World Bank Document

Compared with the industrialized maintain strong growth after 1985. developing countries, the potencountries,growth per person in * The capital-surplus oil ex- tial exists for substantially fasterdeveloping countries will be slightly porters can contribute to efficient growth. While the chances of exlower.The resultant widening in recycling by expanding their ceeding the High case seem slim,income disparities occurs primarily holdings of real and financial it is important that all countriesbecause of slow growth in the foreign assets, by avoiding disrup- recognize the advantages-and thelow-income countries and in the tions in oil supplies or sharp price feasibility-of higher growth.two slowest-growing middle-in- fluctuations, and by extending more What would it require? Onecome groups. Research for this Report direct financial support-conces- important element is more effecsuggeststhat average growth per sional and nonconcessional-to tive adjustment by the industrialpersonof about 1.5 percent a year developingcountries.Andtheycan ized countries, particularly to higherin low-income countries and about help the developing countries to energy costs. Another is a liberal2 percent in middle-income coun- expand foreign earnings by buy- trade environment, with lesstries is needed to prevent the ing more from them and by con- protection for products in whichnumber of people in absolute pov- tinuing to provide employment developing countries have anerty from rising. Thus, for these for their migrant workers. actual or potential cost advantageslow-growing groups (except South * The industrialized countries (this would help to reduce infla-Asia in the High case) the extent can help by avoiding excessive tionary pressures). A third is moreof absolute poverty is likely to in- deflation and by promoting tech- progress by all countries in procreaseduring the decade. nical and policy innovations to ducing and conserving energy, andovercome structural constraints, some reasonable assurance thatPolicy implications by country thus encouraging a rapid resump- supplies would not be suddenlycategories tion of sustained growth. They willassist developing countries (anddisrupted. Improvements in effi-ciency and some further increasesGiven current policies, growth in themselves) by importing more in domestic savings in developingoil-importing developing countries, from them; this requires trade countries would also be valuable.with their total population of 1.8 liberalization as well as economic Finally, capital flows to developingbillion, is likely to be unacceptably growth. The industrialized coun- countries would need to increaselow. The steps needed to move tries should reverse the tendency substantially. Given increases intoward, or beyond, the High case for their aid to fall as a share developing-country exports (andcan be summarized by country of GNP and should encourage thus in debt-servicing capacity)group. prudent expansion in lending and in the efficiency with which* For the oil-importing devel- from their commercial capital capital is used, developing counopingcountries, faster growth markets to developing countries. tries would become increasinglydepends heavily on economic The low-income countries in par- attractive customers to commercialmanagement. This requires efforts ticular need more external finan- lenders. If the industrialized countoincrease exports and invest- cial support than is currently tries grew more rapidly, they wouldment, and to improve the efficiency in prospect. The richer centrally find it easier to provide more aid.with which existing and new in- planned economies also have the With good progress in all thesevestment is used. But increasing capacity to extend considerably areas, GNP per person in thetheir import capacity and their more aid to developing countries developing countries perhapsability to service debt will require and to expand trade with them. could grow 4.3 percent a year inbuoyant export markets, and morethe second half of the 1980s (comcapitalfrom abroad. What would be required for even pared with 3.3 percent in the High* The oil-exporting developing faster growth? case). This would mean growthcountries can grow rapidly; butof 3.9 percent a year in the oiltheymust invest their oil revenues It will take the kind of strong efforts exporting developing countries,productively in the early part of discussed above to reach the High 3.6 percent in the low-income oilthe decade, and ensure that effi- case. But that growth is itself low importers and 4.6 percent in thecient production is encouraged in -measured against that of the 1960s middle-income oil importers.the nonoil as well as oil sectors of and the first part of the 1970s, and Achieving these results wouldthe economy. This will enhance by any reasonable expectations for require much more internationaltheir creditworthiness for the development. Both for the world cooperation than now seems likely.expanded borrowing needed to economy and especially for the Aid of at least 0.5 percent of in-12