WASHINGTON — A new World Bank study reveals that over 100 countries, including China, India, Brazil, and South Africa, are encountering significant challenges in their quest to become high-income nations. The World Development Report 2024: "The Middle Income Trap" provides a comprehensive roadmap to help developing countries overcome with this obstacle.
Middle-Income Trap Defined
The study highlights that as countries grow wealthier, they often hit a "trap" when their GDP per capita reaches around $8,000, about 10% of the annual U.S. GDP per person. Only 34 middle-income countries have transitioned to high-income status since 1990, often aided by European Union integration or oil discoveries.
Current Middle-Income Landscape
By the end of 2023, 108 countries were classified as middle-income, hosting 75% of the global population and two-thirds of people living in extreme poverty. These nations contribute over 40% of global GDP and more than 60% of carbon emissions. They face modern challenges, including aging populations, rising protectionism, and the need for rapid energy transition.
New Strategies Needed
Indermit Gill, Chief Economist of the World Bank Group, emphasized the need for a new approach.
"Many middle-income countries rely on outdated strategies. A balanced approach focusing on investment, technology infusion, and innovation is crucial," Gill stated.
Proposed "3i Strategy"
The report proposes a "3i strategy" to help countries progress through three phases:
- Investment (1i): Initial focus on increasing investment.
- Investment and Infusion (2i): As countries grow, they should adopt and spread foreign technologies.
- Investment, Infusion, and Innovation (3i): In the final phase, countries should push technological frontiers and innovate.
Case Studies of Success
South Korea exemplifies the 3i strategy. Starting with an income of $1,200 per capita in 1960, it reached $33,000 by 2023 through strategic public and private investment, technology adoption, and innovation. Companies like Samsung evolved from humble beginnings to become global innovators.
Global Examples
Poland and Chile also successfully navigated the middle-income trap. Poland raised productivity through technology from Western Europe, while Chile adapted Norwegian salmon farming technologies, becoming a top salmon exporter.
Read more:- India Becomes Food Surplus Leader, Champions Global Food Security at 32nd ICAE: Narendra Modi.
Conclusion
Director of the 2024 World Development Report, Somik V. Lall, remarked, "Success hinges on balancing creation, preservation, and destruction forces. Countries must embrace reforms and openness to achieve sustained growth."
Read more: Supreme Court Upholds LG’s Power to Nominate Aldermen in Delhi MCD, AAP Faces Setback.
Implications
The World Bank's new report emphasizes that while the path to high-income status is challenging, with the right strategies, middle-income countries can navigate through obstacles and achieve economic prosperity.
For more detailed analysis on world report, stay tuned with "In Bulletin".
