Harinder S. Kohli

What Is the Middle Income Trap, Why do Countries Fall into It, and How Can It Be Avoided?

The risks of falling into the Middle Income Trap have increasingly become a focus of discussions on the long-term economic and social development prospects of developing countries. These risks, and how to minimize them, are being debated at the highest levels of policy making in some of the fastest growing emerging economies, even while these countries remain a source of envy to the rest of the world. The term Middle Income Trap is by now also being widely used in economic literature as well as business-oriented media. We draw satisfaction from the fact that some of our previous writings (Gill and Kharas, 2008; Kohli et al. 2009) (co-authored with other colleagues) seem to have helped popularize this term. At the same time, we realize that some have interpreted and used the term quite differently from what we had in mind when we first introduced the term Middle Income Trap in our writings and presentations. This article offers our perspective as to what the Middle Income Trap is, why so many countries fall into it, and the key challenges involved in avoiding the trap. With policy makers as its primary audience, the article is deliberately short in length and straightforward in language.

India 2039: An Affluent Society in One Generation

This book provides a perspective on where India could be in the year 2039, if it maintains the economic growth rates it has experienced recently. In addition to emphasizing the virtuous cycle between growth and poverty reduction, the book outlines the salient challenges that India must overcome to achieve this end. These challenges include: Addressing structural inequalities that lie at the core of poverty and exclusion of the most vulnerable groups. The provision of education and health services, and infrastructure services to rural and urban populations. Ensuring an improved environment—clean air, clean water and sanitation etc. Launching an energy revolution, with a view to reducing the economy’s carbon intensity. Overcoming critical infrastructure bottlenecks. Improving the quality of education and access to secondary and tertiary education. Improving the business environment to foster entrepreneurship and innovation. Taking on the role of a responsible global citizen. The book proposes that India could be one of the top three global economic powers in 30 years. It presents a persuasive case that if India succeeds in sustaining its recent economic success over the longer term (as many East Asian economies have done in the past), India can realistically aspire to become an affluent society—with a GDP per capita of

Latin America 2040 — Breaking Away from Complacency: An Agenda for Resurgence

22,000 (PPP terms and no poor people–within one generation. India 2039 assesses the many hurdles – political, social, policy and institutional – that India must overcome to realize its vision to become a modern, affluent, inclusive society and lift millions of Indians from relative poverty within 30 years. It provides an agenda of intergenerational issues that are central to India avoiding the middle income trap—where countries stagnate at middle income levels and are unable to achieve high income status– that so many other countries have fallen into. The recommendations emphasize a pro-active stance on the climate change agenda, because itis in India’s self-interest. In addition, the authors provide recommendations on the measures required to enhance India’s global competitiveness based on improving the business environment, strengthening innovation and entrepreneurship, and building the required physical, technological and information infrastructure. Importantly, the recommendations also covered cross-cutting issues such as: Improving governance at the national, state and municipal levels. Reform of the bureaucracy, civil service, and judiciary. Measures to address structural inequities, such as those based on ethnic and religious differences that affect the most vulnerable populations.

Africa 2050: Realizing the Continent’s Full Potential

This book presents a long term vision of Latin American society and economies, within which current policy debates and actions must be anchored. It presents a set of multigenerational issues that must be tackled in order for countries in the region to reduce inequities, as well as raise their economic growth rates. The authors provide insight and advice regarding: budgetary policy and management, poverty reduction, macroeconomic policy coordination and integration, labor market policy, long-term macroeconomic reforms, innovation and technological development, infrastructure needs, regional cooperation and trade, and governance and political sustainability. This book provides an analysis of the challenges facing economic growth, equality, public safety, education, competitiveness and technology and innovation. In doing so, the authors analyze the reasons for Latin America’s underperformance during the past 30 years, highlighting the issues related to unsustainable economic, social and political policies. The analysis is based on an innovative instrumental-variable-based structural equation model, developed by the Centennial Group. It is used to project the infrastructure needs of 21 countries for 10 sectors through 2040 under alternate growth scenarios. Latin America 2040 presents a strategy to realize the vision for rapid economic growth and faster reduction in disparities during the next three decades by sharply raising their growth rates while achieving more inclusive societies. It offers an agenda for what Latin America’s national leaders, policy makers and private businesses must do to regain the regions past momentum and achieve a much needed resurgence. A Spanish translation of the book will be available in October 2011. A companion video, based on the key messages of the book, can also be viewed.

ASEAN Dynamism: Agricultural Transformation and Food Security:

This article offers a vision of what Africa could be in 2050. In such a scenario, average per capita income would increase six-fold, an additional 1.4 billion Africans would join the middleclass, the number of poor would shrink to fewer than 50 million, and Africa’s share of global gross domestic product (GDP) would triple. For people, the biggest change would be better, less vulnerable jobs with higher productivity; for economies, dramatic productivity increases driven by private sector investment, diversification, and more competition; and for the continent, better integrated sub-regions and relations with the world based on trade and investment rather than aid. In the face of a multi-polar global economy, aging and population growth, increased competition for natural resources, rapid innovation, climate change, urbanization, and natural resource wealth, Africa needs to manage the risk of fragility and conflict, inequality, and the middle-income trap to achieve such a vision.

Looking at China’s Belt and Road Initiative from the Central Asian Perspective:

This article assesses performance of the agricultural sector in Vietnam, Indonesia, and the Philippines (VIP countries) during the period 1980–2011, future prospects up to 2040 and food security in these countries and in the ASEAN region. Analysis of the past performance and likely future scenarios was carried out with the aid of the Centennial Group’s Global Growth Model after introducing several modifications to address the needs of the agricultural sector. Our modeling efforts were divided into two parts. The first part comprised a macro-economic analysis of future scenarios at the global level and for VIP countries. The second part included analysis at the country level of future total factor productivity (TFP), agricultural production and changes in national food consumption habits. As a countercheck use was also made of IFPRI’s updated IMPACT Model, and in the case of the Philippines, the AMPLE model.

Book Preview: India 2039: An Affluent Society in One Generation Determined Marathoner—or Sporadic Sprinter?

The Belt and Road Initiative (BRI) is a potentially transformational geopolitical development initiative, launched by China, which encompasses 65 countries, accounting for roughly 32 percent of global GDP, 39 percent of global merchandize trade, and 63 percent of the world’s population. The BRI, also referred to as the Silk Road Economic Belt (SREB) and the twenty-first century Maritime Silk Road (MSR), is a geopolitical initiative put forth by Chinese President Xi Jinping, which goes well beyond building infrastructure along the ancient “silk road.” The initiative seeks to develop a wide network of connectivity and cooperation spanning the entire Eurasian land mass and parts of Africa, including Central Asia, Southeast Asia, South Asia, the Middle East, Europe, and North and East Africa. The magnitude of investments anticipated under the BRI is massive. According to the Chinese government, US

Asia 2050: Realizing the Asian Century

890 billion worth of investments have already been disbursed under the BRI umbrella, with an expected total Chinese investment of US

A New Vision for Mexico 2042: Achieving Prosperity for All: Executive Report

4 trillion over the course of the initiative. Developments suggest that BRI could ultimately evolve beyond a mere Chinese-financed initiative. However, the bulk of BRI-related investments still appear to be conceived, driven, and primarily financed by China and financial institutions controlled by Beijing. This could change, however, as national governments that host BRI projects, multilateral institutions, and private sector gets more actively involved.

Vision 2050 — Alternative Scenarios and Strategic Framework

This book presents to the India’s leadership today—in government, business, civic society as well as the intellectuals at large—the major issues, challenges and choices that the authors believe the country needs to confront, starting now, so as to maximise the prospects of their grandchildren living in an affl uent society. The basic premise of this book is that India can indeed be a growth marathoner, but it must understand the world it is operating in and the changing shape of its economic footprint. It must start to put in place the institutions and policy frameworks consistent with a move from poverty to affl uence in one generation. Few countries have achieved this, so the challenge is enormous. But no country has achieved it without serious deliberations over the ingredients for sustained growth. Rather than getting bogged down in a spurious debate over the feasibility of the details of either scenario or any specifi c numbers therein, I hope the readers of the book will focus on what bold and ambitious strategy and actions will be required to achieve an outcome proximate to its vision of an affl uent India in one generation.