ISLAMABAD: Middle-income countries will need progressively greater economic freedom and political courage to bring change in the persistence of institutions and long-standing arrangements.
With rising debt and ageing populations at home, growing protectionism in advanced economies, and escalating pressures to speed up the energy transition, today’s middle-income countries are facing growing headwinds, warns the ‘World Development Report 2024’, which provides the first comprehensive roadmap to enable developing countries to escape the “middle-income trap”.
Today, 108 countries are classified as middle-income and many of them aspire to reach the high-income status within the next two or three decades, the report says.
It added that a handful of economies that have gone from middle- to high-income status have encouraged enterprise by disciplining powerful incumbents, developed talent by rewarding merit and capitalised on crises to alter policies.
The World Bank called for a similar strategy for middle-income countries, which the report said have smaller reservoirs of skilled talent than advanced economies and are also less efficient at utilising them.
Exigencies such as the rise of populism and climate change provide opportunities to dismantle outdated arrangements and make room for new ones, the report says.
The report proposes a “3i strategy” for countries to reach high-income status.
Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies.
However, once they attain lower-middle-income status, they need to shift gears and expand the policy mix to the 2i phase: investment and infusion, which consists of adopting technologies from abroad and spreading them across the economy.
Published in Dawn, August 11th, 2024
