Issues in Developing Countries Bambang Wahyu Nugroho Lecture

Issues in Developing Countries Bambang Wahyu Nugroho Lecture 1

World Bank income groups HIGH INCOME UPPER MIDDLE INCOME LOW INCOME

Definition • Developing country is a term generally used to describe a nation with a low level of material well being. • There is no single internationally-recognized definition of developed country, and the levels of development may vary widely within so-called developing countries, with some developing countries having high average standards of living. • Some international organizations like the World Bank uses strictly numerical classifications. The World Bank considers all low- and middle- income countries as "developing". • In its most recent classification, economies are divided using 2008 Gross National Income per capita. In 2008, countries with GNI per capita below US$11, 905 were considered developing. Other institutions use less specific definitions. • Countries with more advanced economies than other developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries.

Classification • The IMF uses a flexible classification system that considers: 1. per capita income level, 2. export diversification—so oil exporters that have high per capita GDP would not make the advanced classification because around 70% of its exports are oil, and 3. degree of integration into the global financial system. • The World Bank classifies countries into four income groups. – Low income countries have GNI per capita of US$975 or less. – Lower middle income countries have GNI per capita of US$976 –$3, 855. – Upper middle income countries have GNI per capita between US$3, 856–$11, 905. – High income countries have GNI above $11, 906.

Measure & concept of development • The development of a country is measured with statistical indexes such as income per capita (per person) (GDP), life expectancy, the rate of literacy, etc. • The UN has developed the HDI, a compound indicator of the above statistics, to gauge the level of human development for countries where data is available. • Developing countries are in general countries which have not achieved a significant degree of industrialization relative to their populations, and which have, in most cases a medium to low standard of living. • There is a strong correlation between low income and high population growth.

contd… • The terms utilized when discussing developing countries refer to the intent and to the constructs of those who utilize these terms. • Other terms sometimes used are less developed countries (LDCs), least economically developed countries (LEDCs), "underdeveloped nations" or Third World nations, and "non-industrialized nations". • Conversely, the opposite end of the spectrum is termed developed countries, most economically developed countries (MEDCs), First World nations and "industrialized nations".

contd… • To moderate the euphemistic aspect of the word developing, international organizations have started to use the term Less economically developed country (LEDCs) for the poorest nations which can in no sense be regarded as developing. That is, LEDCs are the poorest subset of LDCs. This may moderate against a belief that the standard of living across the entire developing world is the same. • The concept of the developing nation is found, under one term or another, in numerous theoretical systems having diverse orientations — for example, theories of decolonization, liberation theology, Marxism, antiimperialism, and political economy.

Typology of countries Countries are often loosely placed into four categories of development. Each category includes the countries listed in their respective article. The term "developing nation" is not a label to assign a specific, similar type of problem. 1. Newly industrialized countries (NICs) are nations with economies more advanced and developed than those in the developing world, but not yet with the full signs of a developed country. [4]NIC is a category between developed and developing countries. It includes Brazil, the People's Republic of China, India, Malaysia, Mexico, Philippines, South Africa, Thailand Turkey. 2. Big Emerging Market (BEM) economies, a label with various meanings. Jeffrey Garten identified, Brazil, Argentina, Mexico, South Africa, Poland, Turkey, India, Indonesia, the People's Republic of China, and South Korea as the Big 10 BEMs.

Contd… 3. 4. Countries with long-term civil war or large-scale breakdown of rule of law ("failed states") (e. g. Afghanistan, Haiti, Pakistan, Somalia, Myanmar, Iraq, Zimbabwe) or non-development-oriented dictatorship (North Korea). Some developing countries have been classified as "Developed countries" such as South Africa, and Turkey by the CIA, and Antigua and Barbuda, The Bahamas, Bahrain, Barbados, Brunei, Estonia, Equatorial Guinea, Kuwait, Oman, Qatar, Saudi Arabia, and Trinidad and Tobago by the World Bank.

Limitation of the concept • There is criticism of the use of the term ‘developing country’. The term implies inferiority of a 'developing country' compared to a 'developed country', which many such countries dislike. It assumes a desire to ‘develop’ along the traditional 'Western' model of economic development which many countries, such as Cuba, have chosen not to follow. Thus Cuba remains classed as 'developing' due to its low gross national income but has a lower infant mortality rate and higher literacy rate than the USA. • The term 'developing' implies mobility and does not acknowledge that development may be in decline or static in some countries, particularly those southern African states worst affected by HIV/AIDS. The term implies homogeneity between such countries which vary wildly. The term also implies homogeneity within such countries when wealth (and health) of the most and least affluent groups varies wildly.