2 Global changes
In 2014, growth rates in traditional developed countries averaged around 2 %, while the corresponding figure for emerging economies was 4.8 %. According to the World Bank, this trend is set to continue. In 2010, non-OECD countries’ share in world GDP surpassed that of OECD countries for the first time.
Many of the countries in East and Southeast Asia have experienced strong economic growth in recent decades. A number of them have specialised their production in order to participate in global value chains. The same is true for several countries in Latin America. South Asia and sub-Saharan Africa have lagged behind, but this is beginning to change. Over the past 25 years, the proportion of people living in extreme poverty has been more than halved. Altogether, 700 million people have risen above the extreme poverty threshold. This is primarily due to economic growth.
Economic growth has been particularly strong in China, and to some extent in India, and it has had a major impact on the economies of other countries. Growing demand for natural resources has contributed to increased growth in many African countries, especially following major discoveries of coal, oil and gas. But investments in infrastructure, agriculture and tourism have also been important for this growth. On average, the countries of sub-Saharan Africa have experienced an annual economic growth rate of 5.1 % since 2000, while the value of exports from African countries has quadrupled. Several of the world’s fastest growing economies are now in Africa.
Although there are signs of industrial growth and renewal of the industrial structure in some African countries, these tendencies are not yet very pronounced. This suggests that increased investments alone are not enough to ensure private sector development that raises employment levels and creates more productive jobs. At the same time, there is a need to intensify efforts to ensure that nothing hinders the benefits of economic growth from being spread so that they can boost more of the economy in the country concerned.
One of the main challenges will be to build on the favourable trends and ensure that they continue in the years ahead. In order to succeed in this, the private sector needs to become more diversified and integrated into the global economy. Access to modern information and communication services that allow these countries to participate in the global information economy will be crucial. In addition, the private sector must contribute to the transition to a green economy.
Figure 2.1 Senegal. Container terminal in Dakar.
Photo: PIDG/Emerging Africa Infrastructure Fund
In parallel with economic growth, the disparities within many countries have increased. It is crucial that economic growth contributes to job creation and decent working conditions, so that as many people as possible can benefit from it. Even if economic growth continues at the present rate, it may be impossible to achieve the goal of eradicating extreme poverty by 2030 unless there is more equitable income distribution. Economic growth needs to go hand in hand with policies that ensure equitable distribution and that safeguard other key development concerns.
Continued progress depends to a great extent on higher education and training, well-functioning markets for finance, goods and labour, the ability to take advantage of technology, the capacity to adapt for a green economy, and access to important markets both at home and abroad.
2.1 An enabling environment and cross-cutting themes
A number of themes that are important for private sector development are not linked to specific sectors, but are cross-cutting in nature. At the national level, an enabling environment for the private sector requires good governance, resource management and basic infrastructure. In many developing countries, these issues constitute major challenges. Another difficulty, particularly for small-scale enterprises in the informal sector, is lack of access to financial services. Moreover, it is important for the private sector that a well-functioning tax system is in place to provide predictability and revenues to improve the business environment, through investments in economic and social development. Taxation is important for maintaining economic growth over time and stimulating employment.
Figure 2.2 Mozambique. Both technology and knowledge development are needed for this titanium minerals mine in Moma.
Photo: PIDG/Emerging Africa Infrastructure Fund