By Shamshad Akhtar
BANGKOK, Thailand, May 15 2018 (IPS)

Inequality is increasing in Asia and the Pacific. Our region’s remarkable economic success story belies a widening gap between rich and poor. A gap that’s trapping people in poverty and, if not tackled urgently, could thwart our ambition to achieve sustainable development. This is the central challenge heads of state and government will be considering this week at the Economic and Social Commission for Asia and the Pacific (ESCAP). A strengthened regional approach to more sustainable, inclusive growth must be this Commission’s outcome.

Shamshad Akhtar

In several critical areas, the region’s heading in the wrong direction. Environmental stewardship has fallen seriously short. The health of our oceans has deteriorated since 2015. On land, our ecosystems’ biodiversity is threatened. Forest conservation and the protection of natural habitats has weakened. Greenhouse gas emissions are still too high. But it’s the widening inequalities during a period of robust growth that are particularly striking.

Wealth has become increasingly concentrated. Inequalities have increased both within and between countries. Over thirty years, the Gini coefficient increased in four of our most populous countries, home to over 70 per cent of the region’s population. Human, societal and economic costs are real. Had income inequality not increased over the past decade, close to 140 million more people could have been lifted out of poverty. More women would have had the opportunity to attend school and complete their secondary education. Access to healthcare, to basic sanitation or even bank accounts would have been denied to fewer citizens. Fewer people would have died from diseases caused by the fuels they cook with. Natural disasters would have wrought less havoc on the most vulnerable.

The uncomfortable truth is that inequality runs deep in many parts of Asia and the Pacific. There’s no silver bullet, no handy lever we can reach for to reduce it overnight. But an integrated, coordinated approach can over time return our economies and our societies to a sustainable footing. Recent ESCAP analysis provides recommendations on how to do just that.

At their heart is a call to in invest in our people: to improve access to healthcare and education.

Only a healthy population can study, work and become more prosperous. The universal basic healthcare schemes established by Bhutan and Thailand are success stories to build on. Expanding social protection to low income families through cash transfers can also help underpin a healthy society.

Increasing investment in education is fundamental to both development and equality. Here the key to success is making secondary education genuinely accessible and affordable, including for those living in rural areas. Where universal access has been achieved, the focus must be on improving quality. This means upskilling teachers and improving curricula, and tailoring education to future labour markets and new technologies.

Equipping people to exploit frontier technologies is becoming more important by the minute. Information and Communication Technology (ICT) is a rapidly expanding sector. It can quicken the pace of development. But it is also creating a digital divide which must be bridged. So investment in ICT infrastructure is key, to support innovative technologies and ensure no one is left behind. Put simply, we need better broadband access across our region. Geography can’t determine opportunity.

This is also true when it comes to tackling climate change, disasters and environmental degradation. We know these hazards are pushing people back into poverty and can entrench inequality. In response, we need investment to help people to adapt in the region’s disaster hotspots: targeted policies to mitigate the impacts of environmental degradation on those most vulnerable, particularly air pollution. Better urban planning, regular school health check-ups in poorer neighborhoods, and legislation guaranteeing the right to a clean, safe and healthy environment into constitutions should be part of our response.

The robust growth Asia and the Pacific continues to enjoy, gives us an opportunity to take decisive action across all these areas. But for this to happen, fiscal policy needs to be adjusted. More effective taxations systems would increase the tax take, and better governance would increase people’s willingness to contribute. Public expenditure could then be made more efficient and progressive, the proceeds of growth shared more widely, and inequalities reduced.

My hope is that leaders will seize the moment, strengthen our commitment to fighting inequality on all fronts and put us back on track to sustainable development in Asia and the Pacific.

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Asia and the Pacific remains the engine of the global economy. It continues to power trade, investment and jobs the world over. Two thirds of the region’s economies grew faster in 2017 than the previous year and the trend is expected to continue in 2018. The region’s challenge is now to ensure this growth is robust, sustainable and mobilised to provide more financing for development. It is certainly an opportunity to accelerate progress towards achieving the 2030 Agenda for Sustainable Development.

Shamshad Akhtar

Risks and challenges nevertheless remain. Rising private and corporate debt, particularly in China and countries in South-East Asia, low or declining foreign exchange reserves in a few South Asian economies, and trends in oil prices are among the chief concerns. Policy simulation for 18 countries suggests a $10 rise in the price of oil per barrel could dampen GDP growth by 0.14 to 0.4 per cent, widen external current account deficits by 0.5-to 1.0 percentage points and build inflationary pressures in oil-importing economies. Oil exporters, however, would see a positive impact.

These challenges come against the backdrop of looming trade protectionism. Inward-looking trade policies will create uncertainty and would entail widespread risks to region’s export and their backbone industries and labour markets. While prospects for the least developed countries in the region are close to 7 per cent, concerns persist given their inherent vulnerabilities to terms-of-trade shocks or exposure to natural disasters.

The key questions are how we can collectively take advantage of the solid pace of economic expansion to facilitate and improve the long-term prospects of economies and mobilize finance for development as well as whether multilateral institutions, such as the World Trade Organization membership can resolve the global gridlock on international trade?

Economic and financial stability along with liberal trade access to international markets will be critical for effective pursuit of the 2030 Agenda. Regional economies, whose tax potential remains untapped, now need to lift domestic resource mobilization and prudently manage fiscal affairs. Unleashing their financial resource potential need to be accompanied by renewed efforts to leverage private capital and deploy innovative financing mechanisms. The investment requirements to make economies resilient, inclusive and sustainable are sizeable − as high as $2.5 trillion per year on average for all developing countries worldwide. In the Asia-Pacific region, investment requirements are also substantial but so are potential resources. The combined value of international reserves, market capitalization of listed companies and assets held by financial institutions, insurance companies and various funds is estimated at some $56 trillion. Effectively channelling these resources to finance sustainable development is a key challenge for the region.

The need to come up with supplementary financial resources will remain. Public finances are frequently undermined by a narrow tax base, distorted taxation structures, weak tax administrations, and ineffective public expenditure management. This has created problems of balanced fiscalization of sustainable development, even if the national planning organizations have embraced and integrated sustainable development agenda in their forward looking plans.

Despite a vibrant business sector, the lack of enabling policies, legal and regulatory frameworks, and large informal sectors, have deterred sustainability and its appropriate financing. The external assistance from which some countries benefit is insufficient to meet sustainable development investment requirements, a problem often compounded by low inbound foreign direct investment. Capital markets in many countries are underdeveloped and bond markets are still in their infancy. Fiscal pre-emption of banking resources is quite common. For those emerging countries which have successfully tapped international capital markets, a tightening of global financial conditions means borrowing costs are on the rise.

Our ESCAP flagship report, Economic and Social Survey of Asia and the Pacific 2018 (Survey 2018) which has been launched today calls for stronger political will and governments strengthening tax administrations and expanding the tax base. If the quality of the tax policy and administrations in Asia-Pacific economies matches developed economies, the incremental revenue impact could be as high as 3 to 4 per cent of GDP in major economies such as China, India and Indonesia and steeper in developing countries. Broadening the tax base by rationalizing tax incentives for foreign direct investment and introducing a carbon tax could generate almost $60 billion in additional tax revenue per year.

But government action must be complemented by the private sector to effectively pursue sustainable development. The right policy environment could encourage private investment by institutional investors in long-term infrastructure projects. Structural reforms should focus on developing enabling policy environment and institutional setting designed to facilitate public-private partnerships, stable macroeconomic conditions, relatively developed financial markets, and responsive legal and regulatory frameworks.

Finally, while much of the success in mobilizing development finance will depend on the design of national policies, regional cooperation is vital. Coordinated policy actions are needed to reduce tax incentives for foreign direct investment and to introduce a carbon tax. For many least developed countries, the role of external sources of finance remains critical. In many cases, the success of resource mobilization strategies in one country is conditional on closer regional cooperation. ESCAP’s remains engaged and its analysis can support the planning and cooperation needed to effectively mobilize finance for sustained, inclusive and sustainable economic growth.

Dr. Shamshad Akhtar is the Under-Secretary-General of the United Nations and Executive Secretary of Economic and Social Commission for Asia and the Pacific (ESCAP)

By Shamshad Akhtar
BANGKOK, Thailand, Feb 9 2018 (IPS)

All eyes are on the 23rd Olympic Winter Games and 12th Paralympic Winter Games in PyeongChang this February. Top athletes will carry their national flags in an opening ceremony which has come to epitomize the international community. Sports fans worldwide eagerly await the Olympics, and this time there is cause for cautious optimism that sport diplomacy may lower tensions on the Korean Peninsula itself. Leaders, diplomats and citizens from the world over will witness North and South Korean athletes walking side by side. For this, there could be few better places than PyeongChang, which means peace (Pyeong) and prosperity (Chang): goals integral to the mission of the United Nations and the 2030 Sustainable Development Agenda.

Shamshad Akhtar

In this spirit, the first Olympics in South Korea held in 1988 served to foster relationships at a time of rapid geopolitical shifts. These games featured many participating nations, including sizeable delegations from both the USA and USSR. The thaw in relations to which the Olympics contributed led to the establishment of diplomatic relations with neighbors such as Russia and China in the years following the games. The Republic of Korea became a member of the United Nations in 1991.

The Olympics also heralded the economic transformation of the South Korean economy that is now known as “the Miracle on the Han River.” For the decade after the games, its economy grew at an average rate of around 8.5% per year, transforming the country from an aid recipient country to a key aid donor. The material improvement in the lives of people in South Korea was nothing short of a miracle. From 1960 to 1995, GDP per capita increased more than one hundred-fold, virtually eliminating absolute poverty from more than half of the population to less than 5%.

This miracle was linked with another key value of the Olympics and the United Nations – international collaboration. South Korea successfully leveraged international aid, international trade, and international investment with its domestic ingenuity, to show the world it is possible to transform in one generation an agrarian economy into a dynamic technological and cultural producer.

Along with the rapid economic transformation, social and environmental concerns have also risen to the fore. In recent years, we have seen South Korea make commendable steps towards environmental sustainability and inclusive social policies such as the aged pension. Integrating the economic, social and environmental dimensions is the cornerstone of the Sustainable Development Goals. South Korea is once again demonstrating to the world a way to achieve a more inclusive and sustainable prosperity.

South Korea now stands as a valued member of the international community, generating cultural phenomena appreciated by young people around the world, playing a leadership role at the UN, and as a significant contributor of aid to developing countries. Olympic sports can support cultural, political and economic diplomacy in its efforts to achieving and sustaining peace.

The Olympic Truce Resolution adopted by the United Nations is an example of using a momentous occasion in international sports, to build a stronger foundation for a more peaceful and inclusive world. The resolution urges all countries to respect the truce by creating a peaceful environment during the Olympic and Paralympic Games, and calls on all countries to work together, in good faith towards peace, human rights, and sustainable development.

Opening of the direct dialogue between two countries of the Korean peninsula after the 2018 Olympics show cases a commitment to peace and prosperity. I wish South Korea a promising future and success in its endeavors to foster lasting peace and prosperity.

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By Shamshad Akhtar and Erik Solheim
BANGKOK, Thailand, Sep 4 2017 (IPS)

Senior government officials from across Asia and the Pacific will meet in Bangkok this week for the first-ever Asia-Pacific Ministerial Summit on the Environment. The high-level meeting is co-convened by the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) and UN Environment and is a unique opportunity for the region’s environment leaders to discuss how they can work together towards a resource efficient and pollution-free Asia-Pacific.

Shamshad Akhtar

Resources such as fossil fuels, biomass, metals and minerals are essential to build economies. However, the region’s resource efficiency has regressed in recent years. Asia is unfortunately the least resource efficient region in the world. In 2015, we used one third more materials to produce each unit of GDP than in 1990. Developing countries use five times as many resources per dollar of GDP in comparison to rest of the world and10 times more than industrialized countries in the region. This inefficiency of resource use results into wastage and pollution further affecting the natural resources and public health which are the basic elements for ensuring sustainable economic growth.

As the speed and scale of economic growth continues to accelerate across the region, pollution has become a critical area for action. While the challenge of pollution is a global one, the impacts are overwhelmingly felt in developing countries. About 95 per cent of adults and children who are impacted by pollution-related illnesses live in low and middle-income countries. Asia and the Pacific produces more chemicals and waste than any other region in the world and accounts for the bulk – 25 out of 30 – of cities with highest levels of PM 2.5, the tiny atmospheric particulate matter that can cause respiratory and cardiovascular diseases and cancer. More than 80 per cent of our rivers are heavily polluted while five of the top land-based ocean plastic sources are from countries in our region. Estimates put the cost of marine pollution to regional economies at a staggering US$1.3 billion.

Erik Solheim

There are some profound changes underway in Asia and the Pacific. The region is experiencing the largest rural to urban migration in history. Developing these new urban areas with resource-efficient buildings, waste water and solid waste management systems can do much to advance this agenda. Advancing the “sharing economy” might mean we have better utilization of assets such as vehicles, houses or other assets, greatly reducing material inputs and pollution. The widespread move to renewable energy should rein in fossil fuel use. And advances in recycling, materials technology, 3D printing and manufacturing could also support greater resource circularity.

Moving to green technologies and eco innovation offer economic and employment opportunities. Renewable energy provided jobs for 9.8 million people worldwide in 2016. Waste can be converted into economic opportunities, including jobs. In Cebu City– the second-largest city in the Philippines, concerted Solid Waste Management has borne fruit: waste has been reduced by 30 per cent in 2012; treatment of organic waste in neigbourhoods has led to lower transportation costs and longer use period in landfills. The poor have largely benefited from hundreds of jobs that have been created.

At the policy level, it is vital that resource efficiency and pollution prevention targets are integrated into national development agendas, and targeted legal and regulatory measures to enforce resource efficiency standards should be established. For example, the Government of China has instituted a national system of legislation, rules and regulations that led to the adoption of a compulsory national cleaner production audit system that has been in place for more than 10 years. The direct economic benefits from this system is estimated to be more than $3 billion annually.

Further, we need an urgent reform of financial instruments. Too little capital is supporting the transition to green and resource efficient economy – major portion of current investments is still in high-carbon and resource-intensive, polluting economies. Polluter pay principle and environmental externalities are not yet fully integrated into pricing mechanisms and investment models. The availability of innovative financing mechanisms and integrated evaluation methods are important for upscaling and replicating resource-efficient practices. For example, the large-scale promotion of biogas plants in Viet Nam was made possible by harnessing global climate finance funds. Several countries in the region area are already emerging as leaders in the development of comprehensive, systemic approaches that embed sustainable finance at the heart of financial market development, such as Indonesia and Sri Lanka, and we should draw from the positive lessons learned from these experiences.

Resource efficiency and pollution prevention must be recognized as an important target for action by science, technological and innovation systems. This is important for the ongoing development of technology, and for scaling up technologies. Research shows that developing countries could cut their annual energy demand by more than half, from 3.4 percent to 1.4 percent, over the next 12 years. This would leave energy consumption some 22 percent lower than it would otherwise have been – an abatement equivalent to the entire energy consumption in China today.

We need to move to a more resource efficient and pollution free growth path that supports and promotes healthy environments. The cost of inaction for managing resources efficiently and preventing pollution is too high and a threat to economies, livelihoods and health across the region.

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By Shamshad Akhtar
BANGKOK, Thailand, Mar 31 2017 (IPS)

With just over a year since the adoption of a historic blueprint to end poverty and protect the planet, positive signs have already started to emerge among countries in the Asia-Pacific region as they push ahead with the implementation of the 17 Sustainable Development Goals (SDGs).

Shamshad Akhtar

It is encouraging to note that most countries in the region have made serious attempts to domesticate the landmark global action-plan by developing national sustainable development strategies– a first and crucial step if we are to fully realize the ambitious targets set out in the landmark agreement.

Steady economic growth over the past year has seen a decline in poverty and an improvement in the quality of life. A bright spot worth highlighting is the progress on gender equality. Gender parity has been achieved in primary education, and maternal mortality rates have been brought down across the region with the exception of certain pockets. For example, maternal mortality dropped by 64 per cent in South Asia from 1990 to 2015 and by 57 per cent in the Pacific over the same period.

Notwithstanding these incremental gains, a number of outstanding challenges remain which if not effectively addressed may scuttle our collective efforts.

A joint study undertaken by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the Asian Development Bank (ADB), and the UN Development Programme (UNDP) reveals that some 400 million people in Asia and the Pacific continue to live in extreme income poverty and more than one in four people experience poverty in multiple dimensions that impact their health, education, and standard of living. South Asia is the worst affected with 15 per cent of the population living in extreme poverty, and 86 per cent residing in rural areas where income diversification opportunities are limited and challenges of poor natural resource management persist. Of equal concern is the rise in income inequality within countries. The challenge is to ensure that prosperity is felt by all, and not just a fortunate few.

With 12 per cent of the population, or 490 million people, still undernourished in our region, ending hunger and poverty will heavily depend on introducing sustainable food production systems and more resilient agricultural practices. Despite reductions in infant mortality rates, children in low income countries are still nearly nine times more likely to die before reaching the age of one than those in high income countries.

Enhancing the health of citizens will also require expansion of coverage of health services in many countries. This means increasing government spending on health, as per capita government spending is as low as $4 per person in low income economies of our region.

Despite progress in gender equality and women’s empowerment made in Asia and the Pacific on several fronts, significant gaps still remain. Women continue to be paid less and are more likely to find themselves in vulnerable employment with low wages, no formal contracts or labour rights and minimal social protection. In 2015, the gender pay gap in the region as a whole reached an astounding 20 per cent.

As a whole, the region has also experienced declining biodiversity levels – a major source of distress for Pacific island economies – where the value of fish caught in the territorial waters of some small island developing States is worth up to three times their GDP. Future risks to ocean resources are further underscored by the fact that 40 per cent of our oceans are heavily affected by unsustainable practices.

Finally, the Asia-Pacific region faces a high infrastructure deficit. At the same time, demand pressures will grow as the urban population will swell by 50 million each year, aggravating congestion, air pollution and waste management.

Needless to say, these challenges must be urgently addressed. Strong continued leadership, knowledge sharing and UN system collaboration, are pivotal tools that will move us all closer to realizing the aspirations set out by the 2030 Agenda. The dynamism and development track record of our region lends us hope that we can achieve balanced economic, social and environmental development by pursuing the right blend of rebalancing to revive domestic and regional demand.

ESCAP remains committed to strengthening the capacity of countries, so that they can embrace integrated strategies to confront the multidimensional facets of poverty, and promote the opportunity for prosperity for all.

This week ESCAP held the Asia Pacific Forum on Sustainable Development (APFSD 2017) in Bangkok from 28-31 March, which brought together senior representatives from across the region to define a road map that will support member States’ implementation of the 2030 Agenda over the next 15 years.

We are all working to come up with concrete measures that will enhance the region’s achievement of the SDGs to deal with multidimensional poverty, which when considered raises the level of the vulnerable population in Asia and the Pacific region to 900 million. Forums like these are key to marshalling the international support required to achieve this ambitious agenda. Progressing the SDGs in Asia and the Pacific is central to achieving the global 2030 Agenda. We have the opportunity for action now.

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By Shamshad Akhtar
Bangkok, May 11 2016 (IPS)

Investment in science, technology and innovation (STI) needs to be the backbone of productivity-led economic recovery and sustainable development. Despite significant increases in productivity over the past few decades, economic growth in developing economies of Asia and the Pacific has been primarily driven by factor accumulation. However, the average rate of productivity growth slowed between 2000-2007 and 2008-2014 by 65%, which has contributed to the economic slowdown and can undermine efforts to effectively pursue the 2030 Agenda for Sustainable Development. We must revive growth in productivity, one of the keys to which is a highly-skilled labor force.

Shamshad Akhtar

The good news is that the Asia-Pacific region is already home to some of the most dynamic and innovative economies in the world. The Economic and Social Commission for Asia and the Pacific (ESCAP)’s new report, Harnessing Science, Technology and Innovation for Inclusive and Sustainable Development in the Asia Pacific, shows that these economies are consistently ranked as leaders in innovative business environments (e.g. Singapore), socially inclusive government initiatives (e.g. Republic of Korea) and complex scientific research (e.g. China). A number of Asia-Pacific economies also rank among the best in terms of research spending as a share of GDP, with the region accounting for almost 43% of global research and development (R&D) expenditure. In 2013 alone, Asian developing economies spent more than $650 billion on R&D.

However, the report also points out that these impressive gains have been confined to a relatively small number of economies. For example, 95% of the region’s researchers are located in just five countries. To meet the ambitions of the 2030 Agenda, the Asia-Pacific region will need to harness all of its potential resources, with a particular focus on widening the STI net.

Business as usual is not an option for the region if STI is to be used as an effective means of implementing the Sustainable Development Goals. The scale and depth of the Goals require a radically different and disruptive approach—the essence of innovation—along with significant scientific breakthroughs and technological advancements. The limited reach of STI achievements in the region so far will not, however, be sufficient to ensure that the Goals are met in the next 15 years. There are four elements that must be urgently addressed:

First, we must develop a common and effective conceptual framework to enable STI to be more economically and socially inclusive, while promoting climate resilience and the reduction of carbon emissions. Effective institutions and digital infrastructure, appropriate legal and regulatory frameworks, commitment to and incentives for investment, and a workforce for the future are all critical components of such a framework.

Second, to implement the Goals, governments will need to develop integrated and visionary STI policies, while incentivizing businesses and investors to support the three dimensions of sustainable development—economic, social and environmental. This will require explicit consideration of all three outcomes in any reporting standards.

Third, to be supportive of sustainable development, STI policies and strategies need to be inclusive, open and collaborative. Being inclusive in how we innovate, engaging vulnerable communities in the process of innovation and developing innovations that are accessible and affordable to people living in poverty, will be critical to ensure that no one is left behind.

Finally, there is ample scope for regional STI collaboration in Asia and the Pacific. The challenge is to develop concrete and sustainable innovation and technology sharing opportunities to help bridge the gaps that remain, to enable countries at all levels of development to take advantage of available technologies and to develop a robust regional culture of innovation.

ESCAP’s Harnessing STI report is a call to action on regional STI collaboration, to provide a resilient and productivity-driven foundation for a successful pursuit of the Goals. Our region has a wide range of opportunities for private sector innovation, grass-roots innovation, international technology transfer, frugal innovation, foreign direct investment, impact investment, enabling research excellence and supporting mass entrepreneurship, to name but a few. This is why ESCAP is proposing the establishment of a knowledge-sharing platform and the development of specific links between the various global and national efforts.

Regional collaboration will be crucial to share knowledge on what works, and to keep pace with the challenges and opportunities that this fast-moving and ever-changing agenda presents. The benefits of a wider STI net are inextricably intertwined with successful achievement of the 2030 Agenda.

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Shamshad Akhtar

By Shamshad Akhtar
BANGKOK, Thailand , Apr 28 2016 (IPS)

The Asia-Pacific region’s successful achievement of the 2030 Agenda for Sustainable Development needs to be driven by broad-based productivity gains and rebalancing of economies towards domestic and regional demand. This is the main message of the Economic and Social Survey of Asia and the Pacific 2016, published today by the Economic and Social Commission for Asia and the Pacific. Such a strategy will not only underpin the revival of robust and resilient economic growth, but also improve the quality of growth by making it more inclusive and sustainable.

How should Asia-Pacific policymakers go about implementing such a strategy? Approaches by developing Asia-Pacific economies that are tilted more towards reliance on export-led economic recovery will be ineffective under the current circumstances. Despite extraordinary measures, global aggregate demand remains weak and China’s economic expansion is moderating. The impact of further loosening of monetary policy is also likely to remain muted, and is not advisable. The key reason is a confluence of macroeconomic risks that are clouding the economic outlook, such as low commodity prices affecting resource-dependent economies, volatility in exchange rates, as well as growing private household and corporate debt, the impact of which is likely to be complicated by the ambiguous path of interest rate increases to be pursued by the United States.

The contribution of export-led economic growth to overall development of economies, supported by low interest rates and rising private debt, seems to have plateaued, with economic growth in developing Asia-Pacific economies in 2016 and 2017 forecast to marginally increase to 4.8% and 5% respectively from an estimated 4.6% in 2015. This is considerably below the average of 9.4% in the pre-crisis period of 2005-2007.

Along with the economic slowdown, progress in poverty reduction is slowing, inequalities are rising and prospects of decent employment are weakening. At the same time, rapid urbanization and a rising middle class are posing complex economic, social, and environmental and governance challenges. Such conditions can undermine the significant development successes of the region in recent decades, making it more difficult to deal with the unfinished development agenda, such as lifting 639 million people out of poverty. Had inequality not increased, approximately 200 million more people could have been lifted out of poverty in the three most populous countries of the region alone.

To overcome these challenges, revive the region’s economic dynamism and effectively pursue the 2030 Agenda, policymakers are advised to use all available policy levers, including countercyclical fiscal policy and supportive social protection measures, which critically calls for raising domestic resources. Such interventions would not only support domestic demand but also strengthen the foundations for future productivity-led growth by targeting areas such as: labour quality, including knowledge, skills, and health of the workforce; innovation through trade, investment and R&D; adequate infrastructure in transport, energy and ICT; and access to finance, especially by SMEs.

Fiscal measures, underpinning such initiatives, should be accompanied by sustained reforms towards efficient and fair tax systems which deliver the necessary revenues for the required investment in sustainable development

Sustained increases in domestic demand will also require steady growth in real wages. This requires linking labour productivity more closely to wage levels. Strengthening the enabling environment for collective bargaining is one necessary component in the policy arsenal of governments, with the enforcement of minimum wages as another important policy tool.

After increasing significantly over the last few decades, productivity growth has declined in recent years. This is worrying not only because wage growth has lagged behind productivity growth, but also because wage growth ultimately depends on productivity growth. Specifically, compared to the period 2000-2007, annual growth of total factor productivity has declined by more than 65% in developing countries of the region, averaging only 0.96% per year between 2008 and 2014; labour productivity growth has declined by 30%, reaching just 3.9% in 2013.

The recently-adopted Sustainable Development Goals provide an entry point to strengthen productivity. For instance, raising agricultural productivity and thus lifting rural households income must be the center of the focus to end poverty (Goal 1), to end hunger and achieve food security (Goal 2). This is because agriculture accounts for one in four workers in the region and more than half of the region’s people live in rural areas. Efforts to eradicate poverty and increase agricultural productivity would also foster development of the rural sector and encourage industrialization (Goal 9).

Higher levels of productivity in agriculture will also free-up labour, which would be available to work in the non-agricultural sector. It is therefore imperative to consider a broader development strategy that moves towards full and productive employment (Goal 8) to accommodate the “agricultural push” of labour. This will require mechanisms to provide, particularly those with low skills, access to quality education and lifelong learning (Goal 4).The need to provide quality education cannot be overemphasized in view of the skills bias of modern technology, which reduces the pace of absorption of unskilled labour released from the agricultural sector.

Thus, whereas the Goals will contribute to strengthening productivity, importantly, strengthening productivity will also contribute to the success of a number of the Goals, creating a virtuous cycle between sustainable development, productivity and economic growth.

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