The 2030 development agenda aims to achieve sustainable and inclusive growth. The road ahead is paved with challenges driven by long-term trends—such as demographics and automation—that are already shaping the future of several developing countries. Against this background, the conference will focus on the following questions: With developing economies increasingly interlinked to the global economy, how will these trends shape the economic landscape over the next two decades? What job opportunities and challenges to inclusive growth and gender equality can these long-term trends create for developing countries? What role can economic diversification and structural transformation play in this context? How can domestic policies—especially education, innovation and infrastructure policies—facilitate these opportunities and mitigate the challenges and barriers to inclusive growth?   

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Contributor: Veronika Sola, Secretary’s Department

The 2030 development agenda aims to achieve sustainable and inclusive growth but the road ahead is paved with challenges that are already shaping the future of several developing countries. The conference focused on how these trends will shape the economic landscape and on policies that can help promote job-rich, inclusive growth.

Introductory remarks:

Martin Muhleisen, Director, Strategy, Policy and Review Department, IMF

Tao Zhang, Deputy Managing Director, IMF

Keynote speech 1:

Dani Rodrik, Ford Professor of International Political Economy, Harvard University

Professor Rodrik focused on potential sources of growth for developing and low income countries in an era of early deindustrialization and declining share of manufacturing.

Key Points:

• -Earlier deindustrialization. Countries are starting to deindustrialize earlier and at a lower level of income than in the past. This is mostly driven by a decline in low skill manufacturing jobs, with continuous skill upgrading in the industry.

• -Recent growth booms are different. Recent high growth episodes in developing countries were based on support from extensive public or private investment. However, unlike the past cases of successful industrialization, the positive convergence effect does not arise from a direct effect on productivity in manufacturing, but rather through a structural shift from lower to higher productivity activities. This type of growth might not be sustainable in the long term.

• -Policies need to be employment focused. In this new world, policy makers need to scale down growth expectations although convergence with developed countries remains possible. Countries should invest in developing strong fundamentals and ensure that job creation remains the focal point of policies. An effective strategy could be to pay more attention to productive firms, rather than to only those at the high end of the productivity spectrum.

Quotes:

“The future of growth is not going to be like the past of growth.” Dani Rodrik

“Today we have a greater gap between the skill demands of manufacturing and the skill endowments of the average low income country than we ever had before.” Dani Rodrik

“Looking at all policies—industrial, trade, macro, infrastructure—from the perspective of how many jobs are created really becomes a key issue.” Dani Rodrik

Panel 1:

Moderator: Jonathan Ostry, Deputy Director, Research Department, IMF

Panelists:

James Manyika, Chairman, McKinsey Global Institute

Mthuli Ncube, Professor of Public Policy, University of Oxford

Carolina Sanchez, Senior Director of the Poverty and Equity Global Practice, World Bank

Gayle Smith, President and CEO, ONE Campaign

The panel focused on the risks and opportunities presented by technology and how they may affect developing countries’ ability to reap their demographic dividend.

Key Points:

• -Manufacturing remains relevant for growth and employment. While it is unlikely that manufacturing will grow at the same pace as in the past, the absolute employment numbers are still on the rise and the sectors retains its importance for developing countries despite the dislocations caused by technology (Sanchez). Manyika agreed, but noted that countries will need to adapt to its changing nature.

• -Technology and other factors in job creation. Developing countries might not fully reap the benefits of the demographic dividend, but technology is not the main obstacle (Ncube). Many developing countries face other constraints, including lack of needed skills, power outages, and insufficient infrastructure. Sanchez added that technologies such as mobile banking are tools for opening new opportunities that were inaccessible to the poor before.

• -Education quality and female participation. Panelists highlighted that reforming the education systems in many developing countries will be of fundamental importance to keep up with the demands imposed by the fast-evolving landscape. The focus should be primarily on quality of the education and its alignment with the labor market demands, rather than excessive focus on tertiary education (Smith). Bringing in more girls into the education system and promoting their active participation can have considerable benefits for developing countries (Smith and Manyika).

Quotes:

“Digital revolution has really opened up a world of opportunities that were not available to the poor before.” Carolina Sanchez

“The demand for jobs is threatening the demographic dividend because it is falling or staying stagnant, but the reason is not only technology.” Mthuli Ncube

“In many developing countries education is at a point where there is a room to reform, reshape, redesign, and rather dramatically, and to more closely align the educational system with the economy people are trying to build.” Gayle Smith

“Manufacturing is not dead as a pathway for development, although its share is decreasing.” James Manyika

Session 2: The Road Ahead and Policy Priorities for Inclusive Growth

Keynote Speech:

Ricardo Hausmann, Professor of the Practice of Economic Development, Harvard University

Professor Hausmann spoke on the drivers of economic development, the dynamics of identifying new sources of growth, and the importance of mobility for the diffusion of know‑how and technology. Panelists reflected on their policy experiences and the tradeoffs between delivering high growth and fostering inclusiveness.

Key Points:

·                  Leveraging resources. Using the analogy of Scrabble, Hausmann indicated that the more letters you have, the more value an additional letter generates. In policy terms, the capacity to use new technology and know‑how depends on how much has already been absorbed. This diffusion of capital and know‑how, in turn, determines how fast a country can grow.

·                  Improving infrastructure and mobility. To exploit the benefits of urbanization, physical infrastructure in developing countries needs to be improved. If the cost of transportation is high, in value and time terms, this becomes an indirect tax on labor. Additionally, limits on the participation of foreign workers impede innovation and development.

Contributor: Marushia Gislén

Panel 2: The Road Ahead and Policy Priorities for Inclusive Growth

Moderator: Abebe Aemro Selassie, Director, African Department, IMF

Panelists:

Mauricio Cardenas, Minister of Finance and Public Credit, Colombia

Denny H. Kalyalya, Governor, Bank of Zambia

Sahar Nasr, Minister of Investment and International Cooperation, Arab Republic of Egypt

Vera Songwe, Executive Secretary, United Nations Economic Commission for Africa

Melanne Verveer, Executive Director, Georgetown Institute for Women, Peace and Security, Georgetown University

Key Points:

·                  Political economy. There is a tension between higher growth and inclusiveness (Cardenas). Nasr pointed to Egypt’s dilemma of deciding whether to support investment in labor‑intensive industries that could lower unemployment and poverty rates, or advance technological industries that could bring new skills to the country. She also highlighted that foreign participation can be politically sensitive.

·                  Policy examples. Cardenas explained how the private sector in Colombia is encouraged to use tax liabilities to build public goods. The Colombian authorities have also used product‑mapping to identify which sectors could be developed with already existing technology. While this information has been distributed to the private sector, the government should not subsidize such sectors. In Egypt, special economic zones have been used to attract investment which have garnered interest and become a critical part of the one Belt One Road Initiative (Nasr).

·                  Investment environment. Songwe emphasized the importance of a stable policy environment, the need to boost innovation, and to encourage foreign skills and investment. Songwe and Hausmann pointed to the increasing importance of diaspora investments, which sometimes are larger than aid flows or even foreign direct investment.

·                  Financial inclusion and gender. Kalyalya emphasized the need to lower the costs of technology to further financial inclusion. Verveer highlighted the need for incentives to keep girls in the educational system and remove impediments to female labor force participation.

Quotes:

“You can’t make watches without watchmakers” Ricardo Hausmann

“The question of unequal development is a two‑way conversation; not only policy makers learning from the analytical world, but also posing questions to help expand analytical work” Mauricio Cardenas

“There are instances where there is space for decisions which can promote growth, but which might not be inclusive in the short‑term” Mauricio Cardenas