What are the ingredients for successful growth in developing countries?

Developing countries can achieve fast, sustained, equitable growth if they take advantage of opportunities in the global economy and have committed leaders. Those are among the messages in a report that Danuta Hübner, Commissioner for Regional Policy, and Nobel Laureate Michael Spence present today in Brussels. The 'Growth Report: Strategies for Sustained Growth and Inclusive Development' concludes two years of work by the Commission on Growth and Development. Commissioner Hübner was a member of this group, created under the auspices of the World Bank, and chaired by Professor Spence. The report identifies distinctive characteristics of successful growth, using 13 high-growth economies since 1950 as examples, and explores how developing countries can emulate them.

The report examines the economies of Botswana, Brazil, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan (China) and Thailand. All have enjoyed high, sustained growth since World War II. All have some characteristics in common, such as their strategic integration in the world economy, mobility of resources, particularly labour, high savings and investment rates, and capable governments committed to growth.

Commenting on the report, Commissioner Hübner said: “We agreed in our discussions that growth should be inclusive to be sustainable and that growth strategies should be based on equal opportunities for all. Leadership and credible, pragmatic governments play an important role. No country has ever industrialised without urbanising. That is why urbanisation needs to be well managed. This is true not just for developing countries; it is also how we have designed our European Cohesion Policy. ”

Among the ingredients which the report highlights are:

  1. Leadership and governance: Leaders need to conduct policymaking in a patient, pragmatic and experimental way.
  2. Involvement in the world economy: Growth strategies that rely exclusively on domestic demand have limited time spans.
  3. Need for investment: The report makes clear that growth requires high levels of investment. Overall, public and private sector investment rates of 25 percent of GDP or more are needed. Investment in infrastructure, education and health are crucial.
  4. Environment and energy use: The report argues against the growing pattern of subsidising energy consumption in developing countries. The report recommends more generous incentives for developing energy-efficient technologies, and the setting up of an international institution to monitor emissions cuts.
  5. The urban-rural nexus: With half of the world’s population now living in cities, the report reminds us that no country has ever industrialised without also urbanising.

What it the Commission on Growth and Development?

The Commission on Growth and Development is an independent body launched in April 2006. Its objective is to deepen the understanding of economic growth for development and poverty reduction. It aims to highlight policy actions which are likely to improve developing countries' growth prospects.