New social contract

Is there an institutional trap in middle-income countries?

Development Matters New social contract , ,

By José Antonio Alonso, professor of Applied Economics at the Complutense University of Madrid. He is co-editor of the recent book: Trapped in the Middle? Developmental Challenges for Middle-Income Countries, Oxford University Press, 2020

It is assumed that, as countries progress, they require better institutions to manage the societal issues that emerge with more extensive and sophisticated markets and respond to the needs of a more demanding society. In other words, the development process requires a path of institutional change. However, economic and institutional processes do not necessarily evolve at the same pace, as institutions are subject to greater inertia. As a consequence, inertial institutions can fall behind social demands, or else changes in institutions may not be properly rooted in social behaviour.

These issues are particularly relevant to middle-income countries which tend to experience episodes of intense economic growth that put their institutional frameworks under pressure. Transforming expansive episodes into sustained economic convergence with high-income countries requires a continuous and successful process of institutional improvement. However, these two processes are difficult to synchronise.

Continue reading →

Fiscal policy in the time of COVID-19: a new social pact for Latin America

Development Matters Covid-19, Latin America and the Caribbean, New social contract , , , ,

By Pablo Ferreri, Public Accountant and former Vice Minister of Economy and Finance of Uruguay

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

We could say that ultimately the role of government remains unchanged overtime: to achieve ever higher levels of development with the understanding that true development means achieving sustained economic growth while generating greater equity and social cohesion. This must be done through more and better exercise of civil rights and in an environmentally sustainable manner. But in achieving this ultimate goal, challenges change according to realities that governments must face.

Challenges that Latin America faced fifteen years ago, when it enjoyed high levels of growth and a commodity boom in an increasingly open world, are quite different to those that have been brought about by economic slowdown, lower international prices and new isolationist tendencies.

Continue reading →

We know what policies can fix the COVID-19 inequality emergency. But only people power can win them

Development Matters Covid-19, New social contract, Policy , ,

By Ben Phillips, Advisor to the United Nations, governments and civil society organisations, former Campaigns Director for Oxfam and for ActionAid, and co-founder of  the Fight Inequality Alliance. He is the author of “How to Fight Inequality”

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

COVID-19 did not create the inequality crisis. But COVID-19 is seeing inequality metastasise into the most socially dangerous global emergency since World War II.  The problem is clear. The OECD Secretary-General has rightly drawn the analogy with the Post-War reconstruction and Marshall Plan to illustrate the level of ambition needed. Opening the OECD conference on “Confronting Planetary Emergencies”, President Michael D Higgins of Ireland set out the need for a “radical departure” from “decades of unfettered neoliberalism” which have left people “without protection as to basic necessities of life, security and the ability to participate”. As he noted, “it is no longer sufficient to describe, however brilliantly, systemic failure. We must have the courage to speak out and work for the alternatives.”

Continue reading →

Victoire historique devant la Cour suprême en Zambie : des milliards de dollars US en recettes fiscales supplémentaires et un message par-delà les frontières

Development Matters Africa, Français, Natural Resources, New social contract , , ,

Par Ignatius Mvula, Directeur adjoint, Unité de vérification dans le secteur minier, Administration fiscale de la Zambie, Mary Baine, Directrice, Programmes fiscaux, Forum de l’administration fiscale africaine, et Ben Dickinson, Chef de la Division des Relations internationales et du développement, Centre de politique et d’administration fiscales, OCDE

Read this blog in Eglish

En mai 2020, l’administration fiscale de la Zambie (ZRA) a remporté une victoire fiscale historique devant la Cour suprême contre Mopani Mining Copper plc. Le Tribunal a condamné l’entreprise à payer 240 millions de kwacha (13 millions USD) d’impôts supplémentaires. La décision tenait au fait que la Zambie devait baser la partie technique de son dossier en apportant la preuve de l’évasion fiscale par des stratégies de l’érosion de la base d’imposition et du transfert de bénéfices, ou BEPS.  Partout dans le monde, des entreprises multinationales exploitent les failles et les inadéquations entre les règles fiscales internationales, occasionnant aux pays une perte s’élevant jusqu’à 100 à 240 milliards USD par an, soit l’équivalent de 4 à 10% des recettes totales de l’impôt sur les bénéfices des sociétés dans le monde. Par ailleurs, pour les pays en développement, leur dépendance proportionnellement plus élevée à l’égard des recettes de l’impôts sur les sociétés signifie qu’ils pâtissent de l’érosion de la base d’imposition et du transfert de bénéfices de manière disproportionnée. La Zambie ainsi que beaucoup d’autres pays africains indiquent que l’utilisation abusive des règles de prix de transfert – telle que la fixation des prix des biens et des services entre parties liées d’une entreprise multinationale – représente l’un des risques les plus élevés de BEPS pour leur assiette fiscale.

Continue reading →

Landmark Supreme Court victory in Zambia: collecting millions in tax revenues and sending a message across borders

Development Matters Africa, Natural Resources, New social contract , ,

By Ignatius Mvula, Assistant Director – Mining Audit Unit, Zambia Revenue Authority, Mary Baine, Director – Tax Programmes, African Tax Administration Forum, and  Ben Dickinson, Head of the Global Relations and Development Division, Centre for Tax Policy and Administration, OECD

Lire ce blog en français

In May 2020, the Zambian Revenue Authority (ZRA) won a landmark tax case against Mopani Copper Mining plc in the Supreme Court. The Court ordered the company to pay additional tax of 240 million Kwacha (USD 13 million). The judgement hinged on Zambia making a technical case showing evidence of tax avoidance through base erosion and profit shifting or BEPS strategies. In countries around the world multinational enterprises (MNEs) exploit gaps and mismatches between different countries’ tax systems, costing countries up to 100-240 billion USD in lost revenue annually, the equivalent to 4-10% of the global corporate income tax revenue. Moreover, developing countries’ higher reliance on corporate income tax means they suffer from tax base erosion and profit shifting disproportionately. Zambia and many African tax administrations report that the abuse of transfer pricing rules – the pricing of goods and services between related parties of a multinational enterprise – represents one of the highest BEPS risks to their tax bases.  

Continue reading →

Trapped in the middle? Developmental challenges for middle-income countries

Development Matters New social contract ,

By José Antonio Alonso, Professor at Universidad Complutense and member of the Spanish Co-operation Council and José Antonio Ocampo, Professor at Columbia University, and former UN Under-Secretary-General for Economic and Social Affairs and Finance Minister of Colombia – Editors of the recent book Trapped in the Middle? Developmental Challenges of Middle-Income Countries, Oxford: Oxford University Press, 2020

The intense growth enjoyed by a group of emerging economies during the last two decades drove some analysts to predict the beginning of a new stage of generalised economic convergence. In their vision, more and more middle-income countries (MICs) were likely to reach high-income status in the near future, taking advantage of the new opportunities provided by access to financial markets, information technology and international trade, including the development of global value chains.

Unfortunately, data have not confirmed these optimist predictions. Actually, up to now, economic convergence has been a selective opportunity for a small group of countries, and rather a generalised tendency for the whole group of MICs. Moreover, there is growing evidence that trespassing the low-income threshold and achieving middle-income status is not enough for countries to converge toward high-income levels. Few MICs have successfully completed that transition in recent decades, with the majority getting stuck in the middle-income group, thus facing what has come to be called the middle-income trap.

Continue reading →

Preventing a child marriage pandemic

Development Matters Covid-19, Gender, Women and Girls, Humanitarian, New social contract , , ,

By Gabrielle Szabo, Senior Gender Equality Adviser and Chiara Orlassino, Research Adviser, Save the Children UK

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
Shumi, 16, avoided child marriage with the support of Jasmin, a neighbour and Save the Children-trained peer leader who runs an advocacy group for girls in the village. Photo: Tom Merilion/Save The Children/Bangaladesh

By New Year’s Eve, half-a-million girls may already have married as a result of the economic crisis caused by COVID-19. New analysis from our Global Girlhood Report suggests that by 2025, 2.5 million girls may marry as children. These marriages will add to the estimated 12 million child marriages that take place every year, 2 million of which involve girls under 15 years of age.

These increases will continue over the next decade, but they are not a challenge for future leaders and communities – they are a challenge for today. The risks that set girls on a path to child marriage are already mounting, and materialising. Decision-makers and gender equality advocates must ask ourselves what we can do to stop COVID-19 triggering a child marriage pandemic now. Fortunately, our history already holds many of the answers and we are learning more about how to respond to new challenges from each other every day.

Continue reading →

Public health and migration: from the Postcolonial era to COVID-19

Development Matters Asia, Covid-19, Migration, New social contract , , , ,

By Ranabir Samaddar, Distinguished Chair in Migration and Forced Migration Studies, Calcutta Research Group

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
Photo: Juan Alberto Casado, Shutterstock

I wrote The Postcolonial Age of Migration in 2016-2019. It came out just two months ago as the pandemic continued (and continues) to rage in India and around the world. Global mobility came to a screeching halt and I have not yet seen the book in print. Locked down in my house and aware that the book had come out, I was driven to reflect on what I had written: did I do justice to our age, which I had described as the postcolonial age of migration? The book time and again goes back to colonial histories of war, plunder, changes in land use pattern, peasant dispossession, primitive accumulation, and their continuities in our time. Against this backdrop, the book discusses how the colonial practices of violence and border building are being reproduced today on a global scale. Wars, famines, and ecological changes are major driving factors behind migration and forced migration flows today. They also influence patterns of labour mobility. Yet as I reflected, the overwhelming reality of the COVID-19 pandemic brought home the realisation that the book does not account for epidemiological disasters as an integral part of the colonial history of migration and the postcolonial age of migration. The absence of any concern for migrant workers and refugees in public health structures should have been discussed. The book speaks of refugees’ health concerns in camps, yet the broader perspective of migrants and public health is absent.

Continue reading →

Can middle income countries rise up to their citizens’ expectations?

Development Matters Development in Transition, New social contract , ,

By Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary General on Development[i]

A call for a new social contract

Despite significant economic growth over the past years, middle-income countries (MICs) face increasingly complex challenges related to, among others, a growing demand from their new and still vulnerable middle-classes. As middle-classes have grown in recent decades, so have citizens’ aspirations and demands for quality public goods, better services and a more responsive and transparent state. More educated, better informed, and more connected than ever before, citizens are asking for more voice in public decisions. In parallel, growing aspirations confronted with chronic vulnerability of middle-classes tend to generate frustration and, more and more frequently, social turbulence. Discontent has been erupting for several years in many of these countries, going back to the Arab Spring, with recent examples like Lebanon, and some Latin American countries, including high-income countries like Chile. Today, challenges are exacerbated as the COVID-19 crisis pushes members of the middle class who had previously escaped extreme poverty, back into it. Governments seem increasingly incapable of understanding how people perceive their quality of life.

Continue reading →

Democracy is a public good. What is the development community doing about it?

Development Matters New social contract , ,

By Anthony Smith, CEO of the Westminster Foundation for Democracy (WFD)

Democracy has been undervalued by the development community. I understand why – I am a child of decolonisation and its political economy of liberation, and my introduction to international development was through the target-driven Millennium Development Goals (MDGs). But I have come down firmly on the side of Amartya Sen’s view on the timing of democracy.  He said: “A country does not have to be deemed fit for democracy; rather, it has to become fit through democracy.” For too long, some in the donor community have been ambivalent about this, wanting proof that development goals would be reached faster in democracies than in autocracies and implying that democracy could wait. For too many of us, the politics of our partner country was just a factor to be navigated around to avoid disrupting our programmes.

Continue reading →