World Bank publishes roadmap to avoid middle-income trap

ISLAMABAD: Middle-income countries will need progressively greater economic freedom and political courage to bring change in the persistence of institutions and long-standing arrangements.
With rising debt and ageing populations at home, growing protectionism in advanced economies, and escalating pressures to speed up the energy transition, today’s middle-income countries are facing growing headwinds, warns the ‘World Development Report 2024’, which provides the first comprehensive roadmap to enable developing countries to escape the “middle-income trap”.
Today, 108 countries are classified as middle-income and many of them aspire to reach the high-income status within the next two or three decades, the report says.
It added that a handful of economies that have gone from middle- to high-inc­o­me status have encouraged enterprise by disciplining powerful incumbents, developed talent by rewarding merit and capitalised on crises to alter policies.
The World Bank called for a similar strategy for middle-income countries, which the report said have smaller reservoirs of skilled talent than advan­ced economies and are also less efficient at utilising them.
Exigencies such as the rise of populism and climate change provide oppor­­­t­­unities to dismantle outdated arrangements and make room for new ones, the report says.
The report proposes a “3i strategy” for countries to reach high-income status.
Depending on their stage of development, all countries need to adopt a sequenced and progressively more sophisticated mix of policies.
However, once they attain lower-middle-income status, they need to shift gears and expand the policy mix to the 2i phase: investment and infusion, which consists of adopting technologies from abroad and spreading them across the economy.
Published in Dawn, August 11th, 2024