'Rich countries must remove trade barriers'

BANGALORE MAY 22. The Vice-President and Chief Economist of the World Bank, Nicholas Stern, has said that rich countries should back their pledge to help reduce global poverty by removing barriers to the exports of developing countries and by increasing aid.

He called upon developed countries to boost development assistance. Despite better aid allocation by donors and stronger policies and institutions in developing countries, aid flows had declined in the 1990s. The World Bank and the United Nations estimated that aid would need to be doubled to $ 100 billion a year to reduce absolute poverty in the developing world. However, several high-income countries had recently announced plans to increase aid.

The developing countries needed to continue to strengthen governance, invest in and empower people and improve the investment climate, especially conditions facing small farmers and entrepreneurs.

Mr. Stern was speaking at the World Bank's Annual Bank Conference on Development Economics (ABCDE) here on the second day today.

"The wealthier countries, which wrote the rules of the current trading system and continue to dominate global trade flows, have a special role to play."

Mr. Stern, who has done extensive research on India, said the country must have a strong leadership which would demonstrate the effective use of aid, and by being an advocate for developing countries in global forums it could help strengthen the commitment to achieve the millennium development goals (MDGs). The conference was being held in India because its development experience offered valuable lessons to the international community, he said.

Large investments in education, child and maternal health, gender equality and protection of the environment were essential to achieve the MDGs. The World Bank estimated that global trade liberalisation, including a reduction in barriers to trade in both rich and developing countries, could make a significant contribution to achieving the goals of the MDGs, lifting at least 300 million people out of poverty by 2015. Most of the seminar papers had focussed on India, which was home to about a third of the world's poor people. However, economic growth had been accelerated and poverty reduced to some extent after the introduction of economic reforms in 1991.

Mr. Stern warned that India's growing public debt was squeezing out investment, making it difficult to achieve the targeted annual 8 per cent economic growth.

"Eight per cent growth is difficult without hastening reforms. The Tenth Plan has set an ambitious target, well above past performance." "India's rich experience, both its significant successes and the problems that it is currently confronting, offers valuable lessons for other developing countries. India's tremendous strengths lead me to be cautiously optimistic about its future. Reform must move ahead strongly if growth is to accelerate."

The investment climate had improved and exports doubled from seven per cent to 14 per cent of the GDP. He cited the need to ensure that public expenditure was efficiently allocated to promote growth and reduce poverty. "I would argue that a radical reform of the subsidy culture is needed to cut non-permit subsidies that largely fail to reach targeted beneficiaries, incur huge opportunity costs, and distort factor prices, while hurting the economy and the environment." India had become the second largest user of anti-dumping laws in the world after the U.S. Discipline in the use of "substitute" instruments of protection was necessary, he said.

The conference concludes here on Friday with an in-depth debate on recent innovations in service delivery in Karnataka. Mr. Stern praised the State's initiative in cleaning up land records by making available land documents to citizens within the shortest possible time, transparency in administration, and the right to information being piloted by the Krishna Government.

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