growth in their exports is postulated that world trade will also grow more as they managed in 1973-80, although China's ini- slowly. The 5 percent annual growth of world trade tial export drive is assumed to slow down. The projected for 1985-95 is about the same as was middle-income oil importers would have the fast- achieved in 1973-80, but greater than that pro- est growth of all, also about the same as that jected for 1980-85 (see Table 3.3). Within this total, achieved between 1973 and 1980. By contrast, ex- the industrial countries are expected to increase ports by oil-exporting developing countries would their exports more slowly than in 1973-80. One rise the slowest, consistent with the slow growth reason for this slowdown is that a large proportion in energy demand. of their output of goods is already traded-30 per- Although the Central case assumes no new pro- 30 TABLE 3.3 Past and projected growth of export volumes, 1965-95 (average annual percentage Change) Central case Value 1980 projections (billions of Country group 1965-73 1973-80 dollars) 1980-85 1985-95 All developing countries 8.2 4.2 512 4.3 6.8 Low-income Asia 7.3 9.9 36 4.9 7.2 Africa 6.7 0.3 12 3.0 4.2 Middle-income Oil importers 9.6 8.1 272 4.7 8.8 Oil exporters 7.4 -0.6 192 3.7 3.2 High-income oil exporters 9.9 0.8 192 -6.5 1.2 Industrial market economies 8.8 5.5 1,513 2.6 4.8 Worlds 8.7 4.9 2,394 2.3 5.1 Note: Export volumes include goods and nonfactor services. a. Including East European nonmarket economies. tectionist measures, some of the existing ones, if TABLE 3.5 not removed, will become a stronger brake on Past and projected increases in trade prices, exports. The Multifibre Arrangement, for example, 1970-95 (average annual percentage Change) hampers newcomers to the textile and clothing trade, while allowing little growth for established 1970-80 1980-95 exporters. In some other sensitive products, the World export prices' 13.3 5.6 pace of market penetration may slow as exporters Nonfuel primary products 9.1 5.8 face stiffer competition when they attempt to ex- Fuels 29.1 7.6 port manufactured goods that compete more di- Manufactures 10.6 5.2 rectly with those produced in the industrial coun- Industrial countries' GDP deflator5 10.1 5.5 tries. Thus exports are expected to grow somewhat Note: Projections are based on the Central growth scenario. more slowly toward the end of the projection pe- a Including nonfactor services and gold. riod. Table 3.4 shows the projected exports by b. In US dollars. category. The projected increases in trade prices associ- wheat, sugar, and nonfood agricultural raw ma- ated with the Central case are shown in Table 3.5. terials are assumed to move up quickest, given Economic recovery is expected to benefit exporters their responsiveness to cyclical fluctuations and of nonfuel primary products. The prices of metals, earlier reductions in capacity. For many foodstuffs (particularly tropical beverages and fats and oils), abundant supplies are likely to persist. Over the TABLE 3.4 long term-up to 1995-prospects vary consider- Exports of developing countries, 1980-95 ably for different commodities. In real terms prices Average annual are projected to grow for metals (especially cop- percentage growth per, nickel, and aluminum) beef and most agri- 1980 value ,i 1Rfl rniv,'a (billions of cultural raw materials (especially natural rubber, Exports dollars) 1980-85 1985-95 timbers, and cotton), while those for some food- stuffs (especially bananas) are expected to be less Total merchandise' 434 4.2 6.6 buoyant (see Figure 3.3). Nonfuel primary products 126 2.6 2.6 Fuels 163 3.7 2.8 Manufactures 130 6.6 12.0 Workers' remittances Nonfactor services 78 5.0 7.6 Goods and nonfactor Projections up to 1995 reflect a constrained outlook services 512 4.3 6.8 for workers' remittances. In northern Europe, re- ,\'ote. Projections are based on the Central case. cord unemployment means that the demand for a. Includes gold. migrant labor is unlikely to grow in the next few 31 FIGURE 3.3 The resource gap Price index of selected commodities, 1982-95 Capital inflows contribute to development by sup- Index (1982 = 100) plementing domestic savings and by financing 200 - Sugar I imports. Foreign borrowing also permits flexibility I Wheat in managing the balance of payments, thereby 180 I -- Copper fostering a relatively stable environment and an I r I efficient use of resources. Some forms of capital I I can also promote transfers of technology, which 160 Rubber may have large payoffs. Such inflows have been Logs important to development throughout history 140 Rice including, notably, that of North America and Tin Australia in the 19th century. The demand for Cotton foreign capital by today's low-income developing 120 Phosphate rock countries, whose average per capita income is only Iron Ore 2.4 percent that of the industrial countries, is likely 100 - Coffee to be substantial in future. Cocoa The amount of foreign capital going to devel- ,.Bananas oping countries reflects many factors: savings and 80 investment patterns in the countries providing 1982 85 90 95 capital; the willingness of their governments to Prices are in constant dollars. lend to the developing world, and of their busi- nesses to invest there; the willingness of develop- years and restrictive immigration policies might ing countries to spur growth through borrowing; continue. Even in the long term, these countries and their capacity to absorb and service foreign will probably require fewer foreign workers than capital on the terms offered. None of these factors in the 1960s and early 1970s. In the high-income can be predicted with certainty, depending as they oil-exporting countries, real oil revenues are pro- do on the prospects for interest rates, GDP, and jected to increase at a much slower rate than dur- export growth, and on economic policy and man- ing 1970-80, and the demand for foreign labor is agement in the developing countries. Overall, the unlikely to grow substantially. projections in the Central scenario envisage an The projections in Table 3.6 reflect broad trends annual real increase in net capital flows of just 3.6 only, being subject to several imponderables. The percent in 1982-95, compared with an average of factors determining the pattern of migration dur- over 10 percent in 1970-80. The outlook varies for ing the next decade and beyond will include the different types of capital (see Table 3.7). These are changing structure of skills demanded in the labor- discussed below. importing countries and the ability of labor-ex- porting developing countries to provide those skills. Commercial borrowing TABLE 3.6 By 1982 current account deficits and debt burdens Workers' remittances to developing countries, had become major constraints for a large number 1980-95 of developing countries. Measures have since been taken to ease the liquidity problems of major bor- Annual rowers. However, the recent fall in oil prices has Billions of percentage current dollars growth placed some oil-exporting countries in jeopardy, Country group 1980 1995 (1980-95) where previously the prospect of stable export revenues had given confidence to commercial All developing countries 24.0 91.3 9.3 bankers. Low-income Asia 3.0 7.5 6.3 A period of transition to more viable external Africa 0.3 1.8 12.7 financing is unavoidable; for some countries, it has Middle-income been under way for some time. Following a period Oil importers 16.9 68.9 9.8 of adjustment, during which foreign borrowing is Oil exporters 3.8 13.1 8.6 expected to be sharply curtailed, capital flows are Note: Projections are based on the Central growth scenario. projected to resume their growth, but at a far slower 32 TABLE 3.7 The financing of current deficits for all developing countries, 1982-95 Billions of current dollars Annual percentage growth 1982a 1995 1970-80 1980-82 1982-95 Current account balanceb -118.2 -276.2 17.2 41.7 6.7 Net capital flows 85.2 294.2 20.4 2.2 10.0 Official development assistance 23.9 81.2 17.9 -1.0 9.9 Official nonconcessional loans 11.0 42.0 24.5 5.6 10.9 Private loans 35.0 109.6 22.3 -0.4 9.2 Private direct investment 15.3 61.4 18.6 12.5 11.3 Use of reserves and other capitaU 33.0 -18.0 Memorandum items Debt outstanding 548.0 1,996.8 19.9 13.7 10.5 Official 199.0 809.8 16.5 12.5 11.4 Private 349.0 1,187.0 22.3 14.3 9.9 Resource gap as percentage of GNP 3.7 1.6 na. na. na. Current account deficit as percentage of GNP 5.0 2.7 Net capital flows as percentage of GNP 3.6 2.9 Debt service as percentage of GNP 4.7 3.5 Debt service as percentage of exports 20.7 12.0 Interest payments as percentage of GNP 2.1 1.5 . Deflator' 95.7 213.8 10.3 -1.6 6.4 na. Not applicable. Not available. Estimated. Excludes official transfers. These figures are different from the current account given in Table 2.11, hich includes official transfers. Short-term borrowing. US dollar GDP deflator for industrial countries. rate than in the 1970s. Even when the projected deal with payment crises, providing at the same adjustment is achieved, the developing countries time an opportunity for the more orderly rene- will have repaired only some of the recent damage gotiation of debt. Thereafter, cofinancing with in- to their external financial positions. Moreover, if ternational development agencies of projects with uncertainty leads lenders and borrowers to dis- well-assured returns, can give lenders confidence count more heavily their expectations of future in the willingness of other banks to lend. Such export earnings, they may seek to reduce debt and financing facilitates adjustment; a vigorous adjust- debt service in relation to exports to levels even ment program by developing countries to reduce below those previously considered acceptable. their need for new loans is essential to retain or Only about one-third of the total debt owed to reestablish creditworthiness. private sources is guaranteed or insured by cred- That the international banking system will itor governments. Commercial banks have become weather the present crisis is not in doubt, consid- increasingly concerned about their debtors' liquid- ering the small fraction (about 6 percent) of banks' ity being sufficient to cover repayments on all their assets represented by their claims on developing loans. That can be achieved only if an adequate countries. For a few banks in a few countries it is volume of new loans continues to be made by the nonetheless possible that losses may be sustained, banking system as a whole. The risk is that indi- which could pose problems for the international vidual banks will lose confidence in a particular banking system. Consequently, the margins de- borrower and precipitate a general withdrawal. manded in future are likely to be higher than in Unilateral reschedulings or moratoria are some- the past, and the growth of lending much slower. times suggested as a response, but these do great Concern about the concentration of debt in the harm to the functioning of the international finan- larger developing countries may limit or halt the cial system. Short-term loans from the Bank for growth of lending to these countries in relation to International Settlements, allowing time for agree- total loans. Similarly, concern about the adequacy ments to be reached under the aegis of the Inter- of banks' capital may limit the growth of their total national Monetary Fund, are a far better way to loans in relation to their capital. In the 1970s, by 33 contrast, both these ratios increased. Even if com- raise the share of their GDP to ODA; and the GDPs mercial banks are willing to expand their lending themselves are not expected to rise fast. Some more rapidly, they may be unable to do so if reg- countriesnotably the United States and mem- ulatory action to limit international lending, as now bers of OPECmay even reduce their ODA ratios. contemplated, is introduced. Deregulation of The Central case projection assumes that ODA banking in the United States and revived domestic increases only in line with industrial-country borrowing may also increase the relative attrac- growth, and that there is no further reallocation tiveness of the home market. of aid from middle- to low-income countries. In Reflecting these considerations, the Central sce- that case, ODA would be about 60 percent higher nario assumes that medium- and long-term lend- in real terms by 1995 than it was in 1980. As a ing to developing countries increases in real terms share of total gross capital flows, however, ODA by an average of 3.5 percent a year in 1982-95-- would continue to fallto 28 percent, compared or about in line with the GDP growth of industrial with 30 percent in 1980 and 37 percent in 1970 countries and one-third the real rate in the 1970s. even with the projected slowdown in commercial Having grown faster than the developing coun- lending. tries' production and trade over the past decade, The strong implication of this analysis is that the relative importance of private loans may well ODA as currently planned falls far short of the diminish in future. needs of the developing countries, especially of the low-income countries, if world poverty is to be seriously tackled. This is not a simple issue of Private direct investment charity, but rather a complex one of world eco- nomic interdependence. Over the past five years, Some of the expansion in bank lending over the past decade substituted for private direct invest- low-income countries received only 37 percent of total ODA; there has been no clear long-term trend ment. This trend was encouraged by the relatively low interest rates through most of the 1970s and toward increasing this share, which was no higher in 1981 than in 1971. Given the special problems by the restrictions host countries placed on direct investments. The restrictions were often a reaction of the least developed nations, which even with to past experiences of investments that were un- sound policies lack creditworthiness, there is a strong argument for channeling a larger share of necessarily subsidized or were seen as having been bilateral aid to them. inconsistent with development objectives. For Overall, the projections summarized in Table 3.7 multinational firms, it was often easy to substitute imply that by 1995 total capital inflows would de- debt for equity. The outlook for direct investment has become cline to 2.9 percent of developing-country GDP, more attractive recently, since the cost of borrow- about half the 1981 ratio and close to that of the ing has risen and an understanding has been early 1970s. Netting out factor income and the need for reserve accumulation, the net transfer of reached between investors and some host govern- foreign resources would be 1.6 percent of GDP by ments. Moreover, the outflows related to direct 1995. Debt is projected to decline significantly in investmentin the form of profit remittances relation to exports (see Figure 3.4). While this would are directly dependent on the success of the en- ease debt servicing burdens, the slower growth of terprise, and there is more flexibility as to timing. financial flows would give countries less flexibility With the prospects for bank lending more con- than in the 1970s. strained, direct investment may contribute a greater share of the capital flows to developing countries. However, the scope for substitution is limited to Implications of the Low case the private sector; direct investment cannot be used The assumption underlying the Central case is that to finance most development infrastructure. industrial countries will resume an average growth rate higher than in the 1970s, though well short Flows from official sources of their record in the 1950s and 1960s. It is, of course, possible that the industrial countries will Table 3.7 shows that developing countries will de- fail to tackle their structural problems. The Low pend on ODA for a large part of their net resource case illustrates the consequences of their manag- inflows. Yet the outlook for ODA is not encour- ing to grow by only 2.5 percent a year between aging. Only a few countries seem determined to 1985 and 1995 (see Table 3.1). 34 FIGURE 3.4 numbers, already quite strong in host countries, Debt and exports of all developing countries, 1970-95 would grow. It is easy to envisage a downward global eco- Billions of dollars nomic spiral emerging from the Low case, with 2500 catastrophic consequences for the developing countries. Indeed, it would be difficult to forestall 2000 such a global crisis if the industrial countries' re- Exports covery were to taper off into a decade of very slow growth. If anything, the assumptions about the 1500 trends associated with the Low case are optimistic. The aid effort of industrial countries and high- 1000 Debt income oil exporters is not projected to decrease as a ratio of their total GDP. No allowance is made -I. for migrants being expelled. No new curbs are 500 assumed to be imposed on international capital movements, and commercial capital flows have 0 been reduced merely in line with the lower per- formance of developing countries. The inroads of 1970 75 80 85 90 95 protectionism have been limited to the equivalent of a 15 percentage point increase in the average tariff of industrial countries (see Box 3.1). Such slow growth would have several severe Despite these moderate assumptions, the im- implications. Some of them bear on the industrial pact of the Low case on the developing countries countries themselves. The Low case growth rate is alarming. The ten-year decline in the per capita would barely match the industrial countries' per- incomes of low-income African countries would formance in 1973-79--years of inflation and continue. In the case of the large and relatively mounting unemployment in the industrial coun- closed economies of India and China which dom- tries. With slow growth in the 1980s and 1990s, inate low-income Asia, their high saving rates and unemployment would mount, reinforcing protec- lower reliance on foreign capital would afford them tionist pressures. Restrictions would be directed some protection against the adverse impact of the particularly at developing countries because their global economic deterioration. Yet their per capita relatively labor-intensive exports compete with incomes would still probably not grow by much vulnerable manufacturers in the industrial coun- more than 2.5 to 3.0 percent, substantially slower tries. The negative impact of low growth in the than in the Central case. However, the outlook industrialized countries on trade in general, and presented by the Low case for Bangladesh and on the exports of developing countries in partic- some of the smaller Asian countries would be not ular, would therefore be disproportionately high. much better than for the low-income African With lower export prospects lowering their credit- countries. worthiness, commercial capital flows to develop- The middle-income oil-importing countries, ing countries would also be negatively affected. mostly highly dependent on trade and on commer- The growth of aid would be curtailed, even if it cial capital, would also be badly affected. Their per were to remain a fixed ratio of the industrial coun- capita income growth rate would fall by about one- tries' GDP, as assumed in the Central scenario. In third, to about the same rate as in the industrial the difficult international environment associated countries. With such a growth rate, unemploy- with the Low case, more bilateral aid would tend ment, already a serious problem in most middle- to be distributed following nondevelopmental cri- income developing countries, would become in- teria; this could be particularly harmful to the tractable. It might in turn endanger social stability low-income countries. At the same time, lower and governments' ability to devise and implement demand for oil exports would also reduce the rev- rational economic policies, and hence even to enues of the high-income oil exporters, and prob- maintain the Low case growth rates. ably their aid. Labor remittances are likely to be With the projected slowdown in growth, pres- affected more than proportionately; not only would sures would mount to increase the share of con- the growth in migrants' wages be necessarily less sumption in income, and thus reduce domestic under the Low case, but pressures to reduce their savings. The Low case assumes that these pres- 35 Box 3.1 The implications of a 15 percent across-the-board increase in protection in industrial countries If governments give ground before pro- protection were introduced gradually, the countries by such a development be- tectionist pressures generated by higher GDP of both developing and developed cause they are more open and thus more unemployment, thus eliminating most of countries would be significantly reduced vulnerable to protectionist measures taken the gains achieved in the GAfF rounds by 1995 as follows: by their trading partners. In the large of tariff negotiations, a serious deterio- low-income countries, traditional agri- Reduction in GDP ration in the world trading system would culture, which is less sensitive to exter- result. To illustrate, the implications of Billions of nal disturbances, still accounts for a large an increase in protection (import lic- Percent 1980 dollars share of total output. ences, quotas, voluntary import re- Low-income It is striking that developed countries straints) by an amount equivalent to a countries 0.8 9 would suffer a loss in GDP growth equal rise in tariffs of 15 percentage points can Middle-income to that of the middle-income countries be estimated. This assumption is not ex- oil importers 3.4 70 a loss of their own making, demonstrat- treme: protection was much higher in Industrial ing that measures to protect declining the 1930s. Quantifying the costs of pro- countries 3.3 390 industries backfire by harming other sec- tection is difficult. However, using the tors, reducing efficiency, and probably Brussels world model (see Technical ap- Middle-income oil-importing countries worsening income distribution. pendix) it is estimated that even if such would he hit harder than low-income sures would be resisted. Most important, how- income countries. And, under these much more ever, it has been assumed that the developing favorable circumstances, more countries could rely countries would be able to continue to benefit from exclusively on commercial borrowing, allowing a a relatively open trading system. Otherwise, fall- greater concentration of aid on the poorest. ing efficiency would become increasingly likely for This scenario is simulated in the High case sum- many developing countries. marized in Table 3.1, which assumes that the in- dustrialized countries would return to a growth The possibilities for faster growth rate matching the achievements of the 1950s and 1960s. Aid and workers' remittances would rise in Emerging from the second worst recession of this line with faster growing incomes. Trade would century, with concerted policies to sustain eco- expand, not only in line with income growth, but nomic recovery, limit wage increases to produc- even more rapidly. Under this High case, low- tivity growth, liberalize trade, and adjust to chang- income Asian countries would double their per ing comparative advantage, economic growth in capita incomes in twenty years. The middle- the industrial countries could once again reach 5 income countries could grow even more quickly than percent a year. Developing countries would share in the 1960s. In relative terms, the improvement the benefits. They could expand their GDP by be- for low-income Africa could be greatestfrom tween 6 and 7 percent a year; over the ten-year stagnation under the Central case to marked period to 1995, their GDP would nearly double. growth, which by 1995 would reverse the decline With rapid growth, labor shortages would in of the 1970s. time emerge in the industrial countries, making With regard to energy, the High case assumes them more open to labor-intensive manufactures worldwide progress in energy conservation such imported from the developing countries. The that real oil prices would not rise any faster than growth rate of exports of developing countries could in the Central case. Also, there is sufficient pro- then match, and even exceed, the achievements duction capacity in the oil-exporting countries to of the 1965-73 period. Given such fast growth, meet some increase in demand without acceler- particularly in the manufactured exports of newly ating the rise in oil prices. Oil-importing devel- industrializing countries, trade among developing oping countries could therefore expect to obtain countries would also be stimulated. With higher considerable benefits from higher export earnings export growth, developing countries would be- without having to pay higher oil prices. come creditworthy for larger amounts of com- If prosperity in the developing countries is linked mercial borrowing. Aid flows could more easily to growth in the industrial countries, the reverse be increased, disproportionately benefiting the low- is also true. The severity of the 1980-82 recession 36 was in part due to the absence from the devel- Domestic savings oping countries of the kind of buoyant demand provided during the 1974-75 recession. Without During the past two decades developing countries such demand, the recovery now getting under have had remarkable success in increasing their way will also be slower and more arduous. It is savings. Markedly lower than in industrial coun- therefore greatly to the advantage of industrial tries in 1960, savings rates in most developing countries to stimulate growth in the developing countries are now generally higher. Although the countries. shocks of the 1970s partly reversed earlier trends The greatest immediate dangers are renascent in the industrial countries, they only slowed them protectionism, unduly restrictive policies toward down in the developing countries. The exception commercial bank lending, and parsimonious aid to this generally satisfactory performance has been the consequences of slow growth in the industrial sub-Saharan Africa, where the savings rates of the countries. All three are symptoms of introspection low-income countries have fallen well below those in difficult times. All three would contribute to of twenty years ago. This decline is in part related increasing those difficulties, and not only for the to the region's extreme vulnerability to terms of developing countries. A determined effort to trade shocks, which have raised the amount of resume the liberalization of trade, prudent but domestic production needed to pay for a given dynamic international lending policies, and more quantity of imports, thus leaving less for domestic generous aid need not await the resumption of savings. It is also related to the slow economic fast global economic growth; on the contrary, they growth and high population growth of the region; are necessary to help bring it about. with falling per capita incomes, it would have been extremely difficult to maintain earlier savings rates. Domestic determinants of developing-country In addition, the policies pursued by many African growth countries were in part to blame, not only for the This chapter has so far focused on the impact of slowdown in GDP growth but also for the fall in trends in the industrial countries on the devel- savings. In particular, subsidies on consumer goods oping countries. These external factors are indeed and the losses of state enterprises were a signifi- important in an increasingly interdependent world. cant drain on public savings. However, within the constraints imposed by the In the Central case, an increase in savings rates global environment, it is domestic policies that over the present low level has been projected for hold the key to developing-country performance. the low-income countries of sub-Saharan Africa, For developing countries, GDP growth of only though still not attaining the rate achieved in the 2.5 percent a year in the industrial world would l960s. But for the oil-exporting countries, savings greatly complicate economic management. Many rates are unlikely to be sustained now that the rate of the policy changes needed would be much harder of increase in oil prices has tapered off. to introduce under conditions of slow growth. To redirect investment and production to those activ- Returns on investment ities in which countries have a comparative ad- vantage needs growth. Just as the Central scenario Better use of capital offers the greatest scope for assumes a considerable improvement in the do- raising the growth rates of developing countries. mestic performance of developing countries, so Return on investmentthe additional output per also the Low case depends partly on their per- unit of investmentmeasures the result of the formance. The three growth scenarios in Table 3.1 combined influence of many forces, some external, assume the same policy improvements in devel- some purely related to domestic policies and ac- oping countries. Without those improvements, their tions. Intercountry comparisons show that some growth would be even lower. countries regularly obtained higher returns on Growth depends partly on a country's ability to investment than did others. The Central case pos- generate savings and then on how efficiently it tulates that the rate of return on investment, after invests and manages the new capital. In addition, improving markedly from current levels, will sta- growth is influenced by a country's ability to pro- bilize around the 20 percent level experienced dur- mote exports and save imports. These four deter- ing the 1970s. Policies to improve the return on minants of growthsavings, returns on invest- investment are discussed in Part II of this Report. ment, export promotion, and import restraint While raising efficiency is by no means easy, there are summarized by country group in Table 3.8. are clearly many areas for potential improvement. 37 TABLE 3.8 Past and projected indicators of domestic performance, 1960-95 Country group Indicator 1960-70 1970-80 1985-95 All developing Saving as percentage of GDP 19.6 24.2 24.0 countries Return on investment (percent)' 26.8 20.5 20.0 Import elasticity' 1.4' 1.7 1.3 Manufactures export ratio' 2.0' 4.4 3.0 GDP growth (annual percentage change) 5.7 5.3 5.5 Population growth (annual percentage change) 2.4 2.1 2.0 Low-income Asia Saving as percentage of GDP 20.2 24.6 23.1 Return on investment (percent)' 20.6 18.7 19.8 Import elasticity' -0.2' 1.7 1.4 Manufactures export ratio" 0.9' 2.9 1.6 GDP growth (annual percentage change) 4.7 4.9 4.9 Population growth (annual percentage change) 2.3 1.9 1.7 Low-income Africa Saving as percentage of GDP 10.9 8.8 8.6 Return on investment (percent)' 24.6 10.0 21.2 Import elasticityb 2.1' 1.6 1.8 Manufactures export ratiod 1.0' 4.1 2.8 GDP growth (annual percentage change) 3.4 1.6 3.3 Population growth (annual percentage change) 2.4 2.8 3.1 Middle-income Saving as percentage of GDP 19.6 21.8 24.6 oil importers Return on investment (percent)' 26.9 22.8 22.3 Import elasticity" 1.9' 1.1 1.4 Manufactures export ratiod 2.6 4.9 3.1 GDP growth (annual percentage change) 5.8 5.8 5.7 Population growth (annual percentage change) 2.5 2.3 2.2 Middle-income Saving as percentage of GDP 20.4 29.3 24.6 oil exporters Return on investment (percent)' 34.4 19.5 17.9 Import elasticityb 0.8' 2.2 1.0 Manufactures export ratio" 0.5' 2.0 3.1 GDP growth (annual percentage change) 6.6 5.3 5.6 Population growth (annual percentage change) 2.6 2.7 2.5 Real increase in GOP valued at current prices divided by investment at current prices. Rate of growth of import volume divided by rate of growth of GDP. Refers to 1965-70. Rate of growth of volume of exports of manufactures divided by the rate of growth of world GOP (excluding centrally planned economies). Foreign trade In spite of growing protectionism, developing countries have achieved significant export growth Historically, countries with above-average export (particularly of manufactures) during the 1970s. In growth have enjoyed above-average GDP growth. fact, the elasticity of exports of manufactures of This applies to countries grouped by region and developing countries with respect to world income income level, as well as to the developing world (excluding centrally planned economies) increased as a whole. With slow industrial-country growth steadily from the 1950s to the end of the 1970s. and protectionist barriers, it will be harder for de- The Central scenario assumes that this export elas- veloping countries as a group to raise the rate of ticity will increase by about 30 percent over the growth of their exports. In textiles, with continu- level reached in the early 1980s, but will remain ing strong protectionist measures imposed by the significantly lower than that in the 1970s. With industrial countries, the success of one country in firm policies to promote exports, the elasticity could expanding its exports could well be achieved at be raised further; the High case assumes that such the expense of another. Nonetheless, it is still policies will be pursued. worthwhile for developing countries to strive to In the past most developing countries' imports expand their exports, because that in itself stim- increased somewhat faster than their GDPs. Until ulates a more efficient use of resources and recently they have managed to finance this growth strengthens creditworthiness. with fast-expanding exports and capital inflows. 38 But the current recession has greatly reduced the Even with policy improvements, the outlook for availability of foreign exchange and has limited many developing countries is somber. The Central the inflow of imports. When world growth re- scenariowhich assumes some improvement in sumes, the recent compression of imports will have policieshas per capita GDP in developing coun- to be reversed, and it may therefore be expected tries rising less rapidly during 1980-95 than during that initially the volume of imports of developing the 1970s. And low-income countries in sub- countries will expand faster. However, the Central Saharan Africa manage hardly any increase. Even scenario assumes that over the long run devel- in the High case, per capita income growth matches oping-country imports will grow only a little faster only what was achieved in the 1970s; by 1995 low- than GDP and more slowly than in the past. Such income sub-Saharan Africa still fails to regain its an improvement is compatible with the 1970 per capita income. pursuit of open trading policies that foster Earlier World Development Reports explored the productive efficiency in line with comparative link between growth and poverty alleviation. It advantage. has been estimated that even with an annual GDP growth rate of 5 to 6 percent between 1975 and Population growth 2000, more than 600 million people will remain below the poverty line in developing countries in Continued progress in reducing fertility and mor- the year 2000, unless the pattern of growth is mod- tality is a prerequisite for population growth rates ified to put more emphasis on poverty alleviation. to remain broadly stable up to 1995. Despite the The current prcjections clearly suggest more mod- considerable gains achieved in most Asian and erate growth prospects and thus reinforce the need many other middle-income countries in lowering for policies not only for stimulating growth but fertility, the battle is far from won. If low-income also for curbing population growth and meeting Africa could match the birth rate of low-income basic needs. They also underline the importance Asia (which reflects the remarkable performance of bolstering improved domestic policies with ad- of China and, to a lesser extent, India), its pop- equate inflows of capitalespecially concession- ulation growth rate would decrease by 40 percent. ary aid directed to the low-income countries. In addition to the direct impact on per capita in- come (an eightfold acceleration if total income growth is not affected), there would be an indirect impact: reduced population growth allows re- sources to be invested in improving productivity and welfare, instead of being stretched out to cover more people. Conversely, failure to match lower mortality with lower fertility would reduce the projected gains in per capita incomes. These issues will be explored in depth in World Development Report 1984. Conclusions Steady growth in the industrial world is vital for developing countries. At the same time, domestic policies are critical for their performance. And these are within their control. The scenarios discussed in this chapter convey one clear policy message: while there is some scope for improving resource mobilization, the principal area for improvement is in the efficiency of resource use. One major source of greater efficiency is tradeby better ex- ploiting comparative advantage. To improve eco- nomic performance requires both policy reforms and strengthened institutions for management the subject of Part II of this Report. 39 Part II Management in Development 4 The search for efficiency Part I of this Report has highlighted the economic economic policies, Part II of this Report is chiefly difficulties facing most developing countries, lend- concerned with management for long-term devel- ing urgency to efforts to improve their perform- opment. ance. Part II concentrates on the measures needed Faced with widespread poverty and slow eco- to produce such an improvement. nomic growth, governments are naturally keener Over the past two decades, governments in most than ever to promote development. But their prog- developing countries have played an activist role ress is constrained by weak institutions and man- in development, building infrastructure and often agement. These constraints vary greatly among engaging directly in productive activities. Their countries, and their capacity to deal with them policies have also been critical in determining the reflects differences in population, incomes, natural environment in which the private sector operates. resources, and political systems. In many coun- Much of this activism has produced encouraging tries, however, managerial weaknesses are ex- progress: over twenty years, developing countries plained in part by the shortage of experienced and have on average achieved growth rates that had well-trained people. While this bottleneck will ease not been managed before, either by the develop- as education spending yields dividends, the im- ing countries or by today's developed market mediate need is to use existing resources, includ- economies at a similar stage of their development. ing managerial skills, more effectively and eco- In relation to expectations and potential, however, nomically. progress in many countries has been unsatisfac- Although managerial capacity places an overall tory. limit on a country's development, it is far from To bring performance into line with potential, homogeneous. The skills needed to frame ma- governments must play a central role in ensuring: croeconomic policy differ from those needed to A stable macroeconomic environment, by run a productive enterprise; and large organiza- adopting sustainable monetary, fiscal, and foreign tions place greater demands on management than exchange policies do small ones. Governments tend to be involved A system of incentives that encourages re- in the management of big organizations, such as sources to be allocated efficiently and used opti- running state farms and marketing boards, rather mally than relying on peasant farmers, small traders, A pattern of growth whereby benefits are and individual truckers. And the mistakes that big widely shared. organizations make have more serious conse- Since the world is beset with uncertainty, govern- quences. ments need the flexibility to respond to unforeseen The main criterion for judging economic man- events and to resolve the inevitable conflicts be- agement is "efficiency"a concept that has mean- tween competing interest groups. ing only in the context of an agreed set of objec- After the experience of the past ten years, the tives. This chapter first clarifies the concept, then importance of macroeconomic management needs illustrates the potential long-term gains from in- no underlining. In a hostile world environment of creasing efficiency, and provides an analytical modest growth, high interest rates, and fluctuat- framework for Part II of this Report. ing exchange rates, the macroeconomic policies of developing countries will continue to be critical in The analysis of efficiency ensuring price stability, balance of payments equi- librium, and conditions conducive to growth. While The search for efficiency is not merely a matter of recognizing the importance of shorter-term macro- finding technically optimal solutions; it is also a 41 political process. Governments seeking change have (discussed in Chapters 6 and 7); and operational to start with existing institutions that have their efficiencyto maximize the use of labor and cap- own historical inertia and underlying political in- ital through the sound management of enter- terests. The process of reform therefore involves prises, projects, and programs in both the public negotiation and compromise, accepting "second- and private sectors (discussed in Chapters 8, 9, best solutions" that are politically feasible. This and 10). Report recognizes that individual countries attach These in turn contain both static and dynamic different weights to particular political and eco- dimensions. In static terms, efficiency may be de- nomic objectives, and so draws from the experi- fined as maximizing the present value of output ence of countries with a wide range of political from a given level of inputs. Alternatively, when and economic systems. the goal is to achieve a particular social objective In every country efficiency has two distinct but (such as malaria eradication) or to provide a spe- related aspects that are critical to economic per- cific service (for example, a telephone link), effi- formance: efficient resource allocationthrough ciency may be defined as cost minimization. Either prices, markets, and administrative interventions way, a key factor determining efficiency is the Box 4.1 The concept of efficient pricing An economy is considered production ef- opportunity cost of their production when ically, however, societies are interested ficient if the supply of any good (or serv- the alternative would be to produce in other objectivesa more equitable ice) cannot be increased without reduc- traded goods, or by their scarcity value distribution of income, for exampleas ing the supply of some other good. One in displacing traded goods. well as efficiency. In this event, shadow important way in which economies can An economy is efficient, as opposed to prices are measures of social costs and make goods available is by exporting some just production efficient, if it is impos- benefits that reflect concern with these goods in exchange for others; thus pro- sible to make anyone better off without other objectives. duction efficiency also implies that a making someone else worse off. In ad- The case for removing distortions and country has made best use of its foreign dition to producing efficiently, the final moving market prices closer to efficiency trade possibilities. If a country cannot consumers must have exhausted all pos- prices rests on the argument that prices affect prices in the rest of the world (a sibilities of mutually beneficial exchange. influence production decisions, and the reasonable assumption for most devel- This in turn requires that they all face reform will increase production effi- oping countries), its foreign trade pos- the same market prices, and that these ciency. Since choices between alterna- sibilities are defined by the relative border are equal to efficiency prices. However, tives depend on relative prices, it may not prices of exports and imports. an economy may be efficient and yet pro- be enough to eliminate a few distortions, This definition in turn helps determine duce a distribution of income and wealth since this could move relative market opportunity costs. The opportunity cost of that is deemed unacceptable. The gov- prices even further from relative effi- any good or service is the value of for- ernment may then impose taxes and sub- ciency prices. In some cases, however, gone alternatives. If the alternative to us- sidies or intervene in other ways to im- it may not be desirable to eliminate dis- ing a good were to export it, for example, prove the distribution of income and tortions (such as carefully targeted food the opportunity cost would be measured wealth. Such intervention may make subsidies or indirect taxes), since this will by the border price of the good and the consumer prices deviate significantly from prejudice other social objectives; but in resulting foreign exchange that could have efficiency prices. But by preserving pro- many cases these social objectives are best been used to purchase some other im- duction efficiency, the largest possible served by other instruments or by more port or to replace some other export. The quantity of goods and services will be carefully chosen taxes and subsidies. scarcity value measures what the good is made available for distribution among Thus, it is often possible to confront pro- worth to the economycalculated, for consumers. Hence the concepts of pro- ducers with efficiency prices while keep- example, by the value of the extra ex- duction efficiency and efficiency prices ing indirect taxes and subsidies for dis- ports the good enables to be produced. remain important for producer prices (for tributive purposes. From a policymaker's If the economy is producing efficiently, example, before indirect taxes are added) viewpoint, the appropriate prices are scarcity values must be equal to oppor- even when market prices (consumer those that best achieve these broader so- tunity costs, and their common value is prices) are distorted. cial objectives. Choosing appropriate the efficiency pricewhich, for imports and Shadow prices, also known as accounting prices is therefore equivalent to choosing exports, will then be identical to the bor- prices, are the same as efficiency prices the best set of taxes and subsidies, a choice der price. For nontraded goods, effi- if society is concerned exclusively with central to the design of public policy. ciency prices can be measured by the efficiency in the sense here defined. Typ- 42 pricing of inputs and outputs to reflect relative FIGURE 4.1 scarcities. Prices of goods that deviate significantly Growth, investment, and return on investment, from their scarcity value (or "opportunity cost") 1960-70 and 1970-80 may be regarded as "distorted" (see Box 4.1). deal GDP Investment Return on Efficiency must also be viewed in a dynamic growth rate rate investment (percent)' (percent a year) (percentage of GOP) context. The process of capital accumulation al- 26.8 lows new technology to be incorporated into the 25.8 economy, which implies both discarding obsolete 22.8 plant and retraining staff. Efficiency therefore re- 20.5 quires capital and labor to be priced according to their marginal productivities at international prices. In other words, labor costs per unit of output must be kept internationally competitive and interest 10 rates should reflect the cost of foreign borrowing. If this is done, countries will invest and expand in ways that reflect the relative scarcity of capital 5.1 45.3 and laboravoiding, for example, capital-inten- 3.2 sive production methods if they have abundant 0 1960-70 1970-80 1960-70 1970-80 manpower. Industrial market Developing It is precisely this dynamic element that lends economies countries so much importance to sound macroeconomic Points represent averages for 1960-70 and 1970-80 for the three management. Efficient financial institutions are vi- indicators in industrial and developing countries. tal for mobilizing savings for investment, while a. Average annual growth of real GDP divided by the average investment smoothly operating financial markets ensure that rate at current prices. money goes to investments yielding the highest returns. Yet both these tasks will be undermined if macroeconomic policy attempts to keep interest percent average for industrial market economies rates negative in real terms. in 1980. Although this rise in investment was partly This view of efficiency is consistent with gov- financed by foreign capital, it was chiefly made ernment goals for alleviating poverty and meeting possible by higher domestic savings rates. Despite basic needs. The ability of a government to tackle increased investment, however, the annual growth poverty is much enhanced when economic growth rate of GDP in developing countries has remained is rapid, while many initiatives to boost efficient at about 5 percent, indicating that GDP growth productionsuch as reducing capital subsidies or per unit of investment has declined by nearly a keeping producer prices up to international lev- quarter between the 1960s and the 1970s (see Fig- elsalso directly affect the welfare of the poor by ure 4.1). This decline in the aggregate return on creating jobs and raising farm incomes. There will, investment in the 1970sa rough index of the of course, be occasions when the goals of effi- trend in the total productivity of the economy-- - ciency and distribution conflict and will have to had many causes: the recession in world trade, oil be traded off. There is, however, usually more price shocks, strains in the financial system, lower than one way to achieve distributional objectives. returns on capital locked in aging industry, inef- The effect of different options on both efficiency fective macroeconomic policies that postponed and distribution should be carefully evaluated so rather than promoted adjustments, and more cap- that the desired objectives can be achieved at the ital-intensive investment--all have played a part. lowest possible cost. The declining returns to investment, combined with rising real interest rates, were an important The potential for greater efficiency factor behind increasing debt servicing difficulties in 1980-83. In sixteen countries of twenty-two re- During the past two decades, developing coun- quiring debt rescheduling during 1982-83 (see Box tries have invested heavily to expand their agri- 2.2), the rate of return on investment had declined culture and industry, build their infrastructure, below 20 percent in the late 1970s and early 1980s. and provide essential services. Their investment The decline in the return on investment has been rate rose from about 20 percent of GDP in 1960 to evei more marked in the industrialized countries, about 26 percent in 1980, compared with the 23 and many of the efficiency issues discussed in this 43 Report are relevant in developed as well as de- 80 was approximately 40 percent lower than in veloping countries. 1970-75. This deteriorationwhich was partly due The implications of this lower productivity are to heavy investment in six large sugar complexes, profound, given the conclusion reached in Chap- with production costs that were three times the ter 3 that foreign lending to developing countries world market priceled the government to greatly is likely to slow down in the 1980s. For developing strengthen its project appraisal procedures. In- countries even to maintain the growth rates of the dustrial economies have also made costly mis- 1970s, they will either have to boost their own takeswitness the Anglo-French Concorde, where savingat great sacrifice to consumptionor they the only two airlines that bought the aircraft have will have to maintain the present investment rate difficulty covering even their operating costs, and but make better use of resources. Certainly, a re- none of the development costs (several billion dol- covery in the world economy alone will improve lars) will be recouped. productivity; but with good management the gains can be much greater, particularly in the following Investment delays areas. Since governments are under constant pressure to start new projects, they frequently adopt an in- Macroeconomic policies vestment program that exceeds their financial and In many developing countries, ineffective ex- managerial capacity. They then stretch projects out change rate and monetary and fiscal policies and over longer periods than initially intended, with excessive borrowing during the 1970s resulted in a consequent loss of output. For a sample of coun- inflation and unsustainable balance of payments tries, the World Bank has estimated that, assum- positions. This led unavoidably to significant re- ing an opportunity cost of capital of 10 percent, trenchment, with adverse effects on both the rate the cost of a two-year delay in the implementation of investment and its productivity. Abrupt policy of a projecta common occurrencewould amount changes introduce uncertainty, which dampens to 20 percent of the cost of investment. In practice, overall investment rates, while controls on interest some delays are due to overoptimistic scheduling rates have resulted in savings being channeled to and unforeseeable contingencies and some to jus- less productive uses. tified postponement owing to changed circum- stances. But there is undoubtedly considerable scope for shortening the costly gestation period Distorted incentives for investments through better project planning Several studies have shown that output losses due and execution. Embarking on fewer projects would to inappropriate trade policies alone could have also help. reduced GDP in some developing countries by up to 10 percent. As reported in Chapter 6, Bank Low capacity utilization cross-country analysis for the 1970s confirms the findings of the 1960s that price distortions slowed In industrial market economies, fluctuating de- GDP growth in developing countries. During the mand and technical obsolescence are the main 1970s the growth rate of countries with highly causes of excess capacity. In developing countries, distorted prices was as much as 2 percent less than unreliable infrastructure and market distortions-- - the average for developing countries. especially underpricing of capital and shortages of materials and skilled staffoften figure more prominently. Underused capacity is costly, in terms Low-yielding investments of forgone output and the ripple effect on the rest of the economy. For example, if in 1981 the Indian Losses from the misallocation of resources as a fertilizer industry had operated at 85 percent of consequence of poor investment analysis can also rated capacity instead of 67 percent, India would be enormous. In the mid-1970s a series of unviable have saved some $400 million of foreign exchange investments by Indonesia's national oil company, spent on importing fertilizers. Irrigation also pro- Pertamina, costing over $10 billion, cast a shadow vides a good illustration of the potential for effi- over the country's creditworthiness later in the ciency gains (see Box 4.2), as does transport. The decade. In the Ivory Coast the rate of return on Republic of Korea, for example, increased the ef- 58 billion of public investment undertaken in 1976- ficiency of its rail freight (as measured by the ton- 44 Box 4.2 Irrigation design and management Public and private investments in irri- is lost in distribution. Although losses of distribution system traditionally con- gation in developing countries have in- 25 percent are regarded as acceptable, sisted of unlined canals serving forty- creased dramatically over the past twenty they are often much higher due to man- hectare blocks. Where these have been years, reaching about S15 billion in 1980. agement weaknesses in the operation of replaced by lined tertiary canals serving But the returns are much below their po- the system. For instance in Pakistan 50 eight-hectare blocks, water available at tential: one recent estimate for South and percent of the water distributed over 13 the field has increased by 40 percent, and Southeast Asia suggested that an addi- million hectares is lost. If this ratio could net returns on the investment by some tional 20 million tons of rice, enough to be cut to 30 percent, the volume of water 160 percent. In Madhya Pradesh, com- provide the minimum food requirements saved would equal the capacity of three bining underground water supplies with of 90 million people, could be produced Tarbela dams (equal to a $9 billion in- dams and canals has raised the rate of every year with inexpensive improve- vestment). return on investment from 10 to 29 per- ments in water distribution. Losses can often be reduced by rela- cent. A simple measure of the efficiency of tively cheap improvements in irrigation an irrigation system is how much water design. In Maharashtra, India, the public Box 4.3 The costs of poor road maintenance The worldwide road-building boom of ening, or resealing. And foreign aid donors have sometimes the 1960s and 1970s threatens to become To prevent further deterioration, undermined efficiency by: the road-maintenance crisis of the 1980s maintenance budgets need to be in- Making finance for new equipment and 1990s. Over the past ten years, roads creased by at least 25 percent in three- readily available, but leaving it to the in many developing countries have been quarters of the countries for which recent country to buy spare parts allowed to deteriorate beyond the point studies are available; in more than half, Promoting an uneconomic prolifer- where normal maintenance could be ef- the required increase exceeds 75 percent. ation of different makes and models of fective. Traffic loading has been much But more money is not the only answer. equipment through tied aid or other pro- heavier than intended, and maintenance Maintenance costs could be significantly curement regulations has been widely neglected. Funds bud- reduced by improved efficiency. For ex- Supporting capital projects that di- geted for highways have been mostly ab- ample, use of plant and equipment is vert the country's own resources from sorbed in expanding rather than main- often extremely low, sometimes only a more urgent maintenance wo"k. taining the network. quarter or a third of the rates achieved When road authorities are not able to In several West African countries roads by the best maintenance organizations. afford maintenance work, the costs have had to be rebuilt at costs 20 to 40 Of a sample of seventeen countries, ten passed on to road users are larger than percent higher than necessary had they had utilization rates of 35 percent or less. the "savings" in public expenditure. Over been properly maintained earlier. For Only three countriesthe Dominican the life of a road, the total operating costs tarred roads, rehabilitation or recon- Republic, Malawi, and Nigerhad rates of vehicles are typically four to ten times struction costs $125,000 to $200,000 per of 50 percent or more. In 1981 Malawi the costs of road construction and main- kilometer, four to eight times what it was the only country to reach a 75 per- tenance. Since operating costs may easily would have cost had roads been main- cent utilization rate, a reasonable target double on poorly maintained roads, the tained and strengthened as weaknesses for all countries. economic loss is considerable. Moreover, arose. In a recent survey of twelve de- The lack of spare parts and fuel is often in most countries the extra costs chiefly veloping countries, more than 25 percent to blame for poor plant utilization. In involve spending foreign exchange on of the tarred road network in eight of addition, maintenance costs are fre- spare parts, fuel, and replacing vehicles. them required rehabilitation, strength- quently inflated by serious overstaffing. nage carried per wagon per kilometer per day) by and 90 percent in Asia, but only 30 to 70 percent almost 60 percent between 1970 and 1980, and in Latin America and Africa. Mexico managed a 47 percent improvement. Sav- ings affect capital as well as running costs: a 2,000- Poor maintenance kilometer railway in Africa with an operational fleet of 90 locomotives would need to invest $35 Because of inadequate maintenance budgets, pub- million less if it could manage a 90 percent avail- lic sector assets are often run down much faster ability rate of locomotives instead of 60 percent. than they would be if routine maintenance were Actual availability rates vary widelybetween 75 correctly carried out (see Box 4.3). For example, 45 in Brazil it is estimated that a significant propor- administrative burden on the public sector. When tion of the federal highway network built in the governments have tried to control too much eco- past ten years already needs major rehabilitation, nomic activity, efficiency has been impairedusu- while in Nigeria most of the roads built in the ally because key prices (such as exchange rates, 1970s had to be rebuilt three to five years later. interest rates, and energy prices) have been dis- The poor state of the US interstate highway system torted. Chapter 6 details the potential gains to be is partly attributable to underfunding of mainte- derived from reducing price distortions. nance work. The virtues of microeconomic efficiency can be magnified or undermined by the choice of macro- The framework for improving efficiency economic policies. Successful macromanagement requires a strong capacity for policy analysis, backed Although both policy and institutional aspects of by mechanisms to translate policies into actions efficiency are interwoven, for the purposes of and a reliable monitoring and evaluation system. analysis it is useful to distinguish between them. These important linkages are frequently lacking in In both, however, the state plays a pivotal role: it developing countriesissues which are taken up is government that determines the policy environ- in Chapter. 7. ment in which enterprises and farmers must op- The state's role as a producer is considered in erate; government that provides the social and Chapters 8 and 9, the former focusing on state- physical infrastructure that underpins productive owned enterprises and the latter on the design activities; and government that frequently contrib- and execution of government projects and pro- utes to production through state-owned enter- grams. These chapters pinpoint the important prises. causes of inefficiency that project and enterprise In many countries the expansion of the public managers cannot themselves resolve, even within sector has stretched its managerial capacity to the a framework of sound economic and budgetary point where serious inefficiencies result. Chapter policies. Country-wide skill shortages, poor per- 5 examines the role of the state, indicating a need sonnel management, and weak administrative to reassess priorities, prune what has become un- structures and procedures all constrain the initi- manageable, and strengthen the effectiveness of atives that can be taken by the individual agency the state's core responsibilities. Less reliance on or enterprise. Chapters 10 and 11 consider these controls and more on incentives to achieve social systemic issues associated with managing public and economic objectives would also reduce the bureaucracies. 46 5 The role of the state Some economic activities are universally recog- and fiscal difficulties arose. Many coffee- and cop- nized as the sole responsibility of the state; others, per-exporting countries were caught in this way it is widely agreed, are best left to private initia- during the 1970s; more recently, some oil export- tive. Between these extremes, governments have ers have also been affected. A few, such as Papua tended to expand their sphere of activity for a New Guinea, have prudently set aside windfall variety of reasons. They face demands from many gains in a special development or revenue equal- competing constituencies. They often come under ization fund. strong popular pressure to intervene more, not only to protect the public but also to regulate eco- Components nomic activities and actively to promote economic growth and social welfare. In response, the gov- Since the public sector is such a hybrid of central ernment may engage in production directly or may departments, state and local authorities, semi-au- act indirectly through controls. This chapter de- tonomous agencies, and state-owned enterprises scribes how the public sector has grown world- (SOEs), it is hard to compare the composition of wide, then discusses the division of labor between its spending. Some activities performed by central public and private sectors, and concludes with a government in one country may, in another, be review of how state intervention may be designed the responsibility of SOEs or local governments. to promote efficiency. Comparisons are further complicated by the va- riety of intrastate transactions (subsidies, trans- Public spending fers, and loans). Moreover, consolidated data are rarely available for the government as a whole. For as long as records have been kept, the ratio Although the level of public activity can be mea- of public revenue and expenditure to GDP has sured by its contribution to value added or by its tended to grow in most countries (see Figure 5.1). current spending plus investment, neither mea- In industrial countries, public spending has risen sure captures the state's other rolesas a redis- from less than 10 percent of GDP in 1900 to about 40 percent in 1980; in Sweden, the ratio has reached 65 percent. However, public administration alone FIGURE 5.1 is generally less than one-tenth of total public Central government revenue, 1960-80 expenditure. Percentage of GDP 35 Industrial market Growth economies 30 The expansion of public spending has not been a Middle-income 25 smooth process. In many instances, its ratio to economies GDP has remained stable for long periods, only 20 to jump during a war or when some main source Low-income of new revenue was found. Thereafter it has sel- 15 economies dom declined significantly. The dangers of this ratchet effect can be seen in countries that set their 10 spending on the basis of revenue from export taxes 1960 65 70 75 80 at times of exceptionally high prices; when prices Sources IMF, Gocerninent Finance Statistics Yearbook, 1982, and International Financial Statistics, 1982. collapsed, expenditure could not easily be reduced 47 FIGURE 5.2 1980 ranged from 10 percent of GDP for Japan to Government expenditure by category, 1980 29 percent for Sweden. For some developing coun- tries, substantial mineral revenues have enabled the share to rise even higher: 39 percent in Maur- itania, for example. Growth in the share of public services in GDP, too, has varied widely over the past two decadeshardly any increase in the United Low-income States, but a doubling in some countries (Den- economies mark, Mexico, and Togo). Subsidies and transfers. These items include wel- Middle-income fare payments to individuals and subsidies to oil importers parastatals. In developed countries a large and growing part of this spending has gone for social security, medical care, and unemployment com- Middle-income pensation. In developing countries welfare pay- oil exporters ments are much smaller, and the main items are subsidies. High-income Investment. Investment takes two forms: (a) cap- oil exporters II ital spending by the government itself (on roads, schools, and hospitals, for example), which av- Industrial erages about a quarter of total capital formation in market economies developing countries, but in 1977 went as high as 107 69 percent in the Sudan and 77 percent in Ghana; and (b) investment by SOEs. The latter also con- The bars represent total central government expenditures; tribute to GDP through their current spending; colored divisions within the bars show percentage of spend- ing by category. their role is discussed in more detail below. Source: IMF, Government Finance Stat,stics Yearbook, 1982. Interest payments. In many developing countries interest payments are growing rapidly, reflecting higher interest rates and increasing indebtedness. Net lending. A relatively minor item, net lending tributor of income through subsidies and transfer is normally associated with the financing of in- payments and as a borrower and lender. vestment by SOEs. Bearing these difficulties in mind, several dif- By summing these components, one finds that ferent categories of public spending need to be the public sector in most developing countries ac- distinguished: services, subsidies and transfers, counts for 15 to 25 percent of value added in GDP investment, interest payments, and net lending. and some 50 to 60 percent of total investment. For Figure 5.2 shows how these vary in importance in industrial countries as a group, the public sector's different country groups. Data for selected coun- contribution to value added is a little higher but tries are set out in Figure 5.3, which shows that its share in investment is lower. no simple correlation exists between the com- position of government expenditure and per capita The state as producer income. Public services. Also known as "public consump- In most developing countries the bulk of produc- tion," public services comprise all current govern- tion is in private hands. Agriculture, commerce, ment spending on wages and salaries and goods personal services, and small-scale manufacturing and services (including military outlays). Expendi- ture on wages and salaries to provide public serv- TABLE 5.1 ices is defined as central and local governments' Cost of public services as a share of GDP contribution to GDP. For industrial market econo- Countri group 1960 1980 mies, the share of public services in GDP has grown only slowly in recent years. The comparable shares Low-income economies 8 11 for low- and middle-income countries are lower, Middle-income economies 11 14 but have grown faster (see Table 5.1). Among in- Industrial market economies 15 17 dustrial countries, spending on public services in Note: Shares are GDP weighted. 48 FIGURE 5.3 Central government expenditure by sector Percentage of GOP 0 10 20 30 40 50 Burma (5170) I IL RDefense Malawi Administrative ($230) J services Kenya ($420) Education Liberia Health, social security, ($530) and welfare Egypt Economic services (0580) Thailand Other ($670) I I Paraguay ($1,300) Tunisia LI ($1,310) Costa Rica ($1,730) Italy ($6,480) France ($11,730) Belgium (512,180) Countries are listed in ascending order of 1980 GNP per capita. fore an approximate indication of total government expenditure In all cases, more than 90 percent of total government revenue as a percentage of GDP. accrues to central government. The length of the bars is there- Sources: IMF, Government Finance Statistics Yearbook, 1982, and International Financial Statistics, 1982; World Development Report, 1981 and 1982. are typically dominated by the informal private available, SOEs account for at least a quarter of sector, while large-scale manufacturing, mining, total capital formation, and in a few cases signif- and finance are usually the preserve of SOEs, icantly more (see Table 5.2). Even these figures transnationals, and a few large, domestically owned understate the weight of SOEs in modern sectors enterprises. Electricity, gas, and water are pro- of the economy. SOEs may be responsible for pro- vided mainly by state-owned utilities, and SOEs ducing and marketing major exports of foodstuffs. also play a significant role in transport and com- munications. In contrast, the pattern of ownership TABLE 5.2 varies considerably in mining and manufacturing Investment by SOEs as a percentage of gross (see Figures 5.4 and 5.5). fixed capital formation in selected countries In industrial market economies the contribution of SOEs to GDP averaged about 10 percent in 1980, Country Years Percent up from 9 percent in 1970. For developing coun- Algeria 1978-81 68 tries for which data are available, the average has Burma 1978-80 61 risen from 7 percent at the beginning of the 1970s Zambia 1979-80 61 to about 10 percent by the end of the decade. Most Pakistan 1978-81 45 countries are grouped in the 7-15 percent range, Ivory Coast 1979 40 but there are variations from as low as 2 to 3 Ethiopia 1978-80 37 Venezuela 1978-80 36 percent in the Philippines and Nepal to as high India 1978 33 as 38 percent in Ghana and Zambia and 64 percent Bangladesh 1974 31 in Hungary, excluding cooperatives which pro- Brazil 1980 23 duce another 17 percent (see Figure 5.6). SOEs Korea, Rep. of 1978-80 23 also contribute substantially to investment; in most Peru 1978-79 15 of the developing countries for which data are Source: Peter Short (1983). 49 FIGURE 5.4 They may dominate domestic credit markets, par- State-owned enterprises' share of GDP by sector ticularly in small economies, because of their bor- Share of sectoral rowing privileges; in the late 1970s, SOEs were value added responsible for 40 percent or more of domestic (percent) credit outstanding in Benin, Guinea, Mali, Sene- gal, and Bangladesh. The size of the SOE sector needs to be consid- ered alongside the state's role in providing basic services. Many developing countries are plagued by frequent power cuts, overcrowded ports, de- 0 0 teriorating roads, water shortages, unreliable tele- U phone service, and poor schools and health facil- Austria ities. The task of improving such services is (1970-75) hampered if the state is also involved in less es- France sential activities. This argues for tailoring a gov- (1981) Italy ernment's responsibilities to match its financial and (1975)' managerial capacity. United Kingdom Governments cite a wide variety of reasons for (1975) Congo creating SOEs. Whereas some have an ideological (1980)° preference for public control, others have traveled Ivory Coast the same route for more pragmatic reasons. They (1979) Kenya may have wanted to wrest control of key enter- (1980) prises from foreign owners (Egypt in 1956 and Senegal (1980) Madagascar in 1974) or from minority ethnic groups Sierra Leone (Uganda in the 1970s); in other instances, enter- (1979) Tanzania prises were inherited by the state after indepen- (1980-81) dence (Bangladesh in 1972) or a revolution (Por- Bangladesh (1980) tugal in 1974), or as a result of private sector Burma bankruptcies. Governments have used nationali- (1980) zation to capture the rents from the exploitation India of minerals and, where national security is in- (1978) Korea, Rep. of volved (as in arms manufacture), to exercise direct (1974-77) military control. In other instances, governments Nepal (1978- 79) have decided to take the lead in starting a major Pakistan new industry in the absence of private investors, (1980) or have rescued a bankrupt private firm. Sri Lanka (1974) The key factor determining the efficiency of an Greece enterprise is not whether it is publicly or privately (1979) Portugal owned, but how it is managed. In theory it is (1976) possible to create the kind of incentives that will Tunisia (1976) maximize efficiency under any type of ownership. Argentina But there is a great difference between what is (1980) theoretically feasible and what typically happens. Mexico As a commercial entity, an SOE must sell in the (1980) Nicaragua marketplace. As a public organization, it is given (1980) other objectives and is exposed to pressure from Uruguay (1979) politically powerful sectional interests. SOEs are often operated as public bureaucracies, with more The blocks indicate the range of sectoral value added attrib- attention to procedures than to results; and ready uted to SOEs. The color and height of the blocks indicate access to subsidies can erode the incentive for percentage shares. Developed countries are shown first, fol- managers to minimize costs. lowed by developing countries grouped by region. In some cases, SOEs are not necessarily the only Enterprises with more than twenty employees. Gross output. or the best vehicle for achieving the goals of gov- Sources: UNIDO; World Bank; Peter Short (1983). ernment. Other alternatives have sometimes proved 50 more efficient. On occasion, public monopolies have state marketing boards; measures to stimulate the been replaced by competing private firms (see Box capital market can promote industrialization with- 5.1), and in other instances governments have ex- out the state being directly involved. And govern- ercised control indirectly by taxing and subsidizing ments have used management contracts to tap pri- private companies or by controlling their prices. vate managerial and technical skills to provide better Public stabilization funds may be an alternative to services (see Box 5.2). Though private management has much to con- tribute, it would be misleading to portray it as FIGURE 5.5 universally efficient. In poor countries, managerial State-owned enterprises' share of value added capacity is weak in both the public and private in manufacturing sectors. However, the greater potential for com- Percent petition and the ever-present possibility of bank- 0 20 40 60 80 100 ruptcy exercises a discipline over private busi- Greece (1979) nesses that is lacking in the public sector. When services can be provided efficiently by small busi- Argentina (1975) nesses, such as individual truckers, reliance on the Portugal (1976) private sector economizes on management. Rec- ognizing that, some governments have decided to Romania (1978) reduce the size of the public sector, while others Mexico (1975) are actively considering doing so. This choice has nothing to do with political ideology: Hungary Hungary (1978) legislated in 1982 to allow the formation of private Panama (1977) companies employing up to 150 people. In Bel- Korea, Rep. of (1977) grade street cleaning is contracted to a private company, while in New York the same task is Turkey (1980) undertaken directly by the city government. Syria (1977) Tunisia (1978-81) FIGURE 5.6 Ivory Coast (1979)' Nonfinancial state-owned enterprises' share of GDP Nicaragua (1980) GNP per capita (1980 dollars) Thailand (1979) Germany, Fed. Rep. 10,000 France. Egypt (1979) Australia Austria Italy United Kingdom Bolivia (1973-75) Spain Venezuela Senegal (1974) F-i Argentina s Portugal Pakistan (1975) Ghile Korea, Rep. of Sierra Leone (1979) Tunisia 1,000 Paraguay .Ivory Coast Tanzania (1974-77) . Philippines Liberia Bolivia Zambia S India (1978) Senegal Ghana S Kenya. Togo Burma (1980) Pakistan. Benin Tanzania S Guinea India Ethiopia (1979-80) Mali Nepal Bangladesh Bangladesh (1978) 100 0 10 20 30 40 The twenty-four developing countries shown above are listed Percentage of GDP at faclor cost in descending order of 1980 GNP per capita. The length of the bars indicates the percentage of the countries' manufac- This figure shows that, for many countries with different turing value added attributed to nonfinancial SOEs. levels of GNP per capita, SOEs' share of GDP is close to a. Includes mining. 10 percent. Sources; UNIDO; World Bank; Peter Short (1983). Sources; UNIDO; World Bank; Peter Short (1983). 51 Box 5.1 Bus services: the comparative advantage of private operators In many cities bus services are domi- In Calcutta the State Transport Cor- buses normally charge twice as much as nated by large, publicly owned or highly poration (CSTC) was given a monopoly regular buses, yet account for more than regulated companies operating full-size in the early 1960s. In response to public 90 percent of all trips. The passengers buses (forty to sixty seats). Most require demand, private buses were permitted clearly prefer the convenience of the government subsidies to cover their def- in 1966. The private buses charged the minibuses. The main bus company loses icits. The experience of cities that have same fares and earned a profit, while money; the minibuses make modest allowed competition shows that smaller, CSTC lost money. Today, private buses profits. private companies running smaller buses operating without subsidies account for Some of the doubts about private bus (twenty-five Seats or fewer) offer more two-thirds of all bus trips. On similar operators are not borne Out in practice. frequent and convenient service and are routes at the same fares, CSTC still re- For example, city authorities may fear profitable. quires subsidies of $1 million a month. that bus companies pursuing profits Public transport in Buenos Aires, for The success of the private companies has would not serve poorer communities or example, is provided by about fifty pri- been attributed to quicker repairs (only work off-peak hours. Yet in such cities vate companies operating 23-25 seaters. half of CSTC's buses are running at any as Istanbul, Calcutta, Bangkok, Hong The government sets their routes, but one time), better fare collection (CSTC Kong, and Nairobi, minibuses are the most have to compete on each route. As loses an estimated 25 percent of its fares only transport serving many low-income a result, the buses are well maintained through evasion), and higher labor pro- communities, especially illegal squatter and run frequently; 94 percent of the ductivity (CSTC employed thirty staff per areas or centers with narrow streets. Pri- routes enjoy service for eighteen hours bus in 1980, one of the highest staffing vate bus companies are also criticized for or more a day. An earlier experiment levels in the world). keeping down the incomes of their driv- with full-size buses run by a large (ini- Chiengmai, a city of about 100,000 ers. But the limited empirical evidence tially private, later public) company failed: people in northern Thailand, allows vir- shows that drivers in Istanbul and Cal- the company's service deteriorated rap- tually free competition between large cutta earn more than the average house- idly and by 1959 its annual losses totaled buses following fixed routes and mini- hold income. about $44 million; in 1962 it was dis- buses which adapt their routes according solved. to the demands of the passengers. Mini- The state as regulator ments will always have legitimate noneconomic objectives that can be pursued only by interven- Economic output will be maximized only when tion. The challenge for every government, what- resources are allocated by a mechanism that takes ever its political complexion, is to intervene in full account of their relative scarcity and costs. At ways that minimize economic costs to achieve de- one theoretical extreme lies centralized planning, sired goals. Designing mechanisms that alleviate where allocations are all determined administra- market failures without creating "bureaucratic fail- tively; at the other, an unregulated market system. ures" has been a difficult task. All too often the In reality, all countries use a combination of mar- attempted cure has been worse than the disease: kets and government intervention. This reflects Import restrictions have led to high-cost do- the experience that no planning organization is mestic industry that penalizes consumers. They capable of calculating relative scarcities for all goods enable those lucky enough to obtain an import and services, while entirely free markets can have license to reap windfall gains from the scarcities major failings. that are created. One estimate for Turkey in 1968 Markets may not perform perfectly because of suggests that rents associated with import restric- insufficient information or because they do not tions alone amounted to about 15 percent of GNP; take adequate account of indirect losses and ben- for India in 1964, the estimated loss of welfare was efits (the so-called externalities such as pollution put at 7 percent of GNP. or worker training). Nor can free markets handle Credit allocation and subsidized interest rates public goods (such as national defense), where the have resulted in a bias toward capital-intensive cost of supply is independent of the number of industry. beneficiaries, or natural monopolies. Finally, mar- Minimum wage laws have reduced the de- kets do not act to correct inequalities in income mand for labor. and wealth. Some market failures are so evident Regulations have created large black markets. that they cannot be ignored; in addition, govern- Some are associated with the vast traffic in drugs, 52 but in other cases clandestine activities are linked market mechanisms have been effective without to crops that governments have overtaxed or Un- changes in ownership. China, for example, has derpriced. Coffee and cocoa in West Africa are reformed its commune system to allocate land to examples of how black markets can undermine individual farmers (see Box 5.3). It has also intro- controls, at great cost in lost revenues and often duced a pricing system for medical services that in output as well. allows patients to choose. Prices set low to benefit consumersespe- The difficulty lies in ensuring that prices reflect cially for foodhave frequently discouraged pro- costs. In any economy a vast amount of rapidly ducers, creating scarcities and greater dependence changing information on the supply and demand on imports. for goods and services must be handled promptly To overcome these weaknesses, almost all the and accurately. Competitive markets permit the economic reforms attempted by market and cen- necessary flexibility and responsiveness and, be- trally planned economies have placed greater re- cause they decentralize the task of handling in- liance on prices to decentralize decisionmaking. formation, also economize on scarce administra- Where administrative skills are generally at a pre- tive resources. mium, the theoretically optimal solution to a pub- Changes in government policy can lead to dra- lic management problemsuch as a value added matic improvements in enterprise efficiency (see tax to fund government operations without intro- Box 5.4). In addition to ensuring that firms operate ducing fiscal distortionsmay prove impractical, within a pricing framework that reflects scarcities, and a second-best solution must be sought. The governments can help to improve the efficiency of option of using price incentives in place of ad- enterprises in several ways. ministrative solutions always merits serious con- sideration. Not only do price incentives lighten Fostering corn petition the administrative burden but they also reduce costly distortions. The use of market mechanisms Japan has demonstrated the importance of com- does not require or assume private ownership. petition to promote efficiency. The Japanese mar- Both in socialist countries and within the public ket was large enough to provide healthy compe- sector in "mixed" economies, reforms based on tition even in industries producing for the domestic Box 5.2 Management contracts for water supply in the Ivory Coast The water and sewerage service in the fore makes a reasonable profit, whereas fully, the Ivory Coast can finance its Ivory Coast is provided on a manage- other (usually public) water supply com- high standard of service. Water rates are ment contract by a private company, So- panies in West Africa mostly operate at among the highest in Africa, which means ciete de Distribution d'Eau de Ia Cote a loss. SODECI's fee is only part of the that consumers, rather than taxpayers, d'lvoire (SODECI). It was started by a water tariff, which is set to cover not pay for the service they receive. Rates French water supply company; today 52 only operation and maintenance costs but for smaller users are low, so the poor percent of its shareholders are Ivorians. also debt service. can afford the service. Although the company still depends Despite rapid expansion, water supply During periodic traffic reviews, the partly on expatriates, the general man- in the Ivory Coast offers one of the high- government can carefully scrutinize ager and most of the other managers are est standards in West Africa. The sys- SODECI's costs; between reviews, Ivorians. tems are well designed, equipped, main- SODECI has a strong incentive to keep A unit in the Ministry of Public Works tained, and operated. Water quality and down its costs. is responsible for planning and building pressure are uniformally good. Con- As a private company, SODECI is all large new investments in water. This sumption is metered and water losses free (within the contracted limits) to hire, unit is also responsible for supervising are low. Several factors contribute to these fire, and compensate its staff. This free- SODECI. Under its contracts, SODECI is good results: dom, plus a strong emphasis on training paid a fee related to the volume of water The institutional separation of in- (SODECI is the only water supply com- sold. The fee is calculated on the basis vestments from operations makes it eas- pany in West Africa with its own training of agreed standards for staff, equipment, ier to evaluate SODECI's performance and center), enables the company to attract, energy, and other inputs, plus a margin assures government control over the ex- train, and keep qualified people. based on agreed overheads and profits, pansion of the system. indexed against inflation. SODECI there- By setting water tariffs to reflect costs 53 Box 5.3 The search for efficiency in China: the rural production responsibility system Since 1979 China has embarked on a far- and implements are assigned to individ- lower prices, thereby levying a form of reaching program of economic reform to ual households for several years (usually taxation. Beyond these quotas, however, increase efficiency within a system of five). Households may farm the land as farmers can sell in markets governed public and collective ownership and cen- they wish, but must undertake to pro- purely by supply and demand. As an tral planning. The basic components of vide an agreed amount of their output incentive, the government has recently this program are: at fixed prices to the government and to reduced the size of the fixed quota. The Greater decentralization of produc- their village production team. Beyond government is also encouraging the es- tion and investment decisions to enter- these obligations, which account on av- tablishment of collective and private prises and farms erage for one-third of a household's total commercial ventures to market con- Stronger incentives, with more di- production, farmers can keep whatever sumer goods and agricultural inputs in rect links between material rewards and they produce. rural areas. And it is providing credit for the work of households and individuals The method of allocating land varies private and collective activities in raising Greater use of market mechanisms in different parts of the country. In most livestock and for handicrafts, for in allocating resources. areas allocation depends on household example. Although the reforms extend to all as- size or the number of laborers in a house- Since these reforms are at an early pects of China's economy, the most hold. In some places, however, those stage, many questions remain. In partic- striking changes so far have been in the households that agree to deliver most to ular, it is unclear whether the new sys- rural areas. Until recently, farmers had the village get the largest farms. Where tem can retain the advantages of the old little autonomy: they were told what to the main activities are growing vegeta- system in financing social services for the growhow much, where, and with what bles or raising livestock, instead of as- poor and in organizing large-scale in- inputs. The bulk of their output had to signing land to households, production vestment. Nonetheless, the reforms have be delivered to the government or their contracts are negotiated between village already produced impressive results. collective, and their incomes were only leaders and groups of households or During 1978-82, gross agricultural out- partly determined by the amount and workers to deliver a fixed amount of out- put rose at 7 percent a year, more than quality of their crops. put. The groups receive an agreed pay- double the average rate in the preceding While still retaining collective owner- ment when they deliver, with bonuses twenty years. Because of higher pro- ship of land and most agricultural equip- for surpluses and penalties for shortfalls. curement prices, farmers' real incomes ment, the government has introduced Crops subject to compulsory delivery (which barely increased in 1957-77) have significant changes in the organization have been reduced in number and lim- risen even fasterat about 10 percent a of production and marketing and in the ited mainly to staples such as grains and year during 1978-82. The quantity, qual- distribution of income. Under the new cotton. For these crops, a multi-tier price ity, and variety of agricultural produce "production responsibility system," system has been introduced. Within fixed available in urban areas have also im- farmland and sometimes draft animals quotas, the government buys crops at proved substantially. market and protected from international compe- that exporting also stimulates productivity gains, tition. The gradual liberalization of imports ac- as manufacturers strive to penetrate competitive cording to a fixed timetable was an added pressure markets. A case study of a successful public com- for efficiency (discussed in Box 6.3 in the next pany in India, Hindustan Machine Tools, suggests chapter). Brazil is another example of a country that even modest export sales can have this effect. where, despite import protection, domestic com- petition has helped increase efficiency. In smaller countries, however, attempts to pro- Reducing uncertainty mote internal competition by restricting the size of companies have usually resulted in uneconom- The level of business uncertainty in developing ically small producers. A better approach is to re- countries is often much higher than in developed duce tariffs and achieve the right mix of incentives economies. Uncertainty encourages companies to between exporting and import-competing indus- build up inventories and cash balances, while dis- tries. The partial liberalization of imports in the couraging innovation and investment. For exam- Republic of Korea and Brazil during the 1960s in- ple, a policy of short leases (no more than five creased the competitive pressure on industry. The years) in the Turkish marble industry fostered experience of several East Asian countries shows mining methods that accelerated the destruction 54 of the ore body and discouraged investments that ized lists. In Tanzania, applications for import would have added value to the rock. licenses must be submitted three months in While a certain amount of uncertainty is una- advance for six months' worth of imports; then voidable, governments can reduce it by providing applicants are typically granted only a fraction of information on their own intentions and the econ- their requests. In 1980 an Indonesian cement man- omy in general, by making regulations less arbi- ufacturer and its distributors were found to need trary, and by providing guarantees and insurance. twenty-four different licenses (health, environ- Consultation between business and government mental, transport, and so on) to operate, while an can be encouraged by creating a forum for public importer had to produce between 25 and 100 pages and private participants to meet and air their views. of documentation to obtain one piece of equip- A good example comes from Japan, which estab- ment. A study of industrial licensing in India in lished several liaison agencies in the Ministry of 1973 found the process took two to three years International Trade and Industry (the Commerce and sometimes only the first phase of a project and Industry Deliberation Council in 1927, the In- would be approved; subsequent reforms have dustrial Rationalization Council in 1949, and the helped to alleviate this bottleneck. Industrial Structure Council in 1961). These bodies allowed industrial leaders, academic specialists, and Simplifying procedures officials to discuss and modify government policy. The Republic of Korea also brings government and Several countries are trying to speed up govern- business together through monthly meetings, ment procedures. Brazil, for example, created a chaired by the country's president, which focus Ministry of Debureaucratization to cut down on on the export targets set by firms. Participation in regulations and licensing. Since 1979 Brazil has this open forum provides an incentive for both eliminated some of the millions of documents pre- sides to do well. Mauritius has a national economic viously required from private firmssaving them, council to bring together government, labor, and to date, an estimated $1 billion. In the Philippines, business representatives. the approval time for export incentives was short- Government controls can also breed uncer- ened from ninety to sixty days in 1979; exporters tainty. This is particularly the case when licenses were granted advance tax credits or duty rebates for investment and imports are issued on an ad on imported inputs only seven days after export- hoc basis, and when there is a danger of delays ing the finished product. In the Republic of Korea or changes in procedures. Some countries (such export and import procedures are being comput- as India and Turkey) have frequently changed the erized. quantities of imports permitted and have shifted "One-stop" agencies help to centralize and sim- items back and forth between quota and liberal- plify industry's contacts with government. Indo- Box 5.4 Reform of the Turkish fertilizer industry In 1980 the Turkish government initiated managers because of wage controls. The agerial systems in key state enterprises a program to improve the performance state-owned firms also suffered from in- are being revamped and staff training of state-owned and private fertilizer plants adequate organization and lack of man- has been expanded. A major investment in Turkey, after a detailed analysis of the agement autonomy. program has begun to rationalize eight industry had indicated serious shortcom- The government's reforms have ad- plants by removing technical bottlenecks ings in eight out of seventeen plants. The dressed these failings. As a result of rais- and improving their energy efficiency. industry lacked foreign exchange to im- ing fertilizer producer prices close to in- While it will take several years to correct port raw materials and local credit to fi- ternational prices, the financial viability all the industry's deficiencies, progress nance working capital. Most older plants of most companies has been restored and has already been dramatic. Capacity uti- were profligate consumers of energy, they have started to expand output and lization increased from a low of 41 per- while others used expensive feedstocks. invest in improvements. This has been cent in 1979 to 67 percent in 1981 and is Most plants suffered from a pricing pol- supported by giving the firms better ac- expected to climb further by 1986 at the icy that caused even the most efficient cess to working capital and foreign ex- end of the rationalization program. to lose money heavily. Public sector plants change for imports of raw materials. lacked skilled workers and competent Moreover, the organizational and man- 55 nesia converted its industrial coordination board signs, quality control, and technical services to into a one-stop agency in 1979. Businessmen can their contractors. In some countries, such as Sri now get licenses that previously involved several Lanka and Bangladesh, governments have pro- different ministries, although bureaucratic delays moted special agencies to inform large firms of the are still a problem. Turkey has centralized export capabilities of smaller companies and to assist sub- promotion incentives in the Office of Incentives contractors in meeting quality control and delivery and Implementation. The Singapore Economic De- standards. Removing cascading sales taxeswhich velopment Board acts as the official liaison with tax transactions between firms but not within a foreign investors and assigns people specially to single firmcan also encourage subcontracting. help cut through red tape. Conclusions Encouraging technological development The role of the state changes as the economy does. Promoting technology in developing countries In least developed countries, the indigeneous pri- generally requires removing barriers to innovation vate sector consists largely of subsistence farmers and increasing access to information. A study of and small'family traders, while the modern sector sub-Saharan Africa found that low crop prices dis- is dominated by expatriate or minority-owned firms couraged the transfer of agricultural innovation. concentrated in a few export crops or mining. Under High taxes, licensing procedures, and measures such circumstances, governments generally feel that that reduce competition can have the same effect. only they have the resources and the purpose to The most important source of new technology promote development. In more advanced econo- for developing countries is foreign firms. Since mies, with the potential for greater private sector their presence can raise delicate political issues, activity, the state may play more of a regulatory some countries have tried to emulate the Japanese role, concentrating on rectifying market failures. in separating foreign investment from the import This chapter has suggested that government in- of technology. With increasing competition to at- terventions can result in large losses of efficiency tract foreign investment, however, few countries and should therefore be selective. In the face of can close their doors to the companies and import compelling political and social pressures, govern- only their technology. Other attempts to restrict ments will always be tempted to do more than transnationalsby requiring them to purchase lo- can be accomplished efficiently. Yet today's wide- cal inputs or work with domestic partners, for spread reexamination of the role of the state is examplecan discourage them completely from evidence of a new realism. In the search for greater locating in the market. cost-effectiveness in the provision of services, gov- One way to increase access to foreign technol- ernments are exploring ways of tapping private ogy is through exporting. A study of industry in initiative and simulating competitive conditions. the Republic of Korea found that it enjoyed vir- The most common approach is to use private con- tually free access to technological and managerial tractors in a variety of fields, from road mainte- information through foreign buyers, who were the nance to garbage collection. This serves to mobi- most important single source of ideas on product lize new managerial resources and, if well innovation. Buyers' suggestions also improved the supervised, can greatly improve the quality and organization of production and upgraded man- reduce the cost of services. Where reliance is placed agement techniques. on markets, however, governments are finding Governments can help spread information to that price distortions can exact a heavy toll. This small and medium-size companies by encouraging is the subject of the next chapter. subcontracting. Large firms typically provide de- 56 6 Pricing for efficiency In the industrial market economies prices play a Price distortions pivotal role in the allocation of resources. The cen- trally planned economies have also started to move The issue of price distortions has been widely re- in that direction, and in developing countries there searched and debated in recent years and has been is a growing body of evidence on the benefits of reviewed in several earlier World Development Re- using prices to reflect scarcities and encourage ports . Distortions exist when the prices of goods growth. Remunerative prices helped foster South and services, as well as of capital and labor, do Asia's agricultural development in the 1960s, and not correctly reflect their scarcity. For goods that competitive exchange rates contributed to the ex- are internationally traded, scarcity is generally in- port successes of several East Asian countries in dicated by international prices (a fuller discussion the 1970s. is given in Box 4.1). Yet government development programs often Price distortions may be caused by monopolistic still concentrate more on the quantity of saving, tendencies in the private sector or by government investment, and output than on prices. Where intervention. It is possible for government inter- governments have intervened directly in prices, ventions, if properly designed, to correct distor- they have often produced unintended results. Price tions. In most instances, however, price distor- controls to improve income distribution, for ex- tions are introduced by government directly or ample, have sometimes ended up hurting the indirectly in pursuit of some social or economic poorestas when low food prices, intended to objective, sometimes deliberately, sometimes in- benefit the urban poor, reduce the incomes of the cidentally. (more numerous) rural poor. Similarly, import In most cases, these price-distorting policies have controls designed to save imports and improve the their origin in a complex set of political and eco- balance of trade have often harmed exports and nomic factors. In the 1950s the dominant theories home production and ended up worsening the of economic development played down the power trade balance. Controlled low interest rates in- of prices and the degree of flexibility in resource tended to help investors and farmers often ended allocation. Instead, inward-looking trade policies up reducing the pool of savings available and forc- were favored by governments in many newly in- ing small investors and farmers to rely on high dependent countries, partly in reaction to the co- interest rates in black or informal markets. Pricing lonial power's keenness to export their agricultural policy became increasingly critical in the 1970s be- products and to import industrial products from cause of the international upheavals in energy the metropolitan country. In other countries, par- prices, interest rates, and exchange rates. ticularly in Latin America, governments wanted This chapter reviews the extent of price distor- to be less dependent economically on the domi- tions in developing countries in the 1970s and nant industrial powers. Many of the controls lead- assesses their impact on growth. The main con- ing to distortions were imposed in response to clusion is that during the 1970s price distortions scarcities of foreign exchange, or capital, or certain were serious in many developing countries. Those goods (particularly during and after World War countries with the worst distortions experienced II); but the controls were often continued even significantly lower domestic saving and lower out- after their rationale had vanished. Often distor- put per unit of investment, thus leading to slower tions have arisen as the unintended by-product of growth. inflation under a regime of fixed exchange rates. 57 As background research for this Report, the in Chapter 8, Box 8.1.) While the problem was available facts on price distortions have been col- generally less severe for other regions, in several lated for thirty-one developing countries, repre- countries an overvalued exchange rate harmed not senting more than 75 percent of the population of only the balance of payments but also their growth. the developing world excluding China. The analy- Even in such countries as Argentina, Chile, Sri sis concentrates on distortions in the prices of for- Lanka, and Uruguay, which initiated programs of eign exchange, capital, labor, and infrastructure economic reform during the 1970s, the real ex- services (particularly power). Distortions are not change rate was subsequently allowed to appre- measured against some theoretical ideal, but are ciate and thus weakened their reform programs. practical approximations commonly used in policy analysis. For example, to measure distortions in Trade restrictions the pricing of foreign exchange, one should ideally measure the effective exchange rates for imports Trade restrictions have often led to high and var- and exports as they deviate from the "equilib- iable rates of protection between different manu- rium" rate. In practice, it is difficult to calculate facturing industries. By contributing to an over- equilibrium exchange rates; policy discussions valued exchange rate, such restrictions have generally focus on changes in real effective ex- inadvertently discriminated against both exports change rates from a base period, together with the and agriculture. In several countries (such as Cam- effective protection or taxation of traded goods. eroon, Ghana, Senegal, Tanzania, and Turkey), Similarly, distortions in interest rates are judged this bias against exports has been supplemented by how far interest rates were negative in real by export taxes or even outright restrictions, some- terms; in wages, by movements in real wages rel- times leading to increased agricultural imports at ative to productivity adjusted for changes in the the expense of domestic production. terms of trade; in the value of money, by high When import controls are intended to protect and accelerating inflation; and in infrastructure infant industries, they are rarely geared to pro- prices, by the rates of return in utilities. The es- mote an industry's long-run growth potential; nor timated price distortions are found to be inversely are they reduced even after the industry has reached related to growth and efficiency, but there is no adolescence. The loss of efficiency resulting from strong evidence of such distortions leading to any such policies can be considerable. In extreme gain in equity. casessteel in Bangladesh, tin cans in Kenya, and cars in Thailandthe foreign exchange cost of im- Exchange rates porting raw materials and capital significantly ex- ceeds the foreign exchange cost of importing the Changing the real exchange rate can be a powerful finished products. Apart from these losses, the tool for balancing trade without burdening the ad- system of protection in many developing countries ministrative system and without distorting do- has become a serious administrative burden and, mestic incentives. Yet in the 1970s in many coun- by giving windfall gains to those who obtain im- tries with a large balance of payments deficit, the port licenses, often makes the distribution of in- exchange rate was allowed to become overvalued come more unequal as well. in relation to the purchasing power of the cur- rency. This lack of competitiveness became par- Interest rates ticularly serious in sub-Saharan Africa, where the average real effective exchange rate appreciated by Overvalued exchange rates and low tariffs on im- 44 percent between 1973 and 1981. (The real ef- ported capital goods encourage capital-intensive fective exchange rate is here defined as the import- techniques at the expense of creating jobs. These weighted exchange rate adjusted by the ratio of tendencies are strengthened when interest rates the domestic consumer price index to the import- charged to borrowers (and paid to savers) fall short weighted combination of consumer price indices of the inflation rate. At various times in the 1970s, in the trading partners.) Several African countries negative real interest rates were almost a world- now find that producers of traditional export crops wide phenomenon. But they were particularly se- cannot be paid enough to cover their costs of pro- vere and persistent in countries such as Argentina, duction, even though these are the crops for which Brazil, Ghana, Jamaica, Nigeria, Peru, and Turkey, they have a strong comparative advantage. (Cocoa frequently reaching double figures. Such negative in Ghana is an obvious example and is discussed real interest rates not only penalize savers and 58 stimulate capital outflows but also encourage ex- double-digit rates. Nearly all the countries that cess demand for creditwhich is then suppressed had high-15 percent a year or moreinflation in by rationing loans, causing more administrative the 1960s (such as Brazil, Chile, Republic of Korea, burdens. and Uruguay) continued in that category in the 1970s, and many others joined their ranks. In sev- Costs of labor eral countries (such as Argentina, Bolivia, Chile, Ghana, Mexico, Nigeria, and Turkey), the rate of Capital-intensive investment has also been en- inflation in the 1970s was high, and several times couraged where the price of labor has been in- that in the 1960s. Rapid and accelerating inflation creased by unrealistic minimum wage laws and undermines allocative efficiency because it in- social security taxes. In many mineral-based creases uncertainty and induces savers to invest economies, especially in Africa and Latin America, in unproductive "inflation hedges" such as real the drive for higher mining wages has spread to estate, consumer durables, gems, and foreign cur- other sectors. This has pushed labor costs far above rency deposits. Some countries have developed those of competitors, and encouraged rural people complex systems for indexing wages and prices to to leave the land in pursuit of the high wages paid compensate for inflation, though this is adminis- to those lucky enough to find jobs in the urban tratively costly and tends to penalize those (mostly sector. In some Latin American countries in the poor) people outside the indexation system. Where 1970s, social security contributions have added up indexation does not exist, the "inflation tax" con- to 20 percent to the cost of labor. In the 1970s tributes to a growing sense of social and economic wage negotiations in several countries (such as injustice. Ivory Coast and Sri Lanka) failed to allow for de- terioration in the country's terms of trade. As a Linkages among distortions result, real wages grew significantly faster than productivity adjusted for changes in terms of trade. Most price distortions are connected: some coun- teract each other, others are reinforcing. For ex- Infrastructural services ample, an overvalued exchange rate tends to offset the degree of protection given by tariffs, but it The rapid increases in international costs of energy increases the bias against exports caused by export and capital in the 1970s required correspondingly taxes. Consumer subsidies may moderate the higher prices for infrastructural services, which are pressures for raising wages but exacerbate infla- generally both energy and capital intensive. With tionary pressures through increasing budgetary the exception of some oil-exporting countries and deficits. Low interest rates and transport prices for some energy products, most developing countries farmers, along with subsidized inputs, may coun- have adjusted domestic energy prices to interna- terbalance the losses they suffer from an overval- tional levels. However, infrastructure prices have ued exchange rate. Similarly, agricultural protec- been raised too slowly to judge by the low rate of tion works not only through its effects on agriculture return on capital achieved by power utilities. A but also through its effects on wages and industrial review of sixty countries conducted by the World efficiency. Bank in 1980 showed that about half had low (less It is therefore not enough to judge the efficiency than 4 percent) rates of return, while several in- of allocation on the basis of individual distor- curred losses. In transport and water supply, rates tionsas is done, for example, when growth is of return are not available for any sizable sample related just to inflation or just to interest rates. of countries, but the indications are that most Some composite measure of price distortions is countries fail to recover the full costs of these needed. Nor is it enough to analyze only static services. Such underpricing not only increases efficiency. Price distortions that produce a loss of demand for these capital- and energy-intensive static efficiency might nevertheless increase dy- services but also undermines the financial viability namic efficiency, or they might produce cumula- of the agencies supplying them. tive dynamic losses. Finally, it is hard to know at what point investment encouraged by protection Inflation or subsidized interest rates becomes profligate. The answers to these questions must be sought from The 1970s was a decade of rising inflation the world empirical evidence. over, with most developing countries experiencing That evidence is set out in Figure 6.1. For each 59 TABLE 6.1 Indices of price distortions and various components of growth in the 1970s Domestic Simple Annual GDP Simple savings Simple Distortion group growth rate group income ratio group Country index average (percent) average (percent) average Malawi 1.14 6.3 14 Thailand 1.43 7.2 21 Cameroon 1.57 5.6 18 Korea, Rep. of 1.57 9.5 22 Malaysia 1.57 1.56 7.8 6.8 20 21.4 Philippines 1.57 6.3 24 Tunisia 1.57 7.5 27 Kenya 1.71 6.5 19 Yugoslavia 1.71 5.8 27 Colombia 1.71 5.9 22 Ethiopia 1.86 2.0 8 Indonesia 1.86 7.6 22 India 1.86 3.6 20 Sri Lanka 1.86 4.1 13 Brazil 1.86 1.95 8.4 5.7 22 17.8 Mexico 1.86 5.2 22 Ivory Coast 2.14 6.7 24 Egypt 2.14 7.4 12 Turkey 2.14 5.9 17 Senegal 2.29 2.5 Pakistan 2.29 4.7 7 Jamaica 2.29 -1.1 16 Uruguay 2.29 3.5 14 Bolivia 2.29 4.8 20 Peru 2.29 2.44 3.0 3.1 21 13.8 Argentina 2.43 2.2 22 Chile 2.43 2.4 14 Tanzania 2.57 4.9 12 Bangladesh 2.57 3.9 2 Nigeria 2.71 6.5 21 Ghana 2.86 -0.1 9 Overall average 2.01 5.0 17.4 Not available. Increase in real GDP valued at current prices divided by investment at current prices. This is the reciprocal of the incremental-capital-output ratio, adjusted for differential rates of inflation in investment goods and GDP. It is thus equivalent to income rate of return on revalued capital. GDP growth rates were negative. Source: World Development Report 1982. of the major prices, distortions are classified as the "high" category. It is interesting to note that high, medium, or low on the basis of available these groups contain a mixture of countries, un- figures and the qualitative judgments of Bank staff. connected by geography, natural resources, or de- For a particular country the degree of distortion gree of government activism. may be widely different for different prices. A composite index was therefore obtained by cal- Price distortions and growth culating an average of price distortions (see Box 6.1). Figure 6.1 ranks countries in order of increas- A large body of theoretical literature has demon- ing distortion in the 1970s: Malawi, Thailand, strated how price distortions result in a loss of Cameroon, the Republic of Korea, and Malaysia efficiency. At an empirical level, studies of Brazil, have the lowest distortion, while Argentina, Chile, Chile, Pakistan, Philippines, and Turkey relating Tanzania, Bangladesh, Nigeria, and Ghana are in to the 1960s estimated that the costs of distorted 60 Additional output Annual growth Annual growth Annual growth per unit of Simple rate of Simple rate of Simple rate of Simple investment group agriculture group industry group export volume group (percent) average (percent) average (percent) average (percent) average 25.3 4.1 7.0 5.7 27.6 4.7 10.0 11.8 26.3 3.8 8.6 2.5 31.1 3.2 15.4 23.0 32.6 27.6 5.1 4.4 9.7 9.1 7.4 6.7 23.1 4.9 8.7 7.0 31.4 4.9 9.0 4.8 32.7 5.4 10.2 -1.0 18.4 2.8 7.1 3.9 27.4 4.9 4.9 1.9 30.7 0.7 1.4 -1.7 40.1 3.8 11.1 8.7 15.6 1.9 4.5 3.7 22.2 2.8 4.0 -2.4 35.5 26.9 4.9 2.9 9.3 6.8 7.5 3.9 23.4 2.3 6.6 13.4 25.5 3.4 10.5 4.6 24.2 2.7 6.8 -0.7 24.5 3.4 6.6 1.7 12.8 3.7 3.7 1.2 28.1 2.3 5.2 1.2 0.7 -3.5 -6.8 20.9 0.2 5.2 4.8 22.7 3.1 4.3 -1.6 21.5 16.8 0.0 1.8 3.7 3.2 3.9 0.7 10.7 2.6 1.8 9.3 15.1 2.3 0.2 10.9 23.9 4.9 1.9 -7.3 22.3 2.2 9.5 -1.9 23.8 0.8 8.1 2.6 -1.2 -1.2 -8.4 23.2 3.0 6.1 3.5 prices due to trade restrictions alone could have Statistical analysis of the relationship between amounted to 4 to 10 percent of their GNP. Those the price distortion index and growth in the 1970s countries that embarked on programs of correcting confirms these earlier findings. The average growth prices in the 1960s (for example, Brazil, Colombia, rate of those developing countries with low dis- and the Republic of Korea) also showed significant tortions in the 1970s was about 7 percent a year- gains in output (and employment) resulting from 2 percentage points higher than the overall aver- these liberalization efforts. More recently, as re- age. Countries with high distortions averaged counted in the 1981 World Development Report, it growth of about 3 percent a year, 2 percentage has been found that countries which avoided dis- points lower than the overall average. torting trade policies were typically more success- The relation between price distortions and the ful in adjusting to external shocks in the 1970s various components of growth is presented in Table, than those with distorted prices. 6.1. High distortions are associated with low do- 61 FIGURE 6.1 I Price distortions and growth in the 1970s High distortion Foreign exchange pricing Factor pricing Product pricing Composite distortion index Growth of GDP, 1970-80 0 distortion aMedium >5 Incre>rsing distortion Estimated Low be 0 Low High .- Actual be a distortion 0 0 (annual percentage change) on be a be U U 1 2 3 0 2 4 6 5 Malawi Thailand Cameroon Korea, Rep. Malaysia Philippines Tunisia Kenya Yugoslavia Colombia Ethiopia Indonesia India Sri Lanka Brazil Mexico Ivory Coast Egypt Turkey Senegal Pakistan Jamaica Uruguay Bolivia Peru I .. Argentina Chile .I Tanzania Bangladesh II Nigeria Ghana In this figure countries are l'sted in order of increasing degree . increases, the color of the circle changes from yellow to red. In of distortion in prices. In the first section, the color of the the right hand section, the blue circles show the actual annual squares indicates the degree of distortion in the principal cat- rate of growth of GDP; the green circles are estimates of GDP egories of prices. The middle section is a composite index of growth obtained by a regression relating growth to the distor- price distortion for each country: as a country's distortion index tion index. 62 Box 6.1 Price distortions and growth: a statistical analysis In Figure 6.1 the distortion indices in ma- these circumstances the composite dis- sidered in a more complete explanation jor prices are classified as low, medium, tortion index in Figure 6.1 is obtained as to account fully for the variation in growth and high. For statistical analysis, these a simple unweighted average of the in- rates. Thus as shown in Figure 6.1, Bra- categories were replaced by numbers 1, dividual distortions. zil, Egypt, Indonesia, Nigeria, Republic 2, and 3 respectively. For the panel of The figures on growth rates and dis- of Korea, and Ivory Coast did much bet- thirty-one countries, the degree of dis- tortion indices show that the relatively ter than would have been predicted by tortion in each price, thus defined, was high (top one-third) distortion countries the regression equation, and Ethiopia, found to be negatively correlated with had growth rates about 2 percentage Ghana, and Jamaica considerably worse. the GDP growth rates during the 1970s, points lower than the average (which is While the degree of distortions in prices with the exchange rate distortion being about 5 percent a year) and the low (bot- has a significant association with growth, the most significant. tom one-third) distortion countries, were the analysis indicated virtually no cor- These distortions are interrelated about 2 percentage points higher than relation with the distribution of income. among themselves and each distortion average. For twenty-seven countries for which affects growth through a complicated set The regression equation relating growth figures are available on income distri- of interactions on various elements of the to the composite distortion index shows bution, the analysis shows that the dis- economy. There are therefore major con- that price distortions can explain about tortion index explains hardly 3 percent ceptual and statistical problems in any one-third of the variation in growth per- of the variation in equity, when the latter attempt to identify simultaneously the formance. Many other elements, not least is measured by the proportion of income effects of individual distortions on over- natural resource endowment as well as going to the bottom 40 percent of the all growths or the relative importance of other economic, social, political, and in- population. different distortions in the total mix. In stitutional factors, would need to be con- mestic savings in relation to GDP and with low the rest is the result of other economic, social, value added per unit of investment (this latter political, and institutional factors. So a country association being statistically stronger). Distor- well endowed with natural resources (such as tions also affect growth rates in agriculture and Nigeria) or with an active and mobilized labor force industry, with a marked influence on exports. In (such as China) could still grow relatively fast even short, the statistical analysis clearly suggests that if its price structure is distorted. With fewer price prices do matter for growth. distortions, however, its growth would be signif- However, price distortions alone can explain less icantly faster. than half the variation in growth among countries; 63 7 National economic management Every government has a fundamental responsi- tries, the institutional arrangements do not exist bility to establish a sound macroeconomic policy to coordinate short-term financial management with framework within which economic agents can longer-term policy analysis and investment plan- function efficiently. It is important that this frame- ning, or to respond quickly to changing circum- work be flexible enough to permit the economy to stances. adjust to external disburbances, that it provide This chapter reviews the experience of macro- adequate incentives for longer-term growth, and economic management and draws lessons for the that it permit the attainment of the objectives of future. It underlines the importance of: equity and social advance. Policy flexibility to permit adjustment to The macroeconomic policy framework is com- changing circumstances posed of a series of interlocking policies that affect Stabilization efforts that also permit price ad- all aspects of economic behavior. The key elements justments that increase efficiency are fiscal, monetary, exchange rate, wage, and trade Managing the system of incentives rather than policies. They combine in determining the rate of formulating comprehensive long-term targets for domestic inflation, the rate and pattern of capital investment, production, and consumption accumulation and resource utilization, and the Improving the capacity of public sector enti- amount of foreign exchange earnings, the main- ties to formulate sound investment programs, with tenance of balance of payments equilibrium and particular emphasis on appraising major public foreign borrowing, and ultimately, the pace of eco- sector projects nomic activity and growth. There are no simple Consulting and coordinating both within gov- generalizations about a single set of appropriate ernment and with the public policies that will apply to all countries in all cir- Concentrating on a few selected policy issues cumstances. Similarly, there are no institutional and programs in place of elaborate blueprints arrangements for managing economic policy that Improving the provision of information to keep are uniformly suitable. The appropriateness of pol- better track of the key economic developments. icies and institutions varies with a country's level of development, size, and natural endowment. Macroeconomic policies and adjustment The establishment of planning agencies for for- mulating comprehensive development strategy The challenge of macroeconomic management is represented an important institutional departure to adjust established policies in light of changing in many developing countries. In some countries domestic and international economic circumstan- finance ministries continued to oversee economic ces. This often requires overcoming vested inter- policy, primarily through their control of the bud- ests the given policies have created. get and supervision of the central bank. Both In the past few decades developing countries arrangements have their weaknesses. Finance have accumulated considerable experience in ma- ministries tend to be preoccupied with short-run croeconomic policy adjustment. Brazil, Colombia, questions of financial management and pay in- and the Republic of Korea are among the best- adequate attention to long-term development documented examples of countries that undertook issues. Planning agencies have generally failed to sustained programs of stabilization and price ad- fulfill the high hopes placed in them in the 1950s justment in the 1960s. In all three, realistic and and 1960s, and have often been limited to assem- flexible exchange rates were adopted, trade re- bling public investment programs with only weak gimes liberalized, exports modified, and interest links to budgets and policymaking. In most coun- rates allowed to increase in response to market 64 conditions. In all three, there were significant im- Some of these adjustment programs are of rel- provements in export performance, industrial atively recent origin and it is too early to judge growth, and domestic savings, leading to faster their overall effectiveness. In others the reforms growth in GDP and jobs. have had an uneasy course. Chile started with These long-term benefits were not obtained widespread distortions and made major changes without some short-term costs in a temporary re- over a remarkably short period; adjustment was duction of output and incomes. Experience sug- followed by rapid growth in GNP and consider- gests that the best policy is to avoid as much as able success in controlling inflation. However, dis- possible internal imbalances that require subse- tortions have subsequently reemerged in certain quent adjustment. Economies with consistently key areas and there has been a rise in unemploy- good growth records in recent years, such as Cam- ment and a weakening in the financial position of croon and Colombia, have maintained this balance many enterprises. In Sri Lanka, GNP, investment, by avoiding large fiscal deficits and rapid mone- and employment have grown faster since 1977, tary expansion. But when imbalances do arise, the although the balance of payments and inflation sooner they are corrected, the smaller the ultimate have worsened (see Box 7.1). Turkey's case is par- costs of adjustment tend to be. ticularly interesting; it has achieved rapid growth The existence of short-term costs suggests that in exports and has brought inflation down sharply, reforms may need to be gradual, as long as grad- but has managed only modest growth in private ualism does not imply timidity or policy reversal investment and employment. On average, those on the part of the government. Experience sug- countries where adjustment led to low price dis- gests that the costs of stabilization are reduced and tortions have managed a significantly better growth the benefits of import liberalization enhanced if performance in 1979-82 than have those with high external assistance is provided in a timely manner distortions. in support of stabilization and liberalization Many other countries are now showing interest packages. in adjusting their price structure. For them, the In the 1970s the developing countries' capacity question is not whether to adjust but how. Ex- to manage their economy was tested to the limit. perience suggests that the process of adjustment Energy prices surged twice, inflation rose to new has to be managed carefully with regard to timing, peaks and then came down sharply, exchange rates pace, and scope. For example, countries have found fluctuated widely, and international interest rates difficulty in liberalizing trade and financial mar- were higher for longer than at any time in history. kets while simultaneously trying to moderate in- Growth rates in the industrial countries slumped flation through restrictive monetary and fiscal pol- as they faced the most protracted recession in fifty icies. The benefits of liberalization operate through years. The problems of managing in a hostile en- changes in relative prices, which require new in- vironment were thus superimposed on the "nor- vestment and are easier to bring about when eco- mal" problems of macroeconomic management. nomic growth is rapid. The pace of adjustment Policy reform has not proved easy to manage. has also to be tailored to the circumstances of each In the 1970s major changes were initiated in the countryits political resilience, the degree of dis- Southern Cone of Latin America, starting in 1974 tortions in its pricing system, and the resources in Uruguay, 1975-76 in Chile, and 1976 in Argen- (especially foreign exchange) it has available dur- tina. In the second half of the 1970s, Sri Lanka ing adjustment. The Republic of Korea's successful embarked on a program of adjustment. More re- reforms in the early 1960s were bold and were cently, Ivory Coast, Jamaica, Kenya, Peru, Phil- greatly helped by a favorable external environ- ippines, and Turkey have also attempted varying ment. Turkey's reformsless comprehensive and degrees of adjustment. The elements in these pro- more gradual, though nonetheless radicalwere grams usually include a lower exchange rate, more initiated in much more difficult circumstances, yet export incentives, less industrial protection, tight- were largely successful. er monetary policy, higher real interest rates, less The most important lessons from experience are direction of credit, higher energy prices, and smaller that the transitional problems of adjustment pro- consumer subsidies. In addition, programs usually grams can be considerable and that there is no try to restrain public sector spending and increase universal prescription for the right path of ad- the scope for the private sector and market forces. justment. What is required is "pragmatism" and Similar reform programs in socialist economies are "flexibility"; these terms cannot be defined a priori, described in Boxes 5.3 and 11.6. but they can be illustrated by the successes of, for 65 Box 7.1 Liberalization in Sri Lanka During the three decades after inde- removed subsidies on rice, wheat, and unleashed pent-up demand for imports pendence in 1947, government interven- most petroleum products; abolished most in an economy starved of both producer tion in Sri Lanka's economy increased state trading monopolies and encour- and consumer goods. Some local com- significantly. After twelve years of ad hoc aged competition from the private sector; panies failed to compete with cheap im- policymaking, a ten-year plan was intro- raised interest rates to foster private sav- ports (often backed by export subsidies duced in 1959 which placed emphasis on ings and more active financial markets; or as part of a dumping strategy), so import-substituting industrialization. The and gave new incentives to exports and some jobs were lost and output reduced. early 1970s saw a further significant move foreign investment. Externally, Sri Lanka started to run large toward autarky. The authorities estab- The liberalization program initially co- current account deficits after 1979. Its lished strict controls on trade and pay- incided with unusually high commodity terms of trade deteriorated by more than ments to maintain an overvalued cur- prices for Sri Lanka's traditional exports, 30 percent between 1977 and 1981. More rency, controlled many domestic prices, which helped pay for extra imports. liberal imports of motor vehicles and other and set up several monopolies in the Paddy production also increased at 7 energy-intensive consumer goods in- public sector through nationalization and percent a year, so the volume of food- creased the oil import bill. Export per- takeovers. grain imports fell by 40 percent between formance suffered owing to a 30 percent Between 1971 and 1977 almost all parts 1977-78 and 1981. The economy grew appreciation in the real effective ex- of the economy either stagnated or grew rapidly, with GDP growth doubling from change rate between the end of 1978 and only slowly. The rate of saving and in- 3.4 percent a year in 1970-77 to 6.6 per- the end of 1981. However, the most se- vestment fell significantly, and unem- cent a year in 1978-81. The rate of in- rious problem was the government's huge ployment rose. Recent government es- vestment rose from 14 percent of GDP investment program coupled with a de- timates suggest that policy distortions in in 1977 to 34 percent in 1980. With mi- clining ratio of taxes to GDP. By 1980 1971-77 reduced the GDP growth rate by gration of labor to the Middle East, eco- budgetary deficits had increased sharply about two percentage points a year. nomic growth reduced the unemploy- to 23 percent of GDP, and the balance In 1977, with the election of a new ment rate from 24 percent in 1977 to 15 of payments gap widened to unsustain- government, economic strategy was percent in 1981. able levels. In 1981 the government in- transformed. The government disman- These achievements have not been troduced measures to reduce the budget tled most trade and payment controls, costless, however. Devaluation and the and balance of payments deficits. The relied on tariffs to protect domestic in- reduction of consumer subsidies inevit- sheer size of these deficits means that dustry, and devalued the exchange rate ably raised the inflation rate, as mea- adjustment will take several years to by 44 percent. In 1979 the authorities sured by the Colombo cost of living in- complete. ended food rationing and introduced a dex, from 12 percent in 1978 to 26 percent food stamp scheme for the poor. They in 1980. The ending of import controls example, Brazil, Japan, and the Republic of Korea cupations of finance ministries. They are now (see Boxes 7.2-7.4). To be effective, such a prag- commonplace in developing countries. A recent matic and flexible approach in turn requires insti- World Bank survey of some eighty countries in- tutions capable of designing, evaluating, and ad- dicated that four out of five have multiyear de- justing key economic policies. Such institutions velopment plans; over the past ten years, approx- are generally weak in developing countries; imately 200 plan documents have been prepared. strengthening them should be a high priority in In most countries, however, planning agencies the 1980s. have not lived up to expectations. By the late 1960s there was widespread talk of a "crisis" in plan- Economic management and planning ning. Even India, which pioneered the introduc- tion of planning in mixed economies, allowed its Through their control of the purse strings, finance plan to lapse between 1966 and 1969 and relied ministries have traditionally played a preeminent solely on annual budgets. In Yugoslavia two suc- role in economic management. After 1945, how- cessive plans were abandoned in the early 1960s. ever, the establishment of planning agencies rep- In Latin America there was wide agreement by the resented a major institutional departure in devel- late 1960s that medium-term planning had little oping countries. These agencies were intended to influence either on public sector investments or provide medium- and long-term perspectives on on economic policy; indeed, Mexico, which had development, supplementing the short-run preoc- the most impressive development record in the 66 1950s and 1960s, had no medium-term plan. Af- Several factors underlie the limited success of rican planners were also mostly ineffective since plans. At root, there is an inherent weakness in they were often excluded from decisionmaking. the "blueprint" approach of planning agencies: In the 1970s the relevance of formal plans was available analytical techniques are just not able to further reduced by dislocations in the world econ- cope with the complexity of economic change and omy. Some countries (thirteen out of thirty-four to produce plans that are up-to-date, relevant, and surveyed recently) managed to achieve or exceed comprehensive. Even the less ambitious forms of their targets in the first half of the 1970s. None- planning have their weaknesses. For example, in- theless, developing countries grew increasingly vestment planning based on input-output models disillusioned about the performance of their cen- has fallen foul of changing technical coefficients tral planning agencies and the usefulness of and demand patterns. Similarly, manpower fore- medium-term plans. casting has been highly inaccurate because of the Box 7.2 Japan: thematic plans and guiding visions Since the mid-1950s, Japan has had a se- mining the size of total expenditure and duced. MIII made detailed studies of the ries of national economic plans. Each fo- its allocation among ministries and major effects of liberalization on industry; the cused on one or two themes within the expenditure items. The Ministry of Fi- least vulnerable industries were those first framework of long-range economic nance played an important role in eco- exposed to foreign competition. For some analysis and prospects. The plans indi- nomic management through its deter- industries a detailed timetable of liber- cated the direction of economic devel- mined pursuit of a balanced budget. alization was drawn up, which seems to opment and the contribution expected Another agency which played a key have stimulated efficiency. MIT! tried to from individual sectors. The process of role in economic management was the realize economies of scale by arranging preparing the plans provided a forum for Ministry of International Trade and In- mergers where it felt that firms were too identifying and discussing future policy dustry (MIT!). Unlike many countries in small to compete internationally, by en- needs. It also enabled private industry the postwar period, Japan did not na- couraging firms in the same industry to to consider its problems in a broader per- tionalize its key industries, Nonetheless, specialize, and by indicating those firms spective. in cooperation with the private sector and which needed to modernize their equip- The quantitative targets set out in the other government agencies, MIT! con- ment and expand their plants. Steel, plans were normally conservative, so tributed significantly in guiding indus- computer, and automobile industries are (until recently) outturns often far ex- trial development through its strategic examples of such MITT-inspired reorgan- ceeded projections. All plans were re- planning and authority (both formal and ization. vised before the end of the period they informal) over investment and produc- Equally interesting and instructive (for were intended to cover. This lack of ad- tion priorities. This was true not only in both developed and developing coun- herence to detailed plan targets was all the promotional phase of the 1950s but tries) was the MIT! approach to Struc- to the good inasmuch as the underlying also in the liberalizing years of the 1960s tural adjustment in response to more ex- objective was to achieve maximum and the retrenchment of the 1970s. In- pensive energy in the 1970s. Industries growth. The higher actual growth rate stead of drawing up "blueprints" for in- that had become uncompetitive (for ex- was the result of buoyant private in- dustrial development and allocating re- ample, open-hearth and electric-furnace vestment, which the government did not sources accordingly, MIT! (in the words steelmaking, aluminum refining, syn- try to limit to the plan target. Moreover, of one of its senior officials) "tried to thetic fibers, and Shipbuilding) were ministries and agencies did not regard arrive at a vision that may serve as a classed as "depressed industries" and their plan targets as strictly binding. policy target and to persuade and guide included in a special adjustment pro- Flexibility and responsiveness at both industry towards the vision." In creating gram. This program set out, for example, macro- and microlevel were seen as more these "visions" and executing its poli- steps to reduce excess capacity, the tim- important than consistency in macro- cies, MIT! sought the opinions of various ing of such reductions, and restrictions planning and tight overall coordination. expert groups and businesses. on further expansion. Where necessary, This flexibility extended to the relation In the 1950s the emphasis of MITI pol- the industries were allowed to establish between long-term planning and annual icies was on the protection of selected arrangements to maintain orderly mar- budgeting. The annual budgets, as well industries from imports, export promo- kets under the condition of excess sup- as public investment and loan plans, were tion, fiscal and financial incentives, and ply and were given government financial determined by the Ministry of Finance. the development of technology. In the support to facilitate structural adjust- Annual budgets played an important role liberalization phase of the 1960s, protec- ment. in the process of policymaking by deter- tion was gradually and selectively re- 67 Box 7.3 The Republic of Korea: flexible policies and strong planning Between the early 1960s and the late Deliberation Committee chaired by the fling so that the budget for a single year l970s, the Republic of Korea made re- prime minister. The Korea Development may be formulated on realistic assump- markable economic progress. GNP grew Institute, which works in close collabo- tions about the availability of resources by 10 percent a year, per capita income ration with EPB, was also a channel in future years. more than tripled in real terms, and the through which outsiders contributed ad- Monitoring and evaluation. Each re- number of people with incomes below the vice; it became the research arm of the sponsible government agency is required poverty line fell from about 40 percent of government for economic policies. to monitor the progress of all projects the population to about 10 percent. Among Despite such thorough preparation, the included in the annual plan. The EPB the key factors that contributed to this suc- plans were not remarkable for their tech- conducts a quarterly evaluation of how cess were a strong and stable government, nical sophistication. Nor were they re- the plan is implemented and provides a single-minded attention to economic garded as sacrosanct: each of the four summary of the results to the president. growth, a disciplined and socially mobile plans produced since the early 1960s was The EPB is also responsible for consoli- population, a favorable world environ- drastically revised soon after its incep- dating the results of the performance ment, and flexible and pragmatic eco- tion. Individual policies were also evaluations, including recommended nomic policies orchestrated by a central changed as circumstances changed. For changes in problem projects, and sub- economic authority. instance, in 1982 almost 1,000 laws or mits a report to the cabinet twice a year. The Economic Planning Board (EPB) regulations were either enacted or Central to the Republic of Korea's suc- was established in 1961, incorporating the amended, and about 10 percent of them cess was its export promotion policy. Ex- Bureau of Budget (transferred from the were revised more than twice in the same ports were encouraged mainly by incen- Ministry of Finance) and the Bureau of year. tives, but the way those incentives were Statistics. The EPB was later made re- The distinguishing characteristic of the determined and then made available was sponsible for price policy, fair trade Republic of Korea's planning has been far from automatic. Two institutional administration, project appraisal, and the the strong emphasis on implementing mechanisms that were important in the monitoring and evaluation of project investment decisions by means of: country's export drive were the system performance. It thus became a "super Annual plans. The annual Economic of setting export targets and the practice ministry" overseen by the deputy prime Management Plan is intended to review of holding monthly national trade-pro- minister, its status indicating the seri- and evaluate performance in the preced- motion meetings. These two mecha- ousness of the planning effort in the Re- ing year and, if necessary, revise policy nisms helped translate political resolve public of Korea. The EI'B was able to directions and the list of projects to be into bureaucratic and corporate resolve. coordinate policies and control conflicts implemented. It also reassesses macro- They also provided up-to-date informa- between different economic ministries. economic forecasts in the light of chang- tion on export performance by firm, Its work was supported by units in each ing conditions. It provides guidelines for product, and market and enabled the operating ministry that were responsible the government's annual budget and is government to analyze the reasons for for both development planning and bud- expected to indicate the stance of gov- any discrepancies between targets and geting. ernment policy toward the private sec- performance. The government then ad- The government of the Republic of Korea tor. justed its export incentives and targets also drew on the views of experts from The integration of plans into bud- accordingly. Firms, meanwhile, were kept bodies outside the government, such as gets. Responsibility for drawing up the informed of the government's shifting industrial associations, financial institu- budget rests with the EPB, especially its priorities and policies. More recently ex- tions, research institutes, and universities. Bureau of the Budget. In view of grow- port targets are treated more as forecasts They belonged to a number of working ing economic uncertainty and fiscal strin- than as policy objectives, and the gov- groups contributing to the countly's eco- gency, the government has recently ernment is emphasizing the liberaliza- nomic plan, which in turn reported to the started some medium-term fiscal plan- tion of trade and finance. difficulties of specifying particular skills and of the process of planning has been useful. It has projecting demand over a long period. Moreover, provided a forum for bringing together different by the nature of their job, many planners have government agencies and different sections of so- tended to favor big public sector projects and am- ciety to think about national development, and it bitious targets. This bias, sometimes encouraged has helped politicians to mobilize public support by foreign aid agencies, has seldom produced the for development programs. These are considerable most efficient use of resources. virtues. It is now necessary to build on them, so While the products of planning agenciesthe that in the uncertain economic environment of the plans themselveshave frequently been ignored, 1980s the agencies involved in national economic 68 management can work together in a more coor- ing many aspects of policy, from medium-term dinated and systematic way. investment planning to the incentive systemis already taking place in several countries. In the Managing in uncertain times Republic of Korea, for example, the latest plan puts most weight on changing incentives and treats Given the current uncertainties, comprehensive projections for investment and output more as planning intent on managing quantities (of pro- background scenarios to aid decisionmaking than duction and investment) over the medium to long as targets. In both India and Pakistan recent plans term will be increasingly inappropriate. Instead, give much greater attention than before to prices emphasis should be put on rationalizing the cur- and incentives. rent policy framework. First and foremost, gov- While attempts to plan overall national invest- ernments must ensure macroeconomic stability ment have generally proved futile, governments through sound monetary, fiscal, and exchange rate clearly need a strong capacity for appraising public policies. investment programs. In many countries the ef- Within such a framework of macroeconomic sta- ficiency of public investment would increase sig- bility, it is necessary to correct price distortions in nificantly if, as a minimum, large projects were order to provide an environment for the best pos- carefully vetted. In addition, it is important to ag- sible use of resources. Such reorientationaffect- gregate all public sector projects to discover their Box 7.4 Brazil: flexibility and pragmatism in managing industrialization Between 1950 and 1980 Brazilian manu- lowed until the mid-1960s by both pri- dustry, one ct the five, is a classic ex- facturing grew at an average of almost vate investors and public officials was ample. Costs were high at first, but by 10 percent a year, with GNP growth of import substitution: anything imported the late 1960s at least one firm was pro- about 7 percent a year. During this pe- was potentially a candidate for domestic ducing at internationally competitive riod, per capita income (in 1980 dollars) production. Beyond this, public officials costsperhaps the only one in any de- increased from about $600 to more than had some ideas about priorities to be veloping country at that time. Since then $2,000 and, despite continuing problems given to some sectors, especially in steel, costs and prices have come down in other of poverty in some regions, the overall automobiles, and petrochemicals. But in- firms, and today the industry produces incidence of poverty declined signifi- direct promotional policiessuch as trade competitively and exports a large part of cantly. protection and fiscal and credit subsi- its output. Industrialization was clearly the goal diesowed their design at least as much In the mid-1960s, when the initial phase of Brazil's development strategy, al- to the entrepreneurs who stood to gain of import substitution was largely com- though priorities were not set in any sys- or lose from them as to the public offi- pleted, Brazil switched to an export-ori- tematic or detailed way. Growth fol- cials' view of what was "best" or "effi- ented strategy with major adjustments lowed a typical, and in some sense cient" for the nation. Indeed, one reason in its real exchange rate and in financial natural, sequence: first came import sub- for the "miracle" growth in the late 1960s policy. This was followed by a boom in stitution of consumer nondurables and and early 1970s was precisely that gov- exports and economic growth that lasted then consumer durables; intermediate ernment listened to the private sector and nearly a decade. Since the mid-1970s the goods and capital goods followed. The largely accommodated its wishes. government has expanded its share of pattern of protection was adjusted flex- Consultation and consensus also pre- industry and played a bigger role in the ibly and gradually. Whereas in the 1960s vailed during the 1950s, notably in the choice of new investment. It has pro- the protection rate was high for con- "Executive Groups" formed to promote moted a new wave of import substitution sumer goods, medium for intermediate growth in five industrial sectors. These in the few activities where this remained goods, and low for capital goods, by the groups, made up of senior officials from possible. Some sectors (such as steel) may early 1980s this pattern had been fully all relevant agencies, negotiated with have been overexpanded, and many of reversed. private investors to achieve a package the new industries (such as sophisticated Brazil's style of growth did not, of that gave the government what it wanted machine tools and computers) have com- course, occur accidentally. Government in terms of import substitution, domestic plex and rapidly evolving technology; decisions about exchange rates, tariffs and procurement of inputs, and so forth, but being capital goods, their cost and qual- other import controls, public invest- that also gave the investors what they ity will affect the whole economy. ments, investment subsidies, and export needed to be profitable. The government Whether these new activities will be- incentives strongly influenced the allo- negotiated hard, but the policy package come internationally competitive re- cation of resources. The basic logic fol- was designed jointly. The automobile in- mains to be seen. 69 implications for financial management over sev- to be selective in the goals and key instruments eral years. Together, public sector projects can they emphasize. In Japan both the national plans change some basic parameters in the economy and and "visions" of the Ministry of International Trade affect the implementation and viability of other- and Industry concentrated on selected themes. In wise sound projects. the Republic of Korea export promotion became a Experience during the 1970s has shown that even focal point for the development effort. In Ban- the most carefully designed policies and invest- gladesh planning was improved when it was di- ment programs can be confounded by changes in rected at such important issues as increasing food the world economy. In addition, limited knowl- production. In Malaysia improvement in the dis- edge about how quickly economies adjust to policy tribution of income and wealth between Malays changes means that rigid adherence to policy pre- and non-Malays has been the central theme for scriptions can be hazardous: Chile has provided the past ten years. In mineral-based economies an example of this danger. The failure to adjust such as Botswana, planning has focused on con- investment programs to reduced resources has also verting mineral wealth into human and physical been costly in countries such as Turkey, Mexico, capital, while minimizing the adverse side effects Yugoslavia, and Venezuela. Governments there- on the rest of the economy. fore need to be much more flexible in their policies One way to combine flexibility with consultation and programs. To be both flexible and successful, is to assign responsibility for coordination to a they require better facilities for obtaining and ana- central authority. In the Republic of Korea plan- lyzing information on the effect of their policies ning, budgeting, and policy functions have been and programs. integrated under a deputy prime minister, who is To design adjustment policies and programs, also the chairman of a policy committee consisting consultation and coordination between policy- of various economic ministries. In Brazil and Japan makers and interest groups is essential. The ex- the finance and industry ministries have played amples of Brazil, Japan, and the Republic of Korea an active part in coordinating policies. In Hungary show that consultation and coordination among that role has been assumed by an economic policy different agencies within government and be- committee. In both India and Pakistan policy re- tween government and the private sector can pro- view capacity has recently been strengthened in vide practically sounder, if analytically less artic- the planning agencies and in the offices of the ulate, policies and programs. prime minister and the president. Although the For the purposes of sectoral coordination, cen- specific arrangements depend on the circumstan- tral ministriessuch as finance and planning or ces of each country, an authoritative coordinating any other central coordinating bodyneed to agree agency is clearly desirable. Particular attention must on clear guidelines for such ministries as agricul- always be given to establishing arrangements that ture, industry, and energy, and then act as a clear- successfully integrate planning, budgeting, and inghouse for contacts between them. Similarly, performance evaluation. while proposals for policy issues such as agricul- tural prices, or exchange rates, or interest rates Improving links between planning, originate in the responsible ministries, some cen- budgeting, and evaluation tral agency should analyze the links and present political leaders with well-evaluated options on In discussions of development planning methods which to base decisions. Governments have found over the past thirty years, the need to strengthen considerable merit in involving academics and links between budgets and plans has been a con- businessmen in policy discussions. Their partici- stant themeto little avail. Only one developing pation, usually through committees, working country in ten has any system of multiyear bud- groups, and conferences, improves official aware- geting, which is essential if multiyear plans are to ness and helps build a consensus on the means be integrated with budgets. and ends of national development. Development research institutes (such as the Korea Develop- Financial planning and budgeting ment Institute) can provide forums for govern- ment and outsiders to exchange ideas. While planning agencies have often been preoc- Combining flexibility with consultation and co- cupied with the allocation of national resources, ordination is not easy: consultation is time-con- they tend to pay too little attention to the availa- suming, flexibility implies a quick response. To bility of these resources and the financing needs reconcile these requirements, governments need of different tiers of government and of state-owned 70 enterprises. Examples abound of public expendi- countries have tried to employ concepts and pro- ture being out of control because the central cedures for evaluating the results of public spend- authorities have not been aware of the spending ing. Only slow and intermittent progress has been programs of different public agencies. Several made. The output of many government services countries, particularly large federal states such as is not clearly definable, let alone measurable. Nor India and Brazil, are now increasing their efforts is it easy to evaluate the performance of an indi- to obtain a complete picture of the public sector's vidual agency in programs which involve several financial position. agencies. And comprehensive evaluation gener- Planning agencies have also tended to concen- ally takes so long that governments cannot wait trate on new projects rather than on completing for results before deciding whether more money half-finished projects and financing the mainte- should be spent in the same way. A more prom- nance needs of completed ones. In six out of ten ising procedure, adopted in several countries, is of the World Bank's borrowers in the early 1980s, selectively to track and evaluate outputs of pro- this bias has assumed serious proportions. In sev- grams that have a significant influence on the bud- eral countries many projects are not being com- get (see Box 7.5). In place of annual pro forma pleted because of insufficient funds. This problem "checking," evaluators undertake a thorough in- can be minimized if, after budgeting for the legit- vestigation of a service or program. The results imate needs of existing and completed projects, are then made the basis for efforts to improve the amount of "free resources" is calculated sys- performance. tematically before new projects are approved. Botswana's National Development Plan contains Improving management information projections of the recurrent budget costs arising from each project in the public investment pro- A good information system is essential for all as- gram. These are consolidated into revenue and pects of economic management. Systematic ad- spending projections for the next three years, which justments in policies and programs, necessary in are periodically updated and rolled forward. a fast-changing world, are not possible without To cope with budgetary shortages and uncer- reliable monitoring of current developments. As a tainties, finance ministries in many countries have rule, better informationespecially about key per- tended to release money only on a monthly or formance indicatorsbrings bigger dividends for quarterly basis. This has made it difficult for min- economic management than do sophisticated tech- istries and project managers to plan their opera- niques of long-term forecasting. Although senior tions even a year ahead. Finance ministries have officials may readily agree on the need to improve also resorted to across-the-board cuts, which hit statistics, genuine commitment (as evidenced by high-priority projects as hard as any others. To the provision of adequate resources) and sustained minimize this damage, some countries have found efforts are often lacking. it useful to identify a "core investment program" that has priority for funding in case of cuts. Even Costs of poor data with such provision, however, countries in both the developed and developing world need to re- The problems of planning without facts have been vise their investment programs regularly. For most, well documented in Africa, but they are serious a three-year horizon is the longest that is practi- in many other countries as well. Lacking sectoral cable, with programs being rolled over each year. statistics, governments have not been able to ad- With the advent of minicomputers, data process- dress sectoral issues. This proved particularly ing has opened up new possibilities for consoli- damaging when oil prices rose sharply in the 1970s, dating and revising budgetary programs. because few developing countries had the data they needed to reassess their energy requirements Evaluating expenditure and to develop conservation programs. For years the lack of good agricultural statistics has seriously In the past, governments have put too little em- handicapped the analysis of agricultural devel- phasis on getting value for money from public opment programs and the formulation of policies. expenditure. Traditional audits have largely been And the whole world has now learned of the dan- confined to examining whether the money was gers of ignorance about a country's financial po- spent as authorized. Since the mid-1960s, how- sition. In several countriesnotably Indonesia, ever, following the program budgeting approach Mexico, and Turkeythe external debt crisis was pioneered in the United States, several developing compounded by the lack of comprehensive data, 71 Box 7.5 Government watchdogs: tracking bureaucratic effectiveness From Russia's inspectors general to the Personnel Office helps set the ground one of the world's largest evaluation or- United States' Government Accounting rules for individual scrutinies, then turns ganizations, with more than 200 profes- Office, watchdogs have long been ap- over the task of carrying them out to the sional staff and a network of thirty-four pointed to help keep governments hon- examining officers. Each scrutiny is ex- field offices. Local evaluation offices have est. Many countries are now emphasiz- pected to lead to an action document also been established in India's twenty- ing efficiency as well. Since 1977 Canada within three months; these show the ex- two states. has required that federal agencies and amining officers' recommendations, the PEO is an independent branch of the departments undertake periodic apprais- minister's response, the legislative and Planning Commission. It reports to Par- als of their own efficiency in administer- administrative actions needed for imple- liament and provides the Planning Com- ing programs and their effectiveness in mentation, target dates, and expected mission with information for forward meeting objectives. In 1978 Malaysia savings in money and manpower. They planning and mid-course revisions to added a unit charged with improving also name the officials responsible for programs. Most PEO reports are made management systems and civil service carrying out the recommended reforms. public; their findings are debated in the operations to the already strong project The government has been impressed media and in Parliament. The atmos- monitoring team in its prime minister's enough with the 135 scrutinies so.far to phere of accountability that PEO has cre- office. extend the system throughout the gov- ated has encouraged the government to Two other examples, in more detail, ernment. Every department is now re- take quick corrective action on program are: quired to draw up a financial manage- shortcomings. At the project level, the Value-for-money audits in the United ment plan to aid it in answering the feedback provided by PEO has come to Kingdom. A 1982 government report question "Where is the money going and be appreciated rather than feared. noted that, over a period of three years, what are we getting for it?" Each must PEO's working methods have changed the audits had saved $850 million in also develop a management information considerably since the days it limited it- wages, boosted tax collections by more system to track its costs. To involve civil self to evaluating completed agriculture than $40 million, and reduced social se- servants in the spirit of reform and "guard and rural development projects. Now it curity operating costs by 6 percent. The against a failure of morale," staff are to combines sophisticated data gathering audits involve rigorous three- to six- be more involved in decisionmaking. Part and analysis with surveys of intended month scrutinies carried out by exam- of the anticipated savings is to be used beneficiaries, particularly those from mi- ining officers drawn from the manage- to "enhance the working environment," nority groups. It has developed a train- ment of the office being investigated. and staff-management communications ing program including courses in cost- "Ministers and their officials are better are to be improved, all with the goal of benefit analysis, performance budgeting, equipped than anyone else to examine helping the civil service to "sustain its and statistical sampling and interviewing the use of resources for which they are sense of pride in a job worth doing well." techniques. Regular regional workshops responsible," said a 1981 note on the Program evaluation in India. The for senior and supervisory staff have be- program. "The scrutinies, therefore, rely Programme Evaluation Organization come an important forum for teaching heavily on self-examination; on applying (PEO) was created to oversee India's techniques and sharing experiences. PEO a fresh mind to the policy or activity under Community Development Programme. programs have also been used to train scrutiny, unfettered by committee or Its success led to its investigating pro- evaluators from Egypt, Philippines, Ni- hierarchy." grams of education, health, rural devel- geria, Malaysia, and Nepal. A staff of nine in the Management and opment, and social welfare. PEO became especially on private debt (which had been grow- prehensive and up-to-date statistics on foreign ing rapidly). Finally, at the project level, the ab- trade. Kenya, through its rural household surveys, sence of effective monitoring and evaluation pro- gathered estimates of food production and pre- cedures has hampered mid-course correction, and pared crop forecasts that proved invaluable in the made it difficult to feed back information helpful drought of the late 1970s. The authorities were in the design of future projects. able to act quickly in organizing transport and distribution of supplies to the drought-stricken Benefits of good data areas. By contrast, the countries of the Sahel re- The rewards of a better information system are gion had poor or nonexistent information on food illustrated by the experience of several countries production, which made it difficult to organize such as Kenya, Bangladesh, India, and the Re- effective drought-relief operations in the 1970s. public of Korea. The export-oriented strategy of Improved data on food supplies helped Bangla- the Republic of Korea was greatly aided by corn- desh tackle food shortages in 1979 much better 72 than it had done in 1974. And in India the recent as current statistics for short-term policymaking, centralization of information on movements of particularly dealing with food and agriculture. railway wagons has helped improve the railways' The administrative records of government agen- efficiency, with spin-off benefits for such indus- cies can also provide valuable information. Al- tries as coal and fertilizers. though they have weaknesses, administrative rec- ords are an inexpensive source of data. The records Statistical priorities of different agencies can often be linked in useful Since it is expensive to collect information, gov- ways: in Malaysia, for example, information on ernments must set themselves clear priorities. This family planning acceptors has been combined with task can be assisted by a medium-term plan for records on births to indicate the impact of the statistical development, as the Malaysian experi- family planning program. The usefulness of ad- ence has shown. Such plans identify not only what ministrative records can be enhanced if statistical figures are required, but also what is needed to agencies are consulted in the design of adminis- collect themequipment, manpower, office ac- trative forms and the development of appropriate commodation, and so on. In many countries, classifications and codes. priorities include financial statistics, covering both All three themes developed in this chapter external debt and government receipts and spend- coordination of planning efforts, reforms of budg- ing. In several countries, however, even the basic etary systems, and monitoring of projectsentail components of the national income accounts and the processing of large quantities of data. They are balance of payments are absent or unreliable; as a therfore all greatly helped by recent advances in rule, these should receive priority. microcomputers and associated software (see Box To assist flexible policymaking, governments 7.6). Being relatively cheap, portable, resifient, and need to make more use of sample surveys and easy to operate, microcomputers are suitable for administrative records. Well-planned and well- work in rural areas and for middle and junior designed sample surveys are relatively cheap in managers who have no special programming skills. comparison to censuses, impose a smaller burden However, their full exploitation does depend on on the statistical office, and can produce thorough accounting systems being rationalized and on the and up-to-date information. Kenya has made wide development of appropriate indicators for pro- use of such surveys; its Central Bureau of Statistics gram monitoring. Both of these changes initially is now able to provide better historical data as well require a substantial investment of skills and time. Box 7.6 The management information revolution The value of microcomputers in process- prove its annual budgeting process. Un- expenditure reports, the ministry has de- ing information is well illustrated by their til then, spending estimates sent to the veloped a printout format that reduces use in Nigeria and Kenya. In Nigeria mi- Finance Ministry were simply the sum the annual budget documents from 100 crocomputers are now handling data from of the estimates proposed by operating stenciled pages to only 5 pages of sum- farm management surveys on nine ag- divisions. Sometimes they amounted to mary information. Where budget short- ricultural projects, three of which cover double the previous year's spending on falls are identified, the computer projects entire states. The first computer was in- agriculture and twice the likely amount the results of alternative budget cut- troduced in August 1981 and was in op- available from the Treasury. As a result, backs. When officials decide to reduce eration two months later. By June 1982 the Finance Ministry was effectively in spending on a particular activity, the seventeen machines were in use, with charge of deciding agricultural priorities. printout immediately summarizes the another eleven on order. Field staff Microcomputers have helped the Min- corresponding reduction in the overall needed only two weeks' training in op- istry of Agriculture regain control of its budget deficit, and shows the average eration and preventive maintenance. They own budget through: percentage cut needed on other activities now enter data directly onto computer Improved management information. in order to stay within Treasury ceilings. files, so avoiding the need to code and With a simplified reporting format, This kind of control has been made pos- cardpunch large numbers of survey forms showing budgets, commitments, and sible by up-to-date expenditure reports, for later analysis. Managers now obtain spending for different subheads on a se- since any requests for more money could reports within a month of survey com- ries of single summary sheets, the min- immediately be compared with recent pletion and they can handle large quan- istry can now calculate expenditure re- performance and inflated requests ad- tities of data bunched at peak seasons. turns within two days of receiving the justed accordingly. Kenya's Ministry of Agriculture raw data. adopted microcomputers in 1981 to im- Clearer ranking of priorities. As with 73 8 Managing state-owned enterprises In all countriesdeveloping and developed, mar- a team of managers with appropriate skills. These ket and socialistgovernments are showing in- are the main topics of this chapter, which ends creasing concern over the performance of their with a review of the issues involved in liquidating state-owned enterprises (SOEs). One reason is that and privatizing SOEs. SOEs make large and growing claims on the bud- get. In a sample of twenty-seven developing coun- The growing fiscal burden tries in 1976-79, the net budgetary payment to nonfinancial SOEs averaged more than 3 percent Accounting deficiencies and different ways of clas- of GDP. Current spending alonesubsidies and sifying SOEs make it difficult to generalize about other transfersrepresented 1.4 percent of GDP. their financial performance or to assess the return State enterprises are also important foreign bor- to capital. Available data for SOEs in twenty-four rowers; nonfinancial SOEs accounted for 28 per- developing countries showed a small operating cent of all Eurocurrency borrowing by developing surplus before depreciation in 1977. However, no countries in 1980. account was taken of interest payments, subsi- Governments, intent on curbing SOE borrowing dized input prices, taxes, or accumulated arrears. and getting value for the money they spend, are Proper provision for these items and depreciation searching for ways to improve SOE efficiency. In would show SOEs in many of these countries to theory, efficiency is highest when an enterprise be in deficit, strives to maximize profits in a competitive mar- Since SOEs often control some of the largest ket, under managers with the autonomy, moti- revenue-earning activities (petroleum and mining, vation, and capability to respond to the challenge for example), their poor aggregate performance is of competition. Inefficient enterprises would not especially disturbing. Evidence from individual be able to compete and would go bankrupt. But countries indicates low and declining profitability. SOEs seldom face such conditions. Governments For example, Turkish public enterprises, which may have established SOEs for reasons quite dif- were breaking even in the early 1970s, averaged ferent fromand often incompatible withprofit net losses equivalent to 3.9 percent of GDP during maximization. SOEs often operate in noncompe- 1977-79. Subsequent policy measures resulted in titive markets; the absence of competition is one a profit of 0.1 percent of GDP in 1981 and an reason for creating them. Their autonomy is often estimated 0.5 percent in 1982. Mexican SOEs (ex- compromised by government intervention in their cluding the state petroleum company), which operating decisions. Managers may not be held earned profits equivalent to 0.3 percent of GDP in accountable for results or given incentives to im- 1970, showed a net loss of 1.2 percent of GDP in prove performance. The way they are selected and 1980. Senegal's SOEs, which had been in surplus rewarded often encourages qualities more appro- in the mid-1970s, recorded a deficit in 1977-78 and priate to a central bureaucracy than to a compet- again in 1979-80, and the number of money-losing itive enterprise. Even nonviable SOEs are seldom companies reached forty-two (out of sixty-eight in liquidated. 1980). The picture is not entirely black; in India, These special constraints on SOEs need not be- for example, the gross pretax return on capital come an excuse for poor performance. Efficiency employed grew from 7.8 percent (before interest can be greatly enhanced by setting clear and at- payments) in 1980-81 to 12.2 percent in 1981-82. tainable objectives, reducing undue interference, Low profitability limits the ability of SOEs to self- holding management accountable for results, de- finance their investments, increasing their de- signing a framework of incentives, and developing pendence on central government resources. Figure 74 FIGURE 8.1 Net claims on the budget of nonfinancial state-owned enterprises Percentage of GDP at market prices 0 2 4 6 8 10 1°78-80 Argentina' 1970-73 Dominican Republic 1978-79 - 1972-73 198 1-82 India 1966-69 Korea, Rep. of 1972-73 1iJ 1978-80 Malawi 1978 1967-69 Panama 1978-79 1970-73 Sri Lanka 1966-6 1978-80 Tanzania 1977 1966-69 Tunisia 1978-81 1968-69 Turkey 1978-79 1966-69 Zambia 1978-80 1966-69 The length of the bars indicates government subsidies, transfers, int6rest payments to government, as a percentage of GDP at and net lending to nonfinancial SOEs, less SOE dividends and market prices. a. Major enterprises only. Sources: World Bank; Peter Short (1983). 8.1 shows how the net claims on the budget have As much as 2.2 percent of GDP in Mali grown for a sample of twelve developing coun- roughly two-thirds of expenditure on education or tries. These figures include legitimate and desir- twice that on health able equity investments by government, of course, Some 1.4 percent of GDP in Bolivia-14 per- but they also reflect the limited ability of SOEs to cent of tax revenue or one and a half times the generate internal resources. spending on health. In an aggregate analysis it is impossible to de- termine the extent to which these results reflect The nature of SOEs general economic conditions or price controls and how much they are caused by a failure to minimize The term "state-owned enterprise" covers all state- costs or maximize productivity. Evidence from in- owned industrial and commercial firms, mines, dividual enterprises indicates substantial room for utilities, and transport companies, as well as fi- efficiency gains. A modest improvement in effi- nancial intermediaries. The number of SOEs has ciency could have significant effect. For example, been on the rise in most countries. Figure 8.2 shows a percent increase in SOE revenues plus a 5 5 the increase in a sample of eight countries. SOEs percent drop in costs would generate resources are distinguished from the rest of the government amounting to: because their revenue comes from the sale of goods Almost 2 percent of GDP in Turkey, or 10 and services and because they are self-accounting percent of tax revenues and have a separate legal identity. Beyond that, Some 1.5 percent of GDP in Tanzania, enough their circumstances and characteristics may appear to finance all its spending on health to vary widely. A state enterprise might be op- 75 FIGURE 8.2 lems of SOEs and suggest ways of tackling them. Growth of nonfinancial state-owned enterprises Of course, suggestions have to be tailored to the number characteristics of individual firms and countries. 0 100 200 300 400 500 A government's approach toward a manufacturing SOE selling in competitive export markets will dif- Brazil I 8,1) 80 fer from its treatment of a large, natural monopoly. The former might be required to maximize profits; India H 80 the latter's prices might be set according to its marginal cost or it might be required to minimize Mexico 1U 80 costs. Similarly, the options of countries will vary. In some countries it might be possible to fire poor Pakistan 74 SOE managers and replace them with better ones. A country with less managerial talent might have Peru 80 no alternative but to try and improve the skills of its less capable managers. Sri Lanka Tanzania Defining objectives Zaire5 81 66 One of the most important and difficult tasks for The length of the bars indicates the number of majority state- governments is to clarify and rank the objectives owned enterprises in selected countries for specific years. of their SOEs. Where state enterprises are ex- Local government SOEs are not included. pected to pursue both commercial and social goals Includes minority shareholdings. 100 percent state-owned enterprises only. and to answer to many different constituencies, their performance will suffer unless they are given a clear sense of priorities. Without that, their re- sults cannot be measured against expectations, erating in a command economy surrounded by while losses can be too easily attributed to social other SOEs, or it may be one of a handful of state goals, and poor management thereby concealed. firms in a predominantly free market. In practice, however, SOEs share many quali- ties. Most economies are a mixture of markets and The cost of noneconomic goals central controls, and whatever the mixture, the problems of trying to ensure SOE efficiency are SOEs are frequently expected to contribute to the strikingly similar. Conflicting objectives, insuffi- broader goals of government policy. The conse- cient SOF autonomy, inadequate measures for quences can be perverse, as illustrated by the ex- judging performance, lack of incentives linked to perience of the Ghana Cocoa Marketing Board (see performance, and bureaucratic rather than com- Box 8.1). For instance, SOE prices may be con- mercial management stylesall these have trolled in order to benefit the poor or to assist prompted attempts at reform in socialist and mar- counterinflationary policies. But SOE consumers ket economies alike. When such reforms fail, the are often large industrial users or wealthy people, consequences are also similar. Every economy finds so theynot the poorbenefit most. For instance, that financial weaknesses in SOEs are transmitted energy and food subsidies in Egypt in 1979 to other public and private firms. They suffer if amounted to more than $4 billion; three-quarters SOEs command financial resources to which others of the subsidies went to the relatively more afflu- might ordinarily be entitled, or if they fail to sup- ent urban areas and 62 percent of these went to ply promised goods or services. the richer half of the urban population. Further- Increased SOE efficiency typically requires in- more, the costs of subsidies are shifted from the ternal improvementsbetter financial manage- consumer to the taxpayer or, if the deficit is fi- ment, more careful inventory control, and a bal- nanced through inflationary monetary expansion, anced production line, for example. But these to the public at large. Given the regressive nature reforms will not solve the wider problems of of taxes in many developing countries and the relations between SOEs and government. This impact of inflation on the poor, the net result may chapter will concentrate on these common prob- be to increase income inequalities. 76 Box 8.1 Conflicting objectives: the Ghana Cocoa Marketing Board Agricultural marketing boards are often tive finally prevailed over the other goals. percent in 1959-60, and by 34 percent in subject to conflicting economic and social Producer prices were initially set to cover 1965-66. objectives. Those principally concerned the board's development and operating As cocoa has become less profitable, with the domestic market for basic food- costs and to allow it to accumulate re- Ghana's production has plummeted stuffs are expected to shield consumers serves. However, the need for govern- from a peak of about 540,000 tons in 1965 (mostly urban) from scarcities and high ment revenues soon predominated: after to about 250,000 tons in 1979. The vol- food prices while simultaneously pro- 1965, the board was no longer permitted ume of exports has fallen by almost 80 tecting farmers' incomes. Boards that deal to hold reserves. The government's share percent over the same period. An esti- mainly with export crops are expected of sales revenues increased from 3 per- mated 45,000 tons a year has been smug- both to raise fiscal revenues and to in- cent in 1947-48 to almost 30 percent after gled to neighboring countries, a foreign sulate farmers from fluctuations in world 1953-54 and reached 60 percent in 1978- exchange loss equivalent to about 15 per- prices. Experience in Ghana illustrates 79. CMB's share of revenues was set to cent of the average value of Ghana's ex- what can happen when one conflicting cover operating costs and rarely ex- ports in 1974-78. By 1979 Ghana had lost objective becomes dominant. ceeded 20 percent; farmers' earnings be- its rank as first world producer and ex- The Ghana Cocoa Marketing Board came a residual. porter of cocoa, which it had held since (CMB) was established in 1947, following As a result of this policy and of the the early 1960s. Many farmers have pressures from farmers to eliminate mid- overvalued exchange rate, the price re- switched to other crops, such as maize dlemen and traders. Initially CMB's stated ceived by Ghanaian cocoa farmers has and rice, which in Ghana yield a net re- objective was to market and export cocoa been declining in real terms since the turn per hectare about twice that of co- and to stimulate the activities of small- early 1960s. By 1979 producer prices av- coa. But this switching still involves heavy holders. After ten years of operation, eraged about half their 1963 level, even losses for the countly. If farmers were to however, CMB's governing legislation after taking account of subsidies on seeds receive even half the world price for co- had been amended by two other objec- and other inputs. Furthermore, the CMB coa and no input subsidies, their net re- tives: to protect farmers from extreme was unable to protect farmers from sharp turn per hectare (at 1979 prices) would fluctuations in world cocoa prices and to price fluctuations. The prices they were be more than seven times that of rice and tax export earnings. The revenue objec- paid fell by 30 percent in 1949-50, by 17 more than fifty times that of maize. Similarly, SOEs are often used to expand em- Setting objectives ployment. The excessive wage bills that result can seriously damage an SOE's financial performance In practice it is hard to define targets for SOEs by while overmanning can be bad for morale. Since an assessment of costs and benefits. Often there SOEs are usually capital-intensive, they can make are strong political motives for keeping objectives only a limited contribution to alleviating unem- fuzzy and not analyzing trade-offs. But since non- ployment. In a survey of seventeen developing economic goals are frequently given as a reason countries in 1982, nonfinancial SOEs were respon- for poor performance, governments should at least sible for less than 15 percent of modern sector view this excuse with skepticism and require SOE employment, ranging from a low of 5.5 percent in managers to document the financial effects of hav- Latin America to a high of 20.4 percent in Africa. ing to meet such goals. Where noncommercial achievements are ex- Some governments have gone further. France pected of SOEs, a government can judge the net and Senegal, for example, have negotiated formal gain (or loss) to society only by making these goals agreements with SOEs to establish a clearer explicit and by calculating their costs and benefits. operating framework (see Box 8.3). Under such But a strong case can be made for letting an en- arrangements, governments pledge to meet their terprise operate on commercial, profit-seeking lines, financial obligations and to eschew ad hoc inter- and then using its profits to achieve social goals. ference; for their part, SOEs accept negotiated per- The profits of an SOE could then be invested to formance targets. The agreements help both par- generate new growth and jobs, rather than si- ties to translate vague intentions into specific tasks. phoned into paying the wages of redundant work- Contracts also make the costs of achieving objec- ers. A commercially oriented SOE can be a most tives more transparent, thus allowing a more ra- effective tool for improving social welfare, as ex- tional consideration of costs and benefits. Their emplified by the experience of the Kenya Tea De- success rests on substantial political commit- velopment Authority (KTDAsee Box 8.2). mentas well as a readiness of both parties to 77 Box 8.2 Autonomy, accountability, and incentives: KTDA The Kenya Tea Development Authority a second payment based on market prices personal incentives to hold the Authority (KTDA) was created as a state-owned en- at the end of each season.) Although the to high standards. Similarly, KTDA's fac- terprise in the early 1960s. It has orga- levy has not changed for the past ten tory managers, workers, and field staff nized the planting of about 54,000 hec- years, KTDA has avoided government are held accountable for results by their tares of tea by some 138,000 smaliholders, subsidies by keeping dovn costs. Good supervisors; their performance is moni- and has become a major processor and performance and support from growers tored and evaluated against predeter- the world's largest exporter of black tea. helped secure independence. mined standards. Thanks to its commercial orientation, From the outset KTDA had control over Incentives. The basic set of incen- KTDA developed an industry that sub- all strategic aspects of tea production: tives for both growers and KTDA is pro- stantially benefits the I million members credit, extension, propagation, trans- vided by world market prices. KTDA has of tea-grower households plus untold port, processing, and marketing. With not tried to insulate itself from that mar- numbers of laborers, traders, and others such authority KTDA could tightly con- ket by building up large reserves (or run- in the economically vibrant tea districts. trol the quality of the teaoften a weak- ning deficits). Sustained market pressure KTDA achieved these results without ness of smallholder production. KTDA is thus used to enhance the drive for operating subsidies, in marked contrast has also moved into factory operations premium tea production by demonstrat- to the generally poor results of small- and thus controlled the quality of pro- ing the direct link between quality and holder tea schemes in South Asia or else- cessed tea. returns. where in East Africa. Its success has had Accountability. Since KTDA's objec- In recent years KTDA has become vul- three ingredients: tives were clearly defined, the govern- nerable to the falling trend in world tea Autonomy. KTDA was set up to be ment was able to develop a set of stand- prices. Its finances have also been threat- a commercial enterprise and was not ards against which its performance could ened by a drop in output because of given many secondary social responsi- be evaluated. Through its representative drought and some shift by growers to bilities. It has never been financially de- on the board, the government holds higher-income crops. Furthermore, KTDA pendent on the government. Its start-up KTDA responsible for results. Added to is moving from a phase of rapid expan- and development costs were financed this, the tea growers sit on district tea sion to one of consolidating its gains, a largely by external borrowing. Its oper- committees and are represented on transition that has been difficult for both ating costs are covered by a flat-rate levy KTDA's board. Some are also sharehold- public and private enterprises through- deducted from the monthly "first pay- ers in KTDA factories or members of fac- Out the world. ment" to farmers. (Growers receive a fixed tory boards. The growers play an im- payment per kilogram every month and portant role since they have strong renegotiate if the contracts are threatened by un- Institutional links between government foreseen economic developments. and enterprise To try and reduce arbitrary intervention by gov- Control without interference ernment, countries have devised institutional ar- rangements that place government at arms' length SOE autonomy needs to be counterbalanced by from SOEs. Boards of directors or holding com- some central control. Unless governments monitor panies have been widely used to create a buffer the performance of their SOEs and make the main between SOE management and the central bu- decisions on investment and debt, their macro- reaucracy, to provide policy direction, and to re- economic management will be undermined, as port on results. Special bureaus, commissions, and Brazil's experience has demonstrated (see Box 8.4). ministries have become a popular way of central- Yet central control can itself be poorly organized. izing information and control of SOEs. All too often, different official agencies intervene These arrangements have a mixed record, show- in SOE decisions that should be the prerogative ing that institutional changes alone rarely achieve of management, and yet government fails to co- a satisfactory balance between independence and ordinate their action. Too much interference can control. Furthermore, arrangements that work well be combined with too little control. In addition, for one country or enterprise may not do so else- policy that swings between autonomy and central where. For example, the successful Ethiopian Tele- control can prevent coherent direction of SOEs. communications Authority has a politically ori- The challenge is to design a system that holds ented board of directors dominated by a minister management accountable for results while giving (see Box 8.5)an arrangement that has proved it the power to achieve them. disastrous in other countries. 78 To avoid such direct political control, many On the positive side, the Istituto per la Ricos- countries rely on holding companies. Some have truzione Industriale (IRI) in Italy has been credited proved a useful way of achieving government aims with cooperating with government to achieve its while giving SOEs greater discretion in day-to-day social goals while freeing the individual enter- operational matters; others have become counter- prises to pursue profits. Nevertheless, IRI has been productive, substituting one form of ex-ante bu- caught between conflicting government aimssuch reaucratic intervention for another. An added as the directive to make profits and yet support drawback of introducing an extra layer of bureau- failing subsidiaries to bolster employment. Hold- cracy is that it also uses scarce managerial re- ing companies can also provide technical assis- sources. tance and managerial talent. Portugal's holding Box 8.3 Contracts between the state and its enterprises: the experience of France and Senegal France policies, particularly in the annual dis- of its long-term implications for the com- cussions of the enterprises' investment pany's debt service and operating reve- The concept of contracts for state enter- programs. Furthermore, the contracts nues. Ultimately, senior ministers de- prises was first introduced in France in made the company's results more trans- cided to concentrate new investment on the late 1960s to increase both the au- parent, by distinguishing between nor- freight, rather than passenger, traffic. The tonomy and accountability of SOE man- mal operations and social objectives. For government also adopted formulas for agers. Initially only two contracts be- example, the railway's contract specified regular tariff adjustments linked to in- tween government and SOEs were that the company be compensated for creases in the cost of inputs (especially signed; four more were added in 1979, losses on passenger lines that it was not fuel) for most enterprises. It agreed to and in 1981 the new government an- allowed to close. Similarly, Air France place limits on staff numbers to protect nounced its intention to negotiate more was compensated for having to operate enterprises from pressures to take on ex- contracts with the expanded state enter- the Caravelle Ills and to split operations cess or ill-qualified personnel. prise sector. By early 1983, eight con- between two Paris airports. Most of the contracts have produced tracts had been signed and more were measurable improvements in SOE per- Senegal being negotiated. formance. SOTRAC has been guaran- The French experience has been mixed. The Senegalese government has negoti- teed regular tariff increases, quarterly The first two contracts were overtaken ated contract plans with five SOEs since payment of a specific subsidy for money- by the 1973 oil shock and subsequent 1980, and is in the process of negotiating losing suburban lines, and financial stagflation; although they contained pro- five more. Although it is too early to support for more buses and a second cedures for revisions, these were not ad- draw any firm conclusions, initial results maintenance terminal. For its part, the equate to cope with the unprecedented are promising and suggest some lessons company has set strict targets for worker conditions of the mid-1970s. A serious for other developing countries. productivity, maintenance, and more ef- deficiency of the agreements was their The preparation of the three-year plans ficient fleet utilizationtargets which, so failure to specify remedies for nonper- helped in strategic planning for the SOEs. far, it has met, Improvements in cash formance. The contract with the electric- It forced them to identify the sources of flow alone enabled SOTRAC to eliminate it)' company provided that the state could their operating deficits, and to articulate its bank overdraft and 30 percent of its suspend the contract if the results were medium-term operating and investment arrears to suppliers in the first year of not achieved, but adjustment rather than goals. Thus, for the first time Air Senegal the contract. The one contract that seems suspension is often the more appropriate and the Dakar bus company (SOTRAC) to have failed did so because of the mag- response. The plans were also weakened calculated losses per passenger-kilome- nitude of the restructuring required to or opposed by the bureaucracy, which ter on certain services that the govern- reduce the company's substantial oper- disliked the degree of pricing freedom ment obliged them to operate. ating deficit. which contracts would have given SOEs. The contracts allowed the government Initially, the effect of the contracts on Despite these shortcomings, the con- to compare more systematically the cost the budget and investment program was tracts have helped clarify relations be- of social objectives and investment pro- not adequately assessed. Nor was pro- tween the state and SOEs. They allowed posals with their benefits. As a result, vision made for monitoring performance the implications of government's pricing loss-making air services to certain remote with agreed sanctions in the case of non- and subsidy policy to be discussed. The areas were cut back. The government also compliance. The Senegalese government medium-term focus of the contracts (most reconsidered a costly investment in pas- is taking steps to remedy this, including covered three to five years) required the senger rail equipment after the railway's six-month joint reviews of contract exe- government to be more consistent in its plan presented a thorough quantification cution. 79 Box 8.4 The control of state-owned enterprises in Brazil Until 1979 the Brazilian government had tary funds, control over the economic and is responsible for approving and moni- no consolidated information on earn- financial operations of SUEs was grad- toring the budgets for 382 SOEs and au- ings, spending, or debt of its SOEs. It ually eroded. Projects were started with- tonomous institutions. These are sum- therefore had no way of comparing con- out adequate provision for their financ- marized in an annual SEST budget solidated public investment with finan- ing, and supplementary transfers were authorized by the president. All foreign cial resources, so public investment often often required to prevent large-scale lay- and domestic credit operations by these exceeded the amount of money actually offs and defaults to suppliers, contrac- SOEs require prior SEST approval, as do available, thus increasing inflation and tors, and creditors. any proposals to create, expand, or liq- the country's foreign debt. Faied with growing inflationary pres- uidate any state enterprise. So far the In addition to their own revenues sures and a deteriorating balance of pay- Planning Ministry and SEST have been earned on the sale of goods and services, ments, in 1979 the government intro- primarily concerned with setting and en- the SOEs received substantial transfers duced a series of significant reforms. It forcing firm-by-firm ceilings. They have from the government. These included phased out most of the SUEs' earmarked not become seriously involved in eval- earmarked tax revenues, credits from of- taxes, and centralized authority over SUE uating SUE investment plans, but this ficial financial institutions, inter-enter- finances in a new agency in the Planning may change as a result of the first multi- prise transfers, and loan guarantees. With Ministry, the Special Secretariat for Con- year consolidation of government in- the multiplication of these extrabudge- trol of the State Enterprises (SEST). SEST vestment programs in 1982. Box 8.5 Ethiopian Telecommunications Authority The Ethiopian Telecommunications Au- transport and communications. Its com- managers accountable a,d removing them thority (ETA) has expanded its telecom- position gives the board a political, for poor performance. munication services rapidly, and in the policymaking orientation. The compa- By channeling its objectives through main cities quality is considered good for ny's general manager, in contrast, is re- the board, the government has helped a developing country. For example, pe- cruited from the ranks of ETA, and is avoid putting conflicting demands on riodic checks show that less than 2 per- expected to run the company as a com- ETA. ETA's board has powers that in cent of test calls fail due to congestion mercial operation within the guidelines many other countries are vested in sev- or faulty equipment. ETA's telephone set by the board. While board member- eral different ministries and agencies. It service is one of the least expensive in ship has changed frequently, there has sets tariffs, hires and fires the general Africa, yet it has generated a good fi- been reasonable continuity in ETA's top manager, and gives final approval to the nancial rate of return on net assets. This management, with only six general man- company's staffing plan, budget, and in- allows it to make a reasonable contri- agers since 1952. vestment proposals (with the exception bution to its investment; 33 percent of The board conveys the government's of foreign borrowing, which must also the latest program will be financed in- general objectives to the firm's manage- be approved by the minister of finance ternally. Labor productivity is high for a ment, which then draws up a five-year and the planning authorities). The board developing country: ETA has 50 staff per corporate plan for review and amend- has not interfered in the daily operations 1,000 telephone lines, compared with 75 ment by the board. ETA's current plan of the company. The general manager to 150 staff per 1,000 lines in most Af- responds to the priority the Ethiopian can fire incompetent staff, compete for rican countries. government has assigned to increasing funds in the domestic capital market, and The Authority is run by a policy- rural services. The company also submits make the necessary decisions to imple- making board and a professional man- an annual budget with quantitative tar- ment the plan. ager. Board members are all government gets; at the end of the year the board officials; the chairman is the minister of compares results against targets, holding company, Instituto dos Participacoes do Estado experiences elsewhere. Pakistan, for example, cre- (IPE), for instance, helps subsidiaries negotiate ated a Board of Industrial Management (BIM) in credits if they also agree to undertake reforms. IPE 1973 to direct twelve corporations (with about fifty also recruits experts to assist its subsidiaries in production units) on the model of Italy's IRI. The improving corporate planning or management in- reports of two government commissions found that formation systems. It also provides training and BIM had drastically reduced the production units' finances outside studies. operating autonomy and weakened managerial Such merits need to be set against less favorable authority. It was therefore abolished in 1978. 80 A different approach to decentralizing has been for four reasons: many SUEs are monopolies; the tried in several Eastern European countries (East profit relevant for society is different from private Germany, Bulgaria, Poland, and Romania), where profits; many SOE objectives conflict with profit a new administrative level has been put between maximization; and market prices may be distorted. the ministry and the enterprise. Here again, ex- These qualifications need not negate the use of perience shows that structural changes by them- profits as a guide to performance. selves are not enough to alter the underlying bal- Monopoly. The best way to end monopoly ance of power. The centrale in Romania, for example, power is to introduce competition. Where that is were created in 1968 and given certain minor pow- not possible, the prices of a monopoly SUE can ers over enterprise investments, borrowing, input be set according to its marginal costs (see discus- supply, and marketing. But the ministries contin- sion in Chapter 6); the SOE can then be instructed ued to intervene directly both in the enterprises to maximize profits. If that produces unacceptably and in the day-to-day operations of the centrale. high prices, the enterprise can still be required to Some countries have centralized control in gov- minimize costs. Although adjusting administered ernment bureaus or specialized ministries. India, prices typically involves practical and political for example, created the Bureau of Public Enter- problems, the long-run benefits can be substantial. prises (BPE) as part of the Ministry of Finance in Accounting for public profits. Some items (such 1965. In 1979 Brazil set up the Secretariat for the as interest payments) can be excluded from public Control of State Enterprises, and in Pakistan the profits so as not to encourage SUE managers to Ministry of Production controls all state-owned waste time on, for example, interest arbitrage, which manufacturing enterprises. These bodies are re- may be deemed irrelevant to their tasks. Targets sponsible for setting performance standards (or can also be set for activities such as investment, expenditure limits in the case of Brazil), evaluating maintenance, and research, which might not be results, and approving debt and investments. The compatible with short-run profit maximization or BPE collects and analyzes data on India's SOEs cost minimization. and in 1982 set performance targets with the en- Conflicting goals. If the SUE is required to terprise managers. It also gives technical assist- perform noncommercial roles that reduce its prof- ance and training, does special studies, and pro- its (such as hiring extra staff to increase employ- vides guidelines in such areas as wage settlements. ment or setting up a plant in a particular area to Central bodies thus obtain valuable information promote regional development), the government on SOEs, a prerequisite for effectively assessing can reimburse it for the extra costs or reduce its and controlling performance. However, some- profit target accordingly. Careful calculation is times they become involved in unnecessary detail; needed of the cost of noncommercial goals: if the one such body has set standards for factory pe- subsidy is too high, the incentive for the company rimeter fencing. Central bodies can play a vital to improve its efficiency is reduced. role in monitoring performance or they can be- Distorted prices. These can be rectified by us- come an annoying bottleneck obsessed with trivia. ing shadow prices for assessing SUE results. Their role depends largely on whether a govern- Shadow prices are calculated to reflect the oppor- ment is concerned with short-term goals, such as tunity costs of an enterprise's inputs and outputs. implementing austerity programs or curbing SOE For example, the price of imported fuel may be abuses, or with the long-run process of changing held down by a government subsidy, but SUE relations between SOEs and government. accounting should value it according to its world price to ensure it is used efficiently. Holding managers accountable for results The results derived from shadow-price account- ing can differ widely from conventional profits and There are strong arguments for creating conditions losses, as one study of SUEs in Egypt demon- in which SOEs can be instructed to maximize prof- strated. In almost all twenty-seven industries sam- its and then be judged by that standard. Profit is pled, the financial rate of return calculated on the a composite indicator that applies positive weights basis of extensively controlled market prices pointed (prices) to benefits (outputs) and negative weights in opposite directions from the economic rates of to costs (inputs). If the weights are correct, a profit- return based on shadow prices. Industries pro- maximizing firm strives to achieve maximum ben- ducing oils, soaps, and detergents showed a 14.4 efits for minimum coststhe definition of effi- percent economic rate of return, yet financial prof- ciency. For SOEs, this criterion needs modifying itability was negative; nonferrous metals earned a 81 Box 8.6 Performance evaluation in Pakistan Pakistan's performance evaluation sys- mate the divergence between market efits (such as planning, maintenance, tem, launched in 1981, uses "public prof- prices and real economic costs. Where training, or innovation). Government and itability" as an indicator of performance. that is not feasible, a second-best remedy SOEs will therefore negotiate extra tar- "Public profits" are private profits ad- is to use shadow prices that reflect true gets for these areas, assigning them justed for those elements not deemed economic costs. Shadow prices, how- weights that vary over time and from relevant to an SOE. For example, taxes ever, are complex and controversial to one company to another. A finn will first and interest, which are private costs but administer. Pakistan is therefore judging have to show that it can use existing re- public benefits, are excluded so as not to its SOE managers, for control purposes sources efficiently; hence, 90 percent of encourage SOF managers to devote time only, by trends in public profit at con- its initial target may be assigned to public to minimizing taxes or to interest arbi- stant prices; that is, constructing a quan- profitability. trage. Rather, public profitability aims to tum index of profits based on quantum At the end of the year the performance encourage managers to maximize net indices of inputs and outputs. This is an of each SOE will then be rated according economic benefits, judged from a na- acceptable approximation of efficiency in to how close it came to meeting its com- tional perspective. Costs of noncommer- performance evaluation (though not in posite target. The monitoring and eval- cial objectives (such as the extra cost of project evaluation), since it is concerned uation will be done by the Experts Ad- purchasing from local suppliers to en- with the trend rather than the level of visory Cell, a semi-autonomous agency courage domestic industry) are deducted performance. All enterprises will be responsible to the Ministry of Production before profits are calculated and treated judged on the basis of their return to but financed by a levy on the SOEs them- as an "in-kind" dividend to the govern- fixed operating assets, or public profit- selves. The Cell has been able to main- ment. ability in constant terms. The perfor- tain a remarkable degree of indepen- Since many prices are administered and mance of any individual firm will be dence and, because it is outside the civil there are problems of monopoly pricing, compared with its record over the past service system, to attract a specialist staff. market prices may not reflect true eco- five years, to make allowance for the fact At a review meeting with the Cell, man- nomic scarcity. Since SOE managers gen- that some enterprises operate under agers will be able to present an expla- erally cannot affect prices, it would be greater handicaps than others. nation of their results. The government unfair to reward or penalize them for the Used in isolation, public profitability proposes to reward good performance effects of changing prices on profitabil- would encourage managers to ignore ac- with a salary bonus. ity. The ideal solution would be to elim- tivities with current costs but future ben- 15.5 percent financial rate of return, but the eco- countries the internal management information nomic return was negative. Not only would it be systems of SOEs are deficient or nonexistent. SOEs misleading to judge an SOE on the basis of its (as well as private companies) are not audited ac- financial performance, but a manager reacting to cording to uniform standards; more than seventy financial signals under these circumstances would developing countries have no accounting stan- make the wrong economic decision. Shadow prices dards. Trained accountants are scarce, because in can be complex to calculate and administer, so the many developing countries (outside Latin Amer- best solution is to move market prices closer to ica) accounting became part of the university cur- them by removing distortions wherever feasible. ricula only after 1960. Even now there are often While these four refinements have been exten- no uniform standards of training. sively analyzed in theoretical work, their appli- These weaknesses are gradually being rectified. cation has proven practically and politically diffi- Many francophone West African countries have cult. Some countries are moving to overcome these tried to adapt France's accounting model to their problems. One system for judging the perfor- needs. This programthe OCAM plan comptable, mance of manufacturing SOEs in Pakistan is de- started almost twenty years agohas met with scribed in Box 8.6. The Republic of Korea and mixed success. But its application has been too Venezuela have also initiated similar projects that inflexible, with too much reliance on expatriate will tackle the more complex problem of evaluat- experts and too little attention paid to local ac- ing enterprises responsible to different ministries. counting capabilities. In Senegal the accountancy profession has proposed a two-tiered system, with Information on performance annual external audits conforming to internation- Assessing SOE performance requires a regular flow ally accepted procedures required for all compa- of reliable information. But in many developing nies above a certain size and "limited review au- 82 dits" for all other companies. The latter would. be another domestic producer. Where it is possible stricter than the current standard but less com- to do so, however, exposing SOEs to competition prehensive (and cheaper) than full-scale audits. can be a simple and effective way to promote their The development of uniform and credible, ac- efficiency. And if managers are required to pursue counting requires a trained body of practitioners noncommercial goals for political or social reasons, as well as a system to set and review standards competition will help to quantify the costs of those and to qualify accountants. This foundation can goals. Thus Peru recently reduced tariffs and elim- be built up by designating responsibility within inated import quotas to force industries to com- the government for the development of account- pete with imports. ing; establishing accounting standards backed by Another possibility is to split large public mon- an appropriate legal framework; assessing staff opolies into smaller competing units, especially if needs and designing training for bookkeepers and the monopoly did not benefit from economies of accountants; and fostering a professional associa- scale. In Hungary, for example, at least 130 new tion that could assume responsibility for enforcing enterprises were established by breaking up hor- standards. izontal trusts and large state firms. For competi- Formal accountancy procedures are not the only tion to be fully effective in promoting efficiency, way managers can improve the information on these measures must be accompanied by pricing which they base their actions. Improvements can freedom. Privileged access to subsidized credit and also be obtained through a management audit, inputs would have to end. Also, managers must which requires the firm to establish and adhere to be given discretion to respond to competitive pres- a basic information system and routine control sures, which may mean reducing staff or ending procedures. As with a financial audit, an outside unprofitable services. The enterprise might also auditor would check that these procedures func- have to be reimbursed for the extra costs of meet- tion properly and generate reliable data that man- ing social goals. agement and government can compare with tar- Organized public pressure is another way of gets. Many large accounting firms can now assist encouraging SOE efficiency. Britain, for example, enterprises in setting up and using management- has consumer councils. Although they have no auditing systems. executive powers, they monitor the service pro- A somewhat similar management tool is the ac- vided by public monopolies and act as a proxy for tion plan, designed to focus efforts on improving market forces. The Electricity Consumer Council efficiency and monitoring results. The experience examines not just tariffs but also power cuts, de- of the Bolivian railways illustrates how action plans lays in connections or repairs, and responsiveness work in practice. The railway had three action of staff to customer inquiries and complaints. plans between 1973 and 1979, with objectives that Clients can also induce efficiency; accountability ranged from reorganizing workshops and repair- to growers was an important factor in the success ing rolling stock to rehabilitating and maintaining of the Kenya Tea Development Authority. SOEs track. Monitored targets included the average per- can be required to publish timely annual reports centage of total cars and locomotives in operating and accounts, to be tabled in Parliament or made condition during the year, the number of staff, the publicly available. Chile, for example, recently re- turnaround time for maintenance, and the amount quired state companies to publish their financial of track to be rehabilitated. Action plans specify balances in the newspapers. the measures to be used to achieve the targets (such as training or allocation of foreign exchange Appropriate managerial incentives and skills for the purchase of spare parts) and the timing. Institutional success is often attributed to the pres- Pressure from corn petition, the public, and clients ence of "a good manager." Competent staff are no doubt essential for any efficient enterprise. They Governments cannot always arrange for their SOEs do not operate in a vacuum. They need incentives to be exposed to competition. Many state firms to attract and motivate them, and the power to be are monopolies producing goods and services that effective. are not traded internationally or that the govern- Incentives linked to results. Some of the most ef- ment prefers to produce domestically for reasons fective rewards are nonpecuniaryrecognition, of national security or public interest. In other greater responsibility, promotion, and national cases, the economy may be too small to support honors. Autonomy can also be a strong incentive 83 for SOE managers. For example, the threat of los- vacant or are filled by unqualified staff. For ex- ing its independence motivated the management ample, in Tanzania half of the ten large agricul- of the Kenya Tea Development Authority. By the tural SOEs had no financial manager in 1980. In same token, managers need to know that they face the Nigerian Electric Power Authority, thirty-five penalties for poor performance, such as losing their of eighty-seven higher management posts were jobs. vacant in 1981. The lack of competent middle man- As for pecuniary incentives, few countries have agers often leads general managers to take over used performance bonuses or profit sharing to mo- lower supervisory functions. In a centralized sys- tivate top management. An exception is Mexico, tem they may also be the only point of contact which distributes 7 percent of SOE profits to all with outsiders. The organization thus becomes too employees in proportion to their salaries. In Hun- dependent on its chief executive. gary, ministries judge the size of bonuses to senior The shortage of managers also contributes to a SOE managers by reference to such factors as prof- high rate of turnover, as competent people are itability, exports, development of new products, shifted around to head troubled SOEs. A study of and punctuality of deliveries. Many more coun- nine countries in sub-Saharan Africa found that tries award performance bonuses to workers, and the average tenure of SOE general managers in their experience reveals some of the difficulties the 1970s was less than two years. Even countries involved. Bonuses run the risk of becoming so without a managerial shortage change SOE man- automatic and large that they are treated as part agers with damaging frequency if selection of top of everybody's salary; they are not easily related managers is based on nepotism or political pa- to the actions and decisions of individual man- tronage. To counteract this, some countries (such agers. To be effective, profit-sharing schemes re- as India and Brazil) have set up management se- quire that managers affect profits and that profits lection boards to nominate candidates on merit be a fair guide to performance. Otherwise man- alone. Continuity of top management is especially agers of SOEs in which profits are inherent in their important in a company's formative years. Fur- operating conditionssuch as many petroleum or thermore, continuity allows a good chief executive electricity companieswould be enriched, while time to attract and retain talented middle man- a manager who stems chronic losses might go agers. For example, the Hindustan Machine Tool unrewarded. Company, one of the most successful Indian SOEs, Appropriate managerial skills. The skills of a public was also one of the few public corporations in enterprise manager need to be closer to those of India to have the same chief executive for almost his private sector counterpart than to those of a fifteen years. government bureaucrat. Nevertheless, in some In certain specialized areas (mining in Zaire, for countries managers are part of the civil service, or example), management contracts with expatriate at least subject to its pay scale. Even where this firms have helped alleviate the shortage of man- is not the case, their pay seldom matches private agers. Another step is to give priority to mana- salaries. Although the prestige and challenge of gerial development in SOEs. In the past, more running what are often the largest corporations in attention has been paid to technical expertise for the country may sometimes compensate for lower SOEs than to their managerial requirements. Al- pay, low salaries tend to deter skilled managers though SOE management training does not lend and increase staff turnover. To give one of many itself to centralized direction, governments can en- examples, salaries in a Turkish public utility av- courage SOEs to earmark funds for training. Some eraged one-third those of the private sector in 1981 of the largest have their own management training and the company has had seven general managers centers but most rely on business schools, man- in the past ten years. In addition, good SOE man- agement consultants, expatriate advisers, and for- agers who face frequent unjustified interventions, eign suppliers or collaborators. or whose achievements go unnoticed for want of "Twinning" an SOE with its counterpart in an- a system to evaluate them, tend to become dis- other country has proved an effective way of trans- gruntled and leave. ferring know-how and training staff. Companies The growing number of SOEs has contributed offering technical assistance as twins are not ex- to a chronic shortage of managers in many sub- clusively from North America and Europe. Among Saharan African and South Asian countries, a many examples from developing countries are the shortage sometimes exacerbated by programs for Port of Singapore, the National Irrigation Agency rapid indigenization. Many senior posts are left of the Philippines, and the Tunisian Water Au- 84 Box 8.7 TANESCO: a study in institution building The Tanzania Electric Supply Company risen from 20 percent in 1964 to 85 per- opment. Limited (TANESCO) was founded as a cent in 1980. In 1968, TANESCO estab- The "twinning" of TANESCO and the private company in 1931 and acquired by lished its own technical training insti- Electricity Supply Board of Ireland (ESB) the government of Tanzania in 1964. It tute, which was developed with in 1977 had a decisive influence on the now operates as an SOE under the spon- assistance from the Swedish Interna- development of the company's man- sorship of the Ministry of Water and En- tional Development Agency. European agers. During the first year of the scheme, ergy. TANESCO has more than 6,000 and Indian expatriate staff provided on- about twenty TANESCO staff members employees and produces about 98 per- the-job training. By 1974, after the first were given from three to twelve months' cent of the country's electricity con- stage of the company's literacy program, training in Dublin followed by a brief sumption. all employees were able to read and write. period of on-the-job training with ESB or Management continuity and a firm Between 1976 and 1981 TANESCO sent in similar utilities in the United Kingdom commitment to staff training have been fifty staff overseas to obtain engineering and the United States. Both "twins" took critical to TANESCO's development. Over degrees. The first Tanzanian general great care to design a training program the past twenty-eight years, it has had manager, who was appointed in 1973 and that fitted TANESCO's needs. When the only four general managers, and many retired in 1981, used foreign manage- trainees returned to Tanzania, their of its senior staff have been with the ment consultants to reorganize the utility shared experience in Ireland helped them company for at least ten years. The pro- on functional lines and expanded the to work better as a team. portion of Tanzanians in senior posts has programs for training and staff devel- thority. The more-developed SOE may temporar- eral occasions. Finally, in 1980 and after fifteen ily provide its twin with some of its own staff as years of losses, it was liquidated. advisors and trainers, may make periodic visits to This case also illustrates the need for a proper give technical assistance, or may employ the staff legal framework to allow speedy liquidation. of its twin at its own facility for on-the-job training Peruvian law makes it almost impossible to dis- (see Box 8.7). miss workers (in both the public and private sec- The administrative burden placed on SOE man- tors). Although the company offered its staff a agers may be partly caused by their diversion to bonus over and above required severance pay to extraneous activities. For example, in Peru the leave, for more than six months after the plant management of a public fishing plant also runs a was shut down a small group of workers contin- hotel. While diversification can be profitable and ued to report for work each day to receive their logical, it is often done for the wrong reasons and, wages. Until all the staff had left, the assets could by straining resources, damages the SOE's main- not be sold. stream activities. Liquidation and other forms of divestment give the government the flexibility to put resources to Liquidation more productive use. Since these gains have to be weighed against short-term costs, vested interests By saving the economy the burden of nonviable often deny the state the possibility of even con- enterprises, liquidations act as a major force for sidering the optionto the long-run detriment of efficiency. Because of the financial and social con- the economy. sequences, however, governments are reluctant to let big firms close, whether they are in the public Divestiture or the private sector. Even among small firms, SOEs are seldom liquidated. But the costs of keep- Selling state-owned enterprises is another way of ing nonviable companies alive are considerable easing their administrative and financial burden fiscal drain, administrative demands, and waste on the state. A number of governments, including of potentially productive resources. To take an ex- Bangladesh, Brazil, Chile, Italy, Jamaica, Republic treme case, in Peru a freeze-drying plant owned of Korea, Pakistan, Peru, Philippines, United by the state was built without adequate study of Kingdom, and Zaire, have divested or are plan- the market or its suppliers of raw materials. From ning to divest SOEs. Generally, however, the the start, the firm's production costs exceeded its number and importance of the enterprises sold is revenues. It was shut down and reopened on sev- not large. 85 After an initial attempt to promote industriali- privatization; it may even reduce the attendant zation through state ownership, the Japanese gov- political controversy. Leasing can also be a prom- ernment in the 1880s sold many state firms, in- ising route to divestiture: a private manager might cluding fifty-two factories, ten mines, and three be brought in to run a potentially profitable en- shipyards. Between 1974 and 1980, Chile sold some terprise for a share of the profits and an option to 130 state enterprises, with a value 6f more than buy. $500 million. (In addition, more than 250 enter- prises nationalized between 1971 and 1973 were Agenda for reform returned to their former owners.) Despite these measures, in 1979 the eight largest Chilean com- This chapter has suggested ways of improving SOE panies (in terms of net worth) were still publicly efficiency, concentrating on the problems that are owned. common to most SOEs in most countries. Judging Other privatizing programs have been far more from what is known about the ideal conditions for limited. Brazil created a commission for divestiture operating efficiently, it has examined how the real- in 1981: by mid-1982 it had sold ten enterprises ity of SOEs differs from the theoretical ideal. By and was in the process of selling another thirty- recognizing the SOEs' special circumstances and six, while ten other SOEs have been legally dis- constraints, it is possible to develop an agenda for solved. Jamaica has set up a divestiture committee reform that would correct some of their main which has sold three enterprises and leased four weaknesses: hotels. Pakistan denationalized some 2,000 rice, Setting clear-cut and attainable objectives is flour, and cotton mills, while Bangladesh returned the inescapable first step toward improved SOE 35 jute and 23 textile mills to the private sector. performance. The costs of noncommercial con- Although divestiture can produce important net straints placed on SOEs should be calculated and gains to society when the costs of public operation weighed against the benefits to society. outweigh the benefits, it has been hard to imple- Once constraints have been identified and ment. It is politically sensitive and prompts charges costed, governments can instruct many SOEs to of corruption. In addition, governments often try maximize their profits, taking into account other to sell only their money losers, for which there objectives that reduce profits by reimbursing the are few buyers. Even profitable nationalized com- companies or lowering their profit targets. panies may be hard to sell. An informal survey of Where there are price distortions, shadow the potential market for Peruvian SOEs found that pricing offers a way to assess SOE performance likely buyers were reluctant to purchase even fairly consistent with economic efficiency. The better al- small companies. The reasons given included fear ternative is to move to market pricing (or marginal of renationalization and concern about extensive cost pricing where market pricing is not feasible). government regulation of formerly public firms. This would encourage greater efficiency by giving These perceptions may mean governments have the correct market signals to managers and con- to accept a lower price than the market value for sumers. Although market pricing typically entails a similar private firm. Both Chile and Japan sold short-run political problems and costs, the long- most of their state firms on attractive terms. run benefits are substantial. Another reason divestiture is so difficult in de- Negotiated agreements, such as contracts or veloping countries is the absence of a strong cap- corporate plans, can help put relations between ital market. Public companies are often large and SOEs and government on a more constructive domestic investors may not be able to raise enough plane. In particular, two-way contracts can help capital to buy them. And selling large SOEs to win SOE management over to the idea of reform oligopolists who already dominate the private sec- by laying out benefits as well as responsibilities. tor might reduce competition. It could also result Once government has laid down objectives, in unhealthy ties between financial institutions and managers can be made responsible for choosing industry, further reducing the flexibilty of capital the methods of achieving them. markets. Systems for monitoring and evaluating per- Efforts to develop the stock market, and schemes formance are needed to transform good intentions that appeal to small savers through their pension into results. By promoting domestic and interna- funds, could make it easier for governments to tional competition and encouraging consumers and divest. Spreading ownership more widely and di- other customers to make their views known, gov- vesting only gradually can improve the chances of ernments can add to the pressures for good SOE 86 performance. Some of the most powerful incen- fearing an end to subsidized outputs, suppliers tives are nonpecuniary (recognition, prestige, fearing reduced SOE spending, or even from SOE awards). competitors (some private companies profit nicely Managerial ability is a key to the success of when prices or incentives for a sector are geared SOE reform. Managerial incentives linked to per- to allow an inefficient SOE to survive). formance are important in motivating top man- Since these elements are interrelated, a piece- agers. Compensation and training should be geared meal approach is unlikely to achieve the desired to create a corps of competent SOE managers with results. Without clear objectives there can be no appropriate skills. Efforts should also be directed standards by which to judge performance; without at encouraging continuity of senior staff. accountability few governments would increase The managerial and fiscal burden of SOEs can SOE autonomy; autonomy becomes license with- be reduced by liquidating nonviable enterprises as out performance evaluation; incentives can be linked well as by selective sales. These should not be to performance only if there is a meaningful way treated as instant solutions, but rather as integral to measure results; performance evaluation makes parts of the process of replacing the burden of sense only if managers have the autonomy to in- central administration by decentralized market fluence outcomes; without performance evalua- forces. tion there is no way to distinguish good managers With strong political backing, this agenda is fea- from bad. Developing a framework to guide SOEs sible. In any administrative system there are strong toward efficiency is thus a lengthy, complex pro- vested interests opposed to change. Opposition to cess that requires commitment, persistence, and reform may come from managers of powerful SOEs flexibility on the part of state authorities and en- or senior government bureaucrats fearing loss of terprise management. power, labor unions fearing job cuts, SOE clients 87 9 Project and program management The growing number of development projects and the management approaches needed in physical programs has strained the managerial capacity of and in people-centered development. The final governments in all developing countries. This trend section reviews the management problems that is likely to continue in the 1980s as population arise when projects and programs involve several increases and expectations rise. While lhere is no implementing agencies. Again, there is a contrast general formula for avoiding management strains, between physical projects, which can rely on con- experience has revealed ways of easing them. tracts between agencies, and people-centered pro- The requirements of project management vary grams, which need continuous informal contacts widely according to the nature of the project and among field staff. the number of objectives and agencies involved. In particular, management techniques appropriate Managing physical development for physical projects (building and maintaining in- frastructure, operating industrial plants and utili- Construction projects enjoy a big advantagethe ties) differ significantly from those needed in peo- availability of technical solutions; and suffer from ple-centered development (small farmer agriculture, two common weaknessesthe easiest solutions education, family planning, health and nutrition; are not always the most economically efficient, and infrastructure and housing projects where and financial constraints can delay projects and beneficiaries participate in design, construction, or starve them of resources for maintenance. maintenance). In general, methods in physical Well-defined technology. Fertilizer plants, refi- projects are well understood: constructing and op- neries, dams, highways, and other projects are erating an oil refinery may not be simple, but the broadly alike in that they are built according to technology is well specified and can be applied in well-defined methods, Technical problems can still different countries and cultures. The main man- arise, of course, but the techniques for solving agerial requirements are to train and motivate staff them are generally available to management. Where and to strengthen operational control. Because skills are lacking domestically, they are universal performance can be measured in terms of physical enough to be imported. For example, a scheme in output, there is much scope for reinforcing gov- southern Sudan to build the large Roseires dam ernment efforts by using private contractors. used designs by French and British consultants, In contrast, less is known about how to change and was managed by an Italian contractor. Despite patterns of behavior so that people adopt new its remote location and consequent transport dif- farming methods or birth control, because cultural ficulties, the dam was built in five years instead influences predominate. These uncertainties about of six, and for 97 percent of the estimated cost. people-centered development are combined with Economic efficiency. The fastest and easiest op- less managerial control, since success depends on erational solutions are not necessarily ideal in eco- stimulating peoples' voluntary participation. Man- nomic terms, however. Developing countries with agement therefore requires experimentation, flex- abundant labor ought in theory to avoid capital- ibility, and a willingness to work closely with pro- intensive construction techniques, yet they often gram beneficiaries to learn about, and respond to, lack the capacity to manage large labor forces. Nor local needs. Governments often find programs in- do some countries do much to encourage the de- volving the poorest are the most difficult to make velopment of such a capacity. For example, a key effective. The answer to this dilemma is not to criterion for promotion of government engineers give up, but to build steadily on experience. is often their experience in managing machinery. The first two sections of this chapter contrast Such biases can be reduced by the creation of labor- 88 based construction departments offering security and cost overruns, is an example. Problems arise and prospects of promotion, as Honduras did for partly because commitment to operating efficiency highway construction in 1976. is harder to sustain than commitment to the short- Financial constraints. New construction is often term goal of completing a building. But it is also smoothly implemented because it is politically at- because, unlike one-time construction projects that tractive and therefore given financial priority. can be managed with foreign technical assistance Nonetheless, delays are still common, and not where necessary, continuous production or serv- simply because of bureaucratic procurement pro- ice operations must depend on local managers. cedures or supply problems. Budgetary shortfalls Their expertise can be developed only over long also occur, and are made more damaging because periods. many construction projectsdams, roads, facto- Skilled top management is often seen as the key riesare indivisible. They cannot be scaled down to operating success, yet outstanding senior man- or modified in response to financial constraints. It agers are scarce and cannot run large institutions is therefore particularly important that govern- single-handed. The case of PUSRI in Indonesia ments make realistic provision for construction (see Box 9.1) illustrates the importance of a long- projects in their budgets (discussed in Chapter 7). term development' strategy for training middle management and workers, and for building phys- ical and financial control systems to monitor per- Operating physical projects formance. The managerial task also varies from Chapter 8 explored in detail the problems raised project to project. Sometextiles, cement, power when managers of physical projects are set several and chemical plants, for examplehave relatively (often conflicting) goals by government. Yet even simple technologies, needing relatively few skilled when managers have clear goals and real auton- staff. Otherssuch as steel productionare harder omy, physical projects generally cause more trou- to manage because they involve many processes ble during their operating, than during their con- in which human skills are critical and error costly. struction, phase: the troubled history of Togo's Managing large work forces is difficult in any CIMAO clinker plant, built with only trivial time country, but developing countries face special Box 9.1 PUSRI: a long-term strategy for management development PUSRL Indonesia's largest fertilizer com- PUSRI's training program draws on ex- F'USRI has also earned the confidence of pany, has an international reputation for pertise from abroad and from local government, which ensures its contin- efficiency in both construction and pro- universities, its emphasis is on technical, ued autonomy. duction. Its two most recent expansions, financial, and marketing skills immedi- The company's personnel policy sees supported by foreigr aid and totaling $135 ately relevant to employees' day-to-day training and incentives as part of a single million, were completed in 1977, one tasks. Production directors regularly lec- package. Incentives come partly in the month and four months ahead of sched- ture in the classroom, and much of the form of fringe benefitshousing, trans- ule. Efficient cost control and higher-than- training takes place on the job. port, and medical facilitieswhich may anticipated capacity utilization in the early PUSRI pays special attention to devel- be as important to employees as their years of production helped to produce oping skills in financial management, basic salaries. But the company also uses rates of return significantly higher than since there is no specialized accounting training schemes as an incentive in initial appraisal forecasts. PUSRI's suc- education in Indonesia. Foreign consult- themselves. Training is not limited to cess at home has led to a contract to train ants were brought in to establish cost PUSRI staff; other fertilizer companies in Bangladesh nationals in fertilizer pro- centers and to improve procurement, Indonesia put their technicians and man- duction, and to a joint venture with Kel- management information systems, cap- agers through PUSRI courses. The pros- logg to build plants in other developing ital budgeting, and financial planning. pect of career advancement outside the countries. This attention to financial management company encourages PUSRI staff to seek An outstanding general manager goes far beyond the needs of the official further training to upgrade their skills. helped get PUSRI off the ground in 1959. government audit, which is concerned By consciously training more staff than But the company's subsequent success mainly with compliance with regula- it can handle, PUSRI has turned staff was due to its strong and stable technical tions. It has ensured the company's fi- "wastage" into a valuable incentive. and middle management team and to ef- nancial success, and thus a prestige that fective financial control systems. While helps to attract and retain competent staff. 89 problems. They often need to train many people tenance operations are typically less efficient than from scratchfor example, more than 3,000 in the either. This is partly because successful mainte- Vinh Phu pulp and paper project in Viet Nam, nance provides no visible result, and so can seem which was constructed with assistance from Swe- dispensable. Maintenance and rehabilitation pro- den. And managers may need to overcome cul- grams depend on continuing budgetary support, tural barriers in getting workers to adapt to the but are often neglected in favor of new projects discipline demanded by productioi% lines. (discussed in Chapter 7)a "capital bias" that is Operating performance is also affected by the shared by foreign development agencies. number of links joining the individual enterprise Large, dispersed maintenance programs are par- to the rest of the economy. To operate efficiently, ticularly hard to supervise and control from the the Vinh Phu paper plant depends on forest plan- center. Experience with highway maintenance tations, water treatment and power plants, local illustrates three ways of responding to these schools and health centers, and road, rail, and difficulties: river transport. Many of these services are outside Force account operations (whereby govern- the control of the project's managers. ment departments carry out maintenance them- Having few customers or suppliers greatly sim- selves) can counter the lack of a profit motive with plifies project operation. PUSRI's performance, for improved training and personal reward systems. example, is helped by the fact that it depends for Training programs in Kenya, Zaire, Brazil, Ethio- resources on only one key supplier (the national pia, Nigeria, and the Dominican Republic have oil company), and for revenues on output prices introduced "training production units." In place set by the Indonesian government. By contrast, of classroom instruction, one or more stretches of organizations that depend on charges levied on road are given to each training unit which then many users, such as Sao Paulo's successful water has sole responsibility for their maintenance. supply and sewage company, need to place high Trainees therefore learn their skills in the field, priority on the development of financial and ac- and their performance is judged by the results counting systems to charge and collect from thou- they achieve. sands of consumers. Although large programs are bound by low civil service pay norms, trained staff can often be mo- Managing large maintenance programs tivated through prompter payment linked more While production and service operations tend to closely to performance. For example, wages paid be less efficient than project construction, main- ten days late have been associated with a 25 per- Box 9.2 Contracting maintenance to the private sector Argentina has many private contractors sons of the cost-effectiveness of private direct costs, it has been possible to make who have taken over maintenance of versus public sector operations, since the a comparison; for the same work, private about half the national road network since latter seldom account for indirect costs contractors were 37 percent cheaper. 1979. Other countries have moved less such as interest. Nevertheless, the lim- One main reason contractors are rapidly, often to ease the costs of tran- ited evidence available favors contract- cheaper is their flexibility. They gear up sition. In Brazil, for example, the federal ing. In Brazil, cost-plus contracts are still more easily for peak demand and slim highway authority reduced the extent of the primary method of contracting, down faster when demand slackens. As roads it directly maintained by almost 75 though they give little incentive to con- a result, the capacity utilization of equip- percent between 1970 and 1980. In Yu- tractors to control their costs. They also ment is between 70 and 90 percent for goslavia, with more than twenty years involve government in supervising private contractors, while force account of experience of universal subcontract- quantities used, as well as inspecting re- operations average 40 to 50 percent. Since ing, as few as five inspectors and one sults. Competition for contracted work force accounts treat labor and equipment director control maintenance for a road has been keen: of a sample of 180 cost- as fixed costs, even a small reduction in network of 4,700 kilometers in Slovenia. plus tenders, 45 percent attracted six or a project's budget significantly reduces Slovenia's entire road authority (includ- more bids each, more than two-thirds, output, because the cutback is in variable ing planning, construction, mainte- at least three bids. And in one region of costsfuel and other materials essential nance, operations, and safety) consists Brazil, where the public sector operation to the project. of only 185 people. is considered one of the most efficient, It is difficult to make direct compari- and where government accounts for in- 90 Box 9.3 Backing decentralization with authority and resources Two examples of how projects can be pie copies of forty-page bid documents payment process was much faster and delayed: only through laborious retyping and a thereby resulted in some cost savings: In a West African country, local series of fourteen-hour bus journeys to contractors were often willing to lower managers do not have the authority to the capital city. prices when they were not obliged to buy even small supplies of materials for Such stories are common, and result wait months to be paid. their project. Authority rests with a trav- in delays costing hundreds of times the In Morocco the Ministry of Agriculture eling paymaster who makes short and value of the missing local good or serv- has decentralized its procurement pro- unannounced visits, and will release ice. The solution lies in matching dis- cess in line with a shift in responsibility funds only to the purchasing field officer bursement authority and resources with for agricultural development programs in person. As a result, field staff spend responsibility for implementation. For to its regional and provincial offices. Lo- up to a third of their time waiting for the example, Mexico's rural development cal management has been strengthened paymaster rather than carrying out their program (PIDER) shifted disbursement by staff engineers from the center, who duties, and supplies are held up for as authority from Mexico City to state gov- have received in-service procurement long as six months. ernments in 1977. Each state set up PIDER training. Field staff familiar with local One East African agricultural project accounts, and payments to contractors problems now have the capacity to sup- was hampered by an unreliable postal were authorized locally after checking port and supervise local contractors. and telephone service; lacking a telex or field supervision reports against a con- a photocopier, it could distribute multi- tractor's or agency's invoice. The new cent drop in productivity in Lesotho. Cumbersome the system is established. However, as with all payment procedures as well as budgetary prob- labor-intensive methods, the demands on man- lems are often at fault. In Honduras, for example, agement are heavy while the system is being set before the system was simplified, several depart- up, and technical assistance is often required. ments and two different ministries were involved These three strategies are not mutually exclu- in paying highway construction workers, who each sive. Colombia, for example, is experimenting with had to collect five different stamps and signatures all three. Argentina maintains contract and force before being paid each month. Cutting this kind account operations side by side. Use of both public of red tape can greatly improve force account and private sectors can encourage efficiency through performance. competition; and it makes price-fixing and other Contracting to private companies. This can forms of corruption more difficult. Contracting reduce the management load on highway depart- maintenance automatically involves decentralized ments and increase cost-effectiveness (see Box 9.2). management, which can simplify dispersed op- Experience in countries as diverse as Brazil, erations by dividing them into smallertasks. Col- Yugoslavia, Argentina, and Kenya suggests that ombia's force account operation has used the same the prospects for subcontracting are promising. strategy for its feeder-road program. Since 1980 While much depends on the capacity of the private the organization's twenty-four regional offices have sector in each country, the availabffity of such work increased their responsibility for programming, spurs the growth and skills of private contractors. evaluation, and execution of works; the central Using local communities to maintain local agency's role is now limited to logistic support and roads. An important example is the "lengthman" overall planning, technical, financial, and admin- system for rural road maintenance, successfully istrative control. used in Kenya, Colombia, and elsewhere. Under Delegation by contract to the private sector guar- this system, maintenance workers are hired as part- antees financial resources and reduces bureau- time contractors responsible for from one-half to cratic controls. Within the government, however, two kilometers of road in their area. Roads are decentralization of responsibility is often not ac- inspected once a month, and contractors paid only companied by a complementary grant of resources if maintenance is adequate. Community concern and authority. Successful decentralization neces- the contractor is known to many who use the road sarily involves limited but genuine local auton- he maintainsreinforces formal supervision. De- omy, as in the Mexican rural development pro- pendence on machines and transport is reduced gram and the Moroccan irrigation program (see to an absolute minimum, as is administration once Box 9.3). But if decentralization is to be control- 91 lableand, equally important, if it is to be polit- erate is often turned into usable information too ically acceptable to central governmentits essen- late for practical planning. Even when they are tial complement is the strengthening of central timely, large-scale surveys are better suited to monitoring systems. This is a priority for both quantitative analysis of people's assets and pro- physical and people-centered development pro- duction, for example, than to the qualitative as- grams. sessment of social relations and attitudes required for program design. Managing people-centered development Pilot projectslearning by doing, but on an ini- tially small scaleanticipate implementation prob- Programs to improve the productivity and welfare lems in a way surveys cannot. Provided they are of the poorwho in many countries do not share done by the agencies that will later be responsible even a common language with government ad- for operations, and use procedures that are rep- ministratorshave always posed special prob- licable on a large scale, they can greatly increase lems. In the 1980s increasing concern about the responsiveness to local needs and bureaucratic cost and replicability of programs is leading to realities. Pilot projects make sense particularly for greater involvement of beneficiaries in the con- agencies (including donors) required to justify fu- struction, maintenance, and financing of local ture spending with firm and tested proposals. projects that hitherto either were provided and They do not solve all the problems of running run by government or were simply unavailable. big programs, however. These programs need to People-centered programs are particularly hard be adjusted over time in response to varying local to manage because of the degree of uncertainty needs and environmental conditions. More recent involved. First, goals can be abstract ("community planning methods have therefore moved toward self-reliance," for example) and performance not a continuous learning and design process during quantifiable in terms of construction time and costs implementation. Rather than design one initial or profits and losses. Second, there is little knowl- replicable plan, the aim is to develop a flexible edge of how to design suitable programs, because system for producing local plans in conjunction they involve changing human behavior patterns with local people. Managing the link between bu- that vary among cultures and localities. Third, the reaucracy and people therefore becomes centrally success of a project depends on whether people important. want the services it offers: project managers there- For foreign development agencies, as for recip- fore often have to create demand. The task of ient bureaucracies, the need to shift away from management is thus more one of experimenting blueprint planning is challenging and not entirely and learning than of implementing known pro- welcome. Pressures to "move money" encourage cedures, as is the case with physical development. focusing on the appraisal, commitment, and con- struction phases of projects rather than on their Responding to local needs operation. This focus is reinforced by donors' strong preferences for financing capital and foreign ex- Learning about local communities requires social change rather than recurrent and local costs. These skills not needed in physical developmentskills pressures, coupled with an interest in quick, vis- still neglected by governments in developing ible, and preferably measurable results, have en- countries and by foreign aid agencies. Relative lack couraged donors to take a short-term view of the of success in people-centered programs, coupled development process. They have often paid in- with a growing sociological awareness, has led to sufficient attention to institutional factors. They greater recognition of their complexity and uncer- have also badly underestimated the persistence tainty. This has encouraged a gradual move away needed to mobilize the rural poor, to make full from traditional "blueprint planning," in which an use of local skills and experience, to sort out com- initial learning and design phase is separated from peting interests and objectives, and to try alter- implementation and operation. native ways of expanding income and employ- In blueprint planning, learning is accomplished ment. While some external agencies have acquired largely through surveys and pilot projects. The a longer-term perspective through multiple proj- former have important drawbacks. Although ects with individual institutions, others must be microcomputers promise speedier data process- more prepared to look at their relations with ing, surveys remain complex and time-consuming developing countries in a time frame of decades to organize. The large amount of data they gen- rather than of two or three years. 92 For governments, greater participation of local munities, of course. In the Philippines, a new ap- communities has both drawbacks and advantages. proach being tested by the National Irrigation On the one hand, it adds to the management bur- Administration treats local organization and au- den of government at the project design stage. tonomy as a major goal of development, desirable Also, where communities are highly stratified, par- in its own right (see Box 9.4). In contrast, the ticipation may bring to the surface tensions between Training and Visit (T&V) System of agricultural local interest groups: local elites, which dominate extension pays less attention to community or- "community" organizations, may oppose the in- ganization, though it stresses responsiveness to volvement of disadvantaged groups and take over the needs of beneficiaries (see Box 9.5). T&V's programs to serve their own ends. In addition, field framework of routine procedures, tight supervi- staff may not be enthusiastic if working for local sion, and lack of emphasis on community mobi- communities is thought to incur loss of authority lization have eased its adoption in traditional de- and status, as well as inconvenience. velopment bureaucracies. Suitably adapted, T&V's On the other hand, some form of partnership management principles have great potential for with local communities in the design of programs increasing access to basic services (for example, in is essential, if plans are to meet beneficiaries' needs primary health care and certain types of educa- and encourage contributions of money and labor. tion). In these areas, the morale of field staff is Without such contributions, programs may never often low because they have unclear goals and are be viable or, once started, may not be sustained. poorly supervised, supported, and trained. The widespread success of "sites and services" While the financial burden of T&V and similar schemes during the 1970s indicates that commu- systems falls entirely on government, the costs can nities are prepared to shoulder much of the finan- be minimized by using part-time paraprofessionals cial and managerial burden of development if design recruited from the communities they are to serve technologies and levels of service are appropriate and trained in basic skills. In eastern Senegal, for and affordable. example, herdsmen from traditional communities There are different ways of involving local corn- have been trained as "barefoot vets" responsible Box 9.4 NIA: learning a participatory approach to irrigation development The traditional focus of irrigation devel- from several research institutions, both gineers. In 1980 the program entered its opment on technical design and con- in the Philippines and abroad. third phase, "learning to expand." One struction has often led to long periods of Social scientists participated heavily in project was established in each of the inefficient operation while water man- the initial pilot project in central Luzon, nation's twelve administrative regions, agement skills are developed. Since 1976 which concentrated on developing an and in 1981 each region added two more. the National Irrigation Administration approach to irrigation that made sense In 1982 participatory projects were be- (NIA) in the Philippines has been ex- to the villagers. This first phase"learn- gun in each of sixty-six provinces, and perimenting with a different way of pro- ing to be effective"differed from con- by 1983 the participatory approach had moting small irrigation schemes. ventional pilot projects in that its aim become the standard for communal NIA is developing water users' asso- was not to produce a technology to be irrigation assistance throughout the ciations before the systems are built and packaged and applied elsewhere. Its pri- country. involving farmers in their planning and mary purpose was for NIA to learn how Many NIA staff have found greater job construction. The result is irrigation sys- to work with local people to develop their satisfaction working with farmers, and tems that better meet local needs and a own capacity to manage irrigation. farmers, for their part, watch that the strong and representative farmers' or- The second phase"learning to be ef- money they contribute to construction is ganization ready to aid in water alloca- ficient"began with two new projects in well spent. They observe the opening of tion as soon as the irrigation scheme has central Luzon. Many problems encoun- bids and help check the quantity and been built. Instead of farmers participat- tered in the first project were anticipated quality of materials and find the lowest ing in NIA schemes, the emphasis is in- and avoided so that construction could prices for locally purchased goods. creasingly on NIA participation in the start sooner. A researcher was stationed Working in partnership has added a new farmers' own efforts. The new approach in each of the two sites throughout this dimension of accountabilitydownward has been directed by a Communal Irri- phase, providing monthly reports on the to farmer clients, as well as upward in gation Committee of senior NIA officials. activities and concerns of the farmers, the bureaucratic hierarchy. They are supported by social scientists the community organizers, and the en- 93 Box 9.5 The Training and Visit System of agricultural extension Training and Visit &V) has been adopted usually based on a two-week cycle. VLWs links between researchers, extension staff, as the extension method in more than forty spend eight days a fortnight visiting eight and farmers. Face-to-face meetings, held agricultural projects in about twenty separate farmers' groups, returning fort- as far as possible in farmers' fields, re- countries, and has influenced many nightly to each group on the same day place the common emphasis on time- others. It has four broad principles: of the week, This means that farmers consuming and unproductive written re- Concentration. Village-level workers know when and where to find extension porting. This allows quick and effective (VLWs) spend their time learning from advice, and can hold the VLW account- feedback and adjustments where nec- and advising farmers; they are not ex- able if he does not keep to his schedule. essary. VLWs do no more than keep a pected to deliver supplies, to organize The regular schedule also means that ex- simple diary of key messages and farm- credit, or to make reports. In India, where tension supervisors know where all staff ers' reactions for their own reference. T&V has been adopted by thirteen states, will be on any given day. Each super- Meetings with farmers, in which super- moving to a single line of command and vising extension officer has no more than visors participate, are the main means responsibility required extensive reform eight people under him, so that he can not only of monitoring field staff per- of a system that previously gave VLWs visit each of them not less than once a formance but also of defining priorities a multipurpose role in community fortnight. Group training for VLWs, also for agricultural research. development. rigidly scheduled, is carried out fort- None of the individual management Simplicity. VLWs are trained every nightly in the field by specialists and ag- principles of T&V is new. What distin- two weeks, with emphasis on what is ricultural extension officers. In addition, guishes T&V is that it has combined mu- important for farmers to know about the monthly training workshops are held, tually reinforcing management princi- current stage of cultivating their most which are attended by extension spe- ples into a clearly defined system for important crops. This ensures the rele- cialists, researchers, and supervisors. At managing activities which are geograph- vance of VLW work and does not over- these workshops, forthcoming advice is ically scattered and constantly changing. burden them with more information than refined and disseminated and farmers' Consistent commitment from senior offi- they can handle. reactions are reviewed. cials has been critical to sustained success. Regularity. There are rigid schedules Communication. T&V recognizes the for farm visits, training, and supervision, importance of effective communication for vaccinations and simple medical treatment, advantage. The T&V scheme is one example: ex- leaving fully trained (and scarce) veterinarians to tension workers have nothing to do with the pro- handle more complex cases. vision of agricultural inputs such as seed and fer- tilizertheir service emphasizes professionalism and pride in performance. By contrast, in irriga- Political backing tion management, which is responsible for repair works and rationing a valuable commodity (water), Commitment to the mass provision of services in other approaches must be considered. Morocco rural areas is difficult to sustain against the vested and India have experimented with burying irri- interests that favor urban elites. This is true even gation pipes to reduce the chances of their being where the dominant political doctrine stresses the tampered with: the extra capital cost can be more importance of local communities: in 1965, Mao than justified by higheragricultural production. Zedong summed up China's struggle to achieve Corruption can also bechecked by community responsive primary health care with his exclama- participation in the design, operation, and financ- tion that "the Ministry of Public Health is not a ing of programs, since this increases the account- Ministry of Public Health for the people, so why ability of field staff to local people. In some irri- not change its name to the Ministry of Urban gation schemes in Asia, for example, farmers can Health, the Ministry of Gentlemen's Health, or give part of their water charges to managers as a even to the Ministry of Urban Gentlemen's Health?" performance bonus. Information can also be a Governments find it particularly hard to redirect powerful weapon for increasing accountability. This their bureaucratic efforts to serve local communi- was shown by Kenya's decision in 1978 to publish ties when corruption affects the attitudes of field high school examination results comparing the staff (see Box 9.6). For that reason, programs that performance of schools and districts. Political and do not involve money changing hands have a great official interest was thereby awakened and resulted 94 in awards for successful schools; in 1980 and 1981, tion of private tubewells for lumpy government schools markedly improved their performance. investments in dams. The work of NGOs is sometimes hard to coor- Alternatives to government action dinate with big government programs. Yet the Physically and psychologically remote from the contribution of both foreign and indigenous NGOs poor, bureaucracies are often unable to respond is often underestimated by official bodies. NGOs to popular needs, even when money and man- in the industrial countries of the OECD alone power are not a constraint. Their work can become transferred some $2 billion to developing countries more effective by making greater use of the skills in 1981. NGOs have developed technologies from of nongovernment organizations (NGOs) and the windmills and water handpumps to beekeeping, commercial private sector. In many countries, small and services from primary health care to farm credit. private traders, moneylenders, and truckers al- An NGO which began a self-help housing project ready provide farmers with convenient and flexi- in El Salvador in 1968 (see Box 9.7) has now helped ble support services. Their potential disadvan- to build more than 4,300 houses with about 7,000 tagesmonopoly pricing and diseconomies of small more under construction. In Bangladesh, the com- scale, for exampleare not always assessed against bined efforts of NGOs in promoting nonfarm rural the often greater inefficiencies of government serv- employment are greater than those of govern- ices, especially when the latter are given a mo- ment. The effectiveness of NGOs is the result of nopoly. One alternative to state services is the many factors: commitment to poverty relief; free- "pump-priming" of private sector activityand of dom from bureaucratic procedures and attitudes; increased competitionthrough the provision of scarce funds, which force concentration on prior- credit. Other examples include the provision of ities and replicable technologies; and their small extension advice by private traders in agriculture size, which makes it easier to understand and re- and village midwives in health; and the substitu- spond to the needs of local communities. Box 9.6 Field staff incentives: private profit versus public service The perverse incentives that can deter- cent of each maintenance contract. They vide the construction and maintenance mine field staff behavior have been thor- expect 5 percent of each irrigation area's they are intended to. Staff have an in- oughly documented in the case of an total works budget (including the amount centive to disrupt water supplies in order irrigation program. The program man- spent on field staff salaries). Since junior to increase farmers' uncertainty and hence agers have two main sources of illicit in- engineers generally cannot find this their willingness to pay bribes. As for comethe annual maintenance budget money from their works budget alone, farmers, villages which can afford the and the farmers. By long-established they raise some of it from farmers. In biggest bribes get the most water, to the convention, 8.5 percent of the price of a return for an assurance of water for the detriment both of equity and of farm pro- maintenance contract is shared among whole season, villages whose water sup- duction over the irrigation system as a irrigation staff-2.5 percent to the senior ply is uncertain make a flat-rate pay- whole. engineer (in charge of an area of 80,000 ment. They may also make one-time Safeguards against corruption are to 400,000 acres), 1 percent to the clerical payments for more active intervention needed at every level. Politically, the ac- staff and draughtsmen, 5 percent to be by irrigation staff depending on weather countability of officials to ministers, and split between the works supervisor and conditions and the immediate need for ministers to the general public, is a well- the junior engineer (in charge of 30,000 water. In relation to incomes, the scale tried way to minimize abuse. For pro- to 100,000 acres). This minimum kick- of such corruption is large: for junior en- grams. pressure on corrupt managers can back is supplemented by "savings"_the gineers, it is often more than three times also be increased by making clients (es- contractor uses less material or carries their annual salary, and for senior en- pecially the poor) more aware of their Out less work than specified, and the gineers more than eight times. Since ap- rights. One Asian irrigation scheme has money saved is split between irrigation pointments to these posts are valuable, worked out detailed individual rights officers and the contractor. The size of they are bought rather than decided on how much water will be supplied and these savings is negotiable, but is nor- merit. Senior engineer posts cost from when. Rights are displayed on large mally at least 15 percent of the value of three to well over ten times annual sal- boards at the canals or pumps, and water- the contract, sometimes as much as 40 ary, depending on productivity and hence measuring devices that all farmers can percent. on the farmers' ability to pay. understand are provided. Organizing By custom, senior engineers receive Systematic corruption means that bud- beneficiaries to act collectively can also further payments on top of the 2.5 per- gets, already short of money, do not pro- increase farmers' leverage. 95 Box 9.7 Housing for the poor: tapping local initiative in San Salvador In 1968 a small group of people orga- basic house cost $2,800 in 1982, including gram. As civil unrest grew, community nized by a priest and a Peace Corps vol- land and administrative overhead, with workgroups became more difficult to or- unteer helped to rehouse thirty families credit repayment for families over twenty ganize, and some basic construction was who were victims of flooding in San Sal- years. In addition, FSDVM allowed peo- taken over by small contractors; never- vador. Two years later, with the backing ple to work on their houses in place of theless, homeowners continued to help of local businessmen, La Fundacion Sal- down payments, so that about three- each other with finishing work. vadorena de Desarrollo y Vivienda Min- quarters of all urban families could afford Before external factors intervened, ima (FSDVM) was registered as a non- FSDVM housing. FSDVM's repayment record was excel- profit foundation. Expanding with FSDVM emphasized appropriate tech- lent: in July 1980, arrears on loans were external financial support, by 1980 nology, close contact with participating only 2.3 percent of the total outstanding. FSDVM had become a major producer of communities, and learning by doing. The Foundation's low reserves made re- low-income, institutionally financed Houses were built in affordable stages, payments essential for the program to dwellings in El Salvador. Since then the with top priority given to secure land continue, so all those involved were mo- deteriorating political and economic sit- tenure and services. Potential homeown- tivated to build economically and to col- uation in the country has reduced ers helped reduce costs through mutual lect debts. More important, FSDVM saw FSDVM's effectiveness. help with construction at weekends, and its work not just as an end in itself, but FSDVM's approach to housing was a so laid the foundation for community as a means of organizing and increasing radical departure from government pro- groups capable of self-management. Par- the self-reliance of the urban poor. The grams, which traditionally had concen- ticipation in decisionmaking involved sense of community created during con- trated on building houses that most of beneficiaries in defining and solving their struction encouraged social responsibil- the population could not afford. FSDVM's own problems at every stage of the pro- ity and a willingness to pay. Mass urban and rural services and the results are immediately made available in clinics, districts, and provinces. Each administra- The sheer scale of many people-centered programs tive center receives a report ranking all subordi- makes heavy demands on management. Urbani- nate units by performance, which then influences zation in particular will pose formidable challenges the allocation of finance the following year. for the developing countries, since they will con- Monitoring systems, essential if field managers tain most of the world's large cities by the end of are granted greater autonomy, serve two pur- the century (see Figure 9.1). The more successful posesto maintain central control and to motivate metropolitan development agencies, such as Cal- local managers. Applied intelligently, they can cutta's (established in 1971), have recognized the produce big improvements in performanceeven weaknesses of central control over detailed plan- in their first year of operation, to judge by a new fling and operations and have helped to strengthen monitoring system for rural health care in the In- a local government tier in closer touch with local dian state of Maharashtra. If monitoring is to be needs. For the metropolitan authorities, this has effective, the right balance must be struck between meant politically difficult decisions to relinquish sufficiency and simplicity, so that monitoring does executive control and operating budgets. They have not divert managers from implementing pro- correspondingly strengthened their work in capi- grams. Often more could be done to develop sim- tal budgeting, long-range planning, coordination, ple indicators that relate inputs to outputs, and to and fiscal management. widen the use of monitoring systems as manage- The Indonesian government's successful family ment incentives. planning program has also decentralized day-to- day managerial authority, involved local politi- Managing multiagency programs cians, and strengthened central monitoring. Re- gional managers are largely free to set spending As governments have grown more aware of the and performance targets, but officials in Jakarta interdependence of development efforts, their insist on a realistic relationship between planned projects and programs have become increasingly and past spending, and strict adherence to budget integrated. They often involve many institutions ceilings. Performance is monitored monthly on one- and functions, posing challenging and sometimes page forms that are collated rapidly at the center, overwhelming problems of interagency coordina- 96 tion. These problems have been widespread in the management with responsibility for education, vil- complex "new-style" projects favored by the for- lage electricity, health care, and roadsmuch eign development agencies from the early 1970s. needed though all of these are. Instead, it con- In some cases, it is a mistake to attempt an centrated on farming and fuelwood development, ambitious integration of programs. Coordinating which are critical both to local living standards and the work of agencies with different interests and to the success of measures for soil conservation power takes time and scarce managerial skills, and and reforestation. Similarly, Ethiopia's Minimum can founder in bureaucratic politics. Between Agricultural Package Project concentrated on a few agencies, coordination poses the same managerial key tasks replicable on a large scale with limited problem as people-centered development: how to managerial resources. involve those outside a manager's direct control. Where effective coordination cannot be assured, Coordinating action complex programs can often be simplified by de- linking them, or reducing the number of compo- For some projects and programs, integration is nents. Many of the world's most successful peo- essential. Mines and factories, for example, often ple-centered programs were developed with a single cannot operate without parallel transport invest- purpose: population planning in Indonesia, T&V ments. In agriculture, new seeds will produce high in India, tea development in Kenya, and rural ed- yields only if they have enough water and fertil- ucation in Mexico, for example. The Kenyan gov- izer. Even where integration is not critical, it may ernment plans to divide its ambitious integrated offer significant benefits. Farmers will be more agricultural development program into a series of willing to adopt new agricultural methods if they administratively separate projectsin extension, have access to credit, ready markets, and trans- smallholder credit, livestock, and so on. Such de- port. Innovation is also stimulated by education, cisions recognize that it may often be important while better health means less working time lost. for services to be available simultaneously, but not Similarly, in urban areas, health services are of always essential that they be integrated adminis- limited use without complementary water and tratively. waste services. The need for coordination can also be minimized Establishing cooperation. Where managerial re- by reducing the number of program components. sources can handle the complexities of integrated A recent scheme to rehabilitate watersheds in the development, three strategies for coordination have Indian Himalayas intentionally avoided burdening been commonly adopted: Special management units with their own budgets and resources set up parallel to, and ad- FIGURE 9.1 ministratively isolated from, existing agencies. Number of cities with populations of more than While convenient for foreign development agen- one million, 1960-2000 cies interested in short-term results, these are often Industrial Developing not in the interests of long-term institutional de- countries countries 295 velopment (see Box 9.8). They may also lead to over 4 million bureaucratic proliferation that complicates the tasks 250 of managing budgets and planning investment. 1 to 4 million 205 Contracts and written understandings be- tween agencies. In the case of power supplies, for 200 Total 125 example, some companies in India have required 62 82 69 102 guarantees of continuous electricity before they 150 will build new factories. In general, however, con- tracts are hard to enforce unless tasks are clear 00 and performance quantifiablerarely the case in 1960 people-centered development. Written under- 197 50 standings are more flexible than formal contracts. Several Latin American countries have a tradition of convenios between public agencies for the pro- vision of services. For example, the Brazilian State 2000 of Minas Gerais has successfully coordinated a rural development program involving thirty-nine agen- 97 Box 9.8 Project management units: integration in isolation Parallel project units can increase the of Agriculture because of salary differ- tual merger with a "parent" institution speed at which projects are imple- entials. When the project unit was finally is carefully planned from the outset. One mentedby avoiding bureaucratic pro- dissolved, few if any institutional bene- example is the introduction of the "Sites cedures and the need to negotiate the fits were left. and services" concept in urban housing. cooperation of independent line agen- A more extreme version of this weak- Although the special management unit cies. But they may also have long-term ness can be seen in Sierra Leone, where of a pilot project in Zambia was dis- disadvantages. Such was the experience a series of integrated agricultural proj- banded after the project was completed, with the Thaba Bosiu Rural Develop- ects, each with a separate management the cheapness (and hence replicability) ment Project in Lesotho. The project's unit, has proliferated to cover 80 percent of its approach had been so well dem- management unit was created in 1973 to of the country. The result has been a onstrated that it was taken up by con- integrate road development and soil con- weakened Ministry of Agriculture with ventional housing institutions. A similar servation, with supplies, credit, advice, a field staff demoralized by competition unit in Kenya was successfully merged and marketing services to about 12,000 from the project management units; no with the Housing Department of the farmers. The unit was set up to com- clear lines of authority from headquar- Nairobi City Council. Only when project pensate for administrative weakness in ters to the field; and an inability to plan unit staff are motivated by the prospect the Ministry of Agriculture, and proved rational development in agriculture. The of a long-term career, will they be pre- effective while the project was being im- government is now planning a gradual pared to work for salaries compatible plemented. But its success was partly due reintegration of ministry and units. enough with the parent institution for to above-average local staff attracted by Project units have however proved eventual merging of the unit to be pos- salaries higher than civil service norms. useful vehicles for developing and dem- sible. When the project was completed, the staff onstrating new technologies, and can be could not be integrated into the Ministry effective in the long-term if their even- cies within a convenio framework. In practice, schemes in Mexico and Liberia, agencies took part convenios tend to be renegotiable arrangements. in one- or two-day "project launch workshops" to Their value lies less in the enforceability of the which politicians and press were invited, and in contract than in the joint planning and negotiating which project goals and agency responsibilities were process before signature. set out. Public visibility provided recognitionand Informal cooperation. Most projects require the pressure of increased accountability to com- voluntary cooperation from agencies over which munities. project managers have influence but no direct con- Project plans often emphasize formal coordi- trol. Integration then becomes a matter of nego- nating structures in organograms, rather than the tiation between those who have certain rewards composition of coordinating committees and the and sanctions at their disposal, and agencies with power of their members. A common problem as- varying commitment to program goals. Three broad sociated with liaison committees is the nomination lessons emerge from the many failures and few of senior officials who are too busy to attend reg- successes. Where integration has worked well, co- ular meetings, and who therefore delegate this ordination has been planned at the project design task to junior staff lacking the authority to deal stage, rather than left to emerge during imple- with problems. Getting things done depends on mentation; attention has been given to the people compromise between the power, knowledge, and and processes involved in building and maintain- regular availability of committee members. Coor- ing consensus, rather than simply to organograms dinating committees can be made more effective and structures; and coordinating mechanisms have by balancing agency staff with representatives of been designed at the appropriate hierarchical levels. the beneficiaries and other political groups. This The importance of early involvement is dem- can improve bureaucratic accountability as well as onstrated in all successful integrated programs. involve interest groups with the power to support Agencies will have more incentive to identify with or subvert program goals. a project and contribute to it if they have helped The appropriate level for effective coordination to formulate goals, cooperated in design, and agreed depends on the activity involved. Production of on their implementation tasks. Their roles can then standardized services, for example, needs liaison usefully be publicized: in two urban development at the top of the hierarchy. Electric power in Col- 98 ombia is coordinated by one central company which and budgeting system to transform the attitudes operates the national grid; when a joint effort is of agencies which had jealously guarded their in- needed, it pools the financial resources of regional dependence. Budgets are now jointly agreed, and companies to develop hydroelectric schemes. Peo- later adjusted on the basis of performance; this ple-centered programs, by contrast, require coor- encourages each agency to make its promised con- dinating links further down the hierarchy. Since tributions. Budgeting units such as those in Col- such programs focus on local needs, strong local ombia differ from the special management units liaison is particularly important. described in Box 9.8 in that they do not have an Maintaining cooperation. To be effective, coordi- independent implementing capacity. nation needs to be maintained when a program is in operation. Cooperation can be encouraged by Some lessons learned: a summary sharing information and by joint budgeting, both geared to performance criteria. The effectiveness This chapter has illustrated how management can of coordinating committees depends as much on adapt to the demands of different tasks. While the quality of information available to them, as on approaches vary according to the activity in- the power and abilities of their members. Dia- volved, many successful projects and programs grams (known as critical path charts) showing the share certain qualities: links and lead times of all projects have been used S The development of management skills to monitor slum improvement and sites and serv- through on-the-job training and incentives. On- ices programs in Madras and have helped reduce the-job trainingemphasized by PUSRI in fertil- construction time by a third. All project partici- izer production, TANESCO in the case of a utility, pants know immediately if any of them are falling training production units in road maintenance, and short of their commitment, and this knowledge in the Training and Visit system of extensionis prompts corrective action. relevant and avoids diverting staff from produc- Budgeting can also help to maintain coopera- tive work. Different incentives have been used to tion. Colombia's integrated rural development retain and motivate staff: apart from financial re- program (see Box 9.9) has used its programming wards, they include promotion prospects and sta- Box 9.9 Integrated rural development in Colombia Colombia's rural development program pares budgetary guidelines and selection formance, judged by field visits and uses its planning and budgeting system criteria for investments. Programming monthly financial statements, is deemed to coordinate the activities of eight de- then proceeds from the bottom up. Ver- unsatisfactory. Second, beneficiaries can partmental administrations (the provincial eda assemblies select priority invest- ask for changes through the local and level of government), four central line ments and activities. Their proposals are municipal committees; on their recom- ministries and their provincial representa- examined by technical, municipal, and mendation, the provincial representative tives, eight other government agencies, and provincial committees, which include of the National Planning Office can au- about 2,500 veredas (communities of 50 to representatives of line agencies and ben- thorize program and budget adjustments 100 families) in 226 municipalities where eficiaries as well as local and regional without prior approval from the national small farmers predominate. It has brought government. National planning officials management unit. clinics and schools, water supply, elec- working with provincial governments To use the budget as a coordinating tricity, and rural roads to more than a help to combine individual budgets into device, the Colombian program departs million people; more than 100,000 farm- an overall program. This program is then from budgeting procedures standard in ers have been trained; agricultural pro- presented to an interministerial commit- many countries. First, budgetary and duction has increased; and about 1,000 tee, which need not get involved in bi- disbursement authority is vested in an hectares of forest land have been re- lateral negotiations with individual agen- independent unit. Second, money is al- planted by smallholders. This program cies. Instead, it judges the budgets against located to agencies on the basis of their is being extended to another 126 munic- the objectives and achievements of the previous year's performance (this re- ipalities and eventually will have nation- program. quires a rapid reporting system). Third, wide coverage. Thereafter, the program is coordinated money is released in tranches according Programming and budgeting is initi- in two ways. First, national planning of- to performance instead of being auto- ated and coordinated by the National ficials at the provincial level can suspend matically disbursed when the project has Planning Office, which annually pre- disbursements to any agency whose per- been designed. 99 bility of tenure (PUSRI); collegial management styles roles, and dividing big programs into smaller tasks (NIA in the Philippines and T&V); and public and management teams. Clarity and concentration ranking and recognition of performance (Indone- count, whether in choosing a single program goal sia's population program and Kenya's examina- or limiting extension advice to a few key messages lion system). Management development policies (T&V); agreeing on a set of goals and roles in often have their main payoff in the longer term, multiagency programs (the Minas Gerais inte- so a continuous commitment to them is a precon- grated program); or developing relevant skills (on- dition of success. the-job training). Successful schemes have also de- The use of external resourcesthe private sec- veloped those management functions that are crit- tor, nongovernment organizations, and program ical to particular tasksfor example, PUSRI's em- beneficiaries. This involves corresponding changes phasis on financial management systems and, in in managementsuch as the ability to supervise people-centered programs, the focus on learning, contractors (road maintenance in Argentina and adapting to local conditions, and managing the Yugoslavia), and to enlist the help of beneficiaries link between bureaucracy and beneficiary. (NIA and FSDVM). It also means changing tech- This chapter has been concerned with initiatives nical designs to meet the needs of clients and en- that are within the discretion of agency managers. sure wider replicability. However, such initiatives often require support in Managerial autonomy coupled with the de- areas beyond the control of individual managers. velopment of management information systems. First and foremost, political commitment deter- Successful organizations have made individual mines the adequacy of money and the competence management groups the basic unit for measuring and security of senior staffthe preconditions of performance (PUSRT's cost centers and the Indo- a sustained management-development effort. Sec- nesian population program's field units). Timely ond, project-level efforts to improve personnel reporting of results has given managers the en- management cannot compensate for a sectoral or couragement of recognition and the pressure of national shortage of skills, or for national person- possible sanctions (Colombia's monitoring and nel practices that need reform; these issues are budgeting system for rural development). Report- discussed in Chapter 10. Third, some structural ing results to beneficiaries and the general public and procedural improvementsdecentralization is also an important and much-neglected perfor- and coordination, for examplemay also be pos- mance incentive. sible only in the context of national measures; these A simplified management task, through iso- issues are taken up in Chapter 11. lating priorities, defining individual and agency 100 10 Managing the public service Earlier chapters have proposed various measures out policy reforms. Other policy measures include for improving the performance of the public sec- establishing career schemes for occupational groups, tor. Success in implementing these measures is instituting an effective system of performance largely determined by a government's ability to evaluation, and avoiding big salary differentials staff and manage its public service. That in turn between the private sector and the civil service. depends partly on attractive salaries and career prospects in the public service and partly on po- Availability and distribution of skills litical leaders' being committed to high standards of performance and integrity. Even then, public The labor force in developing countries is expected servants often have to work through and with to grow by 588 million people between now and institutions that have been established only re- the year 2000. Finding productive work for them, centlyand in conditions that may not be con- and for the millions who are already unemployed ducive to efficiency. In many developing coun- or underemployed, is a fundamental challenge of tries, public servants have a more challenging task development. Although developing countries have than their counterparts in developed countries. made remarkable progress in education and train- This chapter is divided into three sections. The ing, most still have large reserves of unskilled la- first traces the growth of public employment and bor alongside severe shortages of skilled people. the skill shortages faced by the public service; the This imbalance is most acute in the public sector, second, the role of training in overcoming them; which provides a high percentage of modern sec- and the third identifies improvements needed in tor employment. Governments are under strong personnel management. A concluding note stresses political and social pressure to employ more peo- the importance of cultural and political factors in ple, while facing strong competition from the pri- reforming a country's management practices. The vate sector for technical and professional staff. chapter has three main findings: Public employment in developing countries Growth in public employment has grown rapidly in recent years in response to the demand for improved public services. But often Recent data for about seventy-five countries show there is overstaffing at lower levels, accompanied that as countries grow richer public employment by shortages of professional and technical staff. increases on a per capita basis but declines as a These shortages are exacerbated by the "brain share of nonagricultural employment. The indus- drain." trial market economies have about twice as many Public service training needs to be made more public employees per 1,000 people as the devel- relevant to the demands of the job. This requires oping countries, but public employment in devel- forging closer links between trainers and trainees oping countries has grown three to four times faster and between training and career development, as in recent years (see Box 10.1). This often makes well as developing local training materials and the state the dominant employer, particularly of programs. professional and technical personnel. In Kenya, A strong civil service requires a personnel of- for example, a 1976 study revealed that roughly fice that actively manages rather than passively 70 percent of these people were employed by the administers personnel policies. Strengthening per- government. sonnel management demands, above all, improv- This rapid growth partly reflects the demand for ing the management capabilities of personnel of- more public services. For example, the number of fices and giving them the status they need to carry primary school pupils in developing countries in- 101 Box 10.1 Trends in public service employment According to recent ILO data from a This disparity is largely explained by ag- as high as 54 percent; followed by Lib- sample of countries, public service em- riculture's high share of the labor force eria, 53 percent; Benin, 50 percent; and ployment in some developing countries in developing countries (more than 70 Tanzania, 46 percent. In developed increased three to four times faster than percent in low-income economies and 40 countries the ratio ranged from a low of in developed countries in the mid- and to 45 percent in middle-income econo- 9 percent in Japan to a high of 30 percent late 1970s and two to three times faster mies, compared with barely 5 percent in in Sweden. than the population at large. In most cases industrial market economies); and agri- Grouped by different levels of govern- this was to be expected, given the small culture is almost entirely in the private ment, the figures show that state and public service with which many devel- sector. A different picture emerges when local government account for 60 percent oping countries started at independence. agriculture is excluded. In a sample of of total government employment in in- While public employment fell in some twenty-eight developing countries, an dustrial countries compared with 14 per- developed countries (such as Canada and average of 27 percent of salaried jobs in cent in developing countries. In the Af- the United Kingdom) between 1976 and the nonagricultural sectors were in gov- rican countries surveyed, less than 7 1980, it increased in all the developing ernment, compared with 20 percent in percent of government employment is at countries surveyed. industrial countries. In India the rate was the local level. In industrial countries the share of public employment in total employment has risen gradually, from 12 percent in Share of government in nonagricultural employment Developing countries 1960 to 18 percent in 1979. On a per cap- ita basis, these countries now have more Latin Africa Asia America than twice the number of government employees as the developing countries. Central government 30.8 13.9 15.8 Local government 2.1 8.0 4.2 Growth in government employment Total Average annual growth rate government 32.9 21.9 20.0 (percent) Central Local 15 government government Industrial countries Mexico Burundi The pie chart compares unweighted aver- figure and the one below are based on the ages for sixteen industrial countries with findings of a survey conducted in 1982 by Nigeria 10 those for twenty-eight developing coun- the IMF; they cover the period between the Ecuador tries. The developing countries are grouped late 1970s and the early 1980s. Cameroon by region in the table. The data for this Egypt Thailand Number of government employees Developing countries per 1,000 inhabitants Kenya Sweden Latin Bolivia 77 Africa Asia America Australia Philippines Denmark Z India Jl Central Belgium government 18 26 30 Turkey France Fed. Rep. 'Germany, United States Local 0 Argentina Japan government 2 4 8 United Kingdom Canada 29 Total 46 government 20 30 38 Points on the graph indicate average annual growth rates for developing countries on the left and for industrial Central Local 4 government government countries on the right. For most coun- tries listed, the period covered is 1976- Industrial Developing 80 and government employment in- countries countries cludes only central and local govern- ment employees. The bars compare unweighted averages for veloping countries are grouped by region sixteen industrial countries with those for in the table. Sos rces: ILO; World Bank, thirty-one developing countries. The de- 102 creased from about 117 million in 1960 to more university graduates were held by expatriates. Since than 236 million in 1975, requiring a proportional then this ratio has been steadily reduced. growth in the number of teachers. Another prin- While skill shortages are hard to quantify, the cipal reason for the rapid growth in public em- World Bank finds that two-thirds of its borrowing ployment is the understandable desire of govern- countries face serious difficulties in filling certain ments to improve tribal, ethnic, or regional posts in the public sector, particularly for engi- representation, or to use public payrolls as a means neers, managers, accountants, economists, and for combating unemployment. The governments doctors. These difficulties are compounded by a of such countries as Egypt, Ivory Coast, Mali, tendency for the more experienced staff to quit the Mauritius, and Sri Lanka have at various times public service in search of better jobs. In about explicitly acted as "employer of last resort," par- half the countries, the outflow from government ticularly of university graduates. In Egypt, accord- is mostly toward employment abroad; in the other ing to an ILO estimate, overstaffing was almost half, mostly toward the domestic private sector. 42 percent of total civil service employment in 1976. Vacancy rates derived from manpower surveys also A consultant's recent study of two ministries in a provide partial evidence of shortages. A 1977 sur- West African country classified as redundant 6,000 vey in Nigeria, for example, found a 22 percent out of 6,800 headquarters' staff. In some oil- vacancy rate for modern sector occupations; rates producing countries, governments have hired extra for scientists, secondary school teachers, and other staff as a way of distributing oil revenues. professionals all exceeded 40 percent. A clear distinction must be drawn between man- Shortages are most severe in local government. fling the public service with competent staff and In Nigeria a third of the primary school teachers using it to tackle unemployment. For the latter, possessed no qualifications beyond a primary school temporary public works (or food-for-work) pro- leaving certificate and most worked in rural areas. grams are cheaper and more effective than indis- This bias extends to technical assistance person- criminate increases in public employment. Over- nel. For understandable reasons, rural institutions staffing imposes a financial burden on the state, everywhere find it hard to lure staff away from undermines morale, and obstructs efficient man- the attractions of urban life. agement. Several countries have therefore started In many developing countries, skill shortages in to reduce the number of staff members, in part the public service are as much qualitative as quan- prompted by recession and fiscal stringency. titative. This stems from the uneven quality of Among industrial countries, the Federal Republic secondary and higher education in most devel- of Germany, United States, Japan, United King- oping countries, the strong demand from the pri- dom, and Canada have recently trimmed or cur- vate sector for good graduates, and the fact that tailed the growth of their public service. Among government salaries are too low to attract or retain developing countries, Turkey's government enough capable individuals. All these problems stopped hiring in 1980 and has since maintained are made worse by emigration. strict control over staff. In Yugoslavia the govern- ment is encouraging older federal officials to retire The brain drain early, and Egypt is trying to limit the growth of staff at lower levels. For many developing countries the export of labor and skills makes an important contribution to their Skill shortages balance of payments. But, given the shortage of professional and technical people in many devel- In most developing countries, overstaffing at lower oping countries, their emigration often has serious grades coexists with severe shortages of senior consequences for development management. The professional and technical peopleshortages that brain drain has some harmful effects even in the can often be made good only by employing ex- few instances in which there appears to be a rel- patriates. More than half the technical assistance ative abundance of skilled people (such as doctors received by developing countries is used to finance and engineers in urban India), since emigrants are expatriates, while much of the rest goes for the then replaced by people who might otherwise have overseas training of developing country nationals worked in rural areas. Some countries undoubt- (see Box 10.2). This imbalance of skills is partic- edly benefit substantially from their emigrants, ularly severe in African countries: at indepen- whose remittances more than offset the cost of dence, more than three quarters of the jobs for their education. For most developing countries, 103 Box 10.2 Technical cooperation in development Between one-fifth and one-quarter of of- alone), and developing-country govern- UNDP; OECD countries provide roughly ficial aid flows goes to financing tech- ments contributed heavily to meeting lo- 110,000 fellowships a year and the UNDP, nical cooperation for the purpose of cal costs. 10,000. Technical cooperation aid is also transferring knowledge and skills to de- The biggest recipient of technical as- used to provide equipment (particularly veloping countries. Although the figures sistance was sub-Saharan Africa, ac- in fields of high technology), design and are not complete, they suggest that total counting for 30 percent of the UNDP's feasibility studies, economic and social disbursements of technical assistance in field expenditures in 1981 and 40 to 50 surveys, and research. 1981 were some $7-8 billion, mostly in percent of the disbursements of OECD In recent years there has been a steady the form of grants. More than half ($4.6 countries. Other big recipients were growth of technical cooperation between billion) was provided by OECD countries Bangladesh, Brazil, Egypt, India, Indo- developing countries (TCDC). Of the on a bilateral basis, most of the rest by nesia, Morocco, Peru, Philippines, and 10,000 experts serving in the field in 1981 the UNDP, $730 million; other UN agen- Thailand. Saudi Arabia and other Middle under programs financed by the UNDP, cies, $540 million; and the World Bank, Eastern oil exporters obtain considerable 37 percent came from developing coun- $510 million. The International Monetary amounts of (reimbursable) technical as- tries compared with fewer than 25 per- Fund (IMF) and the regional banks were sistance from a variety of sources, in- cent in the early 1970s. The UNDP can also important sources of official tech- cluding the World Bank. now use up to 10 percent of its funds for nical assistance, as were the countries of More than half the recorded spending TCDC. Bilateral technical assistance is still Eastern Europe and some of the devel- on technical cooperation is used to fi- mostly tied-provided by people or or- oping countries, such as China and In- nance expatriate staff. Overseas training ganizations in the donor country-but dia. Private voluntary agencies too had of developing-country nationals ac- some donors such as Sweden are fi- technical assistance programs (more than counts for about one-tenth of the total nancing training and other technical as- $40 million for the Ford Foundation outlays of both OECD countries and the sistance from third countries. Technical assistance from DAC countries, 1981 (millions of dollars) Donors Germany, United United Other Recipients France' Fed. Rep. Jo pan Netherlands Kingdom States DAC Total Europe 8.6 60.0 3.5 6.3 3.4 2.0 15.0 98.8 Africa north of Sahara 161.9 37.7 10.9 5.1 9.1 200.0 36.1 460.8 of which Egypt 6.6 19.9 5.6 3.8 8.8 183.0 7.0 234.7 Morocco 66.2 7.6 1.5 0.2 0.1 9.0 15.0 99.6 Africa south of Sahara 449.5 286.3 41.7 94.8 162.8 213.0 371.3 1,619.4 of which Kenya 2.2 16.7 9.4 12.5 25.0 13.0 33.5 112.3 Senegal 72.3 6.8 0.9 1.7 0.5 18.0 7.5 107.7 Sudan 1.7 25.9 1.8 13.5 9.1 16.0 5.6 73.6 Tanzania 0.5 28.3 4.0 15.5 18.9 15.0 64.4 146.6 Zaire 13.4 9.7 2.2 2.3 0.2 7.0 81.3 116.1 North and Central America 11.4 43.0 19.5 21.2 17.3 66.0 31.9 210.3 South America 23.3 132.4 52.4 44.7 13.7 16.0 30.0 312.5 Middle East 22.1 46.3 13.1 12.3 12.4 48.0 12.3 166.5 South Asia 4.4 77.8 31.6 26.5 39.0 55.0 54.9 289.2 of which Bangladesh 0.2 15.0 6.8 8.5 9.2 38.0 20.9 98.6 India 2.1 30.0 2.5 11.1 14.6 1.0 16.2 77.5 Far East 19.3 83.0 137.1 39.8 18.2 53.0 84.8 435.2 of which Indonesia 4.7 25.4 37.3 25.1 7.3 32.0 23.5 155.3 Thailand 1.9 11.2 32.2 4.4 3.5 7.0 10.6 70.8 Oceania 12.2 5.1 6.6 2.0 22.5 6.0 24.3 78.7 Unspecified 110.3 106.9 21.5 68.5 133.9 306.0 168.5 915.6 Total 823.0 878.5 337.9 321.2 432.3 965.0 829.1 4,587.0 a. Excluding French assistance of $687 million to its overseas territories. Source: DAC Secretariat. 104 however, emigration faces them with the difficult tion is political, a change in the political climate (and usually urgent) task of finding replacements may encourage migrants to return. If the brain (see Box 10.3). drain is caused by the pull of higher salaries, how- Small countries tend to be hardest hit by short- ever, reversing it is costly and should only be ages of trained manpower, but the impact can be attempted on a selective basis. The Sri Lankan serious even for relatively large countries. A recent government, for example, launched a program in study of the Philippines estimates that, with pre- 1979 to encourage professionals to stay or return sent enrollment rates and no emigration, it will home by revising its pension system, easing ex- take the country about sixteen years to produce change controls so that people could finance the the physicians it needs. But if the present emigra- education of their children abroad, and making it tion rate among physicians continues, twenty-six possible for senior staff to return at appropriate years will be needed. A World Bank study of mi- levels in the public service. Guaranteeing jobs for gration in the Middle East reached similar conclu- those who might return and recruiting abroad for sions: in 1975 the number of trained people leaving important public service positions have also been nine Arab countries to work in neighboring oil- effective measures. In the 1970s, with a similar producing countries constituted 13 percent of the approach, the Republic of Korea was successful in home countries' professional and technical man- attracting back Korean scientists trained abroad. power. If present trends continue to 1985, more Other steps can also be taken to slow the brain than two-thirds of Sudanese professional and drain, though some may compromise basic human technical workers are likely to be employed else- rights. A survey of developing country students where in the Middle East. in Canada, France, and the United States showed The nature of the brain drain varies from coun- that they were much more likely to return home try to country. When emigration of skilled people if they signed a pledge or deposited a money bond is balanced by a flow of more experienced return- before their departure. Some countries have im- ing migrants and trained expatriates, no serious posed heavy emigration taxes and passport fees problems arise. If the underlying cause of emigra- on trained people to discourage them from leav- Box 10.3 Brain drain: who gains? No comprehensive estimate of the size nical assistance during the same period. tries. While professional and technical of the brain drain is available, though it A third study, conducted by UNCTAD workers constituted only 4 percent of is undoubtedly very large. Most studies in 1975, puts the income gains of Can- Pakistani emigrants to the Middle East focus on a single country of destination ada, the United Kingdom, and the United in 1979, they earned about 17 percent of and examine its gains against the losses States in 1961-72 at $44 billion more than total emigrant income and their per cap- suffered by the countries from which the income lost by the developing coun- ita remittances averaged $4,500 a year people emigrated. Less attention has been tries. The imputed capital value of skilled more than twice that of unskilled work- given to the foreign exchange earnings migration in 1961-72 as a percent of of- ers. Professionally trained Bangladeshis from remittances, and almost none at all ficial aid during the same period is re- returned even morethose working in to the enhanced incomes enjoyed by the ported to be 272 percent for Canada, 56 the Middle East in 1978 sent home about migrants. percent for the United Kingdom, and 50 60 percent of their salaries, an average One study by the United States gov- percent for the United States. of about $9,800 each at 1979 prices. ernment estimated that the United States The balance of these figures changes None of these calculations take into saved $883 million in 1972 in educational when migrants' remittances are in- account the losses in output that may be costs, against a loss suffered by the de- cluded. A recent World Bank study of suffered by the exporting country as a veloping countries of $320 millionthe thirty-two labor-exporting developing result of its losing skilled technicians and amount spent on educating these im- countries shows that these countries re- managers. There are several well-docu- migrants. According to a Canadian study, corded remittances of about $23 billion mented examplesGuyana's bauxite and the replacement costs of the human cap- in 1978, equivalent to about 10 percent electric utility institutions and Turkey's ital transferred to Canada during 1967- of the value of their exports of goods and electricity, coal, and petroleum authori- 73 ranged from C$1.0 billion to C$2.4 services. Within this total, the share con- tiesof just how serious such losses can billion at 1968 pricesroughly ten times tributed by professional and technical be. greater than the value of Canada's people is not known, although there is spending on aid for education and tech- some evidence for a few individual coun- 105 Box 10.4 High returns to secondary education The 1980 World Development leport de- percent of the skills tests earned an av- plications for Kenya and Tanzania. Two scribed how even limited education can erage of 1,109 Kenyan shillings a month decades ago both countries had similar raise the productivity and incomes of poor compared with 864 shillings for the bot- secondary school enrollments and total people. A new World Bank study of 4,000 tom 10 percent of secondary graduates. population. By 1978 secondary enroll- primary and secondary school graduates In Tanzania the most skilled primary ment was 350,000 in Kenya but only in Kenya and Tanzania compared work- graduates averaged 747 Tanzanian shill- 60,000 in Tanzania. Because of this dif- ers' wages with the number of years they ings a month; the lowest scoring sec- ference in enrollments, Kenya's labor had spent in school (their credentials) ondary graduates, 681 shillings. force is more skilled than Tanzania's. The and their literacy and numeracy skills. The findings applied equally to blue- difference in skill, in turn, contributed to The study concluded that skills ac- and white-collar occupations, since the differences in the growth of wages, labor counted for almost 50 percent more of returns to skills achievement were just productivity, and output. Average wages, increased earnings than did credentials. as high in nonmanual occupations. For which fifteen years ago were roughly Although, on average, secondary ed- technicians, machinists, and fork-lift equal in both countries, are now nearly ucation equipped students with better drivers, as much as for accountants, twice as high in Kenya. Tanzania's policy skills and, as a result, they earned more clerks, and secretaries, basic literacy and of moderating wage differentials ac- than those with only primary education, numeracy skills apparently increased their counts for some of the difference in earn- the study showed that, in both coun- productivity enough for employers to pay ings between the two countries; but Ken- tries, primary school graduates with more for their services. In sum, second- ya's greater abundance of skills acquired strong literacy and numeracy skills earned ary education paid in both countries, in school accounts for as much as a third appreciably more than secondary grad- particularly for students who learned their of that difference. uates with weak skills. Thus, Kenyan lessons well. primary graduates scoring in the top 10 The study has important economic im- ing. Developed countries can aid these efforts by sociation between education and economic growth enforcing visa rules for certain categories of tem- noted in World Development Report 1980 (see Box porary immigrants (for example, "exchange visi- 10.4). But the immediate shortages remain and can tors" to the United States) that require visitors to be met partly through job-related training and more leave on completion of their studies. imaginative personnel policies. While a slowing of the brain drain can make it easier for the public service to retain its staff, it Public service training will still face competition from the domestic pri- vate sector. In some Asian countries, where life- Training is widely advocated but often poorly ex- time employment in one organization is the norm, ecuted. Before 1950 most developing countries had labor mobility is low. But in several Middle Eastern only limited training facilities. Over the next thirty countries, many university graduates start their years, aid donors directed large quantities of aid careers in the public sector and later move to the to training public officials in developing countries private sector. In such countries as Kenya and and to building training institutions inside and Nigeria, where graduates are scarce and private outside governments: businesses have grown rapidly, the public sector Five regional and intergovernmental training is continually faced with the danger of losing its institutions have been established in Africa, Asia, senior staff. and Latin Americathree under UN auspicesto Governments are in constant competition with support public service training. the private sector for competent staff. Care must The United Nations, the United States gov- be taken to balance the needs of the public and ernment, and the Ford Foundation are estimated private sectors. Highly successful government re- to have spent roughly $250 million in support of cruitment may risk choking off the supply of skills institutions for training in public administration to the private sector. The long-run solution to this alone during 1951-62. problem lies in producing more skills of all kinds The industrial market economies are currently which means increasing the responsiveness of the granting $500-600 million a year for training of formal educational system to trends in the labor developing country nationals, including the award market. Recent research confirms the strong as- of roughly 110,000 overseas fellowships. 106 Training schemes financed by the UN Devel- on pre-entry and immediate post-entry courses for opment Programme in 1981 amounted to more administrative elites, to the neglect of in-service than $70 million, including the award of 11,500 training and the needs of lower-level staff. In In- overseas fellowships to developing-country na- dia, Malaysia, Pakistan, and the Philippines, among tionals. others, new entrants to the senior administrative World Bank spending on project-related train- ranks go on courses lasting from nine months to ing increased from $38 million in 1976 to $187 two years. Several francophone countries in Africa million in 1981. have followed the French national administration According to a survey by the International As- schools in offering two-year pre-entry training sociation of Schools and Institutes of Administra- courses for top civil servants. tion, there were 276 government institutions, uni- The few reliable studies of training in develop- versity departments, and independent institutes ing countries show that the quality of most public providing public administration and management service training is low. This is primarily because training in 91 developing countries in 1980. This it isusually treated as a discrete event, rather than is four times the number listed in a United Nations as one element in a comprehensive program of report for 1960. In Malaysia the number of people organizational improvement. Too often, little ef- attending courses at such institutes increased from fort has been made to adapt training programs 1,000 in 1960 to 9,000 in 1980. For the Indian cen- borrowed from abroad or to generate indigenous tral government, the corresponding expansion has ones. As a result, most programs are classroom- been from 1,500 to 7,000. In the Philippines nearly based and tend to teach the skills that trainers 20,000 officials participated in a special program know rather than building upon the knowledge for middle-ranking administrators in the five years that trainees already possess. Many programs rely after it was inaugurated in 1972. These are examples on stylized examples rather than on trying to solve of a general trend in all developing countries. real problems. And few offer rotational assign- ments that are tied to a training and career de- Coverage and gaps velopment plan, and that attempt to broaden civil servants' outlooks and help them develop their Despite its growth, training still receives less em- skills in different jobs and organizations. phasis in developing countries than in public sec- tor organizations in industrialized countries, or Policy improvements private enterprises, or multinational corporations. The US and Japanese governments, for instance, The weaknesses of training can be tackled in four offer training opportunities to nearly a quarter of interrelated ways: their employees every year. All IBM managers get The use of training policies and plans. A re- at least forty hours of mandatory training a year, cent review of training in developing countries and Siemens and Unilever annually spend the shows that most have no policies and plans for equivalent of 5 percent of their payrolls on train- public service training, although some (such as ing. By contrast, most developing countries spend India, Kenya, Malaysia, Philippines, and Zim- much less (the Indian central government spent babwe) have made notable attempts to fill this roughly 0.5 percent in 1968). In Malaysia, which vacuum. Plans should specify the nature and pur- puts greater emphasis on training than do most pose of training for different categories of person- developing countries, only 4 percent of federal and nel, and should be based on a systematic assess- state employees received some form of training in ment of training needs and the effectiveness of 1978. In India only one senior civil servant in five past programs. The experience of the World Bank's is likely to have some in-service training during Economic Development Institute in Niger, Tuni- his entire career; in Turkey only one in seven has sia, and other countries shows how important it received any instruction in public administration. is to judge training by its relevance to the actual Local government officials typically fare even worse. problems facing the public service. Field-testing Though they account for 20 to 30 percent of all can therefore be valuable: one such test, con- government employees, only 10 to 15 percent of ducted in Zambia in 1974 by the African Center total government budget for training is allocated for Administrative Training and Research for De- to them. velopment, showed that the training curriculum A dominant characteristic of public service train- designed by the headquarters staff dealt with less ing in most developing countries is its concentration than 30 percent of the subjects in which rural proj- 107 ect managers felt they needed instruction. To en- leadership. Many of these qualities are embodied sure a more accurate assessment of training needs, in INTAN in Malaysia (see Box 10.5). it can be helpful to put training budgets under the Stronger links between training and career de- control of line managers. velopment. If training improves the skills required Better use of existing training facilities. Some for career advancement, trainees will be encour- coursespre-entry programs for top civil ser- aged to take it seriously. But if promotion policies vants, for example can be shortened to make room and staff reports make no reference to training, for training staff in other grades and to give high public servants will know that it is dispensable. fliers better in-service instruction. More use could Governments also need to pay attention to the also be made of institutions such as universities career prospects of the trainers themselves. In most and management training centers. The latter have countries, civil service training bodies (unlike their themselves some lessons to offer in getting the military counterparts) lack status, and instructors most out of their facilities. The best of themsuch have few opportunities for career development. as the Indian Institute of Management, Ahmeda- There are several ways of correcting this bias. A bad (JIMA), the Asian Institute of Management in senior civil servant of recognized merit can be the Philippines (AIM), Malaysia's National Insti- brought in to head the training organization. tute of Public Administration (INTAN), and the Overseas assignments and consultancy opportu- Central American Institute of Business Adminis- nities can be given to successful instructors. After tration (INCAE) in Nicaraguahave several fea- a period in training institutions, staff can be given tures in common. They enjoy autonomy in plan- regular civil service jobs, which would bring them ning and implementing their own strategies; they more closely in touch with operational work and have integrated their training with research and stimulate new ideas for training. consultancy, so helping to forge close links with More international cooperation on training. their clients; and they have benefited from stable Regional institutes and international agencies can Box 10.5 Malaysia's INTAN: training that works Malaysia's National Institute of Public opment. Each trainee's performance is tant policy questions. Senior officials are Administration (INTAN) was created in formally assessed, and in some cases cer- given advanced management training, 1972 to train all grades among Malaysia's tain courses have to be completed suc- while the middle ranks are offered spe- 200,000 federal and local government cessfully before a public servant can be cialized programs in subjects such as fi- staff. Its role is linked to the Govern- promoted. For some jobs, this pattern is nance and personnel management. Re- ment's New Economic Policy, which lays reversedpeople are selected for the cruits in most branches of government stress on improving public sector em- training needed for promotion only if they are given introductory courses and pro- ployment and promotion opportunities have performed well at their jobs. grams designed to teach special skills, for ethnic Malays. INTAN's staff of sev- For a relatively young institution, many of which lead to diplomas. Junior enty now trains some 15,000 government INTAN has developed a wealth of train- staff are given two- or three-week skill- employees a year. Its growth has not been ing methods. Early feedback from par- development courses. The institute also without problems, which it is seeking to ticipants in rural and people-centered undertakes "action-training" programs overcome through various internal re- programs showed that classroom lec- for entire organizational units, and it has forms. tures were not an effective way of train- combined its programs with ministerial INTAN's director is a senior civil ser- ing, so INTAN quickly devised courses training departments and the University vant whose personal prestige under- that included extensive field work. When of Malaya. scores the seriousness with which the ministers complained about releasing staff INTAN has also devoted time to train- government views its work. The institute for the longer courses, the institute di- ing and expanding its own staff. It has is located in Malaysia's central personnel vided its instruction into a series of shorter a large enough budget to be able to offer agency, but has operational and bud- courses instead. The institute often tests competitive salaries, and its own pres- getary autonomy. An advisory council of trainees to see how well its programs tige also helps recruitment. Instructors senior representatives from government have been absorbed, and supervisors as are required to have previous experience ministries and the state governments well as trainees are asked to evaluate the in government, and they benefit from a provides advice and feedback from impact of programs on job performance. systematic staff development plan that INTAN's institutional clients. In many For top administrators, INTAN pro- allows further training (in Malaysia and departments INTAN's courses are often vides seminars and workshops, usually abroad) and advancement within INTAN seen as an integral part of career devel- for not more than four days, on impor- itself. 108 Box 10.6 Improving the relevance of training In their efforts to improve the relevance programs in Niger and Tunisia have en- munications corporation far exceeded its of training, instructors are making increas- couraged participants to assess their own targets for new telephone connections. ing use of four promising approaches: training needs, trained instructors, and Modular training, also used by the Action learning, pioneered by the made selective use of outside consultants ILO, has been effective in upgrading su- National Coal Board in the United King- to provide technical knowledge. pervisoly skills and knowledge quickly. dom and then used in many public and Performance Improvement Planning The training program consists of thirty- private organizations throughout the (PIP), favored by the ILO and the UN, four modules covering various aspects of world. Managers work individually or in has been applied to public enterprises in management such as finance and cost teams to solve a practical problem. They Bangladesh, Dominican Republic, Ecua- control, maintenance, purchasing, and may spend time in a lecture room with dor, Nigeria, Somalia, Sri Lanka, Syria salary and wage administration. Spe- a tutor or consultant, but there is no (where public enterprises and their su- cialized packages have also been devel- "trainer" who is teaching "trainees." Ex- pervising ministries participated in the oped for public works and cooperative periments with action learning have been same exercise), and Zambia. Typically, management. Some of these modules are made with OECD assistance in Egypt, the program begins with diagnostic now available in fourteen languages. The with British assistance in India, with the workshops in which senior managers modules allow the users to choose topics Ford Foundation's support in the Phil- identify problems faced in their organi- that are relevant to their organizations ippines and Bangladesh, and with USAID zations and devise solutions. Consult- and to incorporate local cases and prob- involvement in a number of countries ants and management specialists play lems into the prepackaged materials. The including Ghana, Jamaica, and Tanza- only a catalytic role, Instead of passively effectiveness of modular training can be nia. Initial results have been most en- attending lectures, participants collec- enhanced if trainees, after trying to im- couraging. tively set targets and prepare plans for plement what they have learned, are Integrated Training Programs, de- pursuing them. Follow-up action is spe- brought back to the training institution veloped by the Economic Development cific and immediate, sometimes leading to discuss their results and to work out Institute of the World Bank. This method to dramatic improvements. One airline their own strategies for further action. combines short courses with project-re- turned a large loss into a substantial profit lated technical assistance. Experimental within a year, and a postal and telecom- help satisfy the need for specialized kinds of train- Improving public sector pay and conditions ing. The UN Development Administration Divi- Linking incentives more closely to performance sion and the ILO have concentrated on doing this. Better management of expatriates. Assistance in training instructors can be valuable, To institute such a program, the status of the per- especially for small developing countries that may sonnel function in government should be raised and not be able to afford their own schemes. Aid do- the managerial capacity of the personnel offices nors can also involve local training institutions with should be strengthened. This requires a sustained project-related training activities; and they can do effort, as Bangladesh's experience has demonstrated more in support of research and development in (see Box 10.7). public management training, especially if it is In a number of countries responsibility for per- adapted to the needs of particular countries (see sonnel matters is widely diffused. In such cases it Box 10.6). is difficult to talk of a single civil service; almost every ministry has its own personnel department Personnel policies and management and policies for staff recruitment, promotion, and training. Although some governments have created In most governments, personnel departments play centralized personnel agencies, much more can be a relatively passive (sometimes even negative) role, done to streamline their operations and give them administering an ingrained system of rules rather the status, resources, and authority they need to be than developing policies for improving public sec- effective. At the local government level, improve- tor management. In addition to planning and ments in personnel management often require either overseeing public service training, a more positive horizontal integration of personnel systems with other approach would include: local authorities or vertical integration with the na- Building effective career-development systems tional government structure. 109 Box 10.7 Personnel reform in Bangladesh: persistence pays On gaining independence in 1971, Ban- their service during the war of liberation. The government has introduced other gladesh faced the task of creating a na- The recommendations of a National Pay reforms over the past five years. It has tional administration out of parts of the commission were also largely over- taken several steps to slow the growth Civil Service of Pakistan (CSP) and the looked. Of the nearly 2,000 pay scales in of the public service by a freeze on hiring former provincial East Pakistan Civil existence, only those of the lower grades for certain jobs, delaying appointments, Service (EPCS). In March 1972 an Ad- were rationalized. and reducing the number of reserved po- ministrative and Services Reorganization In 1976 a new government set up the sitions. A National Training Council Committee was appointed, with broad Pay and Services Commission (PSC). Its (NTC) is now responsible for formulat- terms of reference. After a year's work recommendations, though mostly ac- ing training policies and plans and for the Committee proposed the establish- cepted by the government, were disliked monitoring overall progress. A Training ment of a unified grading structure, with by public employees: frequent strikes and and Career Planning unit has been set a number of pay scales matching differ- demonstrations nearly paralyzed the up in the Establishment Division, to serve ent levels of qualifications, skills, and re- administration. This time, however, the as the secretariat to the NTC and to en- sponsibilities. The Committee also rec- government persisted. After protracted sure close links between training and ap- ommended developing a personnel discussions the PSC's main proposals pointments. Almost 40 percent of Class management system based on merit, long- were gradually put into effect. The pay I officers and about 20 percent of super- term career planning, a general training structure was transformed into twenty- visory and support staff are expected to policy, and coordination of institution- one grades and scales of pay, and re- be trained over the next five years. A alized training. mains in place today. The government Management Services Wing is expected For political reasons, the report was also set up a Senior Policy Pool to try to to provide guidance on organizational and largely ignored. During 1971-76 the gov- equalize the status of former CSP and procedural reforms and a Personnel ernment recruited heavily. People were EPCS officers. A unified career service Management Information System is being put in jobs with scant regard to their called the Bangladesh Civil Service was established to help ensure promotion aptitude or skills, often as a reward for created in 1980. based on merit. Strengthening of management and policy analysis up systems for analyzing personnel-related data, and capabilities of personnel offices requires competent for making comparisons across departments and or- specialists. Although training of existing staff can ganizations. Such systems are essential for carrying help, improving the status and career prospects of out manpower planning for the public sector and personnel specialists is needed. In addition, admin- for assessing staffing and training needs more ac- istrators of line agencies can usefully be seconded curately. to personnel offices to expand their awareness and commitment to personnel policies, as well as to keep Career development the personnel office in close touch with client de- partments. Such exchanges are likely to generate an Motivation and training will both be helped if public increased demand for better personnel management servants have a clear idea of their career paths and from the line managers responsible for implement- of how promotion depends on achievement. For ing personnel policies. general administration, many developing countries The installation of efficient information systems have adopted the British or French models of a is also badly needed. In many countries personnel career civil service recruited by competitive exami- records are maintained manually, are updated in- nation, divided horizontally into classes, and gen- frequently, and are too cumbersome for the aggre- erally closed to experienced outsiders. More open gate analysis needed for formulating policies, de- and diversified systems based on American practice termining staffing and training requirements, and are usually to be found in Latin America. About monitoring policy implementation. As discussed in half the developing countries have established sep- Chapter 7, recent advances in microcomputers pro- arate career paths for specialists, most commonly vide new and relatively cheap opportunities for in- for accountants and tax administrators. A system stalling systems for quick and accurate information that allows staff to move between the public and storage, retrieval, and processing. Most developed private sectors has obvious advantages, since it en- countries have computerized personnel information courages new ideas and firsthand experience of systems and several developing countries are setting managerial techniques. 110 Frequent shuffling of civil servants can be harm- civil service once they have reached a certain grade. ful, however. In more than a third of the developing Countries such as Jordan have experienced a flight countries, principal economic decisionmakersthe of skilled civil servants to the local private sector secretary of finance, national planning director, and and to nearby oil-producing states. The same thing central bank govemorhave each been changed three has happened in Turkey, where salaries for new or more times during the past five years. This prob- university graduates are about two and a half times lem is not limited to senior staff: in one developing higher in the private sector, and even higher for country, the commercial, technical, financial, and many experienced professional and technical staff. administrative managers of the national railways were By contrast, qualified public servants in some large changed four to six times each during a three-year Latin American countries, such as Brazil and Mex- period. In another country, the top staff in a pop- ico, are relatively well paid, as evidenced by the ulation field project were changed at least three times difficulties faced by international organizations in in five years. recruiting staff from these countries. Rapid and unplanned promotions are also a major Apart from pay, individuals value government problem. Some governments have promoted young service for its other benefitssuch as status, inter- and inexperienced civil servants into the upper est, and security of tenure. For this reason, complete grades, primarily to fill new posts arising from the equality between public and private sector pay is growth of the public service, or to take over from generally neither necessary nor desirable. Singapore expatriates. Changes of government can also cause and Malaysia, where public sector salaries are reg- disruptive growth: in Turkey, for example, the num- ularly adjusted for changes in the cost of living, are ber of senior civil servants increased by 146 percent two of the few developing countries that appear to between 1976 and 1978, a period of frequent political have maintained parity. In Nigeria, the restructuring changes, compared with an increase of 23 percent of public sector salaries by the Udoji Commission for lower grades. in 1975 resulted in virtual parity, but the private Japan and France have dealt with promotion bot- sector quickly restored its competitive pull for skills tlenecks by moving some civil servants in their fifties in short supply. For most governments it would be out of administrative jobs to staff or advisory posts. prohibitively expensive to match private sector sal- Last year China decided to ease bottlenecks by in- aries across the board. To do so would simply push troducing a standard retirement agesixty for de- up private sector wages and would also widen the partment directors and vice-ministers, sixty-five for gap between public officials and the mass of the ministers. Such measures are particularly relevant population. Average government pay in many de- when there are no serious shortages of skilled peo- veloping countries ranges from four to ten times per ple, and young professionals need to feel that their capita income; for OECD countries, the correspond- paths are not blocked for years on end. ing ratio is 1.8. Nor are public servants short of nonsalary "perks." Salaries and conditions Most governments provide their senior staff with substantial benefits such as housing, cars, director- To join the public service and stay there, staff need ship fees, medical care, and education. This en- salary and nonsalary benefits that compete with al- courages civil servants to seek new benefits while ternative job opportunities. This is particularly im- protecting those they already have, often with dam- portant for those with unusual skills: public service aging results. In one African country, for example, compensation, though adequateand sometimes the daily travel allowance is so generous that mid- excessivefor junior staff, too often fails to attract dle- and high-ranking officials spend a third or more and retain senior professionals. of each year traveling abroad, leaving the business The reward of any job goes far beyond the of running the government to their subordinates. straightforward question of salaries. They are rel- In an Asian country an overnight allowance was atively easy to compare, however, and the scat- given to agricultural extension agents if their work tered evidence from developing countries indi- took them more than twenty-five kilometers from cates that, for senior staff, government pay is their duty station: consequently, the agents were usually lower than in the private modern sector. rarely seen by farmers living within the twenty-five- Moreover, many governments, for political and kilometer radius. equity reasons, have raised salaries of junior staff Some governments also try to retain important more quickly than those of top civil servants, thus officials by giving them discretionary allowances and reducing the incentive for people to stay in the benefits. In theory, this gives added flexibility for 111 rewarding high performers; in practice, it creates lenge. Finally, productivity and job satisfaction can tensions between superiors and subordinates and often be improved if employees are involved in de- can easily degenerate into corruption. Discretionary signing the organization of their workas demon- benefits are best given to whole groups whose skills strated by recent field experiments in India, Nor- are in short supplystatisticians or computer spe- way, and Tanzania. cialists, for example. To ensure that an imbalance does not arise between public and private sector Better management of expatriates salaries, regular (and preferably internal) reviews of public servants' pay should be conducted. Such re- According to a recent World Bank study, there are views should take into account nonpecuniary ben- at least 80,000 expatriates (including teachers) work- efits resulting from public employment and should ing for public agencies under official aid programs eliminate or modify perks that produce perverse in sub-Saharan Africa alone. More than half the results. estimated $7 biffion to $8 billion spent annually by donors on technical assistance goes to finance ex- Linking incentives with performance patriate personnel, with costs being shared with host governments. At one extreme, volunteers While greater rewards do not automatically produce who constitute about one in ten of the technical better performance, it is helpful to establish some assistance staff financed under Development As- link between the two. This is seldom easy to do sistance Committee (DAC) bilateral aidcost about because public bureaucracies are expected to serve $10,000 a year, perhaps less. At the other extreme, social and political objectives that are inherently hard the cost of management assistance supplied by North to quantify. In addition, informal social relations American or European consulting firms can run as between managers and their subordinates are often high as $15,000 to $16,000 per man-month. so strong that, even where "output" can be meas- Donors and recipients tend to approach tech- ured, supervisors are reluctant to jeopardize loyal- nical assistance from different standpoints. Do- ties and friendships. nors are naturally inclined to push such assistance These considerations notwithstanding, several as a ready solution to what they see as adminis- developing countries (including India, Kenya, and trative shortcomings in the institutions to which the Philippines) are starting to devise appraisal sys- they are lending. Recipient governments may be tems that link promotion and pay increases to in- less convinced of the need for outside help; in- dividual performance. This requires, first, strength- deed, local officials often see the recruitment of ening the capacity of personnel offices to work out expatriates as a threat to their own positions and such systems. Second, red tape can often be re- promotion prospects. The proferred assistance may duced. To take an extreme example, a single pro- nevertheless be grudgingly accepted for fear that motion decision in one developing country was found rejection may lead to the aid program being to require fifty-four operations, twenty reviews or reduced. inspections, and seventy-three movements of doc- This conflict of interest can then be com- uments from one place to another. For an employee pounded. Local staff may not be consulted on ex- in a provincial office, an additional forty-one steps actly what kind of assistance they need. Salary were required. Third and most important, promo- differentials and differences in lifestyle can cause tion on merit requires the backing of political and frictions. Personal qualities highly prized in the bureaucratic leaders and the public at large. donor country may be unsuitable in a different Even with such advantages, performance ap- culture. Experts chosen for their technical skills praisal systems are difficult to implement objec- are often inept at training, and recipient govern- tively. In view of this, developing countries should ments anyhow usually prefer to use them as doers install them only gradually, while laying stress on rather than as instructors. nonmaterial rewards for good performance. In some For all these reasons, better management of ex- countries where there is strong loyalty among em- patriates should be a priority both for donor agen- ployers and employees, staff may require fewer pe- cies and for recipient governments. Recipients need cuniary incentives. Research shows that rewarding to establish clear priorities, specify the objectives performance with enhanced prestige or considerate to be met by expatriates, and adopt a more de- supervisory behavior is often an effective way of termined approach to managing and coordinating motivating staff. The same is true of job enlarge- technical assistance staff. Donors need to accept a mentgiving people greater responsibility and chal- more equal partnership with recipients, which 112 Box 10.8 Volunteer executive services: a new form of technical cooperation The British Executive Service Overseas unteers on its roster. It accepts 500 to 600 client writes a report on their perfor- (BESO) has more than 1,000 volunteers assignments a year at an all-inclusive cost mance. If IESC thinks the volunteer's on its register, and has completed more of about $6,000 per man-month. work was unsatisfactory, he is replaced than 600 assignments in more than sixty Volunteers are not paid salaries. Travel at no additional cost to the client. countries since it was set up in 1972. costs are usually paid by the donor To judge by the continued demand for Average cost per assignment, exclusive agency, and living expenses by the client, their services, the three organizations of local costs borne by the host country, who also accepts responsibility for office meet a real need and are a valuable com- was around $4,000 in 1982. The Cana- facilities and translation services. As- plement to the more orthodox forms of dian Executive Service Overseas has nine signments, limited to a maximum of six technical assistance. An evaluation of regional offices in Canada and thirty- months (three months for the IESC), are BESO's activities carried out in 1979 seven representatives overseas. It can call wide-ranging, with a particular empha- showed that clients particularly appre- on 750 volunteers, and was involved in sis on management, marketing, and the ciated the depth of experience and tech- 330 projects in sixty-three countries in transfer of technology. The client speci- nical competence that mature executives 1981-82 at an average cost of $6,000 per fies the job to be done, and thereafter could provide. Since they are neither project, again excluding certain local costs. much depends on the personal relation- being paid salaries nor occupying any The United States International Execu- ships between volunteer and client. IESC position in a hierarchy, it is easier for tive Service Corps (IESC) has twenty-four volunteers write a report to their client them to establish mutual trust with their offices around the world and 8,000 vol- at the end of their assignment, and the local counterparts. means working through a country's institutions developing countries can already offer consider- and procedures rather than bypassing them. The able consulting expertise. A recent study of man- Bank's experience indicates that when the "psy- agement consulting in India, for example, lists eight chological distance" between expatriates and their large private consultancies that have been set up local counterparts is minimized, the value of tech- by industrial firms and chartered accountants, be- nical assistance is much enhanced. tween them employing more than 750 profession- The selection of technical staff is also of great als. In addition, India has numerous small firms importance. For donors, the poor quality of some and individual consultants, four publicly financed of their staff can often be attributed to their not management institutes, the business faculties of having tenure. Development agencies tend to re- various universities, and numerous public sector cruit the majority of their field staff on fixed-term industrial and technical consulting bodies that pro- contracts, and dispense with them first if budgets vide advisory services to small businesses. have to be cut. Attempts to establish a permanent corps of specialists for service in developing coun- A concluding note: the cultural dimension tries have rarely been successful, because staff are not offered promising career prospects. France and It is easy to prescribe what is needed for successful Sweden have instead encouraged the secondment management of the public service. It is much less of staff from regular public and private employ- easy to adapt these requirements to the cultural ment for service overseas. Canada, the United and political environment of individual countries. Kingdom, and the United States have formed pri- Unless management techniques are designed to vate organizations of retired executives to carry take explicit account of these cultural influences, out short-term consultancy work in developing however, they will fall far short of their potential. countries (see Box 10.8). A similar scheme has Although practices evolved in developed countries recently been launched in the Federal Republic of can be used in many developing countries, they Germany. need to be tailored to local realities. And it is just While expatriates often have much to contrib- as important to identify and develop indigenous ute, local consultants should not be neglected. Some management principles. donor agencies, such as the UNDP and the World Whenever an institution is considering changes Bank, have declared their preference for national in its management practices, its internal balance rather than expatriate consultants when both are of power is inevitably threatened. Those who are equally competent. Some of the more advanced least likely to benefit from a change may agree to 113 it in principle, but then offer covert resistance dur- search) that ran counter to local values or political ing implementation. Opposition is usually greater interests, were either rejected outright or failed the more alien an idea seems and the more it eventually. Similarly, in Nigeria, the Udoji Com- appears to have been imported indiscriminately. mission's recommendation to install management- Once installed, however, success or failure in im- by-objectives throughout the government has never plementing the practice largely depends on its been realized. suitability to the local cultural environment. Such experiences have reinforced the view that Some new techniques (for example, quantitative "qualitative" management practices are harder to information-based scheduling, accounting, bud- transfer than those that are more "quantitative," geting, and inventory control) have been intro- though the latter also need to be adapted to local duced and implemented successfully in many de- conditions. Japan's success in using American-based veloping countries. But those that rest heavily on quantitative techniques, while developing its own assumptions about the behavior of individuals (for qualitative management approach, is the best ex- example, management-by-objectives, organization ample of how discrimination can bring consider- development, and "matrix" management) have able rewards. Such a course calls for initiating or either failed or been implemented only after con- expanding programs to adapt foreign techniques siderable adaptation. A study of administrative and to identify and develop promising indigenous change in one Asian country concluded that at- practices, which can be undertaken by univer- tempts to introduce Western management prac- sities, management training institutes, and special tices (such as position classification, performance units within government. budgeting, participatory learning, and team re- 114 11 Reorienting government Many of the management problems identified in educational levels are low, poverty severe, and this Report can be corrected only by changing the institutional experience limited, the task will also way that central bureaucracies are organized and need sustained external assistance, although the managed. Recognizing this, developing countries main contribution will always be a national one. have made numerous attempts to reform their bu- Current institutional problems should not ob- reaucracies in recent years. Few have succeeded scure the notable progress made by developing in improving public sector efficiency, partly be- countries. African countries have within a gener- cause of the unfavorable political climate and partly ation established the entire framework of national because of the institutions that many countries institutions and staffed those institutions with their inherited at independence. This chapter reviews own citizens. Some Latin American countries, the lessons from their experience and emphasizes whose institutional structures long served pre- the need for reforms to change both official pro- dominantly rural oligarchies, have expanded their cedures and administrative structures. It also sug- administrations to cope with the demands of rapid gests that governments should target administra- urban and industrial growth. East Asia has de- tive reforms selectively, as well as keep up the veloped sophisticated economies along with a more pressure for general improvements. It is usually modest, but still impressive, growth in govern- more fruitful to concentrate political and admin- ment capabilities. istrative effort on radical change in a few critical Nevertheless, many countries have equated in- areas than to spread it ineffectually by attempting stitutional development with a proliferation of bu- comprehensive reforms. reaucracy, particularly in the public sector. How- ever understandable this process was in historical The historical and political context circumstances, it now needs reexamining. The cost of developing the public sector has been consid- Developing strong and efficient public institutions erable; the results often disappointing. Inside and requires considerable investment in human skills, outside governments, people are increasingly aware and a readiness to experiment with organizational that recent strategies of institutional moderniza- structures to find those that best fit the societies tion have not delivered on their promises. they are intended to serve. It took today's indus- The alternatives are not simple, however. Many trialized countries more than a century to develop countries brought some of their key industries into reasonably effective institutions (see Box 11.1). public ownership to assert national control; change Many developing countries are attempting to com- in their status or their mode of operation is often press that process into a few decades. It is not politically sensitive. Economic efficiency therefore surprising that disappointments and political strains has to be balanced against considerations of prac- have often occurred. tical politics, national sovereignty, and social poi- Developing countries also have to contend with icy. Similarly, appointment-by-merit in the public unprecedentedly rapid population growth and service is a principle that might have to be mod- technical change, a more integrated and compet- ified to take account of a country's ethnic or reli- itive world economy (which multiplies the con- gious tensions. In many cases, therefore, "ineffi- sequences of mistakes as well as of success), and ciency" is less the fault of bureaucrats than the high political and economic expectations among consequence of demandslegitimate or other- their peoples. Creating the managerial skills and wisethat the political system places on the bu- institutions to cope with these demands is an ex- reaucracy's limited capacities. ceptional challenge. In countries where general That said, there are powerful groups that favor 115 Box 11.1 Institutional development in industrialized countries In the industrialized world, little more across the countryand did so, in part tury onward, it was also active in edu- than a century separates the tolerably ef- by creating state enterprises that for a cating the labor force and in influencing fective bureaucracies of today from time dominated such industries as ship- working conditions through child labor administrations in which corruption and building, railroads, mining, and arma- laws and safety standards. The other side incompetence were the rule rather than ments. In the United States the basis of of the coin, of course, was the way the the exception. No country made prog- modern administration was laid in the state used its power, especially in the ress in the same way, but certain features nineteenth century and then expanded early stages of industrialization, to sup- stand out. First, most of the large leaps during the 1930s as part of the New Deal press trade unions. in administrative reform (which were political response to the Depression. The growth of the public sector has often followed by periods of consolida- Second, administrative development produced its own problems: unequal ac- tion) enjoyed strong political sponsor- also had immediately practical concerns. cess to services provided by the state, ship. In Britain the Northcote-Trevelyan It was prompted by the growth of na- rising administrative costs (and often di- reforms, which established the essence tional economies and the rapid devel- minishing effectiveness), and the growth of a merit-based, nonpolitical bureau- opment of markets, just as it was in de- of self-serving bureaucracies allied to po- cracy, were part of the wide-ranging po- veloping countries. The state undertook litical elites. These weaknesses are par- litical changes between 1832 and 1884 that the essential tasks for economic devel- alleled in some respects in the private consolidated middle-class ascendancy opmentorganizing infrastructure; sector, as large corporations are seen by over the aristocracy. In Japan the leaders standardizing currencies, weights, and many to be less adaptable in the face of of the Meiji Restoration after 1868 wished measures; strengthening commercial laws; changing technological and competitive to build a modernizing administration and so on. From the late nineteenth cen- conditions. bureaucratic growth and oppose changes that would goalsa commitment that is difficult to sustain, improve efficiency. Where the public sector pro- particularly since it must contend with bureau- vides a large proportion of modern employment cratic inertia and resistance. But in many countries (as it does in many developing countries), change this combination of selective radicalism and incre- may be opposed whenever it seems to threaten mental change will achieve more than plunging employees' livelihoods. Overstaffed bureaucracies into wholesale reform of the entire administration, and cumbersome procedures often have even more and can gradually build support for change by powerful beneficiariesthose who control the flow showing results. of patronage or who profit from the corruption Persistence is fundamental to bureaucratic re- that comes from administrative restrictions (see form. This requires a permanent capacitythough Box 11.2). Where institutional development out- not necessarily a single agencyto provide analy- side the state is limited, as in much of Africa, or sis and operational support for reforms. If that where political organizations that could oppose capacity exists, governments will be better placed and expose inefficiencies are suppressed (as they to seize the occasional opportunity to make fun- often are), it is harder than ever to improve gov- damental reforms because the preparatory and ernment performance. technical work will have been done. The experi- ence of developing countries indicates that public Managing administrative change service commissions, central personnel agencies, and the like are inappropriate overseers of admin- Previous attempts at bureaucratic reform have istrative reform, being too limited in scope and sometimes succeeded in establishing new admin- preoccupied with detail. Institutes of public istrative structures but have often failed ta im- administration tend to be too remote from power, prove efficiency or change bureaucratic behavior though they can help to diagnose the kind of re- (see Box 11.3). This suggests that governments form that is needed. In several smaller developing need to choose their candidates for reform care- countries, technical offices concerned with orga- fully and then concentrate their efforts on them. nization and methods or management services have Far from being mere tinkering, such an approach been useful instruments of reform, but are rarely should be seen as the best way of achieving a long- able to deal with the larger structural and per- term strategy for institutional development. It re- formance issues. quires a political commitment to those strategic Experience has also shown how persistence 116 can pay off. Japan's Administrative Management already overextended bureaucracy; second, insti- Agency has a formidable reputation for keeping tuting reforms that make the bureaucracy more government staff numbers firmly under control, responsive, both to political authority and to the and for requiring ministries to carry through their public at large. own reorganizations. In Brazil the Ministry of De- bureaucratization has simplified and reduced Economizing on management paperwork and red tape, by starting at the point where the bureaucracy encounters the public, and Countries have tried to reduce the burden on pub- then working back to make administrative struc- lic sector managers in three main ways: rational- tures suit the requirements of their job. Thailand izing economic management, improving central has a systematic and effective program of reforms coordination, and decentralizing government (see Box 11.4). None of these countries tries to activities. deal with all administrative problems and none of them would claim complete success. Instead, they Rationalizing economic management concentrate on a limited range of objectives and persist with them. It is probably wise, as the Thai Chapter 5 suggested that many countries could experience illustrates, to link reforms to the budg- improve their economic performance if govern- etary process so that leaders can impose their ments intervened less in markets. The managerial priorities on the administration and redirect its benefits would also be considerable, since officials activities. would have fewer economic instruments to ad- In many developing countries it makes sense to minister, and less occasion to devise corrective base reforms on two broad principles: first, re- bureaucratic mechanisms necessitated by inappro- ducing the management intensity of development, priate controls. By simplifying agricultural pro- rather than adding new managerial burdens to an ducer prices, for example, governments would re- Box 11.2 Corruption All societies have corrupt features in the sessive preoccupation. Public officials will on specific actions by government. Many sense that some public money is illicitly do nothing without bribes, and many governments from time to time have in- diverted for private gain. The particular people are unproductively employed in itiated anticorruption drives. However, circumstances of developing countries securing their favors or buying their si- such efforts tend to be shortlived and rapid social and economic change, strong lence. Corruption can thus become an ineffective, since they often concentrate kinship ties, new institutions, overlap- institution's raison d'être, rather than a on punitive measures and even closer ping and sometimes conflicting views minor aspect of its activities. In extreme but still unworkablecontrols, instead about proper public behaviormay be cases, such as in countries which are ma- of designing interventions so as to min- peculiarly conducive to corruption. jor exporters of illegal drugs, adminis- imize the opportunities or incentives for Corruption takes place in transactions tration in entire regions and arms of gov- corruption. For example, corruption can between private individuals or firms and ernment may become perverted by be limited by avoiding administratively public officials; thus, it is the misuse of corruption. created scarcities (as some centrally public funds and the failure of public Corruption tends to favor those with planned economies are doing by effec- trust that is of particular concern. Cor- economic or institutional power. tively sanctioning a "second economy"); ruption seriously undermines the effec- Some corruption is on such a scale by reducing controls on international tiveness of government. that it has major economic conse- trade and payments; and by improving Over time corruption tends to cor- quences: it may stimulate the illegal ex- the incentives and accountability of of- rode popular confidence in public insti- port of capital or result in large projects ficials in the areas where regulations or tutions. This makes it harder to raise the being awarded to contractors (often mul- administrative discretion remain. Cor- standards of public service, deflects pub- tinational companies) according to the size ruption is usually better fought by a com- lic debate away from economic perfor- of their bribes rather than the quality of bination of fewer, better-paid officials mance toward this single issue, and in their performance. controlling only what really needs to be extreme cases prompts (or at least pro- The eradication of corruption as a fea- (and can effectively be) controlled in the vides a justification for) violent changes ture of public life depends on the gradual full light of public scrutiny, than by oc- in government. creation of a political and public climate casional anticorruption "campaigns." "Rent-seeking" can become an ob- favoring impartial institutions, as well as 117 Box 11.3 Experiences with comprehensive administrative reform Most developing countries that have at- Ghana, Indonesia, Republic of Korea, ence and the end of the 1960s, twenty- tempted comprehensive administrative Mali, Pakistan, Peru, Philippines, and eight major reports running to 3,621 pages reform have done so primarily in re- Thailand. were produced by administrative reform sponse to political demands rather than Most of the major reform effortsin committees with a collective member- on the initiative of the bureaucracy itself. both developed and developing coun- ship of 146. None achieved the main ob- At independence, governments were trieshave had only limited impact. jectives of reform. For some African concerned with replacing expatriate pub- Sometimes the political commitment countriesKenya and Nigeria, for ex- lic employees. They also wanted to gear withered as governments fell or achieved amplethe most important practical the public service to promoting their am- their political goals in other ways. Par- Outcome of reform initiatives was a sub- bitious programs of economic develop- ticularly in Latin America, reforms that stantial increase in the pay and perquis- ment. The Indian reform exercises in the were linked to planning ambitions lan- ites of the bureaucracy. The pay propos- 1950s and 1960s, for example, were guished as planning itself became largely als of Nigeria's Udoji Commission (1974) prompted by the view that a more re- irrelevant to government decisionmak- were so radical as to have immediate in- sponsive and decentralized administra- ing. In the numerous instances where flationary and political effects on society tion was needed to spearhead planning. bureaucrats were responsible for imple- at large, while its other recommenda- Kenya's Ndegwa Commission in the late menting proposed reforms, they chose tions were largely ignored. 1960s focused particularly on Africaniz- those that enhanced their status and ig- To overcome these obstacles, reform ing the civil service and its role vis-a-vis nored or emasculated the rest. Examples requires the sustained support of politi- the burgeoning private economy. In Latin from developed countries of limited fol- cal leaders. Without that, reforms will be America some postwar reforms have been low-through after official enquiries in- undermined by those most directly af- closely tied to changes in economic man- cluded the Fulton Committee (United fectedcivil servants themselvesor be agement. Bolivia, Brazil, and Honduras, Kingdom), the Glassco Commission ensnared by the legal and constitutional for example, linked their administrative (Canada), and the Coombs Commission framework of public service laws (a par- reform programs in the 1960s and 1970s (Australia). India's experience has been ticular problem in Latin America and the to national economic plans and planning similiar. Over thirty years, a succession Middle East). Political leaders intent on agencies. The political impetus for radi- of committees, reports, and recommen- reform should therefore concentrate on cal change was sometimes given added dations have tended to produce changes a few priorities at a time, pursuing these thrust by new (and often military) gov- in detail while leaving broad structures to completion before attempting other ernments in such countries as Chile, intact. In Pakistan between independ- changes. duce the need for managing subsidy programs for Facing a crisis in 1979, the Turkish government credit and fertilizer. The feasibility of such ad- set up four coordinating committees in the prime justments depends not only on economic and po- minister's office to implement the country's ad- litical choices but also on effective institutions to justment program. One committee dealt with trade design and evaluate policies. regimes and economic aid; a second, with mon- etary and credit policiesespecially pricing and Improving coordination exchange rate policies; a third reviewed foreign investment applications; and the fourth handled All governments need to coordinate the activities investment policies and export incentives. In the of their different departments to avoid duplication Ivory Coast an interministerial committee was set and confusion. But to save rather than waste man- up in 1981 to monitor the economic recovery pro- agerial resources, coordination needs to take place gram supported by a World Bank structural ad- at the right levelto provide incentives for offi- justment loan and to oversee the budget. Jamaica cials and agencies to cooperate and to ensure that has given high priority to concerting action among it generates useful information for decisionmak- the ministries and public agencies responsible for ing. This much has become clear as a result of energy policy. In other developing countries (for current stabilization and adjustment programs in example, Sudan, Thailand, and Uganda), senior many countries. Governments found that they committees have concentrated on establishing lacked the means of monitoring foreign debt and priorities for the public investment program to take of controlling budgets. Although they have re- account of new financial stringencies. sponded in different ways, all have been con- Although such coordinating committees have cerned with coordinating their policy changes. been valuable in emergencies, they are rarely a 118 long-term solution to management problems. All ordination can degenerate into mere "bureau- too often, top-level "coordination" is merely part shuffling": the recent tendency in some Middle of the pathology of overcentralization. Decisions Eastern countries to put groups of ministries under are routinely referred up the hierarchy, and min- a number of vice-prime ministries has not notice- isters are absurdly overstretched "coordinating" ably improved their performance, and has some- everything in their portfolios or negotiating over times produced further conflicts and coordination details with their cabinet colleagues. Ecuador, for difficulties. The failure of planning (discussed in instance, was recently estimated to have almost Chapter 7) is partly a consequence of expecting 200 coordinating boards, committees, and com- planning agencies to act as coordinating "over- missions. The minister of finance was a member lords" of economic policy even though crucial in- of forty-five of these bodies and was required per- formation, political influence, and operational re- sonally to attend meetings of twelve of them. Co- sponsibilities remained with ministries that had Box 11.4 Thailand's approach to institutional reform Rapid economic growth and progress gram, the government is therefore mak- Generalhave embarked on programs against poverty have made Thailand one ing extensive institutional changes. Its of closely interconnected reforms. These of the success stories of the developing strategy is now more systematic and far- include the introduction of modern pro- world over the past two decades. Yet the reaching than in the past, and the pace gram budgeting mechanisms to link an- country has had many apparent insti- and priorities of reform are being care- nual budget appropriations more effec- tutional disadvantages: political instabil- fully chosen. tively to national policy objectives and ity, bureaucratic fragmentation and du- Part of the current initiative for reform program priorities as well as to the new plication, poor coordination among comes from within the bureaucracy it- fiscal plans and rolling three-year in- government agencies, centralized dcci- self. As in other countries, however, there vestment and borrowing programs; im- sionmaking, and rigid administrative are limits to internally sponsored re- provements in policy analysis, planning, controls. forms, and a perceived need to reinforce and project appraisal at national, sec- Thailand has been greatly helped by and extend the reform process from out- toral, agency, and subnational levels; the dynamism of its private sector and side by gradually developing the bu- changes in government accounting and by a broad consensus on the main goals reaucracy's public accountability through management information systems to of development, despite frequent changes the political system. render them compatible with the re- in political leadership. A third critical fac- The aim of the Royal Thai Government quirements of program budgeting and tor has been the capacity to institute ad- is to improve overall efficiency of public multiyear fiscal and investment plan- ministrative changes, however partial and resource management. On the revenue ning; greater delegation of expenditure imperfect, which have recognized and side, a number of measures are being authority to line managers and provin- corrected institutional deficiencies at cru- taken to increase resource mobilization. cial governors in order to expedite pro- cial junctures when failure to do so would These range from strengthening the fis- gram implementation and to decentral- have had a serious effect on develop- cal planning capacity of the Ministry of ize the impact of public expenditures; the ment. That capacity has existed, with Finance, decentralizing and computer- streamlining of procurement procedures varying effectiveness, for the country izing the operations of the Revenue De- applicable to externally funded projects; since King Chulalongkorn established partment, reorganizing the Customs and and the development of program moni- ministries, provinces, salaried officials, Excise departments, and establishing a toring and performance auditing sys- and other features of modern public training institute for tax officials to ex- tems. Parallel measures are being taken administration in Thailand. Indeed, the panding land survey and property val- to strengthen the organization and man- Thai bureaucracy has for long played a uation capabilities to augment local gov- agement of the public service and to in- central stabilizing role, despite its short- ernment revenues from land and property stitutionalize the promotion of further comings, in the midst of considerable po- taxes. long-term administrative reforms. These litical instability. Simultaneously, major efforts are being measures include the establishment of a The many deficiencies that remain, made to rationalize public expenditure civil service staff college, the develop- however, have been highlighted by Thai- programs. All of the core agenciesthe ment of indigenous management advi- land's recent difficulties in dealing with Budget Bureau, the National Economic sory capabilities, the planned rotation of an expanding fiscal deficit and deterio- and Social Development Board, and the senior government officials, and the rating balance of payments while trying Civil Service Commission in the Prime launching of a major study of public to maintain its development momentum. Minister's Office, the Ministry of Fi- service salaries and fringe benefits. As part of its structural adjustment pro- nance, and the Office of the Auditor 119 nothing to gain and much to lose from coopera- executing development projects might be given lion. Such a coordinating role is possible only if to provincial officers of central government (de- planning agencies influence budget allocations. concentration) to work with local government (de- In the field, the lessons from coordination ef- volution) and with community groups (delegation). forts reviewed in Chapter 9 are clear and widely The most common form of decentralization in applicable. Where effective coordination cannot be developing countries has been deconcentration. In assured, the need for it may be reduced by sim- Indonesia, for example, the centrally funded pro- plifying development programs and shedding or vincial and village development programs enable postponing their least manageable components. provincial and district planning units to plan and Otherwise, collaboration may be improved by joint execute schemes for increasing rural productivity project planning and the negotiation of contracts and incomes. In Thailand funds are now provided between agencies, and by strengthening financial to tambon councils to identify and manage small control so that funds are released only when agen- projects. Pakistan has created markaz councils cies deliver on previous commitments. In some under the supervision of project managerswhich countriesfor example, India, Kenya, and Malay- coordinate the credit, marketing, and other de- siasenior district officials, such as district com- velopment' activities of central government with missioners and collectors, have proved effective those of local agricultural cooperatives and private coordinators. They enjoy considerable authority businesses. Bangladesh is stregthening its thana- within the government and the local community, level administrators to undertake local develop- yet do not threaten each ministry's control of its ment activities. In Tunisia each of the country's plans and budgets. provincial governments receives a block grant for If government feels a strong need to coordinate, spending on locally generated projects under the it could well be a sign that other things in its national rural development program (see Box 11.5). structure and activities have gone wrong. Perhaps Few countries "deconcentrated" as radically as it is trying to do too much. Its decisions may have Tanzania didwith mixed resultsin the 1970s, been inefficiently overcentralized. Departments may when many ministries' functions and staff were be jealously guarding their "territory." Or officials transferred from Dar es Salaam to provincial centers. may not be responding to the requirements of Delegation has also been used extensively in policy and of their clients. Whatever the reason, developing countriesespecially by creating state- governments have to decide whether elaborate owned enterprises (SOEs). And governments have coordination will improve their effectiveness or resorted to special agencies to tackle specific prob- simply postpone other kinds of improvements in, lems, though this may do little more than en- for example, cabinet decisionmaking, policy analy- courage bureaucratic proliferation. Mexico is a sis, and budgetary control. striking example: apart from having more than 600 SOEs, it has approximately 100 "decentralized or- Decentralizing government activities ganizations." Governed by federal administrative laws, they provide social services such as pen- The need for coordination is reduced when gov- sions, health, education, and research. Mexico also ernment managers transfer those functions they has some 800 independent councils and commis- cannot manage efficiently to other levels of gov- sions dealing with issues from the development ernment, public enterprises, local communities, or of arid areas to electricity rate-setting to the pro- the private sector. Decentralization is convention- motion of tourism. Another characteristic form of ally defined as one of three things: (a) "deconcen- delegation is the regional development authority. tration"transferring resources and decisionmak- It is often established to supervise irrigation de- ing from headquarters to other branches of central velopment, as in much of Asia, or to open up government; (b) "devolution"to autonomous underdeveloped regionsfor example, the Ama- units of government such as municipalities and zon basin in Brazil. local governments; and (c) "delegation"to or- Recent trends have not favored devolution as a ganizations outside the regular bureaucratic struc- decentralization technique. After independence, ture, such as public corporations and regional de- Africa's political leaders tended to see local gov- velopment authorities, or even to nongovernmental ernment as incompetent, profligate, and politically bodies such as farmer cooperatives, credit asso- divisive, so its functions and revenues were whit- ciations, and trade unions. In practice, the three tled away. In countries of the francophone ad- forms are often combined: responsibilities for ministrative tradition, local government was in any 120 Box 11.5 Tunisia's rural development program Tunisia's Rural Development Program has ule required by the central Ministry of opportunities and local crises. The gen- been run for almost a decade with mod- Planning, and money can be spent only erally excessive demands on the pro- est success. It works as follows: each of if it has been approved by the central gram's limited funds have their positive the twenty gouvernorats (provinces of government. The vetting is not simply a side: gouvernorat officials have been limited autonomy) receive a block grant, formality: some proposals have been forced to learn how to justify projects on presently about $1.75 million a year. fhe turned down. the basis of their quality. Through this generally poorer inland gouvernorats re- Representatives of the technical min- successful pilot program, more money ceive 53.5 million. The money must be istries in the gouvernorats identify proj- has been made available and experience spent on locally generated and super- ects, study their feasibility and potential gained for the far-reaching proposals for vised projects, with those that promote payoff, harmonize them with central decentralization and regional planning community development and employ- government projects in the region, and which the government is now consid- ment being favored. All project propos- supervise their implementation. Officials ering. als must be backed by a detailed sched- can respond quickly and flexibly to local case part of an administrative hierarchy, with rel- groups has effectively become national policy. In atively little autonomy. This bias against devolu- China, for example, the Production Responsibility tion may now be changing. In countries as diverse System combines moves toward private produc- as Chile, Nigeria, Papua New Guinea, and Sudan, tion with the transfer of authority downward from governments have started to devolve responsibil- state and commune levels (see Box 5.3). In India ities to reformed local government institutions. The the dairy cooperatives formed under the national change may reflect two developments: first, the Operation Flood program are the local agents of growing desire to find new ways of mobilizing the National Dairy Development Board, but are local resources; and second, the recognition that elected by, and responsible to, their village mem- local government employees could be used more bership. In Kenya the self-help movement has used efficiently than they have been. informal taxation, community development groups, By itself, however, devolution can do little to and the women's movement to play a significant compensate for a general shortage of technical and role in secondary and technical education and ru- administrative skills. If other tiers of government ral health care. have difficulty obtaining qualified staff, local gov- Despite difficulties in evaluating the evidence ernment will find it even harder: in developing on decentralization, some lessons can be drawn. countries, its salaries are typically only half those First, decentralizing has been most common where paid by central government. Nor can local gov- governments felt reasonably secure. Weak gov- ernment enjoy genuine autonomy when, as usu- ernments cannot afford to decentralizeexcept in ally happens, it depends on central grants for the desperation, which rarely worksand weakening bulk of its budget. The revival of local government governments try to pull control into the center therefore depends on vigorous action to raise more rather than spread it outward. Second, decentral- local revenues. Evidence from such countries as ization is probably best seen as an incremental the Yemen Arab Republic and the Republic of Ko- process of building up the capacity of organiza- rea suggests that, where local government is tions to assume greater responsibilities. In most strongly established, it can tap revenue sources countries that have decentralized on any scale, that escaped the net of the central authorities. access to services has improved for people in pre- However, property taxeson which local govern- viously neglected communities, the capacity of lo- ments tend to depend for a large part of their cal administrative and political leadership has in- revenuesare inherently difficult to administer. creased, and new perspectives and interests have The central government may be able to help in been introduced into the policymaking process. this task, as it has done in Thailand, for example. Third, the most successful decentralizing efforts Decentralizing has also taken the form either of have been carefully designed and uncomplicated privatization (discussed in Chapter 8) or of in- to administer, have specified clearly the respon- volving communities in the execution of projects. sibilities of different participants, and have started In some countries delegation to users and interest on a small scale. Fourth, for decentralization to 121 Box 11.6 Decentralization in a socialist economy: Hungary Like other socialist states of Asia and Eu- nomic strategy (about 45 percent of in- central bodies, special favors were often rope, Hungary initially adopted, largely vestment over the past decade was de- bargained for, reducing competitive unmodified, the system of centralized cided by the central authorities), they pressures. physical planning practiced in the Soviet were to be implemented chiefly through Between the end of 1972 and 1978, links Union. By squeezing consumption and the use of economic regulators, such as between domestic and international prices extracting substantial surpluses from ag- taxes, subsidies, interest rates, and the weakened and the role of prices in eco- riculture, Hungary quickly raised its rate exchange rate. Prices of industrial and nomic decisions declined. This was partly of industrial investment. It also made im- (to a lesser extent) agricultural goods in response to urban workers' discontent pressive social progress, reducing infant were partially liberalized. Enterprises with increasing income differentials, and mortality and improving educational were given more freedom to decide on partly to try and insulate the Hungarian standards. wages and investment. Workers were free economy from unfavorable international The shortcomings of central planning to seek the employment of their choice, changes. As a result, efficiency suffered became increasingly apparent as indus- and firms to hire the most promising ap- and Hungary did not improve its inter- trialization advanced and consumers' ex- plicants. Profitability became a more im- national competitiveness. It maintained pectations rose. Lacking omniscience, the portant performance indicator than GDP growth at an average of almost 6 planners found that their targets for out- physical output, while central allocation percent a year, but largely by relying put, employment, and investment con- of credit became a key mechanism for heavily on foreign borrowing. flicted with the availability of resources ensuring that firms' decisions were con- In 1978, faced with the prospect of more and the need to improve technology and sistent with macroeconomic objectives. expensive petroleum and other raw ma- the quality of finished products. Prices For big investments, firms generally had terials from its socialist trading partners, did not reflect scarcities, so Hungary was to compete for loans to supplement their and the impossibility of indefinite reli- being denied the chance to maximize its retained profits, plus part of depreciation ance on foreign loans to maintain growth, output and exports by specializing. allowances (normally 60 percent) that they Hungary decided to accelerate its eco- Responding to these problems, Hun- also retained. However, companies have nomic reforms. The government took gary began to experiment with economic still often invested more than the au- measures to link domestic and interna- decentralization in agriculture in 1957. thorities had anticipated, forcing them to tional prices more closely and to unify Farmers were allowed to choose how change the regulators in an effort to con- the exchange rate. Central intervention much produce they would sell to state trol aggregate demand. in enterprises has been reduced, and the buying organizations, and were given an By 1973 the New Economic Mecha- government has divided large state firms incentive to join collectives because they nism had achieved several of its objec- into several smaller units to promote would then be paid higher prices. Over tives, particularly by making prices the competition. Wages are to be linked more the next ten years, Hungary became self- main instrument for decentralizing de- closely to productivity and profits, and sufficient in foodstuffs and managed a cisions. But the reforms had not changed unprofitable enterprises are supposed to net export surplus. This success helped the industrial structurewhich had be- be closed down. It is still early to judge persuade the political leadership to rely come highly concentrated during the the impact on economic efficiency of this more on market mechanisms in other 1960s, thereby limiting domestic com- new phase, especially in bleaker inter- sectors. After long debate and prepara- petition. Furthermore, even when com- national trading conditions. But it is re- tion, in 1968 Hungary initiated its New pany managers had considerable auton- markable that pressure for economic de- Economic Mechanism, which changed the omy in principle, ministries and state centralization has recurred in Hungary fundamentals of its economic planning. agencies retained informal control over as the only means seen to be available Although the national plans remained their decisions. Since managers of large to promote economic efficiency. important for determining broad eco- enterprises could also exert pressures on work, there has to be a real political willingness that they cannot manage, the transfer of owner- to relinquish some central financial powers. Local ship itself confers the autonomy that is needed to organizations need money and, in the long term, make decentralization work. A change of owner- revenue-raising powers as well. The responsibility ship may not be the real objective, however. Gov- of raising and spending money can galvanize local ernments may be decentralizing as a way of ob- people; without it, they feel dependent and taining the greater efficiency that is possible with frustrated. market mechanisms. In socialist countries, for ex- This last point raises broader questions about ample, the main thrust of decentralization has been the purpose of decentralization. Where govern- to increase the autonomy of enterprises and to ments are simply divesting themselves of activities expand market and quasi-market relationships 122 rather than to privatize ownership (although the In many countries it needs strengthening by, for latter has also occurred to a small extentsee Box example, prompter publication of accounts and 11.6). In many developing countries, managerial increased power and staff for auditing agencies. economies in the public sector may be realized by However, there is little point in establishing the simplifying objectives and increasing the auton- principle of accountability if political leaders do omy of managers to carry them out. This is par- not enforce it. Enforcement is clearly much less ticularly important in SOEs, as Chapter 8 showed; likely in countries where the political process does managers spend much of their time coping with not extend far beyond the state apparatus itself. problems created by central government, and Elsewhere, a clear political commitment, even if sponsoring ministries get involved in details in- mainly symbolic, can have salutary effects. In Ma- stead of concentrating on strategic policy issues. laysia, for example, all public servants (including Decentralization should therefore be seen as part the prime minister) have to punch a time clock of a broader market-surrogate strategy, designed when they arrive at, and leave, work. to make public enterprises and bureaucracies more One way to strengthen accountabilityand also responsive to their ministers and to their clientele, to give managers a dispassionate view of particular and to achieve a closer connection between inputs agencies' competence and problemsis to de- and outputs. But a balance clearly has to be struck. velop performance (or "value for money") audit- Governments often need greater central control ing of government bodies. Since monitoring is over some activitiesas they do today over bud- costly, it needs to be done selectively and in col- gets and foreign debt, for example. And some laboration with the bodies concerned (while taking functions will always be subject to close central care to avoid being "captured" by them). There supervision for political and other reasons. How- may also be opportunities to improve performance ever, improving some kinds of central control can by making the bureaucracy accountable to its lay the groundwork for decentralizing other kinds "users." The Brazilian debureaucratization proc- of government activityparticularly the delivery ess has something of this approach in its concen- of rural and social services and routine mainte- tration on the everyday encounters between state nance and administration. Since good senior man- and citizen. Where agencies are operating with agers and administrators are scarce almost every- organized community or user groups, they may where, it is always worth examining the scope for become answerable to themespecially if the dividing up development tasks to make greater clienteles can be given some market power. Chap- use of junior managers. They may be less sophis- ter 8 gave the example of Kenya's Tea Develop- ticated but they are also more abundant. ment Authority, where small tea growers can switch to other crops if they are dissatisfied with the Au- Making bureaucracies responsive thority' s performance. External pressures must be complemented by All these avenues for management-saving re- internal accountabilityofficials being individ- formrationalizing the policy framework, im- ually accountable to their superiors. This can sel- proving coordination, and decentralizationneed dom be done, however, without managerial re- to be supported by corresponding changes in the sponsibilities being decentralized to the appropriate way public employees regard their work. In many operational level. Most large private companies countries, that means improving the accountabil- give managers specific responsibilities and the ity of individual employees and of the bureaucracy budgets and staff to go with themand then judge at large. them on their results. Public bureaucracies, by contrast, have been slow to give their managers Improving accountability similar freedomjust as governments have been reluctant to increase the autonomy of public en- As criticism of bureaucracy has mounted in both terprises. developed and developing countries, administra- The connection between autonomy and ac- tive reform has increasingly been seen as an issue countability matters most in SOEs. As Chapter 8 of accountability. This has both external and in- made clear, before SOE managers can be held ac- ternal dimensions. countable for performance, their goals have to be Political responsibility for the conduct of public established, preferably by negotiation; they must businessespecially the spending of public have reasonable control over the means of achiev- moneyis at the heart of external accountability. ing them; and government must be capable of 123 monitoring their achievements. Performance much depends on what governments are trying agreementscontracts specifying conditions that to achieve, and on what reforms will best fit the can then be monitoredare among the most administrative system of individual countries. promising mechanisms, although they are not Nonetheless, it is worth repeating that all coun- without problems. tries need specific capacity to plan and execute Budgetary reform can also help improve internal organizational reforms in the public sectorfor accountability in the bureaucracy itself, as Chapter better policy analysis, to improve the management 7 indicated. The example of Kenya's Ministry of of public enterprises and the design of develop- Agriculture, for instance, showed how budgetary ment projects, and to improve accountability and procedures and allocations can be brought closer incentives. That capacity is probably best located to the way programs are managed. These changes close to particular targets of reform rather than are always difficult to implementbut the alter- combined in a single grand "reform agency." native can often be worse. In Liberia, for example, Whatever the precise arrangements, experience it can still take a senior official in a rural area three suggests some guidelines for effectiveness: or four months to buy a few bags of cement from Administrative reforms should concentrate on a local merchant. He also needs eleven signatures a few strategic institutions or functions, rather than on the purchase order and at least one trip to the be dispersed (and ineffective) across the board. capital, Monroviafor expenditure that is already Governments can simultaneously keep up approved in the budget. In such circumstances, pressures for gradual system-wide improvements, nobody is really accountable; the system tends to particularly by incremental changes which in- breed irresponsibility and corruption. crease official accountability and which reduce ex- Individual accountability can sometimes be en- cessive coordination requirements or unproduc- couraged by organizing the internal workings of tive centralization. agencies so that units can offer market-like serv- Reform needs careful administrative planning ices to each other. Yugoslavia, for example, has and continuity in implementationclose attention decentralized management accountability in its to detailed procedures as well as the overall policy railway system, so that separate units for traffic, thrust. traction, workshops, track, and so on buy and sell Nonbureaucratic interests must be included in services between each other. Similar structural the reform process to keep up pressure for pressures are part of the Training and Visit Sys- accountability, to ensure that external criteria of tem, with extension workers being encouraged to efficiency and service are observed, and to see that put pressure on agricultural specialists to come up the viewpoint of ordinary people is taken into with more relevant advice, because that is what account. farmers are asking of them. There should be incentives for officials and Finally, this Report has emphasized that better agencies to help devise and execute reforms: management is at root a question of people: in- otherwise their suspicion or hostility can quickly dividual incentives in both private and public sec- undermine results. tors are therefore a vital part of any strategy of Any realistic agenda of reform requires a balance reform. Accountability needs to be buttressed by between society's objectives and the limitations careful changes in the material and nonmaterial and interests of the bureaucracy. Progress is more rewards which public organizations extend to their likely if reforms take account of that realityby employeesas discussed in Chapter 10. assessing the administrative impact of policy changes, by reducing the more unproductive and Conclusions burdensome bureaucratic interventions, and by providing officials with incentives to adopt im- The approach to reform discussed in this Report provements rather than resist them. has emphasized that ends should influence means: 124 12 Concluding themes For three years worldwide development has been problems of some major borrowers have shaken stunted by recession. While population continues confidence in international lending with the perv- to grow inexorably, production and trade have erse effect of reducing the availability of commer- lagged, unemployment has risen, much industrial cial capital even to some developing countries that capacity has remained idle, and the standard of have managed to perform well through the current living in Africa and Latin America has declined. crisis; this has resulted in postponed investment, In some industrial countries there are now signs curtailed inputs, and slowed development. of recovery. But business confidence has been badly In this context the role of international financial shaken, investment is sluggish, and large debts institutions is extremely important. The IMF's re- overhang many countries. Global recovery cannot, cently expanded capacity will help ensure that re- by itself, produce accelerated, equitable growth in sources are available to meet urgent short-term low-income countries, and there is a danger that balance of payments crises. But the restoration of continued recession in developing countries will growth requires that flows from multilateral de- undermine the pace of economic recovery in the velopment banks be expanded as well. They have industrial countries. proven to be effective intermediaries between pri- The World Bank's assessment suggests that a 4 vate markets and developing-country borrowers, to 5 percent GDP growth rate annually over the and yet their current lending levels fall far short next decade is feasible for the developing countries of what can be done. Substantially increased lend- as a group. What is needed to achieve this result ing in support of sound development programs is is a concerted national and international effort to essential to regain and sustain the development ensure that recovery from the current recession is momentum in middle-income borrowers. strong and lasting, and that individual economies The poorest developing countriesespecially are restructured to meet the changed economic those in sub-Saharan Africahave been hardest conditions. hit by the current prolonged recession. They are Policy reforms are needed so all economies can particularly dependent on flows of concessional conform better to their comparative advantage, keep resources (ODA). Yet only 35 to 40 percent of ODA wages in line with productivity, and remove price is channeled to the low-income countries; meas- distortions. These will be much easier to accom- ures should be taken to raise this share. IDA loans plish if pressures toward increased protectionism are the most important component of ODA and are resisted and existing barriers to trade begin to are focused entirely on the poorest countries. An be rolled back, permitting the return to a rapidly essential international action to ameliorate the cri- expanding world trade, including increasing trade sis and restore some forward movement for these among developing countries. countries would be completion of the currently But if the developing countries are to return to delayed IDA VI replenishment and early agree- the growth rates of the 1960s and 1970s, net capital ment on a substantially increased IDA VII. flows of all kinds must continue to increase, not The present debt difficulties of the developing as rapidly as in the 1970s, but by 10 percent or countries are the culmination of trends over sev- more in nominal terms (see Table 3.7). Interna- eral yearsespecially the effect of higher energy tional private capital is essential to the develop- prices and expanding commercial bank lending ment process, in the form of both direct invest- combined with inappropriate domestic policies. ment and commercial lending. The liquidity These difficulties were exacerbated to the point of 125 crisis by the prolonged recession that has caused as producer and owner, its role as regulator is export earnings to fall and by unprecedently high everywhere of prime importance in establishing real interest rates. All arrangements to help indi- incentives for efficiency. vidual countries to avoid default depend in the Good management of the economy depends on first instance on the sustained recovery of the in- well-functioning public institutions as well as on dustrialized countries, and ultimately on the bor- the correct choice of policies, which has been the rowing countries putting in place successful ad- main theme of Part II. The role of the public sector justment programs. With ample underutilized has to be tailored to the human and financial re- capacity, economic recovery will produce many sources available, and these are almost every- benefitscutting unemployment, reducing the where overstretched. Hence the importance of re- pressure for protection, easing the debt problem, lying on markets to do what experience has shown and facilitating structural adjustments. that markets generally do best. That still leaves The restructuring strategy in developing coun- the government responsible for macroeconomic tries should aim at correcting price distortions and policy, for managing public revenues and expendi- at overcoming institutional weaknesses that have tures, and for running public enterprises and pub- contributed to the low productivity of investment lic services. Equipping the public service to carry in recent years. These and other measures dis- out these tasks well is challenge enough. cussed in Part II would assist countries to exploit Though diverse, the experience of developing more effectively their comparative advantage. For countries in managing development has revealed them to bear full fruit, however, the world econ- four broad conclusions: omy must regain the momentum it achieved in Policy and institutional reform are comple- 1976-78. Without that, the developing countries' mentary. Policies are relevant only if there is the prospects are bleak indeed. institutional capacity to carry them out, while strong Over the longer term the challenge for devel- institutions are ineffectiveeven counterproduc- oping countries is to use their limited resources tiveif the policy framework discourages effi- more efficiently and more equitably. Every gov- ciency. ernment faces this challenge: whatever the polit- The implied rejection of "blueprints" in tack- ical objectives, the goal is to find the most cost- ling the complexities of development is not a coun- effective means of achieving them. Evidence sel of despair. The chief lesson to be drawn from abounds of how much can be gained from greater experience is the importance of building into every efficiency. Price distortions alone may slow down strategy and program an effective learning proc- GDP growth by as much as two percentage points ess. This is as true for programs of structural ad- a year. Other substantial losses result from poor justment and administrative reform as it is for new investment decisions, project delays, inadequate initiatives in rural development. maintenance of plant and machinery, and failure Public bureaucracies would be more effective to make full use of human skills and energy. And if they paid less attention to form and more to in most countries, the consequences of these inef- substance. This means agencies' preparing fewer ficiencies are felt most by those who have least grand plans and instead undertaking more ana- the poor. lyses of the actions needed to achieve govern- In an effort to accelerate development, govern- ment's central goals. It means restructuring tra- ments have become increasingly active. In the ditional budgeting to identify the costs of specific process many have often been badly overextended programs. It means transforming auditing into a and hence have contributed to inefficiency. This system of selective performance evaluation that Report has suggested ways to strengthen public relates the cost of inputs to the value of outputs. management and, more generally, the incentives And, at the field level, it means officials' looking for all enterprises to operate more efficiently. Gov- outward to serve their clients rather than inward ernments could also share more of the burden of to satisfy predetermined bureaucratic procedures. promoting development with other organiza- All these changes imply more vigorous attention lionsprivate firms, community associations, and to issues of accountability, cost-effectiveness, and the like. incentives. This Report has stressed the importance of gov- On administrative reform, governments can ernment policy in the adjustment processpartic- achieve more through persistent but selective ef- ularly in correcting price distortions and exploiting forts at change, step by step, rather than through comparative advantage. Whatever the state's role major reforms that threaten many entrenched in- 126 terests simultaneously and are therefore often seek quick solutions. Too often a program has neutralized by them. The correct time horizon for hardly started before fashions change, support is institutional development is decades rather than withdrawn, the approach changed, and a new years. program started. Institutional reform will be suc- Yet the very pressures that push governments cessful only if it is pursued with vision, tenacity, into an activist role are those that drive them to and strong political leadership. 127 Technical appendix This technical appendix discusses the sources of the world market price. The Bank's country group- data in Chapter 2 and the main reasons for dis- ings differ from those of the Fund because, for its parities between sources and across years between analytical work, the Bank needs to make different this World Development Report and previous Re- distinctions among groups of developing countries ports. It also outlines the procedure used for mak- with different economic structures. ing projections in Chapter 3 and notes some of Historical data are revised from one Report to the major changes in these projections compared the next for several reasons: with those presented in the 1982 Report. This ap- Country authorities constantly revise data pendix should be read in conjunction with the Country authorities re-base their country sta- Introduction to the World Development Indicators tistics to different years, often changing measured and Technical notes. rates of growth The membership of country groupings is ad- Historical data justed to reflect changes in income levels which are largely the basis for country classification. The World Bank assembles its data from a variety Historical data may be subject to substantial re- of national sources, and the information reported vision even for periods far into the past. The growth by other international organizations, including the rate for China during 1960-73, for example, in- International Monetary Fund (IMF), the United creased from 4.7 percent reported in the 1982 Re- Nations agencies, the Organisation for Economic port to 5.5 percent reported in the 1983 Report; Co-operation and Development (OECD), the Gen- this change was based on additional benchmark eral Agreement on Tariffs and Trade Secretariat, data for different years supplied by the Chinese and the Bank for International Settlements. Staff government. For high-income oil-exporting coun- estimates are used to fill data gaps. tries between 1960 and 1973 GNP growth was Comparisons of Report data with those of other changed from 8.6 percent to 10.7 percent because international organizations, such as the IMF, is of changes in the oil prices used by country au- complicated by differences in country groupings thorities to value national output, and because of and in underlying statistical conceptsin each case their revisions of estimates of investment income. owing to different analytical requirements and As countries improve their statistical collection varying access to source material. Continuous ef- techniques and the scope of data coverage, such forts are made to reduce these differences. revisions are made by statistical agencies in all For balance of payments data the Bank mainly countries. Historical data for the industrial coun- relies on the IMF. For countries included in the tries for the period 1960-73 have been revised every Bank's country groupings, but not reporting to the year as at least one country in that group has Fund, the Bank staff obtains estimates from the revised data for that period. The United States, country authorities. For a few other countries, IMF for example, from time to time revises components data are adjusted on the basis of information de- of its national accounts as far back as 1929. In rived from the Bank's country economic work. Also, addition to such revisions, the periodic changing the statistical conventions used by the Bank oc- of the base year changes the weights used in com- casionally differ from those of the Fund. For ex- puting indices and, therefore, measured GNP ample, while the Bank values all gold holdings at growth. the London Clearing House price, the Fund values Membership in country groupings is varied to gold holdings for some countries according to that reflect changes in relative levels of economic de- country's convention and for other countries at velopment. Declines in income, for example, led 128 to shifting Ghana from the middle-income to low- of 0.7 percent a year with the three rates of growth income developing-country category. A rise in in- of per capita output associated with the different come and continued growth of industry, on the technical progress and capital formation assump- other hand, moved Spain from the middle-income tions-1.8 percent, 2.8 percent, and 3.6 percent developing-country group to the industrial-coun- forms the "cone" of Low, Central, and High in- try group. dustrial-country potential output growth rates of 2.5 percent, 3.5 percent, and 4.3 percent for ca- Projections pacity GDP that lie behind the projections of actual output shown in Table 3.1. Table 3.1 was derived by first projecting potential Actual industrial-country output presently lies industrial-country output growth, industrial-coun- far below its potential. While the potential output try demand for developing-country exports, and projection does set a ceiling for industrial-country potential industrial-country lending to developing output, it does not provide any information on the countries. These are then used to arrive at indi- rate (or direction) of growth of actual OECD out- vidual developing-country and regional projec- put when below the ceiling. In projecting actual tions consistent within a global framework. output for 1983 and 1984, the Bank follows the forecast of the OECD published in mid-1983. As Projecting industrial-country growth an institution specializing in long-term develop- ment and adjustment and making longer-term To obtain the projections of potential industrial- loans, the Bank concentrates on longer-term pro- country output at full employment, assumptions jections. Therefore, the time horizon is shifted pe- are made about industrial-country labor force riodically to cover eight to twelve years into the growth and technical progress. The industrial- future. For this Report, it was shifted from 1990 country labor force is assumed to grow 0.7 percent to 1995. The Bank makes no independent projec- a year between 1980 and 2000, based on existing tion of short-term industrial-country develop- population size and age structure, with some rise ments, but reviews the upside and downside risks in the female labor force participation rate, and no surrounding the short-term forecasts of the OECD change in migration regulations. Technical prog- and the Fund, and assesses their implications for ress for all industrial countries is assumed to ad- developing countries. vance at the historical rate experienced in the United When, as is now the case, all short-term fore- States, so that potential per capita income growth casts envisage a level of output well below poten- for the industrial countries as a whole falls to 2.8 tial, the Bank projects a rate of growth over the percent over the forecast period from 3.6 percent longer term (3.8 percent from 1984 to 1990) which experienced between 1960 and 1980. Domestic brings the industrial countries gradually back to capital formation is projected to be lower than in full employment and capacity output; after that, the past in view of diminished projected profit growth is assumed to fall to the Central case ca- opportunities arising from reduced labor force pacity rate of growth of 3.6 percent. That projected growth and technical progress. The High case as- rate of recovery is about the average based on sumes a continuation of past trends in reducing postwar cyclical experience; recoveries from rela- differences in technologies, so that less prosperous tively deep recessions tend to be somewhat faster. industrial countries experience more rapid rates of The rate of recovery was assumed to be faster in per capita GDP growth than the average industrial the High case and slower in the Low case projec- country. Under the High case, more rapid tech- tions. nical progress would permit repeating the 3.6 per- Since potential output depends on technical cent annual rate of per capita GDP growth wit- progress and labor force growth, not demonstra- nessed between 1960 and 1980; capital formation bly sensitive to recession over the longer term, the would, accordingly, be higher. The Low case as- projection of potential industrial-country income sumes that all industrial countries experience the levels for 1990 to 1995 is unchanged from the pre- rate of technical progress experienced by those vious Report. The more severe the recession, industrial countries with the lowest rate of per therefore, the larger the gap between potential and capita growth, thereby lowering rates of capital actual output and the greater the possible recovery formation and reducing industrial-country per of output growth after the recession. The increase capita growth to 1.8 percent a year. in projected growth rates for the industrial coun- Combining the projected labor force growth rate triesthis year's Central case is 3.7 percent whereas 129 last year's High case was 3.6 percentreflects the within historical experience, the lending path is severity of the present recession rather than a re- considered feasible. vision of expectations about long-term potential The composition of net capital flows by type of growth. investment is projected with a variety of tech- niques. It is sensitive to data revisions, which can Projecting developing-country growth be quite large for some time series. Direct foreign investment, for example, showed a growth rate in Given the projected industrial-country growth and the 1981 Report of 13.6 percent over the period the projected rate of inflation, the Bank projects 1970-80; but subsequent revisions in estimates of real and nominal developing-country exports of the 1980 level of direct foreign investment raised primary products in detail by individual commod- that growth rate to 18.5 percent. In view of this ities. It constructs aggregate projections of trade upward revision in historical growth rates, the in manufactured goods. These projections show projected growth rates were raised in this Report the exports of developing countries to the indus- to 11 percent, up from the range of 5 percent to trial countries both in aggregate and by develop- 7.5 percent shown in the 1982 Report. ing-country region of origin. Given the above global framework, the Bank's The Bank computes a notional "potential lend- regional economists prepare projections of re- ing" by industrial countries; this is partly based gional economic growth based on detailed country on past shares of net foreign lending in total in- economic analysis. These regional projections are dustrial-country GNP and shares of foreign assets then reconciled with the Bank's aggregate projec- in total industrial-country assets. A separate pro- tions of net capital flows, trade, and debt service cedure projects high-income oil-exporting country payments. The end result is the Central case lending, combining the previous projection of oil scenario. The High and Low cases are obtained exports with a projection of imports. Given the by projecting high and low OECD growth paths assumed underlying long-term real interest rate of and simulating the effects of these changes on 3 percent (plus a 150 basis point spread to devel- developing countries by using a general equilib- oping countries), trial debt service ratios are com- rium system developed, in cooperation with the puted based on the projected exports and trial Bank, by the Centre d'Economie Mathematique et growth rates in developing countries. If the en- d'Econometrie of l'Universite Libre de Bruxelles. suing lending path produces debt service ratios 130 Bibliographical note This Report has drawn on a wide range of World economy can be found in Balassa; Bhagwati; Choksi; Bank work as well as on external research. Se- and Krueger. Rhee, Pursell, and Ross-Larson, as lected sources used in each chapter are briefly noted well as Shinohara, Yanagihara, and Kim's work below, and then listed alphabetically by author. They for the World Bank, provided insights into the role are divided into two groups. The first consists of a of the state in the Republic of Korea and Japan. set of background papers commissioned for this Report; their primary purpose is to synthesize the relevant literature and Bank work. (Thus not all Chapters 6 and 7 the sources cited in these papers are listed sepa- rately.) Those issued as World Bank Staff Working The discussion of price distortions and their im- Papers are available from the Bank's Publications pact on growth draws on the extensive literature Sales Unit. The views they express are not, how- that has developed on the subject over the past ever, necessarily those of the World Bank or of two decades. In addition to the earlier World De- this Report. The second group consists of external velopment Reports, key soulces were the writings publications and World Bank sources, which in- of Balassa; Bhagwati; Krueger; Fry; Little; and clude sector policy papers, ongoing economic McKinnon. analysis and research, and project sector and eco- On planning, the key references are Waterston nomic work on individual countries. and Lewis. A review of the crisis in planning in the late 1960s is provided by Faber and Seers. Issues on budgetary policy are examined in Caiden Selected sources, by chapter and Wildavsky, and the experience of budgetary reforms reviewed in Baudrillart and Poinsard. Chapters 2 and 3 Boxes on Japan and the Republic of Korea draw These chapters draw heavily on the Bank's data on the background papers by Shinohara and Kim files and on published statistics from other official respectively. Other boxes draw on material pre- agencies including the IMF, OECD, GATT, and pared mostly by Bank staff but also by some out- United Nations organizations. The basic projec- side experts. tions are the product of the World Bank's Global Framework as explained by Cheetham, Gupta, and Chapter 8 Schwartz. The sensitivity analysis is the result of simulations undertaken with the Brussels global The analysis of SOE problems is based primarily development model described in Waelbroeck and on the Bank's extensive operational experience, Associates. The trade discussion draws on Hughes supplemented by materials published by UNIDO, and Krueger's study of protectionism and the re- APDAC, and individual governments. Works by port of the group of experts commissioned by the Choksi and materials edited by Baumol; Jones; Commonwealth Secretariat. Shepherd; and Vernon provide a useful overview of SOE problems. The chapter also draws on Jones' Chapters 4 and 5 work on the cost of noneconomic objectives and Bank-sponsored research on performance evalua- Public finance data were derived from IMF sources. lion systems in Pakistan. The statistics on SOEs, Short's study and World Bank files are the main like those in Chapter 5, are predominantly from sources of information on SOEs. General discus- Short's research for the IMF, as well as UNIDO sions of the impact of state regulations on the publications and World Bank data. 131 Chapter 9 the UN, ILO, USAID, Ford Foundation, Com- monwealth Secretariat, and the World Bank's Eco- This chapter is based much more on Bank oper- nomic Development Institute. The treatment of ational experience than on published research. career development and salaries and incentives is While the Bank's evaluations of individual projects based predominantly on World Bank materials and are unpublished, they are summarized in a series UN reports. The section on management of ex- entitled Annual Review of Project Performance Audit patriates is based on information gathered from Reports, which is available from the Bank's Publi- the major donor agencies and on Lethem and cations Sales Unit. Box 9.4 outlines a learning proc- Cooper. Finally, the note on the cultural dimen- ess approach to development more fully described sion relies, among others, on Kubr and Wallace; in Korten, and Box 9.5 on the Training and Visit and Stifel, Coleman, and Black. A full set of ref- System of extension is amplified in Benor and erences for the chapter is listed in Ozgediz. Harrison. Relevant Bank Staff Working Papers include Esman; Heaver; and Smith, Lethem, and Thoolen. Chapter Ii Other publications include Chambers; Honadle and There is a great deal of published material on the Klauss; Paul; and Tendler. evolution of institutions in industrialized coun- tries: Heady; Pempel; and Wiffiamson discuss much Chapter 10 of the relevant literature for the public and private sectors. The discussion of administrative reform The analysis of growth in public employment is draws on a number of reports by government com- based on World Bank country studies and data missions in developing countries, on World Bank compiled by ILO. Figures on the composition of country studies, on Caiden and Siedentopf; on the public service employment reported in Box 10.1 UN Development Administration Division stud- are derived from Heller and Tait. Material on skill ies; and on others. Material on coordination is shortages stems primarily from World Bank re- drawn primarily from World Bank sources, as is ports and the discussion of brain-drain issues from the discussion of experiences in Thailand and UNCTAD studies and World Bank reports. Fig- Hungary. Background papers on decentralization ures on technical cooperation were compiled from (Rondinelli, Nellis, and Cheema), on local govern- data provided by DAC Secretariat and other donor ment (Cochrane), and on corruption (Gould and agencies. Amaro-Reyes) provided material on these themes The discussion of public service training is based for this chapter. The section on accountability is primarily on Paul and secondarily on reports by based on World Bank sources. Background papers Agarwala, Ramgopal. Price Distortions and Growth in Developing Countries. World Bank Staff Working Paper no. 575. Washington, D.C., 1983. Planning in Developing Countries: Lessons of Experience. World Bank Staff Working Paper no. 576. Washington, D.C., 1983. Cochrane, Glynn. Policies for Strengthening Local Government in Developing Countries. World Bank Staff Working Paper no. 582. Washington, D.C., 1983. Gordon, David. Development Finance Companies, State and Privately Owned: A Review. World Bank Staff Working Paper no. 578. Washington, D.C., 1983. Gould, David I., and Jose A. Amaro-Reyes. Corruption and Administrative Performance: Examples from Developing Countries. World Bank Staff Working Paper no. 580. Washington, D.C., 1983. Knight, Peter T. Economic Reform in Socialist Countries: The Experiences of China, Hungary, Romania, and Yugoslavia. World Bank Staff Working Paper no. 579. Washington, D.C., 1983. Kubr, Milan, and John Wallace. Successes and Failures in Meeting the Management Challenge: Strategies and Their Imple- mentation. World Bank Staff Working Paper no. 585. Washington, D.C., 1983. Lethem, Francis J., and Lauren Cooper. Managing Project-Related Technical Assistance: The Lessons of Success. World Bank Staff Working Paper no. 586. Washington, D.C., 1983. Ozgediz, Selcuk. Managing the Public Service in Developing Countries: Issues and Prospects. World Bank Staff Working Paper no. 583. Washington, D.C., 1983. Paul, Samuel. Training for Public Administration and Management in Developing Countries: A Review. World Bank Staff Working Paper no. 584. Washington, D.C., 1983. 132 Rondinelli, Dennis A., John R. Nellis, and G. Shabbir Cheema. Decentralization in Developing Countries: A Review of Recent Experience. World Bank Staff Working Paper no. 581. Washington, D.C., 1983. Shinohara, Miyohei, Toru Yanagihara, and Kwang Suk Kim. The Japanese and Korean Experiences in Managing Development. Ed. Ramgopal Agarwala. World Bank Staff Working Paper no. 574. Washington, D.C., 1983. Shirley, Mary M. Managing State-Owned Enterprises. World Bank Staff Working Paper no. 577. Washington, D.C., 1983. Other sources Balassa, Bela, and Associates. Development Strategies in Semi-industrial Economies. Baltimore, Md.: Johns Hopkins Uni- versity Press, 1982. Balassa, Bela. "Disequilibrium Analysis in Developing Economies: An Overview." World Development (December 1982), pp. 1027-38. Policy Reform in Developing Countries. London: Oxford University Press, 1977. Baudrillart, Wenceslas, and Robert Poinsard. 20 Years of Budgetary Reform: a tentative international stocktaking. General Report of the Working Group on Integrated Budgeting Systems, International Congress of Administrative Sciences. Brussels, 1982. Basu, Prahlad Kumar, and Alec Nove. Public Enterprise Policy on Investment, Pricing, Returns. Kuala Lumpur: Asian and Pacific Development Administration Center, 1979. Baumol, William J., ed. Public and Private Enterprise in a Mixed Economy. New York: St. Martin's, 1980. Benor, Daniel, and James Q. Harrison. Agricultural Extension: The Training and Visit System. Washington, D.C., World Bank, 1977. Bhagwati, Jagdish. Anatomy and Consequences of Trade Control Regimes. New York: National Bureau of Economic Research, 1978. "The Brain Drain." Tripartite World Conference on Employment, Income Distribution, and Social Progress and the International Division of Labour. Background Papers, volume 2. Geneva: International Labour Office, 1976. Caiden, Gerald E., and Heinrich Siedentopf, eds. Strategies for Administrative Reform. Lexington, Mass.: Lexington Books, 1982. Caiden, Naomi, and Aaron Wildavsky. Planning and Budgeting in Poor Countries. New York: Wiley, 1974. Cairncross, Alec, and Associates. Protectionism: Threat to International Order. London: Commonwealth Secretariat, 1982. Chambers, Robert. Managing Rural Development. Uppsala: Scandinavian Institute of African Studies, 1974. Cheetham, Russell J., Syamaprasad Gupta, and Antoine Schwartz. The Global Framework. World Bank Staff Working Paper no. 355. Washington, D.C., 1979. Choksi, Armeane M. State Intervention in the Industrialization of Developing Countries: Selected Issues. World Bank Staff Working Paper no. 341. Washington D.C., 1974. Duncan, Ronald, and Ernst Lutz. "Penetration of Industrial Country Markets by Agricultural Products from Developing Countries." World Development. Forthcoming. Esman, Milton J. Para professionals in Rural Development: Issues in Field-level Staffing for Agricultural Projects. World Bank Staff Working Paper no. 573. Washington, D.C., 1983. Faber, Mike, and Dudley Seers, eds. The Crisis in Planning. Two volumes. London: Chatto and Windus for Sussex University Press, 1972. Fry, Maxwell J. "Savings, Investment, Growth and the Cost of Financial Repression." World Development, vol. 8, no. 4 (April 1982), pp. 317-27. Galbis, V. "Financial Intermediation and Economic Growth in Less-Developed Countries: A Theoretical Approach." Journal of Development Studies, January 1977. General Agreement on Tariffs and Trade (GATT). International Trade in 1982 and Current Prospects. Press release. March 4, 1983. Heady, Ferrel. Public Administration: A Comparative Perspective. New York: Dekker, 1979. Heaver, Richard A. Bureaucratic Politics and Incentives in the Management of Rural Development. World Bank Staff Working Paper no. 537. Washington, D.C., 1982. Heller, Peter S., and Alan A. Tait. Government Employment and Pay: Some International Comparisons. Washington, D.C.: International Monetary Fund. Forthcoming. Honadle, George, and Rudi Klauss. International Development Administration: Implementation Analysis for Development Projects. New York: Praeger, 1979. Hughes, Helen. "External Debt Problems of Developing Countries." Paper presented at the 13th Pacific Trade and Development Conference on Energy and Structural Change in the Asia and Pacific Region, Manila, Philippines, January 24-28, 1983. Washington, D.C.: World Bank. Hughes, Helen, and Anne 0. Krueger. "Effects of Protection in Developed Countries on Developing Countries' Exports of Manufactures." Washington, D.C.: World Bank, 1983. International Labour Office. General Report. Third Session of the Joint Committee on the Public Service. Geneva, 1983. 133 Jones, Leroy P. "Public Enterprise for Whom? Perverse Distributional Consequences of Public Operational Decisions." Paper presented at the Conference on Problems and Policies of Industrialization in an Open Economy, Bogazici University, Istanbul, Turkey, August 20-24, 1981. Jones, Leroy P., ed. Public Enterprise in Less Developed Countries. New York: Cambridge University Press, 1982. Korten, David C. "Community Organization and Rural Development: A Learning Process Approach." Public Admin- istration Review, September-October, 1980. Krueger, Anne 0. "Liberalization Attempts and Consequences." Washington, D.C.: National Bureau for Economic Research, 1978. Trade and Employment in Developing Countries. Chicago: University of Chicago Press, 1982. Lewis, William Arthur. Development Planning: The Essentials of Economic Policy. London: Allen and Unwin, 1966. Lindauer, David. Public Sector Wages and Employment in Africa: Facts and Concepts. World Bank Studies in Employment and Rural Development no. 68. Washington, D.C., 1981. Little, Ian Malcolm David. Economic Development: Theory, Policy, and International Relations. New York: Basic Books, 1982. Magee, Stephen P. "Factor Market Distortions, Production, and Trade: A Survey." Oxford Economic Papers, vol. 25, no. 1 (March 1973), pp. 1-43. McKinnon, Ronald Ian. Money and Capital in Economic Development. Washington, D.C.: Brookings Institution, 1973. Paul, Samuel. Managing Development Programs: The Lessons of Success. Boulder, Col.: Westview, 1982. Pempel, T. J. Policy and Politics in Japan. Philadelphia: Temple University Press, 1982. Redwood, John, and John Hatch. Controlling Public Industries. Oxford: Basil Blackwell, 1982. Rhee, Yung Whee, Gary Pursell, and Bruce Ross-Larson. "Promoting Exports: Institutions, Technology, and Marketing in Korea." Washington, DC: The World Bank, Development Research Department, January 1983. Sadique, Abu Sharaf H. K., ed. Public Enterprise in Asia: Studies on Coordination and Control. Kuala Lumpur: Asian Center for Development Administration (APDAC), 1976. Serageldin, Ismail, James Socknat, Stace Birks, Bob Li, and Clive Sinclair. Manpower and International Labor Migration in the Middle East and North Africa. New York: Oxford University Press, 1983. Shepherd, William G., ed. Public Enterprise: Economic Analysis of Theory and Practice. Lexington, Mass.: Lexington Books, 1978. Short, Peter. Appraising the Role of Public Enterprises: An International Comparison. IMF Occasional Paper Series. Wash- ington, D.C., 1983. Smith, William E., Francis J. Lethem, and Ben A. Thoolen. The Design of Organizations for Rural Development Projects- A Progress Report. World Bank Staff Working Paper no. 375. Washington, D.C., 1980. Stifel, Lawrence D., James S. Coleman, and Joseph E. Black, eds. Education and Training for Public Sector Management in Developing Countries. New York: The Rockefeller Foundation, 1977. Tendler, Judith. Turning Private Voluntary Organizations into Development Agencies: Questions for Evaluation. Program Evaluation Discussion Paper no. 12. Washington, D.C.: US Agency for International Development, 1982. United Nations. Changes and Trends in Public Administration and Finance for Development-Second Survey-1977-79. Sales No. E.82.II.H.1. New York, 1982. United Nations Conference on Trade and Development. The Feasibility of Measuring International Flows of Human Resources. UNCTAD Secretariat Study no. TDIBIc.6IAC.812. Geneva, 1982. United Nations Industrial Development Organization. Papers presented at the Expert Group Meeting on the Changing Role and Function of the Public Industrial Sector in Development in Vienna, Austria, October 5-9, 1981. Vernon, Raymond, and Yair Aharoni, eds. State-Owned Enterprise in the Western Economies. New York: St. Martin's, 1981 Waelbroeck, Jean, J. M. Burniaux, G. Carrin, and Jan Gunning. "General Equilibrium Modeling of Global Adjustment." World Bank Staff Working Paper. Forthcoming. Waterston, Albert. Development Planning: Lessons of Experience. Baltimore, Md.: Johns Hopkins University Press, 1965. Williamson, Oliver E. "The Modern Corporation: Origins, Evolution, Attributes." Journal of Economic Literature, vol. 19, no. 4 (December 1981). 134 Annex World Development Indicators Contents Key 140 Introduction 141 Maps 142 Table 1. Basic indicators 148 Population D Area D GNP per capita 0 Inflation 0 Adult literacy 0 Life expectancy Table 2. Growth of production 150 GDP 0 Agriculture 0 Industry U Manufacturing U Services Table 3. Structure of production 152 GDP U Agriculture 0 Industry U Manufacturing 0 Services Table 4. Growth of consumption and investment 154 Public consumption U Private consumption D Gross domestic investment Table 5. Structure of demand 156 Public consumption n Private consumption U Gross domestic investment o Gross domestic saving U Exports of goods and nonfactor services D Resource balance Table 6. Agriculture and food 158 Value added U Cereal imports U Food aid U Fertilizer consumption U Food production per capita Table 7. Industry 160 Share of value added in food and agriculture U in textiles and clothing U in machinery and transport equipment D in chemicals U in other manufacturing 0 Value added in manufacturing Table 8. Commercial energy 162 Growth of energy production U Growth of energy consumption O Energy consumption per capita 0 Energy imports as percentage of merchandise exports Table 9. Growth of merchandise trade 164 Export values U Import values U Growth of exports U Growth of imports U Terms of trade 137 Table 10. Structure of merchandise exports 166 Fuels, minerals, and metals Other primary commodities u Textiles and clothing n Machinery and transport equipment D Other manufactures Table 11. Structure of merchandise imports 168 Food Fuels Other primary commodities D D Machinery and transport equipment D Other manufactures Table 12. Origin and destination of merchandise exports 170 Industrial market economies D East European nonmarket economies 0 High-income oil exporters 0 Developing economies Table 13. Origin and destination of manufactured exports 172 Industrial market economies D East European nonmarket economies o High-income oil exporters n Developing economies 0 Value of manufactured exports Table 14. Balance of payments and reserves 174 Current account balance 0 Receipts of workers' remittances 0 Net direct private investment D Gross international reserves 0 in months of import coverage Table 15. Flow of public and publicly guaranteed external capital 176 Gross inflow of public and publicly guaranteed medium- and long- term loans 0 Repayment of principal o Net inflow of public and publicly guaranteed medium- and long-term loans Table 16. External public debt and debt service ratios 178 External public debt outstanding and disbursed 0 as percentage of GNP 0 Interest payments on external public and publicly guaranteed debt 0 Debt service as percentage of GNP Table 17. Terms of public borrowing 180 Commitments 0 Average interest rate 0 Average maturity 0 Average grace period Table 18. Official development assistance from OECD and OPEC members 182 Amount in dollars 0 as percentage of donor GNP 0 in national currencies 0 Net bilateral flow to low-income countries Table 19. Population growth, past and projected, and hypothetical stationary population 184 Past growth of population 0 Projected population 0 Hypothetical size of stationary population 0 Assumed year of reaching net reproduction rate of 1 0 Year of reaching stationary population Table 20. Demographic and fertility-related indicators 186 Crude birth rate 0 Crude death rate o Total fertility rate 0 Percentage of married women using contraceptives 138 Table 21. Labor force 188 Population of working age 0 Labor force in agriculture 0 in industry 0 in services o Growth of labor force, past and projected Table 22. Urbanization 190 Urban population as percentage of total population 0 Growth of urban population 0 Percentage in largest city 0 in cities of over 500,000 persons U Number of cities of over 500,000 persons Table 23. Indicators related to life expectancy 192 Life expectancy U Infant mortality rate 0 Child death rate Table 24. Health-related indicators 194 Population per physician 0 per nursing person 0 Daily calorie supply per capita Table 25. Education 196 Number enrolled in primary school as percentage of age group 0 in secondary school 0 in higher education 0 Adult literacy Table 26. Defense and social expenditure 198 Defense expenditure as percentage of GNP U as percentage of central government expenditure 0 Per capita central government expenditure on defense U on education o on health Table 27. Income distribution 200 Percentage share of household income, by percentile groups of households Technical notes 202 Bibliography of data sources 214 139 Key Figures in the colored bands are sum- Not available. In each table, countries are listed in their mary measures for groups of countries. (.) Less than half the unit shown. group in ascending order of income per The letter w after a summary measure capita. The reference numbers indicating indicates that it is a weighted average; All growth rates are in real terms. that order are shown in the alphabetical the letter m, that it is a median value; Figures in italics are for years or periods list of countries below. the letter t, that it is a total. other than those specified. Afghanistan 9 Hong Kong 91 Peru 60 Albania 118 Hungary 119 Philippines 49 Algeria 80 India 17 Poland 122 Angola 50 Indonesia 41 Portugal 83 Argentina 84 Iran, Islamic Republic of 75 Romania 120 Australia 107 Iraq 76 Rwanda 16 Austria 105 Ireland 99 Saudi Arabia 96 Bangladesh 5 Israel 92 Senegal 36 Belgium 110 Italy 101 Sierra Leone 27 Benin 25 Ivory Coast 63 Singapore 93 Bhutan 2 Jamaica 62 Somalia 18 Bolivia 43 Japan 104 South Africa 86 Brazil 81 Jordan 72 Spain 100 Bulgaria 121 Kampuchea, Democratic 1 Sri Lanka 24 Burma 8 Kenya 35 Sudan 32 Burundi 14 Korea, Democratic Republic of 69 Sweden 116 Cameroon 56 Korea, Republic of 74 Switzerland 117 Canada 108 Kuwait 97 Syrian Arab Republic 71 Central African Republic 26 Lao People's Democratic Republic 3 Tanzania 19 Chad 4 Lebanon 79 Thailand 48 Chile 85 Lesotho 42 Togo 33 China 21 Liberia 40 Trinidad and Tobago 94 Colombia 66 Libya 95 Tunisia 67 Congo, People's Republic of 58 Madagascar 28 Turkey 70 Costa Rica 68 Malawi 11 Uganda 13 Cuba 57 Malaysia 77 Union of Soviet Socialist Czechoslovakia 124 Mali 10 Republics 123 Denmark 113 Mauritania 37 United Arab Emirates 98 Dominican Republic 64 Mexico 82 United Kingdom 103 Ecuador 61 Mongolia 65 United States 112 Egypt, Arab Republic of 46 Morocco 52 Upper Volta 15 El Salvador 47 Mozambique 31 Uruguay 88 Ethiopia 6 Nepal 7 Venezuela 89 Finland 106 Netherlands 109 Viet Nam, Socialist France 111 New Zealand 102 Republic of 20 German Democratic Republic 125 Nicaragua 53 Yemen Arab Republic 38 Germany, Federal Republic of 114 Niger 29 Yemen, People's Democratic Ghana 34 Nigeria 54 Republic of 39 Greece 90 Norway 115 Yugoslavia 87 Guatemala 59 Pakistan 30 Zaire 12 Guinea 22 Panama 78 Zambia 45 Haiti 23 Paraguay 73 Zimbabwe 55 Honduras 44 140 Introduction The World Development Indicators, produced as Most of the information used in computing the a by-product of the World Bank's statistical and indicators was drawn from the data files and pub- analytical work, provide information on the main lications of the World Bank, the International features of social and economic development. Over Monetary Fund, and the United Nations and spe- time, the World Bank has developed standard data cialized agencies. formats for operational use, and its data bank has For ease of reference, ratios and rates of growth become increasingly geared to the provision of are shown; absolute values are reported only in a statistical inputs for internal information and de- few instances. Most growth rates were calculated cision papers. The broad range of internationally for two periods: 1960-70 and 1970-81, or 1970-80 comparable statistical information is intended to if data for 1981 were not available. All growth rates be suitable for cross-economy analysis. are in real terms and were computed, unless noted Most of the data collected by the World Bank otherwise, by using the least-squares method. Be- are on its developing member countries. Because cause this method takes all observations in a pe- comparable data for developed market economies riod into account, the resulting growth rates reflect are readily available, these are also included in the general trends that are not unduly influenced by indicators. Data for nonmarket economies, a few exceptional values. Table entries in italics indicate of which are members of the World Bank, are that they are for years or periods other than those included if available in a comparable form. specified. All dollar figures are US dollars. Every effort has been made to standardize con- Some of the differences between figures shown cepts, definitions, coverage, timing, and the eval- this year and last year reflect not only updating uation of the basic data to ensure the greatest but also revisions to historical series. They also possible degree of comparability. Since the pub- reflect revisions to the estimates of population on lication of the first World Development Indicators the basis of new information from surveys and the in 1978, considerable progress has been made, 1980 round of censuses. through the use of more uniform definitions and The economies included in the World Devel- concepts, toward making the data more interna- opment Indicators are classified by GNP per cap- tionally comparable. Although the number of in- ita. This classification is useful in distinguishing dicators included in this edition is greater than in economies at different stages of development. Many the first edition, it is believed that the quality of of the economies included are also classified by the data has been substantially improved. dominant characteristicsto distinguish oil im- The indicators in Table 1 give a summary profile porters and exporters and to distinguish market of economies. The data in other tables fall into the and nonmarket industrial economies. The groups following broad areas: national accounts, agricul- used in the tables are 34 low-income developing ture, industry, energy, external trade, external debt, economies with a GNP per capita of less than $410 aid flows, other external transactions, demogra- in 1981, 60 middle-income developing economies phy, labor force, urbanization, social indicators, with a GNP per capita of $410 or more, 4 high- defense and social expenditure, and income dis- income oil exporters, 19 industrial market econo- tribution. Two of these tables appear for the first mies, and 8 East European nonmarket economies. time this year, one on agriculture and food, the Note that because of the paucity of data and the other on terms of public borrowing. The first is differences in the method for computing national now included because of the importance of the income, estimates of GNP per capita are available agricultural sector and food aid in developing only for nonmarket economies that are members economies; the second, because of growing atten- of the World Bank. tion to the external obligations of developing coun- The format of this edition generally follows that tries. used in previous years, but some of the economies 141 have been reclassified to reflect changes in their low-income economies. And because trade in oil income levels. affects the economic characteristics and perform- In each group, economies are listed in ascending ance of middle-income economies; summary order of income per capita, and that order is used measures are also shown for oil importers and for in all tables. The alphabetical list in the key shows oil exporters. In this year's edition, the large group the reference number of each economy. Countries of middle-income economies is also divided into with populations of less than a million are not lower and upper categories to give greater mean- reported in the tables, largely for lack of compre- ing to the summary measures. hensive data. The technical notes for Table 1 show The weights used in computing the summary some basic indicators for 34 small countries that measures are described in the technical notes. The are members of the United Nations, the World letter w after a summary measure indicates that it Bank, or both. is a weighted average; the letter in, that it is a Summary measurestotals, median values, or median value; the letter t, that it is a total. The weighted averageswere calculated for the econ- median is the middle value of a data set arranged omy groups only if data were adequate and mean- in order of magnitude. Because the coverage of ingful statistics could be obtained. Because China economies is not uniform for all indicators and and India heavily bias the summary measures for because the variation around central tendencies all low-income economies, summary measures are can be large, readers should exercise caution in separately shown for China and India and for other comparing the summary measures for different Groups of economies The colors on the map show what group a country has been placed in on the basis of its GNP per capita and, in some instances, its distinguishing economic characteristics. For example, all low-income countries, those with a GNP per capita of less than $410, are colored yellow. The groups are the same as those used in the 27 tables that follow, and they include only the 125 countries with a population of more than 1 million. Low-income economies Middle-income oil importers ((Fals IraS H Middle-income oil exporters Ut Saioadoi\Naraaa High-income oil exporters Costa SC-h. Industrial market economies East European nonmarket economies Not included in the Indicators Tokelac (NZ) C-, Western 0 Waits and FVana Samoa (Fr) American Samoa (US) French Bolivia Polynesia Nise (NZ( t- Donrencan 0 Tongs (Fr) - . LL St KiSs-Nesis (UK) /Anlrgua and Barbuda Virgin Islands (US) _- -Monrrerrat (UK) &Guadetoape (Fr) Dominica NetheriandsArrlties bMaoiniqae (Fr) (Neth) St. Lacra d 5Barbados / Grenada St Vincent and the Grenadrnes -- \___ _ and Tobago Venezuela 142 indicators, groups, and years or periods. This year's edition again includes five world Readers should also exercise caution in com- maps. The first map shows country names and paring indicators across economies. Although the the groups in which economies have been placed. statistics are drawn from sources generally con- The maps on the following pages show popula- sidered the most authoritative and reliable, some tion, adult literacy, life expectancy at birth, and of them, particularly those describing social fea- the share of agriculture in gross domestic product tures and income distribution, are subject to con- (GDP). The Eckert IV projection has been used for siderable margins of error. In addition, variations these maps because it maintains correct'areas for in national statistical practices mean that the data all countries, though at the cost of some distor- in certain instances are not strictly comparable. tions in shape, distance, and direction. The maps The data should thus be construed only as indi- have been prepared exclusively for the conven- cating trends and characterizing major differences ience of the readers of this book; the denomina- between economies. tions used, and the boundaries shown, do not The technical notes should be referred to in any imply on the part of the World Bank and its af- use of the data. These notes outline the methods, filiates any judgment on the legal status of any concepts, definitions, and data sources. The bib- territory or any endorsement or acceptance of such liography gives details of the data sources, which boundaries. contain comprehensive definitions and descrip- The World Development Indicators are pre- tions of concepts used. pared under the supervision of Ramesh Chander. reenland (Den) Faeroe Islands Union ot Soviet Socialist Republics (Den) nnafl Dem gep Poland Isle of MMtnd Czechoslovakia (UK) Ii Austria Channel Islands (U Hunqu YvgOSl via Netherlands Blegiunr Luxembourg Fed Rep of Germany Switzerland Ponuqal SO Gibraltar - (UK) Afghanistan Morocco Pakistan Foe ab ongKofl9(UK( Cape Verde Lao Peoples pfjyDem Rep Ot Yemen em Rep (Philippines Sen Guam (US) Arab Rep nt Nam TIre Gannbia Upper Volta ea Guinea- Brssau Guinea Trust Territory of the Lanka Pacitrc Islands Sierra Leone Ivory (US) çSri Liberia a So rha Maldives Ghana - Uganda Togo I, -,Kenya Rwarrda Papua Equatorial Guinea Zaire Li New GUinea Sao Tome and Principe Burundi Peoples Rep V the Congo Swychebes Tanzania . SVonnon -. '. 5lslands Tuoafv * Comoros Pal Zambia Sanvatu Fip Moza a Zimbabwe, Mauritius adag Sotswana Revntn New CaleSenia (Fr) (Fr) ,pwazand South Africa New Zealand 143 Population and GNP per capita 0-15 million million The colors on the map show the gen- ulation for each of 124 countries; the I15-50 50-100 million eral size of a country's population. For technical note to that table gives data 100 + million example, countries with a population for 34 more countries with a popula- of less than 15 million are colored yel- tion of less than 1 million. Data not available low. Note that Table 1 gives the pop- In the chart below, the world's pop- The chart at right shows the propor- Population ulation has been arranged by the GNP tions of population and production ac- per capita of the countries that people counted for by each country group, live in. The chart shows, for example, except East European nonmarket that more than 2 billion people live in economies. (The country countries with a GNP per capita of less groups are those shown in than $410. the map on the preceding page and in the 27 tables that follow.) The chart shows, for example, that low-income East Europé countries, those with an av- nonmarket erage GNP per capita of $270, account for more than half the people but less than a Industrial market tenth of the GNP. GNP High-income oil exporters Middle-income Low-income 0 2 Billions of people 144 0-24 percent 25-49 percent The adult literacy rate is the percent- 25. For example, the countries colored 50-74 percent age of people over 15 who can read yellow had an adult literacy rate of 75-100 percent and write. The map classes countries less than 25 percent in 1980. by the rates given for individual coun- Data not available tries in Table 1 and repeated in Table The chart at left shows where the S world's illiterate adults live_mostly in low-income countries, which ac- Literate count for half the world's people. Illiterate The chart at right shows how the pro- portion of illiterate and literate adults changed in developing countries be- tween 1960 and 1980. The height of the cylinders reflects the total number of adults in developing countries in each of the two years. So, while the proportion of literate adults has in- creasedfrom 39 percent to 56 per- centthe number of literate adults has Low-income increased even morefrom 480 mil- Middle-income lion to 1.2 billion. High-income oil exporters 1960 1980 Industrial market 1.2 billion adults 2.1 billion adults East European nonmarket 145 Life expectancy 0-49 years The map classifies countries by life ex- 50-59 years pectancy at birththat is, by the num- 60-69 years ber of years a baby born in 1981 can 70+ years expect to live. For example, life ex- pectancy at birth is less than 50 years Data not available in countries colored yellow. The chart at right shows how life ex- Years pectancy has increased since 1960 for the various country groups. For ex- 70 ample, life expectancy in the low-in- come countries has increased 17 years, from 41 for a baby born in 1960 to 58 for one born in 1981. Table 23 shows how individual countries have fared in relation to the average for their 60 Percentage surviving country group. 1981 the first year of life 50 The chart above shows that the pro- portion of infants surviving the first year of life has increased from 84 per- cent in low-income countries in 1960 1960 to 90 percent in 1981. 40 a) a) C a) a) C a) a) S S a) a) C F a) a) a) -C a) C 146 Share of agriculture in GDP F 0-9 percent 10-19 percent The value added by a country's agri- example, countries whose shares of 20-39 percent cultural sector divided by the gross agriculture in GDP range from 0 to 9 40 + percent domestic product gives the share of percent are colored dark green. The agriculture in GDP. In the map coun- shares say nothing about absolute val- Data not available tries are classified by those shares. For ues of production. The chart at right shows the weighted average of agriculture's share in GDP Low-income Agriculture for each group of countries. For ex- 4 ample, the weighted average for low- 37% income countries is 37 percent, that for industrial countries 3 percent. This Middle-income difference shows that as GNP per cap- ita goes up, the share of agriculture in 14% GDP goes down. It is not that the ag- High-income ricultural sector gets smaller, but that oil exporters the industrial and services sectors get larger. Industrial market 3% The chart at left shows the range of agriculture's share in GDP for low-in- come countries, from 24 percent to 75 percent. The figures are taken from Table 3, which gives data for individual countries. Biggest share Smallest share 147 Table 1. Basic indicators GNP per capita Average Life Area annual Average annual Adult expectancy Population (thousands growth rate of Inflationo literacy at birth (millions) of square Dollars (percent) (percent) (percent) (years) Mid-1981 kilometers) 1981 1960_81b 1960_70c 1970_81d 19800 1981 Low-income economies 2,210.5 31,020 270 w 2.9w 3.5w 11,2w 52 w 58 w China and India 1,681.5 12,849 280w 3.5 w 56 u' 61 w Other low-income 529.0 18,171 240 w 0.8w 3.3w 11.6m 40 w 50 a' 1 Kampuchea, Dem. 181 . . 3.8 2 Bhutan 13 47 80 0.1 45 3 Lao, PDR 35 237 80 . 44 43 4 Chad 45 1,284 110 -22 46 74 15 43 5 Bangladesh 907 144 140 0.3 3.7 15.7 26 48 6 Ethiopia 320 1,222 140 1.4 2.1 4.1 15 46 7 Nepal 15.0 141 150 0.0 7.7 93 19 45 8 Burma 34 1 677 190 1.4 2.7 10.7 66 54 9 Afghanistan 16.3 648 . . . 11.9 5.0 20 37 10 Mali 69 1,240 190 1.3 50 9.7 10 45 11 Malawi 6.2 118 200 2.7 2.4 103 25 44 12 Zaire 29.8 2,345 210 -0 1 299 35.3 55 50 13 Uganda 13.0 236 220 -06 32 412 52 48 14 Burundi 42 28 230 24 28 11.6 25 45 15 Upper Volta 63 274 240 11 1.3 95 5 44 16 Rwanda 5.3 26 250 17 13.1 13.4 50 46 17 India 6902 3.288 260 14 71 81 36 52 18 Somalia 44 638 280 -02 4.5 12.6 60 39 19 Tanzania 19.1 945 280 1.9 1.8 11.9 79 52 20 Viet Nam 55 7 330 87 63 21 China 991.3 9,561 300 50 . . . . 69 67 22 Guinea 56 246 300 02 1.5 46 20 43 23 Haiti 5.1 28 300 05 40 10.0 23 54 24 Sri Lanka 150 66 300 2.5 18 131 85 69 25 Benin 3.6 113 320 0.6 1.9 9.4 28 50 26 Central African Rep. 2.4 623 320 0.4 41 126 33 43 27 Sierra Leone 3.6 72 320 0.4 122 15 47 28 Madagascar 9.0 587 330 -0.5 3.2 10.6 50 48 29 Niger 5.7 1.267 330 -1.6 2.1 122 10 45 30 Pakstan 84.5 804 350 2.8 33 13 1 24 50 31 Mozambique 125 802 . , . . 33 32 Sudan 192 2.506 380 -03 37 159 32 47 33 Togo 27 57 380 25 1.3 8.9 18 48 34 Ghana 11 8 239 400 -11 7.6 36.4 54 Middle-income economies 1,128.4 41,108 1,500w 3.7 w 3.0 m 13.1 rn 65 w 60 a' Oil exporters 506.5 15,036 1,250w 3.8 w 3.0 m 13.8w 58 a' 57 w Oil importers 621.9 26,072 1.670w 3,7w 3.0 m 13.0w 72 a' 63 w Lower middle-income 663.7 t 19,302 t 850 w 3.4w 2.8 m 11.1 m 59 a' 57 w 35 Kenya 174 583 420 29 1.6 10.2 47 56 36 Senegal 5.9 196 430 -0.3 17 79 10 44 37 Mauritania 1.6 1,031 460 1.5 2.1 90 17 44 38 Yemen Arab Rep. 7.3 195 460 5.5 15 6 21 43 39 Yemen, PDR 20 333 460 . . 40 46 40 Liberia 1.9 111 520 12 1.9 8.9 25 54 41 Indonesia 1495 1,919 530 41 . 205 62 54 42 Lesotho 14 30 540 70 2.7 105 52 52 43 Bolivia 57 1.099 600 19 35 230 63 51 44 Honduras 38 112 600 11 29 9.1 60 59 45 Zambia 58 753 600 00 7.6 8.4 44 51 46 Egypt 433 1.001 650 3.5 2.6 11.1 44 57 47 El Salvador 47 21 650 1.5 0.5 108 62 63 48 Thailand 48.0 514 770 4.6 1.8 10.0 86 63 49 Philippines 49.6 300 790 2.8 58 131 75 63 50 Angola 7.8 1,247 . . . . . 42 51 Papua New Guinea 3.1 462 840 25 4.0 8.6 32 51 52 Morocco 20.9 447 860 2.4 2.0 82 28 57 53 Nicaragua 28 130 860 06 1.8 14.2 90 57 54 Nigeria 87.6 924 870 35 4.0 142 34 49 55 Zimbabwe 72 391 870 10 1.3 101 69 55 56 Cameroon 87 475 880 28 42 10.6 50 57 Cuba 9.7 115 . . 95 73 58 Congo. People's Rep 1 7 342 1,110 10 5.9 11 8 60 59 Guatemala 75 109 1,140 26 0.3 104 59 60 Peru 170 '1.285 1.170 10 10.4 34.3 80 58 61 Ecuador 86 284 1.180 4.3 61 141 81 62 62 Jamaica 22 11 1.180 0.8 4.0 16.8 90 71 63 Ivory Coast 85 322 1.200 23 28 130 35 47 64 Dominican Rep. 5.6 49 1.260 3.3 2.1 9.1 67 62 148 GNP per capita Average Life Area annual Average annual Adult expectancy Population (thousands growth rate of Inflatlona literacy at birth (millions) of square Dollars (percent) (percent) (percent) (years) Mid-1981 kilometers) 1981 1960_81b 1960_70c 197081d 19800 1981 65 Mongolia 17 1,565 . . 64 66 Colombia 264 1.139 1,380 32 11.9 22 4 81 63 67 Tunisia 65 164 1,420 4.8 3.6 8.2 62 61 68 Costa Rica 2.3 51 1,430 3.0 1.9 15.9 90 73 69 Korea, Dem. Rep 187 121 . . 66 70 Turkey 45.5 781 1,540 35 56 32.7 60 62 71 Syrian Arab Rep. 9.3 185 1,570 3.8 26 120 58 65 72 Jordan 34 98 1,620 . . . 70 62 73 Paraguay 31 407 1,630 35 31 12.4 84 65 Upper middle-income 464.7t 21,806t 2490w 4.2w 30 186 7 65w 74 Korea, Rep. of 38.9 98 1,700 6.9 17.5 198 93 66 75 Iran, Islamic Rep. of 40.1 1,648 . . -05 20.1 50 58 76 Iraq 13.5 435 . . . 1.7 . . , , 57 77 Malaysia 14.2 330 1,840 4.3 -0.3 7.4 60 65 78 Panama 1.9 77 1,910 31 16 7.6 85 71 79 Lebanon 27 10 1.4 14.6 . . 66 80 Algeria 19.6 2,382 2,140 3.2 2.7 13.4 35 56 81 Brazil 120.5 8,512 2,220 5.1 46 1 42.1 76 64 82 Mexico 71 2 1,973 2.250 38 3.5 19 1 83 66 83 Portugal 98 92 2.520 48 3.0 170 78 72 84 Argentina 28 2 2,767 2,560 19 21 4 134.2 93 71 85 Chile 11.3 757 2,560 07 33.0 164.6 68 86 South Africa 29.5 1221 2,770 23 30 12.8 63 87 Yugoslavia 225 256 2,790 50 126 19.4 85 71 88 Uruguay 29 176 2,820 16 51.1 60.2 94 71 89 Venezuela 154 912 4,220 24 1.3 12.5 82 68 90 Greece 97 132 4,420 5.4 32 148 . 74 91 Hong Kong 52 1 5.100 6.9 24 184 90 75 92 Israel 4.0 21 5,160 36 6.2 45.5 . 73 93 Singapore 2.4 1 5,240 74 1.1 5.2 83 72 94 Trinidad and Tobago 1.2 5 5.670 29 3.2 18.7 95 72 High-income oil exporters 15.01 4,012 1 13,460 , 6.2 18.2w 32 w 57 W 95 L'bya 3.1 1,760 8,450 4.7 5.2 17.3 57 96 Saudi Arabia 9.3 2.150 12.600 78 . 24.3 25 55 97 Kuwait 15 18 20,900 -0.4 182 60 70 98 united Arab Emirates 11 84 24,660 . . 56 63 Industrial market economies 71951 309351 11120w 34w 43w 99w 99w 75w 99 Ireland 34 70 5,230 3.1 52 14.2 98 73 100 Spain 38.0 505 5.640 4.2 82 160 . 74 101 Italy 56.2 301 6.960 3.6 44 157 98 74 102 New Zealano 33 269 7.700 1.5 36 129 99 74 103 Unted Kingdom 56.0 245 9,110 21 41 144 99 74 104 Japan 117.6 372 10.080 6.3 51 74 99 77 105 Austria 7.6 84 10.210 4.0 37 6.1 99 73 106 Finland 4.8 337 10,680 3.6 6.0 12.0 100 75 107 Austaiia 14 7,687 11.080 2.5 31 11 100 74 108 Canada 24.2 9.976 11.400 33 3.1 9.3 99 75 109 Netherlands 14.2 41 11.790 31 54 7.6 99 76 110 Beglum 99 31 11,920 38 3.6 7.3 99 73 111 Fance 540 547 12,190 38 4.2 9.9 99 76 112 United States 229.8 . 9.363 12.820 23 2.9 7.2 99 75 113 Denmark 5.1 43 13.120 2.6 6.4 10.0 99 75 114 Germany, Fec. Rep. 61 7 249 13,450 32 3.2 50 99 73 115 Norway 41 324 14.060 35 4,4 8.8 99 76 116 Sweden 8.3 450 14.870 2.6 4.3 10.0 99 77 11 7 Switzerland 64 41 17.430 1.9 44 48 99 76 East European nonmarket economies 380.8 I 23,422 9w 72w 118 Albania 28 29 . . . . . 70 119 Hungary 10.7 93 2.100 50 . 2.9 99 71 120 Romania 22.5 238 2.540 8.2 -02 . . 98 71 121 Bulgaria 8.9 111 . . . 73 122 Poland 35.9 313 . . . . . 98 73 123 USSR 2680 22,402 . . . . 100 72 124 Czechoslovakia 153 128 . . 72 125 German Dem Rep. 167 108 73 a. See the technical notes. b Because data for the early 1960s are not available. figures in italics are for periods other than that specified c. Figures in italics are for 1961-70, not 1960-70 d. Figures in italics are for 1970-80. not 1970-81. e Figures in italics are for years other than those specified. See the technicai notes. 149 Table 2. Growth of production Average annual growth rate (percent) GDP Agriculture Industry Manufacturing Services 1960_70a1970_81b 196O7O197O81) 196O-70 1970-8V' 1960_70a 1970_81b 1960-7O 197O81' Low-income economies 4.6 w 4.5w 2.2 in 2.3 in 6.6 in 3,6m 5,4w 2.9 in 4.2 in 4.6 in China and India 4.5 w 4.8w 1.8 in 2.4 in 8.3 in 6.4w 5.2 in 4.8 in Other low-income 4.7 ii' 3.6w 2.7 in 2.3 in 6.6 in 3.2m 5.9w 2.8 in 4.2 in 4.6 in 1 Kampuchea, Dem. 31 2 Bhutan 3 Lao. PDR 4 Chad 05 5 Bangladesh 37 42 27 2.4 80 90 66 112 42 5.3 6 Ethiopia 4.4 22 2.2 0.9 7.4 1.8 8.0 2.8 7.8 4.2 7 Nepal 25 21 8 Burma 26 48 4.1 4.7 28 5.6 3.4 46 1.5 4.7 9 Afghanistan 20 3.9 32 3.2 2.8 53 10 Mali 3.3 46 4.0 2.4 59 11 Malawi 4.9 56 . . . . , , , , . . . , 12 Zaire 3.4 -0.2 . . 15 . . -0.8 . . -2.3 . . -04 13 Uganda 56 -16 .. -08 -98 -9.3 . -07 14 Burundi 44 32 . 2.2 . 85 . 5.9 . . 3.5 15 Upper Volta 30 36 . 14 29 34 . . 58 16 Rwanda 2.7 53 . , , , , . . . 17 India 34 36 1.9 1.9 54 44 4.7 50 46 5.2 18 Somalia 10 39 -0.6 . 3,4 . 40 42 19 Tanzania 60 51 55 22 . 29 54 20 Viet Nam 38 21 China 5.2 5.5 1.6 2.8 11.2 8.3 . . . 5.7 4.4 22 Guinea 35 30 . . . . . 23 Haiti 02 34 -0.6 1.1 02 7.1 -0.1 76 11 3.5 24 Sri Lanka 4.6 43 3.0 3.0 66 4.2 6.3 2.1 46 50 25 Benin 26 33 . . . . . . , . . . 26 Central African Rep. 1.9 1.6 08 23 5.4 4.0 54 -4.3 1.8 (.) 27 Sierra Leone 4.3 19 . . 24 . . -3.6 . . 3.7 . 45 28 Madagascar 2.9 0.3 . 0.3 . . 0.3 . . . . . 0.4 29 Niger 2.9 3.1 3.3 -30 13.9 114 . . , (.) 69 30 Pakistan 6.7 4.8 4.9 2.6 10.0 55 94 44 7.0 61 31 Mozambique . . . . . , . . . . 32 Sudan 1.3 4.1 . . 23 . 3.2 . . 1.5 . . 6.0 33 Togo 85 32 1.5 62 . -104 3.2 34 Ghana 21 -02 00 -22 . -10 0.4 Middle-income economies 6.0 w 5.6w 3.4w 3,0w 7.4 in 6.8 in 6.7 in 5.9 ni 5,5 in 6.1 in Oil exporters 6.3 w 6.2 w 3.3 in 3.4 in 7.4 in 7.6 in 7.4 in 8.7 in 4.8 in 7.2 m Oil importers 5.8 w 5.4 w 3.5 in 2.9 in 7.0 in 5.9 in 6.5 in 5.6 iii 5.7 in 5.7 in Lower middle-income 5.0 or 5.6w 3.0 in 3.2 in 6.8 in 7.4 in 7.1 in 5.8 iii 5.3 in 6.0 in 35 Kenya 59 58 4.2 . 85 9,5 60 36 Senegal 25 20 2.9 26 4.4 4.1 6.2 20 1.7 0.9 37 Mauritania 6.7 17 1.4 3.1 14.1 -40 92 4.6 74 52 38 Yemen Arab Rep. 8.7 . . 36 13.9 12.1 117 39 Yemen, PDR 40 Liberia 5.1 1.3 40 -07 5.6 14 41 Indonesia 3.9 78 27 38 52 11.2 33 13.9 4.8 9,5 42 Lesotho 52 8.4 43 12.9 9.6 92 43 Bolivia 52 44 3.0 29 62 37 54 53 54 5.2 44 Honduras 53 3.8 5.7 1.9 54 49 4.5 47 48 4.6 45 Zambia 50 04 1.8 -04 03 1.2 46 Egypt 43 81 29 2.9 5.4 76 48 87 47 11.8 47 El Salvador 59 31 30 23 85 33 88 24 65 3.3 48 Thailand 84 72 56 45 119 99 11.4 103 9.1 7.5 49 Philippines 51 62 43 49 60 84 67 69 52 53 50 Angola 51 Papua New Guinea 67 t9 52 Morocco 44 5.2 47 () 4.2 5.8 42 54 4,4 64 53 Nicaragua 73 0.8 78 2.7 104 21 11.4 28 58 -0.8 54 Nigeria 3.1 4.5 -04 -04 14.7 60 9.1 124 2.3 7.4 55 Zimbabwe 43 18 56 Cameroon 3.7 6.3 3.9 9.4 . 53 . 68 57 Cuba 58 Congo, Peoples Rep 2.3 5.1 1.8 2.1 7.4 13.6 74 -1.8 1.1 22 59 Guatemala 56 55 43 4.3 78 73 82 59 55 5.4 60 Peru 49 30 37 03 50 34 57 2.9 53 35 61 Ecuador 86 . 29 . 125 . . 108 . 8.7 62 Jamaica 44 -12 15 0.5 48 -36 57 -26 46 () 63 Ivory Coast 80 62 42 47 115 93 116 58 9.7 5.8 64 Dominican Rep 45 63 21 3.2 60 76 5.0 61 50 6.7 150 Average annual growth rate (percent) GOP Agriculture Industry Manufacturing Services 1960_70197O81b 1g6Q701g71b 196O-7O 197Q1b 196O-7O 197081l 196O-70 197O81t 65 Mongolia 66 Colombia 51 5.7 35 4.7 6.0 4.7 5.7 5.7 5.7 68 67 Tunisia 4,7 7.3 2.0 4.1 8.2 9.3 7.8 11.7 4.5 75 68 Costa Rica 6.5 52 57 2.2 94 74 106 7.1 57 52 69 Korea, Dem Rep. 70 Turkey 60 5.4 25 32 9.6 6.1 10.9 5.5 69 62 71 Syrian Arab Rep. 46 100 . . 8.2 98 . 8.2 10.8 72 Jordan 73 Paraquay 42 88 .. 7.0 , 110 . 8.1 91 Upper middle-income 6.4 w 5.6 w 4.0 in 2.6 in 8.8 in 4.5 in 7.8 in 6.3 in 7.1 in 6.5 in 74 Koea. Rep. of 86 91 4.4 3.0 17.2 14.4 176 156 89 8.2 75 Iran. Islamic Rep of 113 44 . 13.4 12.0 100 76 Iraq 61 57 . 47 5.9 . 8.3 77 Malaysia 6.5 78 . 5.2 9.3 11.1 . . 8.5 78 Panama 7.8 46 57 20 104 41 105 27 7.6 53 79 Lebanon 4.9 -5.4 63 . 4.5 5.0 . 48 80 Algeria 43 69 0.1 39 11.6 7.6 7.8 11.6 -11 64 81 Brazil 5.4 8.4 5.2 . . 9.1 8.7 8.3 82 Mexico 76 6.5 4,5 3.4 9.4 74 101 7.1 7,3 66 83 Portugal 6.2 4.4 13 -08 88 44 8.9 4.5 59 6.0 84 Argentina 4,3 1.9 18 25 5.8 1.4 5.6 07 38 2.2 85 Chile 44 2.1 3.1 30 44 07 5,5 () 46 29 86 South AIca 63 37 87 Yugoslavia 58 5.7 33 26 62 68 5.7 71 69 5.6 88 Uruguay 12 3.1 19 12 11 35 15 43 1.0 29 89 Venezuela 60 45 58 3.4 46 27 6.4 53 7.3 5.9 90 Greece 69 4.4 35 1.7 94 45 102 55 71 5.2 91 Hong Kong 10.0 99 -30 10 1 92 Israel 81 4.0 93 Singapore 88 85 5.0 17 12.5 9.0 13.0 9.7 7.7 85 94 T"n'oad and Tobago 4.0 5.5 -18 4.0 . 13 . 69 High-income oil exporters 5.3w . . 7.1 m . . 3.1 in 9.2 iii . . 12.2 in 95 Libya 24 4 2.3 105 31 14.7 17.1 96 Saudi Arabia 10.6 53 10.2 6.5 122 97 Kuwa:t 5,7 2.3 7.1 -2.2 9.2 96 98 United Arab Emirates Industrial market economies 5.1 zv 3.0 w 1.4 in 1.6 in 5.7 in 2.9 in 5.9 iii 3.1 in 4.6 in 3.6 in 99 Ireland 42 40 09 . . 6.1 . 43 100 Span 7.1 32 . . 2.1 . 3.9 . . 6.0 4.5 101 Italy 55 29 2.6 1.3 6.6 29 80 37 51 3.2 102 New Zealana 3.6 20 . . . . . . . . . 103 United Kingdom 2.9 1 7 22 1.6 3.1 04 3.3 -0.5 2.8 25 104 Japan 104 45 2.1 0.2 130 5.6 13.6 6.5 10.2 4.2 105 Austria 4.6 35 1.2 1.9 5.4 32 52 3.4 4.4 39 106 Fin ana 4.3 31 0.5 0.0 5.2 3.3 6.1 3.7 5.0 36 107 Australa 5.6 33 2.0 . . 5.9 , , 55 4.0 108 Canada 56 38 2.5 1.8 6.3 2.9 6.8 3.2 55 43 109 Netherlands 5.2 27 28 39 68 2.0 6.6 2.6 51 37 110 Be gium 4.7 30 -0.5 0.7 55 3.1 6.2 3.0 46 3.5 111 F'ance 55 33 1.6 0.5 71 27 7.8 3.2 50 42 112 Un1ed States 43 29 05 1.6 46 23 5.3 29 44 3.3 113 Denmak 45 2.1 0.1 2.6 52 11 5.2 31 46 25 114 Ge'many, Fee. Rep. 44 26 1.5 1.3 48 5.4 21 42 25 115 Norway 43 45 0.7 2.2 55 50 4.8 1.3 50 45 116 Sweden 44 18 08 -11 62 08 59 07 39 27 11 7 Switzerland 43 0.7 East European nonmarket economies 118 Albania , . . , . . , , , . . , 119 Hungary 5.3 5.0 32 29 6.3 5.8 65 5.9 5.8 5.0 120 Romanias 8.6 9.1 1.7 4.9 12.8 9.2 . . , 121 Bugar'a . . . . . . . . . 122 Polano .. .. . .. .. .. .. .. 123 USSR 124 Czechoslovakia 125 Geman Dem. Rep. a Figures in italics are for 1961-70. not 1960-70. b. Figures in italics are for 1970-80, not 1970-81. c. Services include the unallocated share of GDP. d. Based on net material product 151 Table 3. Structure of production GOP Distribution of gross domestic product (percent) (millions of dollars) Agriculture Industry (Manufacturing)a Services 1960' 1981' 1960b 1981c 1960' 1981c 1960b 1981' 1960b 1981c Low-income economies 48w 37w 25w 34w 11w 16w 27 w 29 w China and India 48 w 33 w 28 w 39 w 24 w 28 w Other low-income 48w 45 w 12w 17w 9a 10 a 40 w 38 w 1 Kampuchea, Dern 2Bhutan . .. . 3 Lao.PDR .. 4 Chad 180 52 12 4 36 5 Bangladesh 3.170 11.910 58 54 7 14 5 8 35 32 6 Ethiopia 900 3870 65 50 12 16 6 11 23 34 7 Nepal 410 2,420 . . . 8 Burma 1,280 5,770 33 47 12 13 8 10 55 40 9 Afghanistan 1.190 3,230 10 Mai 270 1120 55 42 10 11 5 6 35 47 11 Maawi 170 1,420 58 43 11 20 6 13 31 37 12 Zaire 130 5.380 30 32 27 24 13 3 43 44 13 Uganda 540 9,390 52 75 12 4 9 4 36 21 14 Burundi 190 880 . 56 . 16 9 , 28 15 Upper Volta 200 1.080 55 41 16 16 9 12 29 43 16 Rwanda 120 1,260 80 46 7 22 1 16 13 32 17 India 29.550 142,010 50 37 20 26 14 18 30 37 18 Somalia 160 1230 71 8 . 3 21 19 Tanzania 550 4,350 57 52 11 15 5 9 32 33 20 VietNam 21 China 42,770 264.340 47C 35 33° 46 . . . 20° 20 22 Guinea 370 1.670 . . 37 33 . . 4 30 23 Haiti 270 1,590 .. .. . . .. 24 S' Lanka 1.500 4.120 32 28 20 28 15 16 48 44 25 Ben n 160 850 55 44 8 13 3 7 37 43 26 Central African Rep. 110 690 51 37 10 13 4 6 39 50 27 Sierra Leone 1.040 . . 31 , , 20 . 6 . 49 28 Maoagascar 540 2,890 37 35 10 14 4 53 51 29 Niger 250 1,710 69 30 9 32 4 8 22 38 30 Pakistan 3,500 25,160 46 30 16 26 12 17 38 44 31 Mozambque 32 Suoan 1.160 7.540 . . 38 . 14 . 6 . 48 33 Togo 120 880 55 24 16 27 8 7 29 49 34 Ghana 1,220 21,260 41 60 10 12 . . 7 49 28 Middle-income economies 24 w 14w 30 a 38 w 20 w 22 W 46 a 48 w Oil exporters 27 w 13w 26 a 40 w 15w 17w 47 U' 47 w Oil importers 23 w 14w 33 a 36 w 22 w 25 w 44 a 50 U' Lower middle-Income 36 . 22 a 25 a 35w 15 a 17w 39 a 43 a 35 Kenya 730 6,960 38 32 18 21 9 13 44 47 36 Senega 610 2,330 24 22 17 26 12 15 59 52 37 Mauritania 90 630 44 28 21 24 3 7 35 48 38 Yemen Arab Rep. 2.770 . 28 . . 16 . 6 . . 56 39 Yemen. PDR 570 13 . 28 . 14 . . 59 40 Libe'a 220 930 36 . 27 . . 8 . . 37 41 Inoonesa 8.670 84,960 50 24 25 42 . 12 25 34 42 Lesotho 30 320 . . 31 21 . . 5 48 43 Boivia 460 7,900 26 18 25 27 15 14 49 55 44 Honouras 300 2,380 37 32 19 25 13 17 44 43 45 Zambia 680 3.430 11 18 63 32 4 18 26 50 46 Egyp1 3.880 23,110 30 21 24 38 20 32 46 41 47 E Savaoo' 570 3.550 32 26 19 20 15 15 49 54 48 Thaiiano 2.550 36.810 40 24 19 28 13 20 41 48 49 Phlppines 6,960 38,900 26 23 28 37 20 25 46 40 50 Angoa 51 Papua New Guinea 230 2,580 49 13 . . 4 38 52 Mo'occo 2.040 14.780 23 14 27 34 16 18 50 52 53 N caragua 340 2.590 24 20 21 33 16 26 55 47 54 N ger'a 3.150 70.800 63 23 11 37 5 6 26 40 55 Zmbabwe 780 6.010 18 18 35 37 17 27 47 45 56 Cameroon 550 6,270 . . 27 . 20 . 8 . . 53 57 Cuba 58 Congo. People's Rep. 130 1,870 23 9 17 53 10 5 60 38 59 Guatemala 1,040 8,660 . . . . , , . . . . . 60 Pe'u 2410 23.260 18 9 33 41 24 25 49 50 61 Ecuaoor 970 13.430 26 12 20 38 16 11 54 50 62 jama'ca 700 2.960 10 8 36 37 15 15 54 55 63 Ivory Coast 570 8,670 43 27 14 23 7 12 43 50 64 Dominican Rep. 720 6,650 27 18 23 27 17 15 50 55 152 GDP Distribution of gross domestic product (percent) (millions of dollars) Agriculture Industry (Manufacturing)e Services 1960b 1981c 1gb 1981' 1gb 1981c 1960b 1981c 1960b 1981c 65 Mongolia . . . 66 Colombia 3780 32,970 34 27 26 31 17 21 40 42 67 Tunisia 770 7,100 24 16 18 37 8 14 58 47 68 Costa Rica 510 2,630 26 23 20 28 14 20 54 49 69 Korea, Dem. Rep, . . . . . . . 70 Turkey 8,820 53,910 41 23 21 32 13 23 38 45 71 Syrian Arab Rep. 890 15,240 . . 19 . . 31 . . 26 . . 50 72 Jordan . 2,550 . . 8 . 30 . . 14 . . 62 73 Paraguay 300 5,260 36 28 20 26 17 17 44 46 Upper middIe-inc .. LI U) 33 w 39 FL 23 w 24 w 49 w 51 w 74 Korea, Rep. of 3,810 65,750 37 17 20 39 14 28 43 44 75 Iran, Islamic Rep. of 4,120 29 . 33 , 11 . 38 76 Iraq 1,580 , . 17 . . 52 . . 10 . . 31 77 Malaysia 2,290 24,770 36 23 18 36 9 18 46 41 78 Panama 420 3,490 23 10 21 21 13 10 56 69 79 Lebanon 830 . 12 . . 20 . 13 68 80 Algeria 2,740 41,830 16 6 35 55 8 11 49 39 81 Brazil 14,540 210,660 16 13 35 34 26 27 49 53 82 Mexico 12,040 238,960 16 8 29 37 19 22 55 55 83 Portugal 2,340 21,290 25 12 36 44 29 35 39 44 84 Argentina 12,170 153,330 16 9 38 38 32 25 46 53 85 Chile 3,910 32,860 9 7 35 35 21 22 56 58 86 South Africa 6,980 74,670 12 7 40 53 21 23 48 40 87 Yugoslavia 9,860 63,350 24 12 45 43 36 30 31 45 88 Uruguay 1,110 9,790 19 8 28 33 21 26 53 59 89 Venezuela 7,570 67,800 6 6 22 45 15 72 49 90 Greece 3,110 33.390 23 17 26 31 16 20 51 52 91 Hong Kong 950 27,220 4 , . 39 . . 27 57 92 Israel 2,030 17,440 11 5 32 36 23 26 57 59 93 Singapore 700 12,910 4 1 18 41 12 30 78 58 94 Trinidad and Tobago 470 6,970 8 2 46 52 24 13 46 46 Highincome oil exporters 1w .. 76w .. 23w 95 Libya 310 27,400 2 71 3 27 96 Saudi Arabia 115,430 78 4 20 97 Kuwait 24,260 (.) 71 . 4 29 98 United Arab Emirates 30,070 77 4 22 Industrial market economies 0 FL 3w 40w 36w 30w 25w 54w 61w 99 Ireland 1.770 16,590 22 . . 26 52 100 Spain 11,430 185,080 7 36 29 57 101 Italy 37,190 350,220 13 6 41 42 31 29 46 53 102 New Zealand 3,940 25010 11 . . 31 23 58 103 United Kingdom 71,440 496,580 3 2 43 33 32 20 54 65 104 Japan 44,000 1,129,500 13 4 45 43 34 30 42 53 105 Austria 6,270 66,240 11 4 46 39 35 37 43 57 106 Finland 5,010 48,940 17 7 34 36 23 25 49 57 107 Australia 16,370 171,070 12 5 40 28 . 48 108 Canada 39,930 282,500 5 4 34 32 23 19 61 64 109 Netherlands 11,580 140,490 9 4 46 33 34 24 45 63 110 Belgium 11,280 96,940 7 2 41 37 30 25 52 62 111 France 60,060 568,560 10 4 39 35 29 25 51 61 112 United States 505,300 2,893.300 4 3 38 34 29 23 58 63 113 Denmark 5,960 58,260 11 4 31 32 21 19 58 64 114 Germany, Fed Rep 72,100 708,540 6 2 53 46 41 41 49 115 Norway 4,630 57.140 9 5 33 41 21 15 58 54 116 Sweden 13,950 112,420 7 3 40 31 27 21 53 66 11 7 Switzerland 8,550 94.260 East European nonmarket economies 118 Albania 119 Hungarye 22,560 28 18 39 48 33 34 120 Romania 48,412 . . 13 . 60 27 121 Bulgaria 122 Poland 123 USSR 124 Czechoslovakia 125 German Dem Rep. a. Manufacturing is a part ot the industrial sector, but its share ot GDP is shown separately because it typically is the most dynamic part of the industrial sector. b. Figures in italics are tor 1961, not 1960. c. Figures in italics are for 1980, not 1981 d. Based on net material product e. Based on constant price series. Services include the unallocated share of GDP. 153 Table 4. Growth of consumption and investment Average annual growth rate (percent) Public Private Gross consumption consumption domestic investment 1960-70° 1970-81' 1960-70 1970-81' 196070e 1970-81k Low-income economies 4.5 m 3.3 in 3.2 m 3.5 in 4.6 in 4.3 in China and India 3.1 in 4.2 in 7.6 in 5.5 in Other low-income 4.6 m 3.1 in 3.2 in 3.5 lfl 4.3 in 3.7 in 1 Kampuchea, Oem 2.6 3.2 0.3 2 Bhutan 3 Lao, PDR 4 Chad 44 -07 23 5 Bangladesh C c 3.4 4.2 111 29 6 Ethiopia 4,7 3.4 4.7 3.4 57 -03 7 Nepal 8 Burma c 2.8 4.2 36 89 9 Afghanistan C 20 -1.0 10 Mali 6.2 73 2.8 48 4.9 35 11 Malawi 46 2.2 41 55 15.4 2.8 12 Zaire 8.5 -0.2 3.5 -3.4 9.6 7.3 13 Uganda C c 5.6 -0.9 7,5 -164 14 Burundi 192 31 32 33 4,3 16.7 15 Upper Volta 7.1 3,5 37 16 Rwanda 11 118 43 3.2 35 149 17 India -0.2 42 37 3.2 53 4.9 18 Somalia 37 0.4 43 19 Tanzania C c 67 6.5 98 37 20 Viet Nam 21 China c C 25 52 9.8 60 22 Guinea 23 Haiti c c -10 5.0 17 91 24 Sri Lanka c c 21 2.7 66 94 25 Benin 17 24 49 3.3 42 11.0 26 Central African Rep 2.2 -29 3.0 2.4 1.3 -7.5 27 Sierra Leone -19 35 -12 28 Madagascar 3.0 1.3 1.9 -06 5.4 -1.1 29 Niger 20 26 3.9 28 30 73 30 Pakistan 73 47 7.1 53 69 3.2 31 Mozambique 32 Sudan 12 1 C -1.6 6.9 -1.3 52 33 Togo 67 99 76 4.1 111 91 34 Ghana 71 47 1.7 -0.8 -31 -14 Middle-income economies 6.2 in 6.6 in 5.2 in 5.5 in 7.7 in 7.9 in Oil exporters 6.3 in 10.6 in 4.8 in 7.4 in 4.2 in 10.5 in Oil importers 6.0 in 6.4 in 5.4 in 4.6 in 8.8 in 6.6 in Lower middle-income 5.8 in 6.6 in 4.8 in 5.5 in 7.9 in 8.2 in 35 Kenya 10.0 92 29 62 10.3 19 36 Senegal -0.2 59 3.2 28 1.1 1.9 37 Mauritania 9.0 2.6 32 -20 64 38 Yemen Arab Rep 108 100 24.6 39 Yemen. PDR 40 Liberia 5.6 22 0.7 42 -39 33 41 Indonesia 0.9 123 41 89 46 14.0 42 Lesotho 15.4 6.5 11.6 20 7 19.3 43 Bolivia 89 6.6 38 6.0 9.6 09 44 Honduras 5.3 7.1 48 4.1 10.2 83 45 Zambia 110 0.8 68 1.9 106 -10.8 46 Egypt C C 67 6.0 31 162 47 El Salvador 64 5.6 61 4.1 3.5 24 48 Thailand 97 '93 70 62 158 75 49 Philippines 50 66 47 48 82 101 50 Angola 51 Papua New Guinea 6.0 -12 5.7 31 23.2 -3.7 52 Morocco 4.4 14.2 4.1 4.3 88 9.2 53 Nicaragua 22 98 7.6 07 109 -1.2 54 Nigeria 10.0 110 0.6 6.3 7.4 100 55 Zimbabwe 56 Cameroon 6.1 3.0 2.7 6.2 93 92 57 Cuba 58 Congo, People's Rep. 54 23 10 17 27 87 59 Guatemala 47 67 47 51 79 71 60 Peru 63 5.6 71 3.0 10 31 61 Ecuador 137 7.5 104 62 Jamaica 8.6 5.9 30 -14 78 -96 63 Ivory Coast 118 10 1 80 58 127 12.1 64 Dominican Rep. 1.9 22 63 6.0 114 96 154 Average annual growth rate (percent) Public Private Gross consumption consumption domestic investment 1960_.70e 1970-1b 196O-70 1970-81' 1960_70a 1970_81b 65 Mongolia 66 Colombia 5.5 5.2 5.5 66 45 66 67 Tunisia 5.2 90 3.2 8.2 4.2 10.8 68 Costa Rica 80 5.9 60 42 71 67 69 Korea, Oem. Rep. 70 Turkey 67 64 51 37 8.8 81 71 Syrian Arab Rep. 16.0 12.1 16.7 72 Jordan 73 Paraguay 69 6.6 53 7.8 68 198 Upper middle-income 6.8 or 6.5 or 5.4 m 5.8 m 7.5 ni 7.2 oi 74 Korea, Rep. of 55 7.8 7.0 7.1 236 122 75 Iran, Islamic Rep. of 160 100 12.2 76 Iraq 81 49 30 77 Malaysia 7.5 10.2 4.2 73 75 104 78 Panama 78 52 67 46 124 10 79 Lebanon 59 44 62 80 Algeria 15 11.4 23 9.2 -0 2 11 8 81 Brazil 3.7 6.9 5.4 8.7 6.1 79 82 Mexico 8.8 8.3 70 6.0 99 90 83 Portugal 7.7 83 5.5 38 77 23 84 Argentina 11 4.8 45 1.1 4.0 2.5 85 Chile 5.1 2.2 37 08 99 3.0 86 South Atrica 70 49 62 0.6 94 32 87 Yugoslavia 06 43 95 58 47 59 88 Uruguay 44 39 0.7 1.3 -18 106 89 Venezuela 63 5.0 . 7.6 90 Greece 66 6.6 71 4. 104 13 91 Hong Kong 8.6 9.9 8.6 9.9 6.9 14.1 92 Israel 138 3.0 7.4 5.3 5.7 -04 93 Singapore 12.6 63 54 68 205 7.2 94 Trinidad and Tobago C C 48 8.7 -23 106 High-income oil exporters . . 13.2 ri 18.5 in , , 17.5 ni 95 Libya , . 156 . 18.5 . 10.7 96 Saudi Arabia . . c , 18.8 . . 426 97 Kuwait 10.8 13 1 17.5 98 United Arab Emirates Industrial market economies 4.2 in 3.5 or 4.3 iii 3.0 in 5.8 in 0.9 m 99 Ireland 39 5.6 38 2.8 90 4.6 100 Spain 38 5.2 70 36 11.3 1.2 101 Italy 41 2.8 61 2.8 37 09 102 New Zealand 3.6 33 3.3 19 32 -0.6 103 United Kingdom 22 23 24 1.6 51 104 Japan 62 45 9.0 4.2 14.6 31 105 Austria 33 39 43 36 59 26 106 Finland 50 5.1 4.0 27 41 107 Australia 71 52 5.0 3.0 67 18 108 Canada 62 2.5 49 45 58 41 109 Netherlands 2.8 2.7 5.9 3.3 74 ' 09 110 Belgium 57 48 38 36 60 08 111 France 40 3.2 53 4.1 7.7 1.4 112 United States 42 2.0 44 3.2 50 1.9 113 Denmark 5.9 4.0 41 1.9 59 - 1.8 114 Germany. Fed Rep 41 35 46 2.8 41 13 115 Norway 62 41 37 50 50 - 0.3 116 Sweden 54 3.3 35 1.9 53 -0.6 117 Switzerland 4.8 1.8 43 14 39 -1.0 East European nonmarket economies 118 Albania . . 119 Hungary c 4.5 3.1 3.7 78 4.9 120 Romania . . . . 11 2 82 121 Bugaria . . 122 Poland , . . 123 USSR 124 Czechosiovakia 125 German Dem. Rep. a. Figures in italics are for 1961-70. not 1960-70 b Figues in italics are for 1970-80. not 1970 81. c. Separate figures are not avaiabie for public consumption, which is therefore included in private consumption. 155 Table 5. Structure of demand Distribution of gross domestic product (percent) Exports of goods Public Private Gross domestic Gross domestic and nonfactor Resource consumption consumption investment saving services balance 1960 1981b 1960° 1981b 1960 1981b 1960° 1981b 1960 1981b 1960° 1981b Low-income economies 8w 11w 78w 74w 19w 24w 18w 21w 7w 9w -1w -3w China and India 77w 74w 21w 26w 20w 25w 4w 8w -1w -2w Other low-income lOw 11w 81w 84w 12w 14w lOw 7w 15w 12w -2w -7w 1 Kampuchea, Oem 2 Bhutan 3 Lao, PDR 4 Chad 13 82 11 5 23 -6 5 Bangladesh 6 8 86 90 7 17 8 2 10 7 1 -15 6 Ethiopia 8 15 81 81 12 10 11 4 9 13 -1 -6 7 Nepal C 92 14 8 -6 8 Burma c c 89 83 12 24 11 17 20 9 -1 -7 9 Afghanistan c 87 16 13 4 -3 10 Mali 12 26 79 80 14 16 9 -6 12 18 -5 -22 11 Malawi 16 10 88 80 10 22 -4 10 21 22 -14 -12 12 Zaire 18 16 61 59 12 33 21 25 55 36 9 -8 13 Uganda 9 c 75 97 11 3 16 3 26 1 5 (.) 14 Burundi 3 16 92 79 6 19 5 5 13 9 -1 -14 15 Upper Volta 10 15 94 96 10 16 -4 -11 9 13 -14 -27 16 Rwanda 10 17 82 75 6 23 8 8 12 12 2 -15 17 India 7 10 79 70 17 23 14 20 5 7 -3 -3 18 Somalia 8 86 10 6 13 -4 19 Tanzania 9 14 72 78 14 22 19 8 31 14 5 -14 20 Viet Nam 21 Ch'na c c 76 72 23 28 24 28 4 9 1 (.) 22 Guinea 19 67 11 14 34 3 23 Haiti C C 93 99 9 13 7 1 20 14 -2 -12 24 Sri Lanka 13 7 78 81 14 28 9 12 44 31 -5 -16 25 Benin 16 13 75 89 15 35 9 -2 12 31 -6 -37 26 Central African Rep 19 13 72 90 20 9 9 -3 23 26 -11 - 12 27 Sierra Leone . 11 . 91 . 13 -2 17 . -15 28 Madagascar 20 16 75 77 11 15 5 7 12 13 -6 -8 29 Niger 9 9 79 76 13 27 12 15 9 22 -1 -12 30 Pakistan 11 11 84 82 12 17 5 7 8 12 -7 -10 31 Mozambique . . . . -12 . . . . 32 Sudan 8 c 80 100 12 13 12 (.) 16 9 (.) 33 Togo 8 17 88 68 11 31 4 15 19 25 -7 -16 34 Ghana 10 11 73 85 24 6 17 4 28 4 -7 -2 Middle-income economies 11 it 14 w 70 w 66 w 20 a' 25 w 19 a' 22 w 17 w 23 w -1 w -3 w Oil exporters 11w 15w 70w 61w 18w 26w 19w 24w 21w 23w 1w -2w Oil importers 11 w 14 a' 70 it' 69 w 21 w 25 to 19 w 21 w 15 it' 23 to -2w -4 it' Lower middle-income lOw 13w 76w 68 a' 15 a' 25w 14w 19 it' 15w 23 a' -1 it' -6w 35 Kenya 11 21 72 63 20 25 17 16 31 25 -3 -9 36 Senegal 17 22 68 83 16 17 15 -5 40 29 -1 -22 37 Mauritania 25 29 71 62 38 38 4 9 15 49 -34 -29 38 Yemen Arab Rep 20 101 44 -21 6 -65 39 Yemen. PDR . 40 Liberia 7 21 58 62 28 18 35 17 39 51 7 -1 41 Indonesia t2 11 80 66 8 21 8 23 13 28 () 2 42 Lesotho 17 26 108 163 2 21 -25 -89 12 13 -27 -110 43 Bolivia 7 10 86 77 14 13 7 13 13 13 -7 () 44 Honduras 11 14 77 68 14 24 12 18 22 32 -2 -6 45 Zambia 11 28 48 57 25 23 41 15 56 36 16 -8 46 Egypt 17 19 71 64 13 30 12 17 20 34 -1 -13 47 El Salvador 10 15 79 75 16 12 11 10 20 31 -5 -2 48 Thailand 10 12 76 65 16 28 14 23 17 25 -2 -5 49 Philippines 8 8 76 67 16 30 16 25 11 19 () -5 50 Angola 51 Papua New Gunea 28 26 71 63 13 28 1 11 16 38 -12 -17 52 Morocco 12 c 77 92 10 23 11 8 24 21 1 -15 53 Nicaragua 9 21 79 73 15 24 12 6 24 21 -3 -18 54 Nigeria 6 12 87 65 13 29 7 23 15 25 -6 -6 55 Zimbabwe 11 18 67 67 23 22 22 15 . -1 -7 56 Cameroon 7 . 71 21 . . 22 . . 32 1 57Cuba . .. -21 -66 . 58 Congo. Peoples Rep 23 12 98 50 45 32 38 21 62 6 59 Guatemala 8 8 84 81 10 17 8 11 13 17 -2 -6 60 Peru 9 13 64 73 25 19 27 14 20 17 2 5 61 Ecuador 11 15 78 61 14 26 11 24 16 22 _3 2 62 Jamaica 7 21 67 67 30 16 26 12 34 50 -4 -4 63 lvoy Coast 10 18 73 62 15 27 17 20 37 34 2 -7 64 Dominican Rep 13 8 68 78 12 24 19 14 24 18 7 -10 156 Distribution of gross domestic product (percent) Exports of goods Public Private Gross domestic Gross domestic and nonfactor Resource consumption consumption investment saving services balance 1960a 1981' 1960a 1981' 196O 1981b 1960 1981i 196O 1981b 1960 1981' 65 Mongolia 66 Colombia 73 68 28 24 16 12 ()4 67 Tunisia 68 Costa Rica 6 17 10 8 15 15 76 77 62 60 21 17 18 31 28 21 13 7 23 25 20 21 42 44 10 8 5 3 69 Korea. Dem Rep. 70 Turkey 71 Syrlan Arab Rep. 11 11 22 76 70 69 16 25 24 13 19 9 3 11 18 3 15 6 72 Jordan 30 86 41 16 54 57 1 . 73 Paraguay 8 7 76 74 17 29 16 19 18 7 10 Upper middle-income 12 w 15 u' 67 w 65 w 22 u' 25 w 21 u' 24w 18 w 23 w 1 u' 1w 74 Korea, Rep of 15 12 84 66 11 26 1 22 3 39 10 4 75 Iran. Islamic Rep. of 10 69 17 21 19 4 76 Iraq 48 20 34 42 14 77 Malaysia 78 Panama 18 11 11 21 21 62 78 53 56 t4 16 32 29 27 11 26 23 54 31 53 40 513 6 6 79 Lebanon 10 85 16 5 27 11 80 Algeria 15 16 60 45 42 37 25 39 31 34 17 2 81 Brazil 12 c 67 81 22 20 19 5 9 1 1 82 Mexico 6 15 16 76 76 62 77 20 25 27 21 18 12 23 10 13 27 2 7 2 19 83 Portugal 11 19 8 17 1 84 Argentina 85 Chile 86 South Africa 9 9 15 13 70 79 62 75 50 22 14 22 26 22 29 21 12 27 23 12 37 14 30 9 18 36 7 2 10 3 87 Yugoslavia 88 Uruguay 9 19 9 13 15 13 64 49 79 56 75 37 18 32 15 32 12 29 12 14 14 23 15 5 6 3 5 3 8 89 Venezuela 14 14 53 56 21 25 33 30 32 30 12 5 90 Greece 12 18 77 87 66 19 25 30 11 14 24 82 9 20 8 11 12 6 91 Hong Kong 7 8 68 18 6 111 92 Israel 18 36 68 59 27 20 14 5 14 43 13 15 93 Singapore 94 Trinidad and Tobago 8 9 10 C 95 61 57 60 11 28 42 30 3 30 33 40 163 37 212 45 14 9 2 10 High-income oil exporters 21w . 22w 26 w . . 58 w 69w . 32w 95 Lbya 26 26 34 48 60 14 96 Sauc: Arabia 23 . 18 26 . 59 . 68 33 97 Kuwait 15 39 17 46 71 29 98 United Arab Emirates 11 17 28 . 72 78 44 Industrial market economies 15 w 17 w 63 w 61 w 21 w 22 w 22 w 21 w 12 w 20 w 1w1w 99 Ire,anu 12 22 77 72 62 70 16 30 20 11 16 18 32 10 63 5 14 2 100 Spain 12 18 17 101 Italy 7 13 18 62 63 60 25 21 21 25 19 14 27 2(.) 3 2 2 102 New Zealand 17 68 23 25 23 22 29 103 United Kingdom 11 17 22 66 58 19 17 21 17 20 21 28 2 3 104 Japan 8 10 59 58 33 31 33 32 11 15 () 1 105 Austria 13 18 59 56 28 26 28 26 25 42 (.) () 106 Finland 58 55 30 28 29 27 23 34 1 1 107 Australia 13 tO 18 17 65 60 29 26 25 23 25 15 15 28 3 2 3 108 Canada 14 20 65 55 23 25 21 18 (.) 109 Netherlands 62 27 18 29 21 48 58 2 3 110 Belgium 13 13 18 20 69 61 66 19 18 18 14 33 65 1 4 4 111 France t3 16 62 67 23 21 25 17 15 22 2 112 United States 17 18 64 64 18 19 19 18 5 10 1 1 1 113 Denmark 13 28 62 56 26 16 25 16 32 36 (.) 114 Germany. Fed Rep 21 57 56 27 23 29 23 19 30 2 115 Norway 14 t3 19 30 59 47 52 30 26 28 24 34 41 23 48 31 2 1 1 (.) 8 116 Sweden 25 18 117 Switzerland 16 9 13 60 62 63 29 19 26 29 24 29 37 (.) 2 East European nonmarket economies 118 Abania 119 Hungary . c 10 74 61 28 30 26 29 39 . 1 120 Romania . 33 . 28 () 121 Bulgaria 122 Poland . . . . . . 123 USSR 124 Czechoslovakia 125 German Dem. Rep a Figures in italics are for 1961, not 1960 b Figures in italics are for 1980. not 1981 c. Separate figures are not available for public consumption. which is therefore included in private consumption. 157 Table 6. Agriculture and food Value added Volume of Food aid Fertilizer Average index of in agriculture cereal imports in cereals consumption food production (millions of (thousands (thousands ot (per hectare of per capita 1975 dollars) of metric tons) metric tons) arable land) (1969-71 = 100) 1970 1974 1981 1974b 1981b 1970" 1980 1979-81 1981 Low-income economies 22,884 t 27,052 5,659 3,827 180 w 560 w 111 w China and India 14,4371 18,9341 1,582t 4721 230 u' 766 w 111 zt' Other low-income 8,447f 8,1181 4,077 1 3,355 78 w 166w 111 zv 1 Kampuchea. Dem. . 223 150 226 133 13 27 45 2 Bhutan 23 30 0 1 0 11 107 3 Lao. PDR 53 50 13 2 4 78 110 4 Chad 246 211 50 14 13 14 7 3 96 5 Bangladesh 9.475 11100 1.719 1.079 2.130 737 142 463 94 6 Ethiopia 1,128 1.300 118 207 59 228 4 40 85 7 Nepal 1.012 1.068 19 12 0 45 30 97 84 8 Burma 1.479 2.528 26 14 14 0 34 100 102 9 Afghanistan 5 965 10 75 24 63 97 10 Mali 260 352 281 102 114 50 29 60 88 11 Malawi 221 . 17 113 (.) 17 52 141 96 12 Zaire 397 497 343 538 (,) 77 8 13 87 13 Uganda 1.926 1,543 37 37 16 57 13 1 86 14 Burundi 239 310 7 19 6 12 5 8 100 15 Upper Volta 217 262 99 71 0 51 3 40 94 16 Rwanda 394 3 16 19 15 3 1 104 17 India 29.097 35,407 5.261 1.523 1.582 435 114 309 103 18 Somalia 357 42 432 110 330 31 23 65 19 Tanzania 842 1.352 431 265 148 237 30 69 91 20 Viet Nam 1.854 1.150 6 142 512 407 112 21 China 42.900 59.400 9.176 17.411 37 418 1.546 116 22 Guinea 520 63 134 49 34 18 2 87 23 Haiti 83 233 25 84 4 4 89 24 Sri Lanka 841 1,148 951 669 271 226 496 770 148 25 Benin . 217 8 93 9 11 33 17 96 26 Central African Rep 120 152 7 14 1 3 11 5 102 27 Sierra Leone 192 231 72 58 10 12 13 10 81 28 Madagascar 691 722 114 268 7 26 56 29 94 29 Niger 440 322 155 89 75 11 1 8 93 30 Pakistan 3.258 4.273 1 274 305 619 277 168 495 105 31 Mozambique 62 368 34 155 27 90 73 32 Sudan 1.435 1,778 125 305 50 195 31 65 102 33 Togo 145 178 6 62 0 4 3 30 90 34 Ghana 2.281 2.500 177 256 43 94 9 43 74 Middle-income economies 41,308 73,513 2,342 1 4,884 212w 457 w 110 w Oil exporters 17,941 34,822 1,0741 2,5611 145w 394 w 108 u' Oil importers 23.367 38.691 1.2681 2,3231 249 w 489 w 112 zt' Lower middle-income 16,947t 29,3891 1,582 1 3,840 170w 357w 109 ri 35 Kenya 700 1.184 15 534 2 173 224 262 85 36 Senegal 491 514 341 458 28 153 20 36 76 37 Maurtania 117 146 115 182 48 106 6 108 77 38 Yemen Arab Rep. 221 390 158 509 0 4 1 35 96 39 Yemen. POR . . 149 252 38 29 0 98 102 40 Liberia 142 201 42 111 3 26 55 92 95 41 Indonesia 7.896 12.168 1.919 1.978 301 382 119 630 118 42 Lesotho 34 61 49 95 14 44 17 154 86 43 Bolivia 348 488 207 253 22 55 13 16 102 44 Honduras 306 390 52 144 31 36 160 139 80 45 Zambia 278 351 93 295 1 84 71 157 92 46 Egypt 2.683 3,716 3.877 7,287 610 1.865 1,282 2.324 90 47 El Salvador 328 396 75 123 4 50 1.048 892 104 48 Thailand 3.591 5.666 97 221 0 21 76 162 129 49 Philippines 3.682 6.149 817 1,071 89 85 214 337 122 50 Angola 149 244 0 25 45 48 81 51 PapuaNewGuinea 336 461 71 155 . . . 76 148 97 52 Morocco 1.725 1,541 891 2.758 75 120 130 335 81 53 Nicaragua 265 324 44 67 3 58 184 358 87 54 Nigeria 9.061 8,707 389 2.441 7 0 3 57 91 55 Zimbabwe 375 56 21 . 18 466 655 92 56 Cameroon 732 1,125 81 106 4 9 28 51 101 57 Cuba . . 1.622 2.094 . . 1.539 1.653 106 58 Congo. People's Rep. 93 131 34 56 2 2 112 8 82 59 Guatemala ' 138 186 9 14 224 507 116 60 Peru 2.232 2.349 637 1.245 37 116 297 325 84 61 Ecuador 628 888 152 317 13 4 123 277 97 62 Jamaica 206 227 340 459 1 37 886 661 90 63 Ivory Coast 876 1.480 172 619 4 0 71 137 110 64 Dominican Rep. 667 981 252 427 16 76 354 421 99 158 Value added Volume of Food aid Fertilizer Average index of in agriculture cereal imports in cereals consumption food production (millions of (thousands (thousands of (per hectare of per capita 1975 dollars) of metric tons) metric tons) arable land) (1969-71 = 100) 1970 1981 1974 1981 1974b 1981b 1970c 1980 1979-81 65 Mongolia . . . 28 173 . . . . 18 86 92 66 Colombia 2,848 4,630 503 694 28 5 310 537 122 67 Tunisia 480 899 307 960 1 99 82 135 124 68 Costa Rica 338 461 110 177 1 1 1.086 1.500 110 69 Korea. Oem. Rep 1,108 720 1.484 3.255 134 70 Turkey 7,691 10.777 1,276 299 70 9 166 412 112 71 Syrian Arab Rep. 595 1484 339 971 47 39 67 220 163 72 Jordan 97 171 619 63 84 20 104 74 73 Paraguay 419 899 71 68 10 11 58 33 111 Upper middle-income 24,361 t 44.124 t 760 t 1,044 t 252 o' 555w 113 74 Korea, Rep of 3.995 5,610 2.679 7.687 234 678 2,466 3,757 126 75 Iran, Islamic Rep. of 3,739 . . 2.076 3,236 . . . . 76 359 112 76 Iraq 1.172 . 870 2.275 1 0 35 169 89 77 Malaysia 2.049 3,554 1,017 1.244 1 0 436 1.051 139 78 Panama 290 345 63 89 3 2 391 533 102 79 Lebanon . . 354 692 21 39 1279 764 109 80 Algeria 952 1,464 1,816 3,261 54 29 174 320 81 81 Brazil 8.737 14,932 2.485 5.571 31 3 169 678 125 82 Mexico 8.501 12.649 2.881 6.602 . 0 246 517 106 83 Portugal 2,242 2,025 1,860 3.942 0 255 411 730 74 84 Argentina 3.523 4,313 0 10 24 32 116 85 Chile 440 557 1,737 1,392 331 28 317 210 97 86 South Africa 127 476 425 779 104 87 Yugoslavia 3.655 4.840 992 454 766 1.045 117 88 Uruguay 385 404 70 44 31 0 392 424 104 89 Venezuela 1.362 1,918 1,270 2.378 165 642 104 90 Greece 2.851 3.521 1.341 685 858 1.342 123 91 Hong Kong 183 155 657 801 , . . . 71 92 Israel . . . . 1,176 1,700 53 10 1.394 1.987 103 93 Singapore 100 123 682 1.258 (.) 0 2.667 5.500 148 94 Trinidad and Tobago 80 65 208 327 . 640 506 69 High-income oil exporters 1,327 5,715 59 zi' 378 w 95 Libya 126 388 612 942 64 374 141 96 Saudi Arabia 331 551 482 4.100 44 352 97 Kuwait 20 37 101 386 0 4.400 98 United Arab Emirates 132 287 0 2.692 Industrial market economies 65,494 t 65,420 985 1,258 u' 112w 99 Ireland 631 598 3.573 6.182 115 100 Spain 7.945 9,762 4.675 6.012 595 810 125 101 Italy 14.093 15.820 8.100 7.088 962 1.701 112 102 New Zealand . . . . 92 62 8.875 10,177 107 103 United Kingdom 5.386 6,744 7.541 4.366 2.521 2.936 122 104 Japan 24.218 24,825 19.557 24.420 3.849 3.721 91 105 Austria 1.806 2,018 165 99 2,517 2,491 112 106 Finland 3.188 3.009 222 524 1.931 2.039 103 107 Australia 4.351 5.916 2 8 246 277 117 108 Canada 6,743 8,371 1.513 1.393 192 432 109 109 Netherlands 3.173 4,721 7.199 5.228 7.165 7.888 116 110 Belgium 1,929 2,204 4.585 6.083 5.686 4.990 109 111 France 17.077 17,957 654 1,746 2,424 3.008 117 112 United Stales 46.300 59.800 460 188 800 1.116 116 113 Denmark 1,641 2,365 462 509 2.254 2,364 111 114 Germany. Fed. Rep. 11.567 13,870 7.164 4.995 4.208 4.714 110 115 Norway 1.409 1.859 713 686 2.471 3.010 117 116 Sweden 3.133 3.080 301 216 1,639 1,624 117 117 Switzerland . . . 1.458 1.199 3.842 4,576 119 East European nonmarket economies 18,543t 58,774t 635w 1.050 107 118 Albania . . 48 4 745 1.249 106 119 Hungary 1.619 2,240 408 180 1,485 2.624 132 120 Romania . . 1.381 2.590 0 559 1.165 147 121 Bulgaria . . 649 1,016 1.446 1.984 116 122 Poland 4,185 7.218 0 1.715 2.356 96 123 USSR 7.755 43.713 437 809 102 124 Czechoslovakia 1.296 1.128 2.402 3.347 114 125 German Dem. Rep. 2.821 2.925 3.202 3,252 129 a Figures in italics are for 1980 not 1981 b Figures are for the crop years 1974.75 and 1980;81. c. Average for 1969-71. d. lnciuoes Luxem- bourg. 159 Table 7. Industry Distribution of manufacturing value added (percent; 1975 prices) Machinery Value added Textiles and in manufacturing Food and and transport Other (millions of agriculture clothing equipment Chemicals manufacturing 1975 dollars) 1980e 1980a 1980 1980e 1980 1970 1980 Low-income economies China and India Other low-income 1 Kampuchea. Dem . . . 2Bhutan 3 Lao. PDR 4Chad .. . . 37 27 5 Bangladesh 26 40 4 16 14 647 1197 6 Ethiopia 236 335 7Nepal . . .. . 8 Burma . . . . . 287 429 9 Afghanistan lOMali . .. .. . . 44 55 11 Malawi 50 11 . . 39 56 12 Zaire 44 20 10 26 186 162 13 Uganda 222 90 14 Burundi 23 43 15 Upper Volta 67 94 16 Rwanda 58 42 100 17 India 13 19 20 13 35 10.202 15909 18 Somalia 42 19 Tanzania 190 237 20 Viet Nam 21 China 22 Guinea . . 44 23 Haiti 38 12 . 1 49 24 SriLanka . 556 679 25 Benin . 43 26 Central African Rep 54 39 27 Sierra Leone 25 34 28 Madagascar 27 41 11 19 295 353 29 Niger 54 165 30 Pakistan 1.492 2.270 31 Mozambique 32 Sudan 266 284 33 Togo 30 14 34 Ghana 31 69 601 490 Middle-income economies Oil exporters Oil importers Lower middle-income 35 Kenya 30 11 12 8 39 165 501 36 Senegal 52 14 7 27 276 348 37 Mauritania 21 30 38 Yemen Arab Rep 25 83 39 Yemen. PDR 40 Liberia 27 . . . 73 25 41 41 Indonesia 29 8 7 11 45 1.517 5.546 42 Lesotho 5 12 43 Bolivia . . . . 237 389 44 Honduras 46 13 1 7 33 137 213 45 Zambia 14 20 12 13 41 319 381 46 Egypt . 1.835 4.204 47 El Salvador . . . . . . 252 321 48 Thailand . . 1.675 4.355 49 Phnippines 39 11 10 8 32 2.816 5.519 5oAngoia . . ,, . 51 Papua New Guinea , . . . . . . 71 132 52 Morocco 32 12 9 9 38 1.138 1.960 53 Nicaragua . . . . 262 334 54 Nigeria 25 18 13 13 31 1,191 3598 55 Zimbabwe 21 18 10 10 41 511 717 56 Cameroon 201 342 57 Cuba 36 16 17 31 58 Congo. Peoples Rep 114 65 59 Guatemala 60 Peru 27 14 10 11 38 2,911 4.048 61 Ecuador 29 14 10 7 40 322 872 62 Jamaica . . . . . 428 339 63 Ivory Coast . . . 398 732 64 Dominican Rep 72 4 1 5 18 483 931 160 Distribution of manufacturing value added (percent; 1975 prices) Machinery Value added Textiles and in manufacturing Food and and transport Other (millions of agriculture clothing equipment Chemicals manufacturing 1975 dollars) 1980k 1980 1980 1980 1980 1970 1980 65 Mongolia 22 31 5 42 66 Colombia 32 15 12 12 29 1,800 3,293 67 Tunisia 23 15 9 16 37 222 727 68 Costa Rica . . . . . . 261 540 69 Korea, Oem Rep. . . . . . 70 Turkey 24 12 13 12 39 3678 6,056 71 SyrianArabRep. 25 31 . . 3 41 575 1,318 72 Jordan . . . . . . 191 73 Paraguay 31 12 8 4 45 183 398 Upper middle-income 74 Korea, Rep, of 17 22 17 12 32 2,346 9,843 75 Iran, Islamic Rep. of . . . . . . 2,601 76 Iraq . . . . . . . . 522 77 Malaysia 22 8 17 6 47 941 2,780 78 Panama 51 11 2 6 30 252 319 79 Lebanon . . . 80 Algeria . . . . . 1,030 3,030 81 Brazil 14 10 28 10 38 18819 44,733 82 Mexico 19 9 19 12 41 14592 29,084 83 Portugal 13 20 20 10 37 3,496 5,905 84 Argentina 12 11 27 13 37 10,693 12,637 85 Chile 15 5 16 11 53 1,881 2,107 86 South Africa 15 11 16 11 47 87 Yugoslavia 15 14 20 8 43 6,579 13,300 88 Uruguay 26 23 11 8 32 725 1,034 89 Venezuela 25 7 8 9 51 3,419 5,718 90 Greece 20 26 9 9 36 2,540 4,594 91 Hong Kong . . . . 1,620 4,030 92 Israel 13 12 25 8 42 93 Singapore 5 4 53 5 33 827 2,323 94 Trinidad and Tobago 13 4 9 7 67 404 480 High-income oil exporters 95 Libya . . . . 154 632 96 Saudi Arabia 3 . . . 97 1,726 3,378 97 Kuwait 8 . . . 17 75 369 915 98 United Arab Emirates Industrial market economies 99 Ireland 22 10 12 12 44 100 Spain 12 15 17 10 46 18,331 33,396 101 Italy 10 15 26 9 40 102 New Zealand 26 11 15 5 43 103 United Kingdom 13 8 34 10 35 58,677 56,530 104 Japan 8 6 33 8 45 118,403 234,036 105 Austria 14 9 23 7 47 9,112 13,532 106 Finland 12 8 22 8 50 5,636 8,635 107 Australia 17 8 22 8 45 20,207 108 Canada 14 7 21 8 50 25,748 36,232 109 Netherlands 18 4 26 15 37 18,684 24,245 110 Belgium 17 8 28 13 34 14,386 19,650 111 France 16 8 32 9 35 75,800 107,805 112 United States 11 6 32 12 39 382,200 436,900 113 Denmark 23 6 26 7 38 5,858 8,095 114 Germany, Fed Rep. 9 6 35 11 39 149,113 184,741 115 Norway 15 4 27 7 47 5,322 6,373 116 Sweden 10 3 34 6 47 16,743 18,817 117 Switzerland 15 9 21 16 39 East European nonmarket economies 118 Albania , , . . , . . . , 119 Hungary 10 10 29 10 41 3,244 5,700 120 Romania 12 15 33 12 28 121 Bulgaria 24 15 15 6 40 . 122 Poland 5 19 32 8 36 . 123 USSR 12 11 28 6 43 124 Czechoslovakia 8 9 35 9 39 125 German Dem. Rep 18 10 32 9 31 a. Figures in italics are for 1979, not 1980 161 Table 8. Commercial energy Energy imports Average annual energy Energy consumption as a percentage growth rate (percent) per capita (kilograms of merchandise Energy production Energy consumption of coal equivalent) exports 1960_74a 1974-80 1960-74k 1974-80 1960b 1980 1960 1980c Low-income economies 5,0w 5,6w 4,9w 5,0w 218w 368 w 11w 43w China and India 4.6 w 5.6w 4,6w 5,2w 252 w 450 w Other low-income 14.7w 6.5w 9.0w 2.0w 58 w 107w ic 1 Kampuchea. Dem. -51 44 0 19 128 9 2 Bhulan 3 Lao, PDR 93 138 16.2 16 127 4 Chad 8 22 23 5 Bangladesh 11.8 69 49 27 6 Ethiopia 141 2.5 22 7 -16 5 25 11 42 7 Nepal 26 8 0.7 152 21 3 13 43 8 Burma 5.6 119 43 5.8 60 87 4 9 Afghanistan 38.8 -31 10.4 5.1 23 83 12 10 Mali 40.4 70 10.2 4.7 10 31 13 11 Malawi 27 2.9 59 24 12 Zaire 3.0 13.2 6.5 0.1 82 107 3 13 Uganda 52 -83 89 -84 39 34 5 14 Burundi 35.2 1.8 68 11 16 14 15 Upper Volta 78 12.7 5 33 38 52 16 Rwanda 4.6 82 96 15 28 17 India 49 45 55 46 210 11 43 18 Somalia 97 128 16 85 4 12 19 Tanzania 106 124 136 -13 17 69 47 20 Viet Nam 00 66 113 -13 95 148 21 China 45 58 44 53 340 618 22 Guinea 16.0 05 178 16 17 83 23 Haiti 129 101 127 16 88 47 24 Sri Lanka 101 69 4,9 22 177 201 8 47 25 Benin 10.1 17 38 70 16 26 Central African Rep 14 1 40 77 7.7 30 46 12 26 27 Sierra Leone 0.8 0.4 212 166 11 28 Madagascar 6.7 -63 110 -0.2 40 74 9 29 Niger 149 14.1 5 54 6 55 30 Pakistan 94 69 51 46 143 224 17 31 Mozambique 32 4T9 64 -29 111 103 11 32 Sudan 29 6 128 125 -42 58 101 8 32 33 Togo Ti 66.9 125 20 7 22 203 10 43 34 Ghana 36 9 2.9 125 19 104 268 7 Middle-income economies 12.5w '-2.4w 7.9 w 4.8 w 462 w 987 w 9w 23 iv Oil exporters 13.5 w -3.7w 6.1 w 4.6w 423 w 760 w 5w 7 iv Oil importers 7.8 w 3,7w 8.7 w 4.9 w 493 w 1172 w 13w 34 w Lower middle-income 23,2w 3.6w 8.2 iv 5,4w 218w 504w 8 iv 22 w 35 Kenya 96 133 93 23 57 208 18 63 36 Senega 1.7 -05 555 364 8 55 37 Maur;tana 20 9 4.8 18 199 39 38 Yemen Aab Rep 12.9 139 7 62 591 39 Yemen. PDR -12.8 9,9 40 L:bera 31.8 -58 19.6 01 96 502 3 25 41 Indonesia 8.5 59 4.3 90 129 266 3 8 42 Lesotho 43 Bolivia 17 1 -Ti 65 77 169 452 4 1 44 Honduras 29 4 124 85 24 149 292 10 20 45 Zambia 17 29 733 46 Egypt 94 232 25 106 287 595 12 2 47 El Salvador 51 20 7 78 70 145 357 6 24 48 Thailand 28 3 -25 163 65 63 370 12 44 49 Philippines 30 26 2 97 44 159 380 9 41 50 Angola 35A -16 115 1,1 85 255 6 51 Papua New Guinea 123 104 21.8 44 36 332 7 52 Morocco 2.0 48 76 68 173 368 9 41 53 Nicaragua 26.4 -104 103 -0.4 181 362 12 42 54 Nigeria 36 6 07 93 93 29 169 7 55 Zimbabwe -24 -02 778 56 Cameroon 11 52 3 53 71 79 154 7 14 57 Cuba 21 2 50 4.4 42 920 1.36 1 58 Congo. Peoples Rep 158 70 62 24 7 130 458 25 3 59 Guatemala 99 70 63 45 180 308 12 25 60 Peru 36 173 67 34 433 807 4 2 61 Ecuador 194 45 86 133 216 692 2 62 Jamaica -07 -11 96 -52 654 1.440 11 46 63 Ivory Coast 97 102 147 46 73 248 5 11 64 Dominican Rep 18 -47 146 -08 158 517 51 162 Energy imports Average annual energy Energy consumption as a percentage growth rate (percent) per capita (kilograms of merchandise Energy production Energy consumption of coal equivalent) exports 1960_74a 1974-80 1960-74 1974-80 1960b 1980 1960 1980 65 Mongolia 10.4 122 7.4 10.2 529 1,452 66 Colombia 3.5 13 6.3 4.8 519 970 3 14 67 Tunisia 71.9 6.0 10.2 9.2 173 652 15 33 68 Costa Rica 9.5 6.7 104 7.0 311 829 7 24 69 Korea, Gem. Rep. 94 3.2 9.6 3.5 1179 2,864 70 Turkey 7.5 3.1 9.8 5.0 258 779 16 126 71 Syrian Arab Rep 860 40 114 11.9 233 964 16 50 72 Jordan , 69 126 185 ' 627 79 73 73 Paraguay 10.4 8.9 9.6 80 300 . . 41 Upper middle-income 8.8 w -4.5 w 7,7w 4.5 w 798 w 1,677 w 10 w 23 w 74 Korea, Rep. of 6.3 3.2 15.0 10.7 208 1,563 70 38 75 Iran, Islamic Rep. of, 14.6 -17.4 64 -2.1 1,185 1.210 1 76 Iraq 5.0 6.6 5.3 8.7 598 1,221 (.) 77 Malaysia 36.8 24.1 41 7.7 616 881 2 13 78 Panama 14.7 40.0 18.6 -5.4 468 1,623 125 79 Lebanon 12.7 -0.3 8.0 -3.1 665 1,153 68 80 Algeria 11.1 44 64 11.4 321 814 14 2 81 Brazil 8.3 75 8.8 6.6 385 1,102 21 53 82 Mexico 5.8 16.7 74 78 786 1,684 3 3 83 Portugal 4.5 8.8 7.7 6.5 536 1,822 17 48 84 Argentina 6.5 3.7 5.6 3.5 1,177 2,161 14 14 85 Chile 39 0.6 6.1 0.1 833 1.137 10 24 86 South Africa 38 10.0 6.8 43 1,762 3,204 9 (.) 87 Yugoslavia 50 35 75 45 858 2,402 8 40 88 Uruguay 37 8.5 2.1 21 1.020 1.160 35 45 89 Venezuela 11 -3.7 52 -0.3 3,014 3,039 1 1 90 Greece 143 82 117 54 516 2.605 26 48 91 Hong Kong , , . , 10.1 64 649 1,881 5 6 92 Israel 41.8 -52.9 109 25 1,006 2,813 17 38 93 Singapore . . . . 10.1 6.6 2,111 8,544 17 36 94 Trinidad and Tobago 2.8 28 2.1 4.8 6,497 7,312 35 29 High-income oil exporters 16.6w 2.8w 13.5w 17.2w (.)w 95 Libya 29.0 49 12.5 30.0 288 3,549 83 () 96 Saudi Arabia 14.0 4.4 14.6 10.5 1,271 6,764 . (.) 97 Kuwait 4.5 -2.8 2.9 34 . . (.) 98 United Arab Emirates 37.9 1.8 70.0 22.5 . . . . , Industrial market economies 4.0w 1.8w 5.4w 0.8w 4,540w 7,495w 12w 29w 99 Ireland -01 47 50 46 1,868 3.770 17 19 100 Spain 30 61 94 33 900 2,944 22 63 101 Italy 2.3 -04 81 0.6 1,452 3,725 18 35 102 New Zealand 5.7 30 6.2 0.8 2.759 4,816 7 23 103 United Kingdom -1.0 114 2.0 -0.2 4.750 5.363 14 14 104 Japan -1.4 37 10.9 2.2 1,354 4,649 18 54 105 Austria 14 0.7 53 2.5 2,482 5.102 12 22 106 Finland 3.3 4.5 99 1.6 1.501 6.351 11 32 107 Australia 11.0 3.0 5.8 2.8 4.020 7.214 12 13 108 Canada 8.7 11 5.9 24 7.560 13.153 9 11 109 Netherlands 16 1 0.3 91 10 3,078 8,068 15 25 110 Belgium -72 45 54 17 3.853 7,431 11 19 111 France -1.3 2.8 5.7 18 2.858 5.368 16 32 112 United States 35 09 42 16 8,408 11,626 8 38 113 Denmark -198 253 60 26 2.748 5.746 15 26 114 Germany. Fed. Rep. -0 6 00 44 09 3,859 6.053 7 22 115 Norway 68 21.3 58 44 5,058 11,928 15 16 116 Sweden 36 49 49 10 4.623 7.971 16 26 117 Switzerland 4.2 2.6 6.0 1.3 2,718 5.223 10 14 East European nonmarket economies 6.6w 4.1 n' 5.3 a 4.1 2,884w 6,217 118 Albania 97 24 125 38 528 1.800 119 Hungary 27 27 4.9 4.4 1,710 4.094 13 17 120 Romania 59 0.2 79 5.5 1,537 4,775 121 Bulgaria 33 34 97 5.0 1,362 5,957 7 122 Poland 40 2.8 43 4.3 3.108 5.799 20 123 USSR 76 4.7 56 42 2,896 6.422 4 124 Czechoslovakia 12 1.6 34 31 3,862 6,847 . 19 125 German Dem. Rep 06 2.0 22 20 4.609 7.412 a. Figures in italics are for 1961-74. not 1960-74 b. Figures in italics are for 1961, not 1960 c. Figures in italics are for 1979. not 1980 163 Table 9. Growth of merchandise trade Merchandise trade Average annual growth rates (millions of dollars) (percent) Terms of trade Exports Imports Exports Imports (1975=100) 1981' 1981b 1960-70 1970_81c 1960-70 1970-81' 1978 1981" Low-income economIes 42,444 60,117 4.9m -0.7m 5.3 fl; 2.4 m 109m 87m China and India 29,624 36,567 Other low-income 12,820 23,550 5Dm -0,8w 5Am 1.9m 11Dm 88m 1 Kampuchea, Dem. . S . . 2 Bhutan . . . . . 3 Lao,PDR 9 85 .. .. .. 4 Chad 141 137 59 -7.2 5.1 -38 111 101 5 Bangladesh 791 2,594 6.5 -0.7 7.1 51 99 79 6 Ethiopia 374 738 3.6 -0.8 6.2 (.) 158 69 7 Nepal 63 195 . . . . S 8 Burma 455 373 -116 1.3 -57 -2.8 110 123 9 Afghanistan 263 484 2.5 5.3 0.8 8.9 107 112 10 Mali 154 370 29 7.1 -04 74 110 102 11 Malawi 284 359 11.6 5.9 7.6 2.4 108 82 12 Zaire 662 672 -1.8 -3.1 5.5 -11.9 100 74 13 Uganda 317 395 49 -98 62 -91 144 106 14 Burundi 71 167 . . . . 15 Upper Volta 75 338 14.6 7.3 8.0 7.6 106 98 16 Rwanda 147 191 158 04 8.0 107 180 107 17 India 8,064 15,001 32 4.6 -09 3.2 108 66 18 Somalia 200 199 2.4 6.7 2.6 3.2 109 98 19 Tanzania 566 1,140 3.4 -8.1 6.0 -1.2 121 113 20 Viet Nam 153 791 . . . . . 21 China 21,560 21,566 . . . . . . . 22 Guinea 428 351 . . . S . . 23 Haiti 333 587 . . . . . . . 24 Sri Lanka 1,036 1,803 46 -1.5 -02 1.4 151 80 25 Benin 36 886 5.0 -7.0 75 5.0 101 84 26 Central African Rep. 136 88 8.1 1.9 4.5 -1.9 116 104 27 Sierra Leone 277 238 0.4 -4.4 1.9 -1.6 112 73 28 Madagascar 335 494 54 -2.5 41 -3.1 117 87 29 Niger 297 449 6.0 23.4 11.9 13.4 106 88 30 Pakistan 2,880 5,342 8.3 3.0 5.3 40 97 75 31 Mozambique 457 774 6.0 -150 79 -16.7 84 77 32 Sudan 658 1.529 2.2 -5.2 0.6 42 86 88 33 Togo 344 597 10.5 15 85 10.3 97 63 34 Ghana 878 1,184 0.2 -71 -1.5 -50 193 75 Middle-income economies 337,172 405,729 5.4 m 4.1 m 6.4 m 4.8 m 98 m 87 m Oil exporters 146,227 148,221 3,9 m 2.5 m 2.8 m 9.5 m 95 rn 133 m Oil importers 190,945 257,508 7.0 m 4.3 m 7.6 rn 3.2 m 101 m 73 m Lower middle-income 98,497 t 122,588 5.2w 3.0w 6.5w 4,lm 98rn 77w 35 Kenya 1,144 1,946 72 -1.9 6.5 -1.8 144 99 36 Senegal 416 1,035 1.2 -1 4 2.3 2.5 97 68 37 Mauritania 259 265 50.6 -0.3 46 3.2 81 72 38 Yemen Arab Rep. 39 1,699 . . . . . . . . . 39 Yemen, PDR 421 1,096 , . . . . , 40 Liberia 531 448 184 1.2 29 -1 5 88 63 41 Indonesia 22,259 13,271 3.4 65 2.0 11 9 95 154 42 Lesotho , . , , . . 43 Bolivia 909 825 96 -1.9 8.0 70 129 153 44 Honduras 760 949 107 4.2 11.6 19 102 75 45 Zambia 1,044 1,032 2.3 -02 9.8 -68 89 67 46 Egypt 3,233 8.839 32 04 -0.9 94 83 86 47 El Salvador 792 986 5.5 0.7 6.3 2.3 129 80 48 Thailand 6,918 10,014 5.2 11.8 11.4 4.9 87 62 49 Philippines 5,722 7,946 22 77 7.2 26 98 68 50 Angola 1,744 1,640 90 -12.7 115 02 103 152 51 Papua New Guinea 851 1,116 . , . . , , . 52 Morocco 2,242 4,356 2.5 2.2 3.4 5.4 74 63 53 Nicaragua 529 731 97 02 10.5 -1.3 113 76 54 Nigeria 18,727 18,776 6.5 0.5 1.7 17.8 102 190 55 Zimbabwe 663 704 . . . , . . . . 81 94 56 Cameroon 1 079 1,428 70 49 9.3 69 168 90 57 Cuba 1,128 1,897 4.0 1.2 5.4 1.6 72 65 58 Congo, People's Rep 1,040 791 5.1 16.8 -1.0 6.7 82 96 59 Guatemala 1,281 1,774 90 50 71 52 134 77 60 Peru 3,255 3,803 2.0 46 38 0.5 90 72 61 Ecuador 2,562 2,332 2.9 57 11.6 9.3 107 136 62 Jamaica 974 1,473 4.6 -6.7 8.1 -65 107 75 63 Ivory Coast 2,586 2,434 87 5.1 9.7 57 150 78 64 Dominican Rep. 1,188 1,450 -2.3 3.8 10.0 22 49 49 164 Merchandise trade Average annual growth ratea (millions of dollars) (percent) Terms of trade Exports Imports Exports Imports (1975= 100) 1981b 1981 1960-70 197081c 1960-70 1970_81c 1978 1981" 65 Mongolia 66 Colombia 3,190 5,181 2.2 1.6 2.5 6.5 145 127 67 Tunisia 2,209 3924 4.2 40 2.3 9.2 81 104 68 Costa Rica 968 1,198 95 4.0 10.0 22 125 87 69 Korea, Dem. Rep. , . . , , , . , , , 70 Turkey 4703 8911 . . 1.2 . . 2.0 95 67 71 Syrian Arab Rep. 2,103 4663 3.3 5.2 4.1 12.6 99 130 72 Jordan 732 3.149 10.1 21 2 3.6 139 74 61 73 Paraguay 296 506 5.4 6.8 7.6 6.6 110 72 Upper middle-income 238,675 t 283,141 5.4 iii 7.0 in 5.9 in 4.7 iii 97 in 89 in 74 Korea, Rep. of 21 .254 26,131 334 22.0 20.6 10.9 105 67 75 Iran, Islamic Rep. of 10,169 12.634 12.5 -13.4 11 6 10.5 94 217 76 Iraq 9,372 18,907 5.4 -2.1 1.4 23.6 94 209 77 Malaysia 12,884 13,132 5.8 6.8 2.3 7.1 109 101 78 Panama 315 1,540 10.2 -1.9 10.5 -43 93 93 79 Lebanon 1,107 3,946 14.4 1.9 5.1 3.3 101 88 80 Algeria 14,056 11505 3.5 10 -1.1 120 96 196 81 Brazil 23,172 24007 5.0 8.7 49 29 108 56 82 Mexico 20,033 24.168 2.8 15.3 64 9.5 92 89 83 Portugal 4,147 9,799 9.6 . 14.2 . . . 84 Argentina 6,304 9,425 3.5 9.4 0.4 3.2 77 71 85 Chile 3,952 6,364 0.7 9.8 4.8 3.5 88 61 86 South Africa 22,670 21.485 5.4 72 8.2 -1.4 80 73 87 Yugoslavia 10,929 15,817 7.7 4.5 8.8 4.6 104 99 88 Uruguay 1,215 1,599 2.2 4.3 -2.9 3.6 124 87 89 Venezuela 20,959 10.645 1.1 -70 4.4 9.6 92 212 90 Greece 4,292 8.677 10.8 108 108 4.7 98 88 91 Hong Kong 21,737 24,680 12.7 9.7 92 12.1 103 100 92 Israel 5,416 7,777 10.8 9.6 88 2.2 101 68 93 Singapore 20,967 27.608 4.2 12.0 5.9 9.9 102 94 Trinidad and Tobago 3,725 3.115 4.9 -4.9 3.2 -58 96 129 High-income oil exporters 174.131 t 68,249 t 11.0 in -1.5 in 11.0 in 20.8 in 94 iii 208 in 95 Libya 16,391 15,414 675 -75 154 15.7 94 213 96 Saudi Arabia 120.240 35,244 11.0 45 11 2 33.5 94 205 97 Kuwait 16,561 8,042 5.2 -9.4 107 16.0 92 210 98 United Arab Emirates 20.939 9.549 . . 45 5.5 256 96 189 Industrial market economies 1,210,104 1,290,41St 8.5 in 5.4 in 9.5 in 4.4 in 100 in 90 in 99 Ireland 7,706 10,603 71 8.4 83 6.4 104 90 100 Spain 20,337 33,159 11.5 18.5 . . 99 87 101 Italy 75,215 91,022 13.6 67 9.7 3.6 101 86 102 New Zealand 5.563 5,684 4.6 39 29 17 114 107 103 United Kingdom 102,807 101,991 4.8 6.6 5.0 3.6 107 105 104 Japan 152,016 143,287 17.2 9.0 13.7 3.9 112 79 105 Austria 15,845 21,048 9.6 7.3 9.6 6.7 97 88 106 Finland 14.015 14,202 6.8 4.8 7.0 2.5 92 84 107 Australia 21,767 23.768 6.5 3.8 72 5.2 92 92 108 Canada 69,907 66,010 10.0 4.2 9.1 5.5 93 95 109 Netherlands 68,732 65,921 9.9 5.0 9.5 3.5 100 96 110 Belgium 55,705 62,464 10.9 4.6 10.3 5.3 96 90 111 France 100,497 120.924 8.2 6.6 11.0 6.5 101 90 112 United States 233,739 273,352 6.0 65 9.3 4.4 95 86 113 Denmark 16,317 17,874 7.1 4.9 8.2 2.5 101 87 114 Germany, Fed. Rep. 176,043 163,934 10.1 5.8 10.0 5.5 101 86 115 Norway 18,220 15,652 9.1 7.0 9.7 4.3 92 129 116 Sweden 28,630 28,824 77 2.2 72 42 93 87 117 Switzerland 27,043 30.696 85 42 90 4.5 108 102 East European nonmarket economies 150,270 t 146,968 9.4 in 6.7 m 8.6 in 6.1 in 118 Albania 119 Hungary 8,893 8,854 97 8.2 9.1 61 98 96 120 Romania 12,610 12,458 9.4 . . 8.8 . . . 121 Bulgaria 1,848 2,633 14.4 11.6 12.9 8.7 . . 122 Poland 13,182 15,224 -0.3 6.7 -04 6.0 101 98 123 USSR 79.003 72.960 9.7 56 7.1 8.3 124 Czechoslovakia 14,876 14.658 6.7 6.4 7.0 51 125 German Dem Rep. 19,858 20,181 8.3 . 8.6 . a. See the technical notes. b. Figures in italics are for 1980. not 1981 c. Figures in italics are for 1970-80. not 1970-81 d Includes Luxembourg. 165 Table 10. Structure of merchandise exports Percentage share of merchandise exports Machinery Fuels, Other and minerals, primary Textiles transport Other and metals commodities and clothing equipment manufactures 1960e 1980i 1960 1980 1960 1980L 1960a 1980b 1960 1980b Low-income economies 9 18w 70w 37: 15w 18w C) 4w 6w 23w China and India 20w 30w 18w 5w 27w Other low-income 8w 9w 83w 62w 4w 21w (.) w 2w 5w 6w 1 Kampuchea, Dem 0 100 0 0 U 2 Bhutan 3 Lao, PDR 4 Chad 94 5 Bangladesh (,) 34 49 (.) 17 6 Ethiopia 0 8 100 92 0 () 0 () 0 (.) 7 Nepal () 69 24 0 7 8 Burma 4 95 0 0 9 Afghanistan (.) 82 14 3 10 Mali 0 96 2 11 Malawi () 90 5 4 12 Zaire 42 57 0 0 13 Uganda 8 92 0 0 (,) 14 Burundi (.) 99 (.) 15 Upper Volta (.) 100 89 2 2 16 Rwanda 17 India 10 7 45 34 35 22 7 9 18 Somalia 0 1 88 98 0 (.) 8 (.) 4 19 Tanzania () 10 87 74 0 8 0 13 7 20 Viet Nam 21 China 25 28 16 5 26 22 Guinea 42 58 0 0 0 23 Haiti 0 100 0 0 0 24 Sri Lanka 16 99 65 0 11 0 25 Benin 10 80 7 3 26 Central African Rep. 12 (.) 86 74 (.) (.) 26 27 Sierra Leone 15 20 p 0 65 28 Madagascar 4 9 90 84 2 1 2 4 3 29 Niger 100 0 0 0 30 Pakistan o 7 73 43 23 37 1 2 3 11 31 Mozambique U 100 0 0 0 32 Sudan 0 1 100 96 0 1 0 2 0 (,) 33 Togo 3 58 89 32 3 4 0 3 5 3 34 Ghana 7 83 0 0 10 Middle-income economies 30 w 36 w 59 w 27w 3w 9w 1w lOw 7w 18w Oil exporters 48 w 78 iv 48 w 15 iv 1w 2w (.)w 2w 3w 3 iv Oil importers 15w 12 w 68 or 34 w 5w 13w 2w 14w lOw 27 iv Lower middle-income 20w 44w 76 w 38 iv 1w 5w (.)w 2ii' 3w 11w 35 Kenya 34 87 50 0 0 3 12 12 36 Senegal 3 39 94 46 1 3 1 11 37 Mauritania 4 69 . . 20 6 38 Yemen Arab Rep 49 6 25 20 39 Yemen. PDR 75 25 (.) (.) (,) 40 Liberia 45 59 55 38 0 (,) C 0 2 41 Indonesia 33 76 67 22 0 (.) (,) (.) 42 Lesotho 43 Bolivia 86 11 (.) 2 44 Honduras 7 93 81 2 0 () 10 45 Zambia 46 Egypt 4 67 84 22 9 9 () () 3 2 47 El Salvador 0 5 94 59 3 13 (.) 3 3 20 48 Thailand 7 14 91 57 0 9 0 6 2 14 49 Philippines 10 21 86 42 6 O 2 3 29 50 Angola 51 Papua New Guinea 0 46 92 52 0 (.) o 8 2 52 Morocco 38 45 54 31 1 10 1 1 6 13 53 Nicaragua 3 3 95 83 0 2 O (.) 2 12 54 Nigeria 8 95 89 4 0 (.) C (.) 3 55 Zimbabwe 71 . 25 .. 1 (.) 3 56 Carneroon 19 33 77 64 0 1 2 () 2 2 57 Cuba 2 5 93 90 1 0 (.) 0 4 5 58 Congo, Peoples Rep. 7 86 84 7 (.) (.) 5 (.) 4 7 59 Guatemala 2 6 95 70 1 6 0 1 2 17 60 Peru 64 5° 20 0 6 0 61 Ecuador 0 56 99 41 0 1 0 62 Jamaica 23 45 14 2 1 0 3 3 59 63 Ivory Coast 5 98 87 0 3 (.) 2 3 64 Dominican Rep. 6 3 92 73 0 (.) 0 23 166 Percentage share of merchandise exports Machinery Fuels, Other and minerals, primary Textiles transport Other and metals commodities and clothing equipment manufactures 1 960a 1 980b 1 96O 1 98O' 1 96O 1 980b 1 96O 1 980b 1 960a 1 980b 65 Mongolia . . . . . . 66 Colombia 19 3 79 77 0 6 (.) 2 2 12 67 Tunisia 24 56 66 8 1 18 1 2 8 16 68 Costa Rica 0 1 95 65 0 5 0 4 5 25 69 Korea, Dem. Rep. . . . . . . . . 70 Turkey 8 8 89 65 0 16 0 3 3 8 71 Syrian Arab Rep. 0 74 81 18 2 4 0 1 17 3 72 Jordan 0 29 96 35 0 4 0 9 4 23 73 Paraguay 0 (.) 100 88 0 (.) 0 (.) 0 12 Upper middle-income 38w 32w 46w 23w 4w 10w 2w 13 w 10 w 22w 74 Korea, Rep. of 30 1 56 9 8 29 (.) 20 6 41 75 Iran, Islamic Rep. of 88 . . 9 . . 0 . . 0 . . 3 76 Iraq 97 . . 3 . 0 . . 0 . . 0 77 Malaysia 20 35 74 46 (.) 2 (.) 11 6 6 78 Panama 24 . 67 . . 3 . . (.) 6 79 Lebanon . . . . . . . . . . 80 Algeria 12 99 81 1 0 (.) 1 (.) 6 (.) 81 Brazil 8 11 89 50 0 4 (.) 17 3 18 82 Mexico 24 39 64 22 4 3 1 19 7 17 83 Portugal 8 7 37 21 18 27 3 13 34 32 84 Argentina 1 6 95 71 0 2 (.) 7 4 14 85 Chile 92 59 4 21 0 (.) 0 1 4 19 86 South Africa 29 23 42 23 2 1 4 5 23 48 87 Yugoslavia 18 9 45 18 4 9 15 28 18 36 88 Uruguay . . 1 71 61 21 16 . . 4 8 18 89 Venezuela 74 98 26 (.) 0 () 0 (.) (.) 2 90 Greece 9 25 81 28 1 17 1 3 8 27 91 Hong Kong 5 2 15 5 45 34 4 19 31 40 92 Israel 4 2 35 16 8 8 2 13 51 61 93 Singapore 1 28 73 18 5 4 7 26 14 24 94 Trinidad and Tobago 82 93 14 2 0 () 0 1 4 4 High-income oil exporters . . 98 a (.) w . (.) w . . 1w . . 1w 95 Libya 100 100 0 (.) 0 (.) 0 (.) 0 (.) 96 Saudi Arabia 95 99 5 () 0 (.) 0 (.) 0 1 97 Kuwait . . 89 . 1 . . 1 . . 3 . . 6 98 United Arab Emirates . . . . . . . . Industrial market economies 11w 13w 23w 15w 7w 5w 29w 35w 30w 32w 99 Ireland 5 3 67 39 6 8 4 19 18 31 100 Spain 21 8 57 20 7 5 2 26 13 41 101 Italy 8 7 19 8 17 11 29 33 27 41 102 New Zealand () 7 97 72 0 3 (.) 5 3 13 103 United Kingdom 7 18 9 8 8 4 44 35 32 35 104 Japan 11 2 10 2 28 4 23 55 28 37 105 Austria 26 5 22 12 10 9 16 28 26 46 106 Finland 3 8 50 22 1 7 13 18 33 45 107 Australia 13 28 79 44 (.) 1 3 7 5 20 108 Canada 33 28 37 23 1 1 8 26 21 22 109 Netherlands 15 26 34 23 8 4 18 17 25 30 110 Belgiumc 15 15 9 11 12 7 13 22 51 45 111 France 9 8 18 18 10 5 25 34 38 35 112 United States 10 9 27 23 3 2 35 40 25 26 113 Denmark 2 5 63 38 3 5 19 24 13 28 114 Germany. Fed. Rep. 9 7 4 7 4 5 44 45 39 36 115 Norway 22 59 34 9 2 1 10 12 32 19 116 Sweden 10 9 29 12 1 2 31 40 29 37 117 Switzerland 2 5 8 4 12 6 30 33 48 50 East European nonmarket economies 18 ii' 33 w . . 3w . . 34 w . . 21 w 118 Albania 119 Hungary 28 25 7 7 38 32 21 27 120 Romania 121 Bulgaria 3 . 75 12 . . 6 . 4 . 122 Poland 20 . 9 . 6 . . 36 29 123 USSR 24 . 28 . 1 . 21 . 26 124 Czechoslovakia 20 7 11 9 () 5 45 50 25 29 125 German Dem Rep a. Figures in italics are for 1961, not 1960. b. Figures in italics are for 1979, not 1980. c. Includes Luxembourg. 167 Table 11. Structure of merchandise imports Percentage share of merchandise imports Machinery Other and primary transport Other Food Fuels commodities equipment manufactures 1960 198O' 1960 1980' 1960a 1980b 196Oa 1980b 1960a 1980b Low-income economies 22w 14w 7w 14w 18w 17w 26w 25w 27 w 30 iv China and India 13w lOw 23w 24w 30 w Other low-income 24w 16w 21w 4w 4w 21w 28w 43 iv 31w 1 Kampuchea, Dem 2 Bhutan 3 Lao, PDR 4 Chad 19 12 19 46 5 Bangladesh 25 11 24 32 6 Ethiopia 8 25 3 28 36 7 Nepal 4 18 2 32 44 8 Burma 4 9 17 56 9 Afghanistan 14 7 4 14 61 10 Mali 20 5 4 18 53 11 Malawi 8 15 34 41 12 Zaire 13 Uganda 6 25 53 14 Burundi 13 22 53 15 Upper Volta 21 21 13 24 29 34 16 Rwanda 17 India 21 9 33 28 10 30 16 15 32 18 Somalia 27 19 5 0 7 18 33 51 36 19 Tanzania 13 21 3 35 28 20 Viet Nam 21 China 15 0 29 27 29 22 Guinea 23 Haiti 24 Sri Lanka 39 20 7 24 5 15 25 34 28 25 Benin 17 10 18 54 26 Central Atrican Rep 15 21 9 2 2 3 26 34 48 40 27 Sierra Leone 23 12 5 15 45 28 Madagascar 17 9 6 15 3 4 23 34 51 38 29 Niger 24 5 4 18 49 30 Pakistan 22 13 10 27 2 6 27 25 39 29 31 Mozambique 32 Sudan 17 26 8 13 3 14 29 58 30 33 Togo 16 14 6 18 3 32 29 43 38 34 Ghana 19 5 4 26 46 Middle-income economies 15 iv 11w 9w 19 iv 13w 7w 28 w 31 iv 35w 32 iv Oil exporters 19 iv 14w 7w 7w 8w 5w 27 iv 39 w 39 IV 35 iv Oil importers 14iv lOw lOw 23 w 16w 8w 29 iv 28 iv 31 iv 31w Lower middle-income 16 IL' 14w 7w 18w 9w 5w 28w 30w 40w 33w 35 Kenya 12 B 11 34 8 3 27 28 42 27 36 Senegal 30 25 5 25 2 19 23 44 26 37 Mauritania 5 3 3 39 50 38 Yemen Arab Rep 28 7 28 36 39 Yemen, PDR 17 47 23 12 40 Liberia 16 19 4 28 7 2 34 28 39 23 41 Indonesia 23 13 5 16 10 6 17 34 45 31 42 Lesotho 43 Bolivia 10 2 44 43 44 Honduras 13 10 16 2 24 30 51 42 45 Zambia 46 Egypt 23 32 11 16 8 25 27 25 32 47 El Salvador 17 18 6 18 6 4 26 13 45 47 48 Thailand 10 5 11 30 11 7 25 25 43 33 49 Philippines 15 8 10 28 5 5 36 24 34 35 50 Angola 51 PapLJa New Guinea 30 5 4 23 38 52 Morocco 27 20 8 24 7 10 19 21 39 25 53 Nicaragua 9 15 10 20 5 1 22 14 54 50 54 Nigeria 14 17 5 2 6 3 24 39 51 39 55 Zimbabwe 56 Cameroon 20 9 12 17 34 52 43 57 Cuba 58 Congo, Peoples Rep 18 27 6 6 31 26 44 40 59 Guatemala 12 8 10 24 7 7 26 22 45 39 60 Peru 16 20 5 5 5 37 40 37 33 61 Ecuador 13 8 3 9 4 33 49 42 38 62 Jamaica 22 20 8 38 9 3 24 12 37 27 63 Ivory Coast 18 15 6 11 2 2 27 35 47 37 64 Dominican Rep. 17 25 4 22 32 168 Percentage share of merchandise imports Machinery Other and primary transport Other Food Fuels commodities equipment manufactures 196O 1980b 196O 1980b 1960 198O' 196O 1980b 196O 1980b 65 Mongolia 66 Colombia 12 3 12 15 6 43 38 31 32 67 Tunisia 20 14 9 21 4 8 23 23 44 34 68 Costa Rica 13 9 6 15 6 4 26 24 49 48 69 Korea, Oem. Rep 70 Turkey 7 4 11 48 16 5 42 18 24 25 71 Syrian Arab Rep. 24 14 8 25 5 4 15 23 48 34 72 Jordan 18 17 3 . . 28 . 34 73 Paraguay 13 24 . 1 . . 36 . . 26 Upper middle-income 15w lOw 9w 19w 15w 8w 28w 32w 33w 31w 74 Korea, Rep. of 10 10 7 30 25 17 12 22 46 21 75 Iran, Islamic Rep. of 14 13 1 (.) 1 5 23 44 61 38 76 Iraq . . . .. . . S S 77 Malaysia 29 12 16 15 13 6 14 39 28 28 78 Panama 15 10 10 31 1 1 22 21 52 37 79 Lebanon . . . S . . 80 Algeria 26 21 4 2 2 5 14 37 54 35 81 Brazil 14 10 19 43 13 6 36 19 18 22 82 Mexico 4 8 2 2 10 7 52 50 32 33 83 Portugal 15 14 10 24 28 11 26 25 21 26 84 Argentina 3 6 13 10 11 7 44 40 29 37 85 Chile . . 14 . . 21 . . 4 . . 27 . . 34 86 South Africa 6 5 7 1 9 6 37 52 41 36 87 Yugoslavia 11 8 5 24 25 12 37 28 22 28 88 Uruguay 5 8 24 29 46 7 17 30 8 26 89 Venezuela 18 15 1 2 10 5 36 43 35 35 90 Greece 11 9 8 23 16 8 44 36 21 24 91 Hong Kong 27 12 3 6 16 6 10 22 44 54 92 Israel 20 11 7 26 18 6 28 21 27 36 93 Singapore 21 9 15 29 38 7 7 29 19 26 94 Trinidad and Tobago 16 11 34 38 7 3 18 25 25 23 High-income oil exporters 15 w 2w 2w 38 w . 43 w 95 Libya 13 19 5 1 10 2 40 38 32 40 96 Saudi Arabia 14 . 1 . . 2 . . 39 . . 44 97 Kuwait . . 15 . . 1 . . 2 . . 36 . . 46 98 United Arab Emirates 11 . 10 . . 2 . . 38 . 39 Industrial market economies 22w 11w 11w 27w 24w lOw 16w 22w 27w 30w 99 Ireland 18 12 12 15 11 5 21 27 38 41 100 Spain 16 13 22 39 25 11 22 18 15 19 101 Italy 20 13 14 28 31 13 13 21 22 25 102 New Zealand 8 6 8 22 16 6 29 30 39 36 103 United Kingdom 36 13 11 13 27 11 8 26 18 37 104 Japan 17 12 17 50 49 19 9 6 8 13 105 Austria 16 6 10 15 20 9 29 29 25 41 106 Finland 13 7 10 29 20 7 33 27 24 30 107 Australia 6 5 10 14 16 5 31 36 37 40 108 Canada 12 8 9 12 12 7 36 46 31 27 109 Netherlands 18 15 13 24 14 7 22 20 33 34 110 Belgiurnc 15 11 10 17 26 11 21 22 28 39 111 France 25 10 17 27 25 9 14 21 19 33 112 United States 24 8 10 33 25 7 10 25 31 27 113 Denmark 18 11 12 22 11 8 23 20 36 39 114 Germany Fed. Rep. 26 12 8 23 28 10 10 19 28 36 115 Norway 12 8 9 17 13 8 36 29 30 38 116 Sweden 13 7 14 24 13 7 26 27 34 35 117 Switzerland 18 8 8 11 13 10 21 24 40 47 East European nonmarket economies 118 Albania 119 Hungary 12 16 28 13 28 29 24 34 120 Romania 121 Bulgaria 122 Poland 14 . 18 11 . . 27 30 123 USSR 12 4 . . 18 . . 30 . 36 . 124 Czechoslovakia 10 19 . 15 . 36 . 20 125 German Dem. Rep. a. Figures in italics are for 1961, not 1960. b. Figures in italics are for 1979, not 1980. c. Includes Luxembourg. 169 Table 12. Origin and destination of merchandise exports Destination of merchandise exports (percentage of total) Industrial East European market nonmarket High-income Developing economies economies oil exporters economies Origin 1960 198P 1960 1981 1960 1981k 1960 1981a Low-income economies 51 iv 50w 21w 5w 1w 4w 27 iv 41 China and India 39 w 49 w 36 iv 6w (.)w 3w 25 iv 42w Other low-income 66 w 52w 3w 5w 2w 7w 29 w 36w 1 Kampuchea, Dem. 2 Bhutan 3 Lao, PDR 61 0 6 33 4 Chad 73 44 0 27 49 5 Bangladesh 34 . . 8 57 6 Ethiopia 69 56 1 11 6 8 24 25 7 Nepal 50 . 0 (.) 50 8 Burma 23 25 3 1 (.) 2 74 72 9 Afghanistan 48 46 28 21 0 3 24 30 10 Mali 93 62 0 (.) (.) 7 37 11 Malawi 83 0 0 17 12 Zaire 89 64 (.) () (,) 11 35 13 Uganda 62 78 0 (.) 0 3 38 19 14 Burundi 74 (,) 0 26 15 Upper Volta 4 39 (.) (.) 96 61 16 Rwanda 61 0 (.) 39 17 India 66 58 10 2 6 25 26 18 Somalia 85 10 (.) (.) 76 15 14 19 Tanzania 74 51 4 0 (.) 25 45 20 Viet Nam 40 9 (.) 51 21 China 14 46 61 4 (.) 2 25 48 22 Guinea 63 82 8 (.) (.) (.) 19 18 23 Haiti 98 97 (.) (,) 0 (.) 2 3 24 Sri Lanka 75 42 3 4 0 6 22 48 25 Benin 90 75 2 (.) 0 (.) 8 25 26 Central African Rep. 83 77 0 (.) 0 (.) 17 23 27 Sierra Leone 99 90 0 0 (.) 10 28 Madagascar 79 75 0 (.) 20 24 29 Niger 74 64 0 (.) 0 15 26 21 30 Pakistan 56 36 4 4 2 18 38 42 31 Mozambique 29 39 0 (.) 3 71 58 32 Sudan 59 48 8 21 4 7 29 24 33 Togo 74 52 0 2 0 (.) 26 46 34 Ghana 88 77 7 10 (.) (.) 5 13 Middle-income economies 68w 65 iv 7w 4w (.)w 2w 25 w 29w Oil exporters 68 w 73w 410 1w (,)w (.) 28w 26w Oil importers 68 w 59w 9w 6w (.)w 4w 23 o' 31w Lower middle-income 73w 70 iv 7w 3w 1w 2w 19w 25w 35 Kenya 77 50 0 (.) 23 48 36 Senegal 89 40 0 0 (,) 11 59 37 Mauritania 89 92 0 (,) 0 (.) 11 8 38 Yemen Arab Rep. 46 48 18 3 (.) 11 36 38 39 Yemen, PDR 42 21 (.) (,) 2 42 56 37 40 Liberia 100 92 0 2 0 (.) 5 41 Indonesia 54 74 11 (.) (.) 42 25 42 Lesotho 43 Bolivia 88 46 0 16 0 3 12 35 44 Honduras 77 86 0 (.) 0 (.) 23 14 45 Zambia 71 . . 1 (.) 28 46 Egypt 26 52 33 9 2 3 39 36 47 El Salvador 88 76 0 (.) 0 (.) 12 24 48 Thailand 47 53 2 5 3 5 48 37 49 Philippines 94 75 0 3 (.) 6 21 50 Angola 64 68 2 3 0 34 28 51 Papua New Guinea 91 . . 0 0 9 52 Morocco 74 67 3 10 (.) 3 23 20 53 Nicaragua 91 69 (.) (.) 0 9 31 54 Nigeria 95 85 1 (.) 0 4 15 55 Zimbabwe 56 Cameroon 93 1 (.) (.) 6 7 57 Cuba 72 . . 19 (.) 9 58 Congo, People's Rep. 93 81 0 (.) 0 7 19 59 Guatemala 94 51 0 1 0 2 6 47 60 Peru 84 66 (.) 4 0 (.) 16 30 61 Ecuador 91 60 1 1 0 (.) 8 39 62 Jamaica 96 81 0 5 0 (.) 4 14 63 Ivory Coast 84 70 0 5 0 (.) 16 25 64 Dominican Rep. 92 84 0 1 (.) 7 15 170 Destination of merchandise exports (percentage of total) Industrial East European market nonmarket High-income Developing economies economies oil exporters economies Origin 1960 1981 1960 1981 1960 1981a 1960 1981 65 Mongolia . . . 66 Colombia 94 70 1 4 0 (,) 5 26 67 Tunisia 76 75 3 1 2 4 19 20 68 Costa Rica 93 62 (.) 2 (.) C) 7 36 69 Korea, Dem. Rep. . . . . . . . . . . 70 Turkey 71 47 12 7 () 15 17 31 71 Syrian Arab Rep. 39 60 19 18 11 7 31 15 72 Jordan 1 6 11 7 26 32 62 55 73 Paraguay 61 47 0 0 0 0 39 53 Upper middle-income 67 w 63 w 6w 4w (.) 3w 28 w 30w 74 Korea Rep. of 89 67 0 () 0 10 Il 23 75 Iran, Islamic Rep. of, 62 55 3 (.) 1 1 34 44 76 Iraq 85 47 1 (.) (.) (.) 14 53 77 Malaysia 58 53 7 3 0 1 35 43 78 Panama 99 72 0 () 0 1 1 27 79 Lebanon 21 10 8 8 32 51 39 31 80 Algeria 93 89 0 2 (.) () 7 9 81 Brazil 81 54 6 7 (.) 1 13 38 82 Mexico 93 91 () (.) 0 0 7 9 83 Portugal 56 77 2 2 () 1 42 20 84 Argentina 75 45 5 25 (.) (.) 20 30 85 Chile 91 67 (.) (.) (.) 2 9 31 86 South Africa 71 80 1 (.) (.) 0 28 20 87 Yugoslavia 48 31 31 49 1 3 20 17 88 Uruguay 82 54 7 8 0 2 11 36 89 Venezuela 62 71 0 () 0 (.) 38 29 90 Greece 65 56 21 8 1 13 13 23 91 Hong Kong 54 60 (.) (.) 1 3 45 37 92 Israel 76 68 1 1 0 (.) 23 31 93 Singapore 38 41 4 1 1 7 57 51 94 Trinidad and Tobago 80 76 0 (.) () (.) 20 24 High-income oil exporters 83w 64w (.) w (.) w Ow 8w 17w 28w 95 Libya 67 86 7 (.) 0 (.) 26 14 96 Saudi Arabia 74 72 0 () 0 3 26 25 97 Kuwait . 51 . 1 . . 4 44 98 United Arab Emirates 91 12 0 () 0 45 9 43 Industrial market economies 67 w 65 w 3w 3w (.) w 4w 30 w 28w 99 Ireland 96 85 () 1 () 3 4 11 100 Spain 80 56 2 4 (.) 5 18 35 101 Italy 65 61 4 3 2 10 29 26 102 New Zealand 95 63 1 4 (.) 2 4 31 103 United Kingdom 57 68 3 2 2 6 38 24 104 Japan 45 46 2 3 2 7 51 44 105 Austria 69 69 13 11 () 3 18 17 106 Finland 69 62 19 27 (.) 1 12 10 107 Australia 75 50 3 4 1 3 21 43 108 Canada 90 84 1 3 () 1 9 12 109 Netherlands 78 81 1 2 1 3 20 14 110 BeIgium' 79 83 2 2 1 2 18 13 111 France 53 66 3 4 (.) 4 44 26 112 United States 61 55 1 2 1 4 37 39 113 Denmark 83 81 4 2 () 2 13 15 114 Germany. Fed. Rep. 70 72 4 4 1 3 25 21 115 Norway 80 88 4 2 (.) (.) 16 10 116 Sweden 79 76 4 4 (.) 3 17 17 117 Switzerland 72 70 3 3 1 4 24 23 East European nonmarket economies 19 30 w 59 53 w (.) 1w 22 w 16w 118 Albania 1 . . 93 . 0 6 119 Hungary 22 27 61 53 (.) 2 17 18 120 Romania 20 35 66 37 () 2 14 26 121 Bulgaria 13 16 80 69 (.) 6 7 9 122 Poland 29 34 () 17 10 123 USSR 18 32 51 49 (.) (.) 31 19 124 Czechoslovakia 16 22 67 65 (.) 3 17 10 125 German Dem. Rep 19 24 68 65 () 1 13 10 a. Figures in italics are for 1980. not 1981, b. Includes Luxembourg. 171 Table 13. Origin and destination of manufactured exports Destination of manufactured exports (percentage of total) manufactured Industrial East European exports market nonmarket High-income Developing (millions economies economies oil exporters economies of dollars) Origin 1962a 1980' 1962 1980b 1962 1980b 1962 1980k' 1962a 1980' Low-income economies 57w 56w 4w lOw 2w 7w 37w 27 w China and India 0 S S S S S Other low-income 61 w 53 w 1w 7w 1w 6w 37w 34 w 1 Kampuohea, Oem 30 () 70 1 2 Bhutan 3 Lao. PDR 35 0 0 65 () 4 Chad 19 0 6 75 1 5 Bangladesh 48 11 (.) 41 437 6 Ethiopia 47 43 2 9 1 6 50 42 2 7 Nepal 73 (.) ( ) 27 29 8Burma 58 () 0 42 3 9 Afghanistan 96 1 0 3 9 10 Mali 33 1 0 66 11 Malawi 19 (,) (,) 81 31 12 Zaire 93 0 0 . 7 12 13 Uganda 15 0 0 . 85 () 14 Burundi 40 (.) (.) 60 15 Upper Volta 19 27 0 () 0 (.) 81 73 1 10 16 Rwanda 90 0 0 10 17 India 56 58 5 11 2 8 37 23 630 4117 18 Somalia 61 48 0 1 4 2 35 49 (.) 1 19 Tanzania 93 58 0 () 0 () 7 42 16 83 20 Viet Nam 10 0 0 90 1 21 China 8.150 22 Guinea 23Haiti . 24 Sri Lanka 63 72 2 (.) (.) 2 35 26 6 198 25 Berun 18 0 0 82 (.) 26 Central African Rep 78 69 2 (.) 0 (.) 20 31 3 29 27 Sierra Leone 98 0 0 2 21 28 Madagascar 87 95 0 (.) 0 (.) 13 5 5 24 29 Niger 7 0 0 93 1 30 Pakistan 46 52 (.) 8 1 9 53 31 97 1.285 31 Mozambique 31 0 0 69 3 32 Sudan 37 46 1 6 3 32 59 16 () 15 33 Togo 44 31 0 (.) 0 (.) 56 69 1 20 34 Ghana 39 11 () 50 12 Middle-income economies 50 w 56w 5w 5w 1w 4w 44 U' 35 U' Oil exporters 61 w 59 w 5w 3w 1w 2w 33 zi' 36 w Oil importers 48 w 56 w 5 U' 5 U' 1w 4 U' 46 U' 35 0) Lower middle-income 53 w 53 U) 8w 3w 1w 3w 38 u' 41 35 Kenya 22 12 0 (.) 2 7 76 81 11 210 36 Senegal 76 30 0 (.) 0 (.) 24 70 5 72 37 Mauritania 98 0 0 2 2 38 Yemen Arab Rep 59 (.) 7 34 11 39 Yemen, PDR 40 Liberia 94 49 (.) ( ) 0 (.) 6 51 3 20 41 Indonesia 52 33 1 (.) 1 3 46 64 2 533 42Lesotho 43 Bolivia 82 71 0 (.) 0 (.) 18 29 4 23 44 Honduras 1 29 0 (.) 0 (.) 99 71 2 102 45 Zambia 46 Egypt 23 45 35 38 3 4 39 13 69 333 47 El Salvador 1 5 0 (.) 0 (.) 99 95 11 255 48 Thailand 51 56 () () () 5 49 39 21 1.886 49 Philippines 91 75 0 (.) (.) 1 9 24 26 2,141 50 Angola 34 4 0 62 21 51 PapuaNewGuinea 97 83 0 2 0 () 3 15 4 17 52 Morocco 52 55 2 6 (.) 4 46 35 28 565 53 Nicaragua 55 5 0 (.) 0 (.) 45 95 2 57 54 Nigeria 91 93 (.) I () (.) 9 6 34 137 55 Zimbabwe 44 0 0 56 31 56 Cameroon 25 78 0 () 0 (.) 75 22 4 50 57 Cuba 1 () 83 () 0 (.) 16 100 6 319 58 Congo, Peoples Rep 88 90 0 () 0 (.) 12 10 14 39 59 Guatemala 46 6 0 ( ) 0 (.) 54 94 8 359 60 Peru 53 37 0 1 0 () 47 62 5 553 61 Ecuador 46 15 0 (.) 0 (.) 54 85 2 57 62 Jamaica 73 74 0 8 0 1 27 17 20 611 63 Ivory Coast 61 35 0 (.) 0 (.) 39 65 2 212 64 Dominican Rep 98 87 0 () 0 (.) 2 13 4 166 172 Destination of manufactured exports (percentage of total) manufactured Industrial East European exports market nonmarket High-income Developing (millions economies economies oil exporters economies of dollars) 1962 1980b 1962 1980' 1962 198O 1962 1980b 1962 1980b Origin 65 Mongolia . . 66 Colombia 57 37 0 1 0 (.) 43 62 16 804 67 Tunisia 64 78 0 2 7 1 29 19 10 801 68 Costa Rica 78 15 0 (.) 0 (.) 22 85 9 354 69 Korea, Dem. Rep. 70 Turkey 73 61 17 8 () 5 10 26 4 782 71 SyrianArabRep. 17 13 7 17 1 31 75 39 9 125 72 Jordan 12 13 10 (.) 32 36 46 51 1 201 73 Paraguay 84 37 0 (.) 0 (.) 16 63 4 34 Upper middle-income 50 w 56 w 4w 5w 1 ?L' 5 45 i' 34 w 74 Korea, Rep. of 83 64 0 () 0 9 17 27 10 15.722 75 Iran, Islamic Rep of 45 . 1 . . 3 . . 51 . 44 76 Iraq 26 . (.) . . 8 . . 66 . . 2 77 Malaysia 11 66 0 () (.) 2 89 32 58 2.464 78 Panama 24 11 0 (.) 0 1 76 88 1 31 79 Lebanon 22 . 4 . . 14 . 60 . . 11 80 Algeria 50 58 0 36 0 (.) 50 6 23 49 81 Brazil 60 42 3 2 0 1 37 55 39 7.770 82 Mexico 71 82 0 1 0 () 29 17 122 3,389 83 Portugal 56 81 (.) 1 () 1 44 17 205 3,322 84 Argentina 62 42 3 5 0 () 35 53 39 1,861 85 Chile 45 29 0 (.) 0 2 55 69 20 758 86 South Atrica 54 69 (.) (.) (.) (.) 46 31 317 5,166 87 Yugoslavia 31 30 30 49 1 3 38 18 344 6,570 88 Uruguay 75 47 13 2 0 (.) 12 51 7 404 89 Venezuela 94 54 0 (.) 0 (.) 6 46 158 330 90 Greece 52 56 6 5 3 13 39 26 27 2,441 91 Hong Kong 63 64 0 () 1 4 36 32 642 18,208 92 Israel 66 69 3 (.) 0 (.) 31 31 184 4,551 93 Singapore 4 47 0 1 2 5 94 47 328 10,452 94 Trinidad and Tobago 39 65 0 (.) 0 (.) 61 35 13 206 High-income oil exporters 13w 32 w 0w (.)w 30w 21 w 57 w 47 w 95 Libya 68 62 0 1 0 (.) 32 37 ( ) 78 96 Saudi Arabia 64 17 0 () 12 14 24 69 3 705 97 Kuwait () 37 0 () 35 24 65 39 11 2,123 98 United Arab Emirates 76 . 0 3 . 21 . 33 Industrial market economies 63 w 66 w 3w 3w 1w 4 ri 33 ii' 27 ri 99 Ireland 76 92 0 1 () 1 24 6 134 4,909 100 Spain 57 57 1 2 () 5 42 36 205 14.967 101 Italy 65 66 5 4 2 8 28 22 3.490 65.797 102 New Zealand 90 69 0 1 0 1 10 29 23 1,174 103 United Kingdom 58 65 3 2 2 6 37 27 8.947 84.287 104 Japan 45 46 4 3 1 7 50 44 4.340 124,027 105 Austria 67 70 18 13 () 1 15 16 931 14,480 106 Finland 56 64 31 24 () 1 13 11 608 9.864 107 Australia 62 31 (.) () (.) 1 38 68 263 6,220 108 Canada 89 87 () 1 (.) 1 11 11 1.959 30,595 109 Netherlands 78 81 2 2 1 3 19 14 2,443 37.827 110 Belgium 83 84 2 2 1 2 14 12 3.257 47.440 111 France 63 68 4 4 () 3 33 25 5,317 81,654 112 United States 48 55 1.) (.) 1 5 51 40 13,957 147,336 113 Denmark 76 82 8 2 () 2 16 14 627 9,252 114 Germany. Fed Rep. 74 73 4 5 1 3 21 19 11.623 165.447 115 Norway 81 74 2 3 () 1 17 22 442 5,931 116 Sweden 76 77 6 3 () 3 18 17 1.958 24.332 117 Switzerland 74 70 3 4 1 3 22 23 2,005 26,647 East European nonmarket economies 118 Albania . . . , , 119 Hungary . 25 . 54 . . 1 . 20 . 5.709 120 Romania . . . . . . , , . . 121 Bulgaria 122 Poland . 22 . . 63 2 . . 13 . . 10,336 123 USSR . . . . , . . 124 Czechoslovakia . 15 . . 69 . 1 . . 15 12,554 125 German Dem. Rep a Figures in italics are for 1963, not 1962 b Figures in italics are for 1979. not 1980 173 Table 14. Balance of payments and reserves Receipts Gross international reserves Current account of workers' Net direct In months balance remittances private investment Millions of of import (millions of dollars) (millions of dollars) (millions of dollars) dollars coverage 1970 1981° 1970 1981 1970 1981° 1970 1981a 1981° Low-income economies 4.0 w China and India 5.2 w Other low-income 1.9w 1 Kampuchea, Dem. . 2 Bhutan 3 Lao,PDR 4Chad 2 . 1 1 . 2 12 5 Bangladesh 60 1.016 386 160 06 6 Ethiopia 32 254 11 4 72 370 52 7 Nepal . 19 94 262 69 63 . 8 Burma 317 98 329 39 9 Afghanistan 50 658 10 Mali 2 140 6 . 48 . . 4 . 1 25 06 11 Malawi 35 101 10 9 . 29 54 13 64 . 12 Zaire 2 42 . . 189 294 13 Uganda 20 161 . 2 4 3 57 17 0.3 14 Burundi 15 68 15 Upper Volta 9 . 18 (.) . 36 75 16 Rwanda 7 59 1 2 () 18 8 173 59 17 India 394 4,040 113 6 1,023 8,109 54 18 Somalia 19 Tanzania 6 36 30 533 . 7 . 5 . . 21 65 38 10 . . 11 . . . 19 0.2 20 VietNam . . . 21 China 2.152 265 10.096 51 22 Guinea 23 Haiti 2 146 17 123 3 18 4 31 06 24 Sri Lanka 59 441 3 230 l) 49 43 352 19 25 Benin 1 . 3 7 . 16 62 26 Central African Rep. 12 7 () () 1 21 1 74 25 27 Sierra Leone 16 143 1.) 8 8 39 16 05 28 Madagascar 10 10 37 29 Niger (.) , , 1 . , 19 110 936 . 667 . 30 Pakistan 2.056 31 107 194 1.455 25 31 Mozambique 32 Sudan 42 648 . 366 . 22 17 01 33Togo 3 1 . 35 157 34 Ghana 68 209 1 68 13 58 271 28 Middle-income economies 3.1 w Oil exporters 3.3 w Oil importers 3.0 w Lower middle-income 2.9 ri 35 Kenya 49 736 . 10 14 61 220 263 1.2 36 Senegal 16 22 20 37 Mauritania 38 Yemen Arab Rep 5 148 659 5 1 . 926 4 5 1 22. 40 3 166 964 3.3 50 39 Yemen, PDR 4 . . 137 60 352 . . 59 271 4.2 40 Liberia 65 - . . 7 0.1 41 Indonesia 310 736 . 83 133 160 6.248 30 42 Lesotho 54 265 . . 43 11 43 Bolivia 4 285 (.) 2 76 60 46 429 38 44 Honduras 64 303 . 2 8 4 20 107 10 45 Zambia 108 649 () 297 . 515 143 09 46 Egypt 148 2.135 29 2.181 746 165 1.683 18 47 El Salvador 9 86 1 48 4 6 64 277 3.5 48 Thailand 250 2.560 - 478 43 291 912 2.721 27 49 Philippines 48 2,286 . 798 29 403 255 2,859 3.0 50 Angola 567 . 51 Papua New Guinea . () . 86 478 3.4 52 Morocco 124 1,839 63 1,013 20 59 141 510 1,0 53 Nicaragua 40 . 1 . 15 . 49 54 Nigeria 368 5,395 205 47 223 4168 21 55 Zimbabwe . . 635 . - 7 . - 4 59 327 1.7 56 Cameroon 30 () . . 16 81 90 57Cuba .- - 58 Congo. People's Rep 460 3 31 9 128 09 59 Guatemala 8 580 - 24 29 128 80 357 20 60 Peru 202 1,512 . (1 70 267 339 1.764 36 61 Ecuador 113 1,001 89 60 76 797 24 62 Jamaica 153 337 50 112 161 12 139 85 05 63 Ivory Coast 38 1,693 6 32 31 48 119 36 0.1 64 Dominican Rep 102 670 25 166 72 93 32 282 15 174 Receipts Gross international reserves Current account of workers' Net direct In months balance remittances private investment Millions of of import (millions of dollars) (millions of dollars) (millions of dollars) dollars coverage 1970 1981 1970 1981 1970 1981 1970 1981a 1981 65 Mongolia . . . . . . . . 66 Colombia -293 -1,943 26 124 39 209 207 6,079 10.6 67 Tunisia -53 -450 29 357 16 294 60 610 18 68 Costa Rica -74 -372 . I) 26 46 16 143 10 69 Korea. Dem Rep . . . . . . 70 Turkey -44 2.175 273 2.500 58 150 440 2783 33 71 Syrian Arab Rep -69 -511 7 581 . 57 622 13 72 Jordan -20 -38 16 1.047 143 258 1.511 40 73 Paraguay -16 -374 . 63 4 39 18 820 89 pper middle-income 74 Korea. Rep of -623 -4.419 33 126 66 59 610 2,802 10 75 Iran. Islamic Rep. of -507 . . 25 . 217 76 Iraq 105 . . . . 24 . . 472 77 Malaysia 8 -2.911 5 94 1.317 667 5.024 39 78 Panama -64 -627 67 13 33 45 16 120 03 79 Lebanon . . . . . 405 5,182 80 Algeria -125 249 211 406 45 315 352 5.915 5.8 81 Brazil -837 -11,762 9 35 407 2.317 1,190 7.480 23 82 Mexico - .068 -1 2.933 123 216 323 2.254 756 4.971 1.4 83 Portugal -2,574 2.896 156 1,565 9.345 9.4 84 Argentina -163 -3.973 6 41 11 902 682 5.006 3.8 85 Chile -91 -4,814 -79 376 392 3.890 42 86 South Africa -1,215 -4.151 202 878 318 . 1,057 4,359 1.8 87 Yugoslavia -372 -2.291 441 4.050 . . . 143 2.335 15 88 Uruguay -45 -463 . . II 49 186 1.778 9.3 89 Venezuela -104 3998 . . II -23 160 1.047 12.719 7.5 90 Greece -402 -2.385 339 1.177 50 520 318 2,554 24 91 HongKong .. . .. 92 Israel -562 - 1.568 21 215 40 -414 452 3.971 3.1 93 Singapore -572 -1.750 . . 93 1,797 1.012 7,549 30 94 Trinidad and Tobago -109 357 3 1 83 166 43 3369 11 3 High-income oil exporters 57 95 Libya 645 -2.263 . . . 139 -1,079 1.596 10.425 67 96 Saudi Arabia 71 45.119 1.) 20 3.376 670 34.051 54 97 Kuwait 13.758 . . 1.1 . 35 209 5,077 57 98 United Arab Emirates . . . . . . . . . 3.472 idustrial mark economies 99 Ireland -198 -1,650 32 286 698 2,794 28 100 Spain 111 -4.939 469 521 179 1.440 1,851 16,611 49 101 Italy 902 -8.430 1.017 2.897 498 -254 5.547 46.635 51 102 New Zealand -29 -1.171 186 22 219 .258 683 10 103 United Kingdom 1,975 12.634 . . . -439 -8.661 2.919 22.803 20 104 Japan 1,980 5.117 . 189 -260 -4,728 4.877 37,839 25 105 Austria -75 - 1.522 13 199 104 90 1.806 13.677 5.5 106 Finland -239 -289 34 124 -41 -124 455 1,988 13 107 Australia -837 -8.489 . 785 1 758 1,709 4,824 17 108 Canada 821 -4.413 . . 566 -8.597 4.733 11.672 16 109 Netherlands -483 3,159 116 450 -15 - 1.822 3,362 26,805 37 110 Belgium 717 -5,231 294 1.135 140 1.343 2.947 18.539 36 111 France -55 -7,254 251 1,296 248 -2,166 5.199 54,797 40 112 United States 2.320 4.185 . . 283 -6.130 12,875 15.237 123.907 41 113 Denmark -544 -1,865 . () 75 -40 488 3,195 15 114 Germany. Fed. Rep 850 -7.133 350 2,323 -290 -2.889 13.879 81,554 45 115 Norway -242 2.301 . . 24 32 493 813 6.724 3.1 116 Sweden -265 -2,735 6 67 -104 -628 775 6,013 19 117 Switzerland 72 2634 23 167 . . 5317 47.083 148 East European nonmarket economies 118 A.bania 119 Hungary -897 2.463 2.6 120 Romania -832 1,831 1.5 121 Bulgaria 122 Polanci 123 USSR 124 Czechoslovakia 125 German Dern. Rep. a Figures in italics are for 1980, not 1981. b See the technical notes. 175 Table 15. Flow of public and publicly guaranteed external capital Public and publicly guaranteed medium- and long-term loans (millions of dollars) Repayment Gross inflow of principal Net inflowa 1970 1981 1970 1981 1970 1981 Low-income economies China and India Other low-income 1 Kampuchea. Dem . 2 Bhutan 3 Lao. PDR 4Chad 6 9 2 10 3 1 5 Bang!aaesh 513 52 461 6 E1hopia 27 149 15 24 13 125 7 Nepa' 8 Burma 1 16 64 431 2 18 2 83 2 2 61 348 9 Afghanstan 34 15 19 10 Ma 21 116 () 36 21 110 11 Maaw 38 130 3 39 36 91 12 Za'e 31 260 28 90 3 170 13 Uganda 26 85 4 53 22 32 14 Buund: 1 30 (.) 3 1 27 15 Upper Vota 2 44 2 8 () 36 16 Rwanoa ( ) 26 () 1 ( ) 25 17 ndia 890 1.987 307 647 583 1,340 18 Soma;ia 4 175 (.) 13 4 163 19 Tanzan'a 50 276 10 73 40 203 20 VetNam 21 Chna 22 Gunea 90 141 10 61 80 80 23 HaI 4 106 4 18 1 88 24 Sr anka 61 369 27 42 34 327 25 Benin 2 172 1 12 1 160 26 Centra Afrcan Rec 26 5 1 21 27 S'ea Leone 28 Maaagasca 2 8 10 64 265 2 10 5 41 74 2 5 24 191 29 Nger 12 284 1 29 10 255 30 Paks1an 484 673 114 331 370 340 31 Mozamoique 32 Suaan 60 540 22 52 39 489 33Togo 5 38 2 21 3 17 34 Ghana 40 117 12 51 28 66 Middle-income economies Oil exporters Oil importers Lower middle-income 35 Kenya 30 476 15 177 15 299 36 Senega 15 266 5 53 10 174 37 Mau:an'a 4 174 3 36 1 138 38 Yemen Aab Re of 294 . 49 245 39 Vpri PDR 1 190 0 32 1 158 40 Lbe'a 7 70 12 11 4 59 41 'nam-esa 441 2.356 59 1.001 382 1.355 42 eso1flo () 47 () 7 () 39 43 Bova 54 337 17 100 37 237 44 Honau'as 29 254 3 37 26 217 45 Zamba 351 248 33 187 318 61 6 Egyc:. Aab Re of 302 3.487 247 1.570 55 1 918 47 E Savaam 8 182 6 17 2 165 48 Tf-aano 51 1.461 23 226 27 1.235 49 Phoones 132 1.529 73 367 59 1.162 50 Angoa . 51 Papua New Gunea 25 138 (.) 20 25 118 52 Mooccc 163 1.704 36 602 127 1.103 53 Ncaagua 44 398 17 91 28 307 54 Ngera 62 1.164 36 361 26 803 55 Zmbabwe 0 330 5 41 5 24 289 286 56 Caneoon 28 371 4 85 57CuOa , 58 Congo. Peop;es Rep. 35 306 6 62 29 244 59 Gua:emaia 37 144 20 20 17 124 60 Peu 148 1,469 101 1.367 47 102 61 Ecuaoo 42 952 16 190 26 762 62 Jarnaca 15 408 6 243 9 165 63 vo'y Coast 77 1.168 27 489 50 679 64 Domncan Rep 38 151 7 77 31 75 176 Public and publicly guaranteed medium- and long-term loans (millions of dollars) Repayment Gross inflow of principal Net nflow 1970 1981 1970 1981 1970 1981 65 Mongolia . , , . 66 Colombia 252 1361 78 257 174 1104 67 Tunisia 87 585 45 302 42 283 68 Costa Rica 30 603 21 80 9 523 69 Korea, Dem Rep. 70 Turkey 328 1,816 128 510 200 1,306 71 SyranArabRep. 59 417 30 303 30 113 72 Jordan 14 335 3 101 11 234 73 Paraguay 15 162 7 40 8 122 Upper middle-income 74 Koea. Rep. of 440 6,087 198 1,820 242 4,266 75 Iran. Islamic Rep. of 940 235 . . 705 76 Iraq 63 18 46 77 Maaysa 43 1,874 45 138 1 1.736 78 Panama 67 342 24 215 44 126 79 Lebanon 12 99 2 40 9 58 80 Algera 292 2.781 33 2,399 259 382 81 Brazil 886 8,997 255 3.619 631 5,378 82 Mex;co 772 13,416 476 3,782 297 9,634 83 Portuga 18 1.622 63 606 45 1,016 84 A'gentina 487 1.845 342 1.092 146 753 85 Chile 397 1.018 163 1.175 234 156 86 South Africa 87 Yugoslavia 180 1,181 168 373 12 808 88 Uruguay 38 292 47 53 9 239 89 Venezuela 224 2,059 42 1,352 182 706 90 Greece 164 1.837 61 612 102 1.225 91 HongKong 0 39 () 155 (.) 115 92 Israel 410 2,482 25 1,368 385 1,115 93 Sngapore 58 169 107 52 62 94 T-nidad and Tobago 8 88 6 10 26 2 62 High-income oil exporters 95 Lbya 96 Sauai Arabia 97 Kuwait 98 Un.ted Arab Emirates Industrial market economies 99 Ireland 100 Spain 101 hay 102 New Zealand 103 United Kingdom 104 Japan 105 Austr.a 106 Finand 107 Australia 108 Canada 109 Netherlands 110 Belgum 111 France 112 United States 113 Denmark 114 Germany. Fed. Rep. 115 Norway 116 Sweden 117 Switzerland East European nonmarket economies 118 Aibana 119 Hungary 1.880 940 940 120 Romania 121 BZgaria 122 Poland 123 USSR 124 Czechoslovakia 125 German Dem. Rep a. G'oss inflow less repayment of principal may not equal net inflow because of rounding 177 Table 16. External public debt and debt service ratios External public debt Interest payments outstanding and disbursed Debt service as percentage of: on external Millions of As percentage public debt Exports of dollars of GNP (millions of dollars) GNP goods and services 1970 1981 1970 1981 1970 1981 1970 1981 1970 1981 Low-income economies 17.5w 18.6w 1.1 iv 1,0w 12.0 iv 8.8 a' China and India Other low-income 22.0w 28.3 iv 1.5 iv 1.5w 12.5w 8.8w 1 Kampuchea. Oem . 2Bhutan .. . . 3 Lao. FOR 4 Chad 32 201 11.9 509 () 2 1.0 29 39 5 Banglaaesh 3.850 . 31 2 46 08 6.9 6 E1hopia 169 792 9.5 18.7 6 16 1.2 1.0 11 4 7.6 7 Nepal 3 234 0.3 95 () 3 0.3 0.2 1.6 8 Burma 101 1.639 47 28.7 3 53 09 2.4 15.8 22 1 9 Afghanistan 547 . 58 1 9 . . 2.5 10 Ma 238 738 881 64.9 () 3 02 0.8 12 38 11 Malaw 122 685 39.1 420 3 49 1.9 54 7.1 245 12 Zaire 311 3.960 17.6 77.0 9 122 12 41 4.4 13 Uganda 138 540 10.5 5.2 4 2 0.6 05 2.6 39 14 Burunai 7 154 31 161 (,) 2 03 05 15 Uppe'Vota 21 296 63 231 () 6 06 11 40 16 Rwanda 2 172 09 136 (.) 2 0.2 02 13 1.5 17 no'a 7,940 17.975 14.9 108 189 378 0.9 0.6 209 18 Soma.ia 77 877 24.4 709 (.) 4 0.3 1.3 21 61 19 Tanzania 248 1.476 19.4 283 6 34 1.2 2.1 49 72 20 Vet Nam . . . . . . . . . . 21 China . . . . . . . . 22 Guinea 314 1 255 51.7 804 4 22 2.4 5.3 23 f-a'ti 40 360 103 229 () 7 1.0 16 5.8 66 24 S' Lanka 317 1.585 161 36.6 12 49 2.0 21 103 57 25 Ben'n 41 549 16.0 55.2 () 10 07 22 22 26 Cen:'a African Rep. 24 213 13.7 31.5 1 1 1.7 09 48 15 27 Se"a Leone 59 346 143 31.0 2 10 29 45 9.9 244 28 Maaagasca' 93 1.258 108 44.6 2 47 08 43 3.5 29 Nge' 32 605 87 36.7 1 34 06 38 38 30 Paks1an 3.059 8.814 305 29.2 76 198 1.9 18 236 9.6 31 Mozamb'que . . . . . . . 32 Suoan 319 4.807 15.8 593 13 31 1.7 10 107 5.0 33 Togo 40 860 16.0 992 1 19 09 47 29 34 Ghana 489 979 226 40 12 27 1.1 03 50 91 Middle-income economies 13.5 19,6w 1.6w 3.4 iv 9.6w 14.4w Oil exporters 13.7 iv 20.3w 1.8w 3.9 iv 10.3w 15.2 a' Ot I importers 13.4w 19.1 w 1.4iv 3.1 iv 9.2 iv 13.9 iv Lower middle-income 15.6w 23.2 ii' 1.6 iv 3.2 iv 9,3 iv 12.5 iv 35 Kenya 313 2.228 20.3 34.4 11 116 1.7 45 5.3 171 36 senegal 98 944 116 42.5 2 41 08 42 2.7 37 Mau'tana 27 827 13.9 122.1 () 18 1.7 80 3.1 158 38 yemen Arab Reo . 1.094 34.3 . 10 18 45 39 Yemen, FOR 1 640 . . 73.1 0 5 43 24 40 Lbe'a 158 592 49.6 63.7 6 24 55 37 64 4 noonesa 2.443 15529 27.1 190 24 973 0.9 24 6.9 82 42 Leso1no 8 107 7.8 15.0 () 3 04 14 . 29 43 Bo v'a 479 2422 47 1 31 9 6 179 2.3 37 11 3 27.0 44 Fonouras 90 1.223 12.8 47 1 3 77 0.8 44 28 12 7 45 Zamb a 623 2.294 37.0 73 1 26 106 3.5 9.4 59 240 46 Egyp1 644 13.887 238 43 7 38 496 4.1 6.5 28.7 226 47 E Savaoor 88 664 8.6 190 4 28 0.9 1.3 36 3.5 48 Tnaano 324 5169 4.9 144 16 395 0.6 1.7 34 67 49 Pi pones 633 7388 9.0 193 25 507 1.4 23 74 99 50 Angoa . . . . . . . . 51 Papua New Gu'nea 36 613 5.8 255 1 46 0.1 2.7 . 69 52 Mo'occo 711 7.879 180 524 23 631 15 8.2 77 30 1 53 N ca'agua 155 1 975 20.7 802 7 93 32 7.5 11.0 54 Nge"a 480 4.652 47 65 20 495 0.5 12 41 46 55 Zmbabwe 233 880 157 138 5 32 0.6 11 44 56 Came'oon 131 2.034 12 1 28 7 4 115 0.8 28 3.1 57Cuba . 58 Congo. Peoo!e s Rep 135 1.105 504 66.7 3 45 3.3 65 8.9 92 59 Gjaemaa 106 684 5.7 80 6 30 4 06 7.4 33 60 neu 856 5.974 12.6 28.6 44 528 21 91 11 6 44.9 61 Ecuaao' 217 3.392 13.2 269 7 345 14 43 91 7.8 62 Lamaca 154 1.434 11.5 53.6 8 109 11 13.2 25 225 63 voy Coas: 256 4.497 18.3 544 11 413 28 10.9 68 222 64 Cam n can Rep 212 1.260 14.5 171 4 124 08 2.7 41 '0.6 178 External public debt Interest payments outstanding and disbursed Debt service as percentage of: on external Millions of As percentage public debt Exports of dollars of GNP (millions of dollars) GNP goods and services 1970 1981 1970 1981 1970 1981 1970 1981 1970 1981 65 Mongolia 66 Colombia 1.293 5.123 188 140 44 408 1.8 1.8 119 13.4 67 Tunisia 541 3.171 382 38.0 18 204 4.5 6.1 175 13.9 68 Costa Rica 134 2,246 13.8 92.6 7 111 2.9 78 10.0 15.3 69 Korea, Dem. Rep. 70 Turkey 1,854 13,809 14.4 234 42 658 13 2.0 163 15.0 71 Syrian Arab Rep. 232 2,337 12.8 152 6 108 2.0 27 108 12.1 72 Jordan 118 1,419 387 2 81 50 36 5.7 73 Paraguay 112 707 191 126 4 32 1.4 13 118 9.8 Upper middle-income 12.4w 17.8 u' 1.6w 3.5w 10.1 w 15.4w 74 Korea, Rep. of 1.797 19.964 20.8 32.1 70 1.777 3.1 5.8 194 13.1 75 Iran. Islamic Rep of 2.193 . 208 . . 85 . 3.0 . 12.2 76 Iraq 274 . . 8.8 . . 9 . 09 . 2.2 77 Maiaysia 390 4.627 10.0 19.2 21 264 17 1.7 3.6 31 78 Panama 194 2.368 19.0 64.5 7 277 30 13.4 7.7 11 5 79 Lebanon 64 246 4.2 . , 1 13 0.2 . 80 Aigeria 937 14392 19.3 35.2 10 1481 0.9 9.5 32 249 81 Brazil 3.236 43.821 7.1 16.0 133 4,998 0.9 31 12.5 31 9 82 Mexico 3.206 42.716 9.1 18.5 216 4,700 2.0 3.7 236 282 83 Por1uga 485 6,313 7.2 27.7 29 641 1.4 55 . 13.5 84 Argentina 1.878 10.506 8.2 87 121 1,058 2.0 1.3 21 5 18.2 85 Chile 2.066 4.423 25.8 14 1 78 489 3.0 53 189 27.2 86 South Africa 87 Yugoslavia 1.198 5.266 8.8 77 72 435 1.8 12 84 3.5 88 Uruguay 269 1.312 11.1 12.2 16 121 2.6 16 21.6 95 89 Venezuela 728 11.352 6.6 16.9 40 1.696 0.7 44 29 12.4 90 Greece 905 5.817 89 15.4 41 715 10 3.5 7.1 129 91 Hong Kong 2 309 0.1 1.2 0 37 () 0.8 92 Israei 2,274 13.868 41 3 64.3 13 707 07 9.6 2.7 19 1 93 Sngapore 152 1,318 7.9 10.2 6 122 0.6 1.8 0.6 08 94 Th.nioao and Tobago 101 659 12.2 9.7 6 72 1.9 14 4,4 65 High-income oil exporters 95 Lbya 96 Sauai Arabia 97 Kuwait 98 Unitea Arab Emirates Industrial market economies 99 reand 100 Span 101 ta!y 102 New Zealana 103 Urited Kingdom 104 Japan 105 Austra 106 Firana 107 Australia 108 Canaaa 109 Netherlanos 110 Begum 111 Fance 112 Uni1ea States 113 Denmark 114 Germany. Fed. Rep. 115 No'way 116 Sweden 117 Swtzerland East European nonmarket economies 118 Aibana 119 Hungary 6.934 319 672 74 156 120 Romania 121 Bugar'a 122 Po and 123 USSR 124 Czechos'ovak!a 125 German Dem Rep 179 Table 17. Terms of public borrowing Average interest Average Average Commitments rate maturity grace period (millions of dollars) (percent) (years) (years) 1970 1981 1970 1981 1970 1981 1970 1981 Low-income economies 3,052 t 9,289 1 2.8 ze 4.4w 30 it' 30w it' 7w China and India Other low-income 2,1191 5,8201 3.0 ii' 4.1 w 28 iv 29 iv 9 iv 7w 1 Kampuchea, Dem. 2 Bhutan 3 Lao, PDR 4 Chad 23 4.8 0.8 7 50 2 10 5 Bangladesh 937 , . 2.1 . . 31 . . 8 6 Ethiopia 21 180 4.3 4.3 32 30 7 6 7 Nepal 17 110 2.8 1.4 27 41 6 10 8 Burma 57 257 4.3 3.8 16 25 4 7 9 Afghanistan 19 . 1.7 . . 33 8 10 Mali 30 128 0.3 2.3 27 26 11 7 11 Malawi 13 158 3.8 6.6 30 30 6 7 12 Zaire 247 154 6.8 6.8 12 20 3 5 13 Uganda 12 75 3.7 5.8 28 18 7 4 14 Burundi 1 137 2.9 2.6 5 35 2 8 15 Upper Volta 9 61 23 3.4 37 27 8 7 16 Rwanda 9 71 08 1.2 50 44 11 9 17 India 933 3,469 2.4 5.0 35 33 8 7 18 Somalia 2 216 0 4.9 4 16 4 4 19 Tanzania 283 294 1.2 2.2 40 33 11 7 20 VietNam ., .. .. .. .. 21 China . . . . 22 Guinea 158 154 2.6 3.8 15 22 6 5 23 Haiti 5 109 6.7 5.3 9 26 1 5 24 Sri Lanka 79 871 3.0 5.2 27 32 5 8 25 Benin 7 92 1.8 2.6 32 38 7 8 26 Central African Rep. 7 19 2.0 3.6 36 30 8 7 27 Sierra Leone 24 66 3.5 2.7 27 28 6 6 28 Madagascar , . 193 . . 2.9 . . 25 , . 5 29 Niger 18 218 1.2 7.1 40 17 8 5 30 Pakistan 935 872 2.8 4.2 32 29 12 7 31 Mozambique . . . . . . . . . . . . 32 Sudan 118 315 1.9 7.2 16 24 7 6 33 Togo 3 65 4.6 3.6 17 35 4 8 34 Ghana 41 44 2.4 2.4 39 45 10 8 Middle-income economies 10,504 I 84,1981 6.1 w 12.5w 16w 12 it' 4 a' 4w Oil exporters 4,014 35.224 I 6.1 w 12.9w 15 it' 11w 4 it' 4w Oil importers 6.490 48,974 I 6.1 w 12.2w 17w 13 a' 4 it' 4w Lower middle-income 3,6681 33,214 1 4.6w 10.2w 22w 14w 5 it' 4 a' 35 Kenya 41 375 3.0 9.5 36 22 8 5 36 Senegal 8 341 4.4 6.0 28 22 8 6 37 Mauritania 7 250 6.5 2.7 11 20 3 5 38 Yemen Arab Rep. 9 220 5.2 2,2 5 20 3 4 39 Yemen, PDR 62 86 0 2.3 21 29 11 7 40 Liberia 12 46 5.3 5.5 19 21 5 5 41 Indonesia 518 4,916 2.7 8.9 34 15 9 4 42 Lesotho (.) 10 5.1 0.8 25 50 2 11 43 Bo]ivia 10 223 3.9 12.0 25 10 7 2 44 Honduras 23 249 4.1 10.7 30 19 7 4 45 Zambia 555 403 4.2 8.6 23 18 6 4 46 Egypt 246 2,381 5.6 7.5 14 13 3 3 47 El Salvador 12 128 4.7 3.7 23 24 6 7 48 Thailand 106 1,641 6.8 10.2 19 17 4 5 49 Philippines 158 2,104 7.4 11.1 11 16 2 5 50 Angola . . . . , , . . , , , . . 51 Papua New Guinea 58 147 6.0 13.8 24 18 8 7 52 Morocco 182 2,546 4.6 8.4 20 10 4 4 53 Nicaragua 23 504 7.1 6.1 18 10 4 3 54 Nigeria 79 4,256 5.8 13.7 ' 17 10 5 4 55 Zimbabwe , , 1,079 . . 11.3 . . 12 . . 3 56 Cameroon 41 341 4.7 6.4 29 21 8 5 57 Cuba .. .. .. .. .. .. 58 Congo, People's Rep. 43 516 3.0 11.5 17 7 6 2 59 Guatemala 50 182 5.2 6.5 26 24 6 7 60 Peru . 125 1,890 7.4 12.6 13 12 4 3 61 Ecuador 78 846 6.1 12.6 20 13 4 4 62 Jamaica 24 478 6.0 9.7 16 15 3 5 63 Ivory Coast 69 1,397 5.9 13.4 19 14 5 4 64 Dominican Rep. 20 171 2.5 6.0 28 24 5 5 180 Average interest Average Average Commitments rate maturity grace period (millions of dollars) (percent) (years) (years) 1970 1981 1970 1981 1970 1981 1970 1981 65 Mongolia . . . 66 Colombia 362 1732 5.9 12.0 21 13 5 4 67 Tunisia 141 628 34 8.3 27 15 6 4 68 Costa Rica 58 620 56 142 28 6 6 2 69 Korea, Oem. Rep . . 70 Turkey 487 2011 3.6 7,9 19 15 5 4 71 Syrian Arab Rep 14 142 4.4 44 8 17 2 5 72 Jordan 33 11 3.9 3.1 12 16 5 5 73 Paraguay 14 346 56 9.9 25 16 6 4 Upper middle income 6836 t 50984 69 i 140 u 13 11 3 4 74 Korea. Rep of 677 5,153 6.0 122 19 14 5 4 75 Iran. Islamic Rep of 1,342 . . 6.2 . . 12 . . 3 76 Iraq 28 . . 3.3 11 . 2 77 Malaysia 83 1,877 6.1 14.9 19 12 5 5 78 Panama 111 327 69 144 15 13 4 4 79 Lebanon 7 13 27 111 21 13 1 4 80 Algeria 288 2,600 6.5 98 10 13 2 4 81 Brazil 1.362 12,538 71 146 14 10 3 3 82 Mexico 826 13,164 8.0 15.1 12 8 3 4 83 Portugal 59 1.407 43 148 17 9 4 4 84 Argentina 488 3,638 74 122 12 14 3 5 85 Chile 343 1,214 69 150 12 11 3 4 86 South Africa . . . . . 87 Yugoslavia 198 1,834 71 13.1 17 11 6 4 88 Uruguay 72 383 7.9 12.1 12 16 3 4 89 Venezuela 198 2.000 8.2 183 8 7 2 2 90 Greece 242 1,855 7.2 13.3 9 11 4 4 91 Hong Kong . 2 . 81 . 12 4 92 Israel 439 2.778 7.3 136 13 19 5 5 93 Singapore 69 192 6.8 11 5 17 9 4 3 94 Trinidad and Tobago 3 10 7.5 88 10 8 1 (.) High-income oil exporters 95 Libya 96 Saudi Arabia 97 Kuwait 98 United Arab Emirates industrial market economies 99 Ireland 100 Spain 101 Italy 102 New Zealand 103 United Kingdom 104 Japan 105 Austria 106 Finland 107 Australia 108 Canada 109 Netherlands 110 Belgium 111 France 112 United States 113 Denmark 114 Germany, Fed. Rep. 115 Norway 116 Sweden 11 7 Switzerland East European nonmarket economies 118 Albania 119 Hungary 1,106 13.1 7 4 120 Romania 121 Bulgaria 122 Poland 123 USSR 124 Czechoslovakia 125 German Dem Rep a Includes only debt in convertible currencies. 181 Table 18. Official development assistance from OECD and OPEC members Amount 1960 1965 1970 1975 1977 1978 1979 1980 1981 l982 OECD Millions of US dollars 101 Italy 77 60 147 182 198 376 273 683 666 820 102 New Zealand 14 66 53 55 68 72 68 65 103 United Kingdom 407 472 500 904 1,114 1465 2,157 1,852 2,194 1794 104 Japan 105 244 458 1,148 1,424 2,215 2,685 3,353 3,171 3023 105 Austria 10 11 79 108 154 131 178 313 361 106 Finland 2 7 48 49 55 90 110 135 144 107 Australia 59 119 212 552 400 588 629 667 649 882 108 Canada 75 96 337 880 991 1,060 1,056 1,075 1,189 1,185 109 Netherlands 35 70 196 608 908 1,074 1472 1,630 1,510 1,473 110 Belgium 101 102 120 378 371 536 643 595 575 497 111 France 823 752 971 2,093 2,267 2,705 3,449 4,162 4,177 3,991 112 United Slates 2702 4023 3,153 4,161 4,682 5,663 4,684 7.138 5.782 8,302 113 Denmark 5 13 59 205 258 388 461 481 403 415 114 Germany, Fed. Rep. 223 456 599 1,689 1,717 2,347 3,393 3,567 3,181 3,163 115 Norway 5 11 37 184 295 355 429 486 467 566 116 Sweden 7 38 117 566 779 783 988 962 919 987 117 Switzerland 4 12 30 104 119 173 213 253 237 251 Total 4.628 6,480 6,968 13,847 15,733 19,992 22,821 27,264 25,636 27,919 OECO As percentage of donor GNP 101 Italy 22 .10 16 11 10 14 08 17 .19 24 102 New Zealand . . . .23 .52 .39 .34 .33 33 29 .28 103 United Kingdom 56 .47 41 .39 45 .46 .52 35 44 .38 104 Japan 24 .27 23 23 21 .23 .27 32 28 29 105 Austria 11 07 .21 .22 .27 .19 .23 48 54 106 Finland 02 06 18 16 .16 .22 22 28 30 107 Australia .37 .53 59 .65 .42 .55 .53 .48 .41 57 108 Canada .19 .19 41 54 .50 .52 48 43 43 .42 109 Netherlands 31 36 61 75 86 82 98 1 03 1.08 1 08 110 Belgium 88 60 46 59 46 .55 .57 50 .59 .59 111 France 1 35 76 66 62 60 .57 .60 64 73 .74 112 United States .53 58 32 27 25 27 .20 .27 20 27 113 Denmark 09 .13 38 58 60 75 77 74 73 .77 114 Germany. Fed. Rep. 31 40 32 40 33 .37 45 44 47 48 115 Norway 11 16 32 66 83 90 93 85 82 1.01 116 Sweden .05 .19 38 82 99 90 97 79 83 1.02 117 Switzerland 04 .09 15 19 19 20 .21 24 24 .25 OECD National currencies 101 Itay (biiions of lire) 48 37 92 119 175 319 227 585 757 1.109 102 New Zealand (millions of dollars) , . 13 54 55 53 66 74 78 86 103 United Kingdom (millions of pounds) 145 169 208 409 639 764 1.018 797 1,091 1,027 104 Japan (billions of yen) 38 88 165 341 382 466 588 760 699 753 105 Austria (millions of schillings) . 260 286 1.376 1.785 2,236 1.751 2,303 4.985 6,158 106 Finland (millions of markkaa) 6 29 177 197 226 351 410 583 694 107 Australia (millions of dollars) 53 106 189 422 361 514 563 586 565 870 108 Canada (millions of dollars) 73 104 353 895 1,054 1,209 1.237 1,257 1.425 1.462 109 Netherlands (millions of guilders) 132 252 709 1,538 2,229 2.324 2,953 3.241 3.768 3.933 110 Belgium (millions of francs) 5.050 5,100 6000 13.902 13.298 16,880 18.852 17.400 21.350 22.708 111 France (milions of francs) 4.063 3.713 5,393 8,971 11,139 12,207 14.674 17.589 22.700 26,230 112 United States (millions of dollars) 2,702 4,023 3.153 4,161 4,682 5.663 4,684 7.138 5,782 8,302 113 Denmark (milllons of kroner) 35 90 443 1,178 1.549 2.140 2.425 2.711 2.871 3.458 114 Germany. Fed Rep. (mIIions of deutsche marks) 937 1.824 2.192 4.155 3.987 4,714 6,219 6,484 7.189 7.675 115 Noway (miHions of kroner) 36 79 264 962 1.570 1.861 2,172 2.400 2.680 3.653 116 Sweden (millions of kronor) 36 197 605 2,350 3.491 3,538 4,236 4,069 4.653 6,201 117 Switzerland (millions of francs) 17 52 131 268 286 309 354 424 466 510 OECD Summary ODA (billions of US dollars. nominal prices) 463 648 697 1385 15.73 19.99 2282 2726 25.63 27.92 ODA as percentage of GNP 51 49 .34 36 33 35 .35 38 .35 39 ODA (billions of US doliars, constant 1980 prices) 1641 20.19 18.15 21.60 21.91 24.09 24.89 2726 2582 28.37 GNP (trillions of US dollars, nominal prices) 90 130 2.00 3.90 470 5.70 6.50 720 730 7.24 ODA detlatorc 28 32 .38 64 72 .83 .92 1 00 99 98 182 Amount 1975 1976 1977 1978 1979 1980 1981 OPEC Millions of US dollars 54 Nigeria 14 83 64 38 30 42 149 75 Iran, Islamic Rep of 593 753 221 278 25 7 -150 76 Iraq 215 231 61 173 847 829 143 80 Algeria 41 54 47 44 272 65 65 89 Venezuela 31 108 56 115 109 125 67 95 Libya 259 94 113 146 105 282 105 96 Saudi Arabia 2,756 3,033 3.138 5,507 4,674 5,944 5,798 97 Kuwait 946 532 1,309 991 477 645 685 98 United Arab Emirates 1,046 1,021 1,060 891 967 906 799 Qatar 338 195 194 109 280 284 175 Total OAPECS 5,601 5,160 5,922 7,861 7,622 8,955 7,770 Total OPEC 6,239 6,104 6,263 8,292 7,786 9,129 7,836 OPEC As percentage of donor GNP 54 Nigeria .04 19 .13 .07 .04 .05 17 75 Iran, Islamic Rep. of 1.13 1.16 .29 .37 .03 .01 76 Iraq 1.63 1.44 .33 .76 253 2.13 .37 80 Algeria .27 33 .24 .18 89 17 .16 89 Venezuela 11 .34 .15 29 22 .21 .10 95 Libya 229 63 63 85 45 92 .37 96 Saudi Arabia 7 76 647 533 8.45 6.12 509 4 77 97 Kuwait 740 3.64 8.20 5.64 1.79 2.04 1 98 98 United Arab Emirates 11 69 888 7.27 6.27 5 09 3 38 288 Qatar 15.59 7.95 776 3.75 603 4.25 2.64 Total OAPECC 5 68 4 20 4 00 4 78 3 56 3 08 2 99 Total OPEC 2.92 2.32 2 03 2.46 1 88 1.74 1.46 Net bilateral flow to low-income countries 1960 1965 1970 1975 1977 1978 1979 1980 1981 OECD As percentage of donor GNP 101 Italy 03 04 06 .01 .02 .01 01 01 02 102 New Zealand . . , . . . .14 .04 .03 02 .02 .01 103 United Kingdom .22 23 .15 .11 .11 .15 .16 .11 13 104 Japan 12 .13 11 .08 .06 .07 .11 .11 06 105 Austria .06 05 .02 01 .01 02 11 02 106 Finland . . . 06 .06 .04 06 08 08 107 Australia . . .08 .09 10 .07 .08 .09 07 .06 108 Canada 11 .10 .22 24 13 .17 13 11 .31 109 Netherlands 19 .08 24 .24 33 .34 30 35 .12 110 Belgium 27 .56 30 31 24 23 28 26 21 111 France 01 .12 09 .10 .07 .08 .08 .09 .10 112 United States 22 .26 .14 08 .03 04 .03 .03 .03 113 Denmark . . .02 10 .20 .24 .21 .26 .27 16 114 Germany, Fed. Rep .13 14 10 .12 .07 .07 .08 07 25 115 Norway 02 .04 12 .25 .30 .39 .34 .28 .09 116 Sweden 01 07 12 .41 44 .37 .40 .33 .28 117 Switzerland . . .02 05 .10 .05 08 06 .08 .06 Total .18 .20 13 .11 .07 09 .09 .09 07 a. Preliminary estimates, b See the technical notes. c. Provisional d. Organization of Arab Petroleum Exporting Countries 183 Table 19. Population growth, past and projected, and hypothetical stationary populationa Hypothetical Assumed Average annual growth Projected size of year of Year of population population stationary reaching of reaching (percent) (millions) population reproduction stationary 1960-70 1970-81 1980-2000 1990 2000 (millions) rate of 1 population Low-income economies 2.3 w 1.7w 2,624 t 3,107 China and India 2.3w 7w 1.4w 6937 t 2,199 Other low-income 2.5 w 2.6 w 2.9w 687 t 908 1 Kampuchea, Oem. 2.6 . . . . . . 2 Bhutan 1.8 2.0 2.3 2 2 5 2040 2155 3 Lao PDR 1.8 1.9 2.6 4 6 20 2045 2155 4 Chad 19 20 2.3 6 7 21 2045 2155 5 Bangladesh 2.5 2.6 2.9 119 156 430 2035 2145 6 Ethiopia 24 2.0 3.1 42 57 244 2050 2155 7 Nepal 1.9 26 26 19 24 73 2045 2155 8 Burma 2.2 22 23 42 52 114 2030 2125 9 Afghanistan 2.2 25 2.4 20 26 82 2045 2155 10 Mali 2.5 26 3.0 9 12 44 2045 2155 11 Malawi 2.8 3.0 3.4 8 12 51 2045 2155 12 Zaire 2.0 3.0 32 39 54 169 2035 2140 13 Uganda 3.0 2.6 3.5 18 25 93 2040 2140 14 Burundi 16 2.2 3.0 5 7 26 2045 2155 15 Upper Volta 2.0 20 2.9 8 11 34 2040 2155 16 Rwanda 26 34 3.6 7 10 44 2045 2140 17 India 23 2.1 2.0 836 1,001 1,838 2020 2140 18 Somalia 28 28 25 5 7 23 2050 2155 19 Tanzania 2.7 3.4 3.5 26 36 119 2035 2120 20 VietNam 31 28 25 70 88 164 2015 2105 21 China 23 1.5 1.0 1,101 1,198 1,435 2005 2040 22 Guinea 2.9 2.9 2.8 7 9 30 2040 2155 23 Haiti 1.6 1.7 20 6 7 15 2030 2130 24 Sri Lanka 2.4 1.7 1.9 18 21 32 2005 2090 25 Benin 2.6 27 3.5 5 7 25 2040 2135 26 Central African Rep. 1.9 2.3 2.3 3 4 11 2045 2155 27 Sierra Leone 2.3 26 29 5 6 20 2040 2140 28 Madagascar 2.2 2.6 31 12 16 54 2040 2140 29 Niger 34 3.3 33 8 11 41 2045 2155 30 Pakistan 28 3.0 3.0 112 148 411 2035 2150 31 Mozambique 21 4.2 3.4 17 24 84 2040 2155 32 Sudan 2.1 3.1 3.0 25 34 112 2040 2135 33 Togo 30 2.5 3.3 4 5 15 2035 2140 34 Ghana 23 3.0 3.9 17 24 85 2035 2135 Middle-income economies 2.5w 2.4w 2.3 a' 1,411! 1,774! Oil exporters 6w 2.7 a' 2.6 w 647! 833! Oil importers 2.2w 2.1 w 764t 9411 Lower middle-income 2,6 2.6 a' 2.5 a' 839 I 1,074! 35 Kenya 32 40 4.5 26 40 157 2035 2130 36 Senegal 2.3 27 3.0 8 10 36 2045 2155 37 Mauritania 2.3 23 2.7 2 3 8 2040 2155 38 Yemen Arab Rep 23 3.0 29 9 12 39 2040 2155 39 Yemen. PDR 2.2 2.5 32 3 4 12 2040 2155 40 Liberia 32 3.5 3.5 3 4 13 2035 2130 41 Indonesia 2.1 2.3 2.0 179 216 400 2020 2140 42 Lesotho 20 2.4 29 2 2 7 2035 2130 43 Bolivia 24 26 2.4 7 9 22 2035 2110 44 Honduras 31 3.4 3.1 5 7 17 2030 2090 45 Zambia 26 3.1 3.6 8 11 40 2035 2145 46 Egypt 25 2.5 2.1 53 64 117 2020 2115 47 El Salvador 29 2.9 2.8 6 8 16 2020 2080 48 Thailand 3.0 2.5 2.0 58 69 109 2005 2105 49 Philippines 3.0 2.7 23 62 76 137 2015 2105 50 Angola 21 2.5 2.8 10 13 46 2045 2155 51 Papua New Guinea 2.2 2.1 2.0 4 5 10 2035 2125 52 Morocco 2.6 3.1 3.5 29 40 113 2030 2120 53 Nicaragua 2.6 39 29 4 5 12 2030 2105 54 Nigeria 25 2.5 3.5 119 169 623 2040 2140 55 Zimbabwe 3.4 3.2 4.4 11 16 71 2035 2130 56 Cameroon 18 22 2.8 11 15 43 2035 2135 57 Cuba 20 1.1 12 11 12 16 2000 2075 58 Congo, People's Rep 24 29 35 2 3 9 2030 2120 59 Guatemala 30 3.1 2.6 10 12 25 2025 2120 60 Peru 29 2.6 23 21 26 50 2020 2110 61 Ecuador 30 3.4 2.8 11 14 32 2025 2115 62 Jamaica 14 15 2.1 3 3 5 2005 2065 63 Ivory Coast 38 50 31 11 15 52 2040 2140 64 Dominican Rep. 2.9 3.0 2.5 7 9 16 2015 2095 184 Hypothetical Assumed Average annual growth Projected size of year of Year of population population stationary reaching of reaching (percent) (millions) population reproduction stationary 1960-70 1970-81 1980-2000 1990 2000 (millions) rate of 1 population 65 Mongolia 3.0 2.9 2.4 2 3 5 2020 2110 66 Colombia 3.0 19 2.0 32 38 62 2010 2110 67 Tunisia 2.0 23 24 8 10 20 2020 2110 68 Costa Rica 34 2.8 21 3 3 5 2005 2065 69 Korea, Oem. Rep 2.9 2.6 2.3 23 28 49 2015 2105 70 Turkey 25 2.3 21 56 68 119 2015 2110 71 Syrian Arab Rep 3.2 3.7 40 14 19 48 2020 2105 72 Jordan 31 35 3.7 5 7 18 2025 2110 73 Paraguay 26 2.6 23 4 5 8 2020 2105 Upper middle-income 2 zi' 2.1 w 572 t oo 74 Korea, Rep of 26 1 7 16 45 52 74 2005 2095 75 Iran, Islamic Rep. of 3.0 31 3.2 54 72 174 2025 2115 76 Iraq 32 3.4 35 19 26 73 2030 2120 77 Malaysia 29 2.5 21 17 21 35 2010 2100 78 Panama 2.9 2.3 21 2 3 5 2010 2090 79 Lebanon 29 06 20 3 4 7 2010 2095 80 Algeria 2.4 3.3 3.6 27 38 111 2030 2120 81 Brazil 2.8 2.1 21 147 177 299 2015 2110 82 Mexico 33 3.1 26 91 115 215 2015 2105 83 Portugal 03 0.8 09 11 11 14 2000 2070 84 Argentina 1.4 16 1.0 31 34 45 2010 2080 85 Chile 21 1.7 1.5 13 15 22 2010 2070 86 South Africa 24 28 3.1 39 52 123 2025 2120 87 Yugoslavia 10 09 0.7 24 26 30 2005 2070 88 Uruguay 10 04 0.9 3 4 5 2010 2075 89 Venezuela 34 34 2.3 19 24 41 2010 2095 90 Greece 0.6 09 0.4 10 10 12 2000 2065 91 Hong Kong 2.6 2.4 12 6 6 8 2000 2060 92 Israel 3.5 26 15 5 5 8 2010 2085 93 Singapore 2.4 15 1.2 3 3 4 2000 2035 94 Trinidad and Tobago 2.1 1.4 1.5 1 2 2 2000 2065 High-income oil exporters 4.3 w 4.9 w 3.4 w 20! 28! 95 Libya 39 41 37 4 6 19 2030 2120 96 Saudi Arabia 35 45 34 12 18 59 2035 2125 97 Kuwait 99 6.3 26 2 2 5 2015 2085 98 United Arab Emirates 9.3 166 20 1 2 3 2020 2110 Industrial market economies 75 99 Ireland 04 13 09 4 4 6 2000 2070 100 Spain 1.0 11 07 41 43 53 2000 2080 101 Italy 0.7 04 0.4 58 60 65 2000 2065 102 New Zealand 1.7 15 1.0 4 4 5 2000 2070 103 United Kingdom 0.6 01 02 57 59 61 2000 2025 104 Japan 1.0 11 06 124 131 137 2000 2030 105 Austria 0.5 01 02 8 8 8 2000 2025 106 Finland 04 0.4 0.4 5 5 5 2000 2020 107 Australia 20 14 07 16 17 20 2000 2055 108 Canada 18 12 08 26 28 32 2000 2030 109 Netherlands 1.3 0.8 06 15 16 17 2000 2025 110 Belgium 0.6 0.2 02 10 10 10 2000 2020 111 France 11 05 05 56 59 65 2000 2050 112 United States 1.3 1.0 06 245 259 289 2000 2040 113 Denmark 08 0.3 03 5 5 6 2000 2020 114 Germany, Fed Rep. 09 0.0 01 62 63 63 2000 2000 115 Norway 08 0.5 03 4 4 5 2000 2030 116 Sweden 07 03 0.1 8 9 9 2000 2000 117 Switzerland 1.5 0.1 0.3 7 7 7 2000 2025 East European nonmarket economies 1.1 0.8 w 0.7 w 411! 437! 118 Albania 28 2.5 19 3 4 6 2005 2060 119 Hungary 0.3 04 0.2 11 11 12 2000 2040 120 Romania 0.9 09 0.7 24 25 31 2000 2085 121 Bulgaria 08 05 0.4 9 10 11 2000 2080 122 Poland 10 0.9 0.7 39 41 49 2000 2080 123 USSR 12 09 0.8 291 312 373 2000 2090 124 Czechoslovakia 05 0.7 0.5 16 17 20 2000 2085 125 German Oem. Rep -01 -02 0.2 17 17 18 2000 2015 Total' 138 a. For the assumptions used in the protections, see the technical notes. b. Excludes countries with populations of less than one million 185 Table 20. Demographic and feitility-related indicatorsa Crude Crude ta9e birth death Chafl9 in: Percentage of rate per rate per Crude Crude Total married women thousand thousand birth death fertility using Contra- population population ceptivesa rate rate rate 1960 1981a 1960 i98i 1960-8P 1960_81e 1981e 1970 1981 Low-income economies 42 w 31 w 23 u' 12w -28.9 u -50.1 w 4.3 China and India 41 w 27 w 23 w 10w -35.0w -55.5w 3.7 w Other low-income 48 w 44 w 24 w 17w -9.3w -32.7w 6.2 w 1 Kampuchea, Dem. 45 . 19 . . . . 2 Bhutan 43 40 26 19 -7.1 -25.0 5.7 3 Lao, PDR 44 43 23 21 -2.5 -8.8 6.4 4 Chad 45 43 29 22 -5.5 -24.5 5.5 5 Bangladesh 54 47 28 18 -12.2 -37.5 6.4 12 6 Ethiopia 51 48 28 24 -5.5 -14.7 6.5 7 Nepal 44 44 26 20 0.1 -25.3 6.4 8 Burma 43 37 21 13 -13.7 -37.2 5.2 9 Afghanistan 50 47 31 26 -6.6 -16.2 6.9 10 Mali 50 49 27 21 -2.7 -19.9 6.5 11 Malawi 56 56 27 23 0.1 -15.9 7.8 12 Zaire 48 46 24 16 -3.7 -32.8 6.3 13 Uganda 50 50 23 18 -0.1 -201 7.0 14 Burundi 47 46 27 20 -1.2 -23.9 6.5 15 Upper Volta 49 48 27 22 -1.5 -19.5 6.5 16 Rwanda 53 54 27 20 1.5 -26.5 8.3 . 17 India 44 35 22 13 -18.8 -38.8 4.8 12 23 18 Somalia 48 48 29 25 0.1 -12.4 6.5 . 19 Tanzania 47 47 22 15 0.8 -32.3 6.5 . 20 Viet Nam 47 35 21 8 -23.9 -60.7 5.1 . 21 China 39 21 24 8 -46.3 -67.1 2.9 . . 74 22 Guinea 47 47 30 22 1.3 -25.9 6.3 . . 23 Haiti 39 33 19 13 -14.1 -32.6 4.7 . . 5 24 Sri Lanka 36 27 9 6 -24.3 -34.8 3.5 8 41 25 Benin 51 49 27 17 -3.1 -36.2 6.5 . 26 Central African Rep. 43 43 28 22 1.5 -22.6 5.5 27 Sierra Leone 47 46 27 18 -2.3 -33.0 6.1 28 Madagascar 47 47 27 18 -0.1 -32.9 6.5 29 Niger 52 51 27 21 -0.8 -22.7 70 30 Pakistan 51 46 24 16 -11.2 -34.9 6.4 31 Mozambique . . . . . . . . . . . 6.5 32 Sudan 47 47 25 18 0.2 -25.1 6.7 33 Togo 51 49 23 18 -2.6 -20.1 6.5 34 Ghana 50 49 20 13 -1.7 -34.2 7.0 Middle-income economies 43 w 35 w 17 w 11 w -20.2w -38.5w 4.8 w Oil exporters 47 w 40 w 20 w 12w -16.2w -40.6w 5.4 w Oil importers 41 w 32 w 15w 9w -23.6w -38.6w 4.3 w Lower middle-income 47w 38 w 20 w 12 w -18.9 w -41.7 w 5.2 w 35 Kenya 55 55 24 13 0.1 -45.5 8.0 36 Senegal 48 48 26 21 0.1 -20.7 6.5 37 Mauritania 51 44 27 20 -14.0 -25.2 6.0 38 Yemen Arab Rep. 50 48 29 23 -2.5 -21.1 6.8 39 Yemen, PDR 50 48 29 20 -4.9 -31.7 70 40 Liberia 50 50 21 14 -0.8 -30.9 6.9 41 Indonesia 46 35 22 13 -24.4 -41.8 4.4 36 42 Lesotho 42 42 23 15 (.) -36.3 5.8 43 Bolivia 46 42 22 16 -9.4 -29.0 6.0 44 Honduras 51 44 19 11 -13.0 -42.3 6.6 45 Zambia 51 49 24 16 -2.4 -34.4 6.9 46 Egypt 44 36 19 12 -17.9 -38.0 4.8 9 17 47 El Salvador 49 40 16 8 -18.4 -50.3 5.6 . . 20 48 Thailand 44 30 15 8 -32.1 -48.8 3.9 8 59 49 Philippines 47 34 15 7 -27.4 -50.1 4.6 2 48 50 Angola 50 49 31 23 -1.5 -26.9 6.5 . 51 Papua New Guinea 44 36 23 15 -18.3 -36.0 5.2 . . 52 Morocco 52 46 23 13 -10.6 -46.4 6.9 1 5 53 Nicaragua 51 44 9 11 -12.6 -39.9 6.1 . . 54 Nigeria 52 50 25 17 -4.5 -34.2 6.9 . . 55 Zimbabwe 55 54 17 13 -1.8 -23.0 8.0 14 56 Cameroon 43 43 27 17 -0.8 -37.2 5.8 57 Cuba 32 18 9 6 -43.3 -29.4 2.2 58 Congo, People's Rep. 40 43 18 10 6.2 -44.0 6.0 59 Guatemala 48 39 18 10 -19.0 -44.0 5.3 60 Peru 46 36 18 11 -20.2 -39.5 5.1 61 Ecuador 47 40 17 9 -14.9 -44.4 5.9 62 Jamaica 39 29 9 6 -26.7 -32.6 3.8 63 Ivory Coast 49 46 27 18 -6.0 -33.7 6.8 64 Dominican Rep. 50 36 16 8 -28.9 -49.6 4.6 186 Crude Crude Percentage birth death change in: Percentage of rate per rate per Crude Crude Total married women thousand thousand birth death fertility using contra- population population rate rate rate ceptives 1960 1981 1960 198l 1960-81 1960_.81a 1981a 1970 1981 65 Mongolia 41 34 15 7 -16.3 -50.6 4.9 . 66 Colombia 46 29 16 8 -32.2 -51 1 37 34 46 67 Tunisia 49 34 21 9 -30.1 -567 5.1 10 21 68 Costa Rica 47 30 10 4 -36.5 -564 3.5 . 65 69 Korea, Dem. Rep. 42 31 13 6 -26.2 -504 42 70 Turkey 43 33 16 9 -23.0 -41.4 46 3 38 71 Syrian Arab Rep. 47 47 18 8 1.0 -56.4 7.4 72 Jordan 47 46 20 9 -1.9 -55.0 73 73 Paraguay 43 32 13 7 -26.5 -429 4.3 16 Upper middle-income 39 w 31w 13w 9w -22.1w -34.0w 4.2w 74 Korea, Rep. of 43 24 13 7 -43.7 -48.5 3.0 32 55 75 Iran, Islamic Rep. of 46 43 17 11 -6.1 -36.7 6.0 3 23 76 Iraq 49 47 20 12 -4.8 -38.9 7.0 . . 23 77 Malaysia 45 31 16 7 -31.0 -53.9 40 7 42 78 Panama 41 30 10 5 -26.2 -464 38 . . 54 79 Lebanon 43 30 14 8 -30.8 -435 40 80 Algeria 50 45 23 13 -45 -41.7 73 81 Brazil 43 30 13 8 -286 -36.7 40 82 Mexico 45 36 12 7 -20.6 -42.8 5.0 38 83 Portugal 24 16 11 10 -326 -83 23 84 Argentina 24 20 9 9 -13 6 06 28 85 Chile 37 25 12 7 -31.6 -39.5 3.0 86 South Africa 39 39 15 9 01 -39.7 51 87 Yugoslavia 24 17 10 9 -28.9 -9.1 2.2 59 88 Uruguay 22 20 10 10 -9.0 -0.5 2.8 . 89 Venezuela 46 35 11 6 -24.4 -51 1 4.4 . 90 Greece 19 15 7 9 -185 24.7 2.3 91 Hong Kong 35 19 8 5 -45.0 -339 2.2 50 80 92 Israel 27 25 6 7 -5.8 131 33 93 Singapore 38 18 8 5 -53.0 -35.0 1.7 45 71 94 Trinidad and Tobago 38 29 8 8 -230 -101 25 44 High-income oil exporters 49w 44w 21 w 12w -9.0w -43.2w 7.1 w 95 Libya 49 47 19 12 -40 -38.5 7.4 96 Saudi Arabia 49 45 23 13 -6.9 -40.0 7.3 97 Kuwait 44 38 10 4 -13.4 -59.3 5.9 98 United Arab Emirates 46 30 19 7 -349 -61.6 6.8 Industrial market economies 20w 14 ri lOw 9w -31.1 w' -7.7w 1.8w 99 Ireland 21 21 12 9 -1.9 -18.3 3.2 100 Spain 22 14 9 8 -35.0 -13.6 2.5 101 Itaty 18 11 10 10 -39.8 -1.0 1.9 102 New Zealand 27 16 9 8 -38.5 -9.1 2.1 103 United Kingdom 18 13 12 12 -25.1 2.6 1.7 104 Japan 17 13 8 6 -24.9 -19.7 17 56 61 105 Austria 18 13 13 12 -302 -3.1 1.6 106 Finland 19 13 9 9 -286 1.1 1.6 77 107 Australia 22 16 9 7 -29.5 -15.1 19 66 108 Canada 27 16 8 7 -41.9 -7.7 19 . 109 Netherlands 21 13 8 8 -39.9 52 1.6 59 75 110 Belgium 17 13 12 11 -254 -9.7 1.7 76 87 111 France 18 15 11 10 -168 -96 1.9 64 79 112 United States 24 16 10 9 -326 -8.4 1.8 65 68 113 Denmark 17 10 10 11 -37.3 158 1.6 67 114 Germany, Fed Rep. 18 10 12 12 42.3 09 1.4 115 Norway 17 13 9 10 -26.0 88 18 116 Sweden 14 11 10 11 -17.5 11.0 1.7 117 Switzerland 18 12 10 9 -34.1 -4.1 1.5 East European nonmarket economies 23w 18w 8w 11w -21.2w 37.5w 2.3w 118 Albania 43 29 10 6 -336 -412 38 119 Hungary 15 13 10 14 -9.5 32.4 1.9 6 28 120 Romania 19 18 9 10 -58 19.5 2.5 121 Bulgaria 18 14 8 11 -20.8 37.0 2.1 122 Poland 23 19 8 9 -16.4 21.1 2,2 57 123 USSR 25 19 7 10 -24.9 45 1 2.4 124 Czechoslovakia 16 16 9 12 -2.5 272 2.4 66 125 German Dem. Rep. 17 14 14 14 -16.5 22 1.4 a. Figures in italics are for years or periods other than those specified. See the technical notes. 187 Table 21. Labor force Percentage of population of Average annual growth working age Percentage of labor force in: of labor force (15-64 years) Agriculture Industry Services (percent) 1960 1981 1960 1980 1960 1980 1960 1980 1960-70 1970-81 1980-2000 Low-income economies 55w 59w 77w 70w 9w 15w 14w 15w 1.7w 1.9 2.0 w China and India 56w 60w 74w 69w 11w 17w 15w 14w 1.7w 1.9w 1.8w Other low-income 54w 54w 82w 73w 7w 11w 11w 16w 1.8w 2,3 w 3.0w 1 Kampuchea, Dem 53 . 82 4 14 . 2.0 2 Bhutan 56 55 95 93 2 2 3 5 1.6 1.8 2.4 3 Lao, PDR 56 51 83 75 4 6 13 19 10 07 27 4 Chad 57 54 95 85 2 7 3 8 1.5 18 25 5 Bangladesh 53 55 87 74 3 11 10 15 21 2.9 3.0 6 Ethiopia 53 52 88 80 5 7 7 13 20 1.6 3.0 7 Nepal 57 55 95 93 2 2 3 5 13 2.3 2.7 8 Burma 59 55 . 67 . . 10 . . 23 11 1.4 22 9 Afghanistan 55 52 85 79 6 8 9 13 1.9 2.0 26 10 Mali 54 51 94 73 3 12 3 16 2.1 2.0 3.0 11 Malawi 52 50 92 86 3 5 5 9 2.4 2.5 32 12 Zaire 53 52 83 75 9 13 8 12 14 2.3 3.1 13 Uganda 54 52 89 83 4 6 7 11 2.6 2.1 3.6 14 Burundi 55 53 90 84 3 5 7 11 1.2 1.5 2.8 15 Upper Volta 54 52 92 82 5 13 3. 5 1.6 15 28 16 Rwanda 53 52 95 91 1 2 4 7 2.2 3.2 3.4 17 India 54 57 74 69 11 13 15 18 1.7 1.9 2.2 18 Somalia 54 54 88 82 4 8 8 10 21 30 20 19 Tanzania 54 51 89 83 4 6 7 11 21 27 3.4 20 Viet Nam 54 . . 71 . . 10 19 . 2.7 21 China 56 62 69 . 19 12 1.7 18 16 22 Guinea 55 53 88 82 6 11 6 7 2.5 2.2 26 23 Haiti 55 53 80 74 6 7 14 19 0.6 1.3 21 24 Sri Lanka 54 60 56 54 14 14 30 32 21 2.0 2.2 25 Benin 53 51 54 46 9 16 37 38 2.1 21 2.9 26 Cenlral African Rep 58 55 94 88 2 4 4 8 lÀ 1.7 2.1 27 Sierra Leone 55 53 78 65 12 19 10 16 15 1.9 2.8 28 Madagascar 55 53 93 87 2 4 5 9 1.7 2.1 3.0 29 Niger 53 51 95 91 1 3 4 6 3D 3.0 3.4 30 Pakistan 52 51 61 57 18 20 21 23 1.9 2.7 3.3 31 Mozambique 56 53 81 66 8 18 11 16 18 3.3 31 32 Sudan 53 53 86 72 6 10 8 18 20 27 31 33 Togo 53 51 80 67 8 15 12 18 2.5 17 31 34 Ghana 53 51 64 53 14 20 22 27 16 23 39 Middle-income economies 54w 55w 62w 45w 15w 21w 23w 34w 2.1 a' 2.3 w 2.7 a' Oil exporters 54w 54w 66w 47w 13w 21 w 22w 32w 2.0 a' 2.6 a' 2.9 a' Oil importers 55 a' 57 a' 60w 44 a' 16 w 21 w 24 w 35 w 2.1 a' 2.1 a' 2.5 w Lower middle-income 54 w 55 w 71 w 55 a' 11 w 17 a' 18 w 28 a' 1.9 a' 2.5 w 2.8 w 35 Kenya 50 47 86 78 5 10 9 12 27 3.2 4,2 36 Senegal 54 52 84 77 5 10 11 13 17 2.0 26 37 Mauritania 53 51 91 69 3 8 6 23 19 20 25 38 Yemen Arab Rep 54 52 83 75 7 ii 10 14 1D 1.8 34 39 Yemen. PDR 52 52 70 45 15 15 15 40 17 1.8 36 40 Liberia 52 51 80 70 10 14 10 16 24 3.1 35 41 Indonesia 56 57 75 55 8 15 17 30 1.7 2.5 20 42 Lesolho 57 55 93 87 2 4 5 9 1.6 19 28 43 Bolivia 55 53 61 50 18 24 21 26 17 23 29 44 Honduras 52 50 70 63 11 15 19 23 2.5 31 35 45 Zambia 53 50 79 67 7 11 14 22 2.1 23 32 46 Egypt 55 57 58 50 12 30 30 20 22 25 24 47 El Salvador 52 52 62 50 17 22 21 27 2.6 2.8 35 48 Thailand 53 56 84 76 4 9 12 15 2.1 28 23 49 Philippines 52 53 61 46 15 17 24 37 2.1 25 29 50 Angola 55 53 69 59 12 16 19 25 16 2.0 2.9 51 Papua New Guinea 57 55 89 82 4 8 7 10 1.7 1.7 1.7 52 Morocco 53 51 62 52 14 21 24 27 15 31 4.2 53 Nicaragua 50 50 62 43 16 20 22 37 2.3 3.8 3.9 54 Nigeria 52 50 71 54 10 19 19 27 1.8 17 3.5 55 Zimbabwe 52 50 69 60 11 15 20 25 27 2.5 4.5 56 Cameroon 57 54 87 83 5 7 8 10 1.3 15 2.8 57 Cuba 61 61 39 23 22 31 39 46 08 1.7 1.9 58 Congo. People's Rep 56 52 52 34 17 26 31 40 1.8 21 37 59 Guatemala 51 54 67 55 14 21 19 25 28 32 29 60 Peru 52 54 52 39 20 18 28 43 21 29 30 61 Ecuador 52 52 57 52 19 17 23 31 29 33 3.5 62 Jamaica 54 54 39 21 25 25 36 53 04 22 33 63 Ivory Coast 54 53 89 79 2 4 9 17 3.6 4.3 29 64 Dominican Rep 49 53 67 49 12 18 21 33 2.2 3.6 33 188 Percentage of population of Average annual growth working age Percentage of labor force in: of labor force (15-64 years) Agriculture Industry Services (percent) 1960 1981 1960 1980 1960 1980 1960 1980 1960-70 1970-81 1980-2000 65 Mongolia 54 54 70 55 13 22 17 23 2.1 2.4 3.1 66 Colombia 50 60 51 26 19 21 29 53 3.0 3.3 2.5 67 Tunisia 52 56 56 35 18 32 26 33 07 3.0 3.2 68 Costa Rica 50 59 51 29 19 23 30 48 3.5 3.9 28 69 Korea, Dem. Rep. 53 56 62 49 23 33 15 18 24 29 2.9 70 Turkey 55 57 79 54 11 13 11 34 4 2.0 25 71 Syrian Arab Rep. 52 49 54 33 19 31 27 36 2.1 34 4.7 72 Jordan 52 51 44 20 26 20 30 60 2.8 31 4.3 73 Paraguay 51 53 56 44 19 20 25 36 2.3 29 3.0 Upper middle-income 55w 57 w 49 w 30 w 20 w 28w 31 42 . 2." ' 0 a, 2.6w 74 Korea, Rep. of 54 62 66 34 9 29 25 37 3.1 26 2.2 75 Iran, Islamic Rep. of 51 52 54 39 23 34 23 27 2.7 2.8 3.9 76 Iraq 51 51 53 42 18 26 29 32 2.9 2.9 4.0 77 Malaysia 51 56 63 50 12 16 25 34 28 29 31 78 Panama 52 56 51 27 14 18 35 55 3.4 2.4 2.6 79 Lebanon 53 56 38 11 23 27 39 62 2.1 1.0 2.8 80 Algeria 52 49 67 25 12 25 21 50 0.5 3.6 4.7 81 Brazil 54 55 52 30 15 24 33 46 2.7 1.0 3.0 82 Mexico 51 52 55 36 20 26 25 39 28 32 3.5 83 Portugal 63 63 44 28 29 35 27 37 0.4 06 09 84 Argentina 64 63 20 13 36 28 44 59 1.3 14 11 85 Chile 57 62 31 19 20 19 50 61 1.4 20 22 86 South Atrica 55 55 32 30 30 29 38 41 3.0 29 32 87 Yugoslavia 63 67 63 29 18 35 19 36 0.6 0.6 0.7 88 Uruguay 64 63 21 11 30 32 50 57 0.8 02 11 89 Venezuela 51 55 35 18 22 27 43 55 2.8 40 31 90 Greece 65 64 56 37 20 28 24 35 00 08 05 91 Hong Kong 56 66 8 3 52 57 40 40 3.3 3.7 1.2 92 Israel 59 58 14 7 35 36 51 57 3.6 2.5 2.0 93 Singapore 55 66 8 2 23 39 69 59 28 2.7 1.3 94 Trinidad and Tobago 53 63 22 10 34 39 44 51 2.5 2.6 2.1 High-income oil exporters 54w 52w 62w 46 w 13 a 19w 25w 35w 3.7w 4.3w 3.5w 95 Libya 53 51 53 19 17 28 30 53 3.6 3.7 3.9 96 Saudi Arabia 54 52 71 61 10 14 19 25 3.3 4.4 3,5 97 Kuwait 63 52 1 2 34 34 65 64 7.0 45 28 98 United Arab Emirates 53 . . . . Industrial market economies 66w 18w 6w 38w 38w 44w 56w 1.2w 1.2w 0.7w 99 Ireland 58 59 36 18 25 37 39 44 0.0 11 15 100 Spain 64 63 42 14 31 40 27 45 02 11 09 101 Italy 66 65 31 11 40 45 30 44 -0.1 0.6 0.4 102 New Zealand 58 64 15 9 37 35 49 56 2.2 2.1 1.2 103 United Kingdom 65 64 4 2 48 42 48 56 0.6 04 0.3 104 Japan 64 68 33 12 30 39 37 49 19 1.3 0.8 105 Austria 66 65 24 9 46 37 30 55 -0 7 0.9 05 106 Finland 62 68 36 11 31 35 33 54 0.4 0.9 0.5 107 Australia 61 65 11 6 40 33 49 62 26 18 10 108 Canada 59 67 13 5 34 29 52 66 2.5 2.0 1.0 109 Netherlands 61 67 11 6 42 45 47 49 1.6 14 07 110 Belgium 65 66 8 3 48 41 44 56 03 07 03 111 France 62 64 22 8 39 39 39 53 07 11 07 112 United States 60 66 7 2 36 32 57 66 18 19 09 113 Denmark 64 65 18 7 37 35 45 58 1.1 06 05 114 Germany, Fed. Rep. 68 67 14 4 48 46 38 50 0.2 08 01 115 Norway 63 63 20 7 37 37 44 57 0.5 07 07 116 Sweden 66 64 14 5 45 34 41 61 1.0 03 04 117 Switzerland 66 67 11 5 50 46 38 49 20 03 0.3 East European nonmarket economies 63 a' 66 w 42 w 18 w 30 a' 44 w 28 w 39 w 0.8w 1.1 V 0.6w 118 Albania 54 58 71 61 18 25 11 14 2.3 28 24 119 Hungary 66 65 37 21 35 43 28 36 0.5 03 0.1 120 Romania 64 64 67 29 15 36 18 35 0.9 06 07 121 Bulgaria 66 66 56 37 25 39 19 24 0.7 03 0.2 122 Poland 61 66 48 31 29 39 23 30 1.7 14 08 123 USSR 63 66 42 14 29 45 29 41 07 12 06 124 Czechoslovakia 64 64 26 11 46 48 28 41 0.8 07 0.7 125 German Dam Rep 65 64 18 10 48 50 34 40 -02 05 03 189 Table 22. Urbanization Percentage of urban population Number of Urban population In cities cities As percentage Average annual of over of over of total growth rate In largest 500,000 500,000 population (percent) city persons persons 1960 1981 1960-70 19708P 1960 1980 1960 1980 1960 1980 Low-income economies 21 4.4 16w 55 ii 145 China and India 18 22 w 3.7 33 w 59 114 Other low-income 12w 20 u' 5.3 28 19w 40 31 1 Kampuchea, Dem. 11 35 . 2 Bhutan 2 4 4.0 4.4 0 0 0 0 0 0 3 Lao, PDR 8 14 37 52 69 48 0 0 0 0 4 Chad 7 19 67 6.5 39 0 0 0 0 5 Bangladesh 5 12 63 65 20 30 20 51 1 3 6 Ethiopia 6 14 65 5.5 30 37 0 37 0 1 7 Nepal 3 6 63 5.0 41 27 0 0 0 0 8 Burma 19 28 39 39 23 23 23 23 1 2 9 Afghanistan 8 16 5.4 58 33 17 0 17 0 1 10 Mali 11 19 5.4 4.6 32 24 0 0 0 0 11 Malawi 4 10 6.6 7.0 . . 19 0 0 0 0 12 Zaire 16 36 5.2 7.5 14 28 14 38 1 2 13 Uganda 5 9 7.1 3.4 38 52 0 52 0 1 14 Burundi 2 2 16 27 . . . . 0 0 0 0 15 Upper Volta 5 11 57 60 41 0 0 0 0 16 Rwanda 2 4 54 64 0 0 0 0 0 17 India 18 24 3.3 37 7 6 26 39 11 36 18 Somalia 17 31 5.7 5.4 34 0 0 0 0 19 Tanzania 5 12 6.3 86 34 50 0 50 0 1 20 Viet Nam 15 19 5.3 33 32 21 32 50 1 4 21 China 18 21 . 6 . 42 73 38 78 22 Guinea 10 20 62 60 37 80 0 80 0 1 23 Haiti 16 28 4.0 4.7 42 56 0 56 0 1 24 Sri Lanka 18 27 4.3 3.6 28 16 0 16 0 1 25 Benin 10 15 5.4 4.1 . 63 0 63 0 1 26 Central African Pep. 23 29 . 40 36 0 0 0 0 27 Sierra Leone 13 22 5.5 4.4 37 47 0 0 0 0 28 Madagascar 11 19 50 5.2 44 36 0 36 0 1 29 Niger 6 13 7.0 72 . . 31 0 0 0 0 30 Pakistan 22 29 4.0 43 20 21 33 51 2 7 31 Mozambique 4 9 6.5 82 75 83 0 83 0 1 32 Sudan 10 26 6.7 71 30 31 0 31 0 1 33 Togo 10 21 5.9 66 60 0 0 0 0 34 G5ana 23 37 4.6 5.0 25 35 0 48 0 2 Middle-income 33 w 45 w 4.3w 4.1 28w 29 w 35 w 48 w 54 1 128 1 Oil exporters 27w 39w 4.3w 4.3 i 27w 30w 32 u' 48w 151 42 Oil importers 37w 51 w 4.4w 4.0 u' 28w 28w 36 w 48 w 39 1 86 Lower middle-income 24 a' 33 w 4.4 w 4.3 a) 27 w 32 w 28 w 47 a' 22 t 60 I 35 Kenya 7 15 6.4 7.3 40 57 0 57 0 1 36 Senegal 23 34 4.9 3.7 53 65 0 65 0 1 37 Mauritania 3 24 155 8.1 . 39 0 0 0 0 38 Yemen Arab Rep 3 11 8.0 82 . 25 0 0 0 0 39 Yemen, PDR 28 37 35 3.8 61 49 0 0 0 0 40 Liberia 20 34 56 57 0 0 0 0 41 Indonesia 15 21 3.6 4.0 20 23 34 50 3 9 42 Lesotho 2 12 7.5 16 1 . 0 0 0 0 43 Bolivia 24 45 3.9 6.9 47 44 0 44 0 1 44 Honduras 23 36 5.4 55 31 33 0 0 0 0 45 Zambia 23 44 52 65 35 0 35 0 1 46 Egypt 38 44 3.6 29 38 39 53 53 2 2 47 El Salvador 38 41 3.2 34 26 22 0 0 0 0 48 Thailand 13 15 3.5 34 65 69 65 69 1 1 49 Philippines 30 37 38 3.7 27 30 27 34 1 2 50 Angola 10 22 57 5.8 44 64 0 64 0 1 51 Papua New Guinea 3 19 15.2 8.2 . . 25 0 0 0 0 52 Morocco 29 41 4.2 4.6 16 26 16 50 1 4 53 Nicaragua 41 54 4.0 5.0 41 47 0 47 0 1 54 Nigeria 13 21 4.7 4.8 13 17 22 58 2 9 55 Zimbabwe 13 24 63 6.3 40 50 0 50 0 1 56 Cameroon 14 36 56 74 26 21 0 21 0 1 57 Cuba 55 66 2.9 19 32 38 38 32 1 1 58 Congo, People's Rep. 30 46 5.0 4.4 77 56 0 0 0 0 59 Guatemala 33 39 3.8 39 41 36 41 36 1 1 60 Peru 46 66 5.3 3.5 38 39 38 44 1 2 61 Ecuador 34 45 4.4 4.6 31 29 0 51 0 2 62 Jamaica 34 42 2.4 25 77 66 0 66 0 1 63 Ivory Coast 19 41 7.3 8.3 27 34 0 34 0 1 64 Dominican Rep. 30 52 5.6 5.3 50 54 0 54 0 1 190 Percentage of urban population Number of Urban population In cities cities As percentage Average annual of over of over of total growth rate In largest 500,000 500,000 population (percent) city persons persons 1960 1981 1960-70 1970_81a 1960 1980 1960 1980 1960 1980 65 Mgoiia 36 51 5.2 4.0 53 52 0 0 0 0 66 Colombia 48 64 5.2 2.6 17 26 28 51 3 4 67 Tunisia 36 53 3.8 4.0 40 30 40 30 1 1 68 Costa Rica 37 44 42 36 67 64 0 64 0 1 69 Korea, Dem Rep 40 60 5.1 43 15 12 15 19 1 2 70 Turkey 30 47 5.1 41 18 24 32 42 3 4 71 Syrian Arab Rep. 37 49 4.8 46 35 33 35 55 1 2 72 Jordan 43 57 4.5 47 31 37 0 37 0 1 73 Paraguay 36 40 2.9 3.3 44 44 0 44 0 1 Upper middle-income 45 o' 63 w 4.2w 3.8 ri' 28 29 w 38 w 51 w 32 t 68! 74 Korea, Rep of 28 56 64 4.6 35 41 61 77 3 7 75 Iran. Islamic Rep of 34 51 49 5.0 26 28 26 47 1 6 76 Iraq 43 72 62 5.3 35 55 35 70 1 3 77 Malaysia 25 30 3.5 3.3 19 27 0 27 0 1 78 Panama 41 55 44 3.6 61 66 0 66 0 1 79 Lebanon 44 77 6.2 2.8 64 79 64 79 1 1 80 Algeria 30 44 3.5 5.6 27 12 27 12 1 1 81 Brazil 46 68 4.7 39 14 15 35 52 6 14 82 Mexico 51 67 4.7 42 28 32 36 48 3 7 83 Portugal 23 31 1.8 24 47 44 47 44 1 1 84 Argentina 74 83 20 20 46 45 54 60 3 5 85 Chile 68 81 31 24 38 44 38 44 1 1 86 South Africa 47 50 2.6 31 16 13 44 53 4 7 87 Yugoslavia 28 43 3.2 2.9 11 10 11 23 1 3 88 Uruguay 80 84 13 06 56 52 56 52 1 1 89 Venezuela 67 84 4.7 4.2 26 26 26 44 1 4 90 Greece 43 63 2.6 2.5 51 57 51 70 1 2 91 Hong Kong 89 90 2.6 2.5 100 100 100 100 1 1 92 Israel 77 89 43 3.1 46 35 46 35 1 1 93 Singapore 100 100 2.4 15 100 100 100 100 1 1 94 Trinidad and Tobago 22 22 18 1.4 . . . 0 0 0 0 High-income oil exporters 30 w 68 w 8.5 w 8.2 w 29w 28 w Ow 34 i' 0! 3! 95 Libya 23 54 8.0 8.1 57 64 0 64 0 1 96 Saudi Arabia 30 68 8.4 74 15 18 0 33 0 2 97 Kuwait 72 89 10.0 75 75 30 0 0 0 0 98 United Arab Emirates 40 73 12.7 16.6 . . . . . , Industrial market economies 68 w 78 w 1.9 w 1.4 w 18 w 18 w 48 w 55 w 104 I 152 99 Ireland 46 58 1.6 2.5 51 48 51 48 1 1 100 Spain 57 75 2.6 2.2 13 17 37 44 5 6 101 Italy 59 70 15 1.1 13 17 46 52 7 9 102 New Zealand 76 85 2.4 1.9 25 30 0 30 0 1 103 United Kingdom 86 91 09 0.3 24 20 61 55 15 17 104 Japan 62 79 24 2.0 18 22 35 42 5 9 105 Austria 50 55 09 06 51 39 51 39 1 1 106 Finland 38 63 32 2.4 28 27 0 27 0 1 107 Australia 81 89 2.5 20 26 24 62 68 4 5 108 Canada 69 76 27 12 14 18 31 62 2 9 109 Netherlands 80 76 10 06 9 9 27 24 3 3 110 Belgium 66 73 12 04 17 14 28 24 2 2 111 France 62 78 2.4 14 25 23 34 34 4 6 112 United States 70 77 1.8 15 13 12 61 77 40 65 113 Denmark 74 85 1.6 0.8 40 32 40 32 1 1 114 Germany, Fed Rep. 77 85 14 05 20 18 48 45 11 11 115 Norway 32 53 3.5 2.7 50 32 50 32 1 1 116 Sweden 73 88 1.8 10 15 15 15 35 1 3 117 Switzerland 51 59 2.2 1.0 19 22 19 22 1 1 East European nonmarket economies 48 w 62 w 2.6 w 1.8 w 9w 7w 23w 32w 35t 64t 118 Albania 31 37 3.8 3.4 27 25 0 0 0 0 119 Hungary 40 54 21 1.4 45 37 45 37 1 1 120 Romania 32 50 3.4 28 22 17 22 17 1 1 121 Bulgaria 39 65 3.8 24 23 18 23 18 1 1 122 Poland 48 57 18 17 17 15 41 47 5 8 123 USSR 49 63 27 18 6 4 21 33 25 50 124 Czechoslovakia 47 64 2.1 19 17 12 17 12 1 1 125 German Oem. Rep 72 77 01 02 9 9 14 17 2 3 Figures in italics are for years or periods other than those specified. 191 Table 23. Indicators related to life expectancy Life expectancy Infant at birth mortality rate Child death rate (years) (aged 0-1) (aged 1-4) 1960 1981 1960 l981 1960 1981 Low-income economies 41 58 165 w 99w 14w China and India 41 w 61 w 165w 92w 26 w 11w Other low-income 41w 50w 163w 124w 30 w 21w 1 Kampuchea, Oem, 46 146 22 2 Bhutan 38 45 195 148 33 22 3 Lao, PDR 40 43 155 126 24 18 4 Chad 35 43 195 146 46 32 5 Bangladesh 37 48 159 135 25 20 6 Ethiopia 46 175 145 40 31 7 Nepal 38 45 195 148 33 22 8 Burma 44 54 158 98 25 12 9 Afghanistan 33 37 233 205 41 35 10 Mali 37 45 195 152 46 33 11 Malawi 37 44 207 169 49 38 12 Zaire 40 50 150 110 33 21 13 Uganda 41 48 139 96 29 17 14 Burundi 37 45 150 120 33 24 15 Upper Volta 37 44 252 208 63 50 16 Rwanda 37 46 147 137 32 29 17 India 43 52 165 121 26 17 18 Somalia 35 39 175 145 40 31 19 Tanzania 42 52 152 101 33 19 20 Viet Nam 43 63 157 97 25 12 21 China 41 67 165 71 26 7 22 Guinea 43 208 163 50 36 23 Haiti 44 54 182 112 47 17 24 Sri Lanka 62 69 71 43 7 3 25 Benin 37 50 206 152 49 33 26 Central African Rep 35 43 195 146 46 32 27 Sierra Leone 37 47 234 205 57 49 28 Madagascar 37 48 109 69 21 11 29 Niger 37 45 191 143 45 31 30 Pakistan 43 50 162 123 25 17 31 Mozambique . . 160 113 36 22 32 Sudan 40 47 168 122 40 21 33 Togo 42 48 182 107 42 20 34 Ghana 45 54 143 101 31 19 Middle-income economies 50 60 u 127 u' 81w w Oil exporters 45 57 145 w 97 w Oil importers 54 63 w 113 69 a' Lower middle-income 46 57 ZL' 145w 95w 35 Kenya 41 56 138 85 29 15 36 Senegal 37 44 182 145 42 31 37 Mauritania 37 44 185 141 43 30 38 Yemen Arab Rep. 36 43 212 90 60 50 39 Yemen, PDR 36 46 209 143 59 29 40 Liberia 44 54 194 152 46 33 41 Indonesia 41 54 150 105 23 14 42 Lesotho 42 52 144 113 31 22 43 Bolivia 43 51 167 129 40 23 44 Honduras 46 59 145 86 30 9 45 Zambia 40 51 151 104 33 20 46 Egypt 46 57 128 110 34 16 47 El Salvador 51 63 136 75 26 7 48 Thailand 52 63 103 53 13 4 49 Philippines 53 63 106 53 14 4 50 Angola 33 42 208 152 50 33 51 Papua New Guinea 41 51 165 102 26 13 52 Morocco 47 57 161 104 37 15 53 Nicaragua 47 57 144 88 30 10 54 Nigeria 39 49 183 133 42 28 55 Zimbabwe 49 55 118 72 23 11 56 Cameroon 37 50 162 106 36 20 57 Cuba 63 73 66 19 5 1 58 Congo, People's Rep. 48 60 171 127 39 26 59 Guatemala 47 59 92 66 10 5 60 Peru 47 58 163 85 38 9 61 Ecuador 51 62 140 80 28 8 62 Jamaica 64 71 52 16 3 (.) 63 Ivory Coast 37 47 173 125 39 25 64 Dominican Rep. 51 62 119 66 20 5 192 Life expectancy Infant at birth mortality rate Child death rate (years) (aged 0-1) (aged 1-4) 1960 1981 1960 1981 1960 1981 65 Mongolia 52 64 109 53 14 4 66 Colombia 53 63 103 55 14 4 67 Tunisia 48 61 159 88 36 9 68 Costa Rica 62 73 83 27 8 1 69 Korea, Dem. Rep. 54 66 78 33 9 2 70 Turkey 51 62 190 119 50 20 71 Syrian Arab Rep. 50 65 132 60 25 4 72 Jordan 47 62 136 67 26 5 73 Paraguay 56 65 86 46 9 2 Upper middle-income 57w 65w 103w 62w 6w 74 Korea, Rep. of 54 66 78 33 9 2 75 Iran, Islamic Rep. of 50 58 163 105 26 14 76 Iraq 46 57 139 76 28 7 77 Malaysia 53 65 72 30 7 2 78 Panama 62 71 68 21 5 1 79 Lebanon 58 66 68 40 5 2 80 Algeria 47 56 165 114 39 18 81 Brazil 55 64 118 75 19 7 82 Mexico 57 66 91 54 10 4 83 Portugal 63 72 82 26 9 1 84 Argentina 65 71 61 44 4 2 85 Chile 57 68 114 42 18 2 86 South Africa 53 63 135 94 28 17 87 Yugoslavia 63 71 92 31 11 2 88 Uruguay 68 71 50 39 3 2 89 Venezuela 57 68 85 40 9 2 90 Greece 69 74 40 18 3 1 91 Hong Kong 67 75 37 10 2 (.) 92 Israel 69 73 31 15 2 1 93 Singapore 64 72 36 12 2 (.) 94 Trinidad and Tobago 64 72 54 31 4 1 High-income oil exporters 44 w 57 w 173 w 96 w 43 w 13 w 95 Libya 47 57 158 97 36 12 96 Saudi Arabia 43 55 185 111 48 17 97 Kuwait 60 70 89 33 10 1 98 United Arab Emirates 47 63 135 52 26 3 Industrial market economies 70w 75w 30w 11w 2w (.)w 99 Ireland 70 73 29 11 2 (.) 100 Spain 68 74 50 10 4 (.) 101 Italy 69 74 44 14 3 1 102 New Zealand 72 74 23 12 1 (.) 103 United Kingdom 71 74 23 12 1 (.) 104 Japan 68 77 30 7 2 () 105 Austria 69 73 38 13 3 1 106 Finland 68 75 21 8 1 () 107 Australia 71 74 20 10 1 (.) 108 Canada 71 75 27 10 2 109 Netherlands 73 76 18 8 1 (.) 110 Belgium 70 73 31 12 2 (.) 111 France 70 76 27 10 2 () 112 United States 70 75 26 12 1 (.) 113 Denmark 72 75 22 8 1 (.) 114 Germany, Fed. Rep. 70 73 34 13 2 1 115 Norway 73 76 19 8 1 (.) 116 Sweden 73 77 17 7 1 (.) 117 Switzerland 71 76 21 9 1 (.) East European nonmarket economies 68w 72w 38w 25w 3w 1w 118 Albania 62 70 83 . 9 119 Hungary 68 71 48 21 2 1 120 Romania 65 71 77 29 8 2 121 Bulgaria 69 73 45 20 3 1 122 Poland 67 73 56 21 5 1 123 USSR 68 72 33 . . 2 . 124 Czechoslovakia 70 72 24 17 1 1 125 German Dem. Rep. 69 73 39 12 3 (.) a. Figures in italics are for years other than that specified. 193 Table 24. Health-related indicators Daily per capita Population per: calorie supply As percentage Physician Nursing persons Total of requirement 1960 1980 1960 1980 1980 1980 Low-income economies 12,222w 5,785w 7,217w 4,668w 2,218w 97w China and India 6,977w 2,626w 6,727w 3,322w 2,270w 99 w Other low-income 37,737w 15846w 9,707w 8,953w 2,050 w 92 w 1 Kampuchea, Dem, 35,440 4,010 2,053 88 2 Bhutan 90 3 Lao, PDR 54,140 20,060 4,980 3,040 1,829 97 4 Chad 72,190 47,530 5,780 3,850 1,768 74 5 Bangladesh 10,940 24,450 1,960 84 6 Ethiopia 100,470 58,490 14,920 5,440 1,735 76 7 Nepal 73,800 30,060 33,420 1,977 86 8 Burma 15,560 4,660 8,520 4,750 2,174 113 9 Afghanistan 28,700 16,730 19,590 25,990 1,775 73 10 Mali 64,130 22,130 4,710 2,380 1,871 85 11 Malawi 35,250 40,950 12,940 3,830 2,095 94 12 Zaire 79,620 14,780 3,510 1,920 2,180 94 13 Uganda 15,050 26,810 10,030 4,180 1,760 83 14 Burundi 96,570 45,020 4,530 6,180 2,114 96 15 Upper Volta 81,650 48,510 4,090 4,950 1,791 95 16 Rwanda 143,290 31,510 11,620 9,840 2,364 88 17 India 4,850 3,640 10,980 5,380 1,880 87 18 Somalia 36,570 14,290 4,810 2,330 1,952 100 19 Tanzania 18,220 17,560 11,890 2,980 2,051 83 20 Viet Nam . 4,190 2,930 1,977 90 21 China 8,330 1,920 4,020 1,890 2,539 107 22 Guinea 26,900 16,630 3,260 2,490 2,071 77 23 Haiti 9,230 8,200 4,020 2,490 1,620 96 24 Sri Lanka 4,490 7,170 4,170 1340 2,238 102 25 Benin 23,030 17050 2,700 1,670 2,292 103 26 Central African Rep. 49,610 27,050 3,280 1,760 2,198 94 27 Sierra Leone 20,420 18,280 2,960 2,130 2,053 89 28 Madagascar 8,900 10,170 3,110 3,660 2,466 109 29 Niger 82,170 38,790 8,460 4,650 2,327 92 30 Pakistan 5,400 3,480 16,960 5,820 2,184 106 31 Mozambique 20,390 39,110 4,720 5,600 2,170 70 32 Sudan 33,420 8,800 3,030 1,410 2,447 101 33 Togo 47,060 18,100 5,340 1,430 2,101 95 34 Ghana 21,600 7,630 5,430 780 1,964 88 Middle-income economies 17,011w 5,332 w 3,889w 1,769w 2,579 w 110w Oil exporters 29,989w 6,706w 4,118w 1,979w 2,498 w 106 w Oil importers 6,681 w 4,174w 3,685 w 1,580w 2,644 w 113w Lower middle-income 27,807w 7,751 w 4,925w 2,261 w 2,476w 106w 35 Kenya 10,690 10,500 2,270 550 2,078 88 36 Senegal 24,990 13,800 2,840 1,400 2,406 100 37 Mauritania 40,420 14,350 5,430 2,080 1,941 97 38 Yemen Arab Rep. 130,090 11,670 . . 4,580 2,712 76 39 Yemen, PDR 13,290 7,390 . . 850 2,122 84 40 Liberia 12,600 9,610 1,410 1,420 2,390 114 41 Indonesia 46,780 11,530 4,510 2,300 2,315 110 42 Lesotho 23,490 18,640 6,540 4,330 2,444 107 43 Bolivia 3,830 1,850 . 3,070 2,084 87 44 Honduras 12,620 3,120 . , 700 2,171 96 45 Zambia 9,540 7,670 9,920 1,730 2,051 93 46 Egypt 2,550 970 1,930 1,500 2,972 117 47 El Salvador 5,260 3,040 . , 870 2,031 99 48 Thailand 7,950 7,180 4,860 2,420 2,308 104 49 Philippines 6,940 7,970 . . 6,000 2,275 116 50 Angola 14,910 6,650 . 2,232 83 51 Papua New Guinea 28,840 13,590 2,450 960 2,164 90 52 Morocco 9,410 11,200 . . 1,830 2,628 110 53 Nicaragua 2,690 1,800 1,250 550 2,135 99 54 Nigeria 73,710 12,550 4,040 3,010 2,595 91 55 Zimbabwe 4,790 6,580 1,000 1,190 1,793 86 56 Cameroon 48,110 13,670 3,280 1,910 2,439 105 57 Cuba 1,060 700 950 360 2,723 122 58 Congo, People's Rep. 16,100 5,510 1,300 790 2,277 94 59 Guatemala 4,420 8,600 9,040 1,620 2,045 93 60 Peru 1,910 1,390 2,210 690 2,057 99 61 Ecuador 2,670 1,620 2,360 , 2,181 88 62 Jamaica 2,590 2,830 420 630 2,624 119 63 Ivory Coast 29,190 21,040 2,920 1,590 2,746 112 64 Dominican Rep. 8,220 4,020 , . 2,150 1,980 105 194 Daily per capita Population per: calorie supply As percentage Physiciana Nursing persona Total of requirement 1960 1980 1960 1980 1980 1980 65 Mongolia 1,070 450 300 240 2,681 111 66 Colombia 2,640 1,920 4,220 1,220 2,529 108 67 Tunisia 10,030 3,690 . 890 2,789 116 68 Costa Rica 2,700 1,470 710 450 2,766 116 69 Korea, Oem. Rep. . . 440 . . 3,073 126 70 Turkey 2,800 1,630 16,310 1,130 2,965 122 71 Syrian Arab Rep. 4,630 2310 6,660 1,440 2,909 117 72 Jordan '5,800 1,890 1,930 1,310 2,355 96 73 Paraguay 1,810 1,710 1,380 1,100 2,741 134 Upper middle-income 2,606w 1,689w 2,678w 1,010 w 2,724w 115 w 74 Korea, Rep. of 3,540 1,690 3,250 380 2,957 128 75 Iran, Islamic Rep, of 4,060 2,320 8,090 2,520 2,018 81 76 Iraq 5,270 1790 3,030 2,140 2,677 111 77 Malaysia 7,020 7,910 1,790 940 2,625 121 78 Panama 2,730 980 3,460 420 2,163 103 79 Lebanon 1,210 530 2,080 720 2,476 100 80 Algeria 5,530 2,650 . . 740 2,433 101 81 Brazil 2,670 1,700 2,810 820 2,447 109 82 Mexico 1,830 1,260 3,650 1,420 2,791 121 83 Portugal 1,250 540 1,420 650 3,101 129 84 Argentina 740 530 750 . 3,494 125 85 Chile 1,780 1,920 640 450 2,790 114 86 South Africa 2,180 . . 480 . . 2,778 118 87 Yugoslavia 1,620 680 630 280 3,565 140 88 Uruguay 960 540 800 190 2,896 110 89 Venezuela 1,510 950 2,840 370 2,525 112 90 Greece 800 420 800 600 3,685 147 91 Hong Kong 3,060 1,220 2,880 790 2,898 128 92 Israel 400 370 360 130 3,020 118 93 Singapore 2,360 1,150 650 320 3,158 134 94 Trinidad and Tobago 2,370 1,490 760 410 2,744 113 High-income oil exporters 13,285w 1,295w 4,496w 841 w 3,036w 127w 95 Libya 6,580 730 1,320 400 3,459 147 96 Saudi Arabia 16,370 1,640 5,850 1,150 2,895 120 97 Kuwait 1210 590 270 180 98 United Arab Emirates . 900 . . 340 . Industrial market economies 816w 554w 474w 183w 3,433w 134w 99 Ireland 950 760 190 120 3,718 148 100 Spain 850 460 1,290 330 3,361 135 101 Italy 640 340 1,330 330 3,662 150 102 New Zealand 850 670 . 130 3,685 126 103 United Kingdom 940 650 210 140 3,306 132 104 Japan 930 780 310 240 2,912 124 105 Austria 550 400 440 230 3,579 135 106 Finland 1,570 530 170 100 3,196 118 107 Australia 750 560 . . 120 3,159 117 108 Canada 910 550 290 90 3,369 127 109 Netherlands 900 540 130 3,514 131 110 Belgium 780 400 450 120 3,916 160 111 France 930 580 530 120 3,391 134 112 United States 750 520 340 150 3,658 139 113 Denmark 810 480 220 210 3,566 133 114 Germany, Fed. Rep. 670 450 370 170 3,561 133 115 Norway 900 520 330 90 3,315 124 116 Sweden 1,050 490 100 60 3,202 119 117 Switzerland 740 410 350 160 3,551 133 East European nonmarket economies 683w 356w 358w 212w 3,412w 133w 118 Albania 3,620 960 530 310 2,664 110 119 Hungary 720 400 330 150 3,534 134 120 Romania 790 680 420 270 3,337 126 121 Bulgaria 710 410 550 190 3,646 146 122 Poland 1,070 570 460 240 3,521 134 123 USSR 560 280 340 210 3,372 132 124 Czechoslovakia 620 360 230 130 3,477 141 125 German Dem Rep. 1,180 520 , . . . 3,780 144 a. Figures in italics are for years other than those specified See the technical notes. 195 Table 25. Educationa Number Number enrolled in enrolled in secondary higher education Adult Number enrolled in primary school school as as percentage literacy as percentage of age group percentage of of population rate Total Male Female age group aged 20-24 (percent) 1960 1980 1960 1980 1960 1980 1960 1980 1960 1979 1960 1980 Low-income economies 80w 93w 68w 105w 34w 80 w 18w 29 w 2w 4w 34w 52w China and India 90w 100w 80w 111w 40w 86 w 21 w 32w 4w 37w 56w Other low-income 37w 70w 50w 83w 24w 55 w 6w 19w 1w 2w 23w 40w 1 Kampuchea, Dem. 64 82 46 3 (.) 31 2 Bhutan 3 11 15 7 3 1 (.) 3 Lao, PDR 25 96 34 104 16 88 1 17 (.) (.) 28 44 4 Chad 17 35 29 51 4 19 3 (.) 6 15 5 Bangladesh 47 62 66 76 26 47 8 15 3 22 26 6 Ethiopia 7 43 11 56 3 30 11 (.) 1 15 7 Nepal 10 91 19 126 1 53 6 21 3 9 19 8 Burma 56 84 61 87 52 81 10 20 4 60 66 9 Afghanistan 9 30 15 49 2 10 1 10 C) 2 8 20 10 Mali 10 27 14 35 6 20 1 28 1 2 10 11 Malawi 62 73 51 1 4 C) 25 12 Zaire 60 90 88 104 32 75 3 23 (.) 1 31 55 13 Uganda 49 50 65 58 32 42 3 5 (.) 1 25 52 14 Burundi 18 29 27 35 g 23 1 3 (.) 1 14 25 15 Upper Volta 8 19 12 24 5 14 1 3 (.) 2 5 16 Rwanda 49 70 68 74 30 67 2 2 () 16 50 17 India 61 76 80 90 40 61 20 28 3 9 28 36 18 Somalia 9 41 13 53 5 29 1 6 (.) 1 2 60 19 Tanzania 25 104 33 110 18 98 2 4 (.) 10 79 20 Viet Nam 116 124 109 48 3 87 21 China 109 117 126 106 21 34 1 43 69 22 Guinea 30 33 44 44 16 22 2 16 5 7 20 23 Haiti 46 64 50 69 42 59 4 12 (.) 1 15 23 24 Sri Lanka 95 100 100 103 90 97 27 51 3 75 85 25 Benin 27 62 38 84 15 39 2 16 1 5 28 26 Central African Rep, 32 70 53 92 12 49 1 10 1 7 33 27 Sierra Leone 23 39 30 45 15 30 2 12 C) 1 7 15 28 Madagascar 52 100 58 45 4 12 (.) 3 50 29 Niger 5 23 7 29 3 17 4 (.) 1 10 30 Pakistan 30 57 46 81 13 30 11 15 2 15 24 31 Mozambique 48 93 60 107 36 79 2 6 (.) 8 33 32 Sudan 25 51 35 60 14 43 3 16 C) 2 13 32 33 Togo 44 116 63 144 24 89 2 33 2 10 18 34 Ghana 38 69 52 77 25 60 5 36 () 1 27 Middle-income economie 100w 84w 106w 67 3U 65 w Oil exporters 101 w 75 w 109w 2 10 58 w Oil Importers 100w 91 w 104w 03 4 t' 13w 72 w Lower middle-income 98w 78w 105w 56w 91w lOU 3w lOu' 59 w 35 Kenya 47 108 64 114 30 101 2 18 (.) 20 47 36 Senegal 27 44 36 53 17 35 3 10 3 6 10 37 Mauritania 8 33 13 43 3 23 . 10 5 17 38 Yemen Arab Rep 8 47 14 82 12 5 3 21 39 Yemen, PDR 13 72 20 93 5 51 5 28 2 40 40 Liberia 31 66 45 82 18 50 2 20 2 9 25 41 Indonesia 71 98 86 104 58 91 6 28 39 62 42 Lesotho 83 104 63 84 102 123 3 17 () 2 52 43 Bolivia 64 84 78 90 50 78 12 36 4 39 63 44 Honduras 67 89 68 92 67 85 8 21 8 45 60 45 Zambia 42 95 51 101 34 89 2 17 2 29 44 46 Egypt 66 76 80 89 52 63 16 52 15 26 44 47 El Salvador 80 74 82 74 77 74 13 23 8 49 62 48 Thailand 83 96 88 79 13 29 2 13 68 86 49 Philippines 95 110 98 111 93 108 26 63 13 25 72 75 50 Angola 21 28 13 2 (.) () 51 Papua New Guinea 32 62 59 70 7 54 1 12 29 32 52 Morocco 47 76 67 95 27 58 5 24 1 4 14 28 53 Nicaragua 66 100 65 97 66 103 7 43 1 9 90 54 Nigeria 36 98 46 27 4 16 (.) 2 15 34 55 Zimbabwe 96 115 107 118 86 113 6 13 (.) () 39 69 56 Cameroon 65 104 87 113 43 94 2 18 19 57 Cuba 109 112 109 116 109 109 14 71 20 95 58 Congo, People's Rep. 78 156 103 163 53 148 4 69 5 16 59 Guatemala 45 69 50 74 39 63 7 16 2 9 32 60 Peru 83 112 95 116 71 108 15 56 4 16 61 80 61 Ecuador 83 107 87 109 79 105 12 40 3 35 68 81 62 Jamaica 92 99 92 98 93 100 45 57 2 82 90 63 Ivory Coast 46 76 68 92 24 60 2 17 C) 2 5 35 64 Dominican Rep. 98 106 99 105 98 107 7 32 10 65 67 196 Number Number enrolled in enrolled in secondary higher education Adult Number enrolled in primary school school as as percentage literacy as percentage of age group percentage of of population rate Total Male Female age group aged 20-24 (percent) 1960 1980 1960 1980 1960 1980 1960 1980 1960 1979 1960 1980 65 Mongolia 79 105 79 107 78 102 51 89 8 9 95 66 Colombia 77 128 77 127 77 130 12 46 2 11 63 81 67 Tunisia 66 103 88 118 43 88 12 27 1 5 16 62 68 Costa Rica 96 108 97 109 95 106 21 48 5 26 . . 90 69 Korea, Dem. Rep, . . 116 . . 118 . . 114 . . . . . 70 Turkey 75 101 90 110 58 93 14 37 3 6 38 60 71 Syrian Arab Rep. 65 100 89 112 39 87 16 46 4 15 30 58 72 Jordan 77 108 94 . . 59 . . 25 79 1 27 32 70 73 Paraguay 98 102 105 106 90 98 11 26 2 7 75 84 Upper middle-income 88 w 104w 93w 108w 83 w 101 w 20w 48w 4w 13 w 61 w 76w 74 Korea, Rep. of 94 107 99 108 89 105 27 85 5 14 71 93 75 Iran, Islamic Rep. of 41 101 56 121 27 80 12 44 1 5 16 50 76 Iraq 65 116 94 122 36 110 19 57 2 9 18 77 Malaysia 96 92 108 94 83 91 19 53 1 3 53 60 78 Panama 96 113 98 115 94 111 29 65 5 23 73 85 79 Lebanon 102 118 105 . . 99 . . 19 58 6 35 80 Algeria 46 95 55 108 37 81 8 33 (.) 5 10 35 81 Brazil 95 93 97 93 93 93 11 32 2 12 61 76 82 Mexico 80 120 82 123 77 116 11 37 3 15 65 83 83 Portugal . . 118 , 120 . . 116 . 55 4 11 63 78 84 Argentina 98 116 98 116 99 116 23 56 11 23 91 93 85 Chile 109 117 111 118 107 116 24 55 4 12 84 86 South Africa 89 . . 94 . 85 . . 15 . . 3 57 87 Yugoslavia 111 99 113 100 108 98 58 83 9 23 77 85 88 Uruguay 111 105 111 107 111 104 37 60 8 16 . . 94 89 Venezuela 100 104 100 104 100 104 21 39 4 21 63 82 90 Greece 102 103 104 104 101 103 37 81 4 17 80 91 Hong Kong 87 109 93 111 79 107 20 62 4 10 70 90 92 Israel 98 96 99 95 97 97 48 71 10 26 84 93 Singapore 111 107 121 108 101 105 32 55 6 8 . . 83 94 Trinidad and Tobago 88 94 89 93 87 95 24 56 1 . 93 95 High-income oil exporters 29 w 83 w 44w 93 w 12 w 74w 44w 1w 7w 9w 32w 95 Libya 59 123 92 128 24 119 9 67 1 6 22 96 Saudi Arabia 12 64 22 77 2 51 2 30 (.) 7 3 25 97 Kuwait 117 96 131 98 102 93 37 75 . . 12 47 60 98 United Arab Emirates , . 116 . . 117 . . 115 . . 52 (.) 3 . . 56 Industrial market economies w 102 wlO7w 103w 112w 103w 64w 89w 16w 36w 96w 99w 99 Ireland 110 102 107 101 112 102 35 93 9 19 97 98 100 Spain 110 109 106 109 116 110 23 87 4 22 87 101 Italy 111 102 112 102 109 101 34 73 7 27 91 98 102 New Zealand 108 105 110 105 106 104 73 81 13 25 . . 99 103 United Kingdom 92 104 92 104 92 105 66 82 9 20 . 99 104 Japan 103 101 103 101 102 101 74 91 10 30 98 99 105 Austria 105 98 106 99 104 98 50 74 8 23 99 99 106 Finland 97 83 100 83 95 83 74 90 7 21 99 100 107 Australia 103 110 103 110 103 110 51 86 13 26 . . 100 108 Canada 107 100 108 100 105 100 46 89 16 36 . 99 109 Netherlands 105 101 105 100 104 102 58 94 13 30 . . 99 110 Belgium 109 101 111 101 108 69 89 24 ... 101 9 . . 99 111 France 144 112 98 112 143 111 46 85 10 25 . 99 112 United States 118 98 . . . . 86 97 32 55 98 99 113 Denmark 103 98 103 97 103 98 65 87 10 29 . 99 114 Germany, Fed. Rep. 133 . 132 . 134 . . 53 . 6 26 . . 99 115 Norway 100 100 100 99 100 100 57 94 7 25 . . 99 116 Sweden 96 97 95 97 96 97 55 86 9 37 . . 99 117 Switzerland 118 86 118 86 118 87 26 55 7 17 . . 99 East European nonmarket economies 101w 104w101w 97w 101w 97w 45w 92w 11w 20w 97w 99w 118 Albania 94 108 102 111 86 105 20 63 5 6 . 119 Hungary 101 97 103 97 100 97 23 40 7 13 97 99 120 Romania 98 101 101 101 95 101 24 75 5 11 89 98 121 Bulgaria 93 97 94 97 92 96 55 86 11 17 91 . 122 Poland 109 100 110 100 107 99 50 77 9 18 95 98 123 USSR 100 106 100 . 100 . . 49 101 11 21 99 100 124 Czechoslovakia 93 91 93 91 93 92 25 44 11 16 95 . 125 German Dem Rep 112 96 111 95 113 97 39 88 16 30 a. Figures in italics are for years other than those specified. See the technical notes 197 Table 26. Defense and social expenditure Defense expenditure as percentage of Central government expenditure Central government per capita (1975 dollars) GNP expenditure Defense Education Health 1972 1980b 1972 1980b 1972 1980b 1972e 1980k' 1972 1980b Low-thcome economies 3.6 16.9w 3 China and India 4.Uu 16.7w Other low-income 3.6 2.5 w 18.9w 1 Kampuchea, Oem. . . . . . . . . . 2 Bhutan . . . . . . 3 Lao, PDR . . . . . . . . . . . . . S 4 Chad 4.5 . . 24.6 . . . S 3 . . 1 5 Bangladesh 0.5 . . 5.1 . . (.) . . 1 . . (.) 6 Ethiopia 2.0 . . 14.3 . . 2 . . 2 . . 1 7 Nepal 0.6 0.9 7.1 6.6 1 1 1 2 (.) 8 Burma 6.3 3.5 31.6 24.2 7 5 3 2 1 9 Afghanistan . . . . . . . . . S . S S 10 Mali . . 2.9 . . 17.4 . . 3 . 5 . . 11 Malawi 0.6 3.7 3.2 12.8 1 5 4 4 1 2 12 Zaire . . . . . . . . . . . . . 13 Uganda 51 0.4 23.2 137 16 1 10 2 4 () 14 Burundi 2.0 . . 10.3 . 2 . . 6 . . I 15 Upper Volta 1.3 2.5 11.5 16.9 1 4 3 4 1 1 16 Rwanda 3.0 1.6 25.6 12.4 4 2 3 3 I 1 17 India . . 2.8 . . 19.4 . . 4 . (.) . . (.) 18 Somalia 6.2 . . 23.3 . . 7 . . 2 . . 2 19 Tanzania 2.3 9.0 11.9 24.5 4 16 5 8 2 4 20 Viet Nam . , , . . . . . . , . . . . 21 China . . 4.6 . . 15.9 . . 10 . . 10 22 Guinea . . , . , . . . . . . . . 23 Haiti .. .. .. .. .. 24 Sri Lanka 1.3 . . 4.1 . . 4 . . 12 25 Benin . . . . . . . . . . . 26 Central African Rep. . . . . . . . . . . 27 Sierra Leone . , 0.9 . . 3.2 , 2 . . 6 . . 2 28 Madagascar 0.8 . . 3.6 . . 2 . . 5 . 2 29 Niger . . 1.0 . 38 . 2 . 8 . . 2 30 Pakistan 6.6 5.0 39.9 30.6 10 10 (.) 1 (.) () 31 Mozambique . . . . . . . . . . . . . . . . . 32 Sudan 3.5 2.6 23.0 13.2 8 7 3 5 2 1 33 Togo . . 2.5 . . 7.0 . . 7 . . 13 . . 6 34 Ghana 1.6 0.5 8.0 3.8 8 2 20 11 6 3 Middle-income economies 3.1 3.0w 13.9w 14.2w 26 w 28 w 20 w 27 w lOw Oil exporters 3.0 a 2.1 a 17,5w 10.8w 33 a 23 w 25 w 32 a 9w Oil importers 3.1 a 3.4 w 12.5w 16.8w 23 w 32 a 17w 22 w 11 w Lower middle-income 3,2w 3.8w 12.7w 15.6w 15w 18w 15w 16w 4a 5w 35 Kenya 1.3 4.4 6.0 16.4 3 11 11 13 4 5 36 Senegal , . , . . . , . . , . . . ' 37 Mauritania . . 12.6 . . 29.4 . . 36 . . 13 . . 3 38 Yemen Arab Rep. . . 10.6 . . 33.2 . . 21 . . 8 . . 3 39 Yemen, PDR ' . . . ' ' . . ' . . , . 40 Liberia . . 1,7 . . 5.8 . . 6 , 13 . . 6 41 Indonesia . . 3.4 . . 13.5 . . 10 . . 6 . . 2 42 Lesotho . , . . . , . . , , . . , . 43 Bolivia 1.5 2.0 16.1 16.6 7 10 13 19 4 5 44 Honduras 1.9 2.4 12.4 11.4 7 9 13 15 6 7 45 Zambia . . . . . . . . . . . . 33 17 13 9 46 Egypt . . 3.0 . . 7.4 . . 14 . . 19 . . 6 47 El Salvador 0.8 1.6 6.6 8.6 4 7 11 15 6 7 48 Thailand 3.5 3.8 19.5 20.6 11 17 11 16 2 4 49 Philippines 1.5 1.8 10.1 14.6 5 7 7 7 1 2 5OAngola . . .. . 51 Papua New Guinea . 16 . . 4.5 . . 7 . . 27 . . 14 52 Morocco 2.8 61 12.3 17.9 13 36 21 35 5 7 53 Nicaragua 1.9 3.4 12.3 11.0 12 16 16 17 4 21 54 Nigeria 5.2 . . 40.2 . 20 . . 2 . 2 55 Zimbabwe . . . . . . . . , . . . . . 56 Cameroon 15 . 9.1 . . 7 . . 9 4 57 Cuba . , . , . . .. . . . . . . . , 58 Congo, People's Rep. . . . . . , . , . . , . 59 Guatemala 1.1 13 11.0 9.9 3 8 5 11 2 9 60 Peru 25 25 ' 14.8 12.5 23 23 35 20 10 8 61 Ecuador 2.0 1.9 16.9 12.5 11 14 20 37 3 8 62 Jamaica . , . , . , . , . . . . . . . . 63 Ivory Coast . . 1.3 . . 39 . . 8 . . 33 . . 8 64 Dominican Rep. 1.5 1.9 8.5 10.3 11 15 18 20 15 13 198 Defense expenditure as percentage of Central government expenditure Central government per capita (1975 dollars) GNP expenditure Defense Education Health 1972 1980' 1972k 1980' 1972k 1980b 1972 1980b 1972 1980b 65 Mongolia . . . . . . . . . . . . . . . 66 Colombia . . . . . . 67 Tunisia 1.1 3.9 4.8 12.0 7 36 46 50 11 21 68 Costa Rica 0.5 0.7 2.6 2.6 5 7 48 71 6 15 69 Korea, Dem,Rep, . . . . . . . . 70 Turkey 3.4 3.8 15.4 15.3 27 36 32 34 6 9 71 Syrian Arab Rep. 10.9 17.3 37.2 477 64 144 19 15 2 3 72 Jordan . 13.1 25.5 . . 74 28 . 12 73 Paraguay 1.8 1.0 13.8 11.7 9 9 8 10 2 3 Upper middle-income 3.1 u 2.6w 14.3w 13.6 w 36w 42 w 25 w 42 w 15 w 17w 74 Korea, Rep. of 4.9 6.6 25.8 34.3 22 49 14 25 1 2 75 Iran, Islamic Rep. of 7.4 . . 24.1 15.0 104 78 45 77 16 23 76 Iraq . . . . . . . . . . . . . . . 77 Malaysia 5.1 4.0 18.5 16.6 33 38 42 50 12 15 78 Panama .. ., .. ., ., .. .. 60 .. 58 79 Lebanon . . , . . . . . . . . . . . , 80 Algeria . . . . . . . . . . . . . . . 81 Brazil 1.4 0.7 8.3 4.3 13 10 11 15 10 20 82 Mexico 0.6 0.4 4.9 2.3 8 7 27 55 8 7 83 Portugal . . , . . , . , . . . . , , . . . 84 Argentina 1.0 2.3 9.0 11.8 18 36 19 27 7 5 85 Chile 2.4 . . 6,1 . . 4 . . 9 . . 5 86 South Africa . . . . , . . . . . . . . . . . . 87 Yugoslavia 4.1 4.5 20.5 48.6 54 81 . . 66 88 Uruguay 1.4 2.6 5.6 11.6 16 41 28 31 5 17 89 Venezuela 2.1 1.2 9.7 5.9 41 28 73 95 27 41 90 Greece 78 . 14.6 . . 90 . . 54 44 91 Hong Kong . , . , . . . . . . . . . . , 92 Israel 17.6 31.2 39.8 24.9 620 1,103 141 261 55 98 93 Singapore 6.0 5.5 35.3 24.9 126 192 56 112 28 53 94 Trinidad and Tobago . . 0.8 . . 2.5 . 23 . . 107 . . 58 High-income oil exporters . . . . . . . . . . . 95 Libya . , . . , , . , . . . . 96 Saudi Arabia . . . . . . . . . . , . . . , . 97 Kuwait 2.7 2.9 8.4 12.2 314 366 559 276 206 154 98 United Arab Emirates . . 6.2 24.5 47.5 . . 1,119 . . 296 . . 200 Industrial market economies 5.0w 3.6w 21.3w 12.2w 281 . 254w 77w 1 ' 141 w 240w 99 Ireland . . . . . . . . . . . . , , . . , 100 Spain 1.3 1.3 6.5 5.2 34 41 43 64 5 7 101 Italy 2.0 1.6 6.3 3.4 70 66 178 164 150 246 102 New Zealand 1.7 1.9 5.8 5.1 70 83 203 237 180 248 103 United Kingdom 5.5 4.6 16.7 14.5 217 246 34 45 158 217 104 Japan . , . . . . . . . . . . , , 105 Austria 1.0 1.2 3.0 3.1 47 71 160 229 156 302 106 Finland 1.5 1.7 6.1 5.6 80 107 203 280 140 199 107 Australia 2.8 2.3 14.5 9,4 188 170 55 152 108 182 108 Canada . 1.8 7,7 136 68 . . 118 109 Netherlands . . 3.1 , 5,5 . . 208 . 495 . . 447 110 Belgium 2.6 2.8 6.6 5.4 157 206 364 551 34 63 111 France . . 2.8 . . 7.3 . . 208 . . 258 . . 431 112 United States 6.3 4.9 32.2 21.2 453 392 45 49 120 193 113 Denmark 2.3 . . 7.0 . . 169 , , 377 , , 231 114 Germany, Fed, Rep. 3.0 2.7 12.4 9.6 200 225 24 22 281 463 115 Norway 34 . . 9,4 . 201 206 255 116 Sweden 3.6 3.2 12.2 7.5 283 288 335 460 81 87 117 Switzerland 2.0 2.0 15.1 10.2 184 189 51 62 122 215 East European nonmarket economies 118 Albania . , . . , 119 Hungary . . . . . 120 Romania . . 2.0 6.2 3.7 121 Bulgaria . . . , 122 Poland . . . . . . , 123 USSR 124 Czechoslovakia 125 German Dem, Rep. a. Figures in italics are for 1973, not 1972 b. Figures in italics are for 1979, not 1980. 199 Table 27. Income distribution Percentage share of household income, by percentile groups of households Lowest Second Third Fourth Highest Highest Year 20 percent quintile ciuintile quintile 20 percent 10 percent Low-income economies China and India Other low-income 1 Kampuchea, Oem. 2Bhutan 3 Lao. PDR 4Chad 5 Bangladesh 1973-74 69 11.3 16 1 23.5 422 274 6 Ethiopia 7 Nepal 1976-77 4.6 80 11 7 16.5 592 465 8 Burma 9 Afghanstan lOMali 11 Malawi 1967-68 10.4 11.1 13.1 14.8 506 401 l2Zare 13 Uganda 14 Burundi . . . 15 Upper Volta . . . 16 Rwanda 17 India 1975-76 70 9.2 13.9 205 49.4 33.6 18 Somalia . . . . 19 Tanzania 1969 5.8 102 13.9 19.7 50.4 356 20 VietNam .. 21 China . 22 Guinea . . . . 23 Hai . . . . 24 Sri Lanka 1969-70 7.5 1 7 15.7 21.7 43.4 282 25 Benin . 26 Centra! Afrcan Rep 27 Serra Leone 1967-69 5.6 9.5 128 196 52.5 378 28 Madagascar . . . 29 Nige' .. . 30 Pakistan . . . . 31 Mozambigue 32 Sudan 1967-68 40 89 16.6 20.7 498 34.6 33 Togo 34 Ghana Middle-income economies Oil exporters Oil importers Lower middle-income 35 Kenya 1974 2.6 63 11.5 192 604 458 36 Senega 37 Mautania 38 Yemen Arab Rep. 39 Yemen. POR 40 L'be'a "41 Indonesia 1976 66 7.8 12.6 236 49.4 34.0 42 Lesotho 43 Bolivia 44 Honcuras 45 Zambia 46 Egypt 47 E Savacor 48 Thaiianc 1975-76 5.6 96 13.9 211 498 341 49 Philippines 1970-71 5.2 90 12.8 190 54.0 385 50 Angota 51 Papua New Guinea 52 Morocco 53 Nca'agua 54 Ngena 55 Zimbabwe 56 Came roon 57 Cuba 58 Congo. Peoples Rep 59 Guatemaia 60 Pe'u 1972 19 51 110 210 610 429 61 Ecuador 62 Jamaica 63 Ivory Coast 64 Domnican Rep. 200 Percentage share of household income, by percentile groups of householdsa Lowest Second Third Fourth Highest Highest Year 20 percent quintile quintile quintile 20 percent 10 percent 65 Mongolia 66 Coombia 67 Tunisia 68 Costa Rica 1971 33 8.7 13.3 199 54 8 39.5 69 Korea Dem Rep. 70 Turkey 1973 3.5 8.0 125 19.5 565 407 71 Syran Arab Rep 72 Jordan 73 Paraguay Upper mddIe-income 74 Korea. Rep. of 75 Iran. Islamic Rep. of 76lraq 1976 ...... . .. . . . 15.4 . . 224 . . 453 . 27.5 77 Maaysia 1973 3.5 7.7 12.4 20.3 561 398 78 Panama 1970 2.0 5.2 11.0 200 618 442 79 Lebanon . . . 80 Aigena . . . 81 Brazil 1972 20 50 9.4 17.0 66.6 506 82 Mex'co 1977 29 70 12.0 204 57.7 406 83 Po'tugal 84 Argentina 1970 4.4 97 14.1 21 5 503 352 85 Chile 1968 44 90 138 21.4 514 34.8 86 South Afnca 87 Yugosav'a 1978 66 12.1 18 7 23.9 38 7 22.9 88 Uruguay . . . 89 Venezueia 1970 3.0 7.3 12.9 22.8 540 35 7 90 Geece .. .. 91 Hong Kong 1980 5.4 108 15.2 21.6 470 31.3 92 Israe 93 Singapore 94 Thnioao and Tobago 1975-76 42 9.1 13.9 22.8 50.0 31 8 High income oil exporters 95 Lbya 96 Sauo Arabia 97 Kuwat 98 United Arab Emirates Industrial market economies 99 Ireland 100 Spain 1974 6.0 118 169 23.1 422 267 101 Italy 1977 6.2 11 3 159 22.7 43.9 28.1 102 New Zealana 103 United Kingdom 1979 7.3 124 17.7 23.4 39.2 238 104 Japan 1969 79 131 16.8 21.2 41.0 272 105 Austria . . . . 106 F'nland 1977 6.8 128 18.7 249 368 21 2 107 Australia 1966-67 66 135 17.8 234 ' 38.8 237 108 Canada 1977 38 10.7 17.9 25.6 42.0 269 109 Netherlanas 1977 81 13.7 17.9 23.3 370 22.1 110 BeIgum . . . . . , . . . 458 , 111 France 1975 5.3 111 160 21.8 30.5 112 Un'ted States 1972 4.5 10.7 173 24.7 42.8 26.6 113 Denmark 1976 74 12.6 183 24.2 37.5 224 114 Germany Fed Rep 1974 69 110 154 219 448 288 115 Norway 1970 63 12.9 188 247 373 22.2 116 Swecen 1979 7.2 128 174 25.4 372 21.2 117 Switzerland East European nonmarket economies 118 Aibana 119 Hungary 120 Romania 121 Bugaria 122 Poland 123 USSR 124 Czechoslovakia 125 Ge'man Oem. Rep a These estimates should be treated with caution. See the technical notes. 201 Technical notes This edition of the World Development Indicators lowing manner. The first step is to convert the provides economic indicators for periods of years GNP series in constant market prices and national and social indicators for selected years in a form currency units to one measured in constant av- suitable for comparing economies and groups of erage 1979-81 prices. This is done by multiplying economies. Although the statistics and measures the original constant price series by the weighted- have been carefully selected to provide a compre- average domestic GNP deflator for the base period hensive picture of development, readers are urged (that is, by the ratio of total GNP in current prices to exercise care in interpreting them. This is par- to total GNP in constant prices for the 1979-81 ticularly true of comparing indicators across period). The second step is to convert the series economies, because statistical methods, coverage, measured in constant average 1979-81 prices in practices, and definitions differ widely. The sta- national currency to one in US dollars by dividing tistical systems in many developing economies still that series by the weighted-average exchange rate are weak, and this affects the availability and re- for the base period. The weighted-average ex- liability of the data, the more so for countries that change rate is the ratio of the sum of GNP in are not members of the World Bank. current prices to the sum of the GNP divided by All growth rates shown are in real terms and, the annual average exchange rate in national cur- unless otherwise noted, have been computed by rency per US dollar for 1979, 1980, and 1981. The using the least-squares method. The least-squares third step is to convert the series measured in growth rate, r, is calculated by regressing the an- constant average 1979-81 US dollars to one meas- nual values of the variable in the relevant period ured in current US dollars by multiplying that se- using the logarithmic form: Log X = a + bt + e, ries by the implicit US GNP deflator for 1979-81. where X is the variable, a is the intercept, b is the This procedure was followed for most economies. slope coefficient, t is time, and e is the error term. The GNP per capita figures were obtained by di- Then r is equal to [antilog b] - 1, the least-squares viding GNP at market prices in US dollars by the estimate of the growth rate. population in mid-1981. The use of the three-year base period is intended to smooth the impact of fluctuations in prices and exchange rates. Because the base period is changed every year, the per Table 1. Basic indicators capita estimates presented in the various editions of the World Development Indicators are not com- The estimates of population for mid-1981 are pri- parable. marily based on data from the UN Population Di- Because of problems associated with the avail- vision. In many cases the data take into account ability of data and the determination of exchange the results of recent population censuses. The data rates, information on GNP per capita is shown on area are from the FAO Production Yearbook 1980. only for East European nonmarket economies that Gross national product (GNP) measures the total are members of the World Bank. The World Bank domestic and foreign output claimed by residents. has a research project under way to estimate GNP It comprises gross domestic product (see the note per capita for nonmarket economies that are not for Table 2) and factor incomes (such as invest- members. But until a broadly acceptable method ment income and workers' remittances) accruing is prepared, figures will not be shown for the GNP to residents from abroad, less the income earned per capita of such economies. in the domestic economy accruing to persons For Romania the GNP per capita figure has been abroad. It is calculated without making deductions derived, following the World Bank Atlas method, for depreciation. by using adjusted official Romanian national ac- The GNP per capita figures were calculated ac- counts data and converting them into US dollars cording to the World Bank Atlas method, under at the effective exchange rate for foreign trade which the conversion of GNP proceeds in the fol- transactions in convertible currencies. For Hun- 202 gary the GNP per capita figure has been derived Gross domestic product per capita computed convention- by applying the Atlas method to official GNP es- ally and computed by using the ICP method, selected coun- tries, 1975 timates with the official commercial exchange rate. Several factors may influence the level and com- Index of GDP per capita (United States 100) parability of these estimates with those of other lnternatu,nal countries. The World Bank is also aware of other dollars con- GDP per capita at US dollars verted at purchasing-power- estimates that have been made for Hungary: these converted at purchasing-power- parity exchange rate official exchange parity exchange as percentage of that estimates have been derived by using methods Country rate rates at official rate that attempt to account for taxes, subsidies, wage and price distortions, and other possible distor- Africa Kenya 3.4 6.6 195 tions introduced through the exchange rate; they Malawi 1.9 4.9 255 cover a range of different results. Zambia 6.9 10.3 149 The use of official exchange rates to convert na- Asia tional currency figures to US dollars does not ac- India 2.0 6.6 322 curately measure the relative purchasing power of Iran, Islamic Rep. of 22.1 37-7 171 currencies. In particular, differences between de- Japan 62.3 68.4 110 veloping and industrial economies in their real Korea, Rep. of 8.1 20.7 254 income, measured by their GNP per capita in US Malaysia 10.9 21.5 198 Pakistan 2.6 8.2 312 dollars, are likely to be exaggerated. The reason Philippines 5.2 13.2 251 is that exchange rates are based on prices of in- Sri Lanka 2.6 9-3 365 ternationally traded goods and services and may Syrian Arab Rep. 10.0 25.0 250 bear little relation to the prices of goods and serv- Thailand 5.0 13.0 261 ices that do not enter international trade but that Europe make up the bulk of the national product of most Austria 69.8 69.6 100 developing economies. Belgium 87.8 77-7 88 The inadequacy of the exchange rate has been Denmark 104.5 82.4 79 France 89.6 81.9 91 demonstrated by the UN International Compari- Germany, Fed. Rep. 94.7 83.0 88 son Project, which has developed reliable meas- Hungary 29.6 49.6 168 ures of real GNP on an internationally comparable Ireland 37.2 42.5 114 scale (see Irving Kravis and others, A System of Italy 47.9 53.8 112 International Comparisons of Gross Product and Pur- Luxembourg 90.2 82.0 91 Netherlands 84.5 75.2 89 chasing Power [Baltimore: Johns Hopkins Univer- Poland 36.0 50.1 139 sity Press, 1975]; Kravis and others, International Romania 24.3 33.3 137 Comparisons of Real Product and Purchasing Power Spain 41.0 55-9 136 [1978]; and Kravis and others, World Product and United Kingdom 57.6 63.9 111 Income: International Comparisons of Real GDP [1982]). Yugoslavia 23.2 36.1 156 This project has already covered 34 countries and Latin America will ultimately cover about 75. The World Bank, and Caribbean the United Nations, and several other interna- Brazil 16.0 25.2 158 Colombia 7-9 22.4 283 tional and regional agencies are engaged in data Jamaica 19.6 24.0 123 gathering and research on appropriate ways of Mexico 20.4 34-7 170 extending purchasing power comparisons to all Uruguay 18.2 39.6 217 the countries of the world. Until such coverage is a. An international dollar has the same purchasing power over total comprehensive, however, exchange rates remain GDP as a US dollar. the only available means of converting GNP from Source: Kravis and others, "World Product and Income: International Comparisons of Real Gross Product (Baltimore: Johns Hopkins Uni- national currencies to US dollars for purposes of versity Press, 1982). comparison. The table on this page gives examples of the value of GDP in constant market prices, both in differences between gross domestic product per national currency. This measure of inflation has capita as conventionally computed and as com- limitations, especially for the oil-producing coun- puted using the ICP method. tries in the light of sharp increases in oil prices. The average annual inflation rate is the implicit It is used as an indicator of inflation because it is gross domestic product (GDP) deflator, which is the most broadly based deflator, showing annual calculated by dividing, for each year of the period, price movements for all goods and services pro- the value of GDP in current market prices by the duced in an economy. 203 The adult literacy rate is the percentage of persons years newborn children would live if subject to aged 15 and over who can read and write. These the mortality risks prevailing for the cross-section rates are based primarily on information from the of population at the time of their birth. Data are UN Educational, Scientific, and Cultural Organi- from the UN Population Division, supplemented zation (UNESCO), supplemented by World Bank by World Bank estimates. data. Because such data are normally. gathered in The table on this page shows basic indicators large-scale demographic surveys and censuses, they for 34 countries that have a population of less than often are not available for the most recent year. a million and are members of the United Nations, For some countries the estimates are for years other the World Bank, or both. For most of these coun- than, but generally not more than two years dis- tries, comprehensive data are not available. tant from, those specified. Thus the series are not The weighted averages in Table 1 are weighted comparable for all countries. by population. Life expectancy at birth indicates the number of Basic indicators for UN/World Bank members with a population of less than 1 million GNP per capita Area Average Average annual Adult Life ex- (thousands annual rate of inflation literacy pectancy Population of square growth (percent) rate at birth (millions) kilo- Dollars (percent) (percent) (years) UN/World Bank member Mid-1981 meters) 1981 19600b 1960-70 1970-81' 1980d 1981' Equatorial Guinea 0.3 28 180 3.7 48 Guinea-Bissau 0.8 36 190 .. .. 7.2 28 37 Maldives 0.2 (.) 1.4 1.0 14.0 82 47 Comoros 0.4 2 320 0.7 3.4 11.8 48 Cape Verde 0.3 4 340 11.2 61 Vanuatu 0.1 15 350 0.4 Gambia, The 0.6 11 370 2.5 2.2 10.7 15 42 Sao Tome and Principe 0.1 1 370 0.0 8.8 Djibouti 0.4 22 480 12.6 10 45 St. Vincent and the Grenadines 0.1 (.) 630 0.3 4.0 14.0 Western Samoa 0.2 3 68 Solomon Islands 0.2 28 640 1.3 3.0 6.8 Guyana 0.8 215 720 1.8 2.4 9.9 .. 70 Dominica 0.1 1 750 -1.0 3.8 16.9 Swaziland 0.6 17 760 5.5 2.2 11.5 65 54 Grenada 0.1 (. ) 850 1.7 3.4 14.1 69 St. Lucia 0.1 1 970 3.4 3.6 11.5 Botswana 0.9 600 1,010 7.9 2.4 11.6 35 57 Belize 0.1 23 1,080 3.0 3.4 8.7 Mauritius 0.9 2 1,270 2.1 2.2 15.0 85 65 Antigua and Barbuda 0.1 (.) 1,550 -0.2 3.1 11.7 Seychelles 0.1 (.) 1,800 2.9 66 Fiji 0.6 18 2,000 3.3 2.5 12.5 75 72 Suriname 0.4 163 3,030 5.1 2.7 9.1 65 69 Barbados 0.3 (.) 3,500 4.9 2.3 13.9 99 71 Malta 0.4 (.) 3,600 8.1 1.5 4.6 72 Bahamas 0.2 14 3,620 -0.2 3.4 6.9 93 69 Cyprus 0.6 9 3,740 6.3 1.3 5.9 89 73 Gabon 0.7 268 3,810 4.9 5.4 19.5 48 Oman 0.9 300 5,920 8.3 2.4 27.2 49 Bahrain 0.4 1 8,960 67 Iceland 0.2 103 12,860 3.3 12.2 36.8 77 Luxembourg 0.4 3 15,910 4.1 3.7 6.9 100 74 Qatar 0.2 11 27,720 2.6 2.6 58 a. See the technical notes for Table 1. b. Because data for the early 1960s are not available, figures in italics are for periods other than that specified. c. Figures in italics are for 1970-80, not 1970-81. d. Figures in italics are for years other than that specified. See the technical notes. 204 Tables 2 and 3. Growth and structure of fense and security is regarded as consumption ex- production penditure. Private consumption is the market value of all goods Most of the definitions used are those of the UN and services purchased or received as income in System of National Accounts. kind by households and nonprofit institutions. It Gross domestic product (GDP) measures the total includes imputed rent for owner-occupied dwell- final output of goods and services produced by an ings. economythat is, by residents and nonresidents, Gross domestic investment consists of the outlays regardless of the allocation to domestic and foreign for additions to the fixed assets of the economy, claims. It is calculated without making deductions plus changes in the net value of inventories. for depreciation. For most coun.tries, GDP by in- Gross domestic saving shows the amount of gross dustrial origin is measured at factor cost, but for domestic investment financed from domestic out- some countries without complete national ac- put. Comprising public and private saving, it is counts series at factor cost, market price series gross domestic investment plus the net exports of were used. GDP at factor cost is equal to GDP at goods and nonfactor services. market prices, less indirect taxes net of subsidies. Exports of goods and nonfactor services represent the The figures for GDP are dollar values converted value of all goods and nonfactor services sold to from domestic currency by using the average an- the rest of the world; they include merchandise, nual exchange rate for the year in question: that freight, insurance, travel, and other nonfactor is, they were not calculated by using the World services. The value of factor services, such as in- Bank Atlas method described in the note for Table vestment income and workers' remittances from 1. Because of these differences in concept and in abroad, is excluded. method of conversion, the figures in these tables The resource balance is the difference between ex- are not comparable with the GNP-based numbers ports and imports of goods and nonfactor services. in Table 1. The GDP figures nevertheless show the National accounts series in domestic currency relative size of different economies. units were used to compute the indicators in these As in Table 1, data are shown only for East tables. The growth rates in Table 4 were calculated European nonmarket economies that are members from constant price series; the shares of GDP in of the World Bank. Table 5, from current price series. The agricultural sector comprises agriculture, for- The summary measures in Table 5 are weighted estry, hunting, and fishing. The industrial sector by GDP in current dollars for the years in question. comprises mining, manufacturing, construction, and electricity, water, and gas. All other branches of economic activity are categorized as services. Table 6. Agriculture and food National accounts series in domestic currency The figures for value added in agriculture are from units were used to compute the indicators in these the World Bank's national accounts series in na- tables. The growth rates in Table 2 were calculated tional currencies, converted to 1975 dollars. from constant price series; the shares of GDP in Cereal imports and food aid in cereals are measured Table 3, from current price series. in grain equivalents and defined as comprising all The average growth rates for the summary cereals under the Revised Standard International measures in Table 2 are weighted by country GDP Trade Classification (SITC) Groups 041-046. The in 1970 dollars. The average sectoral shares in Table figures have discrepancies attributable to the use 3 are weighted by GDP in current dollars for the of crop-year and calendar-year data and donor- years in question. country and recipient-country data. Fertilizer consumption is measured in relation to Tables 4 and 5. Growth of consumption and arable land, defined as comprising arable land and investment; Structure of demand land under permanent crops, including land under temporary crops (double-cropped areas are counted GDP is defined in the note for Table 2. once), temporary meadows for mowing or pas- Public consumption (or general government con- tures, land under market or kitchen gardens, and sumption) includes all current expenditure for land temporarily fallow or lying idle. purchases of goods and services by all levels of The figures on food and fertilizer are from the government. Capital expenditure on national de- Food and Agriculture Organization (FAO): from 205 computer tapes for Production Yearbook 1981, Trade count because reliable and comprehensive data are Yearbook 1981, and Fertilizer Yearbook 1981; and from not available. Food Aid Bulletin, October 1980 and January 1983. The summary measures of growth rates of en- In some instances data are for 1974 because they ergy production are weighted by volumes of pro- provide the earliest available information. duction in 1974; those of growth rates of energy The index of food production per ca pita shows the consumption, by volumes of consumption in 1974; average annual quantity of food produced per cap- those of energy consumption per capita, by popula- ita in 1979-81 in relation to that in 1969-71. The tion in 1974. estimates were derived from those of the FAO, Energy imports refer to the dollar value of energy which are calculated by dividing indices of the importsSITC (Revised) Section 3and are ex- quantity of food production by indices of total pressed as a percentage of earnings from mer- population. For this index, food is defined as com- chandise exports. The summary measures are prising cereals, starchy roots, sugar cane, sugar weighted by merchandise exports in current dol- beet, pulses, edible oils, nuts, fruits, vegetables, lars. livestock, and livestock products. Quantities of food Because data on energy imports do not permit production are measured net of animal feed, seeds a distinction between petroleum imports for fuel for use in agriculture, and food lost in processing and for use in the petrochemicals industry, these and distribution. percentages may be overestimates of the depend- ence on imported energy. Table 7. Industry Table 9. Growth of merchandise trade The percentage distribution of value added among manufacturing industries was calculated from data The statistics on merchandise trade are from UN obtained from the UN Industrial Development Or- publications and the UN trade data system, sup- ganization (UNIDO), with the base values ex- plemented by statistics from the UN Conference pressed in 1975 dollars. on Trade and Development (UNCTAD), the In- The classification of manufacturing industries is ternational Monetary Fund (IMF), and in a few in accord with the UN International Standard In- cases World Bank country documentation. dustrial Classification of All Economic Activities Merchandise exports and imports cover, with some (ISIC). Food and agriculture comprise ISIC Major exceptions, all international changes in ownership Groups 311, 313, and 314; textiles and clothing 321- of goods passing across customs borders. Exports 24; machinery and transport equipment 382-84; and are valued f.o.b. (free on board), imports c.i.f. chemicals 351 and 352. Other manufacturing com- (cost, insurance, and freight), unless otherwise prises ISIC Major Division 3, less all of the above. specified in the foregoing sources. These values The figures for value added in manufacturing are are in dollars at prevailing exchange rates. Note from the World Bank's national accounts series in that they do not include trade in services and are national currencies, converted to 1975 dollars. thus different from the trade figures in Part I of this year's World Development Report. The growth rates of merchandise exports and imports Table 8. Commercial energy are in real terms and are calculated from quantum (volume) indices of exports and imports. For most The data on energy generally are from UN sources. developing economies these indices are from the They refer to commercial forms of primary energy: UNCTAD Handbook of International Trade and De- petroleum and natural gas liquids, natural gas, velopment Statistics and supplementary data that solid fuels (coal, lignite, and so on), and primary show revisions and updates. For industrial econo- electricity (nuclear, geothermal, and hydroelectric mies the indices are from the UN Yearbook of In- power)all converted into coal equivalents. Fig- ternational Trade Statistics and UN Monthly Bulletin ures on liquid fuel consumption include petroleum of Statistics. The summary measures are median derivatives that have been consumed in non- values. Note again that these values do not include energy uses. For converting primary electricity into trade in services and are thus different from the coal equivalents, a notional thermal efficiency of trade figures in Part I of this year's World Devel- 34 percent has been assumed. The use of firewood opment Report. and other traditional fuels, though substantial in The terms of trade, or the net barter terms of some developing countries, is not taken into ac- trade, are calculated as the ratio of a country's 206 index of export unit values to that of import unit Table 12. Origin and destination of merchandise values. The terms-of-trade index numbers shown exports for 1978 and 1981, with 1975 = 100, thus indicate changes in export prices in relation to import prices. Merchandise exports are defined in the note for Table Note in this year's edition that data are given for 9. Trade shares in this table are based on statistics 1978 rather than 1960. The unit value indices are on the value of trade in current dollars from the from the same sources cited above for the growth UN and the IMF except those for nonmember East rates of exports and imports. European nonmarket economies, which are based on data from the Secretariat of the Council for Mutual Economic Aid (coMEcoN). Unallocated exports are distributed among the economy groups Tables 10 and 11. Structure of merchandise in proportion to their respective shares of allocable trade trade. Industrial market economies also include Gi- The shares in these tables are derived from trade braltar, Iceland, and Luxembourg; high-income oil values in current dollars reported in UN trade tapes exporters also include Qatar. The summary meas- and the UN Yearbook of International Trade Statistics, ures are weighted by merchandise exports in cur- supplemented by other regular statistical publi- rent dollars. cations of the UN and the IMF. Merchandise exports and imports are defined in the note for Table 9. Table 13. Origin and destination of In the categorization of exports in Table 10, fuels, manufactured exports minerals, and metals are the commodities in SITC (Revised) Section 3, Divisions 27 and 28, and the The data in this table are from the United Nations nonferrous metals of Division 68. Other primary and are among those used to compute special Table commodities comprise SITC Sections 0, 1, 2, and 4 B in the UN Yearbook of International Trade Statistics. (food and live animals, beverages and tobacco, Manufactured goods are the commodities in SITC inedible crude materials, oils, fats, and waxes) less (Revised) Sections 5 through 9 (chemicals and re- Divisions 27 and 28 (minerals, crude fertilizers, lated products, manufactured articles, and ma- and metalliferous ores). Textiles and clothing rep- chinery and transport equipment) excluding Di- resent SITC Divisions 65 and 84 (textiles, yarns, vision 68 (nonferrous metals). fabrics, and clothing). Machinery and transport equip- The economy groups are the same as those in ment are the commodities in SITC Section 7. Other Table 12. The summary measures are weighted by manufactures, calculated as the residual from the manufactured exports in current dollars. total value of manufactured exports, represent SITC Sections 5 to 9 less Section 7 and Divisions 65, 68, and 84. Table 14. Balance of payments and reserves In the categorization of imports in Table 11, food commodities are those in SITC (Revised) Sections The current account balance is the difference between 0, 1, and 4 and in Division 22 (food and live an- (i) exports of goods and services plus inflows of imals, beverages and tobacco, and oils and fats). unrequited official and private transfers and (ii) Fuels are the commodities in SITC Section 3 (min- imports of goods and services plus unrequited eral fuels, lubricants, and related materials). Other transfers to the rest of the world. The current ac- primary commodities comprise SITC Section 2 (crude count estimates are from IMF data files. materials excluding fuels), less Division 22 plus Net direct private investment is the net amount Division 68 (nonferrous metals). Machinery and invested or reinvested by nonresidents in enter- transport equipment are the commodities in SITC prises in which they or other nonresidents exercise Section 7. Other manufactures, calculated as the re- significant managerial control. Including equity sidual from the total value of manufactured im- capital, reinvested earnings, and other capital, these ports, represent SITC Sections 5 to 9 less Section net figures also take into account the value of di- 7 and Division 68. rect investment abroad by residents of the re- The summary measures in Table 10 are weighted porting country. IMF data files were used in com- by merchandise exports in current dollars; those piling these estimates. in Table 11, by merchandise imports in current Workers' remittances cover remittances of income dollars. by migrants who are employed or expected to be 207 employed for more than a year in their new econ- teed loans that has been disbursed, net of repay- omy, where they are considered residents. ments of principal and write-offs at year-end. In Gross international reserves comprise holdings of estimating external public debt as a percentage of gold, special drawing rights (SDRs), the reserve GNP, GNP was converted from national curren- position of IMF members in the Fund, and hold- cies to dollars at the average official exchange rate ings of foreign exchange ui3der the coMrol of mon- for the year in question. The summary measures etary authorities. The gold component of these are weighted by GNP in current dollars. reserves is valued throughout at year-end London Interest payments are those on the disbursed and prices: that is, $37.37 an ounce in 1970 and $397.50 outstanding public and publicly guaranteed debt an ounce in 1981. The data on holdings of inter- in foreign currencies, goods, or services; they in- national reserves are from IMF data files. The re- clude commitment charges on undisbursed debt serve levels for 1970 and 1981 refer to the end of if information on those charges was available. the year indicated and are in current dollars at Debt service is the sum of interest payments and prevailing exchange rates. The reserve holdings at repayments of principal on external public and the end of 1981 are also expressed in the number publicly guaranteed debt. The ratio of debt service of months of imports of goods and services they to exports of goods and services is one of several could pay for, with imports at the average level rules of thumb commonly used to assess the ability for 1980 or 1981. The summary measures are to service debt. The average ratios of debt service weighted by imports of goods and services in cur- to GNP for the economy groups are weighted by rent dollars. GNP in current dollars. The average ratios of debt service to exports of goods and services are Table 15. Flow of public and publicly weighted by exports of goods and services in cur- guaranteed external capital rent dollars. The data on debt in this and successive tables are from the World Bank Debt Reporting System. That Table 17. Terms of public borrowing system is concerned solely with developing econo- mies and does not collect data on external debt Commitments refer to the public and publicly guar- for other groups of borrowers. Nor are compre- anteed loans for which contracts were signed in hensive comparable data available from other the year specified. sources. - Interest rates, maturities, and grace periods are av- Data on the gross inflow and repayment of principal erages weighted by the amounts of loans. Interest (amortization) are for public and publicly guar- is the major charge levied on a loan and is usually anteed medium- and long-term loans. The net in- computed on the amount of principal drawn and flow is the gross inflow less the repayment of prin- outstanding. The maturity of a loan is the interval cipal. between the agreement date, when a loan agree- Public loans are an obligation of a public debtor, ment is signed or bonds are issued, and the date including the national government, its agencies, of final repayment of principal. The grace period and autonomous public bodies. Publicly guaran- is the interval between the agreement date and teed loans are external obligations of private debt- the date of the first principal repayment. ors that are guaranteed for repayment by a public The summary measures in this table are weighted entity. by the amounts of loans. The data in this table and in successive tables on debt do not cover unguaranteed private debt because comprehensive data are not available; for Table 18. Official development assistance from some borrowers such debt is substantial. The debt OECD and OPEC members contracted for purchases of military equipment is also excluded because it usually is not reported. Official development assistance (ODA) consists of net disbursements of loans and grants made at conces- Table 16. External public debt and debt service sional financial terms by official agencies of the ratios members of the Development Assistance Com- mittee (DAC) of the Organisation for Economic External public debt outstanding and disbursed repre- Co-operation and Development (OECD) and sents the amount of public and publicly guaran- members of the Organization of Petroleum Ex- 208 porting Countries (OPEC) with the objective of and from the World Bank, the Population Council, promoting economic development and welfare. It the US Bureau of the Census, and recent national includes the value of technical cooperation and censuses. assistance. All data shown were supplied by the The net reproduction rate (NRR) indicates the OECD. number of daughters that a newborn girl will bear Amounts shown are net disbursements to de- during her lifetime, assuming fixed age-specific veloping countries and multilateral institutions. The fertility rates and a fixed set of mortality rates. disbursements to multilateral institutions are now The NRR thus measures the extent to which a reported for all DAC members on the basis of the cohort of newborn girls will reproduce themselves date of issue of notes; some DAC members pre- under given schedules of fertility and mortality. viously reported on the basis of the date of en- An NRR of 1 indicates that fertility is at replace- cashment. Net bilateral flows to low-income countries ment level: at this rate childbearing women, on exclude unallocated bilateral flows and all dis- the average, bear only enough daughters to re- bursements to multilateral institutions. place themselves in the population. A population The nominal values shown in the summary for continues to grow after replacement-level fertility ODA from OECD countries were converted into has been reached because its past higher birth 1980 prices using the dollar GNP deflator. This rates will have produced an age distribution with deflator is based on price increases in OECD coun- a relatively high proportion of women in, or still tries (excluding Greece, Portugal, and Turkey) to enter, the reproductive ages. The time taken measured in dollars. It takes into account the par- for a country's population to become stationary ity changes between the dollar and national cur- after reaching replacement-level fertility thus de- rencies. For example, when the dollar depreciates, pends on its age structure and previous fertility price increases measured in national currencies have patterns. to be adjusted upward by the amount of the de- A stationary population is one in which age- and preciation to obtain price increases in dollars. sex-specific mortality rates have not changed over The table, in addition to showing totals for OPEC, a long period, while age-specific fertility rates have shows totals for the Organization of Arab Petro- simultaneously remained at replacement level leum Exporting Countries (OAPEC). The donor (NRR= 1). In such a population, the birth rate is members of OAPEC are Algeria, Iraq, Kuwait, Li- constant and equal to the death rate, the age struc- bya, Qatar, Saudi Arabia, and United Arab Emir- ture also is constant, and the growth rate is zero. ates. ODA data for OPEC and OAPEC were also To make the projections, assumptions about fu- obtained from the OECD. ture mortality rates were made in terms of female life expectancy at birth (that is, the number of years a newborn girl would live if subject to the mortality risks prevailing for the cross-section of Table 19. Population growth, past and population at the time of her birth). Economies projected, and hypothetical stationary were first divided according to whether their pri- population mary-school enrollment ratio for females was above or below 70 percent. In each group a set of annual The growth rates of population are period averages increments in female life expectancy was assumed, calculated from midyear populations. The sum- depending on the female life expectancy in 1975- mary measures are weighted by population in 1970. 80. For a given life expectancy at birth, the annual The projections of population for 1990 and 2000, increments during the projection period are larger and to the year in which it will eventually become in economies having a higher primary-school en- stationary, were made for each economy sepa- rollment ratio in 1975-80 and a life expectancy of rately. Starting with information on total popula- up to 62.5 years. At higher life expectancies, the tion by age and sex, fertility rates, and mortality increments are the same. rates in the base year 1980, these parameters were To project the fertility rates, the first step was projected at five-year intervals on the basis of gen- to estimate the year in which fertility would reach eralized assumptions until the population became replacement level. These estimates are speculative stationary. The base-year estimates are from up- and are based on information on trends in crude dated computer printouts of UN, World Population birth rates (defined in the note for Table 20), total Prospects as Assessed in 1980, from the most recent fertility rates (also defined in the note for Table issue of UN, Population and Vital Statistics Report, 20), female life expectancy at birth, and the per- 209 formance of family planning programs. For most are from the same sources mentioned in the note economies it was assumed that the total fertility for Table 19. rate would decline between 1980 and the year of The percentage of married women using contracep- reaching a net reproduction rate of 1, after which tives refers only to married women of childbearing fertility would remain at replacement level. For age (15-44 years). These data are mainly derived sub-Saharan Africa, total fertility rates were as- from Dorothy Nortman and Ellen Hofstatter, Pop- sumed to remain constant until 1990-95 and then ulation and Family Planning Programs: A Fact book (New to decline until replacement level was reached. For York: Population Council, various issues); Doro- a few other countries in Asia and the Middle East, thy Nortman, "Changing Contraceptive Patterns: those rates were also assumed to remain constant A Global Perspective," Population Bulletin, vol. 32, for some years before beginning to decline. In sev- no. 3 (Washington, D.C.: Population Reference eral industrial economies, fertility is already below Bureau, August 1977); Office of Population, Family replacement level. Because a population will not Planning Service Statistics, Annual Report 1976 remain stationary if its net reproduction rate is (Washington, D.C.: US Agency for International other than 1, it was necessary to assume that fer- Development); and publications of the World Fer- tility rates in these economies would regain re- tility Survey. The data refer to a variety of years, placement levels in order to make estimates of the generally not more than two years distant from stationary population for them. For the sake of those specified. consistency with the other estimates, the total fer- All summary measures are weighted by popu- tility rates in the industrial economies were as- lation. sumed to increase to replacement level by 2000 and then to remain constant. For all the projections, it was assumed that in- ternational migration would have no effect. Table 21. Labor force The estimates of the hypothetical size of the stationary population, the assumed year of reach- The population of working age refers to the popula- ing replacement-level fertility, and the year of tion aged 15-64. The estimates are based on the reaching a stationary population are speculative. population estimates of the World Bank for 1981 They should not be regarded as predictions. They are and previous years. The summary measures are included to provide a summary indication of the weighted by population. long-run implications of recent fertility and mor- The labor force comprises economically active tality trends on the basis of highly stylized as- persons age 10 years and over, including the armed sumptions. They differ from the corresponding forces and the unemployed, but excluding house- figures in last year's edition because of the as- wives, students, and other economically inactive sumption of a higher life expectancy at birth: 82.5 groups. Agriculture, industry, and services are de- years compared with 77.5. A fuller description of fined in the same manner as in Table 2. The es- the methods and assumptions used to calculate timates of the sectoral distribution of the labor the estimates is available from the Population, force are from International Labour Office (ILO), Health, and Nutrition Department of the World Labour Force Estimates and Projections, 1950-2000, and Bank. from the World Bank. The summary measures are weighted by labor force. Table 20. Demographic and fertility-related The labor force growth rates were derived from the indicators Bank's population projections and ILO data on age-specific activity rates, from the source cited The crude birth and death rates indicate the number above. The summary measures for 1960-70 and of live births and deaths per thousand population 1970-81 are weighted by labor force in 1970; those in a year. They are from the same sources men- for 1980-2000, by estimates of labor force in 1980. tioned in the note for Table 19. Percentage changes The application of ILO activity rates to the Bank's are computed from unrounded data. latest population estimates may be inappropriate The total fertility rate represents the number of for some economies in which there have been im- children that would be born per woman, if she portant changes in unemployment and under- were to live to the end of her childbearing years employment, in international and internal migra- and bear children at each age in accord with pre- tion, or in both. The labor force projections for vailing age-specific fertility rates. The rates given 1980-2000 should thus be treated with caution. 210 Table 22. Urbanization into account revised estimates of population. Nursing persons include graduate, practical, as- The data on urban population as a percentage of total sistant, and auxiliary nurses; the inclusion of aux- population are from the UN (Patterns of Urban and iliary nurses enables a better estimation of the Rural Population Growth, Population Studies, no. availability of nursing care. Because definitions of 68, 1980), supplemented by data from the World nursing personnel varyand because the data Bank and from various issues of the UN Demo- shown are for a variety of years, generally not graphic Yearbook. more than two years distant from those speci- The growth rates of urban population were calcu- fiedthe data for these two indicators are not lated from the World Bank's population estimates; strictly comparable. The daily calorie supply per capita the estimates of urban population shares were cal- was calculated by dividing the calorie equivalent culated from the sources cited above. of the food supplies in an economy by the pop- Data on urban agglomeration are also from the ulation. Food supplies comprise domestic produc- United Nations. tion, imports less exports, and changes in stocks; Because the estimates in this table are based on they exclude animal feed, seeds for use in agri- different national definitions of what is "urban," culture, and food lost in processing and distribu- cross-country comparisons should be interpreted tion. The daily calorie requirement per capita refers to with caution. the calories needed to sustain a person at normal The summary measures for urban population as levels of activity and health, taking into account a percentage of total population are weighted by age and sex distributions, average body weights, population; the other summary measures in this and environmental temperatures. Both sets of es- table are weighted by urban population. timates are from the Food and Agriculture Organ- ization. The summary measures in this table are weighted Table 23. Indicators related to life expectancy by population. Life expectancy at birth is defined in the note for Table 1. Table 25. Education The infant mortality rate is the number of infants who die before reaching one year of age, per thou- The data in this table refer to a variety of years, sand live births in a given year. The data are from generally not more than two years distant from a variety of sourcesincluding different issues of those specified, and are mostly from UNESCO. the UN Demographic Yearbook and UN, "Infant The data on number enrolled in primary school refer Mortality: World Estimates and Projections, 1950- to estimates of total, male, and female enrollment 2025," Population Bulletin of the United Nations, no. of students of all ages in primary school; they are 14 (1982)and from the World Bank. expressed as percentages of the total, male, or The child death rate is the number of deaths of female populations of primary-school age to give children aged 1-4 per thousand children in the gross primary enrollment ratios. Although pri- same age group in a given year. Estimates were mary-school age is generally considered to be 6- based on the data on infant mortality and on the 11 years, the differences in country practices in relation between the infant mortality rate and the the ages and duration of schooling are reflected child death rate implicit in the appropriate Coale- in the ratios given. For countries with universal Demeny Model life tables; see Ansley J. Coale and primary education, the gross enrollment ratios may Paul Demeny, Regional Model Life Tables and Stable exceed 100 percent because some pupils are below Populations (Princeton, N.J.: Princeton University or above the official primary-school age. Press, 1966). The summary measures in this table The data on number enrolled in secondary school are weighted by population. were calculated in the same manner, with second- ary-school age generally considered to be 12-17 years. Table 24. Health-related indicators The data on number enrolled in higher education are from UNESCO. The estimates of population per physician and nursing The adult literacy rate is defined in the note for person were derived from World Health Organi- Table 1. zation (WHO) data, some of which have been re- The summary measures in this table are weighted vised to reflect new information. They also take by population. 211 Table 26. Defense and social expenditure especially those for education and health, are not comparable for a number of reasons. In many Data on the central government transactions are economies private health and education services from the IMF Government Finance Statistics Yearbook, are substantial; in others public services represent IMF data files, and World Bank country docu- the major component of total expenditures but mentation. These transactions include current and may be financed by lower levels of government. capital (development) expenditure. The inade- Great caution should therefore be exercised in us- quate statistical coverage of state, provincial, and ing the data for cross-economy comparisons. local governments and the nonavailability of data The summary measures for defense expenditure for these lower levels of government has dictated as a percentage of GNP are weighted by GNP in the use only of central government data. This may current dollars; those for defense expenditure as seriously understate or distort the statistical por- a percentage of central government expenditure, trayal of the allocation of resources for various by central government expenditure in current dol- purposes, especially in large countries where lower lars. The other summary measures in this table levels of government have considerable autonomy are weighted by population. and are responsible for many social services. Central government expenditure comprises the ex- penditure by all government offices, departments, establishments, and other bodies that are agencies Table 27. Income distribution or instruments of the central authority of a coun- try. It does not necessarily comprise all public ex- The data in this table refer to the distribution of penditure. total disposable household income accruing to per- Defense expenditure comprises all expenditure, centile groups of households ranked by total whether by defense or other departments, for the household income. The distributions cover rural maintenance of military forces, including the pur- and urban areas and refer to different years be- chase of military supplies and equipment, con- tween 1966 and 1981. struction, recruiting, and training. Also falling under The estimates for developing economies in Asia this category is experiditure for strengthening the and Africa are from the results of a joint project public services to meet wartime emergencies, for of the World Bank and the International Labour training civil defense personnel, and for foreign Office (ILO). Those for Turkey, Hong Kong, Ma- military aid and contributions to military organi- laysia, and the Republic of Korea are from data zations and alliances. gathered by the World Bank from national sources Education expenditure comprises public expend- but not adjusted. The estimates for Sri Lanka are iture for the provision, management, inspection, from the results of a joint project of the World and support of preprimary, primary, and second- Bank and the Economic and Social Commission ary schools; of universities and colleges; and of for Asia and the Pacific. The estimates for Latin vocational, technical, and other training institu- American countries other than Mexico come from tions by central governments. Also included is ex- the results of two joint projects of the World Bank, penditure on the general administration and reg- one with the ILO, the other with the Economic ulation of the education system; on research into Commission for Latin America. Those for Mexico its objectives, organization, administration, and are the results from the 1977 Household Budget methods; and on such subsidiary services as trans- Survey. port, school meals, and medical and dental serv- Data for industrial market economies other than ices in schools. the Netherlands are from Malcolm Sawyer, Income Health expenditure covers public expenditure on Distribution in OECD Countries (OECD Occasional hospitals, medical and dental centers, and clinics Studies, July 1976); the joint project of the ILO with a major medical component; on national health and the World Bank; and the UN Statistical Office, and medical insurance schemes; and on family A Survey of National Sources of Income Distribution planning and preventive care. Also included is Statistics (Statistical Papers, Series M, no. 72, 1981). expenditure on the general administration and Data for the Netherlands are from that country's regulation of relevant government departments, statistical office. hospitals and clinics, health and sanitation, and Because the collection of data on income distri- national health and medical insurance schemes. bution has not been systematically organized and It must be emphasized that the data presented, integrated with the official statistical system in many 212 countries, estimates were typically derived from which households are ranked according to per surveys designed for other purposes, most often capita household income, not according to their consumer expenditure surveys, which also collect total household income, is superior for many pur- some information on income. These surveys use poses. The distinction is important because house- a variety of income concepts and sample designs. holds with low per capita incomes frequently are Furthermore, the coverage of many of these sur- large households, whose total income may be rel- veys is too limited to provide reliable nationwide atively high. Information on the distribution of per estimates of income distribution. Thus, although capita household income exists, however, for only the estimates shown are considered the best avail- a few countries. The World Bank Living Standards able, they do not avoid all these problems and Measurement Study is developing procedures and should be interpreted with extreme caution. applications that can assist countries in improving The scope of the indicator is similarly limited. their collection and analysis of data on income Because households vary in size, a distribution in distribution. 213 Bibliography of data sources National A System of National Accounts. New York: UN Department of International Economic and accounts and Social Affairs, Statistical Office, 1968. economic Statistical Yearbook. New York: UN Department of International Economic and Social Affairs, indicators Statistical Office, various issues. World Bank Atlas, 1983. Washington, D.C.: World Bank, 1983. World Bank data files. FAO and UNIDO data files. National sources. Energy World Energy Supplies. UN Statistical Papers, Series J, various numbers. New York: UN Department of International Economic and Social Affairs, various years. World Bank data files. Trade Direction of Trade. Washington, D.C.: International Monetary Fund (IMF), various issues. International Financial Statistics. Washington, D.C.: IMF, various issues. Handbook of International Trade and Development Statistics. New York: UN Conference on Trade and Development, various issues. Monthly Bulletin of Statistics. New York: UN Department of International Economic and Social Affairs, Statistical Office, various issues. Yearbook of International Trade Statistics. New York: Department of International Economic and Social Affairs, Statistical Office, various issues. United Nations trade tapes. Balance of Balance of Payments Manual. 4th ed. Washington, D.C.: IMF, 1977. payments, International Monetary Fund balance-of-payments data files. capital flows Development Co-operation. Paris: OECD, various annual issues. and debt World Bank Debt Reporting System. Population World Population Prospects as Assessed in 1980. New York: UN Department of International Economic and Social Affairs, Population Division, 1979. United Nations population tapes. World Population: 1977. Washington, D.C.: US Bureau of the Census, International Statistical Programs Center, 1978. World Bank Atlas, 1983. Washington, D.C.: World Bank, 1983. World Bank data files. Labor force Labour Force Estimates and Projections, 1950-2000. 2nd ed. Geneva: International Labour Office, 1977. International Labour Office tapes. World Bank data files. Social Demographic Yearbook. New York: UN Department of International Economic and Social indicators Affairs, Statistical Office, various issues. Statistical Yearbook. New York: UN Department of International Economic and Social Affairs, Statistical Office, various issues. Statistical Yearbook. Paris: UNESCO, various issues. World Health Statistics Annual. Geneva: WHO, various issues. World Health Statistics Report. Special Issue on Water and Sanitation, vol. 29, no. 10. Geneva: WHO, 1976. Government Finance Statistics Yearbook, Vol. IV, 1980. Washington, D.C.: IMF, 1980. World Bank data files. 214 The World Bank World Development Report 1983 analyzes in its opening chapters the severe repercussions of the 1980-82 world recession on developing countriesthe stagnation in world trade, compounded by the sharp deterioration in commodity prices and high interest rates that have halted economic progress in so many countries and given rise to severe debt problems. In reviewing prospects for the 1980s, the Report argues for concerted in- ternational action to roll back protectionism and maintain growth in capital flows, especially concessional aid to low-income countries. The unfavorable external environment tacing the developing countries lends partic- ular urgency to strengthening development performance. The management aspects of development are the main topic of he 1983 edition. The second part of the Report discusses the means available to governments to make their bureaucracies and state- owned enterprises more efficient. It focuses on issues in economic planning, financial management, decentralization, and accountability. The authors have drawn heavily on country experience worldwide, as well as on the Bank's own experience gained from assisting several thousand projects over the past quarter century. Numerous tables and multicolor maps and graphics supplement the main body of the Report. Case studies are interspersed to provide analyses directly related to the substance of the text. The final portion of the Report comprises "World Development Indicators," 2? two-page tables containing economic and social profiles of 125 countries. World Development Report has been published annually by the World Bank since 1978. Each edition examines the current world economic situation and prospects as they relate to development and offers a detailed analysis of a particular topic or sector of importance in economic and social development. ISBN 0-19-520432-8 ISSN 0163-5085