World Development Report 1981

National and International AdjustmentAnnex World Development Indicators

WorldDevelopment

Report1981

The World BankWashington, D.C.

August 1981

11

© 1981 by the International Bankfor Reconstruction and Development / The World Bank1818 H Street, N.W., Washington, D.C. 20433 U.S.A.

All rights reserved.ISBN 0-19-502997-6 clothISBN 0-19-502998-4 paper

ISSN 0163-5085

The Library of Congress has cataloged this serial publication as follows:

World development report. 1978

[New York] Oxford University Press.v. 27 cm. annual.

Published for the World Bank.

1. Underdeveloped areasPeriodicals. 2. Economic developmentPeriodicals. I. International Bank for Reconstruction and Development.

HC59. 7. W659 330.9'172'4 78-67086

Foreword

World Development Report 1981 isthe fourth in the World Bank'sannual series assessing key de-velopment issues. This year itsmajor focus is the internationalcontext of development. It exam-ines both past trends and futureprospects for international trade,energy and capital flows as well astheir effects on developing coun-tries. This is followed by ananalysis of national adjustmentsto the international economy.

In the year since the last Reportappeared, world economic condi-tions have worsened: the pricesthe developing countries mustpay for their imports, particularlyoil, have increased while theircapacity to pay for them hasdeclined. Their export growth hasbeen constrained by the continu-ing recession in the industrialcountries. Concessional financehas stagnated; and there are signsof uncertainty in the commercialcapital markets. Even under therelatively optimistic assumptionsof this Report's High-case projec-tions, the income gap between therichest and poorest countries willcontinue to increase; under theLow case, even the number of in-dividuals living in absolute pov-erty will rise.

The discussion of internationaltrade finds that middle-incomedeveloping countries fared rel-atively well in the 1970s but thatthe low-income countries benefit-

ed scarcely at all. The discussion onenergy indicates that the world'sconsumption of energy was grow-ing in an unsustainable patternprior to the oil-price increases ofthe 1970s. Some of the necessaryadjustments have now beenmade, but difficulties lie ahead formost countries. As for capitalflows, the Report expects the bor-rowing needs of the middle-income countries to be met largelyby the commercial bankingsystem, with additional supportby international financial insti-tutions. But for the low-incomecountries, prospective aid levelsare inadequate.

In the latter chapters of theReport, the analysis shifts fromthe international to the nationallevel. Here adjustment problemsof particular types of developingcountries are examined and theircurrent policies and the lessons oftheir recent experience are dis-cussed. A dozen case studies arepresented to add further detail tothe analysis of national adjustment.

The conclusions of this analy-sis are consistent with those of thefirst section: countries which pur-

Robert S. McNamaraJune 30, 1981

sued relatively outward-orientedpolicies tended to adjust morereadily to external shocks. Onceagain the low-income countriesemerge as having fewer optionsand little flexibility to adjust. Theywill continue to require substan-tial amounts of aid for decades tocome. The human. developmentissues which were the focus of the1980 Report are examined in thelight of the new circumstances.Human development is threat-ened during the adjustmentperiod, and the potential conse-quences in unnecessary humansuffering are grave. Failure to dealwith these problems will also haveserious consequences interna-tionally in the longer term.

This volume represents thework of many of my colleaguesin the World Bank. The judgmentsexpressed do not necessarilyreflect the views of our Board ofDirectors or the governments theyrepresent. As in previous years,the Report includes the WorldDevelopment Indicators, whichprovide tables of social andeconomic data for more than ahundred countries.

'U

iv

This report was prepared by a team led by RobertCassen and comprising Michael Finger, Norman Hicks,Frederick Jaspersen, Robert Liebenthal, Pradeep Mitra,Rupert Pennant-Rea, Christine Wallich and Oktay Yenal.The Economic Analysis and Projections Departmentprepared the data and projections for Chapter 2,together with their underlying analysis, and suppliedinformation and assistance for the entire report. Theteam has also worked closely with members of the PolicyPlanning and Program Review Department and theDevelopment Research Center. The authors would liketo thank these and many other contributors, reviewersand production and support staff. The work was carriedout under the general direction of Hollis Chenery.

ContentsDefinitions viii

1 Introduction 1

2 A ten-year perspective 8

Growth in the 1970s 8

Prospects for the 1980s 10

Implications for poverty 16

Interdependence 18

3 Growth through trade 20

Trade in the 1970s 20Developing-country trade policy and growth 25Industrial-country policy 28International cooperation 32

4 Energy: a new era 35

The energy transition 35The special problems of traditional fuels 40Energy and growth 42

Energy policy 43

5 External finance for adjustment and growth 49

External finance in the 1970s 50Financial adjustment 53Prospects 54

6 Country experience: managing adjustment 64

The oil-importing developing countries 64

Structure and policy 64External shocks and modes of adjustment 65

Middle-income oil importers 67Low-income oil importers 78

China: adjustment and reform 85

The need for adjustment 85Prospects and options in the 1980s 85

The oil-exporting countries 88

The capital-deficit oil exporters 88The capital-surplus oil exporters 91

Oil-exporting countries' prospects 93

Nonmarket industrial countries: the "intensive strategy" 94

A changing strategy 94Relations with developing countries 95

7 Human development: a continuing imperative 97

Human development and adjustment 97Food and nutrition 100

Population 107

The role of external assistance 110

8 Overview liiThe nature of interdependence 111

Developing countries in the 1970s and 1980s 112

Global adjustment 114

Agenda for growth 117

Technical appendix 120

Bibliographical note 124

Annex World Development Indicators 129

V

Text tables1.1 Growth of GNP per person, by region, 1960-90 32.1 Growth of GDP in industrial countries, 1970-90 102.2 Growth of export volumes, goods and nonfactor services, 1970-90 112.3 Exports of all developing countries, 1970-90 112.4 Net financing flows, all developing countries, 1970-90 132.5 Performance indicators, oil-importing developing countries, 1970-90 142.6 Growth of GDP, by region, 1960-90 152.7 GDP growth rates, 1980-90 152.8 Fuel-import cost ratios, 1970-90 162.9 GDP sensitivity to oil-price increases, 1980-90 172.10 GNP per person, 1980-90 182.11 World production and trade, High case, 1970-90 182.12 Current account balances, 1970-90 193.1 Composition and growth of world merchandise trade, 1970-80 203.2 Purchasing power of exports of all major goods and nonfactor services, 1970-80 213.3 Developing-country shares in the apparent consumption of manufactured goods in

industrial countries, 1970-78 243.4 Structure of merchandise trade, low- and middle-income oil importers, 1970-80 263.5 Import coverage of the Generalized System of Tariff Preferences, 1976 303.6 Increments in the volume of nonfuel trade between developing and developed

countries, 1960-80 313.7 Export purchasing power net of fuel imports for low-income oil importers, 1970 and 1980 324.1 Commercial primary energy production and consumption, by country group, 1970-90 364.2 Index of real energy prices to final users: major industrial market economies, 1974-80 374.3 Typical income and long-term price elasticities for energy 374.4 Commercial energy consumption, 1960-90 385.1 Oil-importing developing countries' current account deficit and finance

sources, 1970-80 495.2 Medium- and long-term external debt, outstanding and disbursed, 1970-80 575.3 Oil importers: financing current deficits, 1970-90 626.1 Developing-country groups 656.2 Balance-of-payments effects of external shocks and modes of adjustment in groups of

oil-importing developing countries, 1974-78 averages 666.3 Percentage rate of change in the consumer price index, selected developing countries,

peak of 1956-70 and mid-1970s 676.4 Selected capital-importing oil exporters: country characteristics 897.1 Central government expenditure on health and education, selected countries,

1977 or 1978 987.2 Foodgrain consumption per capita, 1961-79 102

Technical appendix tablesT.1 Nonfuel primary exports: changes of export purchasing power and export volume by

product category and by country, 1970-80 121T.2 Purchasing power of exports of manufactured goods, increase by major country

group, 1970-80 122T.3 Balance-of-payments effects of external shocks and modes of adjustment: Kenya 122

Text figures1.1 Three decades of progress: income, health, education, 1959-80 62.1 GDP, inflation and exports, by country group, 1961-80 92.2 Developing countries' merchandise exports, 1980 and 1990, High and Low cases 112.3 Developing countries' GNP per person, 1970-90, High and Low cases 172.4 Numbers in absolute poverty, 1980 and 2000 183.1 Oil-importing developing countries' purchasing power of exports, 1965-80 213.2 Developing countries' increases in export purchasing power, 1970-80 223.3 Industrial and oil-importing developing countries' nonfuel primary exports, 1970-80 223.4 Industrial and oil-importing developing countries' manufactured exports, 1970-80 243.5 Developing countries' exports to industrial countries, 1968-78 263.6 Industrial countries' demand for manufactures, 1970-78 304.1 Petroleum prices, 1950-80 and 1972-80 35

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4.2 Commercial primary energy consumption, 1960-90 364.3 Effects of income and price on energy consumption in industrial countries, 1960-90 374.4 Effects of income and price on energy consumption in oil-importing developing

countries, 1960-90 384.5 Increments to world energy supply 394.6 Consumption of traditional and nontraditional fuels in developing countries 404.7 Comparative costs of production 455.1 Middle-income oil importers' current account deficit, 1970-80 495.2 Oil-importing developing countries' sources and uses of financial flows 505.3 External finance to developing countries, 1970, 1975 and 1978 535.4 Global current account balances, 1972-80 535.5 Sources and distribution of aid 565.6 Developing countries' outstanding debt, by type of creditor, 1970 and 1980 576.1 Capital-surplus oil exporters' oil production, 1966-79 927.1 World grain prices, 1966-80 1027.2 Foodgrain production, consumption and net trade, by country group and for selected

countries, 1970 and 1980 1027.3 World grain imports, by country group, 1970 and 1980 1037.4 Developing countries' food imports and food aid 1037.5 Birth and death rates for selected country groups, 1950-95 108

Text boxesSome other factors: South-North and South-South 12Capital flows: a glossary 13Requirements for faster growth 16International comparisons of real income 17Tariff escalation and the growth of processing 23Mineral investment needs 27Multi-Fibre Arrangement 28The Trigger Price Mechanism for steel imports 29Agricultural protection in the European Community 33Protection's price 33Trees for people: a participatory solution 41

Reserves and resources 44International hydro 45Domestic petroleum prices 46Improving industry's energy efficiency 47Traffic management: two experiments 47Workers' remittances 51Variable interest rate debt 52Debt indicators 58Debt relief 59South Korea 68Brazil 70Thailand 72Jamaica 72Managing windfall gains 74The Philippines 76Uruguay 77Zambia 78India 80Tanzania 83Upper Volta 84Nigeria 90Paying for primary education 99Paying for primary health care 100Poverty and human development in China 101

Food subsidies: three cases 106Family planning programs make a difference 109Adjustment mechanisms 118

vu

Definitions

The principal country groupsused in the text of this Report andin the World Development Indica-tors are defined as follows:

Developing countries are divid-ed into: low-income countries, with1979 gross national product (GNP)per person of $370 and below; andmiddle-income countries, with 1979GNP per person above $370.While China is included as a low-income developing country in theWorld Development Indicators, inthe text of the Report it is notincluded in the terms developingcountries or low-income countriesunless including China is specif-ically noted. Developing countriesare also divided into oil exportersand oil importers, as follows:

Oil exporters comprise Algeria,Angola, Bahrain, Bolivia, Brunei,Congo, Ecuador, Egypt, Gabon,Indonesia, Iran, Malaysia, Mex-ico, Nigeria, Oman, Peru, Syria,Trinidad and Tobago, Tunisia andVenezuela.

Oil importers comprise allother developing countries notclassified as oil exporters.

Capital-surplus oil exporters(not included in developing coun-tries) comprise Iraq, Kuwait,Libya, Saudi Arabia, Qatar and theUnited Arab Emirates.

Industrial market economies are

the members of the Organisationfor Economic Cooperation andDevelopment (OECD) identifiedbelow (apart from Greece, Portu-gal, Spain and Turkey, which areincluded among the middle-income developing countries).This group is commonly referredto in the text as industrial countries.

Nonmarket industrial economiesinclude the following developedEuropean countries: USSR,Bulgaria, Czechoslovakia, Ger-man Democratic Republic, Hung-ary and Poland. This group issometimes referred to asnonmarket countries.

Organ isation for Economic Coo pera-tion and Development members areAustralia, Austria, Belgium,Canada, Denmark, Finland,France, the Federal Republic ofGermany, Greece, Iceland, Ire-land, Italy, Japan, Luxembourg,the Netherlands, New Zealand,Norway, Portugal, Spain,Sweden, Switzerland, Turkey, theUnited Kingdom and the UnitedStates.

The OECD Development Assis-tance Committee (DAC) com-prises Australia, Austria,Belgium, Canada, Denmark, Fin-land, France, the Federal Republicof Germany, Italy, Japan, the

Netherlands, New Zealand, Nor-way, Sweden, Switzerland, theUnited Kingdom, the UnitedStates and the Commission of theEuropean Communities.

The Organization of PetroleumExporting Countries (OPEC) com-prises Algeria, Ecuador, Gabon,Indonesia, Iran, Iraq, Kuwait,Libya, Nigeria, Qatar, SaudiArabia, the United Arab Emiratesand Venezuela.

Economic and demographic terms aredefined in the technical notes tothe World Development Indica-tors on pages 184 to 192.

Billion is 1,000 million.

Tonnes are metric tons (1,000 kilo-grams).

Growth rates are in real termsunless otherwise stated.

Dollars are United States dollarsunless otherwise specified.

Symbols used in the text tables areas follows:

Not available.(.) Less than half the unit shown.n.a. Not applicable.

1 Introduction

The external pressures on devel-oping countries have shown littlesign of easing over the past 12months. The combined currentaccount deficit of the oil-importingcountries rose from $26 billion in1978 to $70 billion in 1980 and mayrise even higher this year. Slowgrowth in the industrial countriesis curbing demand for developingcountries' exports while the priceof petroleum (a product that nowconstitutes some 25 percent ofdeveloping countries' importbills) increased over 80 percent inreal terms between 1978 and 1980.

While many of the better-offdeveloping countries have beenable to expand exports and borrowextensively in commercial mar-kets, for most of the poorer coun-tries these new pressures come atthe end of a decade in which theyhave made little or no progress.Some countries in South Asia haveweathered the 1970s reasonablywell. But the majority of the poorcountries of Asia and Africa suf-fered reduced growth in the 1970s,participated negligibly in theexpansion of world trade and ben-efited from aid increases only for ashort period after the first oil-pricerise.

Now they face the 1980s, whichhave started badly for them, withno sign of change in either theirtrade or their aid prospects. Thereis much to be improved in theirdomestic performance. But with-out more support from the inter-

national environment, their max-imum efforts can at best yield onlyslow progress. The world willdivide even more sharply betweenthe haves and the have nots.These countries, even excludingChina, have a population of wellover 1 billion people. The 1980stherefore pose the question ofhow developing countries in gen-eral can maintain or acceleratetheir growth; and how the poorcountries in particular can findways out of an increasingly des-perate predicament.

This fourth World DevelopmentReport offers an integrated discus-sion of international and nationaleconomic policy issues. It dealswith the main dimensions ofadjustment in the global economy,their counterparts in nationaleconomies, and the interactionsbetween the two, The Report willthus:

consider the prospects of thedeveloping countries in the 1980s;

analyze recent experience inworld trade, energy markets andinternational capital flows; and

examine the diverse nature ofcountry adjustment to the trans-formed international environ-ment.

Transformation is not too stronga word to describe the contrastbetween the 1960s and 1970s. Slowgrowth and fast inflation in theindustrial countries, major in-creases in oil prices, the break-down of the fixed-exchange-rate

system, the changing pace andcharacter of international trade(with its acute contrast betweenthe rapid export growth of manu-factures and the much slowergrowth of exports of primary corn-modifies), the steep rise in theflow of commercial bank loans todeveloping countries: few of thesewere foreseen a dozen years agoa fact which counsels caution inlooking at prospects in the 1980s.At the same time, those who quiteproperly expect the 1980s to be aperiod of trial for many develop-ing countries may reflect that the1970s witnessed international eco-nomic convulsions at least asserious as any that may be thoughthighly probable in the next 10years. The world economy'scapacity to withstand shocks hasbeen severely tested. The testswere not passed with entire suc-cess; growth slowed down andweaknesses in the trading andfinancial environment have beenexposed; but parts of the develop-ing world have come throughremarkably well.

To analyze the experience of the1970s, this Report makes use of theextensive work carried out in theWorld Bank and elsewhere on therecent progress of development.The links between domestic andinternational policies and perfor-mance emerge clearly. Developingcountries have to adjust to newcircumstances; their effectivenessin doing so depends critically on

1

their domestic management aswell as on the industrial and oil-exporting countries' domestic andinternational policies.

A second conclusion of theReport's analysis is the need fordurable changes in economic pol-icy. Over the past two years, manydeveloping countries have paidfor part of their increased importbills by a combination of short-term borrowing and drawing onreserves. By definition, these aretemporary expedients. Certainly,developing countries will need toborrow more in the future, fromboth private and official sources.But many will have to take newstepsor intensify existing ef-fortsto increase exports or re-duce imports so as to achievesmaller, sustainable deficits. Formany of them, a principal result ofthe changed external environ-ment is to make long-neededimprovements in domestic eco-nomic management all the moreurgent.

These domestic factors mustcomplement the national andinternational measures requiredfor an orderly transition to lowerdeficits. Structural changes areneeded to help minimize the sacri-fice of near-term growth and long-term development. In the absenceof satisfactory national action anda supportive international envi-ronment, there will be a deflation-ary transition, involving severeand avoidable losses in output,and unnecessary human suffer-ing and harm to developmentprospects.

Global adjustment

In international terms, perhapsthe biggest change from the 1960sand early 1970s is the new impor-tance of trade and financial flowsin balancing out payments for oil.In this context, adjustment meansensuring that this balance, along

2

with changes in the use of energy,occurs in such a way as to permitworld growth to return to some-thing approaching its earlier pace.It may be impossible to match thegrowth rates of the 1960s, but it issurely possible to surpass the rec-ord of the past seven years.

The suddenness of the oil-priceincreases and their consequencesfor the pattern of global deficitsand surpluses has required anequally fast realignment of tradeand international borrowing.Much of this has taken place.Expanded exports have helpedindustrial and middle-incomecountries to pay for their oilimports. The low-income oil-importing countries have beenless successful, although severalof them have enjoyed various off-setting benefits (like migrantworkers' remittances) from therise in oil prices. Another part ofadjustment is containing energydemand; this was slow to start,but has recently begun to makeheadway, especially in the indus-trial countries. A further compo-nent of adjustment, which takeseven longer, will be changes inenergy supplies: the transition tomore plentiful fuelsespeciallycoaland eventually to renewa-ble sources.

In aggregate terms, higher oilprices can be viewed as ultimatelyrequiring an offsetting transfer ofgoods from oil-importing to oil-exporting countries. An equiv-alent effect would follow from anymajor terms-of-trade change, forexample, between manufacturesand primary commodities; but thescale and speed of the rise in oilprices give them particular signifi-cance. To the extent that oil export-ers spend their new revenues, thetransfer takes the form of the extraimports they buy; to the extentthat they lend them to oil import-ers, the transfer is postponedthe lender acquires a financial

asset and the borrower pays inter-est. It is possible to envisagenumerous different patterns ofcurrent account surpluses anddeficits resulting from higher oilprices. On their own, however,they reveal little about the successof adjustment since that alsodepends on what happens toworld economic growth.

The surpluses of one group ofcountries are by definition re-flected in the deficits of others. Butwhile the trade and financial flowswhich underlie them are synchro-nized as a whole, for individualcountries export earnings and bor-rowing may not match theirdesired levels of imports. Oil ex-porters import mainly from theindustrial countries, rather thanfrom developing countries, whichwould help them pay for theiroil. And no mechanism ensuresthat capital flows are distributedamong deficit countries accordingto their balance-of-paymentsfinancing requirements.

In both trade and capital flowsthere is an asymmetry betweenthe industrial and the developingcountries. Not only do the indus-trial countries pay for a large shareof additional oil bills by exportingto the oil producers; their balanceof payments is much less affectedby oil prices, and their adjustmentand growth are mainly deter-mined by their own policies. Theoil exporters invest there, andthey have easier access to capital ingeneral. The developing coun-tries' adjustment is more con-strained: they depend heavilyon the growth and openness ofindustrial-country markets fortheir exports and on the aid andcredit institutions of the industrialcountries for their external finan-cial needs. The main force ofworld growth still flows from thedeveloped to the developingworld, even if today the new tradeand financial links make the trans-

mission of economic activity inthe reverse direction ever moreimportant.

This Report's examination oftrade, energy and capital flowsdraws attention to some par-ticularly important conditions forthe satisfactory functioning ofglobal adjustment. They includethe success of the industrial coun-tries in mastering inflation andother constraints on growth, theiravoidance of protectionism andtheir support for expansion offinancial flows to developingcountries from the private mar-kets. The oil-importing developingcountries need to expand exportsand make efficient use of bor-rowed capital to increase produc-tive capacity, so that loans can beserviced. In all the oil-exportingcountries, patterns of domesticdevelopment are intertwined withpolicies on oil production and oilprices, which affect their importdemand and also weigh heavily inthe global balance. And theinternational financial institutionshave a key role to play in becom-ing more prominent in facilitatinginternational flows of commercialcapital.

Many of these adjustmentsneed time. While payment forhigher oil import bills throughtrade and finance takes placerapidly, borrowing has its limits,and the resumption of sustainablegrowth above recent levels re-quires more fundamental changes-control of inflation, raising pro-ductivity, new investment toreflect rising energy costs. Forlow-income countries especially,reshaping domestic production toraise exports, economize onimports and take account of newenergy scarcities must be a leng-thy process. If they are not to beforced to adjust by curbing growthrates-which for most of them arealready low-and abandoningother development objectives,

Table 1.1 Growth of GNF per person, by region, 1960-90

they must receive reliable supportfrom the international commu-nity. For the world economy as awhole, a period of transition isinevitable until the pattern of cur-rent account balances and foreignindebtedness can be managedmore smoothly and with less fre-quent need for intervention bygovernments and internationalagencies.

Projections

The next chapter of this Reportreviews the global prospects forthe 1980s, bracketing in two sce-narios what is considered a plausi-ble range of developments. Be-cause the decade has started withvery slow growth in the industrialcountries, the outlook is some-what worse than was projected inlast year's Report. Even under thehigher scenario, average per cap-ita incomes are expected to growby only 1.8 percent a year in thelow-income oil importers, com-

Not including South Africa.GNP for China refers to 1979; growth rate is 1970-79.

pared to 3.4 percent in the middle-income oil importers and 3.1 per-cent a year in the industrial coun-tries (Table 1.1).

Both the relative and the abso-lute gaps between the richest andpoorest countries will widen inthe years ahead, including the gapbetween middle- and low-incomedeveloping countries. If nothingbetter than the lower scenario canbe achieved, the number of peopleliving in absolute poverty, nowsome 750 million, will increase byabout 100 million people.

Trade

Chapter 3 looks at developingcountries' trade and its role inadjustment. The great success ofthe 1970s was the export perfor-mance of the middle-income, andespecially the semi-industrial,countries-success that is likely tocontinue, provided the industrialeconomies do not stagnate orbecome more protectionist. But

3

Country group

Population1980

(millions)

GNPper person Average annual percentage growth

(1980currentdollars) 1960-70 1970-80

Low case High case1980-90 1980-90

Low-income oil importers 1,166 220 1.8 0.8 0.7 1.8Africa (sub-Saharan) 175 260 1.7 -0.4 -1.0 0.1Asia 991 210 1.8 1.1 1.0 2.1

Middle-income oil importers 735 1,710 3.9 3.1 2.1 3.4East Asia and Pacific 183 1,242 4.9 5.7 4.3 6.0Latin America and Caribbean 249 1,820 2.7 3.4 2.3 3.2North Africa and Middle East 34 850 2.4 2.7 0.0 0.9Africa (sub-Saharan)' 87 520 1.7 0.4 0.0 0.3Southern Europe 152 3,070 5.7 2.9 1.7 3.3

Oil importers 1,901 790 3.4 2.7 1.8 3.1

Oil exporters 482 1,060 3.8 2.7 2.9 4.0

All developing countries 2,383 850 3.5 2.7 2.2 3.3Low-income 1,307 250 1.8 1.6 1.5 2.6Middle-income 1,075 1,580 3.9 2.8 2.2 3.4

Chinab 977 260 4.1 2.9 4.1

Capital-surplus oil exporters 27 7,390 4.2 2.1 2.8

Industrial countries 674 10,660 4.1 2.5 2.3 3.1

Nonmarket industrialeconomies 356 3,720 3.9 2.8 3.0

most of the low-income countrieshave participated hardly at all inthe growth of world trade or in thegrowing "South-South" tradeamong developing countries: thisis part of the explanation for theircurrent plight. Their terms oftrade, even excluding oil, deterio-rated badly.

The chapter discusses the needfor the industrial countries totackle their problems of tradeadjustment. An open and expand-ing trade environment is central tothe health of the world economyin the 1980s. This is true for thegrowth of the industrial countriesas well as for developing coun-tries, whose exports and credit-worthiness are interconnected.But the chapter concludes that thepoorest countries will generallynot benefit much from tradeunless their development alsoadvances on other fronts.

Energy

A range of energy issues is consid-ered in Chapter 4. It shows thatthe pattern of energy use andgrowing demand before the1973-74 oil-price increase wasunsustainable and describes whatis needed to return to a sustain-able path. It underlines that thetwo critically scarce fuels in the1980s are oil and fuelwood. Thechapter considers the economicfactors governing trends in futureenergy prices, the changing com-position of total energy use, theimplications of higher energyprices for developing countries'growth prospects, and the energypolicies that developing countriescould adopt to reduce their vul-nerability.

International capital flows

Chapter 5 of the Report describeshow, in the mid-1970s, capitalmarkets efficiently recycled the oilexporters' surpluses, particularlyto middle-income developing

4

countries; while bilateral and mul-tilateral aid programs initially re-sponded to the needs of manylow-income countries. The 1979-80oil-price increases mean thatheavy additional borrowing isneeded to avoid unacceptably lowgrowth rates. But there are nowseveral causes for concern thatwere absent in the mid-1970s:many countries have already bor-rowed heavily; the banking sys-tem faces a growing number ofconstraints; and high interestrates will increase borrowingneeds if there is to be a substantialnet transfer of funds, while shortermaturities will call for morefrequent refinancing. These areamong the reasons why middle-income countries' requirementsmay not be met without the in-creased involvement of the inter-national financial institutions; thelatter have in fact already begun toplay a more active role.

Once again, however, it is theplight of the low-income countriesthat most requires new initiatives.They need to borrow moreespecially, more rapidly disburs-ing funds. Yet bilateral and multi-lateral aid agencies have notandon present expectations are notlikely tocome forward on any-thing like the scale that is needed.And at least one of the sources offoreign exchange which helpedsome low-income countriesthrough the 1970sworkers'remittancesis not expected togrow as fast as before. Unless theyreceive more financial support,and quickly, their prospects arebleak. The result can only be fur-ther deprivation in the poorestcountries, several of which havealready had declining per capitaincomes during the 1970s.

National adjustment

Having covered internationalissues, the Report then moves on

to consider domestic questions.Corresponding to each of the fac-ets of global adjustment, nationaladjustment requires policies thatover time, say in five to eightyears, will reduce current accountdeficits to sustainable levels. Thismeans that countries must oftenreduce consumption below what itwould otherwise have been, andgenerate enough foreign exchangeto cover the imports needed forgrowth by expanding exports or,alternatively, reducing importrequirements. To the extent thatincreased financing is necessaryto avoid sudden contraction dur-ing the adjustment period, theymust be able to attract foreigncapital. Patterns of production andconsumption of energy must alterboth so as to economize on its useand to encourage its domesticsupply. In a time of austerity, it ismore than ever essential to makethe most efficient use of scarceresources in promoting economicand social objectives. In the longterm, the strategy of developmentand the relative rates of expansionof different sectors must respondto higher energy costs and for-eign-exchange constraints. Suc-cessful adjustment implies achiev-ing this with the minimum sacri-fice of income growth and withoutabandoning the goals of humandevelopment and a less unequaldistribution of personal incomes.

National adjustment, like globaladjustment, takes time. The expe-rience of different countries hasvaried greatly, as Chapter 6 dem-onstrates.

Low-income oil importers.Several have benefited both frominternal developmentsgoodharvests, successful adjustmentpoliciesand from external fac-tors (not least those originatingdirectly or indirectly from higheroil prices: more exports to the oilproducers, more aid from them,and large workers' remittances).

But the majority of low-incomecountries were harmed both byinternational changes (volatile,slow-growing demand for manycountries' primary commodities,aid stagnating after a briefupsurge in 1974-75) and by theirlong-standing domestic weak-nesses. Many were, in addition,racked by war and civil strife.

Middle-income oil importers.Most of them adjusted fairly wellto changed circumstances. Thosewith advanced manufacturingindustry and easier borrowingopportunities could be flexibleenough to expand exports andmaintain growth. But a few ofthemparticularly those that bor-rowed to defer rather than acceler-ate adjustment, or took on over-ambitious new investment pro-gramsdid so in ways that willproduce problems in the 1980s.And the position of some of theless well-off middle-income pri-mary producers is comparable tothat of the low-income countries.

The oil exporters. They com-prise some 20 percent of the popu-lation of developing countries andbenefited from the changes of the1970s. For many of them, how-ever, extra oil revenues have notbeen enough to finance all theirplanned investments and importneeds. And all face the particulardifficulty of avoiding rapid do-mestic inflationwhich will occurif their expansion plans run aheadof productive capacity for goods orservices that cannot be imported.The capital-surplus oil export-ers have a special concern over therate of immigration which has hadto accompany their new growth.For all oil exporters, there is a pre-mium on developing humanresources and on choosing proj-ects with benefits that will outlivetheir oil reserves.

Chapter 6 also discusses recentdevelopments in China, which isgoing through its own period of

"adjustment and reform." And itexamines a variety of internal andexternal factors which are induc-ing adjustment in the nonmarketindustrial economies.

Human development

Last year's World DevelopmentReport was devoted largely toquestions of human develop-ment. It stressed a number ofthemesthat mitigating poverty,improving health and nutrition,promoting family planning, rais-ing educational levels and enhanc-mg other living conditions wereinterrelated goals, important fortheir own sake; and that theinvestments required for thesepurposes were not just human-itarian in their concern but mademajor contributions to economicgrowth.

Chapter 7 of this Report restatesthese themes. It looks first at thelikely impact of national adjust-ment on human developmentprograms, which are obviously atrisk at a time of budgetary strin-gency. It argues that these pro-grams do not have to be cut, or atleast not severely; if cuts are inev-itable nonetheless, it suggestshow they can be effected with theleast damage to human develop-ment. Unless these programsare maintained, many more mil-lions will live and die in appallingpoverty.

Food and nutrition are exam-ined from three main standpoints:the relation between world foodsupplies and measures to improvefood security for countries and forindividuals; the conflict in domes-tic agricultural policy betweenpoor people's needs for low foodprices and the higher pricesneeded for incentives to farmers;and international and nationalaction necessary to overcomewidespread hunger.

The chapter also discusses pop-ulation issues. If food and other

human needs are not met andhuman development does notadvance, that is bad enough initself. But there is a further conse-quence. The volumes of researchon population in recent yearsdemonstrate clearly that povertyand rapid population growth arelinked. Failed development trans-lates directly into failure to slowthe rate of world populationgrowth. This reinforces the hard-ship of developing countries inone of their many vicious circles:the population growth whichresults from poverty makes theremoval of poverty more difficult.

Nor will that hardship neces-sarily be confined to developingcountries. A world of 1.5 billionpeople in 1900 grew to one of4 billion by 1975 and will exceed6 billion by the end of this century.The pressures this will bring toevery country will be considera-ble, since all are affected by worlddemand for food and for finiteresources, and by the dangers toclean air and oceans. Failure toslow population growth substan-tially by the end of this centurymeans that rapid populationgrowth will continue in the next,and lead to an ultimate world pop-ulation of 11 billion or more insteadof the 8 billion at which it could bestabilized. Any residual belief thatindustrial countries can somehowimmunize themselves from theproblems faced in the developingworld will then be painfullyexposed.

Interdependence

This last theme is one of manyinstances of interdependenceamong issues and among coun-tries brought out in this Report.The final chapter provides anoverview of interdependence;summarizes the Report; and drawssome conclusions on world eco-nomic prospects and the policiesrequired to improve them.

5

Figure 1.1 Three decades of progress: income, health, education, 1950-80

Income GNP per person (1980 dollars)

GNP per person (1980 dollars) 1950 1960 1980 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Industrial countries

Middle-income countries

Low-income countries

Average annual growth (percent) 1950-60

Industrial countries 3.1

Middle-income countries 2.5

Low-income countries 0.6

Life expectancy at birth (years)

EducationAdult literacy rate (percentage)

6

Challenge of development

Future goals must be judged in thelight of past achievements. Inmany countries, independencecame less than 20 years ago and

Increase

1950-79

7

13

14

12

1960-80

3.3

3.3

1.7

1980

1950

1980

1950

1980

Industrialcountries

1950

1979

Middle-incomecountries

1950

1979

Low-incomecountries

1950

1979

1 Low-incomeJ countries

mu sums mis

uusiussuuussuusul

1515$ sum titus Ii $.*iiii5ii$

Middle-incomecountries

economic development has been aformal policy goal for only a rela-tively short time; yet considerablestrides have already been made.Among the middle-income coun-tries, GNP per person has risen

3.2Low-income

countries

3

1

Adult literacy in middle- and low-income countries (percentage) $50 million adults

almost two-and-a-half timesin real terms during the past30 years, from some $640 in 1950(1980 dollars) to $1,580 in 1980. Inthe low-income countries, percapita incomes rose by less than

1950 1960 1979

Industrialcountries 67 70 74

Middle-incomecountries 48 53 61

Low-incomecountries 37 42 51

Nonmarketcountries 60 68 72

1950 1960

Industrialcountries 95 97

Middle-incomecountries 48 53

Low-incomecountries 22 28

Nonmarketcountries 97 97

Health Life expectancy at birth (years) 5 75 million people

Note: All tables exclude China. 0 20 40 60 80 100

1950 ndustrial countries4,130 5,580 10,660

640 820 1,580

170 180 250

19501976

Literate

99Illiterate

721976

Literate39

Illiterate99

4Middle-ncome

Countries

Average annual growth, 1950-80(percent)

Industrialcountries

0 10 20 30 40 50 60 70 80

,usuIuu,w

"sn's,,"'

one-half, from $170 (1980 dollars)in 1950 to $250 in 1980; a gain ofonly $80 per person in 30 yearsthough in the great majority ofthem, significant gains havenonetheless been made in combat-ing illiteracy, in improving educa-tion and health, in lowering mor-tality and fertility.

By contrastand it is a starkcontrastin that same 1950-80period the average income perperson in the industrial countriesincreased by over $6,500 (Figure1.1). These income figures shouldnot be taken too literallytoreflect purchasing power dif-ferences, those for developingcountries should be adjustedupwards by a factor of 2 ormore. Nevertheless, the contrastremains.

Not surprisingly, most develop-ing countries regard industrializa-tion itself as the main path toprosperity, so much so that manyof them have paid insufficientattention to complementary pri-mary production, particularly

food production. Many mkdle-income countries owe a considera-ble part of their growth to expand-ing output and exports of man-ufactures. Yet in the low-incomecountries manufacturing accountsfor only 13 percent of GNP, andthat is only two percentage pointshigher than it was 20 years ago.This does not imply that low-income countries cannot pro-gress. Being a low-income countryis not an immutable fact; it is astatistical category. The middle-income countries were poor oncethemselves; some are still onlynarrowly above the line whichseparates them from the low-income countries. Some,however, have advanced from alow starting point with strikingspeed even in the past twodecades; and several low-incomecountries have reasonable pros-pects of raising their incomes sub-stantially in the years to come.

Thus the questions of this Reportare old questions: how candeveloping countries achieve

growth with equity and sustainedhuman development? Will theinternational environment com-plement their efforts? But some ofthe answers and the facts thatunderlie them are new. In a certainsense, the 1970s may be remem-bered for giving a new shape tothe world economy. This is not theproduct of the search throughnegotiation for greater equality ofeconomic opportunity amongnations which the developingcountries have pursued; littleprogress has been made along thatroute. Rather, what has evolved isa different pattern of economicpower, with new centers of pro-duction, finance and trade, andnew forms of interdependence.The result has been both severedifficulties and favorable oppor-tunities for the developing world;the 1980s will determine whetherthe opportunities can outweighthe difficulties, even for thepoorest countries.

7

2 A ten-year perspective

The 1980s have begun on a slug-gish note. Growth in the indus-trial market economies as a groupslowed down sharply in 1980 andwill remain slow in 1981 as well.These countries show few signs ofovercoming the inflationarylegacy of the 1970sjust one ofseveral similarities between thetwo decades. Others include ris-ing real oil prices; continuing largetrade deficits and, consequently,heavy borrowing from abroad bythe developing countries; and theprospect of much slower growthin low-income countries than inmiddle-income countries.

The 1980s will not, however, be astraight rerun of the 1970s; thecontrasts between the two couldbe almost as significant as theparallels. For example, the price ofenergy in real terms is unlikely tofall in the 1980s as it did in the lasthalf of the 1970s. The reality ofhigher energy prices has beenaccepted and the need to makeadjustments recognized by mostcountries. Many of the lessons ofthe 1970s have now been learnedso that countries may adjust moreeffectively, and with less loss ofgrowth, than they did before.

This chapter highlights theinternational influences on de-veloping countries. The variousprojections and assumptions itmakes about the three mostimportant of those influencestrade, energy and externalfinanceare drawn from the de-

8

tailed analysis in the next threechapters. But the developingcountries' domestic policies alsoaffect their performance. Theirachievements in boosting savingand investment; in making effi-cient use of their capital andhuman skills; in expandingexports and economizing onimportsall these, as Chapter 6demonstrates, have powerfullyinfluenced their record in the past,and will continue to do so.

In practice, national and inter-national factors are connected.With a favorable external environ-ment, developing countries mayfind it easier to make internaladjustments. On the other hand,the degree to which the externalenvironment deteriorates willdetermine the scope of internaladjustment required. For exam-ple, a slight increase in currentaccount deficits can be covered byexternal borrowing in the shortand medium term, but a largerdeficit will require more funda-mental changes over the longerterm. These links are incorporatedin the projections contained in thischapter.

Growth in the 1970s

The industrial countries grew at justover 5 percent a year in the 1960sand, until the last years of thedecade, experienced relatively lit-tle inflation or unemployment.Their erratic growth in the 1970s

averaged only 3.3 percent a year.Aggregate output fell in 1974-75;although it then recovered, thesteady growth of the 1960s has notbeen resumed. Of all the differentcountry groups, the industrialcountries have fallen farthest be-low their earlier trend.

The reasons for this perform-ance are both familiar and com-plex and can be reviewed onlybriefly here. The problems of the1970s were rooted in the late 1960s.At that time, several Europeaneconomies experienced rapidwage inflation. In the UnitedStates major new social programsand the Viet Nam war raisedgovernment spending substan-tially, with no additional taxationto finance it. Slowing productivitygrowth in American agricultureand manufacturing also made itsfirst appearance in the mid-1960s.

Corrective measures led to amild recession in the industrialcountries in 1970-71but infla-tion did not slow down. Later,expansionary policies produced asharp recoveryand anothersurge in inflation. As a group,these countries experienced dou-ble-digit inflation for the first timein 1972, with a further rise in 1973.Stagflation had been born, withsuccessive peaks of activity at everhigher unemployment levels anda seeming disappearance of the"trade-off" between inflation andunemployment.

Growth in many economies

was pushing against a ceiling,both physically and in terms ofthe increasing difficulty of resolv-ing competing claims for the fruitsof the growth. Certainly, the rela-tion between growth and energyuse was untenable and had to becorrected. Some commentatorseven suggest that a longer cyclehas been in progress, involvinga fundamental slowdown intechnological innovation andinvestment.

The 1973-74 rise in oil pricesthrew the industrial countries intofurther disarray, because:

The contractionary effect of theprice increase, on top of restraintimposed to curb the excessiveexpansion of 1972-73, haltedeconomic growth in 1974-75.

The unpredictability of futureoil prices induced a mood of greatuncertainty both for private inves-tors and for government fiscal andmonetary managers.

The oil-price increase itselfadded to inflationalthough byhow much is controversial. Atleast in the countries where infla-tion was moderate, rising oilprices did not impart a major extrainflationary impetus (Figure 2.1).

The marked slowdown in theindustrial economies in the mid-1970s led to a relatively quick re-turn to current account balance.In 1974 they had run a collectivedeficit of $8 billion; by 1978 thishad been converted to a surplus of$30 billion. Yet reduced deficits arenot themselves evidence of suc-cessful adjustment; if they areachieved simply by slowing downactivity, they underwrite the con-tractionary effect of higher oilprices. That was the main result ofthe industrial countries' post-1973response to more expensive en-ergy. They were slow to starteconomizing on their use of oil,even though their earlier rapidgrowth of consumption had itselfcontributed to price increases.

Their most successful short-termadjustmenta sharp rise in theirexports to the oil exporterswasdwarfed by the effects of slowereconomic activity.

The slowdown in productivitygrowth now affected not just theUnited States but Europe andJapan as well; and few countriesmanaged to curb inflation otherthan by severely reducing theirgrowth. Inflation became thecentral issue of economic policy.Governments started payingmore attention to supply factors,fearing that boosts in demandwould raise prices, not output, ifproductive capacity was growingslowly. At the same time, invest-ment resources had to be used toreplace capital stock made obso-lete by the changes in energyprices, reducing the potentialincrease in productive capacities.

After falling by 9 percent be-tween 1975 and 1978 in real terms,oil prices rose 83 percent in1979-80. In percentage terms, thiswas less than half as large as theincrease of 1973-74. But becauseoil had a larger weight in totalspending by 1979, the size of the"oil transfer" was on each occasionabout 2 percent of the industrialcountries' GDP. It is still too earlyto be sure how the industrialcountries will respond this time.Certainly, they have managed toavoid as severe a fall in output asthey had experienced in 1974-75.Investment has not fallen asmuch. Their combined currentaccount deficit has not been com-ing down as quickly as it did in1974-75. Finally, it is clear that theindustrial economies have beenbecoming more economical intheir use of oil (Chapter 4).Coupled with a growing supply ofenergy from domestic sources,this meant that in 1980 theyimported only 18 percent more oilthan they did in 1970, despite the37 percent rise in their real GNP.

20 -

5Lt I I

Oil-importing developing countries' exportsAnnual percentage change

40 -

Figure 2.1 GD!', inflation andexports by country group, 1961-80

Industrial countries' GDP and exportsAnnual percentage change, constant prices

Low-income(excluding India(

5 I I I I t i t i I i i i i I i i i

1961 63 65 67 69 71 73 75 77 79

The progress of developing coun-tries has been influenced both bythe external environment and bytheir domestic policies. For the oilexporters, where one-fifth of thepopulation of developing coun-tries lives, the 1970s were a periodof rapid growth. Some developingcountries also obtained indirect

9

20Ll I I I I I lilt IIOil-importing developing countries' GDP

Annuat percentage change

15

10 - Middle-income

benefits from higher oil prices-by increasing their exports to theoil producers or from remittancesof migrant workers or from aidfrom the oil producers.

As a group, oil importers wereaffected in two main ways by theevents of the 1970s:

Their current account deficitwidened, from $7 billion in 1973 to$33 billion in 1974 and $39 billionin 1975 (5.2 percent of GNP). Itthen fell to $26 billion by 1978 asthe industrial countries recoveredand the developing countriesexpanded their exports. But the1979-80 oil-price increase andslower growth in the industrialeconomies boosted the develop-ing countries' current accountdeficit to $44 billion in 1979 and $70billion in 1980 (4.5 percent ofGNP). Preliminary estimates indi-cate that it may remain at aboutthis level in 1981.

Their growth slowed down,but there were marked differencesbetween the low-income and themiddle-income countries. Percapita growth rates in the low-income countries were more thanhalved (from 1.8 percent in the1960s to 0.8 percent in the 1970s).However, with the exception ofcertain African countries, the mid-dle-income oil importers grewstrongly throughout 1960-80.Their manufacturing growthaveraged 7.6 percent a year in the1960s and 6.8 percent a year in the1970s. Allowing for populationgrowth, their performance com-pares favorably with that of theindustrial countries. GNP perperson in the middle-incomecountries rose 3.6 percent a yearin the 1960s and 3.1 percent a yearin the 1970s, compared with 3.9percent and 2.4 percent in theindustrial countries.

Prospects for the 1980s

The future is best explored not by

10

attempts at precise forecasts but interms of scenarios that span therange of reasonable expectations.This Report therefore follows lastyear's approach in presenting itsprojections in the form of Highand Low cases. In addition, itexamines the sensitivity of theseprojections to external factors anddepartures from present trerds.The projections posit smoothlycontinuous activity, not thebumpy experience of the realworld; they are therefore con-cerned with the average rates ofchange over the decade, not year-to-year movements. (While 1980 istreated as an actual year in thefollowing discussion, in fact manyof the data, particularly fordeveloping countries, are basedon estimates or projections.)

Growth in industrial market andnon market economies

The industrial countries are animportant influence on theeconomic health of the developingworld. The impact of the oil-priceincrease contributed to a fall intheir growth rates to only 1.4percent in 1980, well below the3, percent annual average in1970-78. Their recession has prob-ably now bottomed out, andrecovery will begin in late 1981 orearly 1982.

This recession has not been, andthe recovery is not projected to be,as sharp as in the mid-1970s. The

industrial countries need to makestructural adjustments in order toboost productivity growth, econo-mize on energy and stimulate itsproduction. Most important of all,they need to find some way of con-taining inflation while growingfast enough to reduce unemploy-ment.

The High case reflects a viewthat the industrial countries willbe relatively successful in meetingthese challenges (Table 2.1). If so,growth will recover significantlyin the second half of the decade,from 3.3 percent a year in 1980-85to 4.0 percent a year in 1985-90.This would still be considerablybelow their 1960s' average of 5.1percent but about equal to theirperformance in the early 1970s.

If the industrial countries fail tomake the necessary adjustments,their growth is likely to be closer tothat of the Low case. Under thisscenario, recovery is somewhatslower in the first half of the 1980s.Continuing difficulty in masteringmacroeconomic problems, andpossible external disturbances,then restrain the average rate ofgrowth for the 1980s to only 2.8percent a year (compared with 3.6percent in the High case).

The international environmentwill also affect the nonmarketeconomies, though to a lesserextent. Given the labor-supplyand energy constraints that manyof them are experiencing, they will

Table 2.1 Growth of GDP in industrial countries, 1970-90(average annual percentage change)

Actual Projected

High case Low case

Country group and region 1970-80 1980-85 1985-90 1980-90 1980-85 1985-90 1980-90

Industrial marketeconomies 3.3 3.3 4.0 3.6 2.6 3.0 2.8

North America, Japan,Oceania 3.6 3.6 4.2 3.9 2.9 3.2 3.1

Western Europe 2.8 3.0 3.6 3.3 2.2 2.7 2.4

Nonmarket industrialeconomies 4.8 4.0 3.8 3.9 3.8 3.6 3.7

Table 2.2 Growth of export volumes,goods and nonfactor services, 1970-90(average annual percentage change)

find it hard to grow as rapidly asthe 4.8 percent a year average ofthe 1970s. They are projected togrow by 3.9 percent a year in theHigh case and 3.7 in the Low. Onpast evidence, their performancebarely affects the developingcountries.

TRADE. Two important influ-ences on world trade in the1980s, as in the 1970s, will begrowth in the industrial countriesand the nature and extent of pro-tectionism. Both factors arelinked. Slower growth will notonly limit demand for developing-country exports but could alsoincrease pressures for greaterprotection-particularly againstmanufactures-as unemploy-ment in industrial countries rises.

Conversely, slow growth is lesslikely if protection is avoided sinceprotection itself would reduce theincentives that promote techno-logical innovation and produc-tivity improvements. The interac-tion between growth and protec-tion is discussed in more detail inChapter 3.

The High case projects worldexport growth of 5.7 percent a yearin the 1980s; the Low case seesonly 3.7 percent a year (Table 2.2and Figure 2.2). For the develop-ing countries, exports are ex-pected to average 7.0 percentgrowth in the High case and 3.9percent in the Low case.

For primary goods and services,the sluggishness of the Low case isthe result purely of slower indus-trial-country growth. For man-

ufactured goods, however, theLow case also presumes increasedprotectionism, so that the share ofdeveloping-country exports in theindustrial countries' consumptionof manufactured goods remainsfixed.

This would have a dramaticeffect, reducing the growth indeveloping countries' manufac-tured exports from 12.2 percent ayear in the High case (much thesame as the average for the 1970s),to only 5.1 percent in the Low case(Table 2.3). This combination ofslower OECD growth and in-creased protectionism results ina trade growth rate significantlybelow the trends of the 1970s.

Developing-country exports arenot wholly dependent on indus-trial-country growth and tradepolicies. Trade among developingcountries has grown since 1973, alarge part of which involvedexports from the oil importers tothe oil exporters. South-Southtrade will become even moreimportant in the future as thesecountries' imports continue togrow rapidly (see box, overleaf).The demand generated by the oilproducers affects not only visible

Figure 2.2 Developing countries'merchandise exports, 1980 and1990, High and Low cases

11

High case Low case

Origin 1970-80 1980-85 1985-90 1980-90 1980-85 1985-90 1980-90

World exports 5.3 5.0 6.4 5.7 3.5 3.8 3.7

Developingcountries' 4.7 5.9 8.2 7.0 3.7 4.2 3.9

Oil importers 6.3 6.8 9.5 8.2 4.0 4.7 4.3Oil exporters 1.6 3.6 4.0 3.8 3.1 2.8 2.9

Industrialcountries 5.5 4.9 6.2 5.5 3.5 4.0 3.8

Memo item

Industrialcountries' imports 4.3 3.9 5.8 4.8 2.6 3.4 3.0

a. Excludes China.

Table 2.3 Exports of all developing countries, 1970-90

Billions of

700 -

600 -

500 -

400 -

300 -

200 -

100 -

0

1978 dolla,s

Manufactures

Nonfuelprimary

Fuels

Hgh case

Low ca e

Export composition

Value(billions of 1978 dollars)

Growth rate(average annual

percentage change)

1990

1980 High Low 1970-80 High Low

Merchandise, total

Nonfuel primaryFuelsManufactures

Services

Goods and services'

264.4 550.3 386.4

88.9 131.6 123.673.0 105.3 98.097.4 308.3 159.6

96.5 162.3 144.9

360.9 712.6 531.3

4.6 7.6

3.9 4.00.0 3.7

12.9 12.2

5.0 5.3

4.7 7.0

3.9

3.43.05.1

4.2

3.91980 1990 1990

a. Nonfactor services only.

Some other factors: South-North and South-SouthThe projections presented in this chaptermainly show the impact of the behavior ofindustrial and oil-exporting economieson the developing countries. The growthand performance of the latter, however,will also have an important influence onthe trade and growth performance of theindustrial countries. In other words,there are important flows from South toNorth as well as from North to South.While these "feedback effects" are weakerand more difficult to estimate, it has beenestimated that policies which raisedeveloping-country growth by 1 percent,are likely to "feedback" on the growth rateof the OECD countries so as to increasetheir growth by about 0.1 to 0.2 percent(which in turn would have a further smalleffect on the developing countries).

Another missing element in the discus-sion is the fact that not all developing-country exports go to the industrial coun-tries; there is a significant and growingamount of South-South trade in today'sworld. The matrix gives some veryapproximate figures for the shares ofworld trade between the "North"industrial market and nonmarket econ-omiesand the "South," which includesboth developing and capital-surplus oilexporters. These matrices show that

South-South trade is projected to increase(in the High case) from 7 to 9 percent ofworld trade between 1980 and 1990. Moreimportantly, South-South trade willincrease as a share of total exports of theSouth from 27 to 32 percent. Much of thisincrease is accounted for by the exports ofprimary products to both the oil exportersand the semi-industrial countries. South-South trade in primary products is pro-jected to increase from 8 to 11 percent ofworld trade. On the other hand, South-South trade in manufactures is expectedto remain at about 5 percent of worldtrade during the decade. The easing oftrade restrictions between developingcountries could result in a significantincrease in trade and growth and helpoffset the adverse influence of more slug-gish OECD growth.

Trade Flows(percentage of world trade)

Year From/to North South Total

1980 North 50 24 74South 19 7 26

69 31 100

1990 North 51 21 72South 19 9 28

70 30 100

trade but also the export of certainservices, such as construction. Inaddition, many developing coun-tries earn considerable foreignexchange from remittances sentback from migrants to the oil-pro-ducing countries.

CAPITAL FLOWS. The impor-tance of foreign capital for devel-opment is difficult to estimateprecisely. For all oil importers dur-ing 1975-78, net transfers offoreign resources (the "resourcegap"see box, page 13) totaled3.7 percent of GDP, compared toinvestment rates of about 24 per-cent of GDP. Foreign capitaltherefore financed nearly one-seventh of total investmenta sig-nificant, but not dominant, contri-bution. On the other hand, mostgross investment in developing

12

countries takes the form of hous-ing and other construction.Foreign capital often provides theessential imports of machineryand materials that make otherdomestic investments possible.

There is considerable uncer-tainty about the amount ofcommercial capital developingcountries will be able or willing toborrow in the 1980s (Chapter 5).The prospects for world outputand trade themselves interactwith the capital forecasts. Fastergrowth in the industrial countrieswould boost developing coun-tries' exports and terms of tradeand therefore their ability tocontract and repay commercialdebt. It could also encourageindustrial countries to increasetheir aid (Table 2.4).

This Report assumes that private

capital flows will grow less rapidlyin the 1980s than they did in the1970s. As Chapter 5 shows, thecommercial banks have alreadylent heavily to the developingcountries, and may therefore bemore reluctant than before toincrease their exposure. In addi-tion higher interest rates havediscouraged some potential bor-rowers. Some of the largest bor-rowers face problems of debtmanagement that may deter themfrom increasing their debt somuch again. The oil exporters willagain have the capacity to borrow,but possibly less need to do sothan in the 1970s.

The High case projects noncon-cessional capital flows increasingat about 10 percent a year duringthe 1980s, and about 5 percent inthe Low case, net of repayments.Since inflation is assumed to aver-age 7 percent a year, the real trans-fer would fall in the Low case.These projections may prove toolow if developing countries canimprove their debt-servicingcapacity by higher exports. Noallowance has been made,moreover, for a bigger lending rolefor the International MonetaryFund (IMF).

Net disbursements of OfficialDevelopment Assistance (ODA)from all donors in 1980 were $35.4billion, of which $26.6 billion camefrom DAC donors. The latterrepresents a level equal to 0.37percent of the combined GNP ofthe DAC countries, comparedwith an average for the previousfive years of only 0.34 percent. Forthe High case, it is assumed thatthis higher level of 0.37 percent ismaintained through 1990; for theLow case a decline is projected to0.33 percent. ODA from OPECcountries is assumed to rise from$7 billion in 1980 to $15 billion in1990 in both cases. While netdisbursements from all donorsamounted to over $35 billion in

1980, the actual receipts of ODA bydeveloping countries were about$22 billion. The difference be-tween these two figures isaccounted for by technical assist-ance flows which are not recordedin the balance of payments, andcontributions to multilateral orga-nizations which have not beendisbursed or which form the capi-tal base for nonconcessionarylending. On this basis, the pro-jected total ODA inflow fordeveloping countries would rangebetween $54 and $66 billion in1990, depending largely on GNPgrowth in the OECD countries.The High case also assumes a con-siderable reallocation of ODA, sothat 50 percent of it goes to the low-income countries by 1990, com-pared with the present 34 percent.The High case thus incorporates afair degree of optimism aboutODA for low-income countries.

ENERGY. Energy prices remainone of the key uncertainties affect-ing growth prospects. On the evi-dence discussed in Chapter 4, realpetroleum prices are likely toincrease at some 3 percent a year

in the 1980s, or 10 percent a year innominal terms. This would raisethe OPEC average price from$30.50 a barrel in 1980 to $42 a bar-rel (in 1980 dollars) in 1990.

A smooth upward trend inpetroleum prices is not meant toimply that they will not fluctuate,but that 3 percent will be the aver-

Table 2.4 Net financing flows, all developing countries, 1970-90(billions of dollars, current prices)

Capital flows: a glossaryConfusion often arises over the definitionof such terms as trade balance, resourcebalance, resource gap and the currentaccount balance. In this Report they aredefined as follows:

Trade balance. Exports of goods minusimports of goods, or the balance onmerchandise trade.

Resource balance. Exports of goods andnonfactor services minus imports ofgoods and nonfactor services. Essentially,the trade balance plus the balance ontrade in services (such as tourism, ship-ping), but excluding factor payments(such as interest, workers' remittancesand dividends).

Resource gap. Imports of goods andnonfactor services minus exports ofgoods and nonfactor services, or theresource balance with the opposite sign.This gap constitutes the net transfer ofresources from abroad and is equal to the

difference between gross domesticinvestment and saving. Countries with anegative resource gap (or positiveresource balance) save more than theyinvest and transfer resources abroad.

Current account balance. In the stan-dard definition, as used by the IMF andothers, this is equal to the resourcebalance plus net factor income, plus nettransfers, both private and official.Because of interest payments on loans,developing countries typically make netfactor payments abroad, so their currentaccount deficit is larger, in a negativesense, than their resource balance. It isthe Bank's practice, however, to excludeofficial transfers from the current accountdeficit. Since these are composed largelyof official development assistancereceived in grant form, it is more appro-priate to treat them as a means of financ-ing current account deficits.

age annual increase. That is con-sistent with the range of growthrates projected for the industrialcountries and the likely avail-ability of energy supplies. It hastherefore been used for both Lowand High cases. In the Low case,demand for oil is reduced, but it isassumed that oil producers would

13

Projected'Growth rates'(percentage)

Actual High Low 1980-90

Source 1970 1980 1985 1990 1985 1990 1970-80 High Low

Official Development Assistanceb 4.1 21.7 40.9 65.7 35.3 53.6 18.1 11.7 9.5Nonconcessional loans

Official 1.2 8.1 13.1 22.0 12.3 18.7 21.0 10.5 8.7Private 6.0 36.9 54.7 94.6 38.8 55.2 19.9 9.9 4.1

Direct investment 2.5 8.6 15.7 24.4 13.6 19.4 13.2 11.0 8.5Total' 13.8 75.3 124.4 206.7 100.0 147.0 18.5 10.6 6.7Total, 1978 prices 29.5 62.7 70.5 87.5 56.6 62.2 7.8 3.2 -0.2

Memo itemNet exports (goods and services) -8.5 -52.0 -67.2 -128.3 -55.9 -92.1 19.9 9.5 5.9Net exports (1978 prices) -18.2 -43.3 -38.1 -54.3 -31.6 -39.0 6.7 4.5 1.1

Current account balanced -10.9 -68.6 -95.4 -173.4 -84.4 -129.6 18.4 11.5 8.2DAC-ODA: GNP (percentage) .34 .37 .37 .37 .34 .33

Note: All items net of repayments. C.

a. Average annual percentage change. d.b. Includes ODA grants (official transfers). e.

Excludes short-term capital and reserve changes.Exdudes official transfers.Deflated by OECD GDP deflator.

restrain their production to matchworld demand, so that the realprice would be maintained.

Developing-country performance

In the 1970s developing countriesadjusted in different ways to aworld of moderate growth in out-put and trade and rising realenergy prices. In the 1980s theyface a similar need to adjust. Theirperformance will depend on sev-eral factors, including their abilityto increase the inflow of externalcapital and to raise the rate ofdomestic saving in order tofinance investment aimed atrestructuring their economies.Also of critical importance will betheir success in increasing exportgrowth and reducing dependenceon imported oil, capital goods andraw materials.

Table 2.5 summarizes the dif-ference between the High andLow cases in terms of some mac-roeconomic indicators. For oilimporters the ratio of net fuelimports to GDP (both in constantprices) declined from 3.3 percentin 1970 to 2.7 percent in 1980; it isassumed to fall to about 2 percentby 1990.1 That will require consid-erable efforts of conservation, andsubstitution of domestic for im-ported energy. Historically en-ergy consumption has increasedmore quickly than GNP whencountries are industrializing andurbanizing.

The oil importers have so farresponded to the 1979-80 oil-priceincreases by raising their foreignborrowing. The current accountdeficit rose from 2.3 percent ofGDP in 1978 to 4.4 percent in 1980.In the longer term, however, theirrising debt-service burden, cou-pled with the limited availability

1. In constant 1978 prices, this ratio reflectsthe relationship between the volume of pro-duction and the volume of oil imports. Incurrent prices the ratio is 5.2 percent in1980.

14

Table 2.5 Performance indicators, oil-importingdeveloping countries, 1970-90(percentage of GDP)

a. In constant 1978 prices, this ratio reflects the relationship between the volume of produc-tion and the volume of oil imports.

of concessional capital, means thatthey will have to rely less on for-eign borrowing. In the High case,increased domestic saving sub-stitutes partially for foreign capi-tal, and exports increase fromsome 21 percent of total valueadded in 1978 to about 28 percentby 1990. Combined with the sav-ings on fuel imports, the oilimporters manage to absorb theimpact of higher oil prices whilereducing their dependence on for-eign capital inflows.

The Low case takes a less favora-ble view on all these counts. As ashare of GDP, exports remainroughly at their 1980 level, as doesdomestic savings. Poorer domes-tic performance affects credit-worthiness, and thus limits thesupply of foreign capital, andimports have to be cut to reducecurrent account deficits. Inevita-bly, the cost of this squeeze isslower growth.

PROJECTED GROWTH, DEVELOPING

COUNTRIES. The overall effect ofall these different influences sug-gests that developing countriescould improve on their record ofthe 1970s, when they grew at 5.1percent a year. In the 1980s theHigh case projects about 5.7 per-cent a year, the Low case about

4.5 percent (Table 2.6). Whilecountries adjust, growth is con-strained. In the High case, itregains its pace of the 1960s andearly 1970s. In the Low case,growth remains below historicalaverages throughout the decade.

Average growth rates for alldeveloping countries conceal thelikely diversity of experiencebetween groups of countries, aswell as individual countries. Theoil exporters, for instance, areexpected to grow reasonably fastin both High and Low cases. Theiroil exports help to insulate themfrom the external influences thataffect the oil importers. On theother hand, the sub-SaharanAfrican countries will grow byonly about 3 percent a year, evenin the High case. In the Low case,their GNP is likely to grow lessrapidly than their population, andbelow what was achieved in the1970s. These countries face diffi-cult problems arising from bothexternal events and such internalfactors as poor original resourceendowment and weak domesticpolicy formulation.

On the other hand, the middle-income oil importers, with theirbetter resource endowments andmore open trade policies, areexpected to do better than the low-

Item 1970 1975 1978 1980

High Low

1985 1990 1985 1990

Constant (1978) pricesFuel imports, net 3.3 2.6 2.8 2.7 2.5 2.3 2.6 2.1

Nonfuel imports 21.8 21.0 19.9 20.2 20.4 23.8 17.9 18.4

Exports 19.2 19.7 21.1 21.6 23.5 28.0 21.7 22.1Savings 19.9 19.2 20.8 21.5 21.7 21.9 20.7 21.1

Current pricesCurrent account

deficit 2.4 5.1 2.3 4.4 3.2 3.0 2.9 2.4

Fuelimports, net 1.0 2.9 2.8 5.2 5.8 6.1 5.9 5.6

income countries. Their overallgrowth rates are likely to averagebetween 5 and 6 percent a year,with those in the East Asia regionperhaps reaching as high as 8 per-cent in the High case. As a result,the disparity in per capita incomesbetween the low-income and mid-dle-income countries will widenin either the High or the Low case.

SENSITIVITY TO WORLD GROWTH.

The relative importance of thevarious factors affecting thedeveloping countries' perform-ance can be roughly gauged byfurther simulations of the worldeconomy. Table 2.7 indicates theimpact of slower OECD growthand reduced capital inflows on theHigh case projections. These sim-ulations indicate that, if the OECDcountries achieve only the growthprojected in the Low case, thiscould slow the oil importers'growth from 5.4 to 5.0 percent ayear. The effect on the middle-income oil importers is greaterthan on the low-income countriesbecause of their greater depend-ence on exports to the industrialcountries. If in addition the capitalflows of the Low case are as-sumed, the growth rate of the oilimporting countries would fall to4.8 percent a year because of their

Table 2.6 Growth of GD?, by region, 1960-90

Table 2.7 GDP growth rates, 1980-90

inability to finance the requiredimports. The balance of the dif-ference between this simulationand the Low case is a result of theassumptions of greater protec-tionism in the Low case pluspoorer performance in the devel-oping countries themselves.

Naturally, these simulationsonly indicate what might happengiven certain changes in theassumptions of the underlyingmodel. They do not consider pos-sible offsetting effects: for exam-ple, better performance in thedeveloping countries themselvescould raise their growth, evenwith a deteriorating external

High Low

1970 1980 1985 1980 1980 1985 1980

80 85 90 90 85 90 90

.5.1 5.0 5.8 5.4 3.8 4.4 4.1

3.0 4.0 4.3 4.1 2.8 3.2 3.0

2.4 3.0 3.0 3.0 1.8 2.0 1.93.2 4.2 4.6 4.4 3.0 3.5 3.2

5.6 5.2 6.1 5.6 4.0 4.7 4.3

3.5 3.0 3.3 3.1 2.7 3.0 2.88.2 7.8 8.5 8.1 6.3 6.5 6.46.0 5.1 6.0 5.6 4.4 4.8 4.64.9 4.1 4.1 4.1 3.0 3.3 3.24.6 4.3 5.0 4.6 2.5 3.5 3.0

5.2 6.2 6.8 6.5 4.9 5.9 5.4

5.1 5.3 6.1 5.7 4.1 4.9 4.5

environment. These projections,therefore, should be taken only asillustrating the relative importanceof certain factors affecting growth.The future is always uncertain,and it is possible that the projec-tions of OECD growth and capitalflows themselves could be toolow. It is therefore possible toenvisage circumstances in whichthe High case might be exceeded(see box, overleaf).

CAPITAL REQUIREMENTS FORFASTER GROWTH. The low-income countries in particular,and the oil importers in general,could be helped by a larger inflowof ODA. While ODA is a relativelysmall part of the total resourcesavailable to all developing coun-tries, it accounts for about 14 per-cent of the low-income countries'investment and about 20 percentof their imports.

To move the low-income coun-tries from the 3-percent-a-yeargrowth of the Low case to the 4.1percent of the High case wouldrequire additional ODA of about$30 billion in 1990 at current pricesor about $15 billion at 1980 prices.That extra $30 bfflion would comeon top of the $54 billion projectedin the Low case. It would requireOECD donors to raise their aid to

15

(average annual percentage)

Lower

LowerOECD growth

plus lowerCountry group High case OECD growth capital flows Low case

Oil importers 5.4 5.0 4.8 4.1

Low-income 4.1 4.1 3.7 3.0Middle-income 5.6 5.1 5.0 4.3

Oil exporters 6.5 6.5 6.5 5.4

All developingcountries 5.7 5.4 5.3 4.5

AssumptionsOECD growth,

1980-90 3.6 2.8 2.8 2.8

Resource gap, 1990(billions of1978 dollars) 54.3 54.3 39.0 39.0

(average annual percentage)

1960Region 70

Oil importers 5.7Low-income oil importers 4.2

Sub-Saharan Africa 4.0Asia 4.3

Middle-income oil importers 6.2Sub-Saharan Africa' 4.1East Asia and Pacific 7.9Latin America/Caribbean 5.3Middle East, North Africa 4.1Southern Europe 7.0

Oil exporters 6.5

All developing countries 5.9

a. Excludes South Africa.

0.50 percent of GNP, comparedwith the 0.33 assumed in the Lowcase. That may appear a substan-hal increase, considering recenttrends, although in fact it wouldonly restore the 0.49 percent ofGNP achieved in 1965.

Alternatively, the needs of thelow-income countries could bemet by a substantial increase intheir present 34 percent share ofexisting ODA. The High casealready assumes this would reach50 percent by 1990; an even higherproportion might by then be con-ceivable. As described in Chapter6, concessional aid is needed forinvestments to finance structuralchanges in the longer run as wellas to cover the short-term liquidityproblems resulting from a wors-ening current account. Thus a

16

large share of any increased ODAflow would have to be in the formof rapidly disbursing assistance.The projections, however, do notdistinguish these two kinds of for-eign assistance needs.

ENERGY-PRICE SENSITIVITY.Despite conservation efforts indeveloping countries, energyimports have increased fromabout 9 percent of oil importers'

Table 2.8 Fuel-import cost ratios, 1970-90

total exports in 1970 to 26 percentin 1980. For the future, efforts atconservation and substitution willtend to slow the rise in the volumeof fuel imports, but this will beoffset somewhat by the expectedreal increase in prices. As a result,the fuel-import ratio may comedown only slightly by 1990-andin the Low case, would actuallyincrease (Table 2.8).

Under these circumstances, thedeveloping countries will still beaffected by changes in energyprices. If petroleum prices were torise at 5 percent a year in real termsthroughout the 1980s, the oilimporters' GDP might grow bysome 0.5 percentage points a yearless. On the other hand, if real oilprices did not rise at all, their GDPmight grow by 5.8 percent a yearinstead of the High case's 5.5 per-cent a year. Of course, changes inoil prices have an important effecton such things as growth andinflation in the industrial coun-tries and the size of the oil export-ers' surpluses, which in turn affectthe developing world. Thesesecondary effects are not includedin the growth estimates shown inTable 2.9.

Implications for poverty

Regardless of whether the High orLow case prevails, large dispar-ities of income between develop-ing and industrial countries willremain. In 1980, income per per-son in the industrial countries wasabout five times that of the devel-oping countries as a whole, and 12

Note: Ratio of gross fuel imports to exports of goods and all services, current prices.

Requirements for faster growthSeveral factors could boost the develop- rate of real capital inflows (the resourceing countries' growth above the rates pro- gap). This would produce real transfers ofjected in the High case. For example, the capital of $83 billion in 1990, as opposed tolevel of capital flows, particularly from $54 billion in the High case. Reducingthe private sector, may be considerably protectionism is assumed to have thehigher than expected; and the industrial effect of raising export-growth rates bycountries could reduce or eliminate non- one percentage point a year. While thistariff barriers that restrict the volume of implies an easing of barriers for bothdeveloping-country exports. Neither manufactures and agricultural corn-development is probable, but neither are modities, the benefits go largely to thethey outside the bounds of possibility, middle-income countries. The overall

The table shows what their effects effect would be to boost growth in the oil-might be. The second column illustrates importing developing countries by anthe consequences of doubling the growth extra half-percentage point a year.

Projected GDP growth, 1980-90(average annual percentage change)

Higher capitalHigher flows plus reduced

Country group High case capital flows protectionum

Oil importers 5.4 5.6 5.9Low-income 4.1 4.5 4.5Middle-income 5.6 5.9 6.2

Oil exporters 6.5 6.5 6.5

All developing countries 5.7 5.9 6.1

Memo itemResource gap, 1990

(1978 billion dollars) 54.3 83.1 83.1Export growth

(average annualpercentage change) 7.0 7.0 8.0

(percentage of exports)

1990

Country group 1970 1980 High Low

Oil importers 8.6 26.3 24.4 28.7Oil exporters 3.8 6.1 10.2 10.9All developing countries 7.5 19.3 19.9 22.2

Table 2.9 GDP sensitivity to oil-price increases, 1980-90(average annual percentage increases in real GOP)

Country group

Oil importersLow-incomeMiddle-income

Oil exporters

All developing countries

a. Growth rate of petroleum prices, 1980-90, in real terms.

times that of the low-incomeoil importers. These compari-Sons have made allowance for thelarge differences in purchasingpower between countries; on anexchange-rate conversion basis,the gaps would be much larger(see box).

Will that gap be reduced in the1980s? In the High case, GNP perperson is projected to grow at 3.3percent a year for all developing

Oil price increases'

o percent 3 percent 5 percent

5.8 5.5 5.04.3 4.1 4.06.1 5.7 5.2

6.3 6.5 6.6

6.0 5.7 5.5

countries, slightly faster than the3.1 percent a year in the industrialcountries (Table 2.10, overleaf).Thus the gap between thosegroups will narrow slightly in rela-tive terms. However, becauseGNP per person is projected togrow at only 1.8 percent a year inthe low-income countries, the gapbetween this poorest group andthe middle-income and industrialcountries will widen further.

International comparisons of real incomeConverting the GDPs of different coun-tries to a common currency at prevailingexchange rates is a misleading way ofcomparing real incomes. Exchange ratesdo not necessarily reflect the purchasingpower of currencies because they excludethat (often large) portion of GDP whichdoes not enter into international trade.Moreover, exchange rates now fluctuatewidely; changes of 20 percent or morewithin a single year have not been uncom-mon, even among major currencies.

The International Comparison Project(ICP) is intended to correct these short-comings. It makes comparisons of priceratios for 153 expenditure categorieswithin total GDP. The comparisons aremade with respect to prices in the UnitedStates and are then weighted together toproduce a purchasing-power exchangerate. On the basis of comparisons made in1975 prices, purchasing-power exchangerates have been calculated for 34 coun-tries. Using certain short-cut approxima-tions, these results have been generalizedto all developing countries. The net effectof using ICP adjustments is to increasethe estimates of GNP per person substan-tially, particularly in the low-incomecountries (see table).

These figures should be treated only asrough estimates since any attempt toderive "true" purchasing power equiv-alents inevitably faces numerous diffi-culties. For example, quality and style dif-ferences make it hard to compare con-sumer goods; the value of services is hardto measure, particularly if they are sup-plied free by the public sector. Neverthe-less, the ICP results represent the bestmethodology available for making inter-national comparisons of income and aremuch superior to standard exchange rateconversions.

Exchange rate and purchasing powerconversions of real GNP per person,1980(dollars)

Country group

Oil importersLow-incomeMiddle-income

Oil exportersAll developing

countriesIndustrial

countries

Exchange Purchasingrate power

conversion conversion

790 1,700

220 7301,710 2,690

1,060 2,080

850 1,790

10,660 8,960

In the Low case, oil importerswill grow more slowly than theindustrial countries. GNP per per-son will grow by only 2.1 percent ayear in middle-income countries,and only 0.7 percent a year in thelow-income countries. The indus-trial countries will still be able toincrease income per person at 2.3percent a year. Thus, even underthe most favorable circumstances,the gap between the richest andpoorest will widen in this decade,and this effect will be more pro-nounced under less favorable cir-cumstances (Figure 2.3).

The outlook for reducing pov-erty has worsened along with theprospects for the poor countries.Current estimates suggest that in

1,000

600

Figure 2.3 Developing countries'GNP per person 1970-90, Highand Low cases

(t980 de15r)

Oil-importers

Oil-exporters and oil importers

Oil-exporters

800 - Oil-importers

-

High/

Low

High_-

- - - Low

17

1,600

1,400

1,200

1970 75 80 85 90

Table 2.10 GNP per person, 1980-90

18

Figure 2.4 Numbers in absolutepoverty, 1980 and 2000

Mi/boos

1980 about 750 million peoplelived in absolute poverty in thedeveloping world, about 33 per-cent of its population (these esti-mates exclude China). If High casegrowth is extended to the year2000, the proportion could by thenbe reduced to 18 percent. But con-tinued rapid population growthwould mean that the absolutenumbers living in poverty wouldstill total 630 million (Figure 2.4).Under the Low case, at the end of acentury of unprecedented eco-nomic and social advance in someparts of the world, 850 millionpeople may still be living in abso-lute poverty.

Naturally, projections that lookyears ahead should be treated

Proportion ofpoputliOr5

1161

(8)

1980 2000

only as rough estimates. Indeed,the definition of poverty and itsrelation to income growth is veryuncertain. Domestic policies thatimprove the productivity of thepoorest, decrease fertility andincrease the provision of basic ne-cessities can reduce poverty withina given total income. Neverthe-less, the external environmentand the nature of the structural

adjustment undertaken by thedeveloping countries will have apronounced effect on the num-bers living in poverty in the yearsto come.

Interdependence

Despite the widening of the gap inincomes per person, productionin the developing countries isgrowing faster than that of thedeveloped countries (Table 2.11).(The explanation for this derivesfrom the faster population growthrates in developing countries.) Asa result, the developing world isprojected to contribute about 20percent of world GDP by 1990,compared to only 15 percent in1970. Furthermore, it is expectedto contribute about 26 percent ofthe increase in world productionbetween 1980 and 1990 (Highcase). By 1990 its exports will con-stitute 25 percent of total world

Table 2.11 World production and trade, High case, 1970-90

a. 'Others" includes China as well as nonmarket and capital-surplus economies.

1990(1980 dollars)

Growth rate 1980-90(average annual percentage

change)

Country gmup 1980 High Low High Low

Oil importers 790 1,060 950 3.1 1.8Low-income 220 260 230 1.8 0.7Middle-income 1,710 2,400 2,120 3.4 2.1

Oil exporters 1,060 1,560 1,410 4.0 2.9All developing

countries 850 1,180 1,050 3.3 2.2

Industnalcountries 10,660 14,520 13,380 3A 2.3

Exports, goods and nonfactor services(billions of dollars, current prices)

1970 1980 1990 1970 1980 1990

Industrialmarket economies 274 1,531 5,412 69 61 59

All developingcountries 78 561 2,300 20 22 25

Oil importers 59 357 1,565 15 14 17Low-income 7 27 88 2 1 1

Middle-income 52 330 1,478 13 13 16Oil exporters 19 204 735 5 8 8

Others' 42 435 1,460 11 17 16

Total 394 2,527 9,172 100 100 100

Gross domestic product

Amount(billions of 1978 dollars)

Percentage

Country group 1970 1980 1990 1970 1980 1990

Industrialmarket economies 4,334 5,973 8,539 69 65 62

All developingcountries 979 1,615 2,810 15 18 20

Oil importers 718 1,181 1,998 11 13 14Low-income 148 198 297 2 2 2Middle-income 570 983 1,701 9 11 12

Oil exporters 261 434 812 4 5 6

Others' 988 1,608 2,395 16 17 18

Total 6,301 9,196 13,744 100 100 100Low-income Middle-income

countries countries(35)

(48)

(26)

1980 2000

800

600

400

200

0

trade and will account for 26 per-cent of the increase in world tradebetween 1980 and 1990.

Since world trade is growingfaster than world production, theratio of trade to output willapproach 27 percent by 1990, com-pared to only 22 percent in 1980and 13 percent in 1970. As tradelinks grow closer, the developingcountries will become increas-ingly integrated into the worldeconomy.

It is, of course, difficult to mea-sure the exact degree of depend-ence between countries or regionson the basis of trade statistics.Total trade includes both essentialminerals and food as well as lessessential consumer goods. Whilethe global projections indicate arise in "interdependence," indi-vidual countries (and even groupsof countries) continue to be char-acterized by "net dependence"on the international economy.The low-income African coun-tries, for instance, had importsequal to 25 percent of their com-bined GDP in 1978, indicating ahigh degree of vulnerability toconditions in the internationaleconomy. Yet their combinedexports totaled less than 1 percentof world trade, and their share isexpected to decline during the1980s.

Balance-of-payments patterns

Throughout the 1980s the devel-oping countries are expected tohave current account deficits thatare relatively large in real termsalthough they will decline as apercentage of GNP (Table 2.12).Such deficits, of course, depend

Table 2.12 Current account balances, 1970-90

Note: Excludes official transfers.a. These projections are subject to particular uncertainty.

on the creditworthiness of devel-oping countries and their access tocapital markets (Chapter 5). Be-tween 1980 and 1985 the oil export-ers are likely to move from smallsurplus to deficit, and then remainthere. Conversely, the industrialcountries are projected to turn asmall deficit in 1980 into a sizablesurplus by 1990. Their growingsurplus is offset by a decline in thesurplus of the capital-surplus oilexporters, from $85 billion in 1980to between $16 billion and $35billion (in 1978 dollars) by 1990.

Such a decline depends on theexpected growth of imports inthese countries, which is subjectto a high degree of uncertainty.Present projections imply importsof $6,500 per person in these coun-tries by 1990, compared with GNPper person of only $8,100 (both fig-ures in 1978 dollars). If importsgrew 1 percent a year slower thanprojected in the High case, the

1990 surplus of these countrieswould rise by $21 billion, on top ofthe currently projected $35 billion.Thus the projected surpluses forthe OPEC countries could easilyvary over a wide range, within theassumptions of the High and Lowcases. Changes in these sur-pluses, of course, would imply adifferent pattern of surpluses anddeficits for the other groups aswell.

Whatever the accuracy of theprojections, a more interdepen-dent world has emerged as a resultof the events of the 1970s. Despitecontinuing uncertainty and insta-bility, this interdependence seemslikely to grow during the 1980s,producing a different kind ofworld from that of only a few yearsago. The following chapters ex-hibit in greater detail the nature ofinterdependence in energy, tradeand capital flows.

19

(billions 1978 dollars)

High Low

Country group 1970 1975 1978 1980 1985 1990 1985 1990

Oil importers -18.5 -49.8 -25.5 -52.7 -49 -60 -41 -43Low-income -3.5 -7.0 -5.1 -8.6 -12 -15 -8 -9Middle-income -15.0 -42.8 -20.4 -44.1 -37 -45 -33 -34

Oil exporters -4.7 -3.2 -17.6 4.1 -5 -14 -7 -12All developing

countries -23.2 -53.1 -43.1 -48.6 -54 -74 -48 -55Capital-surplus

oil exportersa 6.0 39.7 18.8 85.1 [57] [35] [55] [16]Industrial market

economiesa 25.9 28.4 29.9 -24.5 [12] [55] [8] [55]Nonmarket industrial

economies andChina 3.4 -9.0 -0.2 -0.1 -3 -4 -2 -3

Statisticaldiscrepancy -12.3 -6.0 -5.4 -11.9 -12 -12 -13 -13

3 Growth through trade

World trade grew by an average of5.7 percent a year in the 1970s,after almost 8 percent a year in the1960s. Despite this slowdown ofthe growth of total trade, develop-ing-country nonfuel exports grewfasterover 7 percent a year inthe 1970s, as compared with 5 per-cent in the 1960s. This expansionof trade has provided developingcountries an avenue for growthand industrialization, and, for theoil importers, a source of earningsto meet their increasing fuel costs.

This chapter analyzes trade pat-terns in the 1970s by country andcommodity groups. It considersthe reasons for the poor perform-ance of many low-income coun-tries, and highlights the well-conceived and courageouslyimplemented trade policies whichunderlie the trade performanceand growth of many middle-income countries. It analyzes thecontribution that the open tradingsystem has made to this growthand to the counterinflationaryefforts of the industrial countries,and discusses some of the centralpolicy issues in international tradenegotiations.

Trade in the 1970s

The most striking changes in thepattern of world trade during thepast 10 years have resulted fromthe increase of fuel prices. Worldtrade in fuels increased from $29billion in 1970 to $535 billion in

20

1980, or from 7 percent of worldtrade to 21 percent (Table 3.1).

That 14 percentage-point in-crease is considerably larger thanthe Federal Republic of Germany'sor the United States' share ofworld trade. Even excluding the(relatively small) increase involume, paying for the 1970s' fuel-price increases was thereforeequivalent to finding the money tobuy all the exports of anotherUnited States or Federal Republicof Germany.

Because their exports wereexpanding rapidly, many of themiddle-income oil importers wereable to reduce their current ac-count deficits to levels finance-able in the medium term, withoutsacrificing their growth. Between1973 and 1978, the industrial coun-tries increased their exports to the

Table 3.1 Composition and growth of world merchandise trade,1970-80(values in billions of current dollars)

oil exporters by enough to coversome two-thirds of the extra costof their imported oil. Only thelow-income oil importers did notreap significant benefits frominternational trade. Many of themreduced their current accountdeficits by curbing imports (andhence growth) rather than byexpanding exports. Increased aidhelped others finance their largerdeficits.

Measuring trade gains

Against a background of rapidinflation, coupled with a sharpchange in the price of one productrelative to others, neither exportvalues nor export volumes are anappropriate measure of exportperformance. Export values maysimply reflect the general increasein prices, But export volumes

ItemTotal

merchandise Fuels

Nonfuelprimaryproducts Manufactures Gold

Value, 1980 2,133 535 400 1,170 27Percentage of total 100 25 19 55 1

Increase of value,1970-80 1,818 507 312 973 26

Percentage of totalincrease 100 28 17 54 1

Higher pricesas a percentage ofincrease of value 87 98 82 81 101

Percentage increaseof volume,1970-80 74 29 64 96 4

understate the gains made byexporters whose prices have in-creased more rapidly than those ofother traded goods. During the1970s, for example, the exportprices of the capital-surplus oilexporters went up 15-fold in nomi-nal terms, almost four times asmuch as their import prices. Thevolume of developing-country oilexports was the same in 1980 as in1970, but the revenue they earnedcould of course buy far more realgoods and services.

To capture the impact of bothexport volume and relative prices,this chapter measures export per-formance in terms of export pur-chasing powerexport earnings de-flated by the general price level forinternationally traded goods, ex-cluding oil. (The industrial coun-tries' export price index of all goodsplus nonfactor services has beenused as a proxy for the price levelof internationally traded goods.)Where appropriate, the impact ofhigher oil prices on what an oilimporter can buy with its exportrevenues will be measured by de-ducting the cost of oil imports andthen calculating the purchasingpower of export earnings net of oilimports. This indicates whether ornot an oil importer's export reve-nues are expanding rapidlyenough for it to pay both fordearer fuel imports and for increas-ing amounts of other imports.

Gains by country groups

The oil-importing developingcountries had mixed success inworld markets. The volume oflow-income oil importers' exportsdid not expand enough between1970 and 1980 to offset worseningnonfuel terms of trade and thehigher fuel bill; their export pur-chasing power net of fuel importswas almost one-third lower in 1980than in 1970 (Figure 3.1). For themiddle-income countries, on theother hand, the terms of trade

Table 3.2 Purchasing power of exports of all goods and nonfactorservices, 1970-80

Low-income oil importersBillions of 1978 dollars

30

Gross20 Net of fuel imports -

10

0

Middle-income oil importersBillions of 1978 dollars

300

200

100

0

Figure 3.1 Oil-importingdeveloping countries' purchasingpower of exports, 1965-80

I -

1965 70 75 76 77 78 80

deteriorated less and their exportvolume expanded more. Whilehalf of the expansion of theirexports went to pay for the in-creased cost of fuel imports, theirexport purchasing power net offuel imports increased by almosttwo-thirds over the decade.

Over the 1970s, total exportpurchasing power (not net of fuelimports) rose by 71 percent forindustrial countries; 84 percent foroil-importing developing coun-tries; 229 percent for oil-exportingdeveloping countries, and morethan 700 percent for capital-surplus oil exporters (Table 3.2).However, developing countriesbegan the 1970s with exports 10times as large as those of the capi-tal-surplus oil exporters but lessthan one-third as large as the in-dustrial countries'. Thus the abso-lute amounts by which export pur-chasing power increased over the1970s were $471 billion for in-dustrial countries; $226 billion fordeveloping countries; and $140billion for capital-surplus oil ex-porters (all figures in 1978 dollars).

21

Item

Oil importers Oil exportersIndustrial

marketeconomies

Low- Middle-income income Total

Deoel-oping

Capital-surplus Total

Percentage change ofterms of trade vis-a-visindustrial marketeconomies 16 + 2 0 + 180 + 389 + 247

Total export purchasingpower (billions of 1978dollars)

Level, 1970 17 127 144 46 19 65 664Increase, 1970-80 3 118 121 105 140 245 471

Volume component 7 114 121 8 13 21 461Relative export-

price component 4 4 0 97 127 224

Increases as percentageof 1970 level

Total increase 18 93 84 229 737 377 71

Volume component 42 90 84 17 68 32 71

Relative export-price component 24 3 0 212 655 345

The $226 billion increase for alldeveloping countries was dividedas follows:

Oil exporters 105Middle-income

oil importers 118

Low-incomeoil importers 3

In short, the oil exporters did wellbecause their export prices rosesharply, and the middle-incomeoil importers did well becausetheir export volume, particularlyof manufactured goods, rose(Figure 3.2). But the low-incomecountries experienced both slowergrowth of their export volumesand deterioration of their exportprices relative to those of othercountries: they have hardly sharedat all in the growth of world trade.To the extent that imports dependon export earnings, they can im-port little more at the end of thedecade than they could at thebeginningthis in the face of amore than one-quarter growth oftheir population.

Gains by commodity group

The increased purchasing powerof developing-country fuel ex-

22

Figure 3.2 Developing countries'increases in export purchasingpower, 1970-80

Billions of 1978 ilollars

a. Part of total change resulting from change of relative pncePart of total change resulting from chaoge of volume.

ports was almost entirely the re-sult of higher prices. Gains in thepurchasing power of developing-country manufactured and non-fuel primary exports resultedfrom higher volume, partly offsetby a fall in their relative price. Foroil importers, the unit purchasingpower of their nonfuel primaryexports fell by 28 percent, that oftheir manufactured exports by 24percent. But there was a muchmore marked difference betweenincome groups: the relative prices ofboth manufactured and nonfuelprimary exports fell by more forlow-income oil importers than foreither industrial countries or mid-dle-income oil importers.

PRIMARY EXPORTS. Prices ofnonfuel primary exports wereboth erratic and generally weakduring the 1970s. The prices of 33nonoil commodities fluctuated byan average of 5 percent a year inthe 1950s and 1960s, whichincreased to 12 percent a year inthe 1970s.

The low-income oil importerswere hit hardest by low prices.The volume of their exports in-

Figure 3.3 Industrial and oil-importing developing countries'nonfuel primary exports, 1970-80

Percentage

Not e: Increase in purchasing power, 1970-80, as percentageof 1970 levela Parr of total change resulting from change of volume.b. Part of total change resulting from change of relative

creased about as fast as that ofmiddle-income oil importers andindustrial countries, but their rela-tive prices fell much more (Figure3.3; Table Ti, Technical Appen-dix). The low-income oil importerswere therefore left with an 18 per-cent gain in the purchasing powerof their nonfuel primary exports,compared with 32 percent for mid-dle-income oil importers and 55percent for industrial countries.Since the low-income oil impor-ters were starting from a smallerbase, the middle-income oil im-porters' gain (in 1978 dollars) was16 times larger and the industrialcountries' 60 times so.

The weakness of the low-in-come countries' primary exportprices reflects both their con-centration in commodities forwhich demand is expandingslowly, and the inability of coun-tries heavily dependent on one ortwo exports to vary their output-mix as relative prices change. Thericher, more diversified econo-mies are more able to adjust torelative price movements. Theindustrial countries expandedtheir export volume most in foodsand beverages and nonfood agri-cultural productsthose catego-ries where prices were relativelystrongest. By contrast, the sharp-est volume increases for the low-income countries were in metalsand minerals, where prices fellmost.

There is another, related inflex-ibility holding back the low-income countries. They still pro-cess very little of the raw materialsthey produce, in contrast to whatis now happening in many mid-dle-income countries. Tariff bar-riers against processed productsare still an obstacle to increasedprocessing for exports, but themiddle-income exporters also facethese barriers (see box). A generallack of industrial skills and capac-ity is a more fundamental reason

140Oil exporters Oil importers

Middle income120

100

80

60

40

20

TotaLwhich

Price

Volumea

Low-income

0

20

Middle- Low-Industrial income income100

Vnlume80

Pspoet60 purchasing

power40

20

0

20

40

60Relative pricey

80

100

Tariff escalation and the growth of processingWhile the rapid growth of world trade inmanufactures bears witness to the open-ness of industrial country markets formany products, tariffs remain high insome sectorsparticularly those of inter-est to developing-country exporters.Even after the Tokyo Round cuts havebeen made, tariff rates in the UnitedStates will still be 17 percent on textilesand clothing; in the EEC, 11 percent onconsumer electronics equipment; in Nor-way, 15 percent on leather goods; in Can-ada, 10 percent on hand tools and othermetal products.

Even where tariffs are generally low,they can still be a considerable barrier tothe expansion of processed exports byproducers of primary products. Whileindustrial-country tariffs add only 3 per-cent to the cost of imported raw materials,they rise to more than 20 percent as thedegree of processing increases (see table).These higher rates are, of course, in-tended to encourage firms in industrialcountries to import raw materials andprocess them there. As the third columnof the table shows, in 1974 developing-country commodity exports were heavilyconcentrated in the lower stages of pro-cessing.

As an intermediate activity betweenprimary production and manufacturing,processing is often viewed as a way ofpromoting industrialization in the devel-oping countries. However, processingshould be judged by the same criteria asthose applied to any other industrial proj-ect, and the same questions posed aboutmarket prospects and domestic resourceand foreign exchange costs. In somecases, the technology of processing isvery capital-, scale-, or energy-intensive(for example, aluminum). It may requireintermediate inputs that must be im-ported, thereby reducing the net foreignexchange gain from exporting processedrather than primary commodities. Inother cases, particularly in the early stageof processing of agricultural products,

these shortcomings are much lessserious.

Generally, transport costs are less, advalorem, at higher stages of processing(the value of the product increases moreper ton than do shipping costs); but thereare many exceptions to this rule. Othercomplications abound: refined coconutoil spoils unless carefully handled, whilecrude coconut oil does not; the world

Industrial-country tariff escalation and distribution ofimports from developing countries

They would grow faster still if indus-trial-country tariffs were reduced. Re-moving the tariffs on processed varietiesof eight agricultural products in whichdeveloping countries have a significantshare of world exports would increase thevalue added in developing-country pro-cessing by an estimated 20 percent ormore. It would boost developing-countryexport revenues by more than the Gen-

Based on processing "chains" for 21 agricultural and mineral products. For example,the chain for cotton and products is (1) raw cotton, (2) cotton yarn, (3) cotton fabrics, (4)clothing.

Based on 1974 imports.Source: Yeats.

cocoa market is highly concentrated and,therefore, more difficult to enter thanothers.

The difficulties are not insuperable.Coconut-oil refining has expandedconsiderably in the Philippines, althoughthis expansion has been largely for localconsumption in the growing processed-food industry. The developing countries'share of world aluminum production rosefrom less than 1 percent in 1955 to almost 8percent in 1978. Generally, the processed-material exports of developing countrieshave been growing faster than exports ofprimary materials, but not nearly as fastas manufactured exports.

eralized System of Preferences has done.That may not have a large impact on

the 90 or more poor countries that dependon nonfuel primary materials for two-thirds or more of their export earnings.During the 1970s, the growth of process-ing by developing countries has beenconcentrated in the middle-income coun-tries. It seems to be determined by thesame factors that have promoted manu-factured exportsskills, entrepreneur-ship and an efficient infrastructure.These are often lacking in the poorestcountries and are not made good purelyby lower tariffs.

why few low-income countrieshave yet made a processing break-through.

MANUFACTURED EXPORTS. Manu-

factured exports grew faster thandid primary exports in the 1970s,

ariddespite significantly slowergrowth in the industrial coun-triesthe developing countriesexpanded their manufacturedexports more rapidly in the 1970sthan in the 1960s.

The low-income oil importers

again had the worst performance.Their manufactured export vol-ume increased by 90 percent dur-ing the 1970s; but in terms ofexport purchasing power, morethan two-thirds of this volumeincrease was offset by declining

23

Averagead valorem

tariff(pre-Tokyo Round)

Distribution Imports fromEffective of imports developing

Nominal (on value from countriesLevel of (on total added in developin' as a percentageprocessing' values) processing) countries' of total imports'

Stage 1 3 3 54 41Stage 2 8 23 29 26Stage 3 9 20 9 12

Stage 4 9 15 8 23Total 100 28

relative prices. Middle-income oilimporters raised the volume oftheir manufactured exports byalmost 300 percent and lost lessthan one-third of this throughrelative price declines (Figure 3.4).Breaking down export purchasingpower gains into relative price andvolume components reveals a

300

250

200

150

100

24

50

0

-50

-100

-150

Figure 3.4 Industrial and oil-importing developing countries'manufactured exports, 1970-80

Percentage

IndustrialMiddle- Low-income income

Relative Prier5

Note: Increase in purchasing power. 1970-80, asprrrrntogenf 1970 level.

Part of total change resulting tram change of volume.Port t total change resulting from change of relative

strong positive relation betweenvolume and price performance(Table T2, Technical Appendix).This highlights the importance offlexibility and entrepreneurship-the capacity to read markets andadjust the product-mix to take ad-vantage of favorable price shifts.

The success that developingcountries have had in expandingmanufactured exports is more con-centrated than Figure 3.4 wouldsuggest. In 1978 only 10 countries,with 45 percent of the developingworld's population, suppliedmore than 75 percent of its manu-factured exports; and three coun-tries, with less than 3 percent ofthe population, supplied morethan 40 percent of the total.

Market penetration

During the 1960s, manufacturingproduction rose by 7.5 percent ayear in the developing countriesand 6.5 percent a year in theindustrial countries while eachincreased their manufacturedexports by just over 10 percenta year. In the 1970s, however,the difference between the twogroups was striking.

The developing countries re-covered quickly from the 1974-75recession so that in 1970-78 theirmanufactured output grew almostas rapidly, and manufacturedexports to industrial countries justas rapidly, as they did in the 1960s.But the industrial countries in-creased their manufactured out-put barely half as fast as they didin the 1960s.

As a result, the developingcountries have increased their

Table 3.3 Developing-country shares in the apparent consumptionof manufactured goods in industrial countries, 1970-78

share of industrial-country mar-kets. Although this increase hasbeen marked, their market shareis still tiny-only 2.9 percent in1978, up from 1.7 percent in 1970(Table 3.3). History obviously in-fluences the degree of penetra-tion-witness the high ratios forthe United Kingdom and theNetherlands. Differences in na-

tional policies are reflected in thepenetration ratios of six of theEuropean Economic Community(EEC) countries; despite theircommon external tariff and in-creasing harmonization of othertrade policies, their penetrationratios range from 7.4 percent forthe Netherlands to 2.6 percent forFrance. The lowest ratio is inJapan-1.3 percent in 1970, up toonly 1.5 percent in 1978.

Industry by industry, however,import penetration patterns varylittle from one industrial countryto another. Imports tend every-where to be highest in labor-inten-sive products like textiles, cloth-ing, footwear, toys and sportingequipment.

South-South trade

As the developing countries andthe capital-surplus oil exporters

increased their share of worldexports, they became more impor-tant markets for world imports-the middle-income oil importersparticularly for primary products,and the oil exporters for manufac-tures and for primary products.As a result, the shares of develop-ing-country nonfuel exports toother developing countries and

Country or trading group

Share of apparent consumption

1970(percentage)

1978(percentage)

Percentage-point

increase

Australia 2.1 4.8 2.7Canada 1.2 1.9 0.7EECr selected members 2.7 4.1 1.4

Belgium 5.6 4.2 -1.4France 2.1 2.6 0.5Germany 2.3 4.1 1.8Italy 2.1 3.9 1.8Netherlands 4.9 7.4 2.5United Kingdom 3.3 4.8 1.5

Japan 1.3 1.5 0.2Sweden 2.8 3.1 0.3United States 1.2 2.9 1.711 industrial countries 1.7 2.9 1.2

to the capital-surplus countriesboth increased. As to source ofimports, the oil importers tradedin increasing proportion with eachother, and the oil exporters inincreasing proportion with theindustrial countries.

The decline of the oil importers'share of the oil exporters' marketreflects two factors. First, man-ufactured imports by the oil ex-porters (particularly the capital-surplus oil exporters) are con-centrated on the more advancedcapital and consumer goods,which are produced in the indus-trial countries. Second, the oilexporters' demand for nonfuelprimary imports, particularlyfood, increased rapidly. Throughthe 1970s, the industrial countries'export supply of these productsexpanded more than did the de-veloping countries'. The industrialcountries therefore took the largershare of this new market for pri-mary products.

The increased intra-trade of theoil importers was due entirelyto the middle-income countries.Their intra-trade in manufacturesexpanded, and their growingdemand for raw materials was metby expanding supplies from theindustrial countries and fromother middle-income countries.This new import market, like thatof the oil exporters, has been cap-hired only marginally by the low-income countries.

Developing-country trade policyand growth

The boom of world output andtrade, which began in the 1950sand built its momentum throughthe 1960s was, in large measure,the result of deliberate and suc-cessful international efforts toreduce restrictions on interna-tional trade. The diverse traderecord of developing countriessuggests, however, that the suc-

cess that some of them haveenjoyed is as much the result oftheir own efforts and of their ownwell-conceived policies as of theopenness of the trading system.

The outward-looking middle-incomecountries

The nature of the response to theinternational environment of thecountries that have enjoyed a mea-sure of success was the focus of the1979 World Development Report.As agroup, the successful countrieshave been those which have re-sisted or overcome the temptationto adopt inward-looking tradepolicies and to delay transition togreater export orientation. Al-though some of the successfulcountries have exploited importsubstitution at earlier stages ofindustrialization (particularly thelarger ones such as Brazil), theyavoided the burdens to exportsthat extending import substitutionto intermediate goods would haveentailed and began at an earlystage to move away from thisorientation.

This shift away from an import-substituting policy-orientation to-ward what is often called an out-ward orientation, has been less areduction of governmental or p0!-icy-provided incentives for theexpansion of industry or primaryproduction than an elimination ofbiases in these policies. Earlierpolicies often favored an indus-trial structure more or less alongthe lines of those already in placein the industrial countries, andnot consistent with the resourcepatterns existing in developingcountries. Policy reform meant notonly identification and scrappingof disincentives to produce forexport, or disincentives to useimported inputs when they werethe less expensive, but also endingpolicies that favored capital-inten-sive over labor-intensive sectorsand methods of production and

placing small-scale enterprises onan equal footing with large firmsso that they could obtain credit,technical assistance and market-ing support.

Thus, policies in the successfulcountries have been generallysupportive of industrializationand commerce but have avoideddirecting that support at any par-ticular sector or method. Deci-sions about what activities andwhat processes could be efficientlyand profitably built up are left toindividual firms, which succeedor fail as their decisions prove tobe correct or incorrect.

The most noted among the suc-cessful countries have been thesemi-industrial countries such asSingapore, South Korea andSpain. Although a few of themwere nonindustrial, low-incomecountries in the 1950s, they arenow characterized by relativelyhigh shares of manufacturing inproduction and exports and aregenerally among the wealthiermiddle-income countries. Manyof them have achieved impressiverates of economic growth andstructural transformation (Figure3.5 overleaf).

In the semi-industrial countriesof East Asia, successful develop-ment has had two hallmarks: asupportive approach to increasesin agricultural productivity andgrowth, along with readiness at anearly stage to replace inward-look-ing import-substitution policieswith trade policies favoring thegrowth of exports in general andof manufactured exports in par-ticular. A shift to a similar policy-orientation by several middle-income Latin American countrieshas caused their trade perform-ance to improve markedly. Thesecountries have now reached thestage at which they can begin toshift into more demanding, skill-and technology-intensive areas ofproduction while continuing to

25

Volo,,re charigi' (1970 100)

250

200

Manufactures /150

100

improve earning opportunities forthe rural population.

Another group of successfulcountries has seen an outward ori-entation lead first to a deepeningand broadening of their agri-cultural exports, the Ivory Coastand Malaysia, for example. Fromthis base they are now movinginto processing and into industrialsectors.

As explained in Chapter 6 ofthis Report, countries that havecontinued in place or adopted out-ward-oriented policies have beenthe most successful in adjusting toexternal shocks without excessiverecourse to foreign borrowing orsevere cutbacks of rates of eco-nomic growth. The flexibility thatan outward orientation provideshas outweighed the vulnerabilitythat it risks.

The low-income oil importers

The low-income oil-importing de-veloping countries include coun-tries with very different economicstructures. In India (which, by26

Figure 3.5 Developing countries'exports to industrial countries,1968-78

Raw materiats

Food

01 I I

1968 70 72 74 76 78

Note Country and commodity groups correspond to UNclassification. Devetoping c000trirs include capital-surplusoil exporters; industrial c000tnes ioctude Sooth Africa andmost of Southern Europe. Manufactures inclode non-ferroos metals; raw materials exclude food ond turf.

population or output is three-fourths of low-income oil-import-ing Asia) and several other low-income Asian countries, the man-ufacturing sector produced in theearly 1970s as large a fraction ofthe countries' gross product as itdid in South Korea and Singapore.Manufactures are as large a shareof low-income Asia's exports as ofthe middle-income oil importers.Low-income African countries, onthe other hand, have a very smallmanufacturing sector, and theirexport earnings come almost en-tirely from commodities (Table3.4).

The major difference betweenthe Asian low-income countriesind the middle-income countriesis not the structure but the amountof their trade. The export-GDPratio is three times larger for themiddle-income countries. Indiais, in terms of structure, a semi-industrial country, but one whoseinward-oriented policies havehitherto isolated it from themarkets that have allowed otherAsian countries to move ahead.

When faced in 1973-74 withhigher fuel-import prices, low-income Asia did not have the flex-ibility to adjust by reducing other

Table 3.4 Structure of merchandise trade, low- and middle-incomeoil importers, 1970-80

imports. A decade of importsubstitution had reduced its im-ports to absolute necessities. Low-income Asia (particularly India)was forced to move marginallytoward export expansion (see boxon India, page 80). In the follow-ing years, their export-GDP ratiorose slightly, and their exportvolumes expanded strongly inpercentage terms. But because ofthe low initial levels of exports andthe relative decline of their exportprices, these gains came to muchless, in dollar terms, than thosecaptured by the middle-incomecountries.

Trade prospects

The record of the 1960s and the1970s indicates that the interna-tional environment does not dis-criminate in favor of the weakercountries or aapick them up" andstart them on the path to develop-ment. On the other hand, theinternational environment has notbeen hostile. The volume of devel-oping-country exports, particu-larly of manufactured goods, hasincreased dramatically, and thisincrease of exports has not yetcaused major resistance to arise.

(percentage)

Composition ofmerchandise exports

Composition ofmerchandise itn ports

Year, countrygroup and

Export-GDP Manu- Nonfuel Mattu-

region ratio factures primary factures Food Fuel

1970

Low-incomeoil importers

Africa 23 11 86 77 11 9Asia 7 54 43 64 21 5

Middle-incomeoil importers 22 33 58 69 12 10

1980

Low-incomeoil importers

Africa 16 9 80 51 16 31Asia 9 47 50 38 14 39

Middle-incomeoil importers 24 46 36 53 11 28

Because of the continuing impor-tance of international trade (par-ticularly trade with the industrialcountries) as an avenue of devel-opment, the continued opennessof the trading system (to be dis-cussed below) is critical.

As long as the trading systemremains open, the now successfulmiddle-income countries shouldcontinue to progress. Their expan-sion of manufactured exports,particularly their continued ex-pansion through the 1970s, hasbeen based more on their owncompetitiveness and entrepre-neurship than on the pull of ex-panding industrial-country mar-kets. Their capacity to diversifyhas been documented, and, asthis chapter shows, has been morethan sufficient to prevent terms-of-trade declines from taking awaythe gains in export receipts thattheir increased export volume hasprovided. Finally, their economiesare becoming large enough to sup-port efficient scales of operationand further overall growth, par-ticularly if their trade policiesallow specialization and tradeamong them to evolve.

The near-term trade prospectsof the low-income Asian countriesare more dependent on thegrowth of world demand. Untiltheir exports deepen into pro-cessed materials and more so-phisticated manufactures, theirexport prices and earnings willcontinue to be closely tied to move-ments of international demand.

Over the longer term, theirtrade prospects are primarily aquestion of their own policies.They have the human and naturalresources which have been, incountries with outward-orientedpolicies, the basis for sustainedgrowth of exports. As notedabove, their export volume in-creased sharply during the 1970swhen they then moved towardthis orientation.

The situation in low-incomeAfrica is much different. Manycountries, such as Chad andUpper Volta, have an extremelylimited base of physical andhuman resources (see box onUpper Volta, page 84). In a num-ber of countries, that base is actu-ally diminishing, for example,from overexploitation and erosionof farmland along with emigrationof the younger and better trainedwork force.

Some countries have attemptedto provide a level of public servicesthat their resources could not sus-tain. These policies became, ineffect, transfers from the ruralpoor to the urban less poor, andstrong disincentives for agricul-tural production (see Chapter 6).Declining production, along withshifts from cash to subsistencecrops, have brought about a sig-nificant drop of low-incomeAfrica's export-GDP ratio and ofits share of world exports. And,although many commodity pricesincreased during the mid-1970s"boom," the late 1970s' recessionin the industrial countries has

brought low prices for metals andminerals, in which the exports oflow-income African countries areconcentrated (see box below, andthe one on Zambia, page 78).

Slow growth of export volumeand declining relative prices havereduced export purchasing powerby roughly equal amounts. If rela-tive export prices had not de-clined over the 1970s, low-incomeAfrica's 1980 export volume wouldhave sold for $2 billion more thanit did. Similarly, holding its 1970share of the volume of world ex-ports would have meant $2 billionmore-45 percent moreexportpurchasing power in 1980 (1978prices).

Malawi and the Ivory Coast areexamples of African countries thathave adopted outward-orientedpolicies and have done well, but itis clear that trade policy alone isnot sufficient to accelerate thedevelopment of many Africancountries. In them, attention overthe next decade must focus onovercoming their poverty ofresources, particularly their lack ofhuman capital. Internally, their

Mineral investment needsRecent low prices for metals and othernonfuel minerals reflect the fact thatworld economic growth in the 1970s wasslower than envisaged when presentmining capacity was installed. But vari-ous projections suggest that by themid-.1980s, mineral demand may be 25 to40 percent above its level of the mid-1970s; by the end of the century, it couldbe 90 to 190 percent higher than at pres-ent, depending on the mineral.

Developing the capacity to meet theextra demand will require considerableinvestment. The table shows one estimateof what will be needed in certain key min-erals. Including infrastructure and capac-ity expansion in other minerals the worldtotal may be $12.5 billion a year (1977 dol-lars), and in developing countries $5.5 bil-lion a year, for the rest of the century. Anestimated three-quarters of the invest-

ment in developing countries will have tobe externally financed.

World capital requirements,1977-2000, for neededadditional capacity, selectedminerals(billions of 1977 dollars)

27

Mineral VVorJdDcs'elopi;b'countries

Bauxite 6.9 5.2Alumina 24.4 6.1Aluminum 76.6 17.6Subtotal 107,9 28.9

Copper 58.0 29.0Nickel 12.5 5.0Iron ore 98.2 31.4Tin 1.7 1.4Total 278.3 95.7

Source: Mikesell.

policies must carefully avoiddisincentives for investment andentrepreneurship. And whilegood trade policy may not, byitself, lead to development, ill-conceivesl trade policy can undothe effects of other factors.

As explained in last year's WorldDevelopment Report, investment inhuman resources is very produc-five, but many low-income Afri-can countries are too close to thesubsistence level of income tofinance such capital formationfrom their own savings. And theyhave almost no access to privatecapital markets. Finally, highenergy prices are a factor whichtoday's middle-income countriesdid not have to face in the earlystages of their development.International assistance will benecessary to allow the poorestcountries to overcome theseobstacles.

Industrial-country policy

In one important sense, the 1970scontinued the trend toward freertrade that had begun after the sec-ond world war. Though negoti-ated in the 1960s, the KennedyRound tariff reductionswhichcut industrial-country tariffs byone-third on two-thirds of theirdutiable importswere not fullyimplemented until 1972. Whenthe Tokyo Round Tariff cutsne-gotiated in the 1970s, to be imple-mented over 1980-87are inplace, industrial-country tariffswill average only 5 to 6 percent advalorem. They will however stillbe much higher on labor-intensiveproducts, which are of prime sig-nificance for developing countries.

However, the 1970s did see onenew and disturbing developmentin trade relationsa plethora ofspecific restrictions, introducedin numerous different ways. TheMulti-Fibre Arrangement (seebox), voluntary restraint agree-

28

Multi-Fibre ArrangementIn the 1950s protection for western indus-trial countries' textile industries wasaimed primarily at Japan and took theform of voluntary restraint Ofl exports.The first steps away from this informalframework were taken in 1961 and 1962with the introduction of the Short-Termand Long-Term Arrangements RegardingTrade in Cotton Textiles (STA and LTA).

These arrangements established a pre-cedent for special treatment for the textileindustry, outside the usual rules of theGATT. In 1974 the LTA was replaced by theMulti-Fibre Arrangement (MFA), whichcovers a broader range of textile productsthan had the LTA.

The MFA expresses three goals:the expansion of textile trade, and the

reduction of barriers to such trade;the orderly and equitable develop-

ment of this trade and avoidance ofdisruptive effects, in both importing andexporting countries; and

the economic and social develop-ment of developing countries, including asubstantial increase in their export earn-ings from textile products and a greatershare for them in world trade in theseproducts.

The operative clauses however relateonly to the second goalparticularly tothe control of disruptive imports. Article

3 of the MFA provides for unilateral actionto limit textile imports; Article 4 sanctionsbilateral agreements that limit trade on"mutually acceptable terms." The contextin which the MFA was negotiated and theway it has operated also suggest a restric-tive rather than expansionary goal.

Since the negotiation of the MFA, theEEC, the members of the European FreeTrade Association, the United States andCanada have all developed elaborate pro-tective systems for textiles. These arerooted in bilateral agreements negotiatedunder Article 4 and enforced, when nec-essary, at the national level by unilateralaction justified under Article 3.

Two bodies have been established tooversee the operation of the MFA: theGATT Textiles Committee and the TextilesSurveillance Body (TSB). The former is anad hoc committee, whose primary re-sponsibility is to produce a yearly reporton the operation of the MFA. The TSB is amore permanent body, whose officialpurpose is to ensure the "efficient opera-tion" of the Arrangement. When partiesto action under Article 2 or 3 fail to agree,the TSB has to make "recommendationsto the parties concerned:' Its annualreport shows that its standard recommen-dation is for the parties to engage infurther consultation with one another.

ments, reference or trigger pricearrangements, safeguards, coun-tervailing and antidumping duties:these administrative mechanismscovered an increasing proportionof world trade during the 1970s. Inthe second half of the decade,industrial countries imposed re-strictions (sometimes temporary)on imports of cutlery, bicycles,televisions and other electricalcomponents; they also revisedand tightened textile quotas.

Apart from the clothing and tex-tile restrictions, curbs were gener-ally aimed at other industrialcountries. There were serioustrade disputes between theUnited States, the EEC and Japanover steel and automobile trade.Even in textiles, the United Statesand the EEC disagreed over theeffects of the US domestic energypolicy and whether this consti-

tuted an unfair subsidy to exportsof petroleum-based syntheticfibers.

Changes in trade policies werenot the only governmental mea-sures that had a protectionistimpact. Governments becamemore actively involved in regionaland industrial policy; their indus-trial subsidies had the same effectas tariff protection and were oftenmore significant. In 1976, theytotaled approximately 6 percent ofGDP in Norway, 4 percent inBelgium and 3 percent in France,the Netherlands and the UnitedKingdom. By comparison, theamount that tariff protectionadded to producer revenues cameto less than 3 percent of GDP ineach country.

Many of these subsidies wereovertly protectionist. But in somecases, the economic objective was

not simply to protect but torestructure the economy. Sub-sidies, it has been traditionallyargued, are a better way of achiev-ing that objective than indirectmeasures like tariffs. They can beaimed directly at the source of aproblem. When subject to budgetappropriations, they can be con-trolled carefully.

Political realities, however, havemeant that approval of a subsidyrequired a compromise of objec-tives and some disguising ofamounts. As a result, the purposeof many subsidies has never beenclear and some have been inten-tionally ambiguous. Many takethe form of tax exemptions ordiscretionary relief and so are notsubject to budgetary or otherreview. Adjustment assistance,which was originally intended toretrain workers and help firmsenter new or more competitive

activities, has often been swal-lowed up in this general vague-ness and turned into strongly pro-tectionist adjustment resistance(see, for example, the box on theTrigger Price Mechanism).

Openness of the trading system

It is hard to gauge how the degreeof "trade openness" has changedover the 1970s. On the one hand,the number of trade disputesreceiving public attention and theproportion of trade coming undersome sort of government scrutinyor guidance certainly increased.The EEC, for example, introduceda formal procedure for placingimports of particular productsfrom particular sources under"surveillance." Surveillance in-volves no restrictive measures butis a clear warning that, if importscontinue to grow, restrictions

might be imposed.On the other hand, the 1970s

saw the last stages of the KennedyRound tariff cuts, the negotiationof the Tokyo Round reductionsand the introduction of the GAITnontariff-barrier codes of conduct.In addition, the industrial coun-tries extended measures whoseexpress purpose or immediateeffect was to expand developing-country exports. The most notedof these was the GeneralizedSystem of Tariff Preferences(GSP), which reduced trade bar-riers on many developing countryexports (Table 3.5, overleaf).

There was also a considerableexpansion of industrial-countryimports from developing coun-tries under value-added or off-shore-assembly tariff provisions.These allow favorable tariff treat-ment for products containingparts or components that were

The Trigger Price Mechanism for steel importsThrough the 1960s and 1970s, the profitrate in the US steel industry was low, andby 1977, the import share of the US mar-ket was up (from 2 percent in the late1950s) to 18 percent. This brought onincreasing pressure for protection.

In late 1977, after consultations with theindustry and with the congressional dele-gations from steel-producing areas, theWhite House announced a program tohelp modernize the US steel industry.This program would include loan guaran-tees, and some relaxing of environmentalregulations, but the centerpiece was to bea "Trigger Price Mechanism" (TPM) toprevent "unfair" price competition fromimports.

In concept, this mechanism was to bequite simple. Costs of production in theworld's lowest cost producer, Japan,would be determined and publicly an-nounced. These figures would be the"Trigger Prices." Then, if the pricecharged for an import shipment werebelow the trigger price, the US Govern-ment would consider launching immedi-ately an accelerated (or "fast-track")antidumping investigation against theforeign supplier.

In practice, the Trigger Price Mecha-

nism was a delicately balanced combina-tion of legal threat and oligopoly pricing.Legal threat was the most emphasizedelement. Any foreign firm that pricedbelow the trigger prices might be subjectto an immediate antidumping investiga-tion and, if found to be dumping, re-quired to pay antidumping duties. Inreality there was little likelihood that anti-dumping charges would increase. Estab-lishment of TPM did not change the anti-dumping law, and it did not provide addi-tional resources for its enforcement. Thelaw itself defines dumping very preciselyand allows very little latitude for politicaldiscretion.

The TPM did, however, fit well with thetendency for industries with high fixedcosts and relatively few competitors toshy away from price competition, andonce a price leader has been established,to follow its lead voluntarily. Price leader-ship is an accepted practice under USantitrust lawand was established assuch by Supreme Court decision in theUnited States Steel Corporation case in1920. This "price leadership" model ofindustry pricing suggests that as long asthe US government announces prices thatseem "fair" to all sellers, they will be

voluntarily observed, and ruinous (fromthe seller's point of view) price competi-tion minimized. Consistent with thismodel, the TPM has actually triggeredonly three antidumping investigations.

The social justification for the TPM wasthat it would help generate the $7 billion ayear (at 1978 prices) needed to modernizethe domestic industry, but it is notapparent that it has been an effectiveindustrial policy. The quarterly adjust-ments of the trigger prices compound to a14 percent per year increase of importprices. The estimated amount by whichthe TPM has allowed prices of domesticsteel to increase is smaller, and thisincrease has been matched by increases ofdomestic firms' costs. The Trigger PriceMechanism has facilitated the pass-through of domestic firms' cost increases,but it has not helped them gain control oftheir costs, and the investment fundsneeded for modernization are not beinggenerated. This means that the need forthe government's present role in theindustry's pricing mechanism will notdisappear, and as the Trigger PriceMechanism has been functioning, thatrole adds to the rate of price increase inthe industry.

29

made in the importing country. Inthe United States, imports fromdeveloping countries under theseprovisions continue to be as largeas GSP imports and are no lessfavorably treated. These schemesare also important in the Nether-lands and the Federal Republicof Germany, and Japan imple-mented one during the 1970s.

30

increase, and economies will notadjust smoothly to changed inter-national circumstances.

There are two dimensions tothis adjustment. One takes thefamiliar form of transferring re-sources from less productive tomore productive uses, in responseto changing patterns of demand,technology and comparative ad-

vantage. Industries facing directcompetition from developingcountries (for example, in textilesand footwear) fall mainly into thiscategory (Figure 3.6).

Another, more recent, form ofadjustment is that which has tooccur within industries. Examplesinclude motor vehicles and steel,which have long been highly con-centrated and protected fromforeign competition by tariffs andlocation. Differences in gasolineprices and in highway systems ledto significant differentiation be-tween American autos and autosproduced for European and Japa-nese markets, insulating Ameri-can producers from internationalcompetition over the major part oftheir product line. As tariffs werereduced throughout the 1950s and1960s, the industrial countrieswere growing rapidly, and domes-tic capacity in these industries wasalways strained to keep up with

domestic demand. This left pro-ducers with little incentive to com-pete for foreign markets.

But the growth of world trade inindustrial products, recent indus-trial country growth rates lowerthan had been expected whenpresent capacity was installed andrising energy prices in the UnitedStates have intensified competi-tion among industrial countries.The relevant definition of themarket for many industrial goodsis now international, and themarket power of producers in anyone country is much less than itwas even a decade ago.

The changes that adjustment togreater competition within indus-tries demands do not necessarilyinclude a net transfer of resources

200

150

1100

Figure 3.6 Industrial countries'demand for manufactures,1970-78

Growth of purchases of:

Constant prices (1970 150)

250 -

1970

Imports fromdevelopingcountries

Market shares, 1978

(percentages)

Imports fromindustrial countries

Imports fromindustrialcountries,..

Oomesticallyproduced goods

1978

TotalCountry or trading group value

AustriaAustraliaCanadaEECFinlandJapanNorwaySwedenSwitzerlandUnited States

Total

Developing-country exports toindustrial countries expandedfastest in those labor-intensiveproducts most subject to traderestrictions. This reflects the largecost differences between indus-trial and developing countries,which trade barriers were not ableto offset. It is also a tribute to theingenuity of developing-countryexporters who found ways to meetthese administrative requirementsand to vary products and marketsso as to minimize their impact.

Prospects

The industrial countries still sup-ply three-fourths of all nonfuelexports and buy three-fifths ofnonfuel imports; their policies willmainly determine whether theinternational trading system re-mains open. Much depends ontheir raising their output- and pro-ductivity-growth rates. Withoutthat, protectionist pressures will

Value Percentage of total

19141529

5144

12251318

647 1261,268 1792,031 303

15,155 4,446415 21

12,314 1,789556 22

1,247 1451,042 257

24,499 3,15459,174 10,442

Table 3.5 Import coverage of the Generalized System of TariffPreferences, 1976(millions of dollars)

Nonfuel merchandise imports from developing countries

Under GSP

out of such industries. Particu-larly, it does not imply the replace-ment of industrial-country pro-duction by imports from develop-ing countries. Developing coun-tries' production of steel andmotor vehicles is expected toincrease strongly over the nextdecadebut so is their consump-tion. Of course, output will not bematched by consumption in everysingle country, so internationaltrade will be affected. Both exportsand imports of developing coun-tries will increase, adding to thecompetitiveness of the worldmarket.

The adjustments required bythis erosion of the market powerof national firms are less in thestructure of production betweenindustries, than in the structure ofdistribution. Profits and (par-ticularly) wages in concentratedindustries have traditionally beenhigher than in other industries.Governments have claimed theirshare of these higher returns bytaxation and by imposing safety orenvironmental regulations thatless oligopolistic industries couldnot have borne.

With the market power of suchindustries diminished by interna-tional competition, that traditioncan no longer be supported.Nationalization or government-sponsored cartels have failed torestore or protect market powerbecause it was the increase of inter-national competition that createdthe strains. In some instances, gov-ernment intervention (by financ-ing sales below costs) has actuallyintensified the degree of interna-tional competition.

This suggests that the positionof industrial countries whose eco-nomic performance is lagging cor-responds to that of a developingcountry which has reached thelimits of import substitution. Fur-ther growth (particularly of pro-ductivity) requires major struc-

tural adjustments. Yet there arestill groups with a vested interestin the old policy regime. In thedeveloping country, their inter-ests were protected by trade bar-tiers; in the industrial country, bymarket structure. An uncompeti-tive industrial country then faces achoice between import substitu-tion, which would protect tradi-tional patterns of output and in-come distribution at the cost offurther growth; or outward-oriented policies, which haveproved successful for many devel-oping countries. The industrialcountries' choice, often presentedas "protect or adjust," is in reality"protect or grow."

Adjustment policies aimed atassisting people to transfer fromone industry to another will noton their own be sufficient. With-out growth, alternative employ-ment will not be created. Adjust-ment policies, no matter how well-designed, will have the effect onlyof maintaining incomes. Evenwith growth, adjustment in in-dustries whose competitive struc-ture has changed will be resisted.The need there is not to shiftresources to higher productivity,

Table 3.6 Increments in the volume of nonfuel trade betweendeveloping and developed countries, 1960-80(billions of 1970 dollars)

and ultimately higher payingalternatives, but to persuade themto accept the lower rates of re-turn required by the loss of theirmarket power.

The key to maintaining an opentrading system is for each indus-trial country to come to gripsdomestically with the opportunityand the challenge which adjustingto a changing international envi-ronment involves. The industrialcountries will certainly benefitfrom expanding their trade withdeveloping countries. From 1970to 1978, developing-country ex-ports of manufactured goods toindustrial countries increased byalmost $12 billion (at 1970 prices);but industrial countries increasedtheir manufactured exports to de-veloping countries by almostthree times as much (Table 3.6).Even excluding the growth ofexports to the oil exporters, theindustrial countries' trade surplusin manufactured goods has beengrowing since 1973 at more than 5percent a year in real terms.

Neither are the benefits fromtrade simply a question of tradesurpluses. Trade with the devel-oping countries has helped raise

SITC definition.Country groups correspond to UN classification. Developing countries include the

capital-surplus oil exporters and exclude South Africa and most of Southern Europe.

31

Time period anddirection

Product category

Foods,etc.

(0+ 1)

Raw materialsexcl. fuels

(2+4)

Nonfuel Allmaterials manufactures

(0+1+2+4) (5-8)

Allnonfuel

merchandise(0-8,less 3)

1960-70

Developed todevelopingL 1.45 1.03 2.48 15.22 17.70

Developing todevelopedb 2.56 1.90 4.46 5.78 10.24

1970-78

Developed todevelopingb 3.86 1.88 5.74 31.83 37.57

Developing todevelopedb 0.98 0.15 1.13 11.48 12.61

the efficiency of manufacturing inthe industrial countries. It hashelped them in their counter-infla-tionary efforts, bringing considera-ble benefits to consumers. And ithas provided the spur to movingresources out of low-productivityindustries and firms into sectorsthat provide higher wages and,ultimately, greater job security.

In some industries, notably tex-tiles and clothing, telecommunica-tions equipment, and householdappliances, industrial-countryimports from oil-importing devel-oping countries have been increas-ing more rapidly than their exportsto them. But even in these sectors,jobs lost as a result of increasedimports have been small comparedwith the effects of demandchanges, technological develop-ments and productivity growth.And the number of jobs lost hasbeen more than offset by employ-ment opportunities created byboosting exports to developingcountries in other, usually higherpaying, industries.

International cooperation

In the nearer term, world atten-tion must focus on the immediateneed to expand the export earn-ings of low-income oil importers.Even in the High case, their exportpurchasing powerafter takingout their payments for fuel im-portswill still be below its 1970level (Table 3.7).

Table 3.7 Export purchasingpower net of fuel imports forlow-income oil importers, 1970and 1980(billions of 1978 dollars)

32

Trade measures to support low-incomecountries

A key element is the restoration ofeconomic growth in the industrialcountries. The export receipts ofthe low-income countriescon-centrated on unprocessed mate-rials and unsophisticated man-ufacturesare more sensitive tothe state of the world economythan those of the middle-incomecountries.

The reluctance of many indus-trial countries to make the adjust-ments that changes in the interna-tional environment demand isslowing down their growth andsimultaneously limiting theexport prospects of the develop-ing countries. From 1978 to 1980,the low-income oil importers notonly saw the increase of oil pricesadded to their current accountdeficit but experienced an addi-tional decline from the recessionin the industrial countries.

On their part, the low-incomecountries might examine theemerging patterns of demand forfood and other primary products,particularly in the oil exportersand middle-income countries.Where possible, they shoulddiversify their export productionto capitalize on these growingmarkets.

To help overcome the scarcity ofentrepreneurship and marketingskills in the low-income countries,the capital-surplus oil exportersmight actively seek to expandtheir imports from these coun-tries. They could seek out sup-pliers and help to establish mar-keting facilities for products fromthe low-income countries.

The same effort could be madein the industrial countries. Theirmarkets for primary products aregrowing less rapidly, and con-sumer loyalty to particular prod-ucts and brandnames are there-fore more difficult to overcome.

But in many cases, good market-ing has turned a developing-coun-try identity into an advantage.Colombian coffee, Jamaican rum,Brazilian furniture and Kenyanfashions are examples.

Such efforts by the industrialcountries and the oil exporterswill, however, have no effect if thelow-income countries are isolatedfrom world markets by their owntrade policies or if their domesticpolicies make it financially diffi-cult for their firms to become relia-ble suppliers on terms normallyencountered in international com-merce.

The International MonetaryFund's Compensatory FinancingFacility was expanded twice dur-ing the 1970s and the EuropeanCommunity's Stabex scheme im-plemented. The United NationsConference on Trade and De-velopment (UNCTAD) CommonFund for commodities has beennegotiated but not yet ratified byenough countries to come to life.

Even so, the exports of primaryproducers were at least as unstablein the 1970s as in previous periods.Their terms of trade and exportreceipts remain closely tied to theindustrial countries' businesscycle. The diversification of themiddle-income countries' exportsand their expansion into process-ing have been the more significantcontributors to the expansion andto the stabilization of their exportreceipts.

Longer term considerations

Over the past 35 years, countrieshave learned the advantages ofcooperative trade arrangementsand have organized and overseenthese in numerous different ways.Industrial country tariffs on mostmanufactured goods have beennegotiated down to insignificantlevels. Countries have committedthemselves against generalizedprotection through the OECD

Area andcountry group 1970 1980

1990High case

Africa 7.4 3.7 4.3Asia 8.8 7.3 8.0All low-income

oil importers 16.2 11.0 12.3

"trade pledge," renewed annuallysince 1974, and through agree-ments reached by heads of state atsummit meetings of the largerindustrial countries.

The recent adoption of a frame-work of codes negotiated at the"Tokyo Round" will help bringseveral nontariff barriers underinternational control. These codes(listed in the 1980 World Develop-ment Report) cover such issues asthe determination and enforce-ment of product standards, andthe procurement practices of stateagencies and businesses. Theobjective of these codes is to en-sure transparency and simplicityof procedures, so as to minimizethe possibility of discriminationagainst foreign sellers.

There are, however, areas wherelittle progress toward trade liberal-ization has been made. Agricul-tural trade is everywhere severelydistorted by national price-sup-port and protection policies,epitomized by the EEC's CommonAgricultural Policy (see box).

Trade in services lacks an inte-grated system of internationalprinciples or conventions. Servicetrade (defined to include, for ex-ample, transport, tourism, bank-ing and financial services and con-struction) in fact produced one-third more export revenue fordeveloping countries in 1980 thandid agricultural exports, althoughthe developing countries' tradesurplus was smaller for servicesthan for agricultural products.

More significant perhaps iswhether the traditional approachto trade liberalization requiresbroadening in order to continue tobe effective. This approach,embodied in the General Agree-ment on Tariffs and Trade (GATT)is based on a belief by the par-ticipating countries that the politi-cal and economic benefits of opentrade would exceed its costs. Theconcept on which the tariff nego-tiations were based was quite sim-plean exchange of concessionsfrom which each country wouldgain. But these negotiations have

Agricultural protection in the European CommunityThe European Community's CommonAgriculture Policy (CAP) is a complexmechanism. The internal prices of majoragricultural products are maintained byimposing variable levies on imports or,when EEC production exceeds demand,by government purchases. Because theinternal prices are held constant whileworld market prices change with marketconditions, the spread between the twofluctuates considerably. Thus over thepast decade, European buyers have hadto pay 1.4 to 5 times the world price formilk powder, 1.5 to 4 times the worldprice for butter, 2.5 times the world priceof soft cheese, twice the world price forbeef, and 1.5 to 2 times the world price forgrains.

European consumers pay these differ-entials, and they also pay taxes to coverthe losses incurred by disposing of sur-pluses at world prices or by divertingthem to inferior uses, such as animal feedsupplements. It has been estimated that

the CAP's total cost to EEC consumerscame to $11 billion in 1976.

Internal prices have been maintained atlevels sufficiently high to maintain self-sufficiency in some products and to leadto production of exportable surpluses inothers. The most obvious example issugar, a commodity produced at least costin the tropics. Because of its price supportand surplus disposal program, the EEChas become the world's leading exporter,after Cuba. With the accession of theMediterranean countries, a much largershare of the EEC's consumption of oliveoil, wine, fruit and vegetables will be pro-duced internally and protected from com-petition from North African and otherdeveloping countries.

The EEC surpluses are in part disposedof as food aid, but the intermittent sellingof surpluses has the effects of depressingworld prices and displacing establishedexporters.

Protection's priceTrade protection is an inefficient way totransfer income. That is a dull way toexpress a simple truthif someone gainsa dollar from protection, someone else inthe same country loses a lot more. For every$20,000-a-year job in the Swedish ship-yards, Swedish taxpayers pay an esti-mated $50,000 annual subsidy. Protectioncosts Canadian consumers $500 million ayear to provide an additional $135 millionof wages in the clothing industry. Andwhen Japanese consumers pay eighttimes the world price for beef, Japanesefarmers are not made eight times better-off. It costs them that much more to pro-duce it.

not brought participating coun-tries to weigh all the benefits theyderive from trade against thecosts. Countries have excludedcertain products from tariff reduc-tions, not necessarily because the(producers') costs of lower tariffswould exceed the (consumers')gains, but for fear that displacedproducers might trigger domesticpolitical pressure to resist liberal-ization. This viewthat exportsare the "gains" from trade and im-ports the "costs"is also reflectedin most countries' safeguards orescape clause procedures. In safe-guards cases (as recognized by theGATT) the only economic effecttaken into account is injury to do-mestic producers (see box).

This shortcoming takes on par-ticular relevance as the developingcountries increase their share ofworld trade. Earlier GATT nego-tiations successfully reduced tar-iffs on industrial products tradedamong industrial countries. Butthis success was largely due to thefact that cost differences weresmall, and the sectors that borethe losses were the same ones en-joying the gains. The resultinggrowth of trade tended to be intra-industrya country's exportsexpanded in the same industries

33

in which its imports expanded.Other sectors, particularly labor-intensive ones where cost dif-ferences between countries werelarge, experienced minimal tariffcuts. Despite faster growth andfuller employment, reciprocityfrom a major supplier was not suf-ficient for governments to over-come resistance from the pro-ducer interests that would lose inorder to achieve the larger con-sumer gains.

The same problem is nowemerging in different guise.Developing countries that, inrestructuring their trade policies,reduce their import barriers find ithard or impossible to obtainmatching concessions from theindustrial countries.

To restore the postwar momen-tum of trade liberalization, anational and international effort tobase policy on a broader conceptof the gains from trade may beneeded. On national fronts, it isessential to redouble efforts tomobilize those domestic interestswithin the industrial and develop-ing countries that bear the costs ofprotection. The safeguards nego-tiations provide an opportunity tobring out the same issues on aninternational scale.

NATIONAL ACTIONS. To iden-tify individual products that areaffected by trade barriers mightseem at first glance a trivial task,but it is not. With more subtleforms of nontariff protection orindustry support programs, sim-ply measuring their coverage (letalone estimating their effects) iseven more difficult.

Some government actions havehelped make such work less diffi-cult. They include the US TradeAction Monitoring System, whichtabulates trade restrictive mea-

34

sures put in place by the UnitedStates; the annual record of gov-ernment industrial aids and tradeprotection provided by the Indus-tries Assistance Commission inAustralia; and the Federal Re-public of Germany's "SubsidyReport," which records by sectorall federal government subsidiesand also forgone tax revenuesresulting from industry tax relief.

While the calculation and pub-lication of the costs of protectionwill surely influence the generalpolitical climate, legislation maybe needed to build this informa-tion into the decision mechanismsthrough which trade policy isadministered.

National governments may findpolitical (and not just economic)merits in institutional changesthat allow them to judge trade dis-putes in the light of overall costsand benefits. Under present rules,the technical commissions andbureaus which adjudicate in tradedisputes cannot take consumerinterests into account. As a result,consumer groups have no alterna-tive but to go "over the heads" ofthese bureaus and commissionsand apply pressure on politicians.Trade disputes therefore tend toescalate into higher level disputesthan they would if, at the lowerlevels, a technical outlet were pro-vided for consumer as well as forproducer interests.

THE SAFEGUARDS CLAUSE. TheGATT embodies a general com-mitment by each participatingcountry to keep its market open toforeign sellers. The safeguards (orescape) clause is, as its name sug-gests, a way out of this commit-ment. The purpose of an escapeclause code is to define the circum-stances under which a countrymight escape, and it is hoped, by

defining them, put limits on theexercise of each country's sov-ereign right to escape. So long asthe proposals for a new safe-guards code are based on the tra-ditional mercantilist principlethat a country's interests areserved by trade restrictions whichreduce immediate injury to do-mestic producersthese nego-tiations, stalemated at the TokyoRound and dormant since then,are unlikely to succeed.

Under present arrangements,the motive for a country to agreeto limits on its right to imposetrade restrictions is to stop its trad-ing partners retaliating. The exer-cise of the right to escape is thensimply a matter of the relativepower of the importer and the ex-porter. Not surprisingly, the out-come in most instances is a "vol-untary" export restraint agree-ment, negotiated between the na-tional governments. The fact thatthe present safeguards article hashardly ever been invoked showshow hard it is to confine this clashof sovereign power within inter-national rules.

If the safeguards negotiationswere to focus on developing amore balanced concept of injury,then the major issue would not be"How much of its sovereign rightto restrict imports will a countrygive up?" but "How can the codehelp a country determine when itis in its overall economic intereststo exercise that right?" This wouldrequire the international com-munity to face an issue that it hasalways avoided. It is a considera-ble challenge. But the record ofsuccessful negotiations suggeststhat trade policy may be the onearea in which few tasks are be-yond the powers of determinedinternational cooperation.

4 Energy: a new era

The shift from cheap and abun-dant energy to higher prices andscarcity has been a dominant fea-ture of the world economy in thepast decade. The previous chaptershowed that over 40 percent of thesubstantial increase in exportsfrom oil-importing countries wasrequired to pay for the increasedcost of their oil imports. Anothersubstantial portion was financedby borrowing from the oil-surpluscountries via the capital markets,which is examined in the nextchapter.

Although some countries canadjust to more expensive energyby boosting their exports and bor-rowing, for the world as a whole alarge part of the adjustment mustbe made more directly, throughchanges in the supply anddemand for energy itself. Thesetake place through substitutingother fuels for scarce petroleum,reducing the energy required perunit of GDP, and changing rates ofgrowth of GDP. These adjust-ments in energy use and the pol-icies to bring them about will beexamined at both the global andnational levels.

(Figure 4.1). Oil and natural gassupplied over 80 percent of theincrease in world use of primaryenergy between 1950 and 1970.Cheap energy made an importantcontribution to the unprece-dentedly rapid growth of worldoutput.

(annual averages)

Constant 2980 dollars per barrel

40

30

20

10

20The energy transition

Until 1970 the postwar period wascharacterized by rates of discoveryof oil in the Middle East andelsewhere that were far in excessof demand. As a result the realprice of petroleum fell steadily

10

01111 I III liii iiiiiil, I ii1950 60 70 80

Figure 4.1 Petroleum prices,1950-80 and 1972-80

Current prices

Constant 1972 prices

76 78 80

This pattern could not be sus-tained indefinitely. As the rate ofgrowth of oil consumption beganto exceed the growth of additionsto reserves, prices would haverisen regardless of the way theworld oil market was managed.The four-fold rise in nominal oilprices that took place in 1973-74was triggered by short-term politi-cal and economic factors and, asshown in Figure 4.1, somewhatovershot the real level sustainableby market forces. The 6 percentcut in world supply triggered bythe revolution in Iran produced afurther increase in real prices ofover 80 percent between 1978 and1980. However, by the end of thedecade petroleum supply anddemand were again closely bal-anced.

World demand

Before 1973 energy consumptionwas growing proportionately toGDP in the industrial countries,somewhat faster in the developingcountries. Even so, the latter nowaccount for only 14 percent ofworld commercial energy de-mand; a quarter of their totalenergy is still supplied by fuel-wood and other noncommercialsources. After 1973 consumptionin the industrial countries grew farless rapidly. While growth in thesecountries has recently recovered,it is projected to be slower thanpre-1973 levels throughout the1980s, and slowest of all country

35

Dollars per barrel

40

30

UI1972 74

groups. In the developing coun-tries, demand has also sloweddown, but not as much. As aresult, their share in total con-sumption will rise to 18 percent by1990. This is shown in Table 4.1which represents this Reports bestjudgment of the likely levels ofenergy consumption and produc-

Table 4.1 Commercial primary energy productionand consumption, by country group, 1970-90(millions of barrels a day oil equivalent)

tion in the country groups (seealso Figure 4.2).

Although the demand forenergy is quite insensitive to pricechanges in the short term, the1973-74 oil-price increases havealready had a marked effect onenergy consumption of oil-im-porting countries, especially the

Average annual growth rate of world supplies(percentages)

Note: Total world consumption refers to apparent domestic consumption only. Total worldrequirements of primary energy equal total world consumption plus bunkers and others.Synthetics from coal are not included in solid fuels.

36

industrial countries. The increasein prices of imported oil hasgradually been passed through toconsumers, cushioned by theslower rise in taxes and in theprices of other types of energy. Inthe main industrial countries, realprices to final users rose by 62 per-cent between 1973 and 1979 (Table4.2). The available data show asimilar rise in oil-importing devel-oping countries but much less inoil-exporting countries.

In the industrial countries, therise in consumer prices, combinedwith governmental actions to con-serve energy, has already had amarked effect on the intensity ofenergy use. The ratio of their totalenergy use per thousand dollarsof GDP has fallen by about 2 per-cent a year between 1973 and 1980.This has meant a saving of about15 percent, or 10 million barrels aday of oil equivalent (mbdoe) in1980, compared to the demandthat would have been expected ifthere had been no increase in realenergy prices.

The main factors affectingdemand for energy can be dividedinto an income effect and a priceeffect (with conservation mea-

Figure 4.2 Commercial primaryenergy consumption, 1960-90

Milhonn of barrel,per day oilequivalent

Country group

1970 1980 1990

Pro-duction

Con-sum ption

Pro-duction

Con-sumpt ion

Pro-duction sumption

Con-

Industrial market economies 43.2 60.6 50.6 72.4 64.3 87.0Petroleum 12.7 29.9 14.5 35.0 16.4 37.4Natural gas 13.0 12.8 13.8 15.0 13.2 16.2Solid fuels 13.0 13.3 13.9 14.0 20.4 19.1Primary electricity 4.5 4.6 8.4 8.4 14.3 14.3

Nonmarket industrialeconomies 28.8 27.6 45.2 43.0 63.4 62.1

Petroleum 8.0 7.2 13.7 13.1 17.9 17.3Natural gas 3.8 3.8 7.7 7.0 12.6 12.3Solid fuels 16.1 15.7 21.8 20.9 29.8 29.4Primary electricity 0.9 0.9 2.0 2.0 3.1 3.1

Capital-surplus oil exporters 12.8 0.3 18.6 0.9 21.7 1.7Petroleum 12.7 0.2 18.3 0.7 20.4 1.1Natural gas 0.1 0.1 0.3 0.2 1.3 0.6Solid fuelsPrimary electricity

Developing countriesOil exporters 13.7 2.8 16.7 5.5 25.2 10.0

Petroleum 12.7 1.8 14.2 3.6 18.3 5.5Natural gas 0.7 0.7 2.0 1.4 5.9 3.5Solid fuels 0.1 0.1 0.1 0.1 0.3 0.3Primary electricity 0.2 0.2 0.4 0.4 0.7 0.7

Oil importers 4.7 7.8 7.5 13.7 15.1 24.3Petroleum 1.2 4.2 1.5 7.3 2.8 11.2Natural gas 0.3 0.3 0.5 -0.7 1.6 1.6Solid fuels 2.3 2.4 3.5 3.7 5.6 6.4Primary electricity 0.9 0.9 2.0 2.0 5.1 5.1

Total world 103.2 99.1 138.6 135.5 189.7 185.1Petroleum 47.3 43.3 62.2 59.7 75.8 72.5Natural gas 17.9 17.7 24.3 24.3 34.6 34.2Solid fuels 31.5 31.5 39.3 38.7 56.1 55.2Primary electricity 6.5 6.6 12.8 12.8 23.2 23.2

Bunkers and others 2.9 3.1 4.6

500.0

200.0Totol

100.0

50.0

Nonrnarketinri_.20.0

10.0 Oil-importingdeveloping

5.0

so

Oil.exportiog2.0 developing countries

10

1970-80 1980-90

Total world 3.0 3.2Petroleum 2.8 2.0Natural gas 3.1 3.6Solid fuels 2.2 3.6Primary electricity 7.0 6.1

1960 65 70 75 80 85 90

Table 4.2 Index of real energy prices to final users:major industrial market economies, 1974-80(1973=100)

sures being part of the latter). Theannual increase in energy use canthen be expressed as a function ofincome growth and price changes.This simple equation takes the fol-lowing form: Energy growthequals A times percentage incomegrowth minus B times percentageprice increase. A is defined as theincome elasticity, or the rate atwhich energy consumption in-creases relative to increases inGDP; while B is the price elasticity,the rate at which energy consump-tion decreases as energy becomesmore costly.

Income elasticities tend to behigher in developing countriesthan in industrial ones, reflectingthe rapid increases in industrial-ization and urbanization thataccompany the early stages ofgrowth. For every percentagepoint increase in income, energyconsumption rises by about 1.3percent in developing countries,compared to 1.0 percent in indus-trial countries (Table 4.3).

Price elasticities tend to besomewhat lower: over the range ofprices experienced to date, each 10

Table 4.3 Typical income andlong-term price elasticities forenergy

a. At user prices. The range of estimates isindicated in parentheses.

percent increase in price has led toa reduction in energy demand ofabout 4 percent in the industrialcountries but only 3 percent in thedeveloping countries. The fulleffects of higher energy prices willtake place over 15 to 20 years asenergy-using equipment is re-placed. The observed effects ofprice rises over the past sevenyears are therefore perhaps half ofthe estimated long-term effects.

The combined effects of pastand future changes in income andprice on energy use are illustratedin Figures 4.3 and 4.4 and in Table4.4. The shaded portion of eachfigure indicates the savings inenergy demand brought about ashigher prices have curbed energyconsumption. The parallel 45-degree lines show energy con-sumption and GDP growing at thesame rate ("constant energy inten-sity"). The points for each yearshow projected energy consump-tion and GDP and reflect the wayin which higher prices offset theeffects of income growth, result-ing in lower energy intensities.

The industrial countries. BothGDP and energy use were increas-ing at about 5 percent a year before1973, and the average intensity oftheir energy use was relativelyconstant at 5.0 barrels of oil equiv-alent per $1,000 of GDP (see Figure4.3). In the absence of any increasein prices, energy consumptionwould have risen to some 117mbdoe by 1990. Because of the dra-matic price increases, however,energy intensities have fallenfrom 5.0 barrels per $1,000 of GDP

in 1973 to 4.4 in 1980. This implies amedium-term price elasticity ofabout 0.2, consistent with thelong-term elasticity of 0.4 shownin Table 4.3.

Since income growth was alsovery slow during this period-2.5percent a year for the industrialcountriesthe increase in energyconsumption arising from incomegrowth was relatively small. It wasalmost cancelled out by the mod-erating effect of higher prices, sothat total energy consumptionslowed down considerably. Thisdoes not mean that energy useand income growth have been

117

87

69

Figure 4.3 Effects of income andprice on energy consumption inindustrial countries, 1960-90

Millio,as of bcerela par doy oil ,quiaclaai

138

Reduction in consumptiondue to price increase

1973

a Ocarels per 01.000 GDP

itO 119 140 170 200

GDP ado,

Energyintensity

"uncoupled": the effect of risingincome is again likely to predomi-nate when the industrial econo-mies return to their earlier, morebuoyant growth, and as priceincreases become more moderate.

Looking ahead to 1990, a furtherreduction in energy intensityto3.7 barrels per $1,000 of GDPisanticipated in the industrial coun-tries as they continue to adjust tohigher prices. Should this occur,GDP growth of 3.7 percent a yearwould be supported by energy-consumption growth of only 2percent a year, less than half asmuch as in the years before 1973.

37

Final users 1973 1974 1976 1978 1979 1980

Residential and commercial 100 123 138 146 168 178Industry 100 130 160 170 185 274

Transport 100 122 119 111 131 156

Total 100 125 140 144 162 195

Source: International Energy Agency.

Incomeelasticity

Priceelasticity

Industrialmarket 1.0 0.4economies (0.2-0.6)

Developing 1.3 0.3countries (0.1-0.5)

The oil-importing develop-ing countries. Notwithstandinghigher prices, energy intensitieswill rise between now and 1990from 4.3 to 4.4 barrels per $1,000 ofGDPbecause the positive effectof income growth on consump-tion outweighs the moderatingeffect of rising prices (see Figure4.4). This is not to say that risingprices have no impact; in theabsence of price changes, oil-importing developing countries'growth would have raised theirconsumption to 31 mbdoe by 1990instead of the 24 mbdoe that is cur-rently projected. Their energyintensity would have risen to 5.6in 1990, instead of 4.4. (Because ofdifferences in the purchasingpower of GDP, the energy inten-sities of developing and industrialcountries are not strictly compara-ble. Converting GDP at the appro-priate purchasing power insteadof at nominal exchange rateswhich would mean roughly doub-ling developing countries' GDPwould show that their energy in-tensities are substantially belowthose of the industrial countries.)

The global effect of rising priceson total energy demand is esti-mated in Table 4.4 by comparing

Millions of barrels per day oil equivalent

36.0 -31.0

24.0

10.0

38

Figure 4.4 Effects of income andprice on energy consumption inoil-importing developingcountries, 1960-90

0 48

Reduction inconsumptiondue to price

a. Barroln per 51,000 CD?

5'1973

100 136

GDP niden

5.6

231 350

Energyintensity

Table 4.4 Commercial energy consumption, 1960-90(millions of barrels a day oil equivalent)

the consumption projected for1990 with what would have beenused to sustain the same GDPgrowth with no increase in prices.Savings reach 44 mbdoe in 1990,equal to just over 20 percent ofworld demand. If there were nochange in the composition ofenergy supply, this would imply asaving of about 20 mbd ofpetroleum. Two-thirds of thisreduction is projected to takeplace in the industrial countries,where energy use per personis the highest and the effect ofrising prices on demand is mostpredictable.

Are rising prices and conserva-lion sufficient to ease the energybottleneck? On these projections,the growth of world energydemand would be lowered from4.0 percent a year to 2.8 percentfrom 1973 to 1990, allowing forGDP to recover to the High casegrowth rates. However, a com-parable adjustment on the supplyside will also be needed to replacepetroleum by more plentifulsources of energy so that oildemand can be limited to theamounts likely to be available overthe next decade.

Energy supply

The price rises of the past decadehave attracted heavy investmentin additional supplies of energy.Inevitably it takes a long time toincrease supplies significantly. As

a result, two-thirds of the adjust-ment to the slowdown in oil pro-duction has taken place throughcurbing demand growth and onlyone-third through accelerating theproduction of other energy sup-plies. In the 1980s, however, theeffects of shifts in supply areexpected to be as important aschanges in demand.

In terms of extra supplies,petroleum will no longer make thelargest contribution. Having pro-vided more than 60 percent of theincrement to energy supplies inthe 1960s, its share is expected tocontinue to shrink (Figure 4.5). Bythe end of the century, it mayaccount for only 30 percent ofworld primary energy, comparedwith its peak of 50 percent in 1973.This decline will have to be offsetlargely by a revival of coal andcoal-based fuels and (in the 1990s)a significant increase in nuclearenergy and synthetic fuels.

Although all forms of energycan be substituted for each otherto some degree, the internationaleconomy is mainly affected bywhat happens to the most trans-portable formschiefly oil andcoal. For the next 10 years at least,the speed with which coal re-places oil will largely determinewhether energy supplies grow atthe 3.2 percent a year needed tosustain economic growth. Othersourcesmainly natural gas,hydroelectricity and nuclear

Actual Projected

Projectedwithout

price increase Savings

Country group 1973 1980 1990 1980 1990 1980 1990

Industrial marketeconomies 69 72 87 82 117 10 30

Oil importers 10 14 24 15 31 1 7

Rest of world(including bunkers) 40 53 78 55 85 2 7

World 119 139 189 152 233 13 44

4.0..-1960

3.5

Figure 4.5 Increments to worldenergy supply(percentage shares)

(18.5)Primary

electricity

(20.6)Primaryelectricity

(1.4)

(21.9)

(10.3))7.2)'HydrO

NucIear'(41.4)

's Petroleum

(17.8)Natural

gas

(30.0)

(18.4)Natural

gas

(13.7)Hydro

Nuclear )4.8i

(8.9)

Other

1960s

1970s

1980s

(24.8)Petroleum

Petroleum

1990s

powerare expected to provide45 percent of the increase in pri-mary energy in the 1980s. But theirlead times are so long that they areless responsive to current marketconditions, and most decisionsaffecting what will come onstream in the 1980s have alreadybeen taken. The following discus-sion therefore concentrates oncoal and petroleum.

Coal

World reserves of coal far exceedthose of petroleum. At presentprices, some 640 billion tons ofproven reserves are economicallyrecoverable, enough to maintaincurrent production levels for overa hundred years. About 90 per-cent of the production and use ofcoal is in the industrial economies,market and nonmarket. The limitsto coal expansion lie in the needfor large investments in transport,coal-using equipment and pollu-tion control.

Coal production is expected togrow more rapidly than oil duringthe 1980sat about 3.6 percentcompared to just over 2 percent inthe 1970sand coal and coal-based fuels will replace oil as themain source of energy growth.Liquids from heavy oils and oilshale as well as gas produced fromcoal should also become competi-tive with petroleum. This substi-tution should have a restrainingeffect on further increases inpetroleum prices.

Replacing oil with coal is a moreimmediate option for the indus-trial than for the developing coun-tries (with a few notable excep-tions, such as China and India,which are already major pro-ducers). Most of the shift from oilto coal is therefore expected totake place in the industrial coun-tries. Although there will be somesubstitution in developing coun-tries, they will continue to rely onoil for about half of their energy

consumption during the 1980s(Table 4.1). In the longer run,however, the developing coun-tries also have considerable scopefor raising coal production.

Petroleum

Petroleum's dominant role in totalenergy supply derives from sev-eral factors. It is the most versatileform of energy, is relatively cleanand is easily transportable (con-stituting some 90 percent of inter-national energy trade). While oilreadily replaced coal in the 1950sand 1960s, it is much harder toreverse this process.

In 1970 the 13 members of theOrganization of Petroleum Ex-porting Countries (OPEC) pro-duced half of the world's petro-leum and held three-quarters ofthe world's reserves. The subse-quent transfer of ownership of oil-producing facilities to the gov-ernments of these countries hashad several long-term effects onpetroleum supplies. Most funda-mentally, supply decisions arenow viewed as part of the overalldevelopment strategy of eachcountry (discussed in Chapter 6).The larger, more populous, andmore diversified economies suchas Algeria, Indonesia, Iran, Vene-zuela and Nigeria, have been ableto spend their increased revenuesand so tend to maximize their oilproduction. But the countrieswith substantial production andreserves in relation to their devel-opment needsSaudi Arabia,Iraq, Kuwait, the United ArabEmirates, Libya and Qatarhavebeen able to expand importsrapidly without spending all oftheir petroleum revenues. Thisgroup now produces two-thirdsof OPEC supplies, playing a piv-otal role in the world petroleummarket.

The behavior of the capital-sur-plus countries is critical not onlyfor world energy markets but also

39

for determining the future size ofOPEC surpluses and the corre-sponding deficits in oil-importingcountries. Over time the problemof recycling oil surpluses is likelyto decrease, however, as thedevelopment needs of the surpluscountries absorb more of their rev-enues. This question is consideredfurther in the following chapter.

The six capital-surplus coun-tries have now accumulated some$300 billion of foreign assets.Although these assets represent adesirable diversification of theirwealth, their rates of return havebeen well below the rate of appre-ciation in the value of their oilreserves. The surplus countrieshave now lowered their produc-tion targets by 2 million to 3 mil-lion barrels a day (mbd) from theirpast production level of about 19mbd; they have the capacity toproduce 5 mbd to 6 mbd morethan their targets. This marginwill tend to narrow as the importsneeded for further developmentrise. But it can also be increased byenhanced recovery and furtherexploration work, currently at alow level.

The effects of the somewhatdiverse objectives within OPEChave so far maintained upwardpressure on prices when marketsare tight while prices lag behindthe rate of international inflationin slack periods. Oil prices havenow reached levels at which vari-ous alternative sources of supplyare competitive with oila factthat countries with substantialreserves can be expected to takeinto account when planning theiroutput. These various factorscombine to produce the centralprice assumption adopted in thisReportan annual increase ofabout 3 percent in real terms from1980 to 1990, from $30.50 to $42 inconstant 1980 dollars. Given thislong-term perspective, the projec-tions should remain unaffected by

40

factors such as the softening ofprices in mid-1981.

The special problems oftraditional fuels

While rising petroleum priceshave captured the headlines, foralmost half of the world's popula-tion energy problems take theform of a daily search for woodwith which to cook food. Over 2billion people still depend almostentirely on wood and other tradi-tional fuels, including crop andanimal wastes. In rural areas, low-income households use only tradi-tional energy. In many developingcountries, industry also reliesheavily on fuelwood, and insome countriesMali, Tanzania,Nepal, Ethiopia and Haiti are ex-amplestraditional fuels repre-sent over 90 percent of totalenergy consumption.

The quantities involved arelarge (Figure 4.6). Perhaps asmuch as 930 million cubic metersof wood, 400 tons of animal wasteand the same amount of crop resi-dues are being burned in develop-ing countries every year. This isequivalent to almost 5 million bar-

Figure 4.6 Consumption oftraditional and nontraditionalfuels in developing countries

Millions of barrels a day oil equivalent

Oil-exporting countries

Oil-importing countries

Con,mercialfuels

5.5

13.7Tradi ional

fuels1.74.9

Tradi jonalfuels1.85.3

commercialfuels

10.0

rels of oil per day and representsroughly one-quarter of the energyused in developing countries, andjust under 5 percent of the world'senergy consumption.

The growing scarcity of tradi-tional fuels is the energy crisis inmuch of the developing world.Shortages are not a new problemin those parts of Asia, Africa andLatin America, where populationgrowth and the need to clear landfor agricultural use have long putpressure on forests. But they arenow much exacerbated as thehigher prices of conventionalenergy raise the demand for tradi-tional fuels, especially for charcoalin urban areas. And demand forconstruction materials and pulpand paper, of course, continues togrow.

Iii many densely populatedareas, forests have dangerouslyshrunk. The hillsides of Nepal arewashing away as the demand forfodder and firewood rises, andmore land is given over to agricul-ture. The use of wood for fuel isgreater than sustainable forestyields in several African andAsian countries. In many more,localized deforestation is a seriousproblem because fuelwood cannotbe transported economically overlong distances. In Zaire, for exam-ple, only 2 percent of sustainableforest yields are cut down everyyear, but wood is very scarcearound Kinshasa. A virtual deserthas been created for at least 70kilometers around Niamey, thecapital of Niger. In their search forfuel, people may even cut fruit-bearing trees, seedlings and treeroots,

As forests disappear, people inrural areas spend more time col-lecting fuel, at the cost of workingon the land. The poorest are theworst affected, since they can leastafford to buy fuel. Iii parts ofAfrica, purchasing fuel can cost apoor family 35 to 40 percent of its

1980 1990

income and people have beenreduced to only one cooked meal aday. In poor areas of Nepal andHaiti, cropping patterns haveeven changed in favor of foodsthat require less cooking.

As wood becomes scarce, peo-ple burn more dung and cropwastes, which would be betterusd as fertilizers. As a result,yields fall, so creating pressure tobring more land under cultivation.But when trees and other vegeta-tion are removed, the soil iseroded and river beds and canalssilt up. Finally, deforestationreduces the earth's capacity toabsorb the extra carbon dioxidecaused by burning fossil fuels.This can raise global temperaturesand affect the weather.

The gravity of the fuelwood cri-sis can therefore hardly be over-stated. It can be tackled in threeways:

S Planting more trees. The useof modern agricultural methodsand new species of trees is a rela-tively new phenomenon in manyparts of the world. Experience hasshown, however, that "tree farm-ing" is feasible and profitablein a variety of circumstances. Butprogress in creating additionalwood resources has been slow. Tomeet likely fuelwood demand indeveloping countries withoutfurther damage to forests wouldrequire an estimated 20 million to25 million hectares of forests to beplanted during the next 20 years.At present rates of planting, onlyone-tenth of that target will be met.

Reforestation mainly involvesland, labor and time. Rural peoplethemselves therefore have thepotential to do the job, and rela-tively cheaply. Designing forestryprojects to achieve this potential,however, presents special prob-lems. Forests compete with landfor food crops or grazing, so thatwooded areas have to be carefullyselected. Moreover, since planting

Trees for people: a participatory solutionIn 1971 the South Korean governmentintroduced a reforestation program underthe driving force of the Saemaeul Udong[New Community] movement. The pro-gram involved a campaign of public edu-cation to encourage tree-growing andconservation, provision of free seedlings,a scheme for plantations in every village,greater support for the Forest Depart-ment, a new forest law, and enforcementof the ban on leaf-raking and removingundergrowth in forests.

By the time World Bank assistance wassought for the program's expansion in1976, nearly 40,000 hectares of trees werebeing planted each year. That success wasin large measure due to the involvementof villagers. Although the program wasimplemented by governmental agencies,their main role was to provide money andtechnical advice. By linking with villageand district committees, they developedplans in accordance with village pri-orities.

In Gujarat, India, the Forest Depart-ment's program of reforestation includeda publicity campaign that showed vil-lagers that trees could be grown with

comparatively quick returns. Seedlingswere distributed free; new and versatilespecies, such as leucaena and eucalyptuswere introduced. With modern cultiva-tion, they yield 5 to 15 times more thantraditional trees, and can often grow onland not suitable for other crops.

The program has had considerable suc-cess in encouraging individual farmers toplant trees. In 1980, 50 million seedlingswere distributed, but that failed to satisfydemand. However, efforts to accelerateplanting on village common land havenot fared so well. They have run into diffi-culties over the availability of land; rela-tively few Panchayats (village councils) inGujarat have enough common land to usefor trees without affecting villagers' otherneeds. Moreover, Panchayats sometimesdecide to establish community lotswithout consulting other villagers, andthe wood is often sold to meet othervillage needs rather than directly used bythe villagers. Regardless of governmentcommitment, social forestry will succeedonly where local people are consultedand participate.

does little to satisfy immediatewood needs, it is often difficult toenlist the cooperation of farmersand landless laborers, especially ifthey are not assured of their rightsto the mature trees. People cannotbe forced to grow trees. They mustbelieve that it will meet theirneeds, as examples of South Koreaand the Indian state of Gujaratdemonstrate (see box).

Improving the efficiency ofenergy use. If people use tradi-tional stoves, 90 percent of heatmay be wasted while open firesuse five times as much energy askerosene stoves. Small improve-ments in chimney and stovedesign could double the usefulenergy obtained from fuelwood,but they have been made onlyslowly. Designs and operatingmethods have not always takenlocal conditions and tastes intoaccount, and poor families oftencannot afford the $3 to $5 it costs to

buy a "cheap" stove. Charcoal istypically produced by felling livetrees and burning them on thespot in sand-covered pits. Itwould be much more efficient toburn the wood in kilns, but highcosts and poorly adapted tech-nologies have so far preventedthat from happening.

Substituting other energy fortraditional fuels. This has beenmade much more difficult by thesharp price increases for commer-cial fuels over the past eight years.The prices that would enable poorfamilies to use even minimalamounts of commercial energy aremuch lower than the prices re-quired for economic efficiency.Nonetheless, many governmentshave subsidized fuels such askerosene and diesel, typicallyused by poor consumers.

While this may be a useful inter-im solution for the poor, it createsmany additional problems. It has

41

not been possible to confine suchsubsidies to those who needthem. Vehicle engines can be con-verted to the use of the cheaperfuels, and it is common for sub-sidized fuels sold in rural areas tofind their way back to the townsand cities. More importantly, largenumbers of consumers receive thewrong price signals; they give lit-tle incentive to promote con-servation or reduce imports, andbudgetary costs can quickly be-come prohibitive.

There is no single solution tothe special problem of energy forthe poor. Many considerations,among them the cost of subsidiesand urgency of deforestation, willhave to be balanced, and policieswill be different in different coun-tries. In some places, biogas unitshave been introduced with somesuccess. Other countries haveexperimented with additives tosubsidized fuels so as to makethem harm combustion engines.

In short, the links betweenprices, income distribution andenvironmental considerationsrepresent a particularly intractableenergy problem. The conflictbetween the needs of poor peoplefor affordable energy, and fueldevelopment, which requireshigher prices, is somewhat sim-ilar to the food-price problemdescribed in Chapter 7. The solu-tion is far from obvious. What isclear, however, is that the majorityof poor rural families will remaindependent on fuelwood andorganic wastes for the foreseeablefuture. Unless that challenge isfaced, the burden of the "otherenergy crisis" on those who areleast able to bear it will continue togrow.

Energy and growth

This Report's discussion of individ-ual countries (Chapter 6) high-lights the somewhat surprising

42

conclusion that, until 1978 at least,the impact of higher oil prices onthe growth rates of the oil-import-ing developing countries was rel-atively modest, largely becausetrading opportunities, workers'remittances, and capital flows,both commercial and OfficialDevelopment Assistance (ODA),expanded sufficiently to offset thisexternal shock to a considerableextent.

What can be inferred from thisfor the 1980s? The 1979-80 oil-price increase has producedunsustainable trade deficits forthe oil-importing developingcountries. In 1980, their net fuelimport bill amounted to 5.3 per-cent of GDP ($74 billion), com-pared with 2.8 percent of GDP in1978. This is projected to rise fur-ther to 6.2 percent of GDP by 1990.

In some countries like Brazil,Turkey and India, oil imports nowabsorb over 50 percent of exportearnings. While trade and capitalflows will help to reduce andfinance these deficits, increasingadjustments will have to takeplace in the energy sphere. At thedomestic level, higher interna-tional prices have now largelybeen translated into the domesticprice increases needed to stimu-late adjustment. The effects of thiswill be felt throughout the econo-mies of the oil-importing develop-ing countries. Yet their currentenergy use is low and is bound torise. Their "energy intensity"the amount of commercial energyconsumed per unit of outputisless than that of the industrialcountries, due to, among otherreasons, continued importance oftraditional fuels and industry'ssmall share in total output.

The oil-importing developingcountries are therefore expectedto raise their energy consumptionfrom 13.7 mbdoe in 1980 to 24.3mbdoe in 1990. Given this pattern,the extent to which higher oil

prices might affect their growthand development prospects is amatter of great concern.

Impact of higher energy costs

The most immediate effect ofhigher energy prices is to reducethe real incomes or profits ofenergy users. To the extent thathigher prices cannot be passed on,energy users will try to modifytheir behavior to minimize thelosses involved. They will sub-stitute less for more expensivefuels and alter production meth-ods to use more energy-efficienttechnology. Consumption pat-terns will also change.

How easily such adjustmentscan take place is not yet clear.Studies based on the experience ofthe industrial countries suggestthat in the long run higher energyprices will not have a drastic effecton growth. However, the studies'long-term view understates thecosts of disruptions and balance-of-payment difficulties of the kindthat occurred in the 1970s.

Neither can their results neces-sarily be applied to the oil-import-ing developing countries. It maybe much harder to substitute labor,capital and other raw materials forenergy in developing countriesthan in the industrial countries.For example, the introduction ofenergy-efficient techniques maybe hampered by shortages ofskilled technicians and managers,or the infrastructure required touse alternative fuels.

The oil-importing developingcountries seem to have one advan-tage over the industrial countries;they are not yet locked into a stockof energy-intensive capital andinfrastructure and therefore, inprinciple, may be better able toexpand while economizing onenergy. But, with scarce capitalresources and balance-of-pay-ments constraints, they may notactually be able to implement the

options open to them. Their gen-erally low levels of energy use sug-gest that much of it is "essential,"so they have less scope than theindustrial countries to curb con-sumption without affectinggrowth. Faster growth and rapidinvestment is the best way ofensuring that the developingcorritries adopt energy-efficienttechnologies.

The initial impact of more costlyenergy is related to the share ofenergy in GD?. For oil-importingdeveloping countries, that sharewas about 4 to 5 percent before1973 and is projected to reachabout 10 to 12 percent of GD? by1990 (even after adjustments tohigher prices have been made).That would represent a potentialGD? loss of some 5 to 8 percentover the period, perhaps half apercentage point a year. For manyoil-importing developing coun-tries, that is the differencebetween rising and stagnatingincome per person. Similar con-clusions were reached in thesimulations in Chapter 2.

Higher energy costs affect thevarious sectors in different ways.Transport, for example, is likely tobe most affected directly, as fuelmakes up some 15 to 30 percent oftotal costs, with virtually no scopefor substitution between fuels orfactors of production.

In agriculture, commercialenergy accounts for no more than5 percent of purchased inputs inmost developing countries. Eventhough modern methods of farm-inginvolving use of high-yield-ing varieties, fertilizers, irrigationand pesticidesuse substantialamounts of energy, their profit-ability is such that higher energyprices are likely to have a relativelylimited effect on output. And,while more energy-intensive perhectare, such modern methodstypically use less energy per unitof food produced.

For industry as a whole, energy'sshare of production costs variesfrom 2 percent to about 8 percent.Certain industries are particularlyheavy users of energyfor exam-ple, aluminum, copper refining,fertilizers and iron and steel. Theyseldom account for more than asmall fraction of total industrialoutput in the developing coun-tries. But, for some countries, theyare leading export industries andoften the biggest source of taxrevenues. It will make increasingsense for countries that havecheap or nontradeable energy(such as natural gas and hydro-electricity) to exploit their advan-tages in these industries. Coun-tries that are less well-placed tosupport these energy-intensiveindustries may suffer. But for mostcountries, the impact of higherenergy prices on comparativeadvantage will be broadly neutralsince competitors all face similarcost increases.

Rethinking development?

It has often been asserted thatcostly energy has made the indus-trial path to development unsuit-able for developing countries.This assertion is not borne out bythe facts. To achieve satisfactorygrowth, a proper balance muststill be struck between industryand agriculture. But, on theirown, higher energy prices will notprevent industrialization andoverall growth, although therewill be some changes in compar-ative advantage, and slowergrowth while countries make theheavy investments needed toadapt to expensive energy. Theirfeasible long-term growth ratemay be somewhat lower thanbefore, and they may find indus-trializing significantly more diffi-cult. But the long-term outlookhas not been fundamentallyaltered. Energy consumption islow in developing countries,

bespeaking the essential nature ofits use. To grow rapidly, they willneed to use much more energy.

Energy policy

The oil-importing developingcountries will have only a margi-nal influence on the world'senergy future, which will con-tinue to be dominated by thepolicies and actions of the indus-trial countries and the capital-surplus oil exporters. The devel-oping countries therefore need toadjust to world conditions and, indoing so, will significantly im-prove their individual perform-ance. In the energy field, the keyelements of their adjustmentinclude:

a strategy for energy use inte-grated into a country's overallplanning framework and develop-ment objectives;

a vigorous program to sub-stitute indigenous energy, includ-ing hydroelectric power, coal,fuelwood and domestic oil andgas, for imported oil (domesticproduction of energy in the oil-importing developing countriescan and should be doubled be-tween 1980 and 1990);

mobilization of the resourcesto carry out this vast program ofdomestic energy production, esti-mated to cost up to $50 billion ayear in the 1980s, compared to $20billion a year in the past five years;and

a major conservation effort,employing both price and non-price policies.

Development strategy

Energy policies need not possessany unique characteristics. Theyshare a common goal with othereconomic and social programspromoting long-term develop-ment. Economizing on energyshould not be regarded as an abso-lute virtue; it is desirable only for

43

the contribution it can make to thislarger objective. Thus planningand policy making in all areasindustry, transport, agricultureand rural developmentshouldbe attuned to higher energy costs.But higher prices do not mean, forexample, that developing coun-tries should eschew all energy-intensive industries. "Good eco-nomics" still implies minimizingtotal costs, not simply energycosts.

Increasing energy supplies

Policies to encourage energy pro-duction are critical for continuedeconomic growth. The oil-import-ing developing countries musttake further steps to identify andassess the domestic oil, gas, coal,hydropower, uranium, oil-shaleand tar sands that, at higherprices, can now be economicallyexploited. Smaller scale renewableenergy, such as solar, wind andbiomass, also merit attention.

What are the prospects for thevarious fuels? In oil and gas theyare good relative to many oil-importing developing countries'own needs. Their proven reservesrepresent about 2 percent of theworld's total. But because thecheapest suppliesfrom largefields and those close to the oilcompanies' major marketsweredeveloped first, the oil and gaspotential in oil-importing devel-oping countries may as yet beunderestimated (see box). Theiroil production is now 1.5 mbd;it is projected to increase to2.8 mbd by 1990 but could reach4.8 mbd with greater explorationand investment. A number ofcountries (Barbados, Brazil, Chile,Colombia, Ghana, Guatemala,India, Ivory Coast, Morocco,Pakistan, Philippines, Thailand,Turkey and Yugoslavia) willreduce their dependence onimports significantly during the

44

Reserves and resourcesAll of the energy within the earth is calledthe resource base, Of this, only a small part(known as proven reserves), consists ofdeposits that have been discovered andcan be exploited with the existing tech-nology. In the case of oil and gas, they arethose reserves that can flow now fromexisting wells in already developed reser-voirs. As more wells are drilled into areservoir, the estimate of proven reservesmay be revised up or down. The ultimatepotential of a field may be up to twice thatof initial estimates.

Since reservoirs in an oil field are geo-logically (if not physically) related, lim-ited drilling can usually determine theextent of additional oil and gas in the

The classification of reserves and resources

RESERVES

Economicatfievree prices

UndiscoveredDireove,nd

Uore,ocereblr

TOTAL RESOURCE BASE

Leeser geological knocnlpdge

Act, Mlnptvd l,vt US C,t,l,gket Sttv,,

UNDISCOVEREDRESOURCES

scbcc000tnl,l

same field with some certainty. Those arecalled indica fed reserves. On the basis ofinformation gleaned from exploratorydrilling, plus considerable geologicalextrapolation, the existence of furtherreserves, also producible at current pricesand costs, can be inferred (though witherrors of up to several orders of magni-tude). Both indicated and inferred re-serves are classified as unproven.

In addition to economically producibleenergy resources, exploratory drillingmay confirm the presence of other de-posits. If these are not exploitable at cur-rent prices or with existing technology,they are designated subeconotnic. Some ofthem may become economic as pricesrise; the rest are the unrecoverable reservesleft behind in reservoirs.

As yet undiscovered resources may existwhere exploratory drilling has not yettaken place but where geological andother data provide suggestive evidence.Estimates of undiscovered resources areinevitably highly uncertain.

These categories are themselves poorguides to the availability of energy forconsumption. If energy is needed forimmediate consumption, then provenreserves considerably overstate howmuch is available. To the consumer, deliv-erable energy, not reserves or resources,matters; this depends not on wells or geo-logical data, but on the pipelines, railwaysand tankers that move it about.

1980s; a few will become self-suffi-cient. Estimates also indicate thatby 1990, production of natural gascould triple to 1.6 mbdoe.

With the exception of a fewcountries, little is known of coalprospects in the developingworld. Developing countries'reserves are an estimated 10 per-cent of the world total, but thisshare should grow as explorationaccelerates. The increase in oilprices since 1973 has not signifi-cantly speeded up coal productionin the developing countries be-cause of the time required toexplore, develop and bring coalmines into production and toinstall the associated infra-

structure and transport facilities.During the 1980s, only 29 develop-ing countries are expected to pro-duce coal. Their production willaverage 4.6 mbdoe, most of it com-ing from existing producers.

As for electricity, nuclear powerwhich now supplies just under2 percent of the electricity in de-veloping countriesis an optionopen only to very large countries.Its capital cost is high, and smallercountries do not have grids withthe minimum capacitysome6,000 MWto handle the mini-mum reactor output efficiently. Ifcountries also lack the skilledlabor and management needed fora nuclear program, the peculiar

proven iredicetod jofee,,d

Figure 4.7 Comparative costs ofproduction

(1980 dollars)

Fuel technologies

Power technologies

Note. Costs include all investment requirements andoperation and maintenance costs, including rate of return.Estimates are based on state-of -the-art scale of operationand U.S. operating conditions.Source: Bechtel

Delivered to domestic refineries.Brazilian operating conditions and raw materials costs,

hazards of nuclear energy produc-tion may make it an unwisechoice. And all must be as con-cerned as the industrial countriesabout the security and safety ofnuclear plants.

International hydroDeveloping countries have substantialscope to exploit the hydroelectric poten-tial of international rivers. This hasalready been done in various placesincluding on the Danube (the Iron Gatesprojects) benefiting Romania andYugoslavia, and on the Parana River(Yacyreta and Itaipu projects) for the com-mon benefit of Paraguay, Brazil andArgentina. Other projects, such as theNangbeto project for Togo and Bénin andthe Mano River project for Liberia andSierra Leone, are under studyand stillmore could be, for example, on theGanges, Mekong and Salween. Installedcapacity costs on large integrated projectsmay be as little as one-half the capacitycost of installing similar amounts ofpower in many smaller-scale projects.

These projects are not easy. Under idealcircumstances, power facilities can beinstalled in each country with equitabledivision of available flows, such as tookplace in the Iron Gates project. However,site conditions may require locating thepower facilities in one country, as in thecase of Yacyreta, and the contractual ar-rangements for investment sharing, plantownership and power delivery fre-quently require delicate negotiations,often delaying implementation by years.

A different set of issues is raised bycountries such as Nepal or Zaire whichhave huge hydro potentials but relatively

small power markets. Exporting powervia regional transmission systems tonearby countries, such as India or Zim-babwe, makes a great deal of sense.Unfortunately, such potential buyers areunderstandably reluctant to becomeoverly vulnerable to outside supply.

Because of such difficulties, thedevelopment of international hydro islikely to continue to be slow. However,the potential benefits from these projectsare so considerable that every case shouldbe explored. For example, Nepal's esti-mated 80,000 MW hydro potential is athousand times greater than that coun-try's present power needs, and will bewasted for centuries unless it can bedeveloped for India's market which couldabsorb the output in several decades.Similarly, the 4,800 MW potential of thePa Mong site, shared by Laos and Thai-land, is about equal to Thailand's presentinstalled generating capacity and wouldoffer economies of scale over smallerhydro sites as well as conserving Thai-land's gas and lignite resources nowassigned to future thermal stations.

Many such options are being studied,and some progress is being made.However, though attractive in theory,international hydro remains prey to themany problems that arise wheneverinternational cooperation is required.

There are better prospects inhydropower. The developing coun-tries' hydro resources account forapproximately half of the worldtotal. Present oil prices justify acapacity cost some 1.5 to 3.5 timesthat of recently built hydroplantsin developing countries. Some ofthe largest potential hydro proj-ects in the world are sited on in-ternational waters, but remainunexploited because of politicaland technical problems (see boxabove).

So far as nontraditional formsof renewable energy are con-cernedbiomass and biogas,sun, wind and waterthese maybe options in the more distantfuture, but are not likely to offer a

large, cost-effective energy sourcefor some time.

Capital requirements for energydevelopment

The capital costs of the oil-import-ing developing countries' energydevelopment programs, includ-ing a doubling of domestic energyproduction, will be enormous.Around $40 billion a year (in 1980dollars) will be needed betweennow and 1985 (including about $5billion a year for oil and gas.Increasing reliance on higher costsupplies will raise the average unitcapital cost of energy productionby 50 percent in the 1980s over thatof the 1970s. This and the higheroverall levels of investment will

45

Production costin dollars perbarrel of oilequivalent

Fuel technologtes

Less than 30

coalnatural gasfar sandsoil shaleoil sandsliquefied natural gas

31-55

light Arabian crude"svood to methanolcoal liquefaction

S coal gasification, medium-BTUgaswood to ethanolsugar to alcohol"

56-85coal gasification. high-BTU gascoal to methanolMothil M gasoline

- andabove

S woitd to high'BTU gasmanure to high-BTU gascorn to ethanol

Generationcost in

cents perkwh

Power technologies

Less than 4.0

nuclear, light water reactorgeothermal, steamconventional coal-fired plantconventional natural-gas-firedplanthydroelectricity

41-6.5

atmospheric fluidized bedcombustionpressurized fluidized bedcombustiongeothermal, brinemagnelohydrodynamicsbreeder reactorconventional oil-fired plantcombined cycle, Nit. 2 distillate

6 6S 0

combined cycle, integrated coalgasificationhiomass (wood chip fuel)fuel cells (low BTU coal gas fuel)

8.1 andabove

solar pholovoltaicocean thermal energy conversion

S uvindsolar thermal

raise the total to more than $50billion a year (in 1980 dollars) be-tween 1986 and 1990 (including $7billion for oil and gas). This com-pares with the oil-importing de-veloping countries' 1980 net fuelimport bill of $74 billion (in 1980dollars). As a proportion of totaldeveloping country investment,energy's capital requirements inthe 1980s may double from 5 per-cent in the past five years (about$20 billion a year in 1980 dollars) tocloser to 10 percent.

Few countries could achievethese increases in energy invest-ment without affecting growth inthe rest of the economy. So if theinvestments are to be made with-out major internal dislocation,substantial capital inflows andtechnical assistance will be re-quired, even with major increasesin domestic savings.

Prices

The impact of higher energy priceson inflation may make govern-ments cautious about raisingprices. Similarly, higher priceshave strong distributional effects:in developing countries, energytakes a larger share of much lowerincomes than it does in industrialcountries. Finally, in those coun-tries where traditional fuels arestill important, the use of the pric-ing tool is further complicated bythe fact that commercial fuels andthe wood used by rural inhabi-tants are close substitutes. Raisingthe price of kerosene, for example,can shift demand from commer-cial fuels onto fuelwood, aggravat-ing the pressure on already en-dangered forests.

Nonetheless, maintaining do-mestic energy prices at levels re-flecting energy's real economiccost is an important, necessarycondition for ensuring that coun-tries adjust to new realities. Thus,appropriate pricing and taxationof energy products to encourage

46

Domestic petroleum pricesGovernments have traditionally taxedpetroleum products heavily because ofthe presumed low price elasticity andhigh income elasticity of their demand. Inthe 1960s, governments of oil-importingcountries collected nearly four times asmuch revenue per barrel as did the oil-producer governments.

However, when international oil pricesrose sharply in the mid-1970s, govern-ments were reluctant to increase themfurther by additional indirect taxation.The table compares international anddomestic prices of gasoline, kerosene andfuel oil in 53 countries, and shows howgovernments used the large tax elementin domestic prices to cushion the impactof oil-price increases.

In real terms, international prices ofthose three products in 1980 were about350 percent above their 1972 levels; butdomestic prices in oil-importing develop-ing countries were only 71 percent higherand in industrial countries only 62 per-cent higher. In oil-exporting developingcountries, there was a real fall of some 30percent.

Ratio of domestic petroleum productprices to international prices, 1972-80

Industrialmarket Oil Oil

Year economies importers exporters

energy conservation and substitu-tion of one fuel for another, and toensure that energy users are givenappropriate signals for longerterm decisions, will be an integralpart of energy policy.

Energy is so pervasively used inevery economy that nonpricemechanisms to encourage con-servation and substitution wouldquickly be overwhelmed. More-over, attempts to protect domesticconsumers from price increasestypically lead to budgetary coststhat can fuel inflation and quicklybecome prohibitive (see box). Theimportance of market prices isnot diminished by the fact thatmany important decisions involv-ing energy production and usemay not take place through themarket. The decisions made bygovernment planners will be moreeffective if reinforced by correctprices.

The difficulty of raising prices inthose countries that have keptthem down for some time shouldnot be underestimated. It wouldtake a doubling of domesticprices, in real terms, for four yearsor more to eliminate the subsidiesin some countries.

Countries that are self-sufficient

in energy are under less immedi-ate pressure to raise domesticenergy prices, and the argumentsfor energy conservation throughprice increases are not easy tocommunicate to populationsacutely aware of their country'spetroleum wealth. By delayingprice increases, however, theylose opportunities to earn addi-tional foreign exchange. Moreseriously, they build up energy-intensive production methodsand consumption and transportpatterns that will be difficult toreverse at a later stage.

Non price policies

Though a necessary condition,correct pricing of fuels is often notsufficient to bring about all tnedesired adjustments. First, pric-ing alone cannot reduce a coun-try's vulnerability to suddenshortages or dramatic changes, ininternational prices, for example.To deal with possible crises, otherpolicies, such as stockpiling andemergency conservation andallocation plans, may be neces-sary. Second, the response tohigher energy prices takes consid-erable time. In some areas, adjust-ment can be speeded up and mar-

1972 3.3 2.7 1.71978 2.0 1.8 0.51980 1.6 1.4 0.3

ket reactions reinforced throughregulation. Examples includeimport restrictions on large auto-mobiles, limits on space-con-ditioning temperatures and trafficcontrol. And in other areas, suchas supplying the rural poor with avigorous forestry program, non-price policies are the only means.

How does this translate intospecific sectoral policies? Inagriculture, extension services helpto spread energy-efficient prac-tices. In rice production, for exam-ple, placing fertilizer directly at thecrop roots can be up to 50 percentmore efficient than scattering it onthe soil. In many poor countrieswhere power shortages are com-mon, inefficient pumps use muchmore energy than is actuallyneeded.

In industry, improved manage-ment and personnel training hasin several countries achieved sig-nificant energy savings within twoto three years. In the middle-income countries, retooling ofolder energy-inefficient machin-ery can be spurred through taxand credit policy. Generally liberalinvestment policies, such as accel-erated depreciation, can also helpensure that new equipmentquickly replaces the older capitalstock (see box below).

Transport is the largest con-sumer of petroleum in many

Improving industry's energy efficiencyThe cement industry is a good example ofpotential for energy saving in manydeveloping countries. The kiln sectionaccounts for about 95 percent of theindustry's total fuel bill. But the actualamount it uses will depend on the processemployed and thus on the nature andmoisture content of raw material enteringthe kiln; whether the subsequent dryingand preheating operations are carried outin the rotary kiln or more efficiently insuspension preheaters; whether calcina-lion takes place in the kiln or in the pre-calciner; and the efficiency of the clinker

cooling. Depending on these factors, theheat needed to produce one kilogram ofcement clinker ranges from 800 to 1,800kilocalories.

Similar savings can be made in otherenergy-intensive industriescopper,ammonia, pulp and paper, andpetroleum refining, for example. Tenta-tive estimates suggest that about 15 per-cent of the total projected industrialenergy consumption in developing coun-tries in 1990 could be saved by suchchanges in industrial practices and pro-cesses.

Traffic management: two experimentsTo reduce the serious traffic congestion incentral Singapore, the Government intro-duced an "Area Licence Scheme" in June1975. All private cars entering a restrictedcentral area and carrying fewer than fourpersons were required to display alicence. Since March 1980 its cost has been$2.30 a day. Parking fees were alsoincreased considerably, and ring roadssubstantially improved.

These measures had a dramatic effect:Before the introduction of the

scheme, an average of 42,790 private carsentered the restricted zone during thebusy morning period; two months afterthe scheme was introduced, this hadfallen to 11,130. By 1980, the number ofcars coming into the zone had increasedto only 13,840.

More than 50 percent of private carsnow carry four or more passengers, com-pared with less than 23 percent before thescheme was introduced, and the propor-lion of travelers taking buses increasedfrom 33 percent to 46 percent.

Gasoline consumption has increasedby only 3.8 percent a year since thescheme was introduced, compared to 6.4percent a year in 1970.-75.

Venezuela has one of the lowest retailprices of gasoline in the world ($0.13 agallon). Both gasoline consumption andits private car fleet have been increasingby more than 10 percent a year. In 1979about 135,000 of the 549,000 vehicles reg-istered in Caracas were driven duringpeak hours, resulting in severe con-gestion.

In November 1979, the Venezuelangovernment decided to ban each car forone day a week, the day depending onlicence numbers. The number of privatecars operating during peak hours hasbeen reduced by more than 20 percent,saving some 1 million liters of gasoline aday, about 16 percent of the total dailyconsumption in Caracas.

In comparison with the traffic plan inSingapore, the Caracas experiment hasdrawbacks. Because gasoline is still socheap, traffic restrictions are only short-term measures and will not stop the vehi-cle fleet from growing rapidly. Traffic con-gestion is thus likely to recur in four orfive years' time. Nonetheless, nonpricemeasures on their own can help to reducedemand for oil.

developing countries. Energy effi-ciency can be achieved throughchanging the mix of transportmethods, shifting traffic from lessto more efficient carriers (such aspublic passenger transport) andincreasing load factors. Somecountries have had success withtraffic control schemes (see box

above). In all sectors, but espe-cially in transport, changes in en-ergy consumption will also requiresubstantial public investment.

International policies

The international community hasan important role to play in help-ing the developing countries toadjust to more expensive energy.The world has a particular interestin boosting energy production inthe oil-importing developingcountries because this will:

improve the balance of energysupply and demand in interna-tional markets;

help the oil-importing devel-oping countries to ease theirbalance-of-payments difficulties,so avoiding strains in internationalcapital markets; and

allow growth in the oil-importing developing countries to

47

recover, so providing an impor-tant stimulus to world trade.

In the energy field above all oth-ers, international interests coin-cide closely with those of thedeveloping countries.

Increasing energy production inthe developing countries willrequire assistance from the indus-trial countries. The institutionaland informational barriers to find-ing and developing new resourcesin the oil-importing developingcountries are often not fullyappreciated. Foreign oil com-panies are sometimes reluctant todo business in oil-importingdeveloping countries, fearingchanges in the rules once signifi-cant discoveries are made. Theirinterest is also dampened by thefact that most future discoveriesare expected to be relatively smalland more suited to import sub-stitution than to filling the multi-nationals' need for stable crudesupplies. Moreover, increasingly,exploration must take place indifficult geological or remoteoffshore areas, to which it isdifficult to attract risk capital.Finally, certain types of projects,which are especially important for

48

the poor, are not attractive to pri-vate capital at all.

Multilateral lending institutionshave considerable experience withenergy in developing countriesand are in a unique position tohelp remove the many marketimperfections that stand in theway of accelerating energydevelopment; they can helpdeveloping countries to evaluategeological risks and to developexploration strategies; assist oilcompanies and host governmentsin reaching agreement on jointexploration and exploitation andprovide reassurance to both par-ties that political risks can be mini-mized.

The infrastructure financed bymultilateral institutions can alsoencourage private companies toexpand exploratory work. Onestudy estimates that where basicinfrastructure must be put in placebefore exploration or develop-ment can occur, the costs of a pro-ject may become four or five timeswhat they would otherwise be.Multilateral lending institutionscan also have an important lever-aging effect: their contribution canbe boosted by attracting additional

private capital into the explorationphase. Finally, multilateral institu-tions may be able to help develop-ing-country governments to seethat the gains from increased oilproduction will not be wastedby inappropriate domestic prices,for example. This knowledge mayencourage private investors tosupport a project. The role forinternational financial institutionsto fulfill these needs, serving thetriple function of promotingdevelopment, easing energy mar-kets and recycling capital, is thusclear.

For the eventuality of futureworld shortages, other interna-tional initiatives will be needed.The oil-importing developingcountries, which are now amongthe first to be pushed into thehigh-priced spot market, shouldbe included in some cooperativeallocation scheme of the kindadministered by the InternationalEnergy Agency for the industrialcountries. This would not onlyguarantee them oil in the event ofan emergency or supply disrup-tion but would also help stabilizemarkets and give all participantsadditional security.

5 External finance for adjustment and growth

In the 1960s and early 1970sforeign capital financed 10 to 20percent of total investment indeveloping countries. Most ofthese flows came from official orsemi-official sources in the form ofgrants, concessional loans andmarket loans. Private finance con-sisted largely of suppliers' creditsand direct foreign investments.

Even before 1970, this patternwas gradually changing. The con-tribution of private bank lend-ing increased rapidly after 1967while workers' remittances(though conventionally classifiedas "current receipts") also becamean important item of externalfinance for several countries inSouthern Europe and NorthAfrica. Dramatic changes occur-red in 1973-75 when the develop-

ing countries had to borrow tocover their much enlarged currentdeficits (Table 5.1 and Figure 5.1).

Between 1973 and 1975 the tradedeficit of the oil importers rose 3.3times in real terms or, as measuredin relation to their GNP, peaked tothe 5 percent level by 1975. Thedeficit of the low-income countriesincreased 2.2 times in real termsbetween 1973 and 1975. The low-income countries were less af-fected largely because oil formeda smaller part of their total im-ports. In addition, some low-income African countries bene-fited from a rise in their exports in1973-74, and there were good har-vests in South Asia in 1975.

The wider financing gap wasbridged initially by extra aid fromindustrial countries, more lending

Excludes net official transfers (grants), which are included in capital flows.A minus sign (-) indicates an increase in reserves.

Billions of 1978 IdIots

350

300

250

200

150

100

Figure 5.1 Middle-income oilimporters' current account deficit,1970-80

Imports of goods- and all services

30

25

20

15

10

Low-income oil importers

111111111

Purchasing powerof exports of goodsand all services

I I

Current accountdrficil'

Includes private transfers.Excludes official transfers.

Table 5.1 Oil-importing developing countries' current account deficit and finance sources, 1970-80

49

(billions of 1978 dollars)

Oil importers

Low-income Middle-income

Item 1970 1973 1975 1978 1980 1970 1973 1975 1978 1980

Current account deficita 3.6 4.9 7.0 5.1 9.1 14.9 6.7 42.8 20.4 48.9

Financed by:Net capital flowsODA 3.4 4.1 6.6 5.1 5.7 3.3 5.3 5.3 6.5 7.9Private direct investment 0.3 0.2 0.4 0.2 0.2 3.4 5.1 3.8 4.6 45Commercial loans 0.5 0.6 0.8 0.9 0.7 8.9 13.7 21.0 29.4 27.1

Changes in reserves andshort-term borrowing' -0.5 -1.1 -.0.7 -1.1 2.4 -0.8 -11.7 12.7 -20.1 9.5

Memorandum item:Current account deficitas percentage of GNP 1.9 2.4 3.9 2.6 4.5 2.6 1.0 5.5 2.3 5.0

1970 75 80

1970 72 74 76 78 80

by international financial institu-tions and depletion of reserves.But the various channels throughwhich the oil exporters' surpluseswere recycled became increas-ingly important. Oil producersincreased their aid; remittancesfrom migrant workers in the Mid-dle East became a significantsource of foreign exchange formany countries; there was a spec-tacular increase in commercialbank lending to the middle-income countries (Figure 5.2).

Oil importers' trade deficitsreached their peak in real terms in1975; over the next three years,their deficits were almost halved.The 1979-80 rise in oil prices againput pressure on the oil importers'balance of payments. In 1979-80,although oil prices rose only 63percent as much as they had in1973-74, the corresponding in-crease in the trade deficits of theoil importers was higher becauseoil accounted for a much highershare of the total cost of imports.

The oil importers have financeda large part of the increase in theirdeficits between 1978 and 1980 bydrawing from their reserves andby short-term borrowings. Butthis is only a temporary solution.In the medium and long term, thedeveloping countries will have toadjust to the recent and antici-pated changes in the internationaleconomy by paying for higherpriced oil through a transfer ofgoodsthat is, by reducing con-sumption below what it otherwisewould be. This chapter considersthe role external finance can playin easing adjustment while main-taining an environment ofgrowth.

External finance in the 1970s

When the developing countries'trade deficits rose sharply after1973, the international communityresponded with great urgency,

50

and with particular concern to theneeds of those countries identifiedas "most seriously affected."OECD donors increased theiraid by 52 percent in two years,from a historically low 0.29 per-cent of their GNP in 1973 to 0.36percent in 1975. OPEC membersincreased their aid even morerapidly; it rose to $5.5 billion in

80

60

40

20

0

20

40

60

Figure 5.2 Oil-importing developing countries' sources and uses offinancial flows

Billions of 1978 dollars

100

80 -100

1970 71 72

a. Includes workers' remittances.

1975, 27 percent of all OfficialDevelopment Assistance (ODA).

The International MonetaryFund (IMF) arranged two oilfacilities to help recycle surplusesaccumulated by OPEC and someOECD economies. An interestsubsidy reduced the cost offinance to low-income countries.The multilateral banks increasedtheir commitments by 46 percentin 1974 and 21 percent in 1975. Inaddition, both bilateral andmultilateral agencies expandedthe share of program lending andother fast disbursing aid. Thus,between 1973 and 1975 OfficialDevelopment Assistance receivedby the low-income countries hadincreased by 60 percent in realterms. Middle-income oil import-ers financed their enlarged deficits

by borrowing at commercialterms.

Although the internationalresponse to the difficulties of1973-75 was encouraging, duringthe second half of the 1970s ODAreceipts grew slowly; in the case ofthe low-income oil importers,they actually declined in realterms. By 1980 ODA from the

Resource transfer

Interest payments

Change in reserves and short-term debtOfficiat Devetopment Assistance

-Medium and long-term commercial tnans

-Peivate direct investment'-..,..-Workers' remittances

OECD countries was little higheras a proportion of their GNP thanit had been in 1975, and only abouthalf of the 0.70 percent of GNPmost of them had accepted as atarget. Their collective perform-ance is heavily influenced by thedisappointing record of the largestdonor. In 1980 their aid was 0.43percent of their GNP, excludingthe United States (0.27 percent ofGNP). Sweden, Norway, Den-mark and the Netherlandsexceeded the 0.70 percent target.

The share of non-OECD coun-tries in total ODA increased dur-ing the 1970s but it reached itspeak (33 percent of the total) in1975. Most of this came from thecapital-surplus oil exporters. Asoil surpluses declined, OPEC'sshare in total ODA also fell, to 18

Sources

73 74 75 76 77 78 79 80

percent, in 1979, but rose to 20 per-cent in 1980. Capital-surplus oilexporters are now contributing 3.1percent of their GNP for aid. Aidfrom the nonmarket industrialeconomies is negligible, 0.12 per-cent of their GNP.

The direct effect of rising oil rev-enues on the exports of thedeveloping countries was small,but some developing countries,most of them among the poorest,benefited from the oil exporters'increased economic prosperitythrough the export of labor andthe corresponding inflow of remit-tances. Total remittances to the

developing countries, mainlyfrom Europe and from the Gulfcountries, rose from about $3.5billion in 1970 to $24 billion in1980$2 billion more than thedeveloping countries' total ODAreceipts, and equivalent to about13 percent of the major recipienteconomies' merchandise exports,and for some, much more (seebox).

Direct foreign investment,which constituted about 20 per-cent of the net capital flows todeveloping countries in 1970, hasgrown less rapidly than otherforms of external capital. Invest-

ment increased sharply in theearly 1970s, responding to thecommodity boom and to morefavorable policies toward foreigninvestment in many middle-income countries. But the spurtwas short-lived; after 1975 foreignequity investment did not evenkeep up with inflation. However,with the expansion of commercialbank lending, the form of foreigninvestment in developing coun-tries itself changed. Intracom-pany loans supplemented equityparticipation. The financing needsof transnational companies werecovered increasingly from sources

Workers' remittancesRemittances from their nationals workingabroad yielded about $24 billion to thedeveloping countries in 1980. Migrantworkers have been mostly concentratedin Europe and more recently in the Per-Sian Gulf area. Major beneficiaries amongdeveloping countries of remittances fromEurope have been Yugoslavia, Turkey,Portugal and Morocco. Migrant laborersemployed in the Gulf states have come

Remittance inflows to majorlabor-exporting countries, 1978

'In these countries, remittance inflowsare almost the only source of foreignexchange earnings.

mainly from other Arab countries (Egypt,Jordan, Syria, the Yemen Arab Republicand the People's Democratic Republic ofYemen) and from South Asia (India,Pakistan and Bangladesh) althoughincreasing numbers have come from EastAsia.

The level of remittances is closelyrelated to the number of migrant workersabroad and their wages, as has beenobserved in countries such as Greece,Yugoslavia and Turkey. In the case of thecountries supplying labor to the Gulfstates, migrant workers seem to remitmore the lower their occupational level.Even though the propensity of unskilledworkers to remit usually remains highbecause they do not often take theirfamilies to the country of employment, ittends to fall over time as the basic needs oftheir families are met and their own localexpenses increase.

Some labor-exporting countries havehad special schemes to attract remittancesfrom their workers abroad. But recentresearch shows that such incentiveschemes do not appear to have any sig-nificant impact on total remittancesalthough they may lead to some realloca-tion of savings.

The experience of Europe has demon-strated that there is a limit to the numberof foreign workers that a society will wishto allow. Many countries have put severerestrictions on foreign labor and haveattempted to "stabilize" their migrantlabor force. Although these measures are

frequently attributed to recession and thedifficulties of 1973-75, the timing of thebeginning of these restrictions shows thatthey preceded the oil price rise. On theother hand, there has been a process of"maturing" of the migrant population.Despite original intentions to importlabor only, even the countries with thestrictest immigration laws found thatmigration had taken on a circulatorycharacter some workers returned, manyhad acquired permanency status and theage-sex composition of the migrant popu-lation was beginning to approach normalprofiles.

The Middle Eastern countries are goingthrough a similar experience. The prob-lem is more acute in this region; in noother country is the proportion of for-eigners in the labor force as large. Nev-ertheless, the outlook for increasing thevolume of migrant labor in the MiddleEast in the near future may be slightlybetter than in Europe because theeconomies of the labor importers in thisregion are crucially dependent on mi-grant labor, and because Iraq and SaudiArabia have not yet reached the samerelative levels of nonnational populationsas Kuwait and the Gulf states. In thelonger term, however, the prospects forincreased employment of migrant labordo not appear bright in this region either.Therefore, unless new "poles" of immi-gration develop, labor exporters are likelyto find that remittance flows will not growat the same rates as in the past.

51

Country

Amount(millionsof dollars)

Remittancesas a

percentage ofmerchandise

exports

Yugoslavia 2,938.0 51.8Turkey 1,011.6 44.5Portugal 1,688.9 60.5Morocco 762.5 51.3

Egypt 1,761.6 88.8Bangladesh 115.1 21.0India 1,238.6 17.8Pakistan 1,303.3 92.9Jordan 520.2 175.4Yemen, PDR 257.7 *

Yemen, AR 1,277.0

Upper Volta 65.9 59.6Mali 31.1 33.0

other than the parent company,such as borrowing from localbanks or the Eurocurrencymarket.

Private commercial bank lend-ing was the component of externalfinance that grew most rapidly,from about $4.0 billion in 1970 to$36.1 billion in 1980. By the end of1980 the outstanding debt of thedeveloping countries to privatesources of market capital hadreached $284 billion, up from $32billion in 1970. Most of thisincrease came in the form of syn-dicated bank loans with floatinginterest rates. The system of float-ing rates-expressed as a marginabove the London InterbankOffered Rate (LIBOR)-enabledthe banks to offer longer matur-ities without exposing themselvesto the risks of changes in short-term rates of interest (see box). Incontrast, borrowing in the bondmarket did not expand. Only in1977 and 1978 did the oil importersborrow a significant amountthrough bond issues. Since 1977most new bond issues by develop-ing countries have been in theform of floating-rate notes, whichare financially very similar to syn-dicated loans from the viewpointof both lenders and borrowers.

Commercial bank lending to thedeveloping countries was con-centrated almost totally in themiddle-income countries; the low-income oil importers did not bor-row more than $630 million (net)from the private banks in any year.Among the middle-income coun-tries the largest borrowers were oilexporters (Mexico, Venezuela andAlgeria) and upper middle-income countries (Brazil, Spain,Argentina, Yugoslavia and SouthKorea). These eight countriesaccounted for 60 percent of totalbank debt outstanding in 1979.

These changes in the pattern offinance affected the low- and mid-dle-income oil importers in dif-

52

Variable interest rate debtIn recent years, the bulk of credits ob-tained from commercial banks have beenat variable interest rates. At end-1979 the33 largest developing-country borrowersheld a total variable interest rate (VIR)debt of around $180 billion includingshort-term debt. For each percentagepoint increase in the base rate (usuallyLIBOR) these 33 countries face extrainterest charges of about $1.8 billion ayear.

Percentage

15

10

0

Inflation and interest rates,1972-80

The LIBOR has been volatile during thepast eight years. For most of that period, ithas been below the rate of inflation in themajor industrial countries (see figure), so

Variable interest rate debt position at end-1979

6-monthLIBOR

borrowers have benefited from negativereal interest rates. But in a period of risinginflation lenders have been better pro-tected against unanticipated inflationwith VIR debt than with fixed-rate debt;as the VIR share in total debt hasincreased, so has the borrowers' "wind-fall" been eroded. This erosion seemslikely to continue, and not just becauseVIR debt is becoming more common. In1979-81 in contrast to 1974-78, real inter-est rates have nearly always been positive;with tight monetary policies, it is unlikelythat real rates could be negative for anylength of time.

Rising interest rates have also increasedearnings on official foreign-exchangereserves and other foreign assets. The 33major borrowers held identified externalVIR assets of $115.3 billion at the end of1979, about two-thirds of total VIR debt(see table). For a few oil importers (Spainand Colombia, for instance) VIR assetsexceeded VIR liabilities, making thesecountries net beneficiaries of increases inmoney-market rates. For Argentina andsome other semi-industrial countries,VIR debt and assets were about the same.

But there are major borrowers with VIRdebt substantially in excess of VIR assets.At end-1979, Brazil had $10 billion of VIRassets and $39 billion of VIR debt; during1980, the gap widened. Other countries ina similar position included South Korea,Turkey, Chile, Ivory Coast, Morocco andthe Philippines.

(billions of dollars)

Total variableinterest rate Foreign exchange

debt assets

Major borrowers (33) fromfinancial markets 181.3 115.3

Oil On porters 111.6 77.7

Semi-industrial countries 92.9 65.0of which: Argentina 9.6 8.9

Brazil 39.0 10.2Chile 4.1 2.2Korea 9.9 5.6Spain 11.5 23.3Turkey 4.2 0.8

Other countries 18.7 12.7of which: Colombia 2.8 3.8

Ivory Coast 1.5 .2Morocco 2.4 .8Philippines 5.4 3.7

Oil exporters 69.7 37.6of which: Mexico 29.6 8.0

1972 74 76 78 80

Figure 5.3 External finance todeveloping countries, 1970, 1975and 1978

Trends

Billions 1978 dollars

100 -70 - Middle-income oil imporlers50 -

30 -

Il I I I I I I I

1970 72 74 76 78 80

Composition

OiJ importers Oil exportersLow- Middle-'

income incomePercent 1Tolals (billions of 1978 dollars)-1shares 3.0 8.5 8.8 16.6 33.3 51.3 7.2 22.6 24.7

100 -

90 -

80-

70 -

60 -

50 -

40 -

30 -

20 -

10 -0

1970 75 78

Hf--

II -lii-Official

UWorkers'remillances

ii IIII iii707578 707578

Commercialloansof which:

Privale

Note: External finance defined as net capital inflows plusworkers remittances.

ferent ways. The middle-incomegroup's receipts increased rapidlyin 1970-80not just those of netcommercial credit and privateinvestments but even of ODA.Only in the case of workers' remit-tances did the low-income coun-tries' receipts grow more rapidly.This reflected the leveling-off ofremittances from Europe, whichaccrued mostly to the middle-income countries, and the sharpincrease in remittances from theMiddle East, where workers wereimported mainly from low-income countries. Middle-income

countries have therefore becomemuch more dependent on com-mercial loans (mostly private bankloans) and relatively less on ODAand direct foreign investment(Figure 5.3).

In contrast, net capital receiptsof the low-income oil importersdid not increase at all after 1975 inreal terms. Real ODA receipts in1978 and 1980 were, in fact, lowerthan the level reached in 1975.There was no increase in the flowof commercial loans either. Thus,poor countries have received noadditional support from the inter-national community to deal withtheir terms-of-trade losses in1979-80, when relatively modestincreases in aid would have re-duced strains on these economiesand on more than 1 billion peopleliving in these countries (exclud-ing China).

Financial adjustment

Until 1973-74 the bulk of externalfinance going to the developingcountries came from the savingsof the industrial market econo-mies: the first group ran a currentaccount deficit, the second a cur-rent surplus. Since the 1973-74 oilprice increase, however, the oilexporters have provided savingsthat have been recycled to bothdeveloping and industrial coun-tries.

After the first oil-price increase,the current account surplus of alloil exporters rose from $4.1 billionin 1973 to $62.6 billion in 1974. Themirror image of this was reflectedin the deficits of all oil importers,both industrial and developingcountries, in almost equal shares.Current accounts of the industrialcountries shifted from a surplus of$18.9 billion to a deficit of $8.5billion while the deficits of the oil-importing developing countriesrose from $7.3 billion to $33.1

Billions of 1978 dollars

100

75

50

25

0

25 -

Figure 5.4 Global current accountbalances, 1972-80

Capital-surplus oilexporters piusindustrialcounlries

lndaslrialcountries'surplus

Capital-surplusoil exporters Low-income

oil importers

Oil.importing developingcountries

50 Oil-expOrting -, All developingdeveloping countries' countriessurplus

I

1972 73 74 75 76 77 78 79 80

billion. This was followed by a nar-rowing of deficits and surplusesduring 1975-78. The second oilprice increase (1979-80) againwidened the deficits and thesurpluses.

These trends, corrected forinflation in Figure 5.4, summarizethe broad contours of financialadjustment that took place duringthe 1970s. The major parties to thefinancial adjustment were thecapital-surplus oil exporters andthe middle-income oil importers.The shares of the low-income oilimporters and the nonmarketcountries in the net financialtransfers were small. Even thoughthe cost of oil-price increases onthe industrial countries' externalpayments was large, these coun-tries adjusted their externalbalances, largely through risingexports to the oil exporters andcontraction of imports. Indeed,by 1975only a year after the firstmajor oil-price risethe currentaccounts of the industrial coun-tries had shifted into surplus byan amount roughly equal to thereduction in the surplus of alloil exporters.

Although the trade and capitalflows among the major groups ofcountries are the results of inter-

53

dependent developments, trendsduring the 1970s suggest a patternof causality running from theactions of the major oil exportersto the balance of payments of theoil importers through the policiesof the industrial countries. Theprice of oil set by major oil export-ers, within the constraints of themarket, has a direct impact on theeconomies of the oil importers.The oil exporters also decide theuse to which they will put theirrevenues. Because of the nature oftheir imports, the positive impactof oil revenues on trade flows hasbeen felt mostly by the exports ofthe industrial countries. Oilexporters used 44 percent of theirearnings on imports from indus-trial countries and only 8 percenton imports from oil-importingdeveloping countries. The finan-cial investments by the oil export-ers have also gone mostly to theindustrial countries.

Therefore, although higher oilprices had a direct impact on theimport bills of the oil importers,their effect on these countries'exports depended on the expan-sion of markets in the industrialcountries. The first oil-price riseoccurred at a time of worldwidedemand pressures and boomingcommodity markets; and theindustrial countries, faced withrising rates of inflation, respondedwith deflationary policies. Thus,rising import demand, induced bythe oil exporters' surpluses, wasnot transmitted to the oil import-ers, and immediate trade adjust-ment was insignificant. In thewake of the most recent oil-priceincrease (1979-80), the downwardsynchronization of economicactivity in the industrial countrieshas been less marked, and theindirect effect on exports of thedeveloping countries is slightlymore favorable than in 1974-75.

There is nothing inherentlyundesirable about external deficits

54

since deficit implies resourcetransfer. The optimum level ofresource inflow to a countrydepends on the expected benefitsfrom the additional resources andtheir costs. Normally the benefitswould relate to the rates of returnon the assets created with theimported resources and the costswould depend on interest ratesand the difficulty of managingrepayment schedules of borrowedresources. In times of sharp exter-nal shocks arising from terms-of-trade deterioration or exportshortfalls (as happened in 1973-75and 1979-80), the utility of exter-nal resources goes up becausethey allow the economy time toadjust to the new circumstan-cesby substitution in pro-duction (between energy andother inputs) and consumption(between traded and nontradedgoods).

It takes time for production pro-cesses to be restructured, for laborand capital to move and for con-sumption habits to be changed.Consequently, the induced de-cline in real income and theincrease in the exchange rate willbe larger in the first period follow-ing an external shock than in suc-cessive periods. These differentialeffects provide a rationale forexternal borrowing to contributeto structural adjustment. Borrow-ing transfers income to the periodwhen real income has experi-enced the strongest decline andincreases the supply of foreignexchange in the period when it ismost scarce. To the extent that adeveloping country cannot getexternal capital, it has to cutexpenditure immediately, beforeproduction or consumption re-sponses have had time to operate.

In the longer term, however,trade adjustment becomes anecessity, not least because theability to supply external capitaldepends on export prospects.

However, as discussed in Chap-ters 3 and 6, the path andspeed of adjustment varies amongcountries, depending on their eco-nomic structure and policies.Middle-income oil importers, es-pecially the more industrializedones that pursue outward-ori-ented policies, can reduce theirdependence on foreign financefaster than can the less indus-trialized or the inward-oriented.On the other hand, low-incomecountries, especially the leastdeveloped and primary pro-ducers, have more limited choiceseven in the medium term.Although economic policies inmany of those leave much to bedesired, their exports will takelonger to respond to improvedpolicies. Neither do they havemuch scope for import substitu-tion. These are also the countrieswhich cannot borrow from privatecapital markets and will remaindependent on concessional assis-tance.

Prospects

In the absence of new externalshocks, external capital require-ments of the oil importers as agroup are likely to decline as aratio to their GNP from the highlevel reached in 1980 (4.9 percent).But the decline will be gradual,and current account deficits arelikely to remain high compared tohistorical averages. These highlevels will reflect the difficultiesof adjustment faced by the oilimporters (especially the poorercountries), higher interest pay-ments which have reduced theproportion of net resource trans-fers, and the continuingthough smalldeterioration intheir terms of trade.

The funds to finance the deficitsof the oil importers will comefrom persistent surpluses of theoil exporters, augmented (or

reduced) by the surpluses (or defi-cits) of the industrial countries.But at what levels these transferscan actually take place will dependon the policies of the donor coun-tries as far as concessional financeis concerned, and as regards mar-ket transfers, on the borrowingcapacities of the developing coun-tries and the efficiency of financialintermediaries.

Official finance

The low-income countries canborrow very little commercially.They will continue to dependheavily on official (and mainlyconcessional) lending for financ-ing their development and struc-tural adjustment. Noncommercialofficial finance is important espe-cially for the debt managementof the middle-income countries.

NONCONCESSIONAL FINANCE.The variable interest rates andshorter maturities of private com-mercial loans have increased thedeveloping countries' debt-ser-vice burden and have added newuncertainties about the futurelevel of interest rates and refinanc-ing possibilities. Moreover, in aperiod of inflation, variableinterest rates contain an elementof compensation for the erosion ofcapital values and have the effectof reducing maturities, therebyadding to the cash-flow diffi-culties of borrowers.

Under these circumstances,credit-market sensitivity toprospective debt burdens influ-ences the possibilities of rollingover or refinancing existing debton maturity. These concerns willbe eased the more countries bor-row on lower and more stableinterest rates and longer matu-rities. Since they have been able toborrow very little of this kind offinance from private markets,middle-income countries would

be greatly assisted by more officiallending.

Despite these considerable ben-efits, nonconcessional officialfinance is not increasing enoughto fulfill its potential. The share ofofficial lending in total nonconces-sional finance was about onefourth in 1970 but had fallen to 18percent by 1980. Contributions tothe multilateral developmentbanks are either being scaleddown or delayed; even if allprospective capital increases andsubscriptions were immediatelyavailable, more funds would beneeded to provide adjustmentassistance while maintaining proj-ect lending.

A new type of lending launchedby the World Bank, structuraladjustment lending (SAL), willhelp oil importers adjust to thechanging international environ-ment. SAL will assist countries informulating and carrying outstructural adjustment programsand will provide finance duringthe adjustment period. Structuraladjustment loans are planned as aseries of three to four operationsover a five- or six-year period.Clearly, if essential World Bankproject lending is not to bereduced, additional funding willbe necessary.

Additional funding will also beneeded for another major effortplanned by the World Bank, theexpansion of lending for energyproduction in the oil-importingcountries. The World Bank hasalready increased its emphasis onlending for energy so that itaccounts for about 17 percent ofthe Bank's program for 1982-86.The $14-billion program envis-aged is, however, no more thanone-half of what is regarded asfeasible and desirable. An addi-tional program of energy invest-ments has been identified totalinga further $16 billion. This cannotbe carried out within the present

capital constraints of the WorldBank and therefore additionalfinance will have to be raised.

The IMF has increased its fund-ing for balance of payments pur-poses and is taking major steps toexpand further its facilities foradjustment lending. The potentialaccess of developing countries toall IMF facilities has risen afterthe seventh general quota increaseand the adoption of new guide-lines on the access of the membercountries to IMF facilities. Toincrease its resources, the IMF hasinitiated the eighth quota review.But as the review will take time,the IMF is supplementing itsliquidity by borrowing. Addi-tional funds will be negotiatedwith member countries. If largeramounts are needed, these will befunded by central banks, and pri-vate capital markets may also betapped. The IMF is also consider-ing new allocations of SpecialDrawing Rights (SDRs) as interna-tional reserves that will help tolighten the developing countries'burden of maintaining adequatelevels of reserves.

AID. The level and outlook forOfficial Development Assist-ance1 is cause for serious concernto the low-income countries.Some donor countries have taken

1. The data on Official Development Assist-ance in Figure 5.5 and Table 16 of the WorldDevelopment Indicators Annex are notcomparable with the ODA data in Tables2.4, 5.1 and 5.4 and in Figures 5.2 and 5.3.The former are based on the OECDDevelopment Assistance Committee(DAC) definitions which show disburse-ments of all types by donor countries.Tables 2.4, 5.1 and 5.4 and Figures 5.2 and5.3 show grants and concessional loansreceived by the developing countries asreflected in their balance of payments. Theprincipal differences are that the DACdefinitions cover technical assistance andcontributions to multilateral institutions,including paid-in capital. The data onODA receipts generally exclude these two,and in the case of the multilateral institu-tions include only the disbursement ofconcessional loans.

55

the position that economic andbudgetary difficulties are addingnew limits to their ODA pro-grams. In the United States,which is already one of thesmallest donors in terms of theproportion of its GNP, new budgetproposals indicate that future aidwill be lower than had seemedprobable a year ago. The UnitedKingdom has announced cuts inpreviously planned programs.Fortunately, however, the ArabOPEC countries and the Scan-dinavian countries have main-tained high ratios of ODA to GNP,and Japan, the Federal Republic ofGermany, France, Canada, Italyand Switzerland have all indicatedthat they hope to increase their aidefforts.

Aid has been criticized for notpromoting growth or for notreaching poor people. Critics haveargued that in some countries,especially in Africa, extra aidcould not be translated into pro-ductive investment. But most crit-icism of aid lacks a basis in fact orexperience. There are countriesthat lack skilled personnel orwhose administrative organiza-tion is weak. Even here, however,there is much to be done by aidcoordination, by improving thequality of aid and by using aid forremoving these very limitations.Aid finances only a small propor-tion of investment in develop-ing countries; but aiding well-conceived and well-monitoredprograms makes a difference tothe overall development effort.The fact that Indiaonce forecastto be famine's permanent homehas become to a considerabledegree self-sufficient in food-grains is due to aid and technicalassistance combined with majorefforts on the part of India itself.Family planning in Indonesia,new cereal varieties in East Africaand railways, roads, dams andpower plants throughout the

56

developing worldall these attestto the value of aid.

In today's circumstances, aidmakes another, no less valuable,contribution. It is needed to helppoor countries adjust to the lossesthat they have suffered or willsuffer as a result of deterioratingterms of trade. Most low-incomecountries have had to forgogrowth to restrict their balance ofpayments deficits. In the future,they will need more concessionalassistance than they seem likely toget if they are to carry out theadjustment process at growthlevels even as high as the inade-quate rates of the 1960s and 1970s.

Reallocating concessional aidfrom middle-income to low-income countries is almost asimportant as increasing its overallamount. In 1979 low-income coun-tries (excluding China)whoseshare of the developing countries'population was 55 percentreceived only 37 percent of ODAgiven by OECD and OPEC coun-tries. Their receipts per person($6.80) were less than half of thoseof the middle-income countries. Ifaid through the multilateralinstitutions is excluded, only 32percent of bilateral aid went to thelow-income countries ($11.80 perperson to middle-income coun-tries and $4.70 to low-incomecountries).

Aid to the middle-income coun-tries from three major sources isheavily biased toward threegroups of countries. Israel andEgypt, together, received about$2.5 billion in 1979 (mostly fromthe United States). This amountedto $58 per person and equaled 7.2percent of their GNP and about 22percent of their imports. In a simi-lar way, OPEC aid is heavily con-centrated on the contributions toJordan and Syria, and a large por-tion of French aid goes to its Over-seas Territories in the form oftechnical assistance (Figure 5.5).

Altogether, out of total bilateral aidof $17 billion in 1979, $11 billionwent to middle-income countries.The economic and humanitarianmerits of a reallocation to thepoorer countries are obvious, butpolitical considerations have so farprecluded such action.

Figure 5.5 Sources anddistribution of aid

ODA flows from major donor groups. 1970,1975 and 1979

Total ODA(billions of 1878 dollars)

Percentageshare

Distribution of aid, 1979

(percentage share)

Uealloeated bycountry

Distribution of bilateral aid tomiddle-income countries

100 - 13.6 6. 6.3 - Nonmarket

90Countries26.6 17.6

86.4 - OPEC80

76.170

66.760

50 -

40 - - DAC

30 -

20 -

10 -0

(percentage)

From From FromCoccntry DAC OPEC DAC & OPECEgypt 12 1 9Israel 14 - 10Jordan 1 29 8Syria 1 42 12French dependencies 16

Sub-total 44 72 51Others 56 28 49

Total 100 100 100

1970 1975 1979

Multilateral ODA partly offsetsthe bias of bilateral aid againstlow-income countries. Principalsources of multilateral ODA arethe United Nations, the EuropeanEconomic Community and theInternational DevelopmentAssociation, the latter disbursingabout 84 percent of its aid to low-income countries.

Private lending

The growing importance of pri-vate bank lending, particularly forthe middle-income countries, hasbeen the outstanding feature ofdevelopment finance during thepast decade. Whether that growthwill be maintained depends es-sentially on two factors: the bor-rowers' willingness and ability toservice more debt, and the banks'willingness and ability to expandtheir role as intermediaries. Thesetwo issues are discussed in turn.

DEBT. Between 1970 and 1980,developing countries' outstand-ing medium- and long-term debtincreased more than sixfold innominal terms (at an averageannual rate of 20.5 percent), reach-ing $438.7 billion by the end of1980, compared with only $67.7billion as recently as 1970 (Figure5.6). The low-income oil import-ers' debt grew less rapidly, sincethey depended more on grants.The single most important factorin these increases was the rapidrate of inflation. In real terms out-standing debt grew at around 10percent a year, compared withabout 12 percent a year during the1960s (Table 5.2).

The growth of debt was notexcessive in relation to GNP orexports (see box, overleaf). Thedebt to GNP ratio increased overthe 1970s, as would be expected;but measured against exports ofgoods and services, the debt ratiowas lower in 1980 than it had beenin 1970. However, significant

Table 5.2 Medium- and long-term external debt,outstanding and disbursed, 1970-80

Note: Includes private nonguaranteed debt.a. Compound annual rate of change.

changes in the composition ofdebt have increased the burden ofservicing it.

Over the past decade, there hasbeen a sharp fall in the share of netborrowing from bilateral official

Figure 5.6 Developing countries'outstanding debt, by type ofcreditor, 1970 and 1980

(percentage shares)

All developing countriesTotal

Official outstanding(biltions of

Bilateral Multilateral Private current dollars)

//

Low-income oil importers

TotalOfficial outstanding

(billions ofBilateral Multilateral Private Current

dollars)

14.5

/I I I I I I I

0 20 40 60 80 100

48.0

sources; a marginal increase in theshare coming from multilateralinstitutions; and a large increasein the proportion of loans fromprivate creditors-especially fromfinancial institutions. As a result,debt to private creditors increasedat 28 percent a year, debt to finan-cial institutions at 41 percent ayear. Private financial institutionsheld 12 percent of outstanding pri-vate and publicly guaranteed debtin 1970 and some 43 percent in1980.

These changes were largely theproduct of what was happen-ing to the middle-income coun-tries. The share of official creditorsin the debt of the middle-incomeoil importers fell from 43 percentin 1970 to 27 percent in 1980 whileprivate creditors accounted foralmost three-quarters of the totalby 1980. By contrast, the composi-tion of the low-income oil im-porters' debt changed very little.They continued to borrow mainlyfrom traditional sources-bi-lateral lenders and multilateralinstitutions.

The growth of borrowing fromprivate banks together with therise in interest rates has increasedthe burden of servicing debt. Partof the rise in interest rates is aninflation premium. But even infla-tion-corrected interest rates have,in recent years, been higher than

57

Billions ofcurrent dollars

Billions of1978 dollars Percentage

real growth,1970 1980 1970 1980Country group 1970-80'

Oil importers 48.0 301.3 102.6 250.9 9.4

Low-income 14.5 48.0 31.0 40.0 2.6Middle-income 33.5 253.3 71.6 210.9 11.4

Oil exporters 19.7 137.4 42.1 114.4 105

All developingcountries 67.7 438.7 144.7 365.3 9.7

1970

1980

1970

1980

Debt indicatorsThere are two broad categories of debtindicators:

Those that measure a country'scapacity for making payments in foreignexchange. The most widely used of theseis the debt-service ratio-interest and prin-cipal payments on long-term debtdivided by exports of goods and services.Its meaning can seldom be easily inter-preted: some countries have had littledifficulty in managing their debt with aratio of 40 percent or more, while othershave had severe problems when debt-service payments were less than 10 per-cent of exports.

The apparent paradox is explainedpartly by how easily countries can borrowcommercially. As long as investors haveconfidence in the management of aneconomy, they will roll over principalrepayments. In such circumstances, theinterest-service ratio-interest paymentsdivided by exports of goods and ser-vices-may be a better indicator of thecountry's ability to make paymentsabroad, since it avoids the distortingeffects caused by a bunching of repay-ments, prepayments, or refinancing.

Developing countries' outstanding debt, 1970-79

Those that measure a country'scapacity to generate real resources (whichcan then be used to pay for imports andservice debt). The ratio of interest paymentsto GNP is often used to illustrate the debt-service burden on an economy's produc-tive capacity.

Some indicators-the ratio of externaldebt to foreign exchange reserves, forexample-combine features of both typesof measure. But none of them are an ade-quate substitute for detailed countryanalysis. In a period (like the 1970s) whendebt is substituting for equity capital, acountry's capital-service ratio-contractualservice payments on long-term debt, plusremitted profits on direct investmentdivided by exports of goods and ser-vices-may be the best guide to a coun-try's creditworthiness.

As the table shows, the various mea-sures have not always moved in line witheach other, although all indicate a cleardeterioration since 1974. Weighted byindividual countries' shares in total publicdebt (so that the effect of countries withgrowing exports but low indebtedness onthe average ratios is minimized) both the

debt-service and the capital-service ratiosincrease more sharply during the 1970s(see figure), reflecting the high and risingdebt of those countries that are currentlythe major borrowers.

Weighted by sharesin public debt

15

10

0

Developing countries' debt-serviceand capital-service ratios, 1970-79

i'crcci,tQgC

30

Unsvrightrd

1970 71 72 73 74 75 76 77 78 79

Note: Includes all developing countries that report to the World Bank's debt-reporting system except: (1) the capital-surplus oil exporters;and (2) countries for which complete and reliable time series data are not available (Afghanistan, Bahrain, Botswana, Burundi, Comoros,Guinea, Iran, Iraq, Lebanon, Lesotho, Liberia, Maldives, Nepal, Papua New Guinea, and South Africa).

Contractual service payments on long-term debt, plus remitted profits on direct investment divided by exports of goods and services.Debt outstanding and disbursed.

in the early 1970s and 1960s.Moreover, while the inflation pre-mium compensates for the ero-sion in the real value of outstand-ing debt, when combined with theshortening of average maturities

58

it aggravates the debt-servicingproblems of developing countries.

Average maturities fell from 20years in 1970 to 12.7 years in 1980,although the maturities of loansfrom official (24 years) and private

(9 years) sources remained prac-tically the same over the period.Thus, the grant element indeveloping countries' debt fellfrom 31.8 percent in 1970 to 6.3percent in 1979, with the share of

(percentages)

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

Indicators

Debt-service ratio 8.9 9.2 9.0 8.8 7.1 8.4 8.4 9.5 12.4 12.6Interest-service ratio 2.8 2.9 2.8 2.7 2.4 3.2 3.3 3.5 4.2 4.8Capital-service ratio' 14.5 14.5 13.4 13.4 11.1 11.9 11.5 12.9 15.5 15.0Debt/GNP (percentage)b 12.3 13.1 13.5 13.1 12.6 13.9 15.5 17.0 18.3 17.8Debt/exports (percentage)b 80.1 85.2 81.8 70.0 59.6 72.1 75.6 79.6 86.6 78.3Debt/reserves (percentage)b 263.7 239.9 183.2 153.9 143.5 193.9 204.6 214.5 217.3 176.4Interest-service/GNP (percentage)b 0.4 0.4 0.5 0.5 0.5 0.6 0.7 0.7 0.9 1.1

Memo item

Total public debt outstanding anddisbursed, all included countries(billions of dollars) 50.4 59.3 69.3 84.8 105.5 128.4 159.1 198.9 251.7 294.4

Capital-service ratio25 - Debt-service ratio

concessional debt in the total fall-ing from 39 percent in 1970 to 23.6percent in 1979.

Higher interest rates and short-er maturities meant that thegrowth in gross borrowing be-tween 1970 and 1980 was not trans-lated into comparable growth innet transfers. In 1970, after amor-tization and interest payments,some 43 percent of borrowedfunds was available for buyingimports and adding to reserves.That share rose to nearly 50 per-

Debt reliefWhile most developing countries havebeen able to meet principal and interestpayments on their external debt, somehave been forced to seek debt relief. Thecircumstances leading to debt renegotia-tions have varied, but most had somesimilar basic features. These includedbalance-of-payments deterioration andexcessively expansionary fiscal andmonetary policies over several yearswhich were aggravated by short-termshocksthat is, shortfalls in exports orworkers' remittances, sharp worsening ofterms of trade and national calamities.Some steps countries took to cope withthese difficulties added to their problems.They borrowed at hardened terms. Pri-vate credit also sometimes had adestabilizing effect. For example, bankswould lend when commodity prices wererising but would cut back when exportearnings declined.

Debt relief has been arranged for a fewcountries through aid consortia; largesums have been involved and differentaims pursued. Pakistan's public debt of$990 million was rescheduled in a series ofagreements negotiated in aid consortiameetings from 1972 to 1974, and in 1981.India received $1.25 billion of debt reliefbetween 1968 and 1976 (along with aidpledges and without interruptions to ser-vice payments) from the Aid Consortium,mainly to improve the quality of aid at atime when debt-service payments wereconstraining India's access to free foreignexchange resources. Turkey receivedmassive debt relief through the OEEC in1959 along with general economic assis-tance.

For 13 other developing countries overthe past 25 years, debt relief on official or

cent in 1975-76, butpartly as aresult of refinancing of debtithad fallen to 40 percent by 1978. Aslowdown in borrowing com-bined with the surge in interestrates caused the ratio to fall to only22 percent in 1980.

BORROWING CAPACITY. Oneindication of a borrower's capacityto service its debt comes from acomparison of debt-service pay-ments with export receipts. Bythis measure, developing coun-

officially guaranteed debt (loans fromgovernments and insured commercialcredits) has been arranged through theParis Clubad hoc meetings of represen-tatives of the governments of creditorcountries. In contrast with consortiummeetings, the Paris Club has discussedonly debt relief and not overall flows offoreign aid.

During the 1970s, loans from commer-cial banks have expanded rapidly, anddebt relief has increasingly involvedcommercial banks. The restructuring ofcommercial banking debts has takenplace in parallel with Paris Club agree-ments for Peru (1978), Sudan (1980),Turkey (1979) and Zaire (1980). In addi-tion, there have been substantial refi-nancings of debt to commercial bankswithout Paris Club involvement: Argen-tina (1976), Jamaica (1979), Nicaragua(1980) and the Philippines (1970). Debtrestructuring agreements with commer-cial banks since 1973 amount to $5.1billion of which Turkey accounts for $3.1billion.

Debt relief has been extended gen-erally for periods of 12 to 18 monthson the condition that the debtor adoptsa stabilization program (usually oneapproved of by the IMF or a stand-byagreement) to eliminate balance of pay-ments difficulties. Repayment of re-scheduled debts is normally over 7 to 10years, including 3 to 4 years' grace.Interest charges on rescheduled debts aretypically set at the rate for new loans ofthe type being rescheduled. Debt reliefon concessional terms (low interest ratesplus long repayment) has been extendedonly to India (noted above), Indonesia(where the entire outstanding debt was

tries have spent an increasing pro-portion of their export earnings ondebt amortization and interestpayments, particularly toward theend of the decade (see box).Part of the recent deteriorationwas caused by large-scale refi-nancing in 1978 when the majorborrowers took advantage offavorable market conditions. Thatreflects good debt management,not a worrisome upward trend.But the interest burden also rosesignificantly: measured in relation

restructured in 1970), Ghana (1974) andPakistan (1974 and 1981). Generally, debtrelief has not been extended on pre-viously rescheduled debt.

The Paris Club arrangements for debtrelief provide for an orderly restructuringof external obligations when debtor coun-tries have serious liquidity problems. Butthere has been continuing disagreementbetween debtor and creditor countriesover the length of the consolidationperiod and the terms of repayment,reflecting different points of view regard-ing the purpose of debt relief. Most credi-tor countries' position is that the objectiveof debt relief is to help debtor countriesrecommence meeting their debt-servicepayments as scheduled and so restoretheir creditworthiness. Thus, a short con-solidation period is considered appro-priate so that debt relief can be adjustedto correspond to the country's changingcapacity to repay. The debtor countriespoint out that when debt difficulties aredeep-seated, short consolidation periodscompel them to seek continuing debtrelief and short repayment periods lead toa future bunching of debt-service obliga-tions. They insist that debt renegotiationsshould take into account their futureadjustment problems and financingneeds and that concern about credit-worthiness should take a longer-termview.

The best way for the international com-munity to assist countries with large debtand poor export prospects remainsunresolved, but increasingly emphasisfalls on the need for debt relief as part of aviable package of foreign financing tosupport an economic program.

59

to developing countries' GNP,interest payments more thanquadrupled between 1970 and1980, from 0.4 percent to 1.8 per-cent of GNP.

Debt-service ratios weighted bythe debt of individual borrowershave risen even more sharplythan the unweighted ratios, indi-cating a more serious deterio-ration for the current borrowerswith the largest debt. Looking justat the principal borrowers, three-quarters of them had higher debt-service ratios in 1979 than they hadin 1970. In several cases, debt-servicing difficulties were sosevere that countries had to seekdebt relief (see box).

Another trend has reduced thedebt-management capability ofmany developing countries inrecent years: the share of export-tied credits has risen, resulting ina declining ratio of freely usablecredits to total borrowings. Com-bined with a falling share of nettransfers (after amortization andinterest), the flexibility acquired inforeign exchange management inthe early 1970s will be muchreduced in the 1980s.

While these trends indicate thatthe developing countries will facemore serious debt-managementdifficulties in the future, they donot signal a generalized debtproblem for the developing coun-tries. Balance of payments projec-tions for the 1980s under probablescenarios support this view. Theconcern about the total debt ofdeveloping countries that occu-pied regulators, financial com-mentators and some bankers inthe late 1970s is likely to bereplaced by a return to greateremphasis on individual credit-worthiness and differentiation oflending terms.

By country group, debt profilescan be summarized as follows:

Low-income oil importers.Although their debt indicators

60

improved significantly between1970 and 1979, that was dueentirely to India's weight in theaverage; its exports and GNP grewenough to raise its credit standingin commercial markets. Someother low-income countries couldalso become borrowers of com-mercial credit on a small scale, butthey will remain largely depen-dent on official aid.

Middle-income oil importers.They saw their debt burden in-crease steadily during the 1970s,a trend that was generally consis-tent with prudent borrowing andtheir expanding economies. Dif-ferences exist, however, amongmembers of the group. Some arein a much stronger position toborrow now than in the mid-1970s because of excellent exportperformance; in nearly every case,they are sizable exporters ofmanufactures. Others run the riskof encountering difficulties if theyattempt to expand their borrowingas rapidly as in the past; nearly allof them are heavily dependent oncommodity exports. As a group,the middle-income oil importersaccount for nearly 58 percent ofthe total disbursed and outstand-ing debt of all developing coun-tries; their performance in the1980s will be a major influence onthe overall growth of lending byprivate creditors to developingcountries.

Oil exporters. Their borrow-ing prospects look as promising asthey did at the time of the 1973-74oil-price increase. Despite theirheavy borrowing in the past, theyare unlikely to run into debt-management difficulties providedthat they invest their borrowedfunds productively and developtheir nonoil exports. However,these countries need to preparetheir economies for the adjust-ment they will face when theiroil reserves are exhausted (seeChapter 6).

Creditworthiness of individ-ual countries will depend essen-tially on their growth and exportperformance and on the structureof their debt. Commercial banksare unlikely to seek expansion oftheir lending to countries withpoor export prospects. On theother hand, countries such asBrazil, Mexico and South Koreahave shown that heavy borrowingcan be serviced provided that theeconomy grows rapidly and ex-ports are buoyant. South Korea'sdebt rose from $1.8 billion in 1970to $15 billion in 1979; yet its exportsgrew so rapidly (outstrippingGNP growth) that its debt-servic-ing capacity improved consider-ably over the decade. Mexico'screditworthiness also improved asearnings from oil exports startedto rise.

Commercial banks will be waryof countries that have borrowedexcessively from them or that areburdened with a disproportionatevolume of private debt on marketterms and rather short maturities.Prudent borrowing policies, larg-er flows of official aid with longermaturities and mechanisms forresolving the liquidity problems ofdebtors through appropriate poli-cies, refinancing and resched-uling, will be needed to minimizedisruptions.

BANKS AS INTERMEDIARJES.After

the rapid expansion of the 1970s,the growth in medium- and long-term private bank lending to thedeveloping countries slowed con-siderably in 1980. This was accom-panied by a hardening of termswider spreads, higher fees andshorter maturities. This lull hasstrengthened concerns that thecommercial banks may not playthe same role in recycling as theydid in 1973-79.

It can, however, be explainedpartly by changes in short-termconditions. The major borrowers

had borrowed heavily in 1978, tak-ing advantage of the low spreadsand the high liquidity of the banksto prepay earlier loans contractedon wider spreads. Some of thesubsequent decline in borrowingin 1980 can also be attributed to thehigh short-term interest rates inthe United States and their impacton the key Eurocurrency rate(LIBOR). And there were particu-lar reasons why some individualcountries did not borrow muchfrom the banks. It seems likelythat the slowdown in lending wasnot as marked as it appeared onthe surface. Data produced by theBank for International Settlements(BIS) suggest large increases inshort-term, unpublicized borrow-ingwhich are not included instatistics of publicized borrowingsin capital markets.

Beyond these short-term fac-tors, are there any reasons whybank lending may not continue togrow? Examination of individualcountries shows some deteriora-tion in the borrowing capacityof certain developing countriesand a slight increase in the con-centration of debt over the decade.However, given the profitability oflending to developing countries,their exemplary record (with fewexceptions) in meeting theirobligations and their continuingneed for foreign finance, it seemsunlikely that financial intermedi-aries will discriminate againstdeveloping countries as a group.They may, however, have to con-sider two institutional constraintson their lending policies.

CAPITAL ADEQUACY. There issome justification for the claimthat banks' capital ratios have beendeclining since 1973, but theextent of this decline and its effecton lending to the developingcountries are less clear. However,a more relevant change has beenthe growth of international assets

relative to domestic assets, result-ing in capital growth not keepingpace with international assetgrowth. Banks' gross claims on oilimporters rose from 49.6 percentof total bank capital in 1975 to 61.5percent in 1978 while claims on de-veloping countries as a percentageof total assets rose from 2.6 per-cent to 2.9 percent. For US banks,the ratio of developing-countryloans to capital rose from 49.4 per-cent (1975) to 57.7 percent (1978),and the ratio of loans to total assetsrose from 3.6 percent to 4.0 per-cent. However, since commercialbank deposits of the developingcountries have also increased, therise in net exposure is much less.

To what extent increasedexposure will cause banks to slowtheir lending to developingcountries will depend on factorssuch as the return on developing-country loans, bankers' percep-tions of desired portfolio limitsand the effect of foreign assetgrowth on the cost of raising newcapital. There is little evidence tosuggest that foreign lending is lessprofitable than domestic lending;indeed, the reverse has probablybeen the case in the 1970s. Bankshave suffered less from defaultson foreign loans than on theirdomestic business. However, it ispossible that bankers and theirshareholders have different viewson the desirability of foreign lend-ing, and this could weaken thebanks' ability to raise new capital.

COUNTRY LIMITS. For pruden-tial reasons, banks impose inter-nal limits on lending to individualcountries. These limits are not for-mally defined or published, sothere is no way of analyzing howclose banks are to these limits.However, some banks are un-doubtedly at or near their ceilingfor some countries; those coun-tries will be able to borrow moreonly if other banks are prepared to

increase their exposure.Summing up these various in-

fluences on commercial banks, itseems highly probable that bothborrowers and lenders will adaptto changing conditions withoutprecipitating any general crisis ofconfidence. While some econ-omies may find it harder to servicetheir debt, others will find iteasier. Different countries areinvolved with different banks,and the degree of their involve-ment also varies. Loans rarelymature simultaneously. And nodeveloping country accounts formore than 3 percent of totalinternational banking assets.Developing-country risks are notsynchronized.

Foreign private banks' relationswith the developing countrieshave become much more diver-sified and complex in recent years,going beyond the lender-bor-rower interaction. Deposits by thedeveloping countries, including alarge proportion of their foreignexchange reserves, reached $90billion in 1979. Private banks alsoserve as correspondent banks,operate local branches, financetrade, advise governments, andact as bankers to their corporateclients that have business interestsin the developing countries. Theseclient relationships are likely togrow, in parallel with the increas-ing financial development of themore advanced of them; and theattractiveness of these oppor-tunities will be an important factorin the growth of private banks'involvement in the developingcountries.

For these and other reasons,banks that feel they are over-exposed internationally can gen-erally be replaced by others ashappened to some extent in thelate 1970s. International lendingby German, Swiss and Dutchbanks accelerated in 1976-77 andby Japanese banks in 1978-79

61

while the American banks wereslowing down their foreign lend-ing.

More recently the OPEC-Arabbanks have increased their par-ticipations in syndicated Euro-loans to the oil-importing devel-oping countries. An analysis ofthe lead management role of thesebanks suggests an increase in theirshare of international lending aswell as a shift toward oil-import-ing developing countries. Whereasabout 80 percent of their lendingwent to oil exporters and Arabcountries and only 10 percent tothe oil-importing developingcountries in 1977-78, in 1980-81

a. Estimate. b. Minus (-) equals increase.

62

the share of oil-importing devel-oping countries has gone up to20-30 percent. Thus, OPEC-Arabbanks now account for about 4.4percent of total international lend-ing and 4.3 percent of lending tothe oil-importing developingcountries. Profitable lendingopportunities in due course attractnew capital into foreign lendingand may even produce new insti-tutions.

This confidence in the basicadaptability of the capital marketsshould not, however, distractattention from the need for vig-ilance by borrowers and lenderson the evolution of the markets or

Table 5.3 Oil importers: financing current deficits, 1970-90

from the need for the support thatthe international financial institu-tions can provide. Because theshare of developing countries inthe total assets of the private banksis small, minor changes in thebanks' perceptions may signifi-cantly reduce the amount that acountry can borrow. Changed atti-tudes can then be self-fulfilling,by precipitating debt-service diffi-culties for the borrowers. To re-duce such risks and uncertaintiesand to improve the access of thedeveloping countries to stableflows of nonconcessional credit,direct placements by the oil ex-porters in developing countries

(billions current dollars)

Item 1970 1980

Projections

Annualpercentage growth

(current prices)

Annualpercentage growth(constant prices)

1985 1990

1970-80

1980-90

1970-80

2980-90

High Low High Low High Low High Low

Current accountsResource gap -8.8 -65.2 -71.6 -58.0 -116.5 -83.0 22.2 6.0 2.4 11.2 -1.0 -4.3Workers' remittances 2.3 16.7 25.7 23.8 36.8 33.5 21.9 8.2 7.2 11.0 1.2 0.2Interest payments -1.4 -22.5 -41.9 -39.8 -65.6 -55.5 32.0 11.3 9.4 20.0 4.0 2.3Other current transactions -0.7 1.5 1.7 2.3 4.0 3.7

Current account balance -8.6 -69.6 -86.1 -71.7 -141.3 -101.3 23.3 7.3 3.8 12.1 0.3 -3.0Financed by

Net capital flows 9.1 55.3 96.2 76.1 161.6 112.2 19.8 11.3 7.3 9.0 4.0 0.3ODA:Grants 1.0 8.3 16.7 13.7 27.9 20.9 23.6 12.9 9.7 12.6 5.5 2.5Concessional loans 2.1 8.0 16.2 13.5 26.4 20.6 14.3 12.7 9.9 4.1 5.3 2.6Total 3.1 16.3 32.9 27.2 54.3 41.5 18.1 12.8 9.8 7.5 5.4 2.6Medium- and long-term

borrowing:Official export credits 0.5 2.6 3.6 3.6 6.7 5.5 17.9 9.9 7.8 7.2 2.4 0.4Multilateral 0.5 3.2 6.3 5.5 9.0 8.1 20.4 10.9 9.7 9.4 3.5 2.3Private 3.4 27.5 42.8 30.5 74.6 43.6 23.3 10.5 4.7 19.7 3.3 -2.1Total 4.3 33.4 52.5 39.6 90.3 57.2 22.8 10.5 5.5 16.6 3.2 -1.4Private direct investment 1.7 5.6 10.8 9.3 17.0 13.5 12.7 11.7 9.2 2.7 4.4 1.9

Change in reserves'and short-term borrowing 0.5 14.3 -10.1 -4.4 -20.3 -10.9

Memorandum itemsDebt outstanding

(billions of dollars) 48.0 301.3 577.3 539.0 1,047.0 872.7 20.2 13.3 11.2 9.1 5.9 3.9Resource gap/GNP (percentage) 2.5 4.6 2.7 2.3 2.5 2.0Current account deficit/GNP

(percentage) 2.4 4.9 3.3 2.9 3.0 2.4Net capital flows/GNP

(percentage) 2.6 3.9 3.6 3.1 3.4 2.7Debt service/GNP (percentage) 1.2 3.9 3.8 3.8 3.8 3.7Interest payments/GNP

(percentage) 0.4 1.6 1.6 1.6 1.4 1.3

should be encouraged, and theinternational financial institu-tions should play a larger role inintermediationdirectly or incooperation with the privatebanks.

TRENDS AND UNCERTAINTIES.TWO

scenarios of the developing coun-tries' adjustment and growth dur-ing the next decade were dis-cussed in Chapter 2. The Highand the Low case assumptionsabout capital flows are consistentwith the views discussed above.The growth of net capital flows tothe oil importers is projected toslow down from the high rates ofthe 1970s, but net capital will con-tinue to contribute resourcesequal to 2.7 to 3.6 percent of theirGNP (Table 5.3). This is lower thanthe levels reached in some years ofthe last decade but higher than thepre-1973 level.

The High case projections ofChapter 2 are not ambitious inrelation to the future supply ofcapital. Surpluses of the oil export-ers and, later in the decade, of theindustrial countries could providehigher counterpart savings; finan-cial institutions could intermedi-ate larger volumes of finance; andricher countries could give more

concessional aid without impos-ing a significant burden on theircitizens. Therefore, it is quite fea-sible for capital flows to grow at afaster rate than is assumed in theHigh case.

These projections are also mod-est in relation to the needs of thedeveloping economies for capitaland their ability to use it produc-tively. Moreover, they are relatedto expectations about trade andcurrent account balances underthe assumption of no abruptchanges in the external environ-ment. Many countries could usemore resources productively ifthey were available on convenientterms. On the other hand, lessfavorable circumstances may alsocall for higher levels of externalsupport (at concessional terms) tosustain minimum developmentefforts.

Needless to say, there are manyuncertainties about the futurecourse of capital flows. The "real"environment in which the capitalflows operatethe global surplusand deficitwill be affected bythe trade, monetary and fiscal pol-icies of the developed, developingand OPEC countries. Operationsof the financial intermediaries willbe more directly influenced. The

financial conditions and policiesin the major industrial countrieswill be an important factor onthe supply side. On the demandside the feasibility of continuedrecycling will depend on the per-formance of the developing coun-tries. Future trends of officialcapital flows are even more diffi-cult to project since they willbasically reflect political decisions.

Most of these uncertainties can-not be eliminated. But officialactions can improve the climatein which developing countries ob-tain private finance. Commercialbank lending needs to be supple-mented by more official credits.Additional ways of recycling theoil exporters' surpluses need to bedeveloped and existing mecha-nisms strengthened. The institu-tional framework for debt refi-nancing and rescheduling must beimproved so that liquidity prob-lems are dealt with promptly.(See box on Debt relief, page 59).Such changes will have the mostimpact on the middle-incomecountries but, for the low-incomecountries, the remedytoimprove the flow of concessionalfinanceis more easily describedthan achieved.

63

6 Country experience: managing adjustment

The previous three chapters haveanalyzed the way the world econ-omy reacted to the difficulties ofthe 1970s. They showed that globaladjustment was helped by avariety of factors: a slight declinein the real price of oil from 1974until 1978; steeply rising importsin the oil-exporting countries; andlarger capital flows from surplusto deficit countries. But these werenot enough to prevent the finalform of adjustmentslowergrowth, notably in the industrialcountries and therefore with

The oil-importing developing countries

Some problems of adjustmentwere common to all oil-importingcountries, but the intensity of theexternal shocks and individualresponses to them varied enor-mously. Governments not onlyhad to aim at balance-of-paymentsadjustment; they also had tochoose investment and produc-hon priorities so as to minimizethe loss of growth involved inrestoring their external accounts.Some were notably successful.Others were not. But in everycase, their economic performancewas determined by the structureof their economy; the policies theyfollowed; and the nature andintensity of the shock.

64

major implications for the rest ofthe world as well.

Different countries adjusted indifferent ways. In general termsindustrial countries increasedtheir exports to the capital-surpluscountries and slowed down theirgrowth. Middle-income countriesborrowed heavily in the capitalmarkets; some also replacedimports and increased their exportpenetration of industrial countrymarkets. Some low-income coun-tries were helped by good crops,and more aid and workers' remit-

Structure and policy

The relations between economicstructure, policy responses andexternal shocks have beenanalyzed for a group of 47 oil-importing developing countries.They have been divided into fourrepresentative sub-groups thatdiffer in their basic economiccharacteristics and policy options.In relation to the analysis of pre-vious chapters, these extend thedistinctions made by income leveland trade structure.

Middle-income oil importers aredivided into:

Semi-industrial countries, andPrimary producers.

tances. But African countriesespecially were beset by domesticproblems and could neitherincrease their exports nor borrowmuch; they had to cut imports andendure stagnation.

This chapter explores in detailthe diverse experience of countrygroups and a number of countries.It looks first at the oil-importingdeveloping countries; then at theoil exporters, both capital-deficitand capital-surplus; at China; andfinally at the nonmarket industrialeconomies.

Low-income oil importers aredivided into:

Large, partially industrializedcountries ("populous South Asia")and

Least developed countries(primarily in sub-SaharanAfrica).Table 6.1 lists the countriesbelonging to each group.

The structural characteristics ofan economy are, of course, theresult of historical circumstancesand past policies. They includesuch elements as the degree ofreliance on a few commodities forexport earnings, the share ofmanufacturing in GDP, the level ofhuman development and the roleof the state in economic life. A

Table 6.1 Developing-country groups

number of these characteristicsmay limit the range of adjustmentpolicies available to any particularcountry.

At the same time, domesticeconomic policy has a crucial roleto play; countries with broadlysimilar structural features have

fared quite differently in responseto comparable external shocks.This chapter examines a numberof country case studies to helpisolate the role of policy ininfluencing adjustment withinthe broad structural constraintscharacterizing the group.

Note: Includes countries with populations of at least 1 million. Italics denotes inclusion of a country among the case studies in the text.Country included in calculation of analytical group total in Table 6.2.

**Country included in group discussion of capital-deficit oil exporters.Also a least developed country.Based on UN classification.

External shocks and modes ofadjustment

Table 6.2 (overleaf) shows theextent to which the balance of pay-ments of different country groupswere affected by the externalenvironment between 1974 and

65

Country group Middle-income Low-income

Semi- Argentina* Portugal*industrial Brazil* Romania

Colombia* Singapore*Egypt* South AfricaGreece South Korea*Hong Kong SpainIsrael* Turkey*Mexico* Uruguay*Philippines* Yugoslavia*

Primary Albania Lebanon Burma*producing Bolivia* Liberia* China

Cameroon* Malaysia* Kampuchea, Dem.Chile* Mongolia Madagascar*Costa Rica* Morocco* Mauritania*Cuba Nicaragua MozambiqueDominican Rep. Panama Sierra Leone*El Salvador Papua New Sri Lanka*Ghana* Guinea* TogoGuatemala Paraguay Viet Nam, Soc. Rep. ofHonduras* Peru* Zaire*Ivory Coast* SenegalJamaica* Thailand*

Jordan Tunisia*Kenya* Zambia*Korea, Dem. Zimbabwe

Republic

PopulousSouth Asia

Bangladesh*aIndia*Pakistan*

Lowest income sub-Saha ran Africa Other

Least Benin Malawi* Afghanistandeveloped" Burundi Mali* Bhutan

Central African Niger HaitiRepublic* Rwanda Lao, P.D.R.

Chad Somalia* NepalEthiopia* Sudan* Yemen, Arab Rep.Guinea Tanzania Yemen, P.D.R.Lesotho Uganda*

tipper Volta

Oil exporters. Algeria** Nigeria** Indonesia**Angola SyrianCongo, P.R. Arab Rep.Ecuador** Trinidad andIran Tobago**

Venezuela**

1978. These calculations areexplained in detail in the TechnicalAppendix, but the key factors are(1) international price effects-theextent to which adverse move-ments from a 1971-73 base inimport and export prices relativeto world prices affected countries'import expenditures and exportearnings; and (2) export volumeeffects-the shortfall in exportdemand arising from worldwiderecession. Both are expressed as apercentage of GNP; together they

Table 6.2 Balance-of-payments effects of external shocks and modesof adjustment in groups of oil-importing developing countries,1974-78 averages

provide a measure of the impact ofexternal shocks on the balance ofpayments.

Table 6.2 illustrates four pointsabout external shocks.

International price effectswere adverse for every countrygroup. This occurred becauseunfavorable import-price effects(the extent to which the rise in agroup's import prices exceededthe general rise in world prices)more than offset favorable export-price effects (the extent to which a

66

group's export prices rose morethan world prices).

Export volume shortfalls aris-ing from the 1974-75 OECD reces-sion were roughly as important asinternational price effects for thesemi-industrial countries. Theywere somewhat more impor-tant for the primary producingcountries.

But they were significantly un-equal for the low-income coun-tries.

Export volume effects were

Figures for this group are 1974-77 averages.Nominal external financing deflatedby an international price index.Comprises changes in capital flows, reserves, services and transfers.

roughly 55 percent of interna-tional price effects for populousSouth Asia. This was becauseIndia's and Pakistan's manufactur-ing exports, which form a largepart of their merchandise exports,were directed mainly to otherdeveloping countries rather thanto the industrial countries whichwere in the grip of recession.

Export volume effects were10 times as important as inter-national price effects for leastdeveloped countries. These coun-

tries export mainly primary prod-ucts whose markets grew slowlyas a result of the OECD recession.

Countries had three basic waysof responding to these externalshocks:

structural adjustment, whichinvolves switching resources to theproduction of exports and importsubstitutes (including substitutesfor imported energy). Whenaccompanied by a rise in domesticsaving, such a reallocation reducesthe trade deficit and is therefore apermanent form of adjustment.

This process may be helped by:external financing, which can

add to imports and investmentand give countries time to investborrowed capital in ways that willeventually promote structuraladjustment. But sooner or latertrade deficits have to be reduced tolevels that are financeable in thelong term. Some countries wereleft with no choice but:

slower growth, which nar-rows current account deficits byrestricting imports.

For many reasons, countryadjustment with high domesticsaving and investment and only atemporary interruption in growthis preferable to adjustmenteffected mainly through anextended period of slower growth.First, programs to expand the pro-duction of energy and tradeablegoods require substantial newinvestment; the enormous capitalcosts of energy development pro-grams alone have been noted inChapter 4. Second, a high-invest-ment economy is able to "turnover" its old capital stock quicklyso as to reflect new scarcities,especially more expensive energy.Third, an economy with risingdomestic saving is able to supportnecessary new investment,restrain domestic demand forexportables and import substi-tutes and narrow the trade deficit.Fourth, the sacrifices involved in

(percentage of GNP)

Primary Populous LeastItem Semi-industrial producing1 South Asia developed

External shocks

International price effectsof which,

Export price effects

0.90

-0.83

1.65

-3.21

1.26

-0.19

0.14

-2.07Import price effects 1.73 4.86 1.45 2.21

Export volume effect 0.91 1.99 0.69 1.39

Total 1.81 3.64 1.95 1.53

Modes of adjustmentStructural adjustment

of which,Export market penetration

0.78

0.09

0.61

0.30

-0.31

-0.51

-2.03

-3.49Import substitution 0.69 0.31 0.20 1.46

Additional real externalfinancing2 3 0.45 2.54 2.35 3.03

Slower growth 0.58 0.49 -0.09 0.53Total 1.81 3.64 1.95 1.53

saving and investment are easierto make in a growing economy,where consumption need notactually decline to permit anincrease in domestic saving.Finally, there is evidence-for amore careful statement, see the1980 World Development Report-that economic growth generallycontributes to the alleviation ofpoverty. The burden of adjust-ment can be more equitablydistributed in a growing economy,a theme partially explored in thenext chapter of this Report.

The desirability of adjusting toexternal shocks through growthmust be tempered by a recogni-tion that developing countrieswere faced with the need to con-tain strong inflationary pressuresin the 1970s. A study of some 25developing countries (excludingArgentina and Chile which wereafflicted by hyperinflation) revealsthat in most cases the mid-1970swere characterized by inflationthat equalled or exceeded histor-ical peaks (Table 6.3). Whiledomestic policy was important inthis process, a significant con-tribution to the synchronization ofworld inflation was made by risingimport prices. To this must beadded the fact that dearer petro-leum and manufactured inter-mediate imports, by raising thecost of production, exerted a con-tractionary influence on the sup-ply of goods and services. Thecombination of rising prices andsluggishly growing output re-sulted in a stagflationary environ-ment. The pursuit of adjustmentwith growth in such circum-stances was a particularly difficulttask.

Middle-income oil importers

Semi-industrial countries

Semi-industrial countries form therichest group among the oil-importing developing countries,

Table 6.3 Percentage rate of change in the consumer price index,selected developing countries, peak of 1956-70 and mid-1970s

a. Average of price rises over the years shown.Source: Bhalla.

with GNP per person rangingfrom under $500 a year for Egyptto over $4,000 for Israel and Spain.The high share of manufacturingin production and exports madefor considerable flexibility andcreditworthiness and allowedthem to borrow from private capi-tal markets in the 1970s.

As a group, they relied on exter-nal financing at the beginning ofthe 1974-78 period. The share ofcommercial lenders in their publicand publicly guaranteed debt roseby 27 percent between 1972 and1978. Disbursed debt to GNP ratiorose from 10 percent to 16 percentduring the same period while thedebt-service ratio rose from 9 per-cent to 15 percent. However, thegroup as a whole increasinglyturned to enlarging their penetra-tion of export markets (mainly inmanufacturing) and substitutingstrongly for imports, so that struc-tural adjustment ultimatelyaccounted for over 40 percent oftheir overall adjustment to exter-nal shocks. Additional externalfinancing was responsible for 25percent of adjustment during1974-78. Almost one-third of thebalance-of-payments accom-modation to the changingenvironment occurred throughslower growth.

The average pattern of adjust-ment conceals substantialdifferences between countries.Their responses can be analyzedin terms of the developmentstrategy they pursued before 1974and the reforms they introducedin the wake of external shocks.

An outward-oriented ap-proach. South Korea provides anexample of a country which hasachieved spectacular resultsthrough export-led growth andwhich did not alter its strategyduring the period 1974-78. Itsexperience in foreign markets,together with a devaluation in1974, led to further gains in exportmarket shares and significantimport substitution. Domesticsaving and investment shareswent up considerably, the effi-ciency of investment rose andadjustment was effected withgrowth (see box on South Korea,overleaf).

Among countries which hadearlier followed an inward-look-ing development path, Uruguayand, to a lesser extent, the Philip-pines responded to the externalshocks of the 1970s by liberalizingtheir trade regimes and undertak-mg structural reforms. Substantialexternal financing was available tobuy imports needed for export

67

Peak Annual averaged Annual averageCountry 1956-70 1973-74 19 75-76

Bolivia 11.2 47.8 6.3Brazil 87.0 20.2 35.3Egypt 14.9 7.6 10.0El Salvador 5.7 11.6 15.1Ghana 25.4 17.2 46.9

India 13.8 22.4 -1.0South Korea 27.9 13.4 28.4Morocco 6.1 10.9 8.2Nigeria 13.9 9.2 27.6Pakistan 11.3 24.9 14.0Philippines 14.4 22.7 7.1Sri Lanka 7.4 10.9 4.0Sudan 12.6 22.0 12.8Thailand 6.2 17.5 4.1Venezuela 5.0 6.2 8.9

South KoreaIn the mid-1950s South Korea's "modern"sector was small. Manufacturing con-stituted 6 percent of GDP, most industrialand much infrastructural capacity havingbeen located in North Korea. Manufac-tured exports were almost unheard of.Until 1962 economic policy emphasizedimport-substituting industrialization.This was followed, comparatively early inthe industrialization process, by a switchto promoting exports. For the next 10years GDP rose at over 9 percent a year.Investment's share in GDP almostdoubled and was substantially financedout of domestic savings. Capital was usedhighly efficiently: the incremental capital-output ratiothe extra investment

68

6,000

5,000 -

4,000

3,000 -

2,000

1,000 -

South Korea

Export and import volumes

(1963 000(

7,000

Espoau

-5 I

Av. 1963 70 71 72 73 74 75 76 77 78 79

-69

needed to produce an extra unit of out-putaveraged 2.5 in 1964-73, one of thelowest in the developing world. Rapidproductivity growth, facilitated by a

skilled and literate workforce, reconciledsubstantial wage increases with moderateinflation. In 1973 GDP grew by a remark-able 15 percent and inflation was only3 percent.

Rapid industrialization had, however,left South Korea heavily dependent onimported oil. When oil prices rose in1973-74, the deterioration in the terms oftrade resulted in a resource lossequivalent to 4.5 percent of GNP and afivefold jump in the current accountdeficit to 11 percent of GNP. The govern-ment initially accommodated this byincreasing foreign borrowing (whichtotaled 11.3 percent of GNP in 1974 and 9.5percent in 1975). But it then opted to cutback the deficit through tradebothexport expansion and import substitu-tionrather than by slowing downgrowth.

Between 1974 and 1978 (see figure),South Korea's export volume recorded aspectacular increase in a wide rangeof manufactured goods. This wasaccomplished by a number of measures.The currency was devalued by 22 percentin 1974. Exporting firms continued toenjoy automatic access to imported rawmaterials at world prices and subsidizedcredit for working capital at a time whencredit for import substitution andnontraded goods was restricted. SouthKorean firms were also successful in win-ning contracts in the booming MiddleEast construction market: by 1978 thevalue of construction contracts stood at$15 billion, and workers' remittanceshelped to swell foreign exchange receipts.

However, short-term measures wereless significant than established policiesaimed at promoting exports. Two institu-tions set up in the 1960sthe exporttarget system and the Export PromotionConference (at which the President ofSouth Korea personally presided)wereused to intensify the pressure to export.They helped to coordinate governmentand private sector efforts in response toshort-term problems and opportunities.The marketing and intelligence facilitiesof the government export marketingorganization (KOTRA) and of the exporttrade associations of individual industrieswere also influential.

In dollar terms, exports almost doubledbetween 1974 and 1976, and by 1977 hadnearly closed the gap with imports. The

trade balance improved very significantlybetween 1974 and 1977 (see figure). Thiswas due roughly equally to importsubstitution, mainly in machinery andconsumer durables, and to increases inworld market shares of South Koreanexports.

During the five-year period 1974-79,GNP accelerated, growing by an average10.1 percent a year. Consumptiondeclined as a share of GDP from 82 per-cent in 1971-73 to 78 percent in 1974-76.

110

105

100

95

90

80

South Korea

Terms of trade, 1970-79

(0970-73 = 000)

0 I I I I

1970 71 72 73 74 75 76 77 78 79

Savings and investment rates corre-spondingly rose (see figure). Inflation,fueled by the oil price increase, acceler-ated to 24 percent in 1974, falling to 15percent by 1976. Real wages, which hadfallen by 6 percent during 1974, were heldin check relative to foreign wages for twoyears after a 22 percent devaluation of thewon in December1974. This helped main-tain the country's competitiveness,though the real exchange rate (the nomi-nal rate adjusted for South Korean rela-tive to US prices) then started to appreci-ate. Between 1972 and 1978 domestic costsrose by 20 percent relative to thoseabroad.

The second oil price rise of 1979-80 oc-curred just as policies were shifting to acontractionary stance in response to anoverheated economy. It implied aresource transfer equivalent to 6.6 per-cent of GDP and resulted, over 1979 and

75 76 77 78 7972 73 7471Av. 1963 70-69Current account and components

Bill,,,,, ,f 3,/I,,,, ',,rc',U+1

Balance on crevices and ,eansrers

irCurrent acceunt balance

1980, in current account deficitsequivalent to about 7 percent of GDP. InOctober 1979 the assassination of thePresident heightened political tensionsand led to unrest and a change of govern-ment. It proved difficult to check themomentum built up in expansion overthe last few years. High investmentdemand tightened labor markets andcaused an acceleration in wages, under-mining the competitiveness of SouthKorean exports, which actually declinedin real terms over 1979. Contraction wasaccentuated by the increase in productioncosts due to the rapid passing through ofrising petroleum prices to the domesticeconomy. Domestic currency prices ofimports were further increased by a 20percent devaluation in January 1980.These factors, plus a disastrous harvest,combined to raise the rate of inflationfrom 18 percent in 1979 to 28 percent in

Percentage of GOP, constant prices

40

35-

30-

25-

20-

15 -

10 -

5-0

South Korea: savings andinvestment rates, 1963-73 and1973-79

Av. Av.

1963-73 1973-79

Investment

Savings

1980 and effected a 5.7 percent decline inreal GNP over 1980.

In 1980 the government initiated aseries of measures aimed at improving theexternal resource balance through struc-tural adjustments. These include facilitat-ing the extension of credit for exports,maintaining incentives through exchangerate policy and initiating efforts to moder-ate increases in wages.

industries and cushion the periodbetween rising import prices andgrowing export volumes. They tooboosted saving and investmentand growth gradually picked up.

An inward-looking approach.Turkey and pre-1976 Argentinacontinued with their inward-look-ing policies in response to externalshocks, These amounted to 1 per-cent of GNP in Argentina and thecountry was preoccupied withinternal problems and runawayrates of inflation. Adjustmentoccurred mainly through importsubstitution throughout theperiod and through gains inexport market shares in primaryproducts in 1977 and 1978. Theapplication of restrictive demand-management policies after 1976led to a marked decline in eco-nomic growth. External financingwas over one-and-a-quarter timesas large as external shocks inTurkey and was used to boost thegrowth rate between 1974 and1978. Export market shares felland import dependence increased,heightening the country's vulner-ability to the external shocks of1979. A comprehensive and far-reaching reorientation of economicpolicies was initiated in 1980 and1981, aimed at restoring economicgrowth and controlling inflationthrough greater emphasis onexports and increased reliance onmarket forces. A flexible exchangerate policy was adopted; interestrates and prices charged by StateEconomic Enterprises were de-regulated and a major tax reformwas enacted.

Countries such as Brazil, Israeland Yugoslavia, which had earlierlessened their bias against exportsafter many years of inward-look-ing industrialization, allowedincentives to export to weakenagain. Brazil borrowed heavily in1974 and 1975 and did not abandon

its commitment to growth. Butits domestic policies did notencourage saving or efficiency inthe use of investible funds, andthe growing burden of nominaldebt, together with poor harvests,eventually led to a cut in growth(see box on Brazil, overleaf). BothIsrael and Yugoslavia economizedon imports. Domestic savings per-formance did not improve sub-stantially and structural adjust-ment was limited. They relied onslower growth to reduce balanceof payments deficits, althoughboth recovered slightly toward theend of the period.

Table 6.2 indicates that, of allthe country groups, the semi-industrial countries relied themost on structural adjustment.This was possible because of a flex-ible production-cum-trade struc-ture, as represented by a highshare of manufacturing in GDPand exports and substantial physi-cal and human resources. Struc-tural adjustment principally con-sisted of import substitution; ex-port market penetrationthoughpositivewas the least importantmode of adjustment for the groupas a whole. Notwithstanding theirrelatively easy access to privatecapital markets, semi-industrialcountries did not rely very muchon additional external financingcompared to other oil-importingdeveloping-country groups dur-ing the 1974-78 period as a whole.The importance of slower growthin overall adjustment was 32 per-cent and was exceeded only in theleast developed countries wherethe corresponding ratio was 35percent. This result is attributableto a marked slowdown in growthduring 1974-79 in Israel, Portu-gal, Singapore and, to a lesser ex-tent, Yugoslavia relative to thatachieved between 1963 and 1973.

The adjustment experience ofcountries within the group sug-gests that those which were

69

BrazilDuring an unprecedented spurt in1967-73, Brazil's industrial growthaveraged 13 percent a year and GNP perperson rose at over 7 percent a year.Although the benefits of growth wereunequally distributed, in the process of"trickle down" gains in absolute incomelevels appear to have been widespread.Investment was largely financeddomestically. The share of manufacturedexports in manufactured output rose,aided by outward-oriented policies.

The annual current account deficitaveraged only 2 percent of GDP in1967-73, but then jumped to 7 percent in1974 and 5.6 percent in 1975. The higheroil prices of 1973-74 hit Brazil at the peakof its boom. High capacity utilization,combined with stockbuilding in the faceof rising inflation, boosted the volume ofimports by about 30 percent in 1974 (seefigure). The economy was heavily depen-dent on imported oil (which still satisfiesover 80 percent of petroleum require-ments, despite major oil explorationefforts).

Current account and components

B,ll,o,,, of dollars, current prices+2

0

Brazil

Export and import volumes

(1963 = 100)

450

10

12Ày. 1963 70 71 72 73 74 75 76 77 78 79

-69

In addition, the terms of trade deterio-rated by 20 percent over 1974-75. Abouthalf of the increase in the total import billover its 1972-73 level was due to increasesin prices (and about half of that due to

130

120

110

100

90

80

70

Brazil

Terms of trade, 1970-79

(1971-73 = 1001

1970 71 72 73 74 75 76 77 78 79

higher prices for manufactured imports);the rest was caused by higher volumes.Slower growth in export markets was lessimportant than terms-of-trade effects in1974-75, but the terms of trade thenrecovered ground as coffee prices rose.

Brazil did not readily abandon thegrowth ethic in response to the hardenedexternal environment. An ebullient senseof "manifest destiny" had been created,and the new government, which came topower in 1974, was committed to continu-ing, if not bettering, the successes of itspredecessor. Growth was also seen asnecessary to ease the process of politicalliberalization. This led to the adoption ofexpansionary domestic policies and sub-stantial external borrowing, to a deferralof adjustment and eventually to slowergrowth.

Domestic demand was maintainedthrough public sector deficits and sub-sidies effected through the credit system.Interest rates charged on credit programsadministered through the Central Bankand Bank of Brazil remained almost con-stant while inflation accelerated from 13percent in 1973 to 44 percent in 1977. Theyrose later, but not enough to match thespiral in inflation toward 100 percentannually after 1979. Negative real interestrates diverted savings from productiveinvestment. Savings, which had grownrapidly from the mid-1960s, began to

decelerate during the second half of the1970s.

Disbursed debt rose nearly fourfoldbetween 1973 and 1978 to the equivalent of25 percent of GDP; and the debt-serviceratio (including medium- and long-termprivate debt) reached 56.4 percent.Increased borrowing from abroad wasreflected in the growing gap betweendomestic savings and investment. Invest-ment priorities emphasized heavy infra-structure and capital-intensive importsubstitution.

O GNP rose by an average 7 percent ayear in 1974-78, compared with 8 percenta year in 1966-73 and 11.5 percent a year in1967-73.

Compared with its 1973 level, theBrazilian real exchange rate (the nominalrate adjusted for changes in Brazilian rela-tive to US prices) changed little during1974-78, real appreciation in 1975 beingreversed in subsequent years. As a pro-portion of demand, imports weresqueezed to below their 1973 levels (seefigure) through tariff increases, advancedeposit requirements and import restric-tions. The resulting bias against exportswas partially offset by tax and credit sub-sidies. Coupled with the 1977 improve-ment in the terms of trade, this allowedvirtual trade balance by 1977. It wasfollowed by a relatively small deficit in1978, due partly to a disastrous harvest.

Brazilian adjustment to higher energyprices has proceeded apace. Massiveinvestments aimed at reducing depen-dence on imported oil have been made,notably through the conversion of sugar-cane to alcohol. In the longer run,hydroelectric potential is estimated atover 200 million kilowatts (around 10times present capacity). Shale and coaldeposits are also promising options forenergy diversification.

The impact of the 1979-80 rise in oilprices has been considerable. By 1980 thefuel import bill had risen to 44 percent oftotal merchandise imports. The interestrates charged on its foreign debt also rosesharply, and the current account deficitwidened to the equivalent of 5 percent ofGDP. A wide range of fiscal, monetaryand price policies was introduced to curbdemand; exports were encouraged by alarge devaluation during 1979, when theexchange rate moved from 21 to 43cruzeiros to the dollar. But, despiteattempts at adjustment, an increased debtburden heightens Brazil's vulnerability tointernational monetary shocks and toslower growth in the demand for itsexports.

70

largely successful in achievingadjustment with growth

either maintained or switchedto a policy of not discriminatingagainst production for exportsrelative to that for the homemarket;

stepped up private and publicsavings; and

increased the share of invest-ment without detriment to its effi-ciency.

Primary producing countries

Primary producers include a largenumber of (mainly) middle-income countries that are eitheragricultural- or mineral-based.Their economic well-being andexport earnings have historicallybeen dominated by a few primaryproductsfor example, tea, cof-fee, cocoa, phosphate, tin or rub-ber. For predominantly agricul-tural countries, the share of thethree most important com-modities in export earningsranges from roughly 70 percentfor Ghana, Ivory Coast and SriLanka to around 50 percent forMalaysia and Senegal and under40 percent for Thailand. Themineral-based economies tend tobe even more undiversified; thecorresponding ratios are in excessof 80 percent for Mauritania, Zaireand Zambia, nearly 70 percent forBolivia and Chile and around 60percent for Peru. Specialization intree crops or minerals, togetherwith the necessary infrastructure,leads to a highly inflexible pro-duction structure and extremevulnerability to international pricemovements and export volumeshortfalls.

Primary producing countrieswere hardest hit by externalshocks. Export volume shortfallswere 20 percent larger than inter-national price effects for the groupas a whole in 1974-77. The agricul-ture-based countries were notmuch affected by international

price effects, since unfavorableimport price movements werenearly offset by higher prices forcocoa, coffee and tea in 1976-77.But they were significantlydamaged by slow growth in themarkets for agricultural com-modities, so that the overall exter-nal shock was adverse for agricul-ture-based primary producers. Bycontrast, losses arising from inter-national price effects were par-ticularly severe for the mineral-based economies and roughlytwice as large as export volumeeffects.

Table 6.2 shows that primaryproducing countries resorted tosubstantial external financingwhich averaged nearly 70 percentof external shocks during 1974-77.Their structural adjustment,which was divided almost equallybetween export market penetra-tion and import substitution, waslimited. It accounted for less than20 percent of total adjustment,partly because of inflexibility inproduction and partly because ofdevelopment policy. The processof industrialization in a number ofthese countries led to increasingreliance on imports of capitalgoods and manufactures. Theaverage adjustment pattern is con-sistent with considerable varia-tions, of which five types may bedistinguished.

Outward-orientation and di-versification in agriculture-basedeconomies. Ivory Coast, Thailandand Tunisia are examples of pri-mary producers that maintainedtheir outward-looking policiesand diversified their exports. Thisprovided raw materials for pro-cessing industries, generated ahome market for industrial outputand earned foreign exchange forimported inputs for theirmanufacturing industries. For theIvory Coast and Tunisia, the ex-ternal environment actuallyimproved slightly over 1974-78.

External borrowing was moderatein all countries except Tunisia, andthe bulk of adjustment occurredthrough trade policy. Exportexpansion and import substitu-tion proceeded at an impressiverate within the framework of avery open economy in ThailandBut they were not to be accom-panied by reform of domesticenergy pricing and interest ratepolicy until late in the decade (seebox, overleaf), and the economywas left uncomfortably exposed tothe external shocks of 1979-80.Gains in export market shareswere also registered in a wholerange of primary commodities inthe Ivory Coast and Tunisia. Theshare of investment was main-tained and adjustment waseffected with growth.

Inward-orientation in agricul-ture-based economies. Kenyamoved from being an open econ-omy in the 1960s to one where theincentive system had begun to betilted against cash crop exportsand in favor of production ofmanufactured goods for thedomestic market. This processwas further intensified in the wakeof the external shocks of 1974-78and accompanied by losses innontraditional primary andmanufactured exports, in part dueto the breakup of the East AfricanCommunity. Recourse to externalfinancing was moderate anddomestic savings performancewas satisfactory. The bulk of ad-justment occurred through im-port substitution which, togetherwith slower growth, was twice asimportant as external shocks. Thismode of adjustment reducedstructural flexibility and led tomoves toward greater outwardorientation at the end of thedecade.

Slower growth without re-form in mineral economies.Jamaica, Peru, Zaire and Zambiawere all forced to cut growth rates,

71

72

ThailandDuring the 1960s Thai GDP grew at 7.6percent a year. The momentum slowedbetween 1970 and 1975 to 6.2 percent, butoil price increases were not the major fac-tor. The initial balance of payments effectof the oil price increase was cushioned byhigher export prices, increased serviceearnings and private transfers (seefigure). Adjustment was thus not im-mediately seen to be necessary, despite adoubling of the share of oil in totalimports to 21 percent.

To sustain growth, policy after 1975included controls on energy and cementprices, a ceiling on interest rates, increas-ing protection, expanded public sectorexpenditures and deficits, and rapidcredit creation to support higher demand.Export growth was exceptional duringthis period (see figure). GDP grew at 8percent a year from 1975 to 1979 but highinvestment tended to involve currentdeficits, which increased with thedeterioration in terms of trade after 1976and declines in services and privatetransfers.

100 -7

Av. 1963 70 71 72 73 74 75 76 77 78 79-69

Current account and componentsdlionn of dollars, current prices

Thailand

Export and import volumes

(1963 11)0)

450

130

120

110

100

90

80

70

Thailand

Terms of trade, 1970-79

(1971-73 = 100)

The government had until recentlyfailed to take the necessary steps toencourage energy conservation and pro-mote domestic supplies. After retailprices of virtually all petroleum productswere increased between July 1973 andFebruary 1974, they were held constantuntil March 1977. This was partly becauseenergy prices constituted a very sensitivepolitical issue and partly becauseincreases were thought to be injurious togrowth. Petroleum product prices were,however, raised in January 1979, July1979, February 1980 and January1981 for acumulative increase of around 120 per-cent, and power tariffs have beenincreased to eliminate subsidies to theelectricity generating authority.

The doubling of oil prices in late 1979led to a widening of the current accountdeficit (see figure) to $2.4 billion or 7 per-cent of GDP in 1980, with oil making upover 25 percent of total imports. This hasencouraged measures to promote struc-tural adjustment with equity. The draft1982-86 plan represents a significant shiftin policy from growth toward distribu-tional tonsiderations, particularly ruralpoverty alleviation; and toward externalbalance. Fiscal and monetary policies areintended tobe less permissive. The majorconcerns include the intensification ofagriculture, increased industrial effi-ciency, and promotion of employmentand manufactured exports. The plan alsostresses the need to reduce consumptionof energy, particularly oil, through pric-ing and energy conservation programs,and to develop domestic energyresources, especially lignite, natural gasand renewable energy sources.

JamaicaDuring the 1960s Jamaica's GNP rose at4.6 percent a year. Agriculture grewslowly, there was increased rural to urbanmigration, and industrial expansion waspromoted behind high levels of protec-hon. Private foreign investment played amajor role in expanding tourism andbauxite productionthe twin pillars ofgrowth in the Jamaican economy. Privatedomestic investment was the major driv-ing force behind the development ofindustry and services.

The government which came to powerin 1972 was committed to (1) expanding

Jamaica

Export and import volumes

(1963 1001

300

250 -

200

150 -

100

50 -

-4 -

-s --6 --7 I I

1970 71

0) I I

1970 71 72 73 74 75 76 77 78 79

Current account and components

Billion, of dollars, current prices+2 Balance on services and transfers

+ 1Trade balance

I i1

IiIiiI 111111 q1lii

Current accnunt balanceI I I I I

72 73 74 75 76 77 75 79

and eventually suffered a fall inGNP. A combination of internalpolicies and external shocksbrought Jamaica to the verge ofeconomic bankruptcy and GNPsteadily fell after 1973 (see box).Peru, which engaged in massiveforeign borrowing, failed to

1970 71 72 73 74 75 76 77 78 79

-2.5 I I I I I I I

Av.1963 70 71 72 73 74 75 76 77 78 79-69

175

160

145

130

115

100

85

Jamaica

Terms of trade, 1970-79

(1971-73 = 100)

01970 71 72 73 74 75 76 77 78 79

he role of the public sector in creating afore diversified economy; (2) creatingincreased employment opportunities forthe large numbers of urban unemployed;and (3) redistributing income. A sharpincrease in the bauxite levy on foreignfirms and heightened political rhetoricreduced private investment. The subse-quent decline in economic growth wasaggravated by adverse external shocksequivalent to 9 percent of GNP. Thesencluded the quadrupling of petroleumprices and reduced demand for tourismrelated to the 1974-75 recession in NorthAmerica, and more important, to grow-ing social and political unrest in Jamaica,itself partly due to worsening economicconditions.

Expansionary policies caused thecentral government deficit to increasefrom 4 percent of GDP in 1972 to almost 20percent in 1976. Large wage increaseswere granted and consumption increasedfrom 78 percent of GDP in 1972 to 90 per-cent in 1976. A large current accountdeficit (10 percent of GDP in 1976),emigration of skilled manpower (initiallyone of the main results of falling output,

but eventually one of its causes), andthree years of declining output led to thevirtual exhaustion of Jamaica's foreignexchange reserves and creditworthiness.

The government attempted to negoti-ate a medium-term support program withthe IMF although it ultimately rejectedthe prescriptions in the program. Policiesto balance expenditures with resourceavailability varied from year to year. Theyincluded tighter price controls; restrictivefiscal measures (principally higher taxesrather than spending cuts); and exchangerate devaluation, to correct for thedifferential between internal and externalinflation. Despite efforts to stimulate theprivate sector, however, there was anincreasing reluctance on the part of inves-tors to commit resources to new projects.

Jamaica compensated for the deteriora-tion in its external position during thisperiod mainly through a reduction inimports. This in turn caused a decline indomestic output, and a shift in the com-position of spending away from import-

Jamaica: savings andinvestment rates, 1963-73and 1973-78

Percentage of GDP. constant prices

30

Av. Av.

1963-73 1973-78

Investment

Savings

intensive investment toward consump-tion of domestically produced goods. By1980, GDP was nearly 18 percent below its1973 level, with the sharpest falls being inmanufacturing (31 percent), construction(58 percent) and mining (10 percent), thelast of which had been an importantsource of foreign exchange and growth inthe 1960s and early 1970s. High levels ofunemployment (15 percent of the laborforce), growing scarcity of consumergoods in domestic markets, and inade-quate resources for maintaining andupgrading social services had eroded therelatively high living standards enjoyedby most Jamaicans at the beginning ofthe 1970s.

In late 1980 a new government came topower. It has negotiated a three-year pro-gram with the IMF, agreed on structuralreforms with the World Bank, andreceived pledges of substantial foreignaid in support of its medium-termdevelopment strategy. This includes:

Reforms in the country's tax struc-ture, deregulation and reduction of stateownership of companies (those whichwere once private but are now in thehands of the government).

Measures to increase agriculturalproduction, including special assistanceto the sugar cooperatives, reconstructionin the banana industry, and strengthen-ing of extension services and marketingfacilities.

Greater incentives in favor of exportsand gradual reduction of protection tosome industries. Jamaica's nontraditionalexports are predominantly sold withinthe Caribbean Common Market. Thesmall size of this market is likely to limitexport growth, so efforts to expand salesto other markets are expected to assumeincreasing importance.

An aggressive tourism drive aimed atraising the current low hotel occupancyrate, coupled with measures to stimulateprivate investment in new hotels.

Active promotion of private invest-ment in bauxite mining and aluminumrefining.

undertake significant structuraladjustment until 1978. Extremedependence on copper and cobaltin Zaire and Zambia made forgreat vulnerability to movementsin copper prices; their terms-of-trade losses were catastrophic.Substantial external financing was

forthcoming until the mid-1970safter which they had to reducetheir growth. Roughly half of the1974-78 balance-of-paymentsaccommodation was achievedthrough slower growth. Savingsperformance was weakdue tolack of incentives, large budget

deficits and high inflation in allfour countries.

Structural reform in a mineraleconomy. Chile, like the pre-viously discussed cases of Uruguayand, to a lesser extent, the Philip-pines, is an example of a protec-tionist economy that was trans-

73

formedin its case when a steepdecline in copper prices, on top ofdomestic upheavals, resulted inradical structural reforms. Theseincluded a massive real devalua-tion and deflationary monetaryand fiscal policies. Saving andinvestment both increased as ashare of GNP, and the efficiencywith which capital was used alsoimproved. Chile gained exportmarket shares in manufacturingand also achieved considerableimport substitution. The growthrate, after an initial fall, hasimproved since 1976 but has been

accompanied by relatively highunemployment.

"Overshooting" adjustment.Countries such as Morocco andSenegal exemplified the difficultiesof volatile commodity prices (seebox on windfall gains). Both coun-tries derive a large proportion oftheir export earnings from phos-phates. The 1974-75 boom inworld phosphate prices, whichwas expected to last longer than itdid, encouraged substantialforeign borrowing and led to theirformulating investment plans thatproved too ambitious when

phosphate revenues fell after 1975.Eventually they had to adoptrestrictive policies and curb theirgrowth.

The experience of the primaryproducers suggests that thosewhich encouraged and diversifiedtheir exports and improved sav-ings performance managed adjust-ment with growth. But many ofthem, especially some mineralproducers, have a production-cum-trade structure that limits therange of options in the mediumterm, necessitating either externalfinancing or slower growth.

Managing windfall gainsAt various times in 1974-77, there weresharp price increases in phosphates,coffee, cocoa, uranium and several othercommodities important to developingcountries. Paradoxically, many exportersof these commodities now face difficultiespartly as a result of the way they managedtheir windfall gains. Typically, govern-ment revenues have been boosted byhigher export earnings (either throughtaxation or participation in profits) andused to raise domestic expenditure to alevel that cannot be sustained whenprices fall. Countries take advantage oftheir credit standing to borrow on com-mercial terms to maintain expenditure.

If the initial rise in public spendingleads to higher growth (and especiallyhigher exports) in the relatively nearterm, it can be sustained. But if growthdoes not increase sufficiently, the result isan increased debt burden. Eventually thisforces sharp and damaging spendingcuts, often at a time when export pricesare falling.

This patternand exceptions to itcan be illustrated by several examples.Phosphate prices rose sharply in 1974,and the prospects for further risesappeared good at the time. In Morocco,investment as a share of GDP conse-quently doubled by 1977. But governmentcurrent spending also rose, much of it onbadly needed social programs. Theexpansion, however, outstripped availa-ble resources once phosphate pricesstarted to decline. Initially, Morocco wasable to maintain the momentum by bor-

rowing abroad. But its external debt-ser-vice ratio increased significantly between1975 and 1978 (when it reached 21.8 per-cent) and it became clear that retrench-ment was needed. Togo also applied itsphosphate "windfall" to investment. Butit too encountered financial difficultyafter prices fell in 1975, despite the coffeeand cocoa boom that started in 1976.Senegal increased public sector invest-ment, but total investment did notincrease. Much of the public investmentwent into unproductive areas, and theprivate sector was discouraged frominvesting, mainly because of the govern-ment's state participation policy. The endof the phosphate boom coincided withincreased groundnut prices (the principalexport), postponing the need to reducespending. In 1977 a period of budgetarystringency followed.

In response to the coffee and cocoaboom, Ivory Coast increased aggregateinvestment by 120 percent in real termsfrom 1973-75 to 1977-79, and sustained itlater by external commercial borrowing.Domestic inflation accelerated and, by1978, it was clear that investment had tobe cut. Kenya, by contrast, channeled lessof the coffee boom proceeds into thepublic sector. Despite increases in publicspending, much of it on defense and toreplace the former East African Com-munity institutions, the overall budgetremained under control althoughdevelopment-oriented recurrent outlaysfell far below needed levels. Similarly,Niger had utilized only three-quarters of

the proceeds of its post-1975 uraniumboom by 1979.

The experience of these price fluctua-tions highlights the need for:

Careful analysis of export priceprospects. Treating a boom as temporarymakes it easier to plan the right mix ofexpenditure and saving.

Effective controls on spending. Animportant factor in Ivory Coast's invest-ment surge was the management of theAgricultural Price Stabilization Fund (the"Caisstab"). This received the exportrevenue surpluses, but operated largelyoutside formal budgetary control. Inlogo, budgetary procedures were by-passed or abandoned.

Productive investment based on care-ful project selection. Some 17 percent ofIvory Coast's investment program was for12 sugar complexes (later cut back to 6)that would have produced an exportablesurplus at production costs well aboveworld prices, logo, small and poor,undertook ambitious projectsan oilrefinery, a steel mill, a thermal powerplant, hotels.

These principles cannot be imple-mented unless there are effectivearrangements for analyzing price pros-pects, scrutinizing and deciding uponinvestment prospects, and evolvingdevelopment strategy. Many countries,especially in Africa, lack the means ofdoing this work. High priority should begiven to developing the finance and plan-ning ministries and to making greater useof their capabilities in decision making.

74

Adjustment problems and prospects

One result of the above analysis of thesemi-industrial and primary produc-ing groups is its suggestion that therewas only a weak association betweenthe magnitude of external shocks in1974-78 and response in terms ofeconomic growth rates after 1973, rela-tive to 1963-73. This does not meanthe shocks were unimportant;rather, their effect for these coun-tries depended significantly onthe trading environment andinternational capital flows, oninternal developments anddomestic management, as well ason underlying structure. A num-ber of middle-income countrieswere able to borrow commercialcapital extensively and expandexports in the 1970s. The mainpolicy issue they face in the 1980sis how far they need to modifytheir development strategy to dealwith the changing internationalenvironment.

A more turbulent world econ-omy leads an oil-importing devel-oping country to consider twokinds of strategic changes. Thefirst is to adopt a more outward-oriented stance, to make productsin which the country has a com-parative advantage and to allowimports to compete with all but alimited range of domestically pro-duced goods. The second is to aimfor greater self-sufficiency in awider range of goods and toreduce trading links with the restof the world over and above whatis dictated by comparative advan-tage, in the hope of lesseningvulnerability to external shocks.

The record shows that as awhole the group of countries opt-ing for the first course (for exam-ple, Chile, Ivory Coast, Philip-pines, Singapore, South Korea,Thailand, Tunisia, Uruguay)managed to effect adjustmentwith only a temporary interrup-tion in growth. Compared withthe group of economies that main-

tamed or turned to inward-look-ing policies (for example, Argen-tina, Brazil, Colombia, Israel,Jamaica, Kenya, Mexico, Morocco,Peru, Portugal, Turkey, Yugo-slavia, Zambia), they were able to:

expand both export marketpenetration and import substitu-tion and

eventually reduce reliance onadditional external financing. Fur-thermore, the outward-orientedeconomies were characterized byan improved savings performanceas well as increasingly efficient useof investment. (This was true of anumber of the inward-orientedeconomies as well.)

EXPORT MARKET PENETRATION.

The superior export performanceof outward-oriented economies isnot unexpected. It is not only amatter of competitive exchangerates, a unified system of incen-tives and access to duty-freeimported inputs for exportingfirms. Just as important, pro-ducers are acutely aware of the vir-tues of quality control and promptdelivery and have experience inchanging product composition inresponse to shifts in foreign de-mand. The box on South Koreaillustrates the impetus providedby a national commitment toexport-led growth.

IMPORT SUBSTITUTION. The rea-son outward-oriented economiesas a group are also more success-ful than the inward-orientedgroup in substituting for importsis that they ensure equal incentivesto production for export and homemarkets. Domestic productionmust therefore compete withimports which, under an out-ward-oriented strategy, usuallyextend all the way from rawmaterials to final consumer goods.This can allow considerable scopefor import substitution when

import prices rise. By contrast,complicated systems of licensingand control can make importsubstitutes virtually nontradeablein inward-oriented countries.Imports are generally limited toessential material inputs andmachinery for which domes-tically produced substitutes aredifficult to find.

EXTERNAL FINANCING ANDDOMESTIC SAVING. Outward-oriented economies used externalfinancing to cover increases in theprices of imports until they wereable to pay for them withincreased exports. Finance bor-rowed at the beginning of 1974-78was invested productively. In allthese countries, most of the extrainvestment needed to effect ad-justment was financed byincreased domestic saving, andtheir strong export performancemeant that debt-service ratios roseonly slightly. By contrast, relianceon external borrowing was signifi-cantly greater in the inward-look-ing group that did not undertakestructural adjustment.

POLICY LESSONS. Outward-oriented economies have a higherproportion of trade in GNP thancountries following an inward-looking strategy. External shocksinflicted upon them a larger loss inrelation to GNP. But their eco-nomic performance is lessdamaged by external shocks andultimately is less dependent onforeign finance. They may have toaccept some temporary loss ofgrowth momentum duringadjustment while they boostexports, restrain imports andattempt to control imported infla-tion. But growth can be expectedto pick up, because their form ofadjustment need not usuallyinvolve deflationary cuts for anylength of time. This is perhaps themost valuable lesson of the ad-

75

justment experience of semi-industrial and primary producingcountries.

It follows that countries tryingto cope with external disturbancesin the 1980s should move towardpolicies that provide equal en-couragement to export and do-mestic production, and adequateincentives for savinga conclu-sion that would, however, needqualification if there were to be amarked deterioration in the inter-national trading and financialenvironment. It is important thatfunds borrowed abroad beapplied toward productive invest-ments which enhance the coun-try's capacity to produce exportsand curb imports. For this reason,the uses to which external financeare put require careful monitor-ing. (The box on managing wind-fall gains is again relevant.) Thiswill be helped by more carefulproject selection, especially whereinvestments involve intensiveenergy and foreign exchange use.

Such domestic policy reform isnot easy. It takes time beforemoves toward a more symmetricsystem of incentives to exportsand domestic production begin toelicit a larger supply of exports.Increased savings will not mate-rialize unless there is general con-fidence in the authorities' abilityto manage the economy. Thisillustrates two things. First, it isimportant to persist with theabove policies even in the face ofpossible short-term setbacks.Second, policy reform will usuallyneed to be supported during atransitional period, as in thePhilippines and Uruguay (seeboxes), by substantial externalfinancing.

Borrowed foreign exchange insupport of a liberalization pro-gram can provide essential inputsfor export industries. It can alsofinance a flow of imports to mod-erate inflationary pressures. Infla-

76

The PhilippinesA change in political conditions in theearly 1970s was accompanied by a switchin economic policy toward greater out-ward orientation Public infrastructuralinvestment was stepped up, while familyplanning programs and partial landreform started to tackle the country'spopulation growth and heavy depen-dence on imported food.

The economy ran into externaldifficulties after 1973, when its exportmarkets became less buoyant and theprice of imported oil rose sharply. Theterms of trade declined by 36 percent be-tween 1973 and 1976 (see figure). Exportvolume fell by 11 percent in 1974 butrecovered quickly in 1975 and 1976, withsubstantial gains in market shares beingrecorded in nontraditional primary aswell as in manufactured exports. Thegovernment's commitment to growth ledto continued expansion of domesticdemand, a high investment-to-GDP ratio,larger imports and an increasing currentaccount deficit (see figure).

The Philippines then negotiated anextended arrangement with the Interna

Philippines

Export and import volumes(2963 - 100)

300

250

200

150

Current account and componentsBillions of dollars, Current 7Y1CO5

.5

1,0

1,5

20Ax. 1963 70 71 72 75 74 75 76 77 78 79

69

130

120

110

100

80

70

Philippines

Terms of trade, 1970-79

11971-73 = 100)

/1970 71 72 73 74 75 76 77 78 79

tional Monetary Fund (IMF) amountingto about $266 million for the period1976-78. The principal quantitativetargets of the extended arrangement pro-gram were an average annual GNPgrowth of 7 percent; an annual inflationrate of not more than 7 percent; and areduction of the current account deficitfrom 6 percent of GNP in 1975 to 4 percentby 1978. Toward these ends, the programenvisaged various structural changes andpolicy adjustments including (1) anincrease in the ratio of domestic fixedinvestment to GNP with a shift in theinvestment pattern in favor of infrastruc-ture, the energy sector, and export-oriented and labor-intensive industries;(2) an increase in the ratio of domesticsavings to GNP, partly through a strongtax effort; and (3) effective demandmanagement policies. Most of the princi-pal targets were broadly attained. Pricesof electricity, transportation and gasolinewere increased; tariffs were lowered anddomestic credit and external borrowingwere effectively controlled. Domestic sav-ings rose from 20 percent of GDP in1963-73 to 25 percent in 1978 (see figure);and exports of labor-intensive industriesincreased at 40 percent per annum. Dur-ing 1976-78 the Philippines purchased anadditional amount of about $206 millionunder the compensatory, oil, and bufferstock financing facilities of the IMF.

The external position deterioratedagain with the second large increase in oilprices in 1979. Although a recovery in theprices of some primary commodities con-tributed to a large increase in nominalexport earnings, the current accountdeficit widened to $1.6 billion (5.4 percentof GNP) in 1979 and an estimated $2.2

76 79

100

Av. 1963 70 71 72 73 74 75 76 7769

billion (or 5.8 percent ot GNP) in 1980.The recessionary effects of deterioratingterms of trade led to a slowdown in GNPgrowth from 6.3 percent in 1978 to 5.8percent in 1979, and an estimated 4.7 per-cent in 1980. Inflation, which rose to 19percent in 1979, has decelerated signifi-cantly since then despite the govern-ment's policy of passing through energyprice increases.

Notwithstanding policy improvementsof the 1970s, the balance of payments stillreflects a number of underlying structuralrigidities. The country continues to relyon traditional commodity exports formore than two-thirds of its foreignexchange earnings, and industry is toogreat a net burden on the balance of pay-ments. More than 80 percent of the econ-omy's energy is supplied by imported oil,which has raised oil's share in totalmerchandise imports from less than 12percent in the early 1970s to over 25 per-cent in 1980. While there are no immedi-ate constraints on foreign borrowing,deficits of 6 percent of GNP Cannot befinanced indefinitely. During the pastyear, the government has thereforeundertaken measures to promote struc-tural adjustment, in close consultationwith the World Bank. These include pro-viding further encouragement to therapid growth of manufactured exports,improving the efficiency of industrialinvestment, and deregulating the finan-cial sector to promote greater resourcemobilization. The structural adjustmentprogram is expected to reduce the currentaccount deficit toward sustainable levelsby 1985.

Philippines: savings andinvestment rates, 1963-73 and1973-79

Percentage of GDP, constant prices

30 -

An.

1963-73Av.

1973-79

) InvestmentSavings

UruguayIn a number of respectshealth and lifeexpectancy, political representation,education levels and an equitable incomedistributionattempts initiated inUruguay since the turn of the century toestablish a European-style welfare statehad met with considerable success. Buteconomic performance was marked byinflation, periodic balance of paymentscrises and declining per capita income.The burden of supporting social over-heads, and weak import-substitutingindustry hampered by minute marketsize, fell entirely on livestock and agri-culturesectors of natural Uruguayancomparative advantage. Protectionist,inward-looking policies discriminatedagainst traditional exporting sectors andhindered any potential expansion ofmanufactured exports. Consumption leftlittle room for modernizing and augment-ing capital. For about 30 years until 1974,the economy grew very slowly; in1964-73, GDP growth averaged only 1.2percent a year (and GDP actually fell by1.5 percent a year in 1971-73).

The peaceful political consensus couldnot survive economic stagnation. As

140

120

100

80

60

40

Uruguay

Terms of trade, 1970-79

(1971-73 - 100)

op I I I I I

1970 71 72 73 74 75 76 77 78 79

unemployment rose, particularly amongthe young, and redistributive mecha-nisms involved successively smallerbenefits being divided among an expand-ing number of people, Uruguay began toexperience political upheaval, whichthreatened to destroy the social fabric ofthe country established over severaldecades.

The changes in the world economyafter 1973 had a dramatic effect onUruguay's external position. Importprices doubled, while the prices of beefand wool (the main exports) declinedby 35 percent and 24 percent respectivelyin 1975. Uruguay was also harmed by theagricultural policy of the EEC, which dur-ing the 1970s shifted from being a net beefimporter to a substantial exporter. Thecurrent account, which had run a surplusbefore 1973, swung into a deficit averag-ing 4.4 percent of GDP in 1974-75 (seefigure). To cover that deficit, Uruguayinitially relied on foreign borrowing (out-standing debt increased by 35 percentbetween 1974 and 1976) and by runningdown its international reserves.

Rather than attempting to reduceimports, however, the new governmentwhich came to power in 1973 decided toalter development strategy. The economywas gradually opened to internationaltrade. Most domestic prices weredecontrolled, import quotas were elimi-nated and tariffs and other restrictionswere progressively reduced. Foreigncapital movements were liberalized, andthe real exchange rate (the nominal rate

(continued overleaf)

77

Uruguay

Export and import volumes

(1963 1001

300

250Exports

100

1II I I I J I

An. 1963 70 7169

Current accountBillions of dollar,, current

-

--I.

72 73 74 75 76 77 78 79

and componentsprices

Trade balance

I Balance on servicesand transfers

iii .r

.2 /Current account

.3-

-.4 I I II

Ày. 1963 70 71 72 73 7469

11 If

balance

I

75 76 77 78 79

25 -

20 -

15 -

10 -

5

0

adjusted for changes in Uruguayan rela-tive to US prices) was devalued by over 20percent in 1974-77. This stimulus toexports was reinforced by rebates,preferential credits and tax relief forexporters. Attempts were made to stimu-late savings and improve the allocation ofinvestible resources through removal ofrestrictions on interest rates.

The new strategy did not affect all sec-tors of the economy evenly. However, itled to a number of desired results.

S GDP growth rose sharply, averaging3.9 percent a year in 1974-79. Employ-ment expanded, though real wages mayhave fallen somewhat between 1973 and1979.

20-

15

Uruguay: savings andinvestment rates, 1963-73and 1973-78

Percentage of GDP, constant prices

25

Av. Av.

1963-73 1973-78

Savings

Investment

Manufactured exports increasedtheir share of the international market bymore than three times between 1973 and1978; import substitution played only aminor role in reducing the trade deficit.By 1978 the current deficit had declined to$127 million, from $189 million in 1975.

Both investment and saving in-creased their shares in GDP (see figure).This was accompanied by a rise in therates of capital utilization.

Although disbursed debt rose fromthe equivalent of 12.5 percent of GNP in1973 to 19.9 percent in 1976, it fell to 17.7percent by 1978.

Rising world oil prices increased oilimport costs by 40 percent in 1979.Responses have differed considerablyfrom those adopted in 1974. The exchangerate was allowed to appreciate, in realterms, as a means of reducing domesticinflation. But unless inflation can bebrought down rapidly enough, this mayreduce incentives to exports and importsubstitution.

In certain respects the Uruguayaneconomy is better placed to cope with anincreased deficit than it was in 1973.Dependence on imported petroleum isslowly being reduced as hydroelectriccapacity expands, and the economy'sability to adjust flexibly to external shocksis not in doubt. Substantial foreign bor-rowing will probably be required in theearly 1980s; so debt-service ratios arelikely to rise. But if fiscal, credit and tariffpolicies continue to be coordinated toreduce inflation, and incentives todomestic savings can be increased,Uruguay should be able to consolidate itsexternal position and maintain theimproved growth rates of the 1970s.

tion can arise not only from theinitial increase in imported oilprices but also from devaluation(frequently the centerpiece of aliberalization program), whichfurther raises the domestic cur-rency price of imports. Withoutexternal borrowing, governmentsmay avoid domestic policy reformfor fear of precipitating internalunrest and a foreign exchangecrisis. In turn, external financingunsupported by policy reformmay simply postpone rather thanavert a crisis.

78

Although the association be-tween external shocks and eco-nomic growth was weak for thesample of middle-income coun-tries analyzed above, it was im-portant for some of the poorerand more inflexible primary pro-ducers. The experience of Zambia(see box) suggests that a policy ofdiversifying the economy awayfrom mining could probably haveprevented no more than a third ofthe precipitous fall in nationalincome from 1974 to 1978. Theother two-thirds could be attrib-

ZambiaZambia's terms of trade deteriorated by 52percent between 1974 and 1978. From apeak in 1974, copper prices fell by 40 per-cent in 1975, while import prices rose byan average 16 percent a year. Wars inneighboring Angola, Zaire and Zim-

500

400

300

200

100

current account and components

Silhio,,s ,f lI,,,,, ru,-,,,,t+1.00

Zambia

GDP and GOY per person and terms oftrade, 1970-80

1970 dollars

600

is-

1975

1970 72 74

1.251970 71

Balance on eeM,ee and tran:fn: II

'VCur,ent account balance

76 78 80

77 78 79

uted to structural factors. Thishighlights the importance of:

policies to promote agricul-tural and other nonmining ex-ports; and

financing to ease adjustmentto external shocks in a mineraleconomy until some diversifica-tion has been achieved.

Low-income oil importers

Populous South Asia

In common with other low-income countries, the large,

74 75 7672 73

+0.75 -

+0.50 -

*0.25 -

0.25 -

0.50 -

0.75 -

babwe (then Rhodesia) disrupted Zam-bia's rail links to the coast and increasedtransport costs. In 1979 a serious drought:ontributed to a 9 percent fall in agri-:ultural production.

Mining dominates Zambia's exports,accounting for 95 percent of the total; inurn, exports make up 40 percent of GDP.[he terms of trade deterioration therefore:aused a huge reduction in nationalncome. Adjusting GDP by the changes in-he terms of trade produces a figure forgross domestic income, GDY. Per person,GDY has been falling continuously since[965; the fall accelerated in 1974-78, soGDY per person was less than half of its[965 level (figure).

Part of this fall was borne by lowernvestment, but consumption per person

has also declined sharply. Rural house-holds, especially those in peripheralIreas, have suffered declines in alreadylow incomes; there are serious shortages,f basic consumer goods, as well as

edicines, drugs, school equipment, andtransport; and child health and nutritionhave probably deteriorated. One indica-tion of this is the spread of scabies, aJisease associated with unhygienic:onditions, reported cases of whichncreased eighteenfold in 1973-78. Inrban areas, wage employment and real

sages have fallen and expenditure on:ommunity services has been cut.

Since independence in 1964, theIovernment has had only limited successn diversifying the economy away fromTuning.

Agriculture, in which Zambia hasibundant potential, has been neglected.[he rural-urban terms of trade haveihifted against agriculture. Despite

increases in official producer prices,agricultural prices generally have beenbelow border equivalents. Governmentsupport services have been inadequateand have deteriorated under budgetarypressure; state farms, rather than smallfarmers, have absorbed large resources;marketing arrangements have been cum-bersome and wasteful.

Industrial policy has emphasizedimport substitution, although industry islargely dependent on imported inputs.By 1978 industrial inputs accounted for 56percent of total imports. As foreignexchange became scarcer, they had to becutresulting in excess capacity andunemployment.

The pattern of investment has tendedto favor projects with long payoff periods,thus restricting employment and outputbenefits in the short and medium term.New investment has been given priorityover maintenance and completion ofongoing projects, resulting in high costs,bottlenecks and low returns. The level ofurban real wages has discouraged labor-intensive activities.

Despite two devaluations since 1975,the real exchange rate (the nominal rateadjusted for changes in Zambian relativeto world prices) appreciated by about 25percent from 1974 to 1979. In conjunctionwith the protection conferred by tariffsand import controls, this has discouragednonmining exports.

Administered prices have com-pressed parastatal revenues and led toheavy subsidization. Between 1965 and1973, government spending, includingsubsidies, rose almost twice as fast asrevenues.

With different policies, Zambia would

have been able to slow the decline inincomes after 1974; but it would still havebeen seriously affected. It might, forexample, have succeeded in raising itsnonmining exports to 20 percent of thetotal by 1974 (implying that their volumewould have increased by more than 20percent a year in 1965-74). If these non-traditional exports had continued to growat 5 percent a year after 1974 and hadexperienced moderately favorable pricemovements, and if food imports had beensubstituted by domestic production,about one-third of the fall in GDY from1974 to 1978 could have been avoided. Buteven with those optimistic assumptions,two-thirds of the fall was unavoidablegiven Zambia's structural dependence oncopper.

Higher copper prices in 1979 and anIMF-supported adjustment programhelped reduce inflation, but GOP fell 9percent. In 1980 preliminary indicationssuggest that it grew only 1 percent.

Future growth requires the allocation ofmore foreign exchange to mining in thenear term and greater emphasis on diver-sification as well as some basic reforms ofinstitutions and economic policies for thelonger term. Zambia's structural inflex-ibility will take many years to overcome,and meanwhile the country will remainvulnerable to terms of trade fluctuations.Adjustment will therefore be hard toaccomplish without balance of paymentssupport (in part provided by an IMFExtended Fund Facility of $1,040 million,approved in May 1981), with special atten-tion given to safeguarding the position ofthe poor.

densely populated countries ofSouth AsiaBangladesh, Indiaand Pakistanare heavily depen-dent on agriculture in terms ofboth GDP and employment. ButIndia and Pakistan, in contrast tomany sub-Saharan African coun-tries, have large, diversifiedmanufacturing industries andenormous numbers of skilled peo-ple. Manufacturing output hasgrown at just under 5 percent ayear over the past two decades inIndia; in Pakistan it grew at nearly10 percent in the 1960s but only 4

percent a year in the 1970s.Manufacturing's high share inGDP (over 15 percent) and inmerchandise exports (over 50 per-cent) makes these countriesalmost semi-industrial in struc-ture and gives them a range ofadjustment options wider thanthose available to other compara-bly poor countries.

It will be recalled that populousSouth Asia is the only countrygroup for which the exportshortfall was significantly lessimportant than price effects.

Adjustment was helped by threefactors (see box on India, overleaf):

a strong agricultural per-formance based on the introduc-tion of high-yielding seed varietiescombined with fertilizer andirrigation (this reduced the needfor food imports);

workers' remittances fromthe capital-surplus oil-exportingcountries; and

an increasing level of aid.Growth, which had averaged

around 3.5 percent in the decade1963-73 for this group of coun-

79

IndiaGNP grew by an average 3.4 percent ayear in 1964-73; it then accelerated to 4.3percent a year in 1974-79, despite thesharp rise in oil prices. This considerableachievement can be attributed to bothshort- and long-term factors. The mostsignificant change was in:

Agriculture. In the past four years,India has imported hardly any food-grains, and built its stocks up to unprece-dented levels (see figure). As a result

Export and import volumes

(1963 = 100)200

175

150

125

Current account and componentsBillIon, of dollar.,, Current prices

+2

+1.5 -

+1 -

-1 -

India

Current account balance-

Eupnrts

Imports

Ày. 1963 70 71 72 73 74 75 76 77 78 79-69

India

Terms of trade, 1970-79

(1971-73 = 100)

120

110

0 I I I I I I I

1970 71 72 73 74 75 76 77 78 79

India was able to manage the conse-quences of a severe drought in 1979without resorting to significant foodgrainimports. Over the 1970s as a whole,foodgrain production rose at an averageof almost 3 percent a year, compared withpopulation growth of 2.2 percent a year.

While the weather is still a major factorin Indian agriculture, the spread of irriga-tion and modern farming techniques hasprovided greater security. So far the big-gest difference has occurred in wheatfarming in the north-western states ofPunjab, Haryana, Uttar Pradesh andspreading eastward into West Bengal. Butfertilizer use and high-yielding varietiesof seeds are starting to affect rice as well,and this has particular relevance for someof the poorest states in the east and southof the country.

By virtually ending foodgrain imports,India has saved substantial amounts offoreign exchange, helping it to pay formore expensive oil without curbing other

imports. It also received the benefits of:Migrants' remittances. In the

mid-1970s, the number of Indian workersin the Gulf states increased considerably.Their annual remittances rose from lessthan $250 million in 1974 to an estimated$2.4 billion in 1980.

The combination of increased remit-tances and savings on grain importsallowed India to run a current accountsurplus in the three years 1976-77 to1978-79 (see figure). As a result, India'sforeign exchange reserves rose to a peakof over $7 billion in 1979. By 1977 thegovernment was able to take advantage ofthis situation by relaxing some importrestrictions on:

Industry. India's policy of importsubstitution has produced a diversifiedindustrial base. Investment has risensubstantially and has been financed by

Millions of metric tons140

130

120

110

101)

90

80

70

60

10

0

India: foodgrain production,imports and stocks, 1955-81

Imports

Closing stocks

1955 60 65 70 75 80 81

Agricultural year ending June 30.Estimates for 19s0 and 1981.

tries, was boosted by a buoyantagricultural sector to roughly 4.2percent during 1973-79.

Bangladesh has fewer adjust-ment options than India andPakistan. It is classified by theUnited Nations as one of the leastdeveloped countries. Since inde-pendence in 1971, agricultural out-

80

put has failed to keep pace withthe needs of a population growingat 3 percent a year. The conse-quent cost of importing food-grains at rising internationalprices was part of the externalshock, and accounted for 40 per-cent of merchandise imports inthe mid-1970s. During that time,

economic difficulties were aggra-vated by political instability. Fewmeasures to promote structuraladjustment were taken; the coun-try relied mostly on external aidand on workers' remittances,which were second only to jute asa source of foreign exchange. Thegovernment has recently taken

lootAv. 1963 70 71 72 73 74 75 76 77 78 79

-69

Balance on services+.5 - and transfers

Trade balance

u

J 'III I I

ment and will not be subject to prevailinglaws on foreign participation. As forinfrastructure, the Sixth Plan (running upto 1985) provides for much increasedinvestment in coal, power and railways.

In the short term, these changes can dolittle to ease the scarcity of foreignexchange that has developed in 1980 and1981. Almost 45 percent of India's importbill in 1980-81 was accounted for by oil.Migrant remittances are unlikely to growas rapidly as they did in the 1970s. Nor isaid, which played an important role in

8

India: industrial production,1947-80

1947 51 55 60 65 70 7651 55 60 65 70 76 80

cushioning the balance of payments afterthe 1973-74 oil-price increases. India istherefore facing a more demandingadjustment than before. Nevertheless, ifit continues its agricultural progress,adopts more outward-looking tradepolicies, improves the infrastructuralsupport for its industry, and continues toreceive external support for its develop-ment effort, India should be able torestore its external position withoutseriously slowing down its growth.

steps to switch resources intoagriculture, especially in low-cost,quick-gestating irrigation projectsand has introduced some incen-tives to encourage exports.

The 1979-80 oil-price rise, com-ing on top of the 1979 monsoonfailure, has worsened the externalposition of South Asia's largest

countries. Oil imports (net of re-exports of petroleum products)were 11 and 13 percent respec-tively of the total imports ofBangladesh and Pakistan in 1978;their share has increased over one-and-a-half times in India's case,rising from 24 percent to over 40percent.

While this is a difficult situation,there is some room for optimism.The response of India's exportvolumes in attaining a growth rateof nearly 7 percent between1975-76 and 1978-79, following ameasure of trade liberalization,indicates that its manufacturingindustry has the potential of com-plementing an increasinglybuoyant agricultural sector in rais-ing exports, restraining importsand effecting flexible adjustmentto external shocks.

Least developed countries

Foremost among the issues affect-ing least developed countries(mainly in sub-Saharan Africa,Table 6.1) is the difficulty ofseparating questions of adjust-ment from those of overalldevelopment. Their productivesectors are weak and inflexible.They lack the skills, the infrastruc-ture and the commercial andfinancial institutions to adjustrapidly to external shocks. Most ofthem rely heavily on a few cropsfor their export earnings: the threemost important commoditiesaccount for more than 80 percentof total exports in Burundi, theGambia and Uganda. They arepoor countries because they res-pond less readily to economicopportunities; they do not res-pond because they are poor. Thereare vicious circles of povertythroughout the developing world,but they are drawn tightest of allaround the least developed coun-tries.

It will be recalled from Table 6.2that export volume shortfalls aris-ing from slow growth in themarkets for primary productswere 10 times as important as priceeffects for the least developedcountries. But well over twice asimportant as the external shockwas the decline in their exportmarket shares, which was causedby domestic failures, particularly

81

Annual average percentage growth

10

lomestic savings for most of the past 20Tears. Yet in industry at least, extra invest-nent has not produced more rapidrowth. Since the mid-1960s, industrial;rowth has slowed (see figure). This cane attributed partly to a sluggish rise in

domestic demand and the fact that Indianindustry has benefited little from thecale economies of exporting to worldnarkets. In addition, industrial licensingias restricted the entry of new firms intoome industries and, in others, limited

the expansion of existing firms. But anore significant cause has been supplyonstraints at home, in particular:

Infrastructure. During the 1970spower shortages have become chronic.

hey are less the result of inadequateapacity than of the poor performance ofxisting capacity, itself due to input short-

ages compounded by maintenance andnanagement failures. On governmentestimates, electricity shortfalls averaged12 percent a year between 1975 and 1980.As a direct result, GDP may have been cutby 2 percent a year.

The power industry has also been hitby shortages of coal. In the three years1977-78 to 1979-80, coal production stag-tated although it picked up again in1980-81. Constraints on railway operationthrough such factors as labor disputesand power shortages have also restrictedthe movement of coal that was produced.Failings in these three infrastructural cor-nerstonescoal, power and transporthave all been interconnected.

Official policy aims to correct all thesedomestic constraints. Licensing require-ments have been eased, allowing com-panies in core sectors to expand theircapacity by 5 percent a year for five years.Export production has been exemptedfrom licensing restrictions for all units,while units exporting all their output willbe exempt from all import controls andduties, will receive favorable tax treat-

in agriculture. This has been duepartly to the lack of researchadapting farming methods toAfrica's varied soil and climate,and partly to the shortage oftrained personnel to implementwhat is already known. But therewere also other reasons. By keep-ing agricultural prices low, gov-ernments have tapped agricul-tural surpluses to finance theprovision of cheap food and otherbenefits for urban populations.The situation has been exacer-bated by inefficient arrangementsfor the delivery of inputs to andthe marketing of produce from theagricultural sector. In a number ofcountries, drought, wars and civilstrife have also taken their toll.

The neglect of agriculture hasled to increasing reliance on foodimports and on foreign aid tofinance those imports. Combinedwith weak export performance, ithas also forced countries such asSudan and Tanzania to compressimports to the point where anyfurther reduction would depresscurrent incomes as well as seri-ously jeopardize the prospects forexport expansion and economicgrowth.

The growth record of the leastdeveloped countries of sub-Saharan Africa has been dis-couraging. After averaging about3.5 percent a year in 1963-73, GNPgrowth slowed to nearly 3 percenta year in 1970-73 and did notimprove in 1973-79. Through-out, population grew at well over 2percent a year, leading to a declinein average incomes for severalcountries.

External shocks, while not amajor problem in the mid-1970s,hit the economies of sub-SaharanAfrica particularly hard towardthe end of the decade. The pri-mary commodity boom of 1976-77led to substantially increasedforeign borrowing on hard termsand rising public spending in a

82

number of countries. The subse-quent fall in commodity prices in1978 and the 1979-80 round of oil-price increases leave sub-SaharanAfrica in the throes of a severeeconomic and financial crisis. Anumber of debt reschedulings arecurrently underway. Others maywell follow, as extensive arrears inpayments have accumulated inseveral countries.

Adjustment problems andprospects

Agricultural performance hasbeen the key feature distinguish-ing the growth record in populousSouth Asia from that in thepoorest countries of sub-SaharanAfrica. India's considerableprogress in raising agriculturalproductivity has made it virtuallyself-sufficient in foodgrains.Throughout South Asia, there ismuch still to be done to improveagricultural yields; but the poten-tial has already been demon-strated, the means of fulfilling itare already known.

In manufacturing too, SouthAsia has considerable scope forexpanding output and exports.The case study on India (see box)has identified bottlenecks in basicinfrastructure as being among theconstraints inhibiting manufac-turing production and exports.Such obstacles to extra productionof tradeabies have to be sur-mountednot least through acombination of external financingand domestic savings to augmentcapacity in non tradeables, for exam-ple, power and transportation.This cannot be accomplished byshort- to medium-term loansdesigned to provide balance-of-payments support. The situationexemplifies a general principle:low-income coun tries require ion g-term external finance for adjustment.

For sub-Saharan Africa, thepolicy priority is to promoteagriculture and agricultural

exports. One significant source ofdiscrimination against agriculturalproduction and exports has beenthe attempt to industrializebehind overvalued exchangerates. The appeal of this strategyderives partly from the fact thatthe alternativedevelopmentthrough primary production andthe gradual diversification ofexportswas associated with col-onialism; and partly because itappeared to offer an avenue torapid industrialization as an insur-ance against low and unpredicta-ble commodity prices.

Past experience points todifferent conclusions. Table 6.2has shown that, for lowest-incomesub-Saharan Africa, supply sideconstraints to expanding exportmarket shares were far moreimportant than adverse externalshocks. Furthermore, countriessuch as Ivory Coast, Malawi and,in the 1960s, Kenya, which limiteddiscrimination against primaryproduction and exports, were ableto expand export volumes andincrease their purchasing powersignificantly. Agriculture in allthese countries responded well toprices and other incentives; withthe right encouragement, andgiven time, it can turn to advan-tage such opportunities as are pro-vided by the international envi-ronment.

The potentially importantrole of the agricultural sector ineffecting adjustment and thedrain on current surpluses causedby present policies should promptgovernments in sub-SaharanAfrica to consider reforms thatcover exchange rates, internalpricing and public sector subsidiesas a matter of priority. They willencounter opposition frompowerful vested interests. But theinefficiencies associated with cur-rent policies can hardly be toler-ated in a decade when externalshocks will probably be no less

TanzaniaTanzania's current economic position isprecarious. Already one of the world'spoorest countries, its GDP per person fellby nearly 5 percent in 1980, and it nowfaces an external financial crisis. The realvalue of imports in 1980 was below its 1973level despite a 150 percent real rise ingross disbursements of external aid. In1980 oil imports absorbed 40 percent oftotal export earnings, drought-relatedfoodgrain imports a further 20 percentand debt service another 9 percent. By the

Export and import volumes

(1963 = 1110)200

175

150

125 -

50

25 -

Tanzania

0) I

1970 71 72 73 74 75 76

Current account and components

Billions of dollars, current prices

Imports

77 78 79

1970 71 72 73 74 75 76 77 78 79

150

140

130

120

110

100

90

Tanzania

Terms of trade, 1970-79

(1971-73 = 1001

1970 71 72 73 74 75 76 77 78 79

end of 1980 net reserves were negative,and external payment arrears hadreached $286 million, half the value ofmerchandise exports.

Nevertheless, there is much that can bedone to maintain Tanzania's economicand social gains, provided that appropri-ate policies are adopted and additionalaid is forthcoming. In deciding on"appropriate" policies, one of the criticalissues is the extent to which adjustmentconflicts with Tanzania's economic andsocial priorities. They emphasize a self-reliant socialist society and rural develop-ment based on li/anna, a form of informalcooperative production. Those objectiveshave guided Tanzania's past efforts toachieve adjustment although in practiceTanzania has become more dependent onoutside assistance, and rural develop-ment has been neglected.

In 1974-75, Tanzania faced a markeddeterioration in its external position,caused in part by higher oil prices, butmore seriously by drought-induced foodimports (at peak international prices) anda drastic fall in export volumes. Thegovernment responded by increasing

agricultural prices (particularly for foodcrops), restricting credit, increasing taxes,and controlling imports more strictlywhile continuing to expand social pro-grams (especially in education andhealth) and increasing the minimumwage. The shilling was devalued in 1975.Public investment was curtailed in1975-76.

The program was carried out in a spiritof sacrifice and austerity. Increased aid(on concessional terms), some use ofreserves, and borrowing from the IMFhelped cover the external shortfall in 1974and 1975. In 1976 and 1977 the currentaccount deficit was reduced (see figure),largely as a result of improved exportprices, particularly for coffee. But by 1978,difficulties resumed. Export prices andvolumes fell, war broke out with Uganda,the effects of the break-up of the EastAfrican Community made themselvesfelt, and adverse weather affected foodoutput.

While there was temporary success inreducing food imports, the adjustmenteffort in the 1970s failed to revive the pro-

(con tin ued over1ea

Tanzania: savings andinvestment rates, 1963-73and 1973-79

Percentage of GDP, constant prices

25

20 - - Investment

Investment

savings5-Savings1

0

Av. Av.

1963-73 1973-79

significant than they were in1979-80.

External assistance and domes-tic policy reform can and shouldbe mutually reinforcing. Theurgent need for policy reformmust be tempered by a recogni-tion of what domestic policy alone

can achieve in the poorest coun-tries, particularly in the short run.And the role of external assistancein fostering adjustment withoutexcessive cuts in growth cannotbe underestimated. For oil-import-ing African countries as a whole,policy reform (exemplified by

Zambia and Tanzania, see boxes)could improve growth rates by asmuch as 2 percent throughout the1980sfrom 2.4 to 4.2 percent inthe Low case, and from 3.0 to 5.0percent in the High case (Chapter2). But such policy reform isunlikely in the conditions of fall-

83

+2

+1 -

B

Balance on services

-Trade

!

and transfersbalancn

p

1 --2 -

-3 -

4 --

6 -7 --8 I I I I I I I I I

15 -

10-

ductive and monetized sectors or toreverse the secular decline in exportvolumes that began in the early 1970s.In part, structural weaknesseslowproductivity, lack of maintenance,undeveloped infrastructure, manpowerconstraintslimited the effectivenessof efforts to increase production in theshort term. But several other factors,more susceptible to government con-trol, also prevented adjustmentmeasures taking full effect:

Institutional transformationmostnotably, the nationwide "villagization"campaign, the replacement of coopera-tives by parastatals and the overlappingresponsibilities of party and govern-ment agencieschanged courseseveral times and disrupted agriculturefor much longer than expected.

Producer prices for export crops fellby almost one-third in real terms, com-pletely wiping out any potential benefitfrom the 1975 devaluation.

Setting investment plans at levelsthat eventually proved unsustainablemeant that many projects were imple-mented slowly and remained un-completed for extended periods. Mainte-nance budgets were underfinanced.

Pervasive government controlsduring periods of shortages led toexpanding unofficial markets andsmuggling and eliminated producerincentives.

Of the factors inhibiting adjustment,none need require revisions which con-flict with Tanzania's developmentobjectives. However, some changes instrategy are urgently needed. Greaterwillingness to permit markets to func-tion is not incompatible with ujamaa;neither is the recognition that somestate controls may be self-defeatingwhile skilled manpower is limited. Con-tinuing external support for Tanzania,especially for food aid and to financethe operating costs of social programs,would facilitate adjustment. It would alsolessen the conflictto the extent that oneexistsbetween growth and equity.

ing per capita income implied bythe Low case. The combination ofpolicy reform and High case levelsof assistance could together im-prove Africa's growth prospectsdramatically. But these are coun-tries where, even under satisfac-tory policies, growth prospects

84

Upper VoltaUpper Volta, a landlocked country in thecenter of West Africa, is one of the poorestcountries in the world. Its GNP per per-son was $180 in 1979. It lacks most of thehuman and physical resources needed topromote development. Its literacy ratewas only 5 percent in 1972, comparedwith an average of 39 percent for low-income countries in 1976; many of its bet-ter-educated, younger people emigrate.Agriculture constitutes a livelihood forover 80 percent of the population, andaccounts for 40 percent of GDP and 90percent of total exports. Yet the soil ispoor and heavily eroded. Rainfall isunreliable. The country's few mineraldeposits (primarily manganese and rockphosphates) are expensive to exploit.

Given these overwhelming constraints,the scope for adjustment to changedexternal circumstances is very limited.Government policies have been generallyconducive to development; investmenthas increased, as has the share of importsin GDP (from 21 percent in 1970 to 40percent in 1977). The expansion of invest-ment and imports has been made possi-ble largely by substantial concessionalaid, by workers' remittances and, to alesser extent, by rising export earnings.Yet GNP growth has only marginally ex-ceeded population growth over the pasttwo decades.

The external position has tightenedsomewhat in 1979-81, reflecting higherpetroleum prices and a deterioration inthe terms of trade. Imports were reducedby 13 percent in 1979 under a stabilizationprogram supported by the IMF. There is

little scope for further trade adjustment,given the concentration of Upper Volta'sexports on primary products and the factthat imports cannot be reduced withoutcutting growth. The prospects thereforecontinue to depend on aid and remit-tances. But the aid outlook is deteriorat-ing (partly because of frustration with thelimited results achieved so far); and remit-tances may not rise so fast, as moreVoltaics settle permanently in other coun-tries. On almost any set of assumptions,Upper Volta faces abject poverty fordecades to come.

Two priorities stand out:A substantial increase in agricultural

productivity. Any program must includeincreased agricultural research, to adaptand apply the findings of crop research tolocal conditions. At present, modernagricultural techniques can be appliedeconomically to only a few crops in themore favored ecological areas. Thedevelopment of improved cultivationpractices should aim at increasing theefficiency of food production and con-serving scarce soil and water, particularlyon the central plateau where populationpressure is most intense.

Human development. Investment inbasic education and primary health carewould have major economic as well associal returns over the long term. But thegovernment's ability to meet operatingcosts is overstretched even by the lowlevel of services already provided. Thereis relatively little potential for increasingcoverage by reallocating spending orredesigning existing services. So a pro-gram on the scale needed would involve amassive infusion of foreign aid.

are so limited by physical andeconomic disadvantages that theywill continue to depend heavilyon aid for the foreseeable future(see box, Upper Volta).

Implications

Adjustment to the 80 percent realincrease in petroleum prices in1979-80 and the concomitantrecession in industrial countries isbeginning to get under way. Theadjustment options of the oil-importing developing countriesare currently more constrainedthan they were in the mid-1970s,

because of the higher cost of pri-vate capital, the dimmer prospectsfor concessional assistance and amore modest rate of increase inworkers' remittances. There arenonetheless many similaritiesbetween the two episodes,especially in the nature of externalshocks confronting the develop-ing world. This should make thelessons learned from the presentstudy of 1974-78 experience par-ticularly valuable in shapingadjustment policies which canpromote growth with equity in the1980s.

China: adjustment and reform

Development efforts in Chinahave consistently been directedtoward two main objectives: first,industrialization, and in particulardevelopment of a heavy industrialbase; second, elimination of theworst aspects of poverty. Chinesedevelopment strategy has alsobeen shaped by two major con-straints: an extreme shortage ofcultivable land in relation topopulation and a high degree ofinternational isolation.

The Chinese response to theseconstraints has been to approachthe two objectives in two differentways. Following an initial phase ofproperty redistribution, povertyreduction mainly through ruraldevelopment and the provision ofbasic social serviceshas beenbased largely on local resourcesand initiative, with a strong em-phasis on economy and technicalimprovisation. Communes,which form the basic units of therural economy, have alsoestablished some industries inrural areas. But industrializationhas been based mainly on a mas-sive infusion of centrallymobilized resources, with lessconcern for cost effectiveness, andusing technology largely de-scended from Soviet designs ofthe 1950s.

Tension between these twoapproaches has contributed tosharp policy oscillations. Never-theless, there has been substantialprogress toward the two mainobjectives. The share of industryin GDP (around 40 percent) is cur-rently similar to the average formiddle-income developing coun-tries. But because the share ofservices is much smaller than inother countries, agriculture still

accounts for 34 percent of GDPand over 70 percent of employ-mentsimilar to the average forlow-income countries. Around 85percent of the population, more-over, lives in rural areas.

Per capita GNP (when adjustedto allow for the unusual structureof prices in China) appears to havegrown at an annual rate of 2.5 to3.0 percent in 1957-79. This rate issignificantly above the average forother low-income developingcountries (1.6 percent in 1960-79)though well below the averagefor middle-income developingcountries (3.8 percent), and hasnot been high enough to pullChina out of the low-incomegroup. A high rate of domestic sav-ings (at 1970 prices, the marginalsavings rate in 1957-79 was over 40percent) has facilitated the rapidpace of industrialization, but hasat the same time caused consump-tion to grow significantly slowerthan income.

Nonetheless, China's mostremarkable achievement duringthe past three decades has been tomake low-income groups far bet-ter off in terms of basic needs thantheir counterparts in most otherpoor countries. They all havework; their food supply is guaran-teed through a mixture of staterationing and collective self-insurance; most of their childrenare not only at school but are alsobeing comparatively well taught;and the great majority have accessto basic health care and familyplanning services. Life expec-tancywhose dependence onmany other economic and socialvariables makes it probably thebest single indicator of the extentof real poverty in a countryis (at

64 years) outstandingly high for acountry at China's per capitaincome level (see box on povertyand human development inChina, page 101).

The need for adjustment

China's economic policies havebeen altered considerably in thepast few years, with the formula-tion of a program of "reform,adjustment, consolidation andimprovement." Its two main fea-tures are reform of the system ofeconomic management, includinggreater reliance on market forces,and a shift in emphasis frominvestment to consumption.

Though partly the result ofpolitical change, the new policieshave been motivated also by someimportant underlying economicconsiderations. In the past, theexpansion of output has beenbased on massive mobilization ofresources and fundamental insti-tutional change. Further progress,however, will have to be moredependent on increased efficiencyof resource use. In addition, thebenefits of technological isolationas a stimulus to improvisationhave been overtaken by its costs interms of backwardness and bot-tlenecks. And the remarkableprogress made in industrializationand in meeting basic needs has notbeen matched byand has cre-ated a demand fora commen-surately rapid rise in general liv-ing standards.

Prospects and options in the 1980s

Although slow populationgrowth, better access to foreignmarkets and technology, and

85

system reform have all improvedChina's economic prospects,especially in the longer term, thegovernment's drive to improve liv-ing standards will in the comingdecade be subject to a set ofinterlocking constraints. Some ofthese are of long standingagri-cultural land, foreign exchange,trained manpower. Others aremore recentdomestic energyproduction and financial re-sources for new investments(which are being squeezed be-tween the government's desire toreduce the savings rate and theclaims of an enormous existinginvestment program).

The scope for improving eco-nomic performance is particularlygreat in industry and energy.In terms of international trade,outward-looking policies shouldpromote a significant expansionof exports. In the short- andmedium-term, China could bor-row substantial amounts offoreign exchange to ease the tran-sition to a restructured economy.

Agriculture

The problems facing agriculture inthe 1980s are similar to those in thepast. On the demand side, food-grain production and food secu-rity will continue to require highpriority. But competition for landwill be sharpened by the newemphasis on raising living stan-dards, which will requirerelatively greater supplies of bothhigher quality foods andagricultural raw materials for lightindustry.

As regards supply, the amountof land per worker has shrunk,and some of the factors that haveraised yields so remarkably in thepastirrigation, fertilizer andchanges in cropping patternsare unlikely to help so much in thefuture. On the positive side, how-ever, substantial gains will prob-ably be realized through86

improved policies and manage-ment. Especially important is thegovernment's present emphasison stronger incentives and moreproducer autonomy, on greaterspecialization of output mix in linewith local comparative advantageand on agricultural research.

Measures to increase agricul-tural efficiency, growth of com-mune industry, and even in-creased agricultural prices will doleast for the rural poor (sincemany communes are net pur-chasers of food). To counteracta possible increase in rural in-equality, increased state supportfor poor areas is needed to pro-mote the development of agricul-ture and nonagricultural activ-ities, and to provide more foodand better social services. This,like general increases in agricul-tural prices, could be financed inpart by progressive taxation ofagricultural income or land. Andin cases where it would be cheaperthan raising their incomes on thespot, the rural poor should grad-ually be allowed to move to otherareas. In addition, they mightbenefit from long-term regionaldevelopment plans: these couldaddress the special problems ofparticular localities, focus moneyand manpower on them and pro-mote coordination among dif-ferent government agencies.

Energy production

The outlook for domestic energyproduction has recently deterior-ated. Oil output peaked in 1979 at2.12 million barrels a day and islikely to fall to about 2 million bar-rels a day in 1985, with little pros-pect of an increase in the latterhalf of the decade. To prevent aneven larger decline, immediatesteps have to be taken to improvereservoir engineering in existingfields and the effectiveness ofexploration. The prospects for coal(which contributes about 70 per-

cent of total commercial energy)are brighter; but output growth inthe 1980s will be slower than in thepast, even if high priority is givento the sector.

Total primary energy produc-tion in the 1980s will thus not growmuch faster than 2.8 percent peryear, with the growth rate in1980-85 unlikely to exceed 2.2 per-centless than one-quarter of the1952-80 growth rate.

The energy sector is alreadyabsorbing over 40 percent ofindustrial investment. The addi-tional capital outlays that wouldbe required in the first half of thedecade to further accelerate thegrowth of energy output in thesecond half, even if feasible interms of specialized manpowerand equipment, would be so largeas to crowd out vital investmentin other sectors. Prospects foreconomic growth in the 1980s thusdepend critically on reducingenergy use per unit of output.This is doubly important in thecase of oil, whose availability foruse as an industrial raw materialwill also fundamentally influencegrowth prospects.

Industrial energy conservation

Because agriculture, commerce,households and transport arelesser users of energy, withrelatively limited scope for conser-vation and interfuel substitution,the outcome will turn mainly onwhat is achieved by industry(including the energy sectoritself). Altering the balance be-tween heavy and light industry infavor of the latter has already con-tributed to a significant reductionin energy use and will continue todo so until the middle of thedecade. Thereafter, heavy indus-try cannot grow much moreslowly than light industry, since itproduces much of the equipmentand materials for light industry,agriculture and the service sectors.

Of greater and more enduringimportance, therefore, will be cutsin energy use and substitution ofcoal for oil within industrial sub-sectors. In this regard, the bulk ofthe large potential for energy sav-ings is in heavy industry.

Substantial savings could beobtained at negligible cost byminor operational improvements.Further savings, and substitutionof coal for oil, could be achieved atmoderate cost by limited equip-ment and technology improve-ments. Beyond that, majorchanges in some processes arecalled for. In certain industries(most notably metallurgy), it willbe both desirable and feasible toeliminate most small plants.

These measures could verysubstantially reduce energy useper unit of industrial output, at acapital cost far less than that ofachieving an equivalent increasein energy supply. But to accom-plish this will require thoroughadvance planning in each of themajor subsectors, and the integra-tion of energy conservation withother aspects of industrial restruc-turing and modernization. It willalso require reform of energyallocation procedures. And itwould be greatly facilitated bychanges in energy prices (espe-cially a large rise in the price of fueloil), in conjunction with furtherreforms to increase the incentiveeffect of prices on users.

Other industrial issues

Industrial expansion in the nextfew years may be constrained notonly by energy, but also by rawmaterials, foreign exchange andfinance for new investments.

Expansion of light industry isalready being held back by short-ages of raw materialsbothindustrial (petrochemicals andappropriate metals) and agri-cultural. Because the domesticsupply of agricultural raw

materials and oil will remaintightly constrained, increasedimports are desirable.

Economy in the use of industrialcapital will be essential if sus-tained rapid growth is to be recon-ciled with a reduced aggregateinvestment rate and higher invest-ment in nonproductive sectors.As with energy, a significantreduction in the use of capital perunit of output can be expectedfrom the shift in emphasis fromheavy to light industry, as well asfrom the reforms in economicmanagement.

Given the shortage of foreignexchange, and the knowledge tobe gained from exposure to worldmarkets, expansion of manufac-tured exports must have highpriority. The outlook is promising,given the abundance of skilledlow-wage labor and the enormouspotential for economies of scale.

At present, three-fifths ofChina's manufactured exportsconsist of products other thanmachinery or equipment sold todeveloping countries or the non-market industrial countries. Toachieve rapid growth, China mustincrease its currently very smallshare of the richer markets,especially in the OECD.

On this basis, the volume ofChina's manufactured exportscould grow in the 1980s at a rate of,about 10 percent a year, and quitepossibly 15 percent. In the lattercase, the value of manufacturedexports in 1990 (in the prices of thatyear) could be over $60 billion.

More generally, the updating ofindustrial technology can producemajor gains in productivity andproduct quality, both in industryand in the other sectors that use itsproducts. It is being actively pur-sued in most industrial subsec-tors. But it could be acceleratedand made more cost-effective bystronger incentives for innova-tion, and by better decisions on

whether, when and how to pur-chase technology from abroad.

Foreign borrowing

China's oil exports will decline involume, and could disappear bythe end of the decade. Slowagricultural growth will restrictprimary export expansion to atbest 4 to 5 percent a year. Thusmanufactured exports will have acritical influence on the growthrate of foreign exchange earnings.

The need for imports will begreat. Substantial imports of rawmaterials will be required to main-tain a rapid rate of industrialgrowth. Pressure to increase con-sumption and constraints onagricultural production areunlikely to permit any reductionof food imports. And a well-chosen program of capital goodsimports could make a major con-tribution to modernization andthe easing of constraints ongrowth in many sectors.

Provided the debt-service ratio(which is low at present) can bekept within manageable bounds,the main consideration in borrow-ing decisions is the value of theadditional resources obtained in re-lation to the real cost of borrowing.

Within the past year, thegovernment has addressed therelationship between the cost offoreign borrowing and the returnsto investment, and has cancelledimport contracts for severalunderprepared projects. Lookingfurther ahead, some key determi-nants of the optimal level ofChina's foreign borrowing,including the rate of growth ofmanufactured exports and theefficiency with which capital afidenergy are used, are both ulti-mately dependent on reform ofthe economic system andimprovement of economicmanagement. But foreign borrow-ing could itself contribute signifi-cantly to the greater efficiency that

87

is needed to accelerate futuregrowth.

Overview

China faces a difficult transitionperiod in the 1980s when itsoptions will be constrained fromseveral directions. But the govern-ment has room for maneuver intwo general areas. The first con-cerns the choice (via investmentdecisions) between present andfuture consumption, and theallocation of consumption be-tween the poor and other groups.The second concerns the improve-ment of efficiency, especially in

The oil-exporting countries

This section considers theproblems and prospects of twogroups of oil exporters, capital-deficit and capital-surplus.1 Bothgroups raised their GNP growthrates significantly in the 1970s.Both also have enormous oppor-tunities for further rapid progress;but they face difficult policychoices in deciding how best toexploit them,

The capital-deficit oil exporters

The capital-deficit oil-exportingdeveloping countries hold a placebetween the capital-surplus oilexporters and the oil-importingdeveloping countries. They sharecommon interests with the formerin trying to improve the returns totheir oil exports; and with the lat-

1. The capital-deficit oil exporters areshown in Table 6.1 under the category "oilexporters." The capital-surplus oil exportersare Iraq, Kuwait, Libya, Qatar, Saudi Arabiaand the United Arab Emirates.

88

the use of energy, materials andcapital, through better policiesand planning, system reform, andexploitation of opportunities forforeign trade, borrowing andtechnology transfer.

Policies in the second area haveso far had mixed results, but theirsuccess in the future will substan-tially affect the government'sfreedom of action in the first.Using capital more efficiently, forexample, would ease the tradeoffbetween present and future con-sumption. Energy and materialconservation would likewisereduce the amount of foreign bor-

ter in having been net importers ofcapital in recent years and beinglikely to need foreign capital in thefuture.

Nature has allocated petroleumto a mixed group of countries.They range in population fromtiny Trinidad and Tobago toIndonesia, the world's fifth mostpopulous nation, which is alsoone of the oil-exporting group'spoorest members (see Table 6.4).But they share common featuresas well. The principal one is aproblem of development policythe need to utilize petroleumexport revenues to effect a transi-tion to sustainable and equitablegrowth. They typically have therevenue to assist them signifi-cantly over the next 10 to 20 years.Such a period is not all that longfor achieving fundamental struc-tural change (Japan and SouthKorea notwithstanding), par-ticularly in agriculture. A secondcommon characteristic is thenature of the short- to medium-run difficulties of economic

rowing needed to attain any givengrowth rate. And faster growthwould enable more help to begiven to the poor without a slowerincrease in the living standards ofother groups.

The actual outcome will ofcourse depend not only on thegovernment's choices and policiesbut also on unpredictable factorssuch as weather, success in oilprospecting, growth of overseasmarkets and the availability offoreign capital on concessionalterms.

management occasioned by thewindfalls they received after theprice increases of the 1970s.

The quadrupling of crude oilprices in 1973-74 led to a 120 per-cent improvement in the net bar-ter terms of trade for the capital-deficit group, which allowed realimport growth rates averaging 16percent a year in 1972-76. Theiraverage resource balance was 1.5percent of GDP in 1972. It rosebriefly to 15 percent in 1974 andthen plunged to minus 3 percentin 1977, by which time onlyIndonesia and Trinidad andTobago still maintained surpluses.On average, resource balances didnot improve significantly until thesecond oil-price increase of1979-80. The deficits werefinanced largely with credits frominternational capital markets,eagerly offered on the strength ofoil reserves.

Most of the oil-exporting coun-tries have close fiscal ties betweenthe oil sector and government.Typically, over half of government

revenue originates from oil-renttaxation. Increased oil revenuesprecipitated particularly sharpincreases in public investment.On average, the growth rate ofinvestment rose from 9.2 percent ayear in 1970-73 to 14.3 percent ayear in 1973-77. Savings as a pro-portion of GDP initially jumpedfrom around 22 percent in theearly 1970s to 41 percent in 1974,but fell to 34 percent by 1977.Public sector savings followed asimilar pattern, in part becausenonpetroleum tax revenues ex-panded slowly. At the same time,public sector capital spendingtended to be maintained at highlevels in accordance with plansformulated immediately after theoil-price rise. In 1976-79, publicsector deficits rose to historicallyhigh levelsfor example to 16percent of GD? in Nigeria in1978-79 (see box overleaf).

Substantial increases in spend-ing were largely directed at theprovision of infrastructure andother basic services. The height-ened demand for constructionand other goods and services notreadily importable was reflected ina rise in their relative prices as wellas in general inflation. The realexchange rate relative to the dollar(the nominal rate adjusted for thecountry's rate of inflation relativeto that in the US) appreciated be-tween 1972 and 1977for exam-ple, in Nigeria (50 percent),Indonesia (70 percent), Gabon (40percent) and Ecuador (25 percent).These rises boosted public sectordeficits by raising the costs ofdomestic purchases relative to oilrevenues denominated in dollars.They also adversely affected non-fuel exports, which fell between1970 and 1980.

The difficulty of scaling downexpansionary public expenditureprograms and the consequentpublic sector and trade deficits ledto an "overshooting" pattern of

adjustment. Contractionarypolicies were adopted in Algeria,Ecuador, Indonesia and Nigeriain the late 1970s. In the case ofIndonesia these included a 34 per-cent devaluation of the rupiah inlate 1978. By mid-1980 over half ofthe resulting gain in competitive-ness in manufactured exports andimport substitutes had beeneroded by domestic inflation asthe real exchange rate reverted toits previous position. In the proc-ess of adjustment, private invest-ment stagnated relative to thedynamic growth of the public sec-tor. This phenomenon charac-terized several members of thegroup after 1974, as private sav-ings were diverted to fund publicinvestment programs.

Public industrial investmentundertaken by oil-producergovernments has tended to favorlarge, capital-intensive projects,frequently in hydrocarbons, butalso in steel, fertilizer and cement.They involve long lead times; as aresult, incremental capital-outputratios (the amount of extra invest-ment needed to produce an extraunit of output) tended to rise overthe 1970s, despite the shift of thenonoil economy toward construc-tion and services, typically ratherlabor-intensive activities. In par-ticular, agriculture is oftenneglected, although some pro-ducers (such as Indonesia) have

Table 6.4 Selected capital-importing oil exporters:country characteristics

a. 1965-73.

been relatively successful in chan-neling resources to their rural sec-tors.

As an anti-inflation measure anumber of oil exporters sub-sidized domestic prices ofpetroleum products. As well asbeing a heavy drain on budgets,subsidies did nothing to en-courage energy conservation.Growing domestic oil consump-tion promises to be a major factorlimiting the growth and, indeed,the existence of net petroleumexports.

Outlook

The second round of oil priceincreases in 1979 and 1980 causedthe current account balance of thecapital-deficit group to shift froma deficit of $20 billion in 1978 to asurplus of $5 billion in 1979.Although the second oil-price risewas smaller in percentage termsthan the first, its potential effecton oil producers may be rathersimilar. While the nonoil GDP oftypical oil producers rose by about40 percent between 1973 and 1978,the value of exports increased rela-tive to GDP, and shares of oil intotal exports and public revenueswere higher. For some producers,the prospective windfall relativeto GDP is therefore comparable.

The medium-term outlook isbright for the oil-exportingdeveloping countries, at least as

89

Real GDP growth rates(annual percentage)

Share ofmineralsector

in GDP(percentage)

Share ofagriculture in

nonmineralGDP

(percentage)

Share ofmanufacturing

in totalexports

(percentage)

Countr!, 1960-73 1973-77 1976-79 1977 1970 1977 1977

Algeria 3.3 5.3 8.4 30 15 13 1

Ecuador 5.7 7.8 5.3 12 28 23 2

Indonesia 5.3 6.6 6.6 19 50 39 2

Nigeria 5.3 6.5 4.7 28 54 47 1

Trinidad 3.7 4.4 5.5 40 5 5 5

Venezuela 5.4 6.3 5.1 22 9 8 2

NigeriaIn the early 1970s agriculture providedabout 50 percent of GDP. The debt-serviceburden was light, and a rapidly develop-ing oil industry was starting to relieve

far as the international environ-ment is concerned. Oil revenueswill provide rising foreignexchange earnings to meet invest-ment targets. The oil exporterswill also be able to borrow com-mercially to supplement theirexport earnings and to smooth outthe short-term fluctuations inthem. These countries areexpected to remain moderate netcapital importers, borrowingabout ito 2 percent of their GNP inthe 1980s.

The "new exporters"Egypt

90

balance of payments pressures and boostgovernment revenues. GDP increased at7 percent a year between 1970 and 1973,considerably more rapidly than in the1960s.

Higher oil prices transformed the pat-tern of the economy. By 1972 oil alreadyconstituted 83 percent of Nigerianexports. The first oil price rise led to athreefold improvement in Nigeria's termsof tradea windfall gain equal to about15 percent of 1974 GDP. Oil's share infederal government revenues rose from67 percent in 1973-74 to 78 percent in1976-77. Total public spending rose fromless than 20 percent of GDP in 1970-73 toabout 35 percent in 1974-77. By 1976-77the federal budget was in deficit.

Nigeria

Terms of trade, 1970-79

(1971-73 WI)

350

300

250

200

150

100

50

1970 71 72 73 74 75 76 77 78 79

and Mexicohave been greatlyaffected by production increasesand the 1979-80 rise in oil prices.Gains from terms-of-trade im-provements during 1978-80 wereequivalent to over 6 percent ofMexican GDP. By 1980 petroleumrepresented 45 percent of mer-chandise exports and 30 percent offederal revenue. Notwithstandingthis, Mexico's current accountdeficit increased by $2 billion (75percent) between 1978 and 1979.Petroleum accounted for 18 per-cent of Egypt's GDP in 1980 and

Government capital spending in-creased from 2 percent of GDP in 1973-74to almost 20 percent in 1975-79 (seefigure). Federal, state and local govern-ments together with public enterprisesaccounted for at least 70 percent of totaldomestic investment in 1974-77. Currentspending emphasized social services,notably education. In 1960 the primaryschool enrollment rate was 36 percent; by1976 it had risen to 60 percent and by 1985primary education is expected to bealmost universal.

Extra demand boosted inflation, andthe exchange rate adjusted for Nigerianrelative to US prices, was allowed toappreciate (by about 50 percent between1973 and 1978). This contributed to thedecline in the world market share ofnonoil exports. The world market share oftraditional exports declined by one-third,while the shares of nontraditional pri-mary exports and manufactured exportsdeclined by 44 percent and 71 percent. By1976 the pressure of increased domesticabsorption of resources led the currentaccount back into deficit, and the countrystarted borrowing heavily abroad.

Agricultural output did not riseappreciably during the 1970s and theurban-rural income differential rose from2.6 in 1960 to 4.6 in 1977. People left theland for the urban areas or to go intononfarm rural activities, notably con-struction.

Despite substantial slow-gestatinginvestment in infrastructure, NigerianGDP grew at an annual rate of 8 percentduring 1974-77. However, the very largepublic sector investment programstrained the country's administrative

65 percent of its merchandiseexports.

However, for both new and oldexporters, extraction and develop-ment policies still require formula-tion and coordination. AlreadyMexico, after two booming yearsmarked by import expansion at 31percent a year, has seen its realexchange rate appreciate as infla-tion rose to 30 percent in 1980.Capital inflows, responding toincreased creditworthiness, under-mined attempts at contractionarycredit policy. As it has in a number

Nigeria

Export and import volumes

(1963 100)

1,000

900 -

800

700 Exports

600

500 /

400

340- /Imports

200

100 -

01 I I I I I

Ac. 1963 70 71 72 73 74 75 76 77 78 79-69

Current account and components1,10,,,, of dollars, current prIce,'+8+7 -+6 - Trade balance

+5 -+ 4 - Correct account

+3

baori

I

ii"3 ' Balance on 5:rvit,e:

IIAv. 1963 70 71 72 73 74 75 76 77 78 79

-69

capacity. This, together with physical bot-tlenecks in the economy, produced someprojects which were hastily conceivedand resulted in some loss of resources.

Nigeria: government capitalexpenditure and current accountbalance, 1973-78

1973 74 75 76 77 78

After the 1979-80 increases in oil prices,the government again raised its capitalspending sharply (current expenditureless so). Attempts have been made toencourage investment in agriculture, anddomestic petroleum prices have beenraised. Nigeria's proven oil reserves aresufficient for only 15 years' production atcurrent rates. But if domestic consump-tion goes on rising as rapidly as it did inthe 1970s, it promises to reduce oil exportsin less than 10 years.

of countries, exchange rateappreciation promises to reduceincentives for private investmentin manufacturing and to substi-tute cheap imported capital goodsfor domestic labor, so contributingtoward a dualistic pattern ofdevelopment. Despite attempts tocontrol costs through subsidiesand price controls, similarproblems have begun to besetEgypt.

The experience of a number ofoil exporters suggests that overlyrapid expansion of government

spending on domestic goods andservices is likely to induce real cur-rency appreciation and lead to the"crowding out" of the private com-modity-producing sectors by therequests of the public sector.Devaluation cannot long restoredomestic competitiveness with-out some moderation in domesticspending. The switching ofdemand onto domestic output isotherwise likely to result mainly ininflation. Priority should be givento removing administrative andother obstacles to the expansionand modernization of productivesectors; to rural development; andto the provision of basic services tothe most needy. Particularly in theearly stages of the "oil boom" caremust be taken to avoid allocatingoil revenues to "prestige" projects,which barely increase domesticcapacity but drain domesticresources away from the privatesector over a critical period.

To strike such a balance is noteasy. It requires considerable pru-dence and foresight in determin-ing the pace at which oil reservesshould be exploited. And it needsto be complemented by trade,foreign borrowing and incentivepolicies that will turn each oilexporter's good fortune into abasis for sustained and diversifieddevelopment.

The capital-surplus oilexporters

The six capital-surplus oil export-ersIraq, Kuwait, Libya, Qatar,Saudi Arabia and the United ArabEmirates (UAE)face adjustmentchallenges of a different kind. As agroup, they vary considerably.Kuwait (population 1.3 million)has a GNP per person over seventimes that of Iraq (population 12.6million). The lifespan of their oilreserves ranges from over 100years (Kuwait) to about 25 years(Qatar). But they have one key fea-

ture in common. To satisfy theirimport requirements, they neednot produce as much oil as theyactually do. They therefore haveto make policy decisions on twosets of issues:

how large a surplus to pro-duce, and how to invest revenues;

how to develop their domes-tic economies so that the benefitsof oil survive its eventual exhaus-tion.

Production

In 1978, a year when the oil-exporting countries as a group ranonly a small current accountsurplus, the six capital-surpluscountries produced 17.5 millionsof barrels a day (mbd) of oil, andexported about 96 percent of it.Their revenues totaled $79 billion,of which all but a quarter wasspent on imports. In 1980, follow-ing the 1979-80 oil-price increases,the capital-surplus countriesappear to have spent only abouthalf of their total oil revenues. Thissurplus margin, varying betweena quarter and a half, representswhat might be termed their discre-tionary production.

Since the first major oil-priceincreases in 1973-74, most of thecapital-surplus exporters haverestrained the growth rate of pro-duction significantly (Figure 6.1,overleaf). They have done so forthree reasons: (1) to stretch thelifespan of their reserves; (2) toprevent oil prices from weaken-ing; and (3) because the investedreceipts from their discretionaryproduction have not appreciatedas much as the price of oil. Thesethree points are connected, andtogether present the group withdifficult policy dilemmas.

By the end of 1980 the externalassets of the capital-surplus coun-tries totaled about $300 billion.Roughly half was deposited withbanks in the industrial countriesor in the Eurocurrency markets.

91

3968-73

Annual average percentage change

30

25

20

15

10

92

Figure 6.1 Capital-surplus oilexporters' oil production, 1968-79

Ratio ofreservesto 1979Output

Iraq (25)

rs Ar,bja (47)

j-UAE (44)

Libya (31)

Qatar (21)

Kuwait (72)

1973-79

Nearly all the rest has also beeninvested in the industrial coun-tries, in equities, governmentsecurities, real estate, and so on.As major investors, the capital-surplus countries are affected bydevelopments in the industrialworld. Currency fluctuations, in-flation and slow growth are allpotentially harmful to their inter-ests. For most of the 1974-79period, their real rates of return oninvestments were low, perhapsnegative. This experience under-lined their stake in the health ofthe industrial economies; simul-taneously it demonstrated thatpreserving oil can be more valua-ble than producing it. Striking thebalance between these two con-siderations is the central produc-tion issue of the 1980s.

Diversification and development

During the past eight years, thecapital-surplus countries havemade considerable progress inexpanding their economic base.Their task has not been so easy asit may at first sight appear. Cer-tainly they have been spared someof the constraints on growth thatother countries experience. Butthey have faced several difficultiesof their own. With the exceptionsof Iraq and Saudi Arabia, they are

sparsely populated (and many oftheir people did not have the skillsand experience needed for rapidindustrialization). All but thosetwo countries have very unprom-ising soil and climate for agricul-ture. And all initially lacked theadequate infrastructural supportthat a major industrialization driverequires.

The single biggest advantageenjoyed by the capital-surpluscountries was abundant capital forinvestment. Their investmentratio was already high in 1973; at 40percent of their nonoil GDP, itcompared with average rates of 26percent in the middle-incomecountries. However, the capital-surplus group then raised theirinvestment ratio to an average of44 percent in 1975-78.

The results of this heavy invest-ment have been impressive.Nonoil GDP rose by an estimated15 percent a year in real terms be-tween 1973 and 1978. Infrastruc-ture was developed quickly, turn-ing shortages of port facilities, forexample, into capacity that shouldbe ample for years to come.

This rapid development hasspawned new types of problems,however. The six countries faced(and still face) a particular dilem-ma about the internal distributionof income. Their governmentsnaturally want all the people toshare in their patrimony and havebeen under popular pressure toensure that this happens. At thesame time, a simple division of theoil revenues in the form of transferpayments would make it hard toengender the motivation to workin construction and in newlyestablished industries. Evenwhere the ñiotivation existed, thewages people would expect(coupled with initially low pro-ductivity) would make industriesgrossly uncompetitive in interna-tional terms.

Governments have sought to

minimize this tension in twoways. First, they have sharply in-creased those types of publicspending that offer citizensbenefits in kind rather than incash. These have included moreand better recreation facilities andsubsidized housing. In addition,the provision of education andhealth services has been greatlyexpandedwith obvious long-term benefits for economicadvance. Second, governmentshave encouraged foreign immi-gration so as to provide neededskills and to moderate the upwardpressure on local wages.

Immigration has certainlyhelped to provide most projectswith the necessary manpower, butit has also created some socialtensions. Incomplete statisticssuggest there were 1.5 millionexpatriate workers in the six coun-tries in 1975; with dependents,they totaled 3.2 million, comparedwith a native population of 20million. They were least importantin Iraq; in the UAE, by contrast,there were 1.8 times as manyimmigrants as nationals in 1975and they made up 85 percent ofthe UAE workforce. If the sixeconomies continue to grow asfast as they did in 1974-78, evenrapidly rising productivity andincreasing participation rates ofnationals in the workforce wouldnot stop the number of migrantsfrom reaching twice the 1975 num-bers in 1985.

The consequences of this in-crease are mixed. From a purelyeconomic point of view, the mostobvious drain on the host coun-tries is the money remitted byforeign workers. These remit-tances from the six countriesincreased from $1 billion (1973) toabout $5 billion (1979)a majorsum for their home countries, buta relatively small outflow for thehost countries (less than their offi-cial aid, for example).

The budgetary implications of alarge immigrant presence havemore important consequences.Since the six countries' govern-ments all subsidize food, fuel,water and electricity, the real costof foreign workers is much greaterthan their wages.

Largely for these social reasons,governments may become in-creasingly reluctant to acceptfurther rapid increases inimmigration. They are more con-cerned about boosting domesticproductivity so as to maintain thepace of economic growth.

Inflation and investment priorities

Despite the easing of manpowerbottlenecks through immigration,the rapid development of the1970s increased inflationarypressures in the capital-surpluscountries. Consumer prices roseby less than 5 percent a year from1968 to 1973 and by 12 percent ayear since then. Within the group,Saudi Arabia had the most rapidinflationan average of 16 per-cent a year (1974-79) with peaksexceeding 30 percent in both 1975and 1976. Since then, there hasbeen a marked deceleration.

These figures for consumerprices do not reflect the nature ofinflation in the six countries.Growing subsidies have helddown the prices of basic consumergoods; most important of all, theinflationary impact of rapidgrowth has been concentrated noton consumer goods but on landvalues and construction. Urbanland prices rose dramatically andbuildings were erected with littleregard to cost and ultimatedemand. In the case of the UAE,this eventually resulted in a col-lapse of the property market.Inflation is thus another factorinducing caution on the part of thesix countries' governments.

The final reason why growth isnow slowing down is that many of

the development goals of the early1970s have been met. Ports, roadsand telecommunications havebeen expanded; administrativebuildings, schools, universitiesand hospitals have been built orare nearing completion. Theemphasis has shifted towarddeveloping manufacturing indus-try and the human skills it needs.Saudi Arabia's current five-yearplan is the most prominent exam-ple of this new priority. The othercapital-surplus countries are mov-ing in the same direction.

The choice of industrial projectsis being influenced by the coun-tries' particular mix of oil, abun-dant investment capital and scarceindigenous labor. Their compara-tive advantage obviously lies inthe various branches of thepetrochemical industry, liquefiedgas plants and aluminum smelt-ing. These are based on petroleumand gas, but are also capital in-tensive and embody advancedtechnology. They take time toestablish, as do the complemen-tary marketing arrangements.However, one methanol plant hadalready gone on stream in Libya in1978, and a number of other largepetrochemical and gas plants arebeing constructed in the region,especially in Saudi Arabia. Analuminum smelter has been builtin the UAE; there are steel mills inQatar and Iraq, with one plannedfor Saudi Arabia.

A shortage of domestic skillshas meant that many of these bigprojects rely on expatriate techni-cal and managerial staff. A secondgroup of new industries is smallerin scale and more labor intensiveand uses less complicated technol-ogy. Examples include metalengineering, building materialsand electrical industries. They areproviding opportunities for do-mestic entrepreneurs, and aregeared more heavily to localmarkets. The growth and spread

of these industries during the1980s will be a significant indicatorof the six countries' success in pre-paring themselves for an oil-lessfuture.

Oil-exporting countries' prospects

The patterns of development inthe oil-exporting countries sug-gest that the 1980s will differ fromthe 1970s in several importantrespects.

As Chapter 4 demonstrated,oil prices are likely to continue ris-ing in real terms during the next 10years. For a period of about threeyears in the mid-1970s, the oilexporters accepted both fallingreal oil prices and negative realreturns on their financial assets.That combination is unlikely tohappen again. The capital-surplusproducers are gearing their oiloutput to suit their domesticpriorities more than they oncedid, and these priorities suggestthat production will be kept closerto desired levels.

Oil-exporting countries aregoing to shift an increasing pro-portion of their production todomestic consumption. The oil-exporting developing countries inparticular are increasing the inten-siveness of their energy use asthey industrialize and urbanize.They will therefore moderate thegrowth in their oil exports (and insome cases may actually startreducing exports before the end ofthe decade).

The surge in migrant workers'remittances that characterized themid-1970s is unlikely to be re-peated on that scale. The capital-surplus countries are taking a lessfavorable view of immigration; thelabor-intensive phase of theirdevelopment (notably construc-tion projects) is becoming less sig-nificant. Chapter 5 projects someincrease in remittances during the1980s, but at less than half the rateof the past seven years.

93

Nonmarket industrial economies: the "intensive strategy"

The nonmarket industrial econ-omies,1 having long appearedrelatively insulated from changesin the world economy, were alsoprofoundly affected by the eventsof the 1970s. The rise in oil pricesdrew these countries into tighterinterdependence, with the SovietUnion supplying the other fivewith oil well below internationalprices. At the same time, all theirexternal convertible currencyaccounts were deterioratingrapidly. Their combined tradedeficit with the industrial marketeconomies grew from about $1billion in 1971 to $12 billion in 1975but increased more slowlythereafter as the pace of theireconomic growth fell off.However, due to rapidly risinginterest payments, current deficitscontinued to grow throughout thedecade, particularly for thesmaller countries.

With the exception of the SovietUnion, the nonmarket countrieshave been experiencing many ofthe same problems as the semi-industrial countries. Economicgrowth declined slightly in the1970s but continued to be higherthan in the industrial countriesdespite mounting external deficitsand growing imbalance betweenenergy consumption and domes-tic energy supply. Heavy borrow-ing more than doubled theamount of outstanding converti-ble currency debt between 1975and 1979, to around $65 billion. By1980 the debt-service ratio basedon convertible currency transac-

1. For the purposes of this Report, the USSR,Bulgaria, Czechoslovakia, the GermanDemocratic Republic, Hungary andPoland.

94

tions varied from 18 percent forthe USSR to 95 percent for Poland.

While there are considerabledifferences between countries inthis group, the pace of futureeconomic growth in mostdepends heavily on their adjust-ing to higher energy costs,improving their agricultural per-formance and expanding theirexport capacity, particularly ofmanufactured products.

A changing strategy

For nearly 30 years after thesecond world war, most of thenonmarket countries pursued adevelopment strategy they desig-nated "extensive development."Based on high levels of invest-ment, principally in heavy indus-try, this strategy was successful inproducing rapid output growthand satisfying the essential needsof large parts of the population. Itwas less successful in promotingeconomic adjustment to a chang-ing world economic environment.As a result, "extensive develop-ment" gradually exhausted itscapacity for rapid growth andwelfare improvements.

Until the mid-1970s, economicgrowth was due to increases inboth capital and labor inputs, andrising productivity. During the1970s, however, labor forcegrowth declined. Productivitygains slowed down because of thelow technical efficiency of muchof the capital stock. Squeezed con-sumption, and a continuingemphasis on producing inter-mediate and capital goods at theexpense of consumer goods,depressed individual incentives.Without some reduction of the

investment rate and determinedefforts to expand and improveincentives by increasing the sup-ply of consumer goods, it becameimpossible to reverse decliningproductivity growth.

Furthermore, agricultural out-put grew slowly while demand forhigh-value food products acceler-ated. The combination produced asharp decline in food exports orrapidly rising food imports, at atime when manufactured exportswere falling. In the case of theUSSR, food imports rose from vir-tually nil during the 1960s to aboutone-quarter of all convertible cur-rency imports during the late1970s.

Today, most of the nonmarketcountries describe themselves asshifting to a strategy of "intensivedevelopment," emphasizing in-creased efficiency and improve-ments in product quality. Theyaim to modernize the capital stockand boost labor productivity. Theformer implies heavy imports oftechnology, the latter requiresincreased consumption and agrowing allocation of resources tothe production of consumergoods.

If this strategy is to be success-ful, the nonmarket countries willhave to develop closer ties withthe industrial countries, resultinginitially in increased trade deficitsand more borrowing. Eventually,they expect exports to rise anddependence on food imports todecline. This will require them toproduce a broad mix of competi-tive exports and to achieve a divi-sion of labor complementary tothat of the industrial economies.Some of the nonmarket countries(Hungary, for example) have

already gone a considerable waydown this road; others are findingthe journey more difficult.

There are two areas in particularwhere major adjustments have tobe made: energy and manufac-tured exports.

Energy

In contrast to the industrial coun-tries, the nonmarket countriesincreased the energy intensity oftheir output during the 1970s; theynow have an overall energy inten-sity more than twice that of OECDcountries. This is the result both ofa different composition of GNPand of widespread inefficiency inenergy use. The Soviet Union hasprovided the smaller countrieswith subsidized petroleum, whichhas been allocated according tocentrally determined physicaloutput targets, without regard toscarcity value. And central controlover aggregate demand resultedin the nonmarket countries' main-taining relatively rapid growth inthe face of higher world energycosts and mounting balance-of-payments problems.

Most of the nonmarket coun-tries suffered declining energyself-sufficiency during the 1970s.Only in the Soviet Union did thegrowth rate of primary energyproduction consistently exceedthat of consumption. Energy(mostly crude oil and derivativesbut recently natural gas andelectricity as well) increasinglybecame the USSR's major exportto the industrial countries, pro-ducing more than two-thirds ofconvertible currency earnings bythe late 1970s. The USSR exporteda similar quantity of energy to thesmaller nonmarket countries,supplying about three-quarters oftheir imported energy needs.

The Soviet Union's petroleumoutput is unlikely to grow so fastin the 1980sindeed targets havealready been reduced below those

achieved in the recent past, andfurther cutbacks are likely. Thefuture exportable surplus ofnatural gas is even more uncer-tain. Its size will depend on theUSSR's being able to acquire theadvanced technology needed todevelop its gas resources, and onpotential customers in westernEurope being willing to finance itsproduction and pipelines. TheUSSR would of course benefitfrom the convertible currency andhigher prices it could obtain byselling to the industrial countries.But given the already criticalenergy shortages in several of itsnonmarket neighbors, it may beobliged to sell a large proportionof its exportable gas to them.

Manufactured exports

The prospects for manufacturedexports will be determined bythree factors:

how quickly the "intensive"development strategy succeeds inproducing high-quality, price-competitive manufacturedexports;

the willingness of the USSR tocontinue the present pattern ofsubsidized energy supplies andother raw materials to the smallernonmarket countries, thereby sav-ing them the need to pay for suchimports by increased manufac-tured exports;

the maintenance of credit-worthiness of the nonmarketcountries, so that they can borrowto pay for imported capital goodsfrom the industrial countries.

Large existing debt (and itsunfavorable term structure)means that some face poor debtprospects, even under the best ofcircumstanceS. The private mar-ket's risk assessment presupposesa de facto cross-guarantee amongthe nonmarket countries. If thatsupposition were to be altered,the outlook for individual coun-tries would rapidly deteriorate.

The success of nonmarket coun-tries in exporting to the industrialcountries is further complicatedby the fact that competition fromthe semi-industrial developingcountries will be intense(especially if industrial countries'economies are sluggish). Even ifthe nonmarket countries establishtechnological and marketingadvantages, they may havedifficulty competing; at presentwage levels, the semi-industrialcountries enjoy significant costadvantages.

The nonmarket countriestherefore face two difficultchallenges in the 1980s. They haveto adjust their developmentstrategy to new internal and exter-nal constraints; and morespecifically, they have to adjust torapidly rising energy costs. Bothadjustments are already overdue.If they are delayed any longer,growth is likely to be increasinglyconstrained. Some experts believethat the nonmarket countries willgrow less rapidly than the 3.7 to3.9 percent a year projected inChapter 2.

Relations with developingcountries

The nonmarket countries' tradeand aid links are highly concen-trated on a few socialist countriesin the developing world (notablyCuba and Viet Nam). In the past,however, they have had close tieswith certain other countriesforexample, Egypt and Somalia. Andthe USSR continues to have sig-nificant trade and aid programswith India.

Given the difficult external posi-tion of most nonmarket countries,they are unlikely to become siz-able markets for the manufacturedexports of developing countries.Another barrier to trade is theabsence of institutions providingcapital to finance it. Neither

95

national banking institutions inthe nonmarket countries nor thecommon banks of the Council ofMutual Economic Assistance (for-merly "Comecon") providemedium- or long-term credits todeveloping countries on a signifi-cant scale. Those providedtypically take the form of financ-ing specific equipment or turnkeyfacilities and often incorporate"buy-back" agreements. Theserestrictive conditions have limited

96

the scale of commercial and semi-commercial financing in the pastand will continue to do so.

Two countries, Cuba and VietNam, receive 96 percent of allfinancial assistance from the non-market countries. Excluding aid toCuba and Viet Nam, aid as a shareof the nonmarket countries' GNPis estimated at 0.02 percent forrecent years. These countries donot consider that the UnitedNations 0.70 percent aid target

applies to them.Other aid donorsand

increasingly the developing coun-tries alsoare calling for moreassistance from the nonmarketcountries in worldwide develop-ment efforts. But on presentprospects, they are unlikely tochange the basic conditions pre-vailing in their commercial and aidtransactions.

7 Human development: a continuing imperative

Some 630 million people will stilllive in poverty in the year 2000even on the favorable assumptionthat High-case growth is achieved.But, as Chapter 2 described,under the Low case, the poorcould number 850 million by then,100 million more than now.Economic growth thus con-tributes to the alleviation ofpoverty in all developing coun-tries, most particularly the low-income ones. But growth by itselfis not sufficient, as the 1980 WorldDevelopment Report made clear.Human developmentmeasuresto increase the productivity andincomes of the poor directlymust accompany and support thegrowth of production. In aharsher external environment,human development and thefinance to support it may be atrisk. This chapter discusses waysof protecting and enhancinghuman development programs; italso considers two related issues:the availability of food and thegrowth of population.

Human development andadjustment

Human development links thecreation of productive workopportunities for the poor withthe provision of goods and ser-vices to meet their essential needs.The elements of human develop-menthealth, education, nutri-

tion and fertility reductionareclosely interrelated. Improve-ments in one area can facilitateimprovements in others and rein-force all aspects of development.

Human development dependson economic growth to providethe resources for expanding pro-ductive employment and basicservices. In turn, these servicesprimary and vocational educa-tion, primary health care, nutri-tional and family planning pro-grams and safe water supplycanmake striking contributions togrowth.

Since many human develop-ment programs are publiclyfunded, they are especiallyvulnerable when growth isthreatened and budgets are underpressure. Brazil, India andTurkey, among others, have eithercut back or slowed the growth oftheir social programs in partbecause of external constraints.For developing countrieseverywhere, the exigencies ofadjustment over the next 5 to 10years could undermine the com-mitment to social programs,whose full benefits are generallyfelt only in the long termperhaps, in the case of reducingfertility or extending literacy, thelifetime of a generation or more.Yet looking to the future, sus-tained growth depends considera-bly on a continuous improvementin people's skills and energy. (Thisis particularly true of poor people,

since it is above all their potentialthat is being wasted.) Interruptinghuman development programsmay be costly, though in ways thatmay not be immediately obvious.

The effects of some programscan, however, be felt much morerapidly and can complementadjustment efforts in the directlyproductive sectors. Training pro-grams can be accelerated andmade more responsive to theneeds of business and trade.Higher food production can bothsubstitute for imports and con-tribute to better nutrition. Specifichealth and nutrition programs canhave strikingly rapid effects: aproject to reduce anemia amongIndonesian workers improvedtheir productivity within eightweeks. The effects of malaria con-trol can also bring quick benefits.

Human development programsthat are sustained through thepresent difficulties will contributeto future growthjust as theability to manage the presentadjustment is built in largemeasure on past human develop-ment efforts. Cross-country com-parisons show that countries withhigh literacy and life expectancyin 1960 tended to grow faster inthe 1960s and 1970s. So, too, acountry's capacity to respondto the changing and uncertainenvironment of the 1980sto pur-sue successfully the "outwardorientation" described in Chapter6will depend critically on the

97

skill and flexibility of its labor forceand managers.

Adjustment constraints andsocial programs

When a country must use more ofits resources to meet externaldemands, and particularly whenadjustment requires at least aperiod of retrenchment, pressureon public-sector finances is likelyto arise.

The recurrent costs of socialprograms, especially salary costs,tend to make them a prominentand therefore vulnerable part ofgovernment budgets (Table 7.1).Even though their impact onproductivity may far exceed someprojects financed through capitalbudgets, they may fall foul of theerroneous notion that only spend-ing on physical capital raisesfuture incomes. Their impact isoften less tangible than that of

Table 7.1 Central government expenditure on health and education,selected countries, 1977 or 1978

98

other programs, especially whentheir benefits are felt in remoterural areas and by "constituen-cies" (women and children, forexample) with little political clout.Social programs, moreover, com-pete with other sectors for skilled(and often scarce) administratorsand technicians. In countries likethose of sub-Saharan Africa withfew trained managers, personnelmay be as serious a constraint asfinance.

There are no simple rules bywhich to allocate resources be-tween human development pro-grams and other productiveactivities. Much depends on howintensively the various programsuse the resources which havebecome scarcer-energy andforeign exchange. Their use insocial programs depends onseveral factors, including thedesign of the program and howelaborate it is. For example,

The costs of primary education(see box) are mainly teachers' sal-aries. Transport and other energy-related costs are generally insig-nificant. Even in developed coun-tries, direct, nonsalary expendi-ture rarely exceeds 10 percent ofprimary education budgets.

Primary health programs (seebox, page 100) use more foreignexchange: their effectiveness canbe sharply reduced when foreignexchange is short.

Rural water supply systemsvary considerably in their use offoreign exchange. Village handpumps use little or none; dieselpumps depend on it heavily.However, water supply systemscan be designed to minimizeenergy consumption and evenproduce some energy by recover-ing methane.

There is no reason to single outsocial programs for cuts during anadjustment period. In manycases, however, budgetary con-straints will force cuts in spend-ing, and a share of this burden willfall on human development pro-grams. Then the issue becomeshow best to maintain the servicesthey provide.

Protecting human developmentprograms

If financial stringency preventsthe expansion of human develop-ment programs, they can often bemade more cost-effective. The pat-tern of social spending in practiceis frequently biased in variousways. Urban programs take prior-ity over rural; curative, high-technology medicine has priorityover preventive, low-cost healthcare; and university educationdevelops more rapidly in relationto needs than primary education.Even if a government favors main-taining human development pro-grams, they may still be uninten-tionally denied resources foradministrative reasons. If budge-

As share of total centralgovernment expenditure

(percentage) Per capita (1975 dollars)

Country and country group Education Health Education Health

Low-income

AfricaBurundi 20.6 4.7 6 1Ethiopia 11.5 4.9 2 1Malawi 11.1 4.1 4 2Mali 21.6 6.2 5 1Niger 23.3 6.0 6 2Rwanda 15.2 4.8 3 1Sierra Leone 16.0 7.6 7 3Somalia 14.0 6.1 5 2Tanzania 13.6 7.1 7 4Togo 13.7 5.8 12 5Upper Volta 15.6 5.5 3 1

AsiaBurma 11.2 5.9 2 1Nepal 11.1 5.5 2 1Sri Lanka 11.6 5.9 8 5

Middle-income

Bolivia 25.6 8.0 18 5Ghana 19.5 7.4 11 5Kenya 21.8 8.2 12 5Philippines 13.2 5.1 7 3Zambia 16.6 7.3 23 11

Source: IMF.

mary education in developing countries:other direct recurrent costs are around3 percent. For example, Bangladesh in1979-80 devoted only 1.2 percent of recur-rent primary education spending to non-salary recurrent items, about .06 percentof central government current spending.In the Dominican Republic in 1977, non-salary recurrent spending on primary edu-cation was 0.1 percent of central govern-ment recurrent expenditures (see table).

These data could understate require-ments: many developing-country schoolsystems are short of essential equipmentand supplies, while in other cases, stu-dents must provide some items (like text-books) themselves. However, for a num-ber of industrial countries where equip- Source: UNESCO

only 6 percent of current spending at theprimary level.

Allocation of public currentexpenditure on primaryeducation, selected industrialcountries, 1977(percentage)

Teachers' Other directCountry salaries expenditures

Belgium 88 12Denmark 66 5Finland 62 5

Japan 79 5Netherlands 81 2

Average 75 6

tary pressure can help to correctsuch biases and make programsmore cost-effective, the momen-tum of human development maynot be lost.

The most vulnerable types ofspending vary from country tocountry; but in many, nonsalaryrecurrent expenditureon drugs,chemicals and chlorine for water

treatment and disinfection, text-books, chalk and paperhasproved the easiest to cut. Yetwhen this happens, the effective-ness of the entire program is com-promisedand the budgetarysavings may be disproportionatelysmall. It is in this area that externalassistance can be particularlyhelpful during adjustment; thereturns to funding these itemsmay be large and the costs minor.More assistance of this kindwould represent a new departurefor many donors concerned aboutthe direct recovery of costs and the"open-endedness" of commit-ments. It therefore bears repeti-tion that recurrent expendituresare or can be highly productive;that costs can often be recoveredin the long term (though in-directly) and that long-term inter-national support for human devel-opment programs can (and should)be planned for.

The scope for low-cost programshas not been fully exploited.Experience suggests ways ofdoing so, even of turning financialpressure to advantage:

In evaluating new invest-ment, planners should considerthe recurrent and foreign ex-change costs. Donors should bemore prepared to finance recur-rent costs: in Malawi, wherealmost the entire developmentbudget for health is aid-financed,the foreign exchange cost of main-taining medical equipment hasoften been neglected.

Budgetary savings can bemade by charging for certain ser-vices (where this is consistentwith national policy). Some of theburden on public services can berelieved by allowing the privatesector to provide for middle-classneeds (for university education orcertain kinds of health care, forexample). In the Philippines,much secondary education is pri-vate (though generally inferior to

99

(percentage)

Country group Teachers' Other directand region Year salaries expenditures

Low-incomeMadagascar 1975 98 2

Mali 1977 97 3

Malawi 1975 98 2

Middle-Income

AfricaCongo 1976 98 2Ivory Coast 1976 90 9

Zambia 1978 90 7

AsiaThailand 1976 90 1

Latin AmericaArgentina 1977 96 4Dominican Rep. 1977 97 1

Ecuador 1977 98 2Peru 1977 90 1

Europe, N. AfricaAlgeria 1974 97 1

Portugal 1977 92 2

Average 95 3

Source: UNESCO

Paying for primary educationTeachers' salaries account for an average ment and supplies are adequate (see95 percent of the operating costs of pri- table), nonsalary direct costs averaged

Allocation of public current expenditure on primaryeducation, selected developing countries

Paying for primary health carePrimary health care systems can use com-mercial energy and foreign exchangequite intensively. Referring patients tosecondary and tertiary levels requirestransport. So does the supervision ofperipheral health workers and the deliv-ery of drugs. Refrigerators for vaccinesand small generators for rural hospitalsrequire power. The secondary and terti-ary levels of health careessential tosupport the primary level servicerequire sophisticated medical equip-ment, energy for operating theaters, foodpreparation and refrigeration of bloodbanks and other supplies.

Country examples illustrate thisdependence. Some 22 percent of Malawi'srecurrent spending on health in 1979-80was devoted to medical equipment anddrugs. Plant and vehicle charges account-ed for another 20 percent. Since spendingon drugs, medical equipment, vehiclemaintenance and fuel involves foreignexchange almost exclusively, perhaps 40percent of Malawi's recurrent healthbudget requires foreign exchange. The

commercial energy costs of primaryhealth care would be less; in a recent ruraldevelopment project in Indonesia, vehi-cle operation and maintenance costs wereestimated at 8 percent of total operatingcosts of the health program.

Drugs are typically a large share ofhealth budgets-24 percent in Thailand(1979), 22 percent in Tanzania (1976), 30percent in Ghana (1976-77). In mostdeveloping countries, these must beimported. Without reducing quality, sav-ings in the drug bill may be possiblethrough changes in procurement meth-ods and local drug formulation. A recentstudy of drug procurement in Ghanafound that in 1976-77 savings on drugs ofas much as 20 percent could be made ifover-prescription was controlled. Asecond study in Tanzania estimatedpotential savings of 30 percent by con-trolling over-prescription, central pur-chasing and use of generic rather thanbrand-name drugs. Indonesia has savedsome 50 percent of costs through bulkprocurement of essential drugs.

the public system); and in Egypt, areduction in the supply of publiclyprovided contraceptives was off-set, for the middle class at least, byprivate supplies. However, not allservices can or should be paid forby recipients; regional and socialinequities may be perpetuated ifexcessive emphasis is placed oncost-sharing.

Costs can also be shared withlocal communities. In Ethiopia,people have, through peasantassociations, given their time tobuild and maintain primaryschools, and it is intended thatthey contribute to teachers' sal-aries. Some evidence suggeststhat shared and participatory ser-vices are also more responsive tolocal needs.

The recurrent costs of provid-ing a given level of service canoften be reduced. Improved com-municationsvia posts or tele-phonesmay reduce travel costs.

100

So may a more rational use ofexisting transport services. Insome countries the costs of publicprocurement of drugs can bereduced (see box).

Personnel policies can alsoplay a part. For many humandevelopment programs, theirgreatest asset is a skilled and com-mitted staff. It is usually difficultto cut staffing levels, but greaterdelegation to paraprofessionals isfrequently possible, as is moreeffective organization.

With the right priorities andadministration, cheapness and cov-erage need not be in conflict. InChina, for example (see box) it isestimated that annual spendingon primary education is only $20per pupil and on health care only$7 per person (of which $4 ispublic expenditure) even thoughthe health service covers virtuallythe whole population of 1 billionpeople.

Food and nutrition

Better nutrition is vital to humandevelopment. Higher agriculturalproduction is, moreover, usuallyessential to raise the incomes ofthe poor. These two dimensionsput food at the center of issues, aswell as highlighting the perennialquestion of whether the world canproduce and distribute enoughfood to feed its expanding popula-tion.

Agriculture has been givengreater emphasis in recent think-ing on development. While indus-trialization is critical to higher pro-ductivity and growth, in mostcountries it has been supportedby broadly based agriculturalprogress. The 1979 World Develop-ment Report showed that agri-cultural success generates domes-tic demand for industrial prod-ucts; supplies cheap food toindustrial workers and rawmaterials for agro-processing;earns foreign exchange to financeimports of capital and intermedi-ate goods for industry; andencourages labor-intensive indus-tries in small towns and villages.

Chapter 6 of this year's Reportstresses how difficult adjustmenthas been in countries that haveneglected agriculture. Virtually allthe sub-Saharan African countrieswhose recent growth has beenslow have had a particularly poorrecord in agriculture. On the otherhand, countries such as India orIvory Coast, which have devel-oped a solid agricultural base, canmore easily adjust to externalpressures.

However, success in agriculturedoes not automatically mean thatfood supplies are secure in thesense that food-deficit regions orhouseholds have enough to eatevery year. In some countries withexpanding agricultural produc-tion, the poor do not eat enough,whether the food is produced

Poverty and human development in ChinaChina's economic structure and nationalincome per person are similar to otherlow-income countries, but the physicalquality of life of the bulk of the Chinesepeople is strikingly better than in mostother low-income countries. From 1950 to1979 life expectancy at birth increasedfrom 36 years to 64. Starting at about thesame level in 1950, the average low-income country improved life expectancyto 51 by 1979, while the average middle-income country started higher (48), butended lower (61).

China's success in this area can beattributed in part to a concerted effort inseveral related and interdependent areas:basic education, health and nutrition, andpopulation control. Mother and childhealth care and nutrition programs were,for example, widely available. Thesereduced infant mortality and hence thenumber of children needed to attain adesired family size. And by reducing thebirth rate the pressures on health andeducation facilities were reduced.

Such programs also exist in otherdeveloping countries, but China has gonefurther than most in organizing itshuman development efforts. They havebeen closely integrated with the socialmobilization begun with the Revolutionin 1949: even family size norms are backedby party organizations and discussed ascommunal responsibilities. Every levelof society, from the production teamthrough the communes to the nationallevel, plays a role in providing social 5cr-

vices. Production brigades may financethe training of one or more "barefoot doc-tors" who both provide primary healthcare and often participate in the brigade'swork as well.

State subventions pay for some of theprograms, but participating groups alsoprovide support and participate in deci-sions concerning them. Local finance hascertain drawbackspoor regions canafford only the most rudimentary facil-ities. Nonetheless, China's impressiverecord in human development has sur-vived several major upheavals, par-ticularly the Great Leap Forward(1958-60) and the Cultural Revolution

Basic indicators

Most 1950 data are estimated.1979.

(1966-76), probably because the programswere financed largely from localresources.

Paradoxically, the income share of thepoorest 40 percent of China's popula-tionestimated at around 18 percentisnot very different from that of other low-income Asian countries. However, muchof China's inequality results from regionaleconomic differences. Within communesand cities, income inequalities are small,largely because property is collectivelyowned. Moreover, the poor in China are,as the quality of life indicators show, farbetter off than those at similar incomelevels in most other developing countries.

domestically or imported. Sincean adequate food supply at boththe national and internationallevel is clearly a precondition forfood security, this section con-siders world trade in food. It looksat the impact on poor countries ofprice stability and reliability ofsupplies. And it considers ques-tions of still greater importanceefforts to increase self-sufficiencyand improve food distribution.

World food in the 1970s

Since the 1960s, and especiallysince the 1973-74 world foodcrisis, many observers have pre-dicted that world food shortages

would gradually worsen. Somecountries would be unable eitherto feed themselves or to affordnecessary imports; hunger andstarvation could become wide-spread in many low-income coun-tries by the 1980s. Fortunately, thispessimism has not been borne outby events, although some seriousproblems have emerged.

Globally, food production hasgrown marginally faster thanpopulation. Consumption perperson has been increasing inmost parts of the developingworld, with sub-Saharan Africaand parts of Asia the major ex-ceptions (Table 7.2, overleaf).

Food prices have fluctuated con-siderably in real terms, but do notshow a pronounced upward trend(Figure 7.1, overleaf). Some mid-dle-income developing countrieshave increased their food imports(Figure 7.2, overleaf), but this hasnot generally reduced the securityof their supplies. While there is noevidence that outright starvationhas become more pervasive,nonetheless the number ofmalnourished people has proba-bly increased and the position ofparticular groups and certainareas may have deterioratedseriously. Most of the under-nourished live in the countryside.

101

Country andcountry group

GNPper person(dollars)

1979

Annualpopulation"rowth rulepercentage)

Adultliteracy

(percentage)1976

Net primary Life exvectancyschool enrollment at drth

(percentage) (years)

1970-79 1975 or 1977 1950' 1979

China 260 1.9 66' 93b [36] 64

Sri Lanka 230 1.7 85 62 [55] 66

India 190 2.1 36 64 [38] 52

Indonesia 370 2.3 62 66 [35] 53

Low-incomecountries 210 2.3 39 56 [37] 51

Middle-incomecountries 1,420 2.4 72 71 [48] 61

Industrialcountries 9,440 0.7 99 94 67 74

Table 7.2 Foodgrain consumption per capita, 1961-79

400

350

300

250

200

150

100

50

0

400

350

300

250

200

150

100

50

0

400

350

300

250

200

150

100

50

0

102

Figure 7.1 World grain prices,1966-80

(dollars per ,n,tñe ton)

Maize

Sorghum

Wheat5

These failings result not onlyfrom a shortage of production andeffective demand, but also from aseries of structural changes, bothglobal and national. They includean increase in the complexity ofinternational grain markets, grow-ing price instability for grains, andlogistical difficulties affecting bothnational and international grain-handling and distribution. Exter-nal pressures on foreign exchangeresources have played a role, ashave internal political conflictsand natural disasters.

CHANGING MARKET STRUCTURE.

Middle-income countries havesubstantially stepped up theirimports and have become theworld's largest market for cerealexports (Figure 7.3). Their grow-ing need for imports has resultedprimarily from the increasingaffluence of urban dwellers,although in some of them foodproduction has not matched thegrowth of population. In addition,livestock production has becomemore important, so that over athird of total cereal consumption(and well over half of totalimports) have been used to feedanimals rather than going directlyto people. In several middle-income countries, the proportionof export earnings devoted to buy-

Figure 7.2 Foodgrain production,consumption and net trade bycountry group and for selectedcountries, 1970 and 1980

Consumption

Frodautioo1 Net import

1980J970

Argentina

1,200 300 200 100 0

Ten thousand tons

Net exports

Other industrialmarket economies

USAICanJAos

Nonmarket

Middle-income

China

Low-income

19801970

Senegal

Sn Lanka

Korea

Brazil

India

100 200

ing foodgrains has actuallydeclined even as their overalldependence on food imports hasgrown-Since other exports, fre-quently agricultural products,have grown faster. By the late1970s only about one-fifth of theirfood import bill was for food-grains, the rest being devoted toless basic commodities like meat,oilseeds, sugar, fresh fruit andvegetables.

The low-income countries haveremained more dependent onfood aid than the middle-incomecountries (Figure 7.4).That depen-dence has both advantages and

Country group and region

Kilograms per capita

Average annual growth rates(percentage)

1961-64;1970-73

1970-73;1976-791961-64 1970-73 1976-79

World total 312.1 342.8 362.1 1.0 0.9

Developing countries 223.0 229.7 239.9 0.3 0.7Low-income countries 207.1 202.7 202.4 -0.2 0.0

Sub-Saharan Africa 159.5 151.9 141.3 -0.5 -1.2South Asia 215.6 211.8 213.5 -0.2 0.2

Middle-income countries 238.1 255.6 275.7 0.8 1.3Sub-Saharan Africa 140.7 150.0 148.5 0.7 -0.2East Asia 257.2 271.2 282.7 0.6 0.7Latin America 235.7 244.0 249.1 0.4 0.3S. Europe, N. Africa,

Middle East 390.6 441.0 495.8 1.4 2.0

Source: FAQ.

1966 68 70 72 74 76 78 80

a. US No. 2 yellow, fob. Gulf Ports.b US No, I Soft R,d Wiuler, Export Prier, Golf.

I I t I I

300 200 100 0 100 200 300MOtion tons

Consumption Net exports

disadvantages. Food aid reducesthe cost of imports, but it is notalways dependable (it has been cutoff for political reasons in thepast); it tends to be squeezed attimes of world shortage, whenlow-income countries need it most(during the 1973-74 food crisis,food aid fell); and it can, if notcarefully handled, have effects onprices that discourage local pro-duction.

Many countries (several low-income ones included) are pro-ducing a larger share of theircereal requirements, but withoutnecessarily improving nutritionfor low-income groups or for thosein predominantly subsistence-farming areas. In both low- andmiddle-income countries, the

Figure 7.3 World grain imports,by country group, 1970 and 1980

(percentage shares)

1970 = 109 million tons

1980 = 228 million tons

poorest urban and rural groupsare chronically undernourished.The worst affected are those livingin rural areas where agriculturalproduction fluctuates widely. Chil-dren and pregnant or nursingmothers bear the brunt when foodis short. Seasonal variations (lessfood in the months immediatelypreceding harvests) and cropfailures (because of weather orpests) are the main supply-relatedcauses of actual starvation. Inmany low-income countries,these conditions are an ever-pres-ent threat to life. Yet the most com-mon cause of undernutrition is ademand, not a supply, factorastraightforward lack of purchasingpower.

The structure of developingcountries' agricultural trade haschanged since 1973. Both agri-cultural exports and food importshave risen rapidly in many cases,implying greater specialization inproduction. While this increasedreliance on trade brings obviousgains, it also increases countries'vulnerability to price fluctua-tioriespecially when world foodprices follow different cycles fromthose of other agricultural pro-ducts.

There are other costs as well.The growth in international foodtrade has increased the complexityof the world food market andthus the cost of using relativelyunsophisticated marketing meth-ods. World Bank studies indicatethat food imports cost developingcountries almost $1 billion a yearmore than necessary in the late1970s, due to poor forward plan-fling and market infrastructure,and a neglect of mechanisms likeforward contfacts to reduce theuncertainties of agricultural trade.Added to these costs are thoseassociated with inadequate portand other transport and storagefacilities; and poor or nonexistentearly warning systems, resulting

Millions of metric tons P,rcentage60 100

Figure 7.4 Developing countries'food imports and food aid

1961 63

- 80

'Food aid as -percentage offood importm - 60

Middle-

65 67 69 71 73 75 77

- 40

- 20

in expensive spot purchases, ship-ping charges and storage costs.

PRICE INSTABILITY. Grain priceshave become less stable, primarilyas a result of the pricing and tradepolicies of the industrial marketand nonmarket industrial econo-mies. These policies are mainlydesigned to protect domestic pro-ducers (see box on EEC agri-cultural policy, page 33), but theyalso insulate domestic consumers,especially of livestock products,from fluctuations in world foodprices. Consumption in thesecountries is thus maintained,while the impact of any shortfall inworld supplies falls on the con-sumers of livestock products inother countries and on residualbuyers, mainly poorer developingcountries. When harvests fail inimporting countriesas they didin 1973-74, with a poor SouthAsian monsoon and an excep-tional drought in the Sahel and theHorn of Africaany deteriorationin global supplies greatly compli-cates efforts to prevent starvation.Bangladesh suffered severe short-ages and malnutrition in 1973-75,when its own food productionwas poor, the international marketwas tight, and it had to find extraforeign exchange to pay for moreexpensive oil.

103

hood old(tons)

50 - Foodiosportn - -

(tont) -

40 -

30 -

20 -

10 -

The indirect effects of such aglobal shortfall may be equallyserious. Food is generally so vitalthat available foreign exchangewill be allocated to importing it,even if it means other importsmust be reduced. If these importsare needed for a country's trans-port systemfuel or spare parts,for examplethe indirect harm toagriculture may be considerable.An importing country's own foodproduction may be as vulnerable asits food imports, especially if aglobal food shortfall coincideswith the foreign exchangepressures of an adjustmentperiod. In Sudan and Zambia, forexample, successive budgetarycuts occasioned by foreignexchange crises have left theagricultural extension service,marketing agencies and farmersthemselves without transport.Inevitably, their food productionhas then suffered.

FOOD EMERGENCIES. Food-re-lated disasters, like those of1973-74, strike suddenly and withlittle warning. This sets a pre-mium on flexibility, responsive-ness and good information if theworld is to maintain its foodsecurity. Local crop shortagesneed not result in starvation if cropreporting is adequate and if theadministrative and logisticalcapacity exists to respond quicklyto a crisis. Where that has been thecaseas with Pakistan's recentresponse to the Afghan refugeesor Ethiopia's much-improvedearly warning system in the 1979droughtrelatively few peoplehave died for want of food.Without reliable crop-reportingsystems, the extent of any possi-ble shortfall becomes a matter ofjudgment, with the danger thatthe shortage is either exaggeratedor the response to it delayed, orboth.

Some of the world's worst food

104

catastrophes have, of course, beenman-made. Perhaps the mostalarming recent examples havebeen in Kampuchea and Somalia.Whenever armed conflict uprootsmany subsistence farmers,widespread starvation is virtuallyinevitable. The world's ability torespond, even to cases such asthese, has arguably improved,especially by dint of resourcefulaction by international agenciesand voluntary organizations.

Lessons from the 1970s

It would be wrong to suggest thatthere is no danger to food suppliesat the global level. Particularlyworrisome are the propensity formarket instability and the poten-tial problems for developing coun-tries when world food prices rise.Nevertheless, the world foodcrisis of 1973-74 now appears as acoincidence of misfortunes ratherthan a harbinger of many morecrises. There is less danger ofglobal shortages than of nationaland local problems requiring bothnational and international action;a failure by many countries to takeadvantage of their potential foragricultural production andgrowth; and disruptive policies bysome developed countries. Sub-Saharan Africa in particular is in acritical situation; 26 countries,with a population exceeding 150million, are currently reportingfood shortages. What are thecauses of such failings and whatfactors have prevented theirresolution?

FOOD PRODUCTION. The out-standing success of the 1970s hasprobably been the improved pro-ductivity of small farmers. Theirextra output has been the key toimpressive growth in such coun-tries as India, Indonesia andMalaysia. Audits of 80 WorldBank-supported projects started

in the late 1960s and early 1970s inmore than 20 countries show thatthose directed at small farmers arejust as cost-effective a way ofincreasing food supplies as proj-ects designed to benefit largercommercial farmers. Frequently,they are even more efficient.

A further success has been theexpansion of irrigation. In the low-income countries, the irrigatedarea has expanded from 41 millionhectares in the early 1960s tonearly 60 million hectares in thelate 1970s. The benefits ofincreased irrigation and storagecapacity are most obvious at timesof potential crisis. The 1979drought in India, which reducedfoodgrain production 17 percentbelow the previous year's recordlevel, was as severe as in 1966,when famine was widespread,and food prices rose 30 percentdespite over 10 million tons offoodgrain imports. In dramaticcontrast, 1980 saw no widespreadfamine. Foodgrain prices rose byonly some 17 percent, causing lesshardship in the rural areas thanhad occurred in 1966. This im-provement was primarily a reflec-tion of a higher average level offoodgrain production and, conse-quently, much higher levels offood stocks (see box on India,page 80).

One clear lesson of experience isthat the strategy for increasingagricultural productivity andalleviating rural poverty mustbe specific to local conditions.Nevertheless, some problems areencountered quite generally:

There are areas where fewtechniques are available for raisingfood production economically.This is particularly true in semi-arid zones like the Sahel. Withonly a limited area under irriga-tion, management and rehabilita-tion problems have been encoun-tered and many areas abandoned.In higher rainfall areas, the

technology (improved seedvarieties, fertilizer) is frequentlyavailable. But farmers are reluc-tant to adopt innovations whosereliability or effectiveness they(often rightly) doubt. Adaptiveresearch is clearly a priority formany countries.

Infrastructural improvementsare urgently needed. Better roads,in particular, would encourageinternal trade and assist the diffu-sion of market information andtechnical knowledge.

Many countries pursue pol-icies that discriminate againstfarmers. In every country, farmersand particularly smallholdersrequire a credible framework ofincentives if they are to increasetheir output. Incentives dependprimarily on prices, but other fac-tors are also important. In manycountries, official prices exceedworld prices at official exchangerates; yet delays in payment forcrops, and costly inefficiencies intransport, storage and marketingsignificantly reduce the pricesfarmers actually receive. Foodprices in the free market com-monly exceed official prices, butare unstable and unpredictableand depend on private trade anddistribution which is often offi-cially discouraged. Governmentdomestic procurement and dis-tribution, on the other hand, isfrequently inadequate to supportprices at harvest time, and a majordrain on the budget and scarceadministrative resources. Erraticimport procurement can alsodestabilize prices. And even whenfarmers do increase their incomes,there are often few consumergoods and services available inrural areas.

Overvalued exchange rates,export taxes and industrial protec-tion have tended to reduce realagricultural incomes, a syndrometypical of (but not exclusive to) oil-and mineral-exporting economies

such as Mexico, Nigeria andVenezuela.

Inequitable land tenurearrangements can both reduceincentives (when, for example,tenants do not receive the benefitsof innovation and increased pro-duction) and exclude the landlesspoor from productive employ-ment and higher incomes.

The discrimination againstfarming goes beyond the incen-tive system. Agricultural extensionservices are frequently under-financed and inadequately staffed,often as the result of neglect ratherthan any deliberate intention todowngrade agriculture.

Many countries wanting togive priority to agriculture havenot adopted appr.opriate strat-egies. Frequently this results froma failure to appreciate the potentialof the small farmer. Also, manyprojects directed at small farmershave been overdesigned, exces-sively complex and have not takenadequate account of the exist-ing farming system: the fact thatfood crops are often grown bywomen, for example, is frequentlyoverlooked.

SELF-SUFFICIENCY. How muchfood to import and how much toproduce domestically is a keystrategic question. There is nosimple answer. But because of theperceived uncertainties aboutglobal supplies, many countries(South Korea, for example) havebought increased self-sufficiencyat considerable economic cost.Others that could and shouldincrease food production (see boxon Zambia, page 78) have failed todo so.

National food self-sufficiencydoes not necessarily mean thatmore food is available to the poor.India, for example, became sub-stantially self-sufficient in cerealsin the late 1970s. This achieve-ment, desirable though it was,

came largely from increased out-put in the northwest; in the poorersouthern and eastern parts of thecountry, there has been lessprogress. At a minimum, an effec-tive distribution system is neededto ensure that available foodreaches groups in need.

In some cases, the aims ofnational self-sufficiency and foodsecurity for poor households canconflict. Countries that have en-couraged import substitution offoodgrains (especially wheat)have sometimes discriminatedagainst the production of foods(cassava, millet, sorghum), whichhave traditionally been producedand consumed by poorer groups.In many West African countries,for example, the urban middleclass has increased its consump-tion of imported rice, partlybecause world prices have fallenand partly because it is quicker toprepare than traditional foods.Almost all the West African coun-tries importing rice have thereforesought to increase domestic pro-duction, but at costs well in excessof import prices.

Stressing import substitution infoodgrains has sometimes causedneglect of other productionopportunities, most obviously inexport crops. In some cases,encouraging export crops (like cot-ton and jute) may discourage foodproduction, but there are also in-stances where producing for. thetwo markets can be complemen-tary. Also, perhaps more funda-mentally, increases in incomesfrom export-crop production haveenabled smallholders to improvetheir nutrition. In yet other cases(Colombia and Tunisia, for exam-ple) low food prices based on foodaid have smothered the incen-tive to increase domestic foodproduction.

FOOD DISTRIBUTION. Almost allcountries have some form of sub-

105

sidized, publicly managed fooddistribution. Such schemes arefrequently the most effective wayof reducing calorie and proteindeficiencies among the poor whobuy food, especially those inurban areas, and involve feweradministrative burdens than otherfiscal outlays (see box). Bufferstocks, financial support for pri-vate stockholding and officialprice supports designed tomoderate the volatility of priceshave encouraged farmers andreduced consumers' vulnerability.

While these schemes aregenerally aimed at keeping foodsupplies reliable and cheap inurban areas, some governments(notably in South Asia) haveattempted to extend them into

rural areas as well. Food-for-workprograms and rural public workshave had some success in reachingthe rural poor; despite leakages tomiddlemen and other unintendedbeneficiaries, the distributed foodstill reaches hungry people.

One danger of public fooddistribution is that it underminesproducer incentives; indeed thereis a clear conflict between short-term consumer interests (lowprices) and producer interests(high prices). Since grain, forexample, cannot be stored indefi-nitely, stocks must be turned overregularly; where commercialmarkets are thin, this rotation hasoften disrupted the markets ofdomestic producers. Incentivesfor farmers have been reduced

Food subsidies: three casesThe benefits and costs of food subsidyschemes depend on several factors,including the income level of benefici-aries, the stage of development of thecountry (particularly its agriculture) andthe vulnerability of the scheme to budgetconstraints.

Food subsidies can contribute to avicious circle of declining producer incen-tives and budgetary pressure. In Zambia,for example, officially controlled con-sumer prices for food have risen moreslowly than other prices. From 1976 to1980, a period of severe economic crisis(see box on Zambia, page 78), maize andfertilizer subsidies increased from 10 to 20percent of the recurrent budget. Even so,producer prices have been below importprices. The subsidy has primarilybenefited urban consumers, who are bet-ter off than most farmers, especially thosein remote areas. Weak producer-incen-tives in turn have reduced the amountsmarketed through official channels. Ablack market has developed where con-sumers pay prices far higher than importprices. (ln 1981, however, the governmentincreased maize meal prices by over 30percent and reduced subsidies.)

Food management in several SouthAsian countries features a complex of pro-curement, storage, rationed distribution,commercial imports, food aid, export

bans and numerous pricing and move-ment interventions. Although thesesystems are generally costly, the balancebetween their costs and benefits variesgreatly with the country, the coverage ofthe system, the choice of subsidizedfoodstuffs, eligibility criteria, purchasingconditions and selection of ration shoplocations.

In India, for example, where wheat,rice and coarse grains are sold in ration orfair-price shops, public interventionseems an effective way of reaching thepoor, despite the administrativedifficulties. Increases in procurementprices, to reflect rising import costs, havebeen passed on to consumers. As a result,the subsidy has been kept withinmanageable limits and budgetarypressures have posed little threat to itssurvival.

S Several middle-income countrieshave succeeded in directly attackingmalnutrition through targeted fooddistribution systems. Colombia's foodcoupon scheme, introduced in themid-1970s, is modest in scale, reachingabout 140,000 households and costingless than 0.1 percent of the central govern-ment's current spending. The couponsare disbursed to farmers in poorerregions and can be redeemed for a limitedvariety of protein-fortified foods.

106

while the people at greatest nutri-tional risk in isolated rural areashave hardly benefited at all.

In many cases, there are betterand cheaper ways to get foodto the poor. Some governmentsare experimenting with rationschemes and food stamp pro-grams, with eligibility dependingon income. Some experts wouldprefer to subsidize "self-targeting"commoditiesthose basic food-stuffs that are consumed mainlyby the poor. But limiting subsidiesto the poorest people alone carriesa risk of losing political support forsubsidies of any kind. And muchdepends on the efficiency of mar-keting and distribution systems.When, as in some African coun-tries, the supply of subsidizedfood is limited, it tends to go to anincreasingly small urban groupand rarely to those who need itmost. The political costs ofmodifying these schemes may besubstantial. External assistancecan play a role in smoothing theadjustment path when this entailsa change in subsidy policy.

Perspectives on the 1980s

There is no cause for compla-cency about the future. Foreignexchange and fiscal constraints inthe developing countries areincreasingly severejust at a timewhen slow economic growth ishighlighting the need to maintainaffordable food supplies to thepoor. If they fear that the UnitedStates might use its dominance inthe world grain market for politi-cal advantage, developing coun-tries could feel forced to adoptcostly import-substitution poli-cies. Political instability could con-tinue to disrupt food productionand consumption in some of theworld's most vulnerable regions.

There are some positive fea-tures, however. The profitabilityof agriculture is probably rela-tively insensitive to energy costs,

since agriculture is generally lessenergy-intensive than many otherindustries (although fertilizer andsome irrigation systems willreflect higher energy costs). Theindustrial countries are increas-ingly recognizing the fiscalburden of agricultural protection.They may be persuaded to im-prove developing countries'markets for certain products (beef,sugar) and reduce market insta-bility in grains.

THE ROLE OF DEVELOPING COUN-

TRIES. The next 10 years thus pre-sent an opportunity for long over-due reforms in agricultural policy.The many governments that arenot now exploiting their countries'resourcesand especially thelatent productivity of small far-mersshould reconsider theirstrategy. Improved incentives,adaptive research, higher invest-ment, the elimination of ineffi-cient marketing systems, thedevelopment of infrastructureand irrigationthese are amongthe principal elements of astrategy giving higher priority toagriculture.

Special attention should be paidto food security. In rural areas, thisimplies not only raising food pro-duction but also reducing its costover the long term and improvingways of reaching the most vulner-able groups. In urban areas, itimplies the allocation of foreignexchange for food imports ifdomestic supplies are insufficient;and the use of various kinds ofgovernment intervention toensure that available food isevenly shared.

INTERNATIONAL POLICY. Thereare several areas where interna-tional policy could better supportnational efforts at agriculturaladjustments.

More open markets. Devel-oped countries should refrainfrom protectionist policies that

tend to increase the instability ofworld food prices. The EEC'sCommon Agricultural Policy isone candidate for reform; but theUSSR and Japan also pursuepolicies with similar effects on thedeveloping countries. A newinternational wheat agreementwith internationally coordinatedinformation on grain reserveswould also help stabilize markets.

Enhanced food security. Therecently concluded Food Aid Con-vention helps to assure develop-ing countries of imports whendomestic production is poor, butdoes not fully address the prob-lem of price- and foreign-ex-change instability faced by low-income countries. Such benefitscould come from the InternationalMonetary Fund's recent decisionto extend financial assistance tocountries facing cereal importcosts temporarily above average,always assuming the money isused to import extra food.

International assistance.While capital will still be neededfor investment (especially inagricultural research and thecostly areas of infrastructure andwater development), support willincreasingly be required for thereform of policies and programs.Where producer prices must beraised, to the potential dtrimentof consumers, international assis-tance (including food aid) can playan important role in ensuring thatdomestic pricing and subsidypolicy contributes to greater foodproduction and consumption bythe poorest people.

Disaster relief. An impressivenetwork of international andvoluntary agencies has donemuch to alleviate food calamitiesin many parts of the world. Theirefforts deserve recognition andsupport. Disaster relief (and foodaid) can remain effective if theirpoliticization is avoided.

Population

It took 35 years for the world'spopulation to rise from 2 billion to4 billion; the next 2 billion is likelyto be added in only 25 years. Mostof that prospective growth isalterable only between narrowlimits. But the extent of progressin development during the rest ofthis century will make a majordifference to population growth inthe next. What happens betweennow and 2000 will determinewhether world population canstabilize at about 8 billion in thetwenty-first century, or carry ongrowing more quickly to 11 billionor more. This will depend in parton government actions during theadjustment periodin particular,whether they can maintain andexpand the programs thatinfluence fertility decline.

The reasons why world popula-tion is, as a minimum, going todouble can be briefly stated. Mor-tality is declining; current fertilityis high; the marriage age indeveloping countries is still low;populations are young; and thenumber of women in, or about toenter, the childbearing age groupis growing rapidly. The lower limitto a "stationary population" is setby making an assumption aboutthe earliest date at which fertilitymight decline to "replacement"level. That level is defined as thenumber of births (about twochildren per couple) at which apopulation will just reproduceitself, given the level of mortality.Experience suggests that, indeveloping countries where fer-tility is high and where couplesare currently having five or sixchildren, a level of two childrenper couple is most unlikely to bereached in less than 20 years.

How quickly replacement-levelfertility is reached obviouslyaffects the size of the ultimate sta-tionary population. For example,

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if fertility in India were to declineto two children per couple in thenext 25 years, the populationwould eventually stabilize atabout 1.37 billion (double its pre-sent level) some 40 to 50 yearsfrom now. But if it takes 20 yearslonger to reach that fertility rate,the stable population would be300 million larger.

Similar calculations for Pakistan(1979 population: 80 million) andKenya (15 million) show that theirpopulations would reach 200million and 44 million, respec-tively, with "replacement fertility"achieved in 25 years, but 283million and 87 million, respec-tively, if replacement fertilityoccurs only after 45 years. Fordeveloping countries as a group,the same calculation puts theeventual stationary population atbetween 6.7 billion and 10.3billion. This is a measure of theurgency with which action toachieve replacement fertilityshould be pursued.

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In the low-income countries crudebirth rates fell from 45 to 37 perthousand between 1960 and 1979,and death rates from 24 to 15 perthousand; over the same period inthe middle-income countries,birth rates fell from 41 to 34 perthousand, and death rates from 15to 10 per thousand. These are allsigns of remarkable progress 0

(Figure 7.5). However, in recentyears the decline in death rates hasbeen slowing down. In manycountries campaigns againstspecific diseases such as choleraand malaria have been the maincause of falling death rates; furtherprogress awaits improvements innutrition, education, health ser-vices, water supply and sanita-tion. In some developing coun-tries, death rates are nowapproaching their lower limit.

As a result, the rate of popula-

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Figure 7.5 Birth and death ratesfor selected country groups,1950-95

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lion growth for developing coun-tries as a whole has passed its peakfrom about 2.4 percent in 1965to 2.2 percent today. Only in Africahas population growth acceleratedin the 1970s. In these countries,fertility has declined very little(indeed, in some countries, it hasincreased slightly) and mortalitydecline has not slowed down, atleast until very recently. In some,population is growing at close tothe theoretical maximumnearly4 percent a year in Kenya, forexample, a rate at which it willdouble in 18 years.

A reduction of the birth ratewould take time to affect the sizeof total population significantly.But its effects on human develop-ment spending would be felt morequickly. Calculations for Kenyashow that if the total fertility ratewere gradually reduced from 8, itspresent level, to 4 by the year2000, the population in that yearwould be 19 percent smaller than iffertility were constant, but therewould be 28 percent fewer prim-ary school children.

The pattern of fertility dedinediffers from country to country:culture, forms of social organiza-tion, family structure and manyother features peculiar to in-dividual societies all play a part.Yet recent research has also con-firmed some generalizationsabout the causes of slower popula-tion growth. Education; improvedhealth conditionsnot least im-proved nutritionthat increasechildren's chances of survival;urbanization; more employmentopportunities, especially in themodern sector and especially forwomen: these are among the fac-tors most commonly related to fer-tility decline in developing coun-tries.

The poverty-population link

These findings add up to onecentral conclusion: poverty and

rapid population growth are inter-related. Attacking poverty (and itsconcomitants of poor health, lackof education and lack of status andjob opportunities for women) isessential both for its own sake andbecause it slows down popula-tion growth. Conversely, rapidpopulation growth contributes topoverty. A poor family oftensees additional children aseconomically beneficialandindeed to the family they may be.But they contribute to a growingpool of labor which, in a poorcountry, is hard to educate, house,keep healthy and provide withcapital to raise productivity andemployment. While growinglabor forces contribute to highertotal output, in conditions whereother resources are scarce andunderemployment widespread,they do not raise, and oftendiminish, the average output oflabor and consequently averageincomes.

While rapid economic growthhelps slow down populationgrowth, the availability of familyplanning services is also impor-tant (see box). Effective familyplanning programs both conveythe message that family size is amatter of choice, and provide themeans to make the choice effec-tive. There is now widespreadagreement that appropriate formsof social and economic change andthe diffusion of the means of birthcontrol are both necessary toreduce fertility.

In the countries where the greatmajority of the developing world'spopulation lives, some progress isbeing made. In other developingcountries, fertility is decliningfaster today than it did in theindustrial countries when theywere going through theirdemographic transition in thenineteenth and early twentiethcenturies. In countries where fer-tility began to decline at the end of

Family planning programs make a differenceExperience in three countries illustratesthe way developmenthigher incomes,better education and literacy, life expec-tancy, improved nutritioncomple-ments family planning programs (seefigure).

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China's crude birth rate declined from34 in 1957 to 18 in 1979, and the populationgrowth rate was only about 1.2 percent ayear in 1980. The official family planningprogram was started in 1956, but onlyacquired impetus in the early 1970s, withthe introduction of free contraceptives,delayed marriages, quotas, peer pres-sures and economic incentives and disin-centives. The result: about 70 percent of

the women who might become pregnantpractice contraception, a rate comparableto that of the United States-68 percent in1976and significantly higher than thatin other developing countries-23 per-cent in India, 41 percent in Sri Lanka and46 percent in Colombia.

Until recently, 28 was the recom-mended marriage age for men and 25 forwomen in cities, 25 and 23 in thecountryside. In Guangdong, Jiangsu,Hebei and Shanghai, more than three-quarters of all marriages in the 1970s wereat the recommended ages.

Women receive paid vacations afterundergoing sterilization and abortion. Insome provinces, couples pledging to haveonly one child receive financial allow-ances and priority in education, employ-ment and housing. Couples having morethan two children are penalized. Disin-centives are mostly socialthe com-munity disapproves of those who do notconform to the birth planning policies.

Other factors increased the program'seffectiveness. The high life expectancy inChina and the low infant-mortality rate(about 56 per thousand) reduced the needfor more children. Nearly universal pri-mary education of women changed at-titudes about family size and increasedcontraceptive use.

In Indonesia, the crude birth rate fellfrom 41 in 1970 to 36 in 1979. A familyplanning program reached the lowersocioeconomic groups and women withfewer children. The Indonesian programis directed centrally, but implementedlocally. Traditional community councils(banjars) and community pressures pro-mote family planning. The results areimpressivein Bali, nearly 49 percent ofeligible couples used contraceptives in1979-80, compared with a national rate of27 percent.

By contrast, in Brazil official supportfor family planning is not strong. Despiterapid economic growth, Brazil's popula-tion growth rate remained at 2.2 percent ayear in 1970-79. Brazil is substantiallyricher than China, but the benefits of itseconomic growth, including health,nutrition and education, have beenspread less widely. Brazil consistentlyfalls below the world norm relatingincome levels to indicators of health andeducation. Although fertility has recentlydeclined it is still higher than in China, aswell as in Sri Lanka, another low-incomecountry which has encouraged familyplanning.

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the nineteenth century (such asBritain, Austria, Italy, the Nether-lands and the United States) ittook about 50 years for crude birthrates to fall from 35 to 20 per thou-sand, an average decline of about0.3 per thousand a year. Countriessuch as Chile, Sri Lanka andMalaysia, which in the early 1960shad crude birth rates of about 35per thousand, have since thenreduced them at a rate of 0.5 to 1.0per thousand a year.

The role of external assistance

The pressures of adjustment,especially budgetary stringency,could lead governments to cutback on human development pro-grams. This could compromise

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precisely those aspects of devel-opment in low-income countriesmost conducive to poverty allevia-tion. Cutting nonsalary recurrentexpenditures, in particular, candamage these programs seriouslywhile saving little. Cuts, whenunavoidable, can and should bemade in ways that minimize thedamage.

Many valuable human develop-ment-related initiatives such asbiomedical research on reproduc-tion, contraceptive developmentand health and family planningprojects now languish for lack ofsupport. The United NationsFund for Population Activities(UNFPA), for example, is cuttingits family planning assistance toIndia, the world's second most

populous country, because ofChina's needsan invidiouschoice thrust on it by inadequatefunding.

International assistance couldprotect and expand these pro-grams in the difficult environmentof the 1980sby financing non-salary recurrent expendituresand by assuring food suppliesto poor countries, particularlyto support the reform of agricul-tural policies.

Aid will continue to be criticalfor broad programs of human de-velopment. To future generationswho inherit an overcrowded andundernourished earth, any dere-liction on the part of the presentgeneration will appear short-sighted, indeed irresponsible.

8 Overview

The main theme of this Report hasbeen adjustment, both global andnational, to promote sustainablegrowth in the world economy. Ithas described the interplay be-tween national and internationalpolicies and their effects ondevelopment. This last chaptersummarizes the principal findingsand policy implications, bringingout some features of interdepen-dence both among differentgroups of countries and amongissues.

The international environmentis most powerfully shaped by thebehavior of the industrial coun-tries and the main oil exporters.These countries today have amutual recognition of each other'sinterestsand, increasingly, ofthe way their interests overlapwith those of developing coun-tries, especially the better-offamong them.

It is the poor countries thatemerge so vividly in this Reportas being left behind by worldgrowth, and facing a further dete-rioration in their prospects. Theyremain on the periphery of theexpanding trade and financiallinks among industrial, oil-export-ing and middle-income countries.Nevertheless, in some sectors,and especially if longer-termtrends are considered, the richercountries have strong reasons forintensifying their cooperationwith the poorer ones as well.

The nature of interdependence

Interdependence is not a new factor a new idea. It has been givenprominence in a number of recentreports and studies, notably thoseof the Brandt Commission, andOECD's Interfutures project. Inthe 1930s, countries learned howtrade restrictions and competitivedevaluations aimed at securingnational advantage could quicklycause universal harm. The institu-tions and procedures establishedafter the second world wartheWorld Bank and InternationalMonetary Fund, the GATT, theUnited Nations agenciesweredesigned to create an environ-ment for liberal trade and to pro-mote international economiccooperation. Under their in-fluence, the world economyexpanded rapidly, especially inthe 1950s and 1960s. Internationaltrade has grown still faster. Evenunder the strains of the 1970s theindustrial countries refrainedfrom trade measures which mighthave incurred retaliation.

Interdependence has beengiven new meanings in the yearssince 1945.

The number of sovereignstates has increased threefold,making the task of internationalcooperation both more necessaryand more difficult.

The growth of the semi-industrial countries has created

new centers of manufacturing andtechnological innovation. Thedeveloping countries are pro-jected to contribute over a quarterof the increase in world produc-tion between 1980 and 1990, bring-ing their share of the total to 20percent, compared with only 15percent in 1970.

The developing countriesplay an increasingly importantrole in world trade. They willaccount for nearly 30 percent ofthe increase in world trade be-tween 1980 and 1990. They pur-chase 38 percent of EEC exportsoutside the Community; of thistotal, half are purchased by oil-exporting countries and half byoil-importing countries. TheUnited States sells 36 percent of itsexports to developing countries; athird of these go to the oil-export-ing and two-thirds to the oil-importing countries. For Japan therelevant figures are 46 percent todeveloping countries, with 14 per-cent going to oil exporters and 32percent going to oil importers. Inmanufactures trade as a whole,the industrial market economieshad a surplus of $34.5 billion withthe developing countries in 1978.

The developing countriesincreasingly act as an "engine ofgrowth" for the rest of the world.While the main transmission ofeconomic activity is still from theindustrial to the developing coun-tries, the reverse effects are not

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negligible. Some estimates sug-gest that an extra percentage pointon the growth rate of developingcountries would raise industrialcountries' growth by about 0.1 to0.2 percent. Another study calcu-lated that, by sustaining theirimports in the mid-1970s while therest of the world's slowed down,the middle-income countries hadan impact on the industrial coun-tries equivalent to a significantreflation of the economy of theFederal Republic of Germany.They prevented the recession inthe industrial world from becom-ing even worse than it was.

Banking links have becomecloser. The Report has dwelt on therole of trade and finance in mak-ing international payments forenergy. The health of internationalbanking, with its growingexposure in the middle-incomecountries, depends on thosecountries' export prospects to a fargreater degree than it did a decadeago. In addition, Far Eastern,Latin American and Arab banksnow have significant roles in theworld banking system.

Though interdependence hasstrengthened the ties betweenindustrial and developing coun-tries, a particular responsibilityfor global prosperity rests on theindustrial countries. Their growthdepends on their ability to masterdomestic macroeconomic prob-lems, to curb inflation, raiseinvestment and productivity, andbecome more economical in theiruse of energy.

None of these tasks is mademore difficult by the dynamiceffects of international trade ontheir own economies; on the con-trary. Imports from developingcountries help them to containinflation. If the industrial coun-tries were to become more protec-tionist, they would reduce theexports and thus the creditworthi-ness of many developing coun-

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tries. This in turn would reducethe ability of developing countriesto borrow, to grow, and to importfrom the industrialized world. Nogroup of countries would gain; allwould lose from slower growth.Similarly, the pricing and produc-tion decisions of the capital-surplus oil exporters, togetherwith their internal developmentand its effects on their imports andtheir lending, will strongly in-fluence the world economy.

Growth in the 1980s will proba-bly be somewhat slower than wasfeasible in the era of cheap energy;but concerted efforts to easebottlenecksof energy, finance,skills, food and raw materialswill help to ensure that even theslowest-growing countries of the1960s and 1970s can make greaterprogress.

In energy and food in particular,all countries share an interest inraising production in developingcountries: here there is coin-cidence between the concerns ofindustrial and low-incomedeveloping countries, as well asthose of the middle-income coun-tries. Population growth also,which is intimately linked todevelopment, will affect all coun-tries. Wherever it occurs, it putspressure not only on worlddemand for food and energy, buton the environmentair, soil andoceansand all exhaustibleresources. Ultimately, the futureof humanity is at stake in theprogress of development in thecoming decades.

Developing countries in the 1970sand 1980s

The importance of the developingcountries' own policies emergesclearly in this Report. Ex-periencenot least that of themore populous oil-exportingcountriesshows that even whenexternal conditions are favorable,

development is still difficult. Inmany countries, domestic policiesand performance had left much tobe desired long before the externalclimate deteriorated. In severalcountries trade and foreignexchange policies, for example,have harmed the chances ofmanufacturing growth; sub-Saharan Africa has had a par-ticularly poor agricultural record.

Nevertheless the internationalenvironment has had a majorinfluence on their progress. Fluc-tuating commodity prices haveaffected domestic policies, entic-ing several countries into short-lived investment booms that havehad to be followed by drasticeconomies in current and capitalspending. And oil-importingcountries had to cope withdepressed markets for theirexports, and deteriorating termsof trade in the mid-1970s whichwere only partly due to the highercost of imported oil.

A number of the middle-incomeoil importers managed to sustaingrowth in the 1970sthey wereable to increase their exports,reduce imports and borrow largeamounts of commercial capital.For that growth to continue, themarkets they sell to must remainopen and continue to expand. Inaddition, the countries them-selves will have to continue toseek out new products and newmarkets. Commercial borrowingis expected to go on rising;however, not all countries bor-rowed equally wisely, and somenow face short-term liquidity con-straints.

Among the low-income coun-tries the record has varied. Formost slower growth was the rule.Without finance to cover currentaccount deficits, and with littlecapacity to increase exports in theshort-run, they found the tighterexternal environment difficult.Immediately after the first round

of oil-price increases, aidinclud-ing that from OPEC countriesexpanded considerably. But thisexpansion did not continue. TheAfrican countries had the slowestgrowth, most frequently fromdomestic rather than externalcauses; their GNP per person roseby only 0.5 percent a year in the1970s. In several countries percapita incomes and food produc-tion actually fell. South Asia faredsomewhat better, assisted byworkers' remittances, severalyears of good harvests, and com-pared with the African countries,a relatively satisfactory record ofdomestic economic managementand greater freedom from war andcivil strife.

The 1980s began with a worsen-ing of external conditions for theoil importers. Recession in theindustrial countries has reducedtheir export prospects; currentaccount deficits have increased inthe past two years, this time byamounts closely matched by theincreases in their oil import bills.There can be some confidence ingrowth expectations for most mid-dle-income countries once recov-ery begins in the industrial world,but the outlook for low-incomecountries is unpromising.

There is no sign of current orfuture aid increases comparable tothose which helped them throughthe mid-1970s. Workers' remit-tances will grow more slowly. Fewwill have easier access to commer-cial borrowing, nor will there beany rapid improvement in theirexport earnings. Adjustment byslower growth is likely to becomemore common. Only their owndomestic efforts combined withincreased aid can change theprospect of balance-of-paymentscrises and acute financial strin-gency early in the decade.

National adjustment: the oil importers

Most developing countries face a

difficult decade adjusting to suchconditions. They must reducetheir present balance-of-pay-ments deficits to sustainablelevels. Ultimately adjustmentrequires shifts in trade, domesticproduction and consumption;borrowing is a necessary instru-ment for investment to accelerategrowth, and for gaining time foradjustment to take place. Butcountries that have borrowed tosupport unsustainable patterns ofproduction, consumption andtrade soon face the reckoning ofexcessive debt and forced macro-economic contraction.

In the Report's comparativeanalysis of countries, little statisti-cal relationship was found be-tween the magnitudes of externalshocks in the mid-1970s and sub-sequent rates of economic growthcompared with the past; but thisdoes not at all mean that externalconditions are unimportant. Asnoted, in the mid-1970s additionalcapital was forthcoming for low-and middle-income countries;expanded trade was also impor-tant for the middle-income coun-tries.

The analysis showed that theeffect of external changes alsodepends a great deal on domesticpolicy responses and basiceconomic structure. It indicatedabove all the value of an outwardorientation, which makes coun-tries more rather than less able tocope with the external environ-ment. Export expansion is notequally easy for all countrieslow-income countries with one ortwo exportable commodities andmodest manufacturing capacityobviously have less room formaneuver. Efficient import-substitution, reflecting interna-tional scarcities and comparativeadvantage, is also an importantpart of outward orientation.

Policies that favor developmentand growthraising domestic

savings, improving the efficiencyof the use of capitalalso assistadjustment. The same is true of allpolicies that help to switchresources efficiently into tradeablegoods and import substitutes. Infact in the poorest countries it ishard to distinguish betweenadjustment and developmentbecause so many of their problemsstem from internal circumstances.When, on top of all their han-dicaps, the external environmentdeteriorates, the poorest countriessuffer acute hardship. The task ofremedying their long-standingdeficiencies becomes more impor-tant than ever.

Human development

Human development programsare threatened by the austerityinevitable during a period ofadjustment. However they pro-vide the essential skills for long-term development, so govern-ments need to be especially care-ful to avoid indiscriminate cuts.This places a premium on pursu-ing the programs efficiently, onfinding ways to cut costs, and onspreading the benefits as widelyas possible. External assistancehas a valuable role to play in pro-vidmg financial and technical sup -port in times of difficulty.

Food and nutritional problemsseldom derive from global foodshortfalls; more often from localand seasonal supply variations,poor distribution systems, and alack of effective demand. Theunderlying cause of hunger andmalnutrition is that those whoneed food do not have the moneyto buy it. In food as in energy, themost intractable policy problemsarise from the conflict between thedesirability of high prices as pro-ducer incentives (and as curbs onconsumption, in the case ofenergy), and their undesirabilityto poor people buying food andfuel. Countries have tried various

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solutions, some successfullybut there are no easy ways out.

Today's population pressuresare the legacy of inadequatedevelopment in the middle of thiscentury. So, too, the heightenedpressures of the twenty-first cen-tury will reflect today's failures.Except in an initial phase whenmortality falls before fertilitydecline follows, rapid populationgrowth results from faileddevelopmentfailed humandevelopment in particular. Theresponse required is active promo-tion of those features of develop-ment associated with fertilitydeclineeducation, improvedhealth, advancement of women,modern-sector employmentand family planning programs.All these are at risk from thebudget cuts made likely duringadjustment in the 1980s.

Oil exporters

For the oil-exporting developingcountries the rise in oil prices hasobviously been a boon, but it hasnot by any means solved theirdevelopment problems. Greaterease in the balance of paymentsand capacity to borrow hasresulted. But many of these arelarge countries with large, rapidlygrowing populationsIndonesia,Nigeria, Mexicoand all theother problems faced by mostdeveloping countries, not least, aconsiderable presence of poverty.

The key policy need is to use oilrevenues efficiently for makingthe transition to durable long-term growth. A factor in this willbe domestic energy pricing itself;domestic consumptionoftensubsidizedis currently growingso fast as to cut into future oilexports. Policies must be found toimprove incentives for investmentin manufacturing and agriculture.The signals to the domestic econ-omy given by exchange rateappreciation (caused by oil114

exports) are often the opposite ofwhat is needed in the longer run;and the close fiscal ties betweenthe oil sector and governmentsmake it easy to expand publicexpenditure and investment,which in many cases ought ratherto be curbed. Excessive invest-ment, not always in projects withhigh returns, recalls the problemsof other countries experiencingcommodity booms. The oil boomis longer-lived, but for most pro-ducers, not more than one or twodecades at current rates of produc-tion and consumption.

Few of these countries have yetfound a development strategy thatpromises not only industrialgrowth, but improved ruraldevelopment, expanded employ-ment and redistribution ofincomes, the provision of basicservices to the poor and limitationof population growththe onlypath to lasting prosperity. Unlikethe low-income countries, the oilexporters are much less hamperedby shortage of financial resourcesto achieve these goals.

Global adjustment

The experience of the 1970s pointsto numerous lessons for develop-ment in the 1980s. The interna-tional environment can comple-ment or thwart domestic efforts; inthis Report that environment isdescribed under three main sub-jects: trade, energy and interna-tional capital flows.

Trade

For developing and developedcountries alike trade has a crucialrole in growth and adjustment.The failure of the low-incomecountries to participate in theexpansion of world trade is a prin-cipal reason for their disappoint-ing performance in the 1970s.Their exports have not grown fastenough to match the rising cost of

oil and other imports. It is a storypartly of their difficulty in expand-ing their supply of competitiveexports, and partly of the obsta-cles to trade and low rate ofgrowth in their export markets.Most of these countries stilldepend heavily on commodities,with little potential for exploitingthe rapid growth in demand formanufactures. But even withincommodities, the low-incomecountries' export prices have beeneroded more than those of themiddle-income countries. Lack offlexibility and adverse supply con-ditionsranging all the way frominadequate infrastructure causinghigh costs to ill-advised export-taxation policies reducing pro-ducers' incentivesplay a signifi-cant part.

It seems natural for the originalproducers to go in for process-ing and gain a larger share of thefinal value of goods made fromtheir raw materials. Yet they areprevented from doing so by acombination of international anddomestic factors. Internationally,escalating tariffs confront suc-cessively "higher" stages of pro-duction. However, the low-income countries have had thesmallest share of such increases inexports as have been achieved.The reasons include marketingconditions; technical and otherconsiderations which make proc-essing at source more rather thanless expensive for some com-modities; and more general condi-tions of industrial efficiency. Proc-essing is an industrial activity. Itappears to be more efficient wheremanufacturing in general is morebroadly established.

An industrial base is obviouslyeven more important for estab-lishing exports of manufactures.However, even where there aremodern and potentially competi-tive manufacturing enterprises inlow-income countries, their

export performance is frequentlyhampered by inappropriate fiscalpolicies and foreign-exchangeregimes. At the same time, thewould-be exporter often faces pro-tection or the threat of protection,which inhibits investment andleaves the field to those who canbetter afford to take risks.

This appears to be saying thatsuccess breeds success. It does.But that is also inherent in theprocess of development; though itcan happen, modernization andefficiency do not usually tend tobreak out in a single sector whilethe rest of the economy is back-ward. Rather, the gradual im-provement of physical and humancapital leads eventually to a pointwhere growth can accelerate. Withwell-designed policies, this broaddevelopment can be accom-panied, not just followed, byexports of manufactures. Suchwas the case in a number of mid-dle-income countries which werepoor themselves only two decadesago. The condition of the low-income countries is not immutable.

But the findings do imply thatinternational measures to improvethe trading prospects of develop-ing countries will tend to benefitmost the more advanced amongthem. The implication is not thatsuch measures are without meritin their own right; on the contrary,reduction of trade barriers andother trade-enhancing measuresare importantboth to develop-ing and developed countries. Butthe main lesson for most low-income countries is that theexpansion and openness ofmarkets are important as permis-sive factors, but ones that will notsoon yield a major source ofgrowth, except for those few withestablished manufacturing sec-tors, unless their developmentsimultaneously advances in otherdirections.

Despite a number of problems,

on balance over the 1970s theinternational trading system didnot become less open. An in-creased share of developing coun-tries' trade with the industrialcountries came under one sort oranother of governmental"scrutiny" that was harmful tosome countries or products, but asimilar share came under varioustrade-creating arrangements,such as the GSP and offshoreassembly provisions, whichbrought benefits to others. Thedanger in recent trends in han-dling trade policy issues stemsfrom the increasing politicizationof trade, which increases the riskthat protection will take hold.

The most stringent remainingindustrial-country import barriersare on agricultural products, pro-cessed materials and textiles.Developing countries tend to pro-tect the same sectors as do thindustrial countries, so their tradewith each other is similarlylimited. Nonetheless, tradeamong developing countries hasexpandedmainly between andto the benefit of countries thathave adopted more outward-oriented, nondiscriminatory tradepolicies.

During the 1970s, the worldgroped for ways to tackle theremaining trade barriers. Thenontariff codes negotiated in theTokyo Round are a beginning, butthey are only a framework: onethat can guide the development ofsuitable approaches but cannotprovide the resolve or the politicaldynamic needed. That dynamicwill have to come from theindividual countries themselves,through their decisions to makethe adjustments needed to restoretheir own growth. This would befacilitated by building the gainsfrom trade into domestic andinternational decision processes.At present the "costs" are given farmore weight. (Particularly, "in-

jury" in the safeguards code mightbe expanded into a net concept,including consumer gains; cur-rently, it includes only producerlosses.) The heavy costs of protec-tion are rarely brought to publicnotice, and the political sensitivityto possible loss of employmentthrough competitive imports isacute while employment gainsfrom exports play a smaller part ingovernment decisions.

The prospects for the 1980s aremixed. The economies of the mid-dle-income countries will con-tinue to expand rapidly if the tradeenvironment remains as open as itis now. Their export expansion hasresulted more from their own"push" than from the "pull" ofworld markets, and they havedemonstrated considerablecapacity to diversify. Theireconomies are becoming largeenough to support economies ofscaleparticularly if they "openup" to each other.

The low-income countries face amore difficult future. A fewnegotiated agreements havebrought them some modestbenefits; but more rapid advancewill depend considerably on theirfurther development and policiestoward exporting sectors.Experience shows that agricul-ture-based countries can, withproper incentive policies, diver-sify production and make valua-ble export gains. One possiblearea for exploration is "affirmativeaction" by the capital-surplus oilexporters to purchase more oftheir imports from developingcountries generally, and the low-income countries in particular.

A major determinant of tradeprospects for developing coun-tries is whether or not theindustrial countries maintain areasonable rate of economicgrowth and of employment. Butthe effects run in both directions:there are gains from trade which

115

contribute to efficiency andgrowth. Indeed, the choice for theindustrial countries is not toadjust or protect; the choice isgrow or protect.

Energy

The pattern of energy use beforethe oil-price rise in 1973 wasunsustainable. When the con-sumption of oil began to growfaster than additions to reserves,the stage was set for higher priceseven without deliberate actionby the oil-exporting countries.Although the adjustment tohigher prices has not beensmooth, their effects have alreadybeen marked. In the industrialcountries, growth of consumptionhas slowed. The amount of energyused for a unit of production hasfallen significantly and is expectedto fall further as further adjust-ments are made. In developingcountries energy intensities can-not be expected to decline at allsoongiven their growing needfor commercial energy as develop-ment, urbanization, and thetransformation of industry andagriculture all take placeeven ifenergy efficiency improves, as itcan.

Comparable adjustments on thesupply side will also take place toease energy bottlenecks in thecoming decade. Investments inenergy developmentwhichbecause of the long lead timesmade little contribution to adjust-ment in the past decadeare nowcoming to fruition. In the 1980schanges in the composition ofsupplies are expected to be asimportant as changes in demand.While oil provided more than 60percent of the additional energysupply in the 1960s, in the 1980s itsincremental contribution will beabout one quarter. Production ofcoal is expected to grow twice asfast as that of oil in the 1980s. Coal

116

will gradually replace oil as theworld's main source of energygrowth. Later, a significantincrease in nuclear and syntheticfuels may also be expected. Thespeed of these demand and sup-ply adjustments implies a con-tinued increase in real energyprices, averaging some 3 percent ayear between 1980 and 1990,though year-to-year changes willinevitably be erratic.

To date the energy transitionhas been managed relativelysmoothly in the oil-importingdeveloping countries, whosegrowth path was not substantiallydisrupted in the mid-1970s. Avariety of factors combine to makethe outlook for their continuedprogress more difficult in the1980s. Reflecting the impact ofhigher oil import prices and lowerexports, balance-of-paymentsdeficits have risen to levels whichcannot be sustained for long. Theeffects of higher domestic energyprices are also now being felt. Insome energy-intensive sectors,such as manufacturing andtransport, they could be pro-nounced.

However, there is little indica-tion that, on their own, higherenergy prices will preventindustrialization and a resump-tion of faster growth. There will besome changes in comparativeadvantage, and slower growth inthe transition period. Policies toincrease domestic energy suppliesand to plan for efficient energy usewill ease this transition.

For many poor countries theenergy problem is the fuelwoodcrisis and spreading deforesta-tion. It is a problem with wideramifications: it affects not onlytheir own physical environmentand ecology, but that of the worldas a whole and its climate. Fuel-wood today represents one quar-ter of developing country energyconsumption, and few tasks are

more urgent than the stepsnecessary to put its use on a sus-tainable basis.

The energy market is a globalone; the development of addi-tional energy supplies anywherebrings benefits to all countries.There is thus a strong incentive forall parties to help boost energyproduction in developing coun-tries. Higher oil production inthese countries could takepressure off internationalmarkets, in addition to diversify-ing sources of world supply;expansion of other energy sourcesreduces the demand for oil. Noinvestments show a greater coinci-dence of the economic and stra-tegic interests of the developedand developing countries.

International cooperation isneeded to promote this energydevelopment. Considerableresources are called for, and mustcome from the industrial coun-tries and the capital-surplus oilexporters. The Report has arguedthat there are good reasons whyinternational financial institutionsshould play a significant part inthis process, borrowing in privatecapital markets for the purpose.Such measures would serve thetriple function of promotingdevelopment, easing energymarkets and recycling capital.

The other main components ofadjustment in energy requireactions from all oil exporters andfrom the industrial countries. It iswidely agreed that there is a needfor oil exporters to pursue morestable price policies. Price,however, depends on both supplyand demand, and year-to-yearfluctuations cannot be avoided.Since the largest share of demandcomes from the industrial coun-tries, it is important that they con-tinue their own efforts to saveenergy and develop alternatives tooil.

Capital flows

Borrowing by developing coun-tries has always been an importantsource of balance-of-paymentssupport, permitting higher levelsof imports and domestic invest-ment to accelerate growth. In the1970s, borrowing also served thecrucial purpose of giving time forcountries to adjust to changedconditions. It helped considerablyto limit the immediate impact ofterms-of-trade losses. The inter-national capital market recycledthe OPEC surpluses efficiently,particularly to middle-incomedeveloping countries. Bilateraland multilateral aid agencies re-sponded well, at least at first, tothe immediate needs of many low-income countries. Remittancesfrom migrant workers in the GulfStates also helped. The secondround of oil-price rises in 1979-80,however, has been accommodatedwith the help of short-term bor-rowing and use of reserves to adegree which is not viable for verylong.

The projections in this Reportindicate the continuing need forsubstantial external financecommercial loans for the better-off countries, and (mainly) con-cessional loans and grants for thepoorer countries. For the better-off, high interest rates willincrease capital requirements ifthere is to be a substantial nettransfer, and shorter maturities willcall for more frequent refinancing.

The international capital marketis capable of providing much ofthe required external finance.Commercial banks have had asmaller proportion of bad debts intheir lending to developing coun-tries than to industrial countries.As a group, developing countriesare no less creditworthy todaythan they were a decade ago. Thenumber of middle-income coun-tries with short-term liquidity

problems has, however,increased, at a time when thebanks may be beginning to besomewhat constrained for onereason or another: the balance ofdomestic and foreign loans intheir portfolios, country-exposurelimits, national regulation, riskperception or capital-asset ratios.The composition of borrowersand lenders may well change,but the private capital market isexpected to continue to play amajor role in recycling fundsfrom the surplus to the deficitcountries.

Nonetheless, there will be aneed for national governmentsand international financial institu-tions to bear a larger share of theoverall flow of recycled funds. Thelatter in particular can assist inlengthening maturities, in coor-dinating capital flows with adjust-ment needs and in cooperatingwith commercial capital markets.

Recycling would require lessinternational support if the capi-tal-surplus countries were to buymore from developing countries,and to lend and invest more inthem directly. Banks and develop-ment agencies of the capital-surplus countries show signs ofexpanding their direct financing.In the same way that they havemoved to take a larger share of theprofits of selling oil, it may wellappeal to them in the course oftime to take a larger share of theprofits currently accruing to banksin the industrial countries whichborrow and on-lend oil revenues,if they are willing also to assumethe management costs and bearthe risks.

It is harder to see how the needsof the low-income countries willbe met. The prospects for bilateralofficial aid are mixed, with somedonor countries improving theirperformance, others cutting back.The nonmarket countries are stillinsignificant aid donors. The cur-

rent attitude of some industrialcountries toward developmentassistance may limit the capacityof the multilateral institutions toplay a larger role in concessionallending. And, mainly for politicalreasons, a large share of official aidgoes to middle-income, not low-income countries.

For the low-income countries,the adjustment problem describedin this Report has no short-termsolution. Apart from immediatebalance-of-payments needs, thelonger-term tasks of investmentand restructuring will require adecade or more of increased sup-port with concessional funds. Thetime-scale is even longer for thevery poorest countries, wherethe essential foundations of eco-nomic developmentinfrastruc-ture, human capital, commercialnetworks, and effective adminis-trative capacity at all levelsarenot yet in place.

Agenda for growth

The Report has described howadjustment may take place inter-nationally and nationally with theleast damage to continuing devel-opment objectives. A summary ofthe results may be found in theReport's two projected scenariosfor 1980-90. Under the High case,the middle-income countriesgrow at 5.6 percent annually in the1980s, the low-income countries at4.1 percent; under the Low case,they manage only 4.3 percent and3.0 percent respectively.

The difference between thescenarios is not just one of growthrates, but a fundamentaldifference of outlook. In the Highcase, poverty is steadily pushedback in developing countries;world trade expands considera-bly; overall adjustment in theworld economy is made easier. Inthe Low case, economic develop-ment slows down and poverty

117

affects ever-larger numbers ofpeople. By the end of this century,the difference between the twocases amounts to some 220 millionmore absolutely poor people.

The main requirements to reachthe higher scenario are notexcessively demanding.

Industrial economies have togrow 0.3 percentage points a yearfaster in 1980-90 than they did in1970-80. That means theirapproaching 4 percent averageannual growth in the second halfof the 1980s.

Combined with this highergrowth, industrial countriesshould refrain from imposing anyadditional trade barriers; oil-importing developing countries'exports could then grow at ratescomparable to those of the 1970s.

The measures described toachieve a global balance betweendemand and supply for energyshould result in an annual realincrease in oil prices of no morethan 3 percent over the decade as awhole.

Aid to low-income countriesshould increase. Either industrialcountries must increase their aidsteadily and couple this with aconsiderable reallocation to low-income countries; or they mustraise their aid more substantially(keeping the same distributionbetween low- and middle-incomecountries). Either way, the low-income countries need to receivesome $4 billion a year more (in1980 dollars) than they do in theLow case.

Developing countries shouldmaintain their domestic savingsrates at least at 1980 levels andimprove the efficiency of their useof capital.

The various policies needed toensure that adjustment is accom-panied by rapid growth arestylized in the tableau (see box).

Each group of countries has toinvest efficiently and raise or118

maintain growth ratesthis willbe assisted by the adjustmentmechanisms. The task of adjust-ment is made easier for each groupof countries by complementaryactions in energy markets, capitalflows and trade, rather than byexclusive reliance on any one ofthem. Similarly, in each area ofpolicy the actions of the maingroups of countries need a degreeof consistency.

Policy making in the 1980s mayseem more difficult than in thel970s. There may, however, besome compensating advantage inthe knowledge derived from

analysis of adjustment in the 1970sand a better understanding of theworkings of the world economy.In particular there will be morerealistic expectations about therole and price of energy: thegeneral dimensions of the energytransition are now accepted on allsides. With reasonable manage-ment, adjustment need not beharder in the next decade than inthe last.

The experience of the past sevenyears shows that to a large extentthe direction and coordination ofadjustment policies can be guidedby price signals resulting from

Adjustment mechanismsCountries Trade Energy Capital flows

Oil-importingdevelopingcountries

Expand exports,including diver-sification of agri-cultural exports,and adequateincentives forexporters

Import substitutionin line with inter-national prices

Raise internalprices to encourageproduction andconservation

Expand energysupplies

Borrow to coverbalance-of-pay-ments deficits andinvest for struc-tural adjustment

Capital-surplusoilexporters

Expand imports,especially fromdevelopingcountries

Stabilize pricepolicy

Support assistancefor developingcountries' energyproduction

Increase aid topoor countries

Increase directlending and invest-ment in develop-ing countries

Industrialcountries

Expand importsfrom developingcountries

Avoid protectionand make positiveadjustments toexpand trade

Conserve energy

Switch to alterna-tive energy sources

Support assistancefor developingcountries' energyproduction

Increase aid topoor countries

Support recycling

Interna-tionalpolicies

Measures toimprove poorcountries' gainsfrom trade

International finan-cial institutionsassist developingcountries' energyproduction

International finan-cial institutionsallocate aid topoorest countriesand supportrecycling

national action. Nevertheless,there are several areas in whichgovernmental action and interna-tional negotiation is needed toreinforce existing institutionalarrangements and to supplementmarkets. A number of these havebeen discussed in the Report. Themost important for the poor coun-tries is an increase in capital flowson concessional terms; they haveno alternative form of adjustmentexcept to slow down growth.

Major responsibilities lie withdeveloping countries for improv-ing domestic performance.Simultaneously, the richer coun-tries of the world must tackle thenecessity of higher aid levels forlow-income countries by one

means or another, if poverty is tobe attacked. Most of the otherglobal policy requirements are inthe joint interests of all countries;insofar as aid is used for investingin energy and food production inlow-income countries, even thatrebounds to the donors' benefit.The expansion of world trade willalso benefit all countries; and theassurance of recycling willforestall unnecessary contractionin global demand.

The difficult world environ-ment of the 1980s may make it alltoo easy to lose sight of the pur-poses of economic development.The most urgent of them is tofurther the struggle againstpoverty. The faster economic

growth that this Report judges tobe attainable will provide theresources to tackle povertydirectly. People and governmentsin developing countries must playtheir part in ensuring that thishappens. Poor people must bereached by the education andhealth programs that have equip-ped others to raise their incomes,live longer lives and fulfill theirpotential. The slower economiesgrow, the greater the risk thatthose programs will be sacrificedfor lack of finance. The vicious cir-cle of poverty and slow growthwill then be drawn round anothergeneration. That is the price offailure. It is a price that need not bepaid.

119

Technical appendix

Chapter 3

In this chapter, Tables 3.1, 3.2, 3.3,3.4 and 3.7 are based on WorldBank data. Most of the variablesused in the tables are familiar con-ceptslike prices, volumes andshares. There are however a fewless familiar variables whoseoperational definitions should bepresented.

Variable definitions

The numerator of higher prices as apercentage of increase of value inTable 3.1 is the amount by whichthe 1970-80 inflation of the pricelevel (in US dollars) increases thedollar value of the 1980 exportvolume. The denominator is, ofcourse, the actual increase of dol-lar export value, which reflectsprice and volume increases. To bemore precise, let C represent con-stant dollar indices of exportvolume, and V represent currentdollar export values. The numberfollowing the letter designates theyear-7 for 1970 and 8 for 1980.Higher prices as a percentage of theincrease of value is then measuredby the formula:

V8 - (C8/C7) (V7)V8V7

The intuitive meaning of thisformula can be seen if concep-tually (a) Values are separated intoPrice times Quantity and (b) theQuantities are substituted for theVolumes. This gives:

120

(1) Q8 (P8 - P7)V8 - V7

which shows that the numerator isthe price change multiplied by the1980 export volume.

Export purchasing power in Tables3.2, 3.3 and Ti and T2 is, asexplained in the text, the dollarvalue of a country group's exportreceipts deflated by the exportprice index of industrial countries.The 1970 to 1980 increase of exportpurchasing power is then dividedinto a volume component and arelative export price component. Thevolume component measures theeffect on export purchasing powerof the 1970-80 change of exportvolume, with relative export pricefixed at the initial (1970) level. Theprice component is the differencebetween the total increase and thevolume component. Concep-tually, it measures the change inthe purchasing power of the 1980export volume which results fromthe 1970-80 change of relativeexport price.

Operationally, export purchas-ing power is V8/D8 for 1980, andV71D7 for 1970, where V is currentdollar export value (as above) andD is the price deflator for theindustrial countries' exports of allmerchandise plus nonfactor ser-vices. The total change of exportpurchasing power (for example,the third row in Table T2) is, ofcourse, V8/D8 minus V71D7. The

"Volume component" is measuredby

fC8 V7\ V7C7 D7) D7.

The relative export price corn po-nent is the difference between thetotal change and the volume com-ponent, which comes to

V8/C8V7D8 C7 D7

Making again the conceptualsubstitutions of P times Q forvalues and of Qs for volumes, (2)and (3) can be transformed so as tobring out their intuitive meaning,into

(Q8 - Q7) P7D7

for the volume component, or theeffect of the volume increase, and

(Q8)I P8 P7'(i5)

as the effect of the relative exportprice change.

External data sources

In Table 3.5, the Total value ofimports is from OECD, Series B,Trade by Commodities. Import valueunder GSP is from United NationsConference on Trade and Devel-opment, Comprehensive Review ofthe Generalized System of Preferences(TDIB/C.5/63, dated 4/9/79).

The data in Table 3.6 werecalculated from quantum indices

and current dollar value seriesfrom United Nations, MonthlyBulletin of Statistics, July 1980.Indices for one-digit categorieswere combined using 1970 tradevalues as weights.

Chapter 6

The analysis presented in Chapter6 examines the adjustment ex-perience of oil-importing develop-ing countries during 1974-78. Itdecomposes changes in the tradeaccount into price and quantitychanges, comparing prices withtheir level5 in 1971-73 and quan-tities with what would have hap-pened had various trends of1963-73 continued. This decom-position, though only one ofseveral which might be chosen,can be used to compare countryexperience within a commonframework and to make generalconcepts more precise.

In Table 6.2, the balance-of-pay-ments effects of external shocksand modes of adjustment are

Country group and variable

Developing countriesLow-income oil importers

Change of relativeexport price

Change of export volumeComposition of 1970

exports (percentage)

Middle-income oilimportersChange of relative

export priceChange of export volumeComposition of 1970

exports (percentage)

Industrial market economiesChange of relative

export priceChange of export volumeComposition of 1970

exports (percentage)

distinguished in the followingway:

External shocks equals Interna-tional price effects plus Exportvolume effects.

Modes of adjustment equalsStructural adjustment (i.e.,Export market penetration plusImport substitution) plusAdditional real external financ-ing plus Slower growth.

The details are explained usingcalculations shown in Table T3 forKenya, one of the poorest middle-income primary producing coun-tries, with a per capita GNP of$380 in 1979.

External shocks

International price effects are thesum of export and import priceeffects.

(1) Export price effects: the extentto which the purchasing power ofexports was eroded by a rise inworld prices more rapid than inthe country's export prices, bothmeasured from a 1971-73 base.

Table Ti Nonfuel primary exports:changes of export purchasing power and export volume,by product category and by country, 1970-80(change as a percentage of 1970 level)

Movements in world prices aremeasured by changes in the unitvalue index of manufacturedexports f.o.b. from developedcountries, a procedure consistentwith the deflation of world tradeelsewhere in this Report. Kenya'sexport-price increases exceededworld-price increases for everyyear between 1974 and 1978. Theyreached a peak in 1977 anddeclined in 1978, reflecting move-ments in coffee and tea prices.

(2) Import price effects: the extentto which the country's outlays onimports were augmented by a risein import prices more rapid thanin world prices, both measuredfrom a 1971-73 base. Kenya'simport-price increases exceededworld-price increases for everyyear between 1974 and 1978 andaveraged $170 million or 5.7 per-cent of GNP over this period. Insum, Kenya suffered from adverseinternational price effects duringthe 1974-78 period, equal to anaverage 1.1 percent of GNP.

Export volume effects: the dif-ference between trend and hypo-thetical exports.

Trend exports are derived onthe assumptions (a) that worldexports of Kenya's traditional pri-mary export products and devel-oping countries' exports of non-traditional products grew from1971-73 at the same rate as in theyears 1963-73 and (b) that thecountry maintained its 1971-73shares in those exports. Theunderlying assumption is that adeveloping country's traditionalprimary exports compete againstall suppliers in the world marketwhereas its nontraditional exportscompete only against those ofother developing countries.

Hypothetical exports arederived on the assumption thatthe country maintained its 1971-73shares in world exports of its tradi-tional primary exports and indeveloping countries' exports of

i21

36 28 33 61+84 +77 +92 +111

100 61 15 24

27 17 19 52+81 +88 +35 +101

100 57 17 26

14 8 6 33+80 +92 +80 +50

100 55 23 22

All Metalsnonfuel Food and Nonfood andprimary beverages agriculture minerals

Table T2 Purchasing power of exports of manufactured goods,increase by major country group, 1970-80

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Table T3 Balance-of-payments effects of external shocks and modes of adjustment: Kenya(millions of dollars, 1971-73 prices)

nontraditional products, withboth the latter categories growingat their actual rates starting from1971-73. The difference between(1) and (2) arises from a fall in thegrowth of international trade from1971-73 onwards relative to itsgrowth during 1963-73. Over theperiod as a whole, it averaged $508million less $453 million, or $55million, equivalent to 1.8 percentof GNP.

External shocks are the sum ofinternational price effects andexport volume effects. They av-eraged 2.9 percent of Kenya's GNPover the 1974-78 period.

Item 1974 1975 1976 1977 1978Av.

1974-78

Av.1974-78

(as percentage of GNP)I. External shocks

1. International price effectsa. Export price effects -88 -35 -132 -313 -116 -137 (-4.6)b. Import price effects 206 65 85 215 278 170 (5.7)

Sum (la + lb) 118 30 -47 -98 162 33 (1.1)2. Export volume effects

a. Trend exports 436 468 504 544 588 508b. Hypothetical exports 423 418 471 464 492 453

Difference (2a - 2b) 13 50 33 80 96 55 (1.8)3. Total (= 1 + 2) 131 80 -14 -18 258 88 (2.9)

II. Modes of adjustment

1. Structural adjustmenta. Export market penetration

(i) Actual exports 375 370 391 373 364 375(ii) Hypothetical exports 423 418 471 464 492 453

Difference [(i) - (ii)1b. Import substitution

(i) Hypothetical imports

-48

635

-48

681

-80

717

-91

790

-128

858

-78

736

(-2.6)

(ii) Actual imports 571 573 550 642 580 583Difference [(i) - (ii)] 64 108 167 148 278 153 (5.1)

Sum (= la + ib) 16 60 87 57 150 75 (2.5)2. Additional real external

financinga. Real resource gap 314 233 112 171 378 241b. Trend resource gap 220 236 251 266 280 250

Difference (2a - 2b) 94 -3 -139 -95 98 -9 (-.3)3. Slower growth

a. Trend imports 656 704 755 810 868 758b. Hypothetical imports 635 681 717 790 858 736

Difference (3a - 3b) 21 23 38 20 10 22 (.7)4. TOtal (= 1 + 2 + 3) 131 80 -14 -18 258 88 (2.9)

Item

Developing countries

Industrialmarket

economies

Oil importers

Oilexporters

Low-income

Middle-income

Percentage change ofrelative export prices -33 -22 -8 -7

Total increase of exportpurchasing power(bIllions of 1978 dollars) 1.1 53.9 2.1 297.8

Effect of volume change 3.9 77.4 2.6 346.4Effect of relative price

change -2.7 -23.5 -0.5 -48.6Increase of export purchasing

power as percentage of 1970 levelTotal (net) increase 26 194 61 76

Effect of volume change 90 279 75 88Effect of relative price

change -64 -85 -14 -12

Modes of adjustment

Slower growth: the differencebetween trend and hypotheticalimports.

Trend imports are derived onthe assumptions (a) that incomeelasticities of import demand, esti-mated separately for fuel and non-fuel imports, remained at their1963-73 levels and (b) that thegrowth of GNP starting from1971-73 remained the same as inthe years 1963-73.

Hypothetical imports arederived on the assumption thatthe income elasticities of importdemand for fuel and nonfuelimports remained unchanged attheir 1963-73 levels, with GNPgrowing at its actual rate startingfrom 1971-73.

The difference between (1) and(2) arises from a fall in the growthof GNP from 1971-73 onwardsrelative to its growth during1963-73. This averaged 0.7 percentof GNP, or nearly a quarter of thetotal adjustment, with a peak in1976, reflecting the application ofrestrictive fiscal and monetarypolicy and import restrictions.

Structural adjustment is thesum of export market penetrationand import substitution.

(1) Export market penetration:increases in exports associatedwith an increase in Kenya's shareof export markets from its 1971-73

level. It will be recalled thathypothetical exports show theconsequences of maintaining1971-73 market shares. The dif-ference between actual exports($375 million in 1974-78) andhypothetical exports ($453 millionin 1974-78) is then attributed tomarket penetration. This was-$78 million or -2.6 percent ofGNP, the adverse impact of whichalmost equaled external shocks(2.9 percent of GNP). The losseswere concentrated in nontradi-tional primary and manufacturedexportsreflecting an increasingbias against exports in trade policyas well as the breakup of the EastAfrican Community.

(2) Import substitution: savings inimports associated with a fall inthe income elasticities of importdemand from the 1963-73 period.It will be recalled that hypotheticalimports show the consequences ofunchanged income elasticities.The difference between hypo-thetical imports ($736 million in1974-78) and actual imports ($583million in 1974-78) is taken toreflect import substitution. At$153 million or 5.1 percent of GNP,import substitution was by far thedominant mode of adjustment inKenya. This could be attributed togreater reliance on import restric-tions and the increase in the use ofLetter of No Objection privileges

which gave firms effective vetopower over imports.

Structural adjustment (i.e., ex-port market penetration plus im-port substitution) on averageaccounted for 85 percent of thebalance-of-payments accommo-dation to external shocks during1974-78.

Additional real external financ-ing: the difference between realand trend resource gaps.

The real resource gap, i.e.,the difference between the nomi-nal values of actual imports andactual exports, corrected for thegeneral rise in world prices; and

the trend resource gap, i.e.,that obtained by subtracting trendexports from trend imports,measured at 1971-73 prices.Both resource gaps refer tomerchandise trade alone andexclude nonfactor services. Thedifference between the realresource gap ($241 million in1974-78) and the trend resourcegap ($250 million in 1974-78) isadditional real external financing,i.e., extra financing corrected forthe general rise in world prices. Itaveraged minus $9 million. Addi-tional nominal financing did nottherefore rise as rapidly as worldinflation and Kenya essentiallyrelied on domestic modes ofadjustment to respond to externalshocks during the 1974-78 period.

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Bibliographical note

This Report has drawn on a widerange of World Bank work as wellas on external research. Selectedsources used in each chapter arebriefly noted below, and thenlisted alphabetically. The WorldBank sources include sector policypapers, ongoing economic analy-sis and research, and project, sec-tor and economic work on individ-ual countries. In addition, a set ofbackground papers is commis-sioned for each Report; their pri-mary purpose is to synthesize therelevant literature and Bank work.(Thus the sources cited in thesepapers are not listed separately.)Many of the background papersare issued as World Bank StaffWorking Papers, which are avail-able at no charge from the Bank'sPublications Unit. The views theyexpress are not, however, nec-essarily those of the World Bank orof this Report.

Selected sources, by chapter

Chapter 2

The basic projections shown in thechapter are the products of theWorld Bank's Global Framework.The data for this exercise are simi-lar to those in the World Bank Atlas,1980 and the World Tables, secondedition. For a discussion of theunderlying assumptions for theprojections, see Cheetham, Guptaand Schwartz, and World Bank(forthcoming).

124

The sensitivity analysis is theresult of simulations undertakenwith the Brussels Global Develop-ment Model, which is calibrated tothe Bank's Global Framework. TheBrussels model is also the sourceof the projected trade shares di-vided between North and South.This model is described in Wael-broeck and associates. The num-bers living in poverty are based onthe methodology developed byAhluwalia, Carter and Chenery,applied to the current projectionsof income and population. For themethodology and results of theInternational Comparison project,see Kravis, Heston and Summers.

Chapter 3

Frank surveys a number of tradeissues of particular interest todeveloping countries. Hughesand Waelbroeck synthesize anumber of studies of the penetra-lion of industrial-country marketsby developing-country exports,and Havrylyshyn and Wolf ana-lyze the evolution of South-Southtrade. Trade policy in developingcountries is discussed in the 1979World Development Report, inreferences cited there, and inBalassa (1980b). Wolf, Finger (1981)and Nelson analyze industrial-country policy. For analyses of themechanisms through whichindustrial countries administertheir trade policy, see Finger, Halland Nelson; Verreydt andWaelbroeck; and Hughes and

Waelbroeck. Murray is a usefulsource on the Generalized Systemof Preferences, Yeats on tariffescalation, Bale and Lutz onagricultural protection and Finger(1975) on the offshore assemblyprovisions. Issues related to com-modity processing will be re-viewed in a forthcoming WorldBankCommonwealth Secretariatvolume on the processing of prim-ary commodities in developingcountries. The potential value todeveloping countries of the newGATT codes are analyzed in the1980 World Development Report andin references cited there. Usefulsources on international tradedispute settlement mechanismsare Hufbauer and Shelton onexport incentives and counter-measures and Merciai on safe-guards. The table in the box ontariff escalation is from Yeats; inthat on mineral investment, fromMikesell.

Chapter 4

The broad energy outlookde-mand trends and supply pros-pects - for both the industrialand developing countries is re-viewed in Choe, Lambertini andPollak. Trends in domesticuser-prices and energy-tax levelsare discussed in InternationalEnergy Agency. The way in whichenergy prices affect consumptionand, in turn, the relationship be-tween income growth and energydemand has been thoroughly

investigated for the developingcountries in Choe. Elasticities forthe industrial countries are sur-veyed in Energy Modelling Forum.

World Bank (1980) discussesprospects for developing variousenergy sources in developingcountries in the coming decade.Hughart reviews developing-country nonconventional re-sources. HablUtzel discusses theproduction strategies and specialconcerns of the capital-surplus oil-exporting countries.

The "other energy crisis," thecrisis in fuelwood, and its humanand ecological consequences is thesubject of Spears. Projects to helpprovide energy for the poor arereviewed in Noronha.

The impacts of higher energyprices on growth are investigatedin Manne. Berndt and Wood'ssurvey reviews empirical esti-mates from a range of studies ofthe ease with which other factorscan be substituted for energy usein production. Ridker providesbackground on the sectoralimpacts of higher energy prices.

The basis for estimating capitalrequirements for the developingcountries' programs of energydevelopment are discussed inWorld Bank (1980). Figure 4.7 isderived from Bechtel.

Chapter 5

Data on external finance are com-piled by various internationalinstitutions. Those processed bythe World Bank draw on its Debtor

Selected sources

Reporting System and its Bor-rowing in International CapitalMarkets as well as on the Interna-tional Monetary Fund's Inter-national Financial Statistics, annualand quarterly reports by the Bankfor International Settlements, andDevelopment Cooperation, theannual review of the OECDDevelopment Assistance Com-mittee.

Both Bryant and Joshi analyzethe macroeconomics of interna-tional adjustment. Bryant empha-sizes the interdependencies oftrade and capital flows and Joshihighlights potential marketfailures and areas for interven-tion. Fleming discusses thegeneral issues of private capitalflows to developing countries,O'Brien describes the evolution ofrelationships between privatebanks and developing countriesand Hope analyzes the debt situa-tion and its implications for futureborrowing. Swamy reviews pasttrends and future prospects forlabor migration and remittances.

Chapter 6

The shock-adjustment calcula-tions are based on a framework ofanalysis pioneered by Balassa(1980a, 1981 and forthcoming).Portions of his work have also ap-peared in Balassa and Barsony, areport issued by the OECDDevelopment Centre. The esti-mates in Table 6.2 have beenadapted from those papers. Theapproach is extended in Mitra,

which also explores the role of sav-ings and investment in the adjust-ment process. Table 6.3 is takenfrom the work of Bhalla. Descrip-tions of country adjustment havedrawn extensively on World Bankcountry economic work and onJaspersen, Liebenthal and Wallichfor oil-importing developingcountries; on Gelb for capital-deficit oil-exporting countries andon Hablützel for capital-surplusoil-exporting countries. Thematerial on nonmarket industrialeconomies is based on Schrenk.

Chapter 7

The main source for material onpoverty, growth and humandevelopment is the 1980 WorldDevelopment Report and thebackground material citedtherein, especially Hicks, and Haqand Burki. The impact of thebudgetary process on humandevelopment programs isdiscussed in Knight, especiallythe chapter by Meerman. Theanalysis of food productionproblems is based on a review ofWorld Bank agricultural sectorstudies for several countries. Fooddistribution, especially its rela-tionship to external economicpressures and potential conflictswith production concerns, isdiscussed in Clay (1981a and b),Chambers and Singer, and Lipton.Recent evidence on the determi-nants of fertility decline and itsrelationship to human develop-ment programs is in Birdsall.

Ahiuwalia, Montek, Nicholas Carter and Hollis B. Chenery. "Growth and Poverty in Developing Countries." Journal ofDevelopment Economics 6:3 (September 1979), 299-341.

Balassa, Bela. "Adjustment to External Shocks in Developing Economies." World Bank Staff Working Paper, 1981*(forthcoming).

"The Newly Industrializing Developing Countries After the Oil Crisis." World Bank Staff Working Paper, no.437, October 1980a.

"The Process of Industrial Development and Alternative Development Strategies." World Bank Staff WorkingPaper, no. 438, October 1980b.

"Policy Experience in Twelve Less Developed Countries." World Bank Staff Working Paper, no. 449, April 1981.*

125

Balassa, Bela and André Barsony. "Policy Responses to External Shocks in Developing Countries." Paris: OECD, 1981.Bale, Malcolm D. and Ernst Lutz. "Price Distortions in Agriculture and Their Effects: An International Comparison."

American Journal of Agricultural Economics 63:1 (February 1981), 8-22.

Bechtel. "Economic Review of Advanced Fuel and Power Technologies." Mimeographed. San Francisco, California:Bechtel, August 1980.

Berndt, E., and D. Wood. "Engineering and Econometric Interpretations of EnergyCapital Complementarity." AmericanEconomic Review 69:3 (September 1979).

Bhalla, Surjit S. "The Transmission of Inflation into Developing Economies." In Cline and Associates.

Birdsall, Nancy. Population Growth and Poverty in the Developing World. Washington: Population Reference Bureau, Inc.December 1980.

Bryant, Ralph. "Notes on the Analysis of Capital Flows to Developing Nations and the 'Recycling' Problem." WorldBank Staff Working Paper, 1981* (forthcoming).

Chambers, Robert, and Hans Singer. "Poverty, Malnutrition and Food in Zambia." World Bank Staff Working Paper,1981* (forthcoming).

Cheetham, R.J., S. Gupta and A. Schwartz. "The Global Framework." World Bank Staff Working Paper, no. 355,September 1979.

Choe, Boum Jong. "Energy Demand in Developing Countries." In International Energy Strategies, edited by JoyDunkerley. Proceedings of the 1979 International Association of Energy Economists and Resources for the FutureConference. Washington, 1980.

Choe, Bourn long, Adrian Lambertini and Peter Pollak. "Global Energy Prospects." World Bank Staff Working Paper,1981* (forthcoming).

Clay, Edward. "Food Policy Issues in Low-Income Countries." World Bank Staff Working Paper, 1981a* (forthcoming).

"Poverty, Food Insecurity and Public Policy in Bangladesh." World Bank Staff Working Paper, 1981b*(forthcoming).

Cline, William R., and Associates. World Inflation and the Developing Countries. Washington: The Brookings Institution,1981.

Energy Modelling Forum. "Aggregate Elasticity of Energy Demand," vol. 1. Stanford, California: Stanford University,August 1980.

Finger, J.M. "Tariff Provisions for Offshore Assembly and the Exports of Developing Countries" Economic Journal 85(June 1975), 365-71.

"Industrial Country Policy and Adjustment to Imports From Developing Countries." World Bank Staff WorkingPaper, 1981* (forthcoming).

Finger, J.M., H. Keith Hall and Douglas R. Nelson. "The Political Economy of Administered Protection." AmericanEconomic Review (forthcoming).

Fleming, Alex. "Private Capital Flows to Developing Countries and their Determination: Historical Perspective, CurrentExperience and Future Prospects." World Bank Staff Working Paper, 1981* (forthcoming).

Frank, Isaiah. "LDC Trade Policy Issues for the 1980s. World Bank Staff Working Paper, 1981* (forthcoming).

Gelb, Alan. "Capital-Importing Oil Exporters: Adjustment Issues and Policy Choices." World Bank Staff Working Paper,1981* (forthcoming).

Hablutzel, Rudolf. "Development Prospects of Capital-Surplus Oil-Exporting Countries: Iraq, Kuwait, Libya, Qatar,Saudi Arabia, UAE1 World Bank Staff Working Paper, 1981* (forthcoming).

Haq, Mahbub ul and Shahid Javed Burki. Meeting Basic Needs: An Overview. Poverty and Basic Needs Series.Washington: World Bank, September 1980.

Havrylyshyn, Oh and Martin Wolf. "Trade Among Developing Countries: Theory, Policy Issues and Principal Trends."World Bank Staff Working Paper, 1981* (forthcoming).

Hicks, Norman. "Economic Growth and Human Resources." World Bank Staff Working Paper, no. 408, July 1980.Hope, Nicholas C. "Developments in and Prospects for the External Debt of Developing Countries: 1970-80 and

Beyond." World Bank Staff Working Paper, 1981* (forthcoming).

Hufbauer, Gary C. and J.R. Shelton. The International Discipline of Export Incentives and Countermeasures. London: TradePolicy Research Centre (forthcoming).

Hughart, D. "Prospects for Traditional and Nonconventional Energy Sources in Developing Countries." World BankStaff Working Paper, no. 346, July 1979.

Hughes, Helen and Jean Waelbroeck. "Trade and Protection in the 1970s: Can the Growth of Developing CountriesContinue in the 1980s?" World Bank Staff Working Paper, 1981* (forthcoming).

126

Independent Commission on International Development Issues [The "Brandt Commission"j. North-South: A Program forSurvival. Cambridge, Massachusetts: The MIT Press, 1980.

International Energy Agency. Energy Policies and Programmes of lEA Countries-1979 Review. Paris: OECD, 1979.

Jaspersen, Frederick Z. "Adjustment Experience and Growth Prospects of the Newly Industrializing Countries." WorldBank Staff Working Paper, 1981* (forthcoming).

Joshi, Vijay. "International Adjustment in the 1980s." World Bank Staff Working Paper, 1981* (forthcoming).

King, Timothy, ed. Education and Income. World Bank Staff Working Paper, no. 402, July 1980.

Knight, Peter T., ed. Implementing Programs of Human Development. World Bank Staff Working Paper, no. 403, July 1980.

Kravis, Irving B., A. Heston and R. Summers. International Comparisons of Real Product and Purchasing Power. Baltimoreand London: Johns Hopkins University Press, 1978.

Liebenthal, Robert. "Adjustment in Low-Income Africa." World Bank Staff Working Paper, 1981* (forthcoming).

Lipton, Michael. "Risks to Nutritional Adequacy of Food Output: Adjustments in India." World Bank Staff WorkingPaper, 1981* (forthcoming).

Manne, Alan. "Energy, Trade and Economic Growth." World Bank Staff Working Paper, 1981* (forthcoming).

Meerman, Jacob. "Paying for Human Development." In Knight, ed.

Merciai, Patrizio. "Safeguard Measures in the GATT" Journal of World Trade Law 15:1 (January-February 1981), 41-66.

Mikesell, Raymond F. New Patterns of World Mineral Development. British-North America Committee, Washington, 1979.

Mitra, Pradeep, K. "An Analysis of Adjustment in Developing Countries." World Bank Staff Working Paper, 1981*(forthcoming).

Murray, Tracey. Trade Preferences for Developing Countries. London: Macmillan, 1977.

Nelson, Douglas R. "The Political Structure of the New Protectionism" World Bank Staff Working Paper, 1981*(forthcoming).

Noronha, R. "Village Woodlots: Are They a Solution?" Paper prepared for a panel on Introduction and Diffusion ofRenewable Energy Technologies, National Academy of Science, Washington, November 1980.

O'Brien, Richard. "Private Bank Lending to Developing Countries." World Bank Staff Working Paper, 1981*(forthcoming).

OECD, Interfutures. Facing the Future: Mastering the Probable and Managing the Unpredictable. Paris: OECD, 1979.

Ridker, Ronald. "The Management of Energy Use in Developing Countries." Mimeographed. Washington: World Bank,1981.*

Sapir, André and Ernst Lutz. "Trade in Services: Economic Determinants and Development Related Issues:' World BankStaff Working Paper, 1981* (forthcoming).

Schrenk, Martin. "The Present and Prospective Role of the CMEA Countries in the World Economy:' World Bank StaffWorking Paper, 1981* (forthcoming).

Spears, J. "Wood as an Energy Source: The Situation in the Developing World." Speech to the 103rd Annual meeting ofthe American Forestry Association, October 1978.

Swamy, Gurushn. "International Labor Migration and Workers RemittancesIssues and Prospects:' World Bank StaffWorking Paper, 1981* (forthcoming).

United Nations. World Energy Supplies 1973 1978. Statistical Papers, Series J, no. 22. New York: United Nations, 1979.

Verreydt, E. and Jean Waelbroeck. "European Community Protection Against Manufactured Imports from DevelopingCountries: A Case Study in the Political Economy of Protection:' World Bank Staff Working Paper, no. 432, October1980.

Waelbroeck Jean, J.M. Burniaux, G. Carrin and J. Gunning. "General Equilibrium Modeling of Global Adjustment:'World Bank Staff Working Paper, 1981* (forthcoming).

Wallich, Christine. "A Comparative Analysis of Developing-Country Adjustment Experiences: Adjustment in Low-Income South Asia:' World Bank Staff Working Paper, 1981* (forthcoming).

Wolf, Martin. "Adjustment Policies and Problems in Developed Countries." World Bank Staff Working Paper, no. 349,August 1979.

World Bank, Economic Analysis and Projections Department. "Development in a Changing Environment." World BankStaff Working Paper, 1981* (forthcoming).

World Bank. "Energy in the Developing Countries." Washington, August 1980.Yeats, Alexander J. Trade Barriers Facing Developing Countries. New York: St. Martin, 1979.

An asterisk (") after a citation indicates papers prepared as part of the background work for this Report.

127

Annex

WorldDevelopment

Indicators

ContentsKey 132

Introduction 133

Table 1. Basic Indicators 134

Population D Area D GNP per capita G Inflation D Adult literacy0 Life expectancy 0 Food production per capita

Table 2. Growth of Production 136

GDP U Agriculture U Industry 0 Manufacturing U Services

Table 3. Structure of Production 138

GDP U Agriculture 0 Industry 0 Manufacturing 0 Services

Table 4. Growth of Consumption and Investment 140

Public consumption 1 Private consumption 0 Gross domestic investment

Table 5. Structure of Demand 142

Public consumption U Private consumption D Gross domestic investmentU Gross domestic saving U Exports of goods and nonfactor services0 Resource balance

Table 6. Industrialization 144

Share of value added in food and agriculture 0 in textiles and clothingU in machinery and transport equipment U in chemicals D in othermanufacturing U Value added in manufacturingU Gross manufacturing output per capita

Table 7. Commercial Energy 146

Growth of energy production 0 Growth of energy consumptionO Energy consumption per capita 0 Energy imports as percentageof merchandise exports

Table 8. Merchandise Trade 148

Export values 0 Import values U Growth of exports0 Growth of imports o Terms of trade

Table 9. Structure of Merchandise Exports 150

130

Fuels, minerals and metals U Other primary commoditiesU Textiles and clothing U Machinery and transport equipment0 Other manufactures

Table 10. Structure of Merchandise Imports 152

Food U Fuels U Other primary commodities U Machinery andtransport equipment U Other manufactures

Table 11. Destination of Merchandise Exports 154

Industrial market economies 0 Developing countries U Nonmarket industrialeconomies U Capital-surplus oil exporters

Table 12. Trade in Manufactured Goods 156

To industrial market economies U To developing countries LI Tononmarket industrial economies 0 To capital-surplus oil exporters U Valueof manufactured exports

Table 13. Balance of Payments and Debt Service Ratios 158

Current account balance before interest payments on external public debtU Interest payments on external public debt U Debt service as percentageof GNP U as percentage of exports of goods and services

Table 14. Flow of External Capital 160

Gross inflow of public and publicly guaranteed medium- and long-term loansO Repayment of principal o Net inflow of public and publicly guaranteedmedium- and long-term loans 0 Net direct private investment

Table 15. External Public Debt and International Reserves 162

Amount in dollars 0 as percentage of donor GNP 0 in national currencies0 Net bilateral flow to low-income countries

Table 17. Population Growth, Past and Projected,and Hypothetical Stationary Population 166

Past growth of population ii Projected population El Hypothetical size ofstationary production El Assumed year of reaching net reproduction rate of 10 Year of reaching stationary population

Table 18. Demographic and Fertility-related Indicators 168

Crude birth rate El Crude death rate 0 Total fertility rate 0 Percentageof women in reproductive age group 0 Percentage of married women usingcontraceptives

Table 19. Labor Force 170

Population of working age El Labor force in agriculture fl in industry0 in services U Growth of labor force, past and projected

Table 20. Urbanization 172

Urban population as percentage of total population 0 Growth of urbanpopulation U Percentage in largest city U in cities of over 500,000persons U Number of cities of over 500,000 persons

Table 21. Indicators Related to Life Expectancy 174

Life expectancy U Infant mortality rate U Child death rate

Table 22. Health-related Indicators 176

Population per physician U per nursing person U Percentage ofpopulation with access to safe water 0 Daily calorie supply per capita

Table 23. Education 178

Number enrolled in primary school as percentage of age groupU in secondary school 0 in higher education U Adult literacy

Table 24. Defense and Social Expenditure 180

Defense expenditure as percentage of GNP U as percentage of centralgovernment expenditure U Per capita central government expenditure ondefense 0 on education U on health

Table 25. Income Distribution 182

Percentage share of household income, by percentilegroups of households

Technical Notes 184

Bibliography of Data Sources 192

131

External public debt outstanding and disbursed 0 as percentage of GNP0 Gross international reserves 0 in months of import coverage

Table 16. Official Development Assistancefrom OECD and OPEC Members 164

Key

In each table, countries are listed in theirgroup in ascending order of income percapita. The reference numbers indicatingthat order are shown in the alphabeticallist of countries below.

132

Figures in the colored bands are summarymeasures for groups of countries. Theletter w after a summary measureindicates that it is a weighted average; theletter m, that it is a median value; theletter t, that it is a total.

Not available.(.) Less than half the unit shown.

All growth rates are in real terms.

Figures in italics are for years or periodsother than those specified.

Afghanistan 11 Hong Kong 92 Peru 57Albania 60 Hungary 121 Philippines 51Algeria 78 India 15 Poland 120Angola 41 Indonesia 35 Portugal 87Argentina 88 Iran 86 Romania 84

Australia 104 Iraq 115 Rwanda 17Austria 102 Ireland 97 Saudi Arabia 116Bangladesh 4 Israel 95 Senegal 40Belgium 110 Italy 98 Sierra Leone 21Benin 19 Ivory Coast 65 Singapore 93

Bhutan 3 Jamaica 72 Somalia 8Bolivia 48 Japan 103 South Africa 81Brazil 82 Jordan 70 Spain 96Bulgaria 119 Kampuchea, Democratic 1 Sri Lanka 18Burma 10 Kenya 37 Sudan 36

Burundi 13 Korea, Democratic Republic of 69 Sweden 113Cameroon 49 Korea, Republic of 77 Switzerland 114Canada 105 Kuwait 118 Syrian Arab Republic 64Central African Republic 29 Lao People's Democratic Republic 2 Tanzania 25Chad 5 Lebanon 71 Thailand 50

Chile 80 Lesotho 33 Togo 34China 22 Liberia 45 Trinidad and Tobago 91Colombia 62 Libya 117 Tunisia 68Congo, People's Republic of 52 Madagascar 30 Turkey 73Costa Rica 83 Malawi 16 Uganda 31

Cuba 76 Malaysia 74 Union of Soviet SocialistCzechoslovakia 123 Mali 9 Republics 122Denmark 112 Mauritania 32 United Kingdom 100Dominican Republic 61 Mexico 79 United States 108Ecuador 66 Mongolia 59 Upper Volta 14

Egypt, Arab Republic of 43 Morocco 58 Uruguay 85El Salvador 55 Mozambique 20 Venezuela 90Ethiopia 6 Nepal 7 Viet Nam, SocialistFinland 101 Netherlands 107 Republic of 12France 106 New Zealand 99 Yemen Arab Republic 39

German Democratic Republic 124 Nicaragua 53 Yemen, People's DemocraticGermany, Federal Republic of 111 Niger 27 Republic of 44Ghana 38 Nigeria 56 Yugoslavia 89Greece 94 Norway 109 Zaire 26Guatemala 63 Pakistan 24 Zambia 46

Guinea 28 Panama 75 Zimbabwe 42Haiti 23 Papua New Guinea 54Honduras 47 Paraguay 67

Introduction

The World Development Indica-tors provide information on themain features of social and eco-nomic development. This editiongenerally follows the format usedin previous years But the coun-try classifications have beenrevised to make them more use-ful for analysis, additional sum-mary measures have been incor-porated, and there is a new tableshowing expenditure on defenseand the main social services.

The indicators in Table 1 give asummary profile of countries.The data in other tables fall intothe following broad areas:national accounts, industrializa-tion, energy, external trade, aidflows, demography, labor force,urbanization, social indicators,defense and social expenditure,and income distribution. Most ofthe information used in comput-ing these indicators was drawnfrom the data files and publica-tions of the World Bank, theInternational Monetary Fund andthe United Nations and spe-cialized agencies.

For ease of reference, ratios andrates of growth are shown; abso-lute values are reported only in afew instances. Most growth rateswere calculated for two periods:1960-70 and 1970-79, or 1970-78if data for 1979 were not available.All growth rates are in real termsand were computed, unlessnoted otherwise, by using theleast-squares method. Becausethis method takes all observationsin a period into account, theresulting growth rates reflect gen-eral trends that are not undulyinfluenced by exceptional values.Table entries in italics indicatethat they are for years or periodsother than those specified. Alldollar figures are US dollars.

Some of the differences

between figures shown this yearand last year reflect revisions tohistorical series by the reportingcountries. They also reflect revi-sions to the estimates of popula-tion on the basis of new inferma- -lion from surveys and censuses.

The country groups used in thetables are: 36 low-incomedeveloping countries with a percapita income of $370 or less in1979; 60 middle-income develop-ing countries with a per capitaincome of more than $370; 18industrial market economies; 4capital-surplus oil exporters; and6 nonmarket industrial econo-mies. A number of countries havebeen reclassified this year toimprove the presentation.

Within each group, countriesare listed in ascending order ofincome per capita, and that orderis used in all tables. The alpha-betical list on the opposite pageshows the reference number ofeach country. Countries withpopulations of less than a millionare not reported in the tables,largely for lack of comprehensivedata. The technical notes for Table1 show some basic indicators for31 small countries that are mem-bers of the United Nations, theWorld Bank or both.

Summary measuresweightedaverages, median values ortotalswere calculated for thecountry groups only if data wereadequate and meaningful statis-tics could be obtained. BecauseChina and India heavily bias thesummary measures for all low-income countries, summary mea-sures are also shown for Chinaand India and for other low-income countries. And becausetrade in oil affects the economiccharacteristics and performanceof middle-income countries, sum-mary measures are also hown

for oil importers and for oil expor-ters. The weights used in com-puting the summary measuresare described in the technicalnotes relating to an indicator. Theletter w after a summary measureindicates that it is a weightedaverage; the letter m, that it is amedian value; the letter t, that it isa total. The median is the middlevalue of a set arranged in order ofmagnitude. Because the coverageof countries is not uniform for allindicators and because the varia-lion around central tendenciescan be large, readers should exer-cise caution in comparing thesummary measures for differentindicators, country groups andyears or periods.

Readers should also exercisecaution in comparing indicatorsacross countries. Although thestatistics presented are drawnfrom sources generally consid-ered the most authoritative andreliable, some of them, par-ticularly those describing socialfeatures and income distribution,are subject to considerable mar-gins of error. In addition, varia-tions in national practices meanthat the data in certain instancesare not strictly comparable. Thedata should thus be construedonly as indicating trends andcharacterizing major differencesbetween countries.

The technical notes should bereferred to in any use of the data.These notes outline the concepts,definitions, methods and datasources. The bibliography givesdetails of the data sources, whichcontain comprehensive defini-lions and descriptions of con-cepts used.

The World DevelopmentIndicators are prepared under thedirection of Ramesh Chander.

133

Table 1. Basic Indicators

GNP per capita

134

Average Average indexArea annual Average annual Adult Life ex- of food

Popula- (thousands growth rate of inflation literacy pectancy productiontion of square (per- (percent) rate at birth per capita

(millions) kilo- Dollars cent) (percent) (years) (1969-71 = 100)1960_70a 1970-79Mid-1979 meters) 1979 1960-79 1976b 1979 1977-79

Low-income countries 2,260.2 t 33,778 t 230w 1.6w 3.0 m 10.8 in 51 w 57 w 105 wChina and India 1,623.7 12,885 t 230w .. .. 54w 59w 108 wOther low-income 636.5 20,893 t 240 w 1.8 w 3.0 in 10.9 m 43 w 50w 97 w

1 Kampuchea, Dem,2 Lao PDR

. .

3.3181237 . .

. .

. .

3.8 .

42 873 Bhutan 1.3 47 80 -0.1 . . . . . . 44 1004 Bangladesh 88.9 144 90 -0.1 3.7 15.8 26 49 925 Chad 4.4 1,284 110 -1.4 4.6 7.9 15 41 916 Ethiopia 30.9 1,222 130 1.3 2.1 4.3 15 40 847 Nepal 14.0 141 130 0.2 7.7 8.7 19 44 888 Somalia 3.8 638 . . -0.5 4.5 11.3 60 44 859 Mali 6.8 1,240 140 1.1 5.0 9.7 10 43 88

10 Burma 32.9 677 160 1.1 2.7 12.1 67 54 9711 Afghanistan 15.5 648 170 0.5 11.9 4.4 12 41 9412 Viet Nam 52.9 330 . . . . . . . . 87 63 10613 Burundi 4.0 28 180 2.1 2.8 11.2 25 42 10514 Upper Volta 5.6 274 180 0.3 1.3 9.8 . . 43 9315 India 659.2 3,288 190 1.4 7.1 7.8 36 52 9916 Malawi 5.8 118 200 2.9 2.4 9.1 25 47 10017 Rwanda 4.9 26 200 1.5 13.1 14.6 . . 47 10718 Sri Lanka 14.5 66 230 2.2 1.8 12.3 85 66 12419 Benin 3.4 113 250 0.6 1.9 9.2 47 9720 Mozambique 10.2 783 250 0.1 2.8 11.0 47 7521 Sierra Leone 3.4 72 250 0.4 2.9 11.3 . . 47 8722 China 964.5 9,597 260 . . . . . . 66 64 11423 Haiti 4.9 28 260 0.3 4.1 10.9 . . 53 9024 Pakistan 79.7 804 260 2.9 3.3 13.9 24 52 10125 Tanzania 18.0 945 260 2.3 1.8 13.0 66 52 9426 Zaire 27.5 2,345 260 0.7 29.9 31.4 15 47 9027 Niger 5.2 1,267 270 -1.3 2.1 10.8 8 43 8928 Guinea 5.3 246 280 0.3 1.5 4.4 20 44 8629 Central African Rep. 2.0 623 290 0.7 4.1 9.1 . . 44 10230 Madagascar 8.5 587 290 -0.4 3.2 10.1 50 47 9431 Uganda 12.8 236 290 -0.2 3.0 28.3 . . 54 9032 Mauritania 1.6 1,031 320 1.9 1.6 10.1 17 43 7533 Lesotho 1.3 30 340 6.0 2.5 11.6 52 51 10034 logo 2.4 57 350 3.6 1.1 10.3 18 47 8135 Indonesia 142.9 1,919 370 4.1 . . 20.1 62 53 10336 Sudan 17.9 2,506 370 0.6 3.7 6.8 20 47 105Middleincome countries 985.0 38,705 1,420w 3.8 iv 3.0 in 13.3 in 72w 61 w 107 iv

Oil exporters 324.8 13,781 1,120 w 3.1 w 3.0 in 14.0 in 64w 57 in 97 ivOil importers 660.2 24,924 1,550 w 4.1 w 3.0 in 12.2 in 76 w 63 u' 113 in

37 Kenya 15.3 583 380 2.7 1.5 11.1 45 55 9238 Ghana 11.3 239 400 -0.8 7.6 32.4 . . 49 8239 Yemen Arab Rep. 5.7 195 420 10.9 . . 17.8 13 42 9540 Senegal 5.5 197 430 -0.2 1.7 7.6 10 43 8841 Angola 6.9 1,247 440 -2.1 3.3 21.6 42 8542 Zimbabwe 7.1 391 470 0.8 1.3 8.4 . . 55 10043 Egypt 38.9 1,001 480 3.4 2.7 8.0 44 57 9344 Yemen, PDR 1.9 333 480 11.8 . . . . 27 45 10645 Liberia 1.8 111 500 1.6 1.9 9.4 30 54 10146 Zambia 5.6 753 500 0.8 7.6 6.8 39 49 9947 Honduras 3.6 112 530 1.1 2.9 8.4 60 58 8248 Bolivia 5.4 1,099 550 2.2 3.5 32.4 63 50 10849 Cameroon 8.2 475 560 2.5 4.2 10.3 . . 47 11050 Thailand 45.5 514 590 4.6 1.8 9.5 84 62 12651 Philippines 46.7 300 600 2.6 5.8 13.3 88 62 11552 Congo, People's Rep. 1.5 342 630 0.9 5.4 10.9 . . 47 8153 Nicaragua 2.6 130 660 1.6 1.9 12.2 90 56 10454 Papua New Guinea 2.9 462 660 2.8 3.6 9.5 . . 51 10655 El Salvador 4.4 21 670 2.0 0.5 10.8 62 63 11356 Nigeria 82.6 924 670 3.7 2.6 19.0 . . 49 8757 Peru 17.1 1,285 730 1.7 10.4 26.8 80 58 8858 Morocco 19.5 447 740 2.6 2.0 7.3 28 56 8359 Mongolia 1.6 1,565 780 3.0 63 9760 Albania 2.7 29 840 4.2 . . . . . . 70 10561 Dominican Rep. 5.3 49 990 3.4 2.1 8.4 67 61 9462 Colombia 26.1 1,139 1,010 3.0 11.9 21.5 63 11963 Guatemala 6.8 109 1,020 2.9 0.1 10.6 . . 59 10764 Syrian Arab Rep. 8.6 185 1,030 4.0 1.9 12.7 58 65 145

GNP per capita

a. Figures in italics are for 1961-70, not 1960-70. b. Figures in italics are for years other than 1976. See the technical notes.

:1.35

Average Average indexArea annual Average annual Adult Life ex- of food

Popula- (thousands growth rate of inflation literacy pectancy productiontion of square (per- (percent) rate at birth per capita

(millions) kilo- Dollars cent) (percent) (years) (1969-71 = 100)1960_70a 1970-79Mid-1979 meters) 1979 1960-79 1976b 1979 1977-79

65 Ivory Coast 8.2 322 1,040 2.4 2,8 13.5 20 47 10266 Ecuador 8.1 284 1050 4.3 . . 14.7 77 61 10267 Paraguay 3.0 407 1,070 2.8 3.1 9.3 84 64 10968 Tunisia 6.2 164 1,120 4.8 3.7 7.5 62 58 11869 Korea, Dem. Rep, 17.5 121 1,130 3.5 . . 63 133

70 Jordan 3.1 98 1,180 5.6 . . 70 61 8971 Lebanon 2.7 10 . . . . 1.4 . . 66 8672 Jamaica 2.2 11 1,260 1.7 3.9 17.4 . . 71 9873 Turkey 44.2 781 1,330 3.8 5.6 24.6 60 62 11074 Malaysia 13.1 330 1,370 4.0 -0.3 7.3 60 68 112

75 Panama 1.8 77 1,400 3.1 1.6 7.4 . . 70 10276 Cuba 9.8 115 1,410 4.4 . . . . 96 72 10077 Korea, Rep. of 37.8 98 1,480 7.1 17.5 19.5 93 63 13878 Algeria 18.2 2,382 1,590 2.4 2.3 13.3 35 56 7579 Mexico 65.5 1,973 1,640 2.7 3.6 18.3 82 66 104

80 Chile 10.9 757 1,690 1.2 32.9 242.6 67 9581 South Africa 28.5 1,221 1,720 2.3 3.0 11.8 . . 61 10282 Brazil 116.5 8,512 1,780 4.8 46.1 32.4 76 63 11583 Costa Rica 2.2 51 1820 3.4 1.9 15.4 90 70 11084 Romania 22.1 238 1,900 9.2 -0.2 0.8 98 71 146

85 Uruguay 2.9 176 2,100 0.9 51.1 64.0 94 71 9686 Iran 37.0 1,648 . . . . -0.5 . . 50 54 10987 Portugal 9.8 92 2,180 5.5 3.0 16.1 70 71 7788 Argentina 27.3 2,767 2,230 2.4 21.7 128.2 94 70 11989 Yugoslavia 22.1 256 2,430 5.4 12.6 17.8 85 70 116

90 Venezuela 14.5 912 3,120 2.7 1.3 10.4 82 67 10091 Trinidad and Tobago 1.2 5 3,390 2.4 3.2 19.5 95 70 9092 Hong Kong 5.0 1 3,760 7.0 2.4 7.9 90 76 5593 Singapore 2.4 1 3,830 7.4 1.1 5.5 71 15994 Greece 9.3 132 3,960 5.9 3.2 14.1 74 118

95 Israel 3.8 21 4,150 4.0 6.2 34.3 72 11096 Spain 37.0 505 4,380 4.7 8.2 15.9 73 125

Industrial marketeconomies 671.2 t 30,430 t 9,440w 4.0w 4.3 m 9.4 m 99w 74 w 110 w

97 Ireland 3.3 70 4,210 3.2 5.2 14.6 98 73 12198 Italy 56.8 301 5,250 3.6 4.4 15.6 98 73 10599 New Zealand 3.2 269 5,930 1.9 3.3 12.3 99 73 106

100 United Kingdom 55.9 245 6,320 2.2 4.1 13.9 99 73 115101 Finland 4.8 337 8,160 4.1 5.6 12.9 100 73 105

102 Austria 7.5 84 8,630 4.1 3.7 6.5 99 72 107103 Japan 115.7 372 8,810 9.4 4.9 8.2 99 76 98104 Australia 14.3 7,687 9,120 2.8 3.1 11.7 100 74 124105 Canada 23.7 9,976 9,640 3.5 3.1 9.1 99 74 109106 France 53.4 547 9,950 4.0 4.2 9.6 99 74 109

107 Netherlands 14.0 41 10,230 3.4 5.4 8.3 99 75 122108 United States 223.6 9,363 10,630 2.4 2.8 6.9 99 74 116109 Norway 4.1 324 10,700 3.5 4.3 8.2 99 75 115110 Belgium 9.8 31 10,920 3.9 3.6 8.1 99 72 104111 Germany, Fed. Rep. 61.2 249 11,730 3.3 3.2 5.3 99 73 109

112 Denmark 5.1 43 11,900 3.4 5.5 9.8 99 75 107113 Sweden 8.3 450 11,930 2.4 4.4 9.8 99 76 113114 Switzerland 6.5 41 13,920 2.1 4.4 5,4 99 75 115

Capital-surplusoil exporters 25.4 t 4,363 t 5,470 w 5.0w 1.7 n, 18.2 Tn 56w 93w

115 Iraq 12.6 435 2,410 4.6 1.7 14.1 56 86116 Saudi Arabia 8.6 2,150 7,280 6.3 . . 25.2 . . 54 96117 Libya 2.9 1,760 8,170 5.8 5.2 18.7 50 56 113118 Kuwait 1.3 18 17,100 -1.6 0.6 17.7 60 70

Nonmarket industrialeconomies 351.2 t 23,266 1 4,230w 4,3w . . 72 w 111 w

119 Bulgaria 9.0 111 3,690 5.6 . . 73 112120 Poland 35.4 313 3,830 5.2 . . 98 72 106121 Hungary 10.7 93 3,850 4,8 98 71 127122 USSR 264.1 22,402 4,110 4.1 100 73 110123 Czechoslovakia 15.2 128 5,290 4.1 . . . . . . 71 117124 German Dem. Rep. 16.8 108 6,430 4.7 . . . . 72 128

Table 2. Growth of Production

1 Kampuchea, Dem.2 Lao PDR3 Bhutan4 Bangladesh5 Chad6 Ethiopia7 Nepal8 Somalia9 Mali

10 Burma11 Afghanistan12 Viet Nam13 Burundi14 Upper Volta15 India16 Malawi17 Rwanda18 Sri Lanka19 Benin20 Mozambique21 Sierra Leone22 China23 Haiti24 Pakistan25 Tanzania26 Zaire27 Niger28 Guinea29 Central African Rep.30 Madagascar31 Uganda32 Mauritania33 Lesotho34 Togo35 Indonesia36 Sudan

37 Kenya38 Ghana39 Yemen Arab Rep.40 Senegal41 Angola42 Zimbabwe43 Egypt44 Yemen, PDR45 Liberia46 Zambia47 Honduras48 Bolivia49 Cameroon50 Thailand51 Philippines52 Congo, People's Rep.53 Nicaragua54 Papua New Guinea55 El Salvador56 Nigeria57 Peru58 Morocco59 Mongolia60 Albania61 Dominican Rep.62 Colombia63 Guatemala64 Syrian Arab Rep.

136

196O7O 1970_79b 196O7O 1970_79b 1960_70a 1970_79b 1960_70a 1970_79b 196O-7O 1970_79b

3.1

3 3.3 1.9 7.0 6.6 5.9

0.5 -0.2 . . 0.7 . . 0.2 . - -1.24.4 1.9 2.2 0.4 7.4 0.4 8.0 1,3

2.5 27 . . 0.8 . . .

1.0 3.1 -1.5 2.7 3.3 -2.6 14.3

3.3 5.0 . - 4.2 . - 4.2 .

2.6 4.3 4.1 3.9 2.8 5.4 3.3 5.0

2.0 4.5

.o '.e

3.0 -0.1 .- -3.3 . . 1.0 . - 2.3

3.4 3.4 1.9 2.1 5.5 4.4 4.8 4.5

4.9 6.3 4.1 7.0 6.7

2.7 4.1 .. .. ..

4.6 3.8 3.0 2.6 6.6 3.6 6.3 1.7

2.6 3.3 . . . . . . . . .

4.6 -2.9 2.1 -1.8 9.5 -5.6 6.6 -5.84.3 1.6 . . 2.3 .

. -3.8 4.4

5.2 5.8 1.6 3.2 11.2 8.7 .

-0.2 4.0 -0.6 2.2 0.1 8,3 -0.1 7.1

6.7 4.5 4.9 2.1 10.0 4.9 9.4 3.7

6.0 4.9 4.9 1.9 3.6

3.62.9

3.5

1.9

2.7

5.9

-0.73.7

3.6

3.3

0.3

6.0 6.5

2.1 -0.1- 8.4

2.5 2.5

4.8 -9.24.3 1.6

4.2 7.6

1.2

3.3 -1.5

0.1

0.8

-1.41.8

- 0.3

2.7 3.6

2.7

5,4

-0.2- 4.5

2.9 3.6

4.0 -10.2

-0.52.9 2.2

. o

- 2.3

5.7 1.3

3.0 3.1

- 3.5

5.5 5.4

4.3 4.9

1.0 0.1

6.7 4.2

.ó a2-0.4 -0.3

3.7 0.1

4.7 -0.3

3.5 4.8

4.3 5.1

4.4 6.4

Average annual growth rate (percent)

-1.113.9 10.2

1.0

-7,9- 0.1

7.0

7.8

5.2 11.3

3.3

10.2 11.4 5.8

-1.5 4.4 1.0

13.5 . . 12.8 . . 11.0

4.4 3.5 6.2 - . 1.7 1.6

11.0 -3.9 7.2 -12.0 4.2 -10.91.8 . . 2.8 . . 2.1

5.3 7.8 4.7 8.2 4.7 11.6

- 1.5 . - 0.4 . - 1.2

5.4 5.0 4.5 5.5 4.8 4.4

6.2 4.8 5.4 6.7 5.4 6.0

6.5 . . 5.4 . - 6.3

11.6 10.4 11.0 11.4 9.0 7.7

6.0 8.4 6.7 6.7 5.2 5.4

7.0 10.6 6.8 2.2 2.1 -0.111.0 3.2 11.1 3,3 5.7 1.3

. o 4, 5.1

12.0 11.2 9.1 11.8 4.9 11.0

-1.5

-5.01.0

10.2

1251.5

4:. ó

- 2.9

4.6 4.5

9.1

4.-2.6

4.6

6.1

4.3

3.6

7.4

GOP Agriculture Industry Manufacturing Services

4. 4.

-a. o

a.4.4

3.7

0.9 3.7

6.37.0

5.9

(.)

(.) 4.6

1'.e 3:.:l

0.1

0.1

7.2

13.9

4.04.8 9.2

6.9

-0.4

4. è 7.0

1.8

3.68.57.63.9

4.31.3

5.1 1_,

5.0 1.5

5.3 3.5

5.2 5.2

3.7 5.4

8.2 7.7

5.1 6.2

2.7 2.9

7.2 2.6

6.5 2.2

5.9 4.9

3.1 7.5

4.9 3.1

4.2 6.1

2.8 6.0

7.3 6.8

4.5 7.5

5.1 6.0

5.6 5.9

5.7 9.0

,o .o 7.

6.0 5.0 5.7 6.6 5.7 7.2

7.8 8.0 8.2 6.6 5.5 5.5

6.3 10.8 5.6 13.2 6.2 9.1

Low-income countries 4.5w 47w 2.5m 2.Oni 6.6m 4.2ni 6.5 in 3.7 iii 3.8 ni 4.5 in

China and India 4.5w 4.9w 1.8m 2.7in 8.8 in 6.6 in 3.9 ii 4.1 in

Other low-income 4.3 w 3.8 w 2.7 in 1.9 in 6.6 in 3.6 in 6.6 in 3.6 in 3.8 in 4.6 in

Middle-income countries 6.1 w 5.5 w 3.6 in 3.0 in 7.4 in 6.5 in 7.0 in 6.6 in 5.5m 6.0iOil exporters 6.5 w 5.5 w 3.4 in 2.2 in 7.6 in 7.8 in 7.0 in 8.2 in 5.lni 7.2ir

Oil importers 5.9 w 5.5 w 3.9 in 3,3 in 7.1 in 5.7 in 7.5 in 6.6 in 5.7 in 5.7 i

5.0 3.7

4.0 7.3

.o io.

5.7 3.2 5.3

3.8 6.3 4.0

a. Figures in italics are for 1961-70, not 1960-70. b. Figures in italics are for 1970-78, not 1970-79.

137

Average annual growth rate (percent)

GDP Agriculture Industry Manufacturing Services

1960_70a 1970_79b 1960_70a 1970_79b 1960_70a 197O79b 1960_70a 1970_79b 196O_7Oa 1970_79b

65 Ivory Coast 8.0 6.7 4.2 3.4 11.5 10.5 11.6 7.2 9.7 7.066 Ecuador 8.3 0.7 13.4 10.2 8.667 Paraguay68 Tunisia

4.24,7

8.37.6 §. a

6.85.1 8.2

9.98.6 7.8

7.410.6 4

8.68.1

69 Korea, Oem. Rep. 7.8 6.270 Jordan71 Lebanon72 Jamaica 4.5 -0.9 1.5 1.3 5.0 -3.1 5.7 -1.3 4.] 0.273 Turkey 6.0 6.6 2.5 3.7 9.6 7.9 10.9 7.7 6.9 7.574 Malaysia 6.5 7.9 . . 5.0 . . 9.9 . . 12.4 . . 8.4

75 Panama 7.8 3.4 5.7 2.2 10.1 0.5 10.5 -0.6 7.6 4.976 Cuba 1.1 6.0 .. .. .. ..77 Korea, Rep, of 8.6 10.3 4.4 4.8 17.2 16.5 17.6 17.8 8.9 8.878 Algeria 4.6 5.8 0.4 0.6 12.9 6.5 7.7 8.8 -3.0 6.179 Mexico 7.2 5.1 3.8 2.2 9.1 6.4 9.4 6.4 6.9 4.7

80 Chile 4.5 1.9 2.6 3.5 5.0 0.3 5.5 -1.0 4.5 2.881 South Africa 6.4 3.6 . . . . .

82 Brazil 5.4 8.7 . . 5.0 . . 9.6 . . 10.9 . . 8.783 Costa Rica 6.5 6.0 5.7 2.6 9.4 8.5 10.6 8.4 5.7 6.084 Romania 8.6 10.6 . . 6.2 . . 11.2 . . . . .

85 Uruguay 1.2 2.5 1.9 0.2 1.1 4.2 1.5 3.9 1.0 2.086 Iran 11.3 . . 4.4 . . 13.4 . . 12.0 . . 10.087 Portugal 6.2 4.5 1.3 -1.5 8.8 4.6 8.9 4.6 5,9 6.388 Argentina 4.2 2.5 2.2 2.5 5.9 2.4 5.7 1.9 3.4 2.589 Yugoslavia 5.8 5.9 3.3 3.0 6.3 7.2 5.7 7.6 6.9 5.7

90 Venezuela 6.0 5.5 5.8 3.8 4.6 3.1 6.4 5.7 7.3 7.291 Trinidad and Tobago 3.9 5.2 .. .. ..92 Hong Kong 10.0 9.4 . . -11.0 . . 4.3 . . 6.1 . . 10.1

93 Singapore 8.8 8.4 5.0 1.7 12.5 8.6 13.0 9.3 7.7 8.594 Greece 6.9 4.9 3.5 1.4 9.4 5.3 10.2 6.4 7.1 5.7

95 Israel 8.1 4.6 . . . . .

96 Spain 7.1 4.4 . . 2.5 4.3 6.6 . . 4.9

Industrial marketeconomies 5.1 iv 3.2w 1.3 in 0.9 in 6.2 in 3.2 in 6.2 m 3.0 in 4.8 in 3.4 in

97 Ireland 4.2 3.7 0.9 . . 6.1 . . . . . . 4.398 Italy 5.3 2.9 2.8 0.8 6.2 2.8 7.2 5.1 3.399 New Zealand 3.9 2.4 . . . . . . . . . . . . .

100 United Kingdom 2.9 2.1 2.3 0.8 3.1 1.3 3.4 0.6 2.7 2.4101 Finland 4.6 2.8 0.6 -0.9 6.3 3.2 6.2 2.8 5.3 3,9

102 Austria 4,5 3.7 1.2 2.0 4.9 3.4 4.8 3.5 4.5 4.2103 Japan 10.5 5.2 4.0 1.1 10.9 5.6 11.0 6.2 11.7 4.9104 Australia 5.5 3.2 2.7 . . 4.6 . . 5.6 . . 4.0105 Canada 5.6 4.2 2.5 2.2 6.8 3.5 6.7 3.5 5,5 4,7106 France 5.7 3.7 1.8 0.1 6.4 3.2 6.6 3.7 5.7 4.3

107 Netherlands 5.5 3.1 2.9 3.7 6.8 3.3 6.6 3.0 5.1 3.3108 United States 4.3 3.1 0.3 0.9 5.2 2.7 5.3 2.9 4.3 3.4109 Norway 4.9 4.8 0.1 2.1 5.5 4.9 5.3 1.7 5.0 4.6110 Belgium 4.8 3.2 -0.5 -0.7 6.0 3.3 6.2 3.2 4.6 3.3111 Germany, Fed. Rep. 4.4 2.6 1.5 1.5 5.2 2.1 5.4 2.0 4.2 1.7

112 Denmark 4.7 2.8 0.2 . . 5.5 . . 5.4 . . 4.9113 Sweden 4.4 2.0 0.6 -1.3 6.2 0.9 6.2 0.8 3.9 2.8114 Switzerland 4.3 0.2

Capital-surplusoil exporters 6.5 w 4.2 in 11.1 in 14.4in .. 11.9in

115 Iraq 6.1 10.5 5.7 -1.8 4,7 13.6 5.9 14.4 8.3 10.4116 Saudi Arabia 11.1 4,2 11.1 5.9 11.9117 Libya 24.4 1.9 11.8 -1.7 18.9 16.4118 Kuwait 5.7 2.0

Nonmarket industrialeconomies 4.8 w 5.2 w

119 Bulgaria 5.9 6.2120 Poland 4.3 6.1121 Hungary 3.8 5,3122 USSR 5.2 5.1123 Czechoslovakia 3.1 4.8124 German Oem. Rep. 3.1 4.5

Table 3. Structure of Production

138

GDPDistribution of gross domestic product (percent)

(millions of dollars) Agriculture Industry (Manufacturing)a Services

Low-income countriesChina and IndiaOther low-income

1960b 1979C 1960b 1979C 1960b 1979C (1960b 1979C) 1960b 1979C

51w

52w

34w33w38w

17w

13w

36w41w23w

11w

9w

13w

9w

32w

35w

30u26u39u

1 Kampuchea, Dem. 0

2LaoPDR3 Bhutan .. .. .. ..4 Bangladesh 3,100 7,670 61 56 8 13 6 8 31 31

5 Chad 180 570 52 70 12 11 4 8 36 19

6 Ethiopia 900 3,530 65 46 12 15 6 9 23 397 Nepal 410 1,760 588 Somalia 160 1,030 67 60 13 11 3 7 20 299 Mali 270 1,220 55 42 10 11 5 6 35 47

10 Burma 1,280 4,950 33 45 12 14 8 10 55 41

11 Afghanistan 1,190 3,76012 Viet Nam . . . . . . . .

13 Borundi 190 730 . . 55 . . 15 . . 10 . . 3014 Upper Volta 200 860 62 38 14 20 8 14 24 4215 India 29,550 112,000 50 38 20 27 14 18 30 35

16 Malawi 170 1,220 58 43 11 20 6 12 31 3717 Rwanda 120 860 81 42 7 21 1 15 12 3718 Sri Lanka 1,500 3,160 32 27 20 31 15 21 48 4219 Benin 160 850 55 43 8 12 3 8 37 4520 Mozambique 830 2,360 55 44 9 16 8 9 36 4021 Sierra Leone 790 36 . . 23 5 . . 4122 China . . 252,230 31 47 2223 Haiti 270 1,180 . . . . . . . . . . . . . 0

24 Pakistan 3,500 17,940 46 32 16 24 12 16 38 4425 Tanzania 550 4,130 57 54 11 13 5 9 32 33

26 Zaire 130 6,020 30 33 27 24 13 4 43 4327 Niger 250 1,710 69 44 9 32 4 10 22 2428 Guinea 370 1,540 . 41 . . 26 . 5 . . 3329 Central African Rep. 110 640 51 37 10 18 4 8 39 4530 Madagascar 540 2,810 37 34 10 20 4 . . 53 46

31 Uganda 540 8,410 52 55 13 7 9 6 35 3832 Mauritania 70 470 . . 27 33 . . 8 4033 Lesotho 30 240 73 36 . . 15 . . 2 . . 4934 Togo 120 1,000 55 25 16 23 8 7 29 5235 Indonesia 8,670 49,210 54 30 14 33 8 9 32 3736 Sudan 1,470 7,640 58 38 15 13 5 6 27 49

Middle-income countries 22w 14w 30w 38w 21 w 24w 47w 48wOil exporters 23w 14w 26w 42w 17w 19w 51w 44wOil importers 21 w 14w 32 w 36w 23w 26w 46w 50w

37 Kenya 730 5,280 38 34 18 21 9 13 44 4538 Ghana 1,220 10,160 41 66 21 10 1339 Yemen Arab Rep. . . 2,910 . . 32 . . . . 5 . 0

40 Senegal 610 2,480 24 29 17 24 12 19 59 4741 Angola 690 2,490 50 48 8 23 4 3 42 29

42 Zimbabwe 780 3,640 18 12 35 39 17 25 47 4943 Egypt 3,880 17,050 30 23 24 35 20 28 46 4244 Yemen, PDR . . 520 13 26 11 61

45 Liberia 220 940 . . 35 . . 26 . 6 . . 3946 Zambia 680 3,240 11 15 63 41 4 16 26 44

47 Honduras 300 1,900 37 32 19 26 13 17 44 4248 Bolivia 460 4,930 26 1] 25 29 15 13 49 5449 Cameroon 550 5,330 . . 32 . . 16 . 9 . . 5250 Thailand 2,560 27,640 40 26 19 28 13 19 41 4651 Philippines 6,980 29,380 26 24 28 35 20 24 46 41

52 Congo, People's Rep. 130 1,120 23 13 17 36 10 16 60 5153 Nicaragua 340 1,560 24 29 21 28 16 24 55 4354 Papua New Guinea 230 2,050 49 37 13 . . 3 8 3855 El Salvador 570 3,520 32 28 19 22 15 15 49 5056 Nigeria 3,150 75,170 63 22 11 45 5 5 26 3357 Peru 2,410 14,770 18 10 33 43 24 26 49 4758 Morocco 2,040 14,950 23 19 27 32 16 17 50 4959 Mongolia60 Albania . . . . . . . . . . . . . . .

61 Dominican Rep. 720 5,230 27 19 23 26 17 16 50 5562 Colombia 4,010 25,250 34 29 26 28 17 21 40 4363 Guatemala 1,040 6,890 . . . .

64 Syrian Arab Rep. 800 9,110 . . 16 . . 22 62

a. Manufacturing is a part of the industrial sector, but its share of GDP is shown separately because it typically is the most dynamic part of the industrialsector. b. Figuresin italics are for 1961, not 1960. c Figures in italics are for 1978, not 1979.

139

GDP(millions of dollars)

Distribution of gross domestic product (percent)

Agriculture Industry (Manufacturing) Services

1960b 1979C 1960b 1979C 1960b 1979C (1960" 1979C) 1960b 1979C

65 Ivory Coast 570 9,130 43 26 14 23 7 12 43 5166 Ecuador 910 9,510 33 15 19 37 14 19 48 4867 Paraguay 300 3,420 36 31 20 24 17 16 44 4568 Tunisia 770 6,070 24 16 18 33 8 12 58 5169 Korea, Dem. Rep.70 Jordan 1,870 . . 8 . . 32 . . 16 . . 6071 Lebanon 830 . . 12 . . 20 . . 13 . . 6872 Jamaica 700 2,390 10 7 36 40 15 15 54 5373 Turkey 8,820 56,460 41 23 21 29 13 21 38 4874 Malaysia 2290 20,340 37 24 18 33 9 16 45 43

75 Panama 420 2,770 23 21 13 5676 Cuba77 Korea, Rep. of 3,810 60,66078 Algeria 2,800 29,810 21 7 33 58 10 11 46 3579 Mexico 12,040 121,330 16 10 29 38 23 29 55 52

80 Chile 3,780 20,920 11 8 38 37 23 24 51 5581 South Africa 6,980 52,920 12 7 40 48 21 22 48 4582 Brazil 24,080 204,480 16 11 35 38 26 28 49 51

83 Costa Rica 510 3,990 26 19 20 26 14 19 54 5584 Romania 42,200 . . 14 . . 50 . . . . . . 3685 Uruguay 1,110 6,060 19 13 28 37 21 31 53 5086 Iran 4120 . . 29 . . 33 . . 11 . . 3887 Portugal 2,340 18560 25 13 36 47 29 37 39 4088 Argentina 11,080 95,120 16 13 38 46 32 37 46 4189 Yugoslavia 9,860 61,500 24 12 45 44 36 31 31 44

90 Venezuela 7,570 48,970 6 6 22 47 . . 16 72 4791 Trinidad and Tobago 470 4070 8 3 46 54 24 11 46 4392 Hong Kong 950 17,390 4 1 34 . . 25 19 6293 Singapore 700 9,010 4 2 18 36 12 28 78 6294 Greece 3,110 33,370 23 16 26 32 16 19 51 52

95 Israel 2,030 15,300 11 5 32 36 23 24 57 5996 Spain 10,350 180,800 9 31 60

Industrial marketeconomies 6 w 4 w 40 w 37 w 30 w 27 w 54 w 59 w

97 Ireland 1,770 14,810 22 26 . 5298 Italy 37190 323,600 13 7 41 43 31 46 5099 New Zealand 3,760 18320 11 31 58

100 United Kingdom 71,380 401,580 4 2 43 36 32 25 53 62101 Finland 4,940 41,410 18 8 35 35 24 26 47 57

102 Austria 6,280 68,390 11 4 49 41 38 29 40 55103 Japan 43,060 974,040 13 5 45 42 34 30 42 53104 Australia 16,310 127,820 12 . . 37 . . 26 51105 Canada 39,940 227,000 6 4 34 33 23 19 60 63106 France 60,060 571,300 10 5 38 34 29 25 52 61

107 Netherlands 11,010 149,060 9 4 46 37 34 29 45 59108 United States 506,700 2,350,000 4 3 38 34 29 24 58 63109 Norway 4,640 53,970 9 5 33 37 21 18 58 58110 Belgium 11,280 110,920 6 2 41 37 30 26 53 61111 Germany, Fed. Rep. 72,100 763,930 6 2 53 49 40 38 41 49112 Denmark 5,900 66,230 11 . . 32 . . 22 57113 Sweden 13,950 101,490 7 3 40 32 27 23 53 65114 Switzerland 8,550 95,010

Capital-surplusoil exporters 2w 75w 5w 23 w

115 Iraq 1 580 30,710 17 52 73 10 6 31 19116 Saudi Arabia 74,060 74 5 25117 Libya 31 Ô 24,570 2 73 3 25118 Kuwait 23,300 (.) 81 5 19

Nonmarket industrialeconomies 21 w 15w 62w 63w 52w 17w 22w

119 Bulgaria 32 19 53 63 46 15 18120 Poland 26 16 57 64 47 17 20121 Hungary 24 15 69 59 59 7 26122 USSR 21 16 62 62 52 17 22123 Czechoslovakia 16 8 73 .74 63 11 18124 German Dem. Rep. 10 69 21

Table 4. Growth. of Consumption and Investment

140

Average annual growth rate (percent)

Publicconsumption

Privateconsumption

Grossdomestic investment

1960_7Oa 1970_.79b 1960_70a 19l0_79b 196O7Oa 197O79b

Low-income countries 4.4 in 4.5 in 3.7 in 3.7 in 5.2 in 6.4 inChina and India 3.3 in 4.6 in 7.7 in 6.3 inOther low-income 4.5 in 4.4 in 3,7 iii 3.7 in 4.8 in 6.4 in

1 Kampuchea, Dem. 2.6 3.2 0.32LaoPDR3 Bhutan . . . . . . . . .

4 Bangladesh c c 3.4 3.1 11.1 -1.45 Chad 4.4 -1.7 -0.7 0.3 2.3 -0.56 Ethiopia 4.7 4.5 4.7 4.0 5.7 -1.87 Nepal . . . . . . . . . . . 11.78 Somalia 3.7 11.7 -0.5 2.7 4.3 8.59 Mali 6.2 7.7 2.8 5.5 4.9 3.2

10 Burma c c 2.8 3.9 3.6 6.6

11 Afghanistan c 9.8 2.5 3.5 -1.0 12.412 Viet Nam . . . . . . . . .

13 Burundi 19.2 6.0 3.2 3.1 4.3 16.514 Upper Volta . . 3.8 . . 1.1 . . 1.215 India -1.5 4.5 3.9 2.7 5.5 5.8

16 Malawi 4.6 6.1 4.1 5.7 15,4 2.317 Rwanda 1.1 14.0 4.2 1.6 3.5 18.918 Sri Lanka c c 2.1 3.0 6.6 6.419 Benin 1.7 1.0 4.9 3.8 4.2 8.320 Mozambique 6.8 -4.0 4.4 -2.3 8.3 -8.421 Sierra Leone . . 4.5 . . 1.5 -1.322 China c c 2.7 5.4 9.8 6.823 Haiti c 0.6 -1.0 3.8 1.7 12.524 Pakistan 7.3 4.3 7.1 4.7 6.9 0.625 Tanzania c c 5.2 6.0 9.8 3.026 Zaire 8.5 -2.2 3.9 -1.8 9.6 -5.027 Niger 2.0 3.8 3.9 3.2 3.0 6.828 Guinea29 Central African Rep.

. .

2.2. .

1.1. .

3.0.

4.4 1.3 6.

30 Madagascar 2.7 0.2 2.0 -0.6 5.4 -1.831 Uganda 5.9 1.3 5.6 1,1 9.8 -13.132 Mauritania . . 18.9 . . 5.0 6.933 Lesotho 0.3 12.0 6.0 10.9 18.5 24.434 Togo 6.7 10.7 7.6 5.7 11.1 14.535 Indonesia 0.9 11.4 4.1 7.9 4.6 14.836 Sudan 12.1 -3.2 -1.2 7.3 -1.3 8.0

Middle-income countries 6.3 m 7.4 in 5.1 in 5.2 in 7.4 in 7.0 inOil exporters 7.4 m 9.4 in 4.3 in 7.0 in 7.2 in 10.3 inOil importers 6.1 in 6.4 in 5.5 in 4.6 in 7.9 in 6.0 in

37 Kenya 10.0 9.0 4.6 6.9 7.0 1.238 Ghana 6.1 -0.2 2.0 0.3 -3.2 -7.939 Yemen Arab Rep.40 Senegal -6. ' 6. 6. i. i'. è41 Angola 9.1 3.0 4.0 -7.9 9.7 -9.042 Zimbabwe43 Egypt 16.

9.75.0

0.47.0 6.

-2.121.5

44 Yemen, PDR45 Liberia t7 4 -4.2 5.246 Zambia 11.0 1.8 6.8 -2.2 10.6 -5.647 Honduras 5.3 7.4 4.8 3.8 10.2 9.648 Bolivia 8.9 8.0 4.1 5.2 9.6 6.349 Cameroon 6.1 5.4 2.7 5.3 9.3 7.950 Thailand 9.7 9.1 7.0 6.9 15.8 7.751 Philippines 5.0 8.4 4.7 4.7 8.2 10.6

52 Congo, People's Rep. 5.4 5.8 -0.3 2.8 2.9 0.253 Nicaragua 3.6 11.8 6.8 2.3 10.7 -2.254 Papua New Guinea 6.5 -1.0 6.9 2.3 21.2 -9.455 El Salvador 6.4 7.2 6.1 4,3 3.5 11.756 Nigeria 10.0 12.4 1.1 6.3 7.4 17.8

57 Peru 6.3 6.5 7.1 2.9 1.0 2.758 Morocco 4.5 12.5 4.0 4.5 8.0 15.259 Mongolia60 Albania61 Dominican Rep. 6.6 .6 ii'. i6.62 Colombia 5.5 4.5 5.5 6.1 4.5 5.563 Guatemala 4.7 6.0 4.7 5.3 7.9 9.864 Syrian Arab Rep. 11.8 10.0 16.5

a. Figures in italics are for 1961-70, not 1960-70. b. Figures in italics are for 1970-78. not 1970-79. c. Seoarate figures are not available for publicconsumption, which is therefore included in private consumption.

141

Average annual growth rate (percent)

Public Privateconsumption consumption

Grossdomestic investment

1 96O7Oa 1 97f79b 1960_70a 1970_79b 1960_70a 1970_79b

65 Ivory Coast 11.8 10.0 8.0 7,3 12.7 13.866 Ecuador 12.1 8.9 10.367 Paraguay 4.8 45 7.4 5.8 18.768 Tunisia 5.2 9.8 3.2 8.2 4.2 11.469 Korea, Oem. Rep.70 Jordan71 Lebanon

, ,

5.9. ,

. .

, ,

4.4,

. . 6.272 Jamaica 8.6 8.0 3.1 -0.6 7,8 -,73 Turkey 6.7 6.2 5.1 5.2 8.8 10.174 Malaysia 7.4 9.6 4.2 7.0 7.2 10.375 Panama 7.8 6.5 6.7 2.1 12.4 0.676 Cuba77 Korea, Rep. of

, .

5.5, ,

8.7. ,

7.0,

8.0 23.6 14978 Algeria 1.7 9.4 4.6 11.1 1.9 11.479 Mexico 9.5 10.0 6.6 3.8 9.6 6.980 Chile 4.7 -0.5 4.8 1.9 3,7 -2.081 South Africa 7.1 . . 6.2 . . 9.582 Brazil 3.5 8.6 5.1 9.1 7.083 Costa Rica 8.0 6.2 6.1 5.3 7.1 9.184 Romania , , , , . , , . 11.2 10.785 Uruguay 4.4 1.5 0.7 (.) -1.8 7.586 Iran 16.0 . . 10.0 . . 12.287 Portugal 7.7 9.0 5.5 4.0 7.788 Argentina 1.2 12.1 4.1 -2.2 4.1 3.089 Yugoslavia 0.6 4.7 9.5 6.6 4.7 7.090 Venezuela 6.3 8.2 5.0 11.0 7.6 10.291 Trinidad and Tobago 6.2 , , 4.3 , , -2.8 6.392 Hong Kong 8.6 9.3 8.6 9.2 6.9 12.593 Singapore 12.6 6.4 5.4 7.2 20.5 6.094 Greece 6.6 7.4 7.1 4.6 10.4 2.095 Israel 13.8 3.9 7.4 5.7 5.7 1.096 Spain 3.8 5.6 7.0 4.4 11.4 2.5

Industrial marketeconomies 4,8m 3,7m 4.3rn 3.6m 5.6m 1.4m

97 Ireland 3.9 5.5 3,7 2.8 8.8 5.298 Italy 3.9 3.0 6.1 2.6 3.8 0.199 New Zealand

100 United Kingdom d.è101 Finland 5,7 5,4 4,3 2.8 4.3 -0.8102 Austria 2.9 3.8 4,4 4,4 5.6 3.2103 Japan 6.4 5.0 9.0 5.3 14.0 3.2104 Australia 6.8 5.6 2.7 3.6 6.2 1.4105 Canada 6.2 2.9 4.9 5.2 5.8 4.5106 France 3.4 3.3 5.5 4.3 7.3 2.0107 Netherlands 3.1 2.8 6.1 3.8 6.8 (.)108 United States 4.1 1.7 4.4 3.6 4.8 1.9109 Norway 6.4 5.3 4.1 4.1 5.1 4.3110 Belgium 5.7 4.7 3.8 3.9 6.0 1.7111 Germany. Fed. Rep. 4.1 3,7 4.6 2.9 4.1 0.9112 Denmark 6.0 3.9 4.3 2.9 6.7 0.5113 Sweden 5.4 3.2 3.8 2.0 5.0 -1.1114 Switzerland 4.8 1.9 4,3 1.4 4.1 -3.3Capital-surplus

oil exporters 18.7m 24.8 to

115 Iraq 8.1 C 4.9 17.0 3.0 27.2116 Saudi Arabia C 18.8 46.7117 Libya 21.6 18.7 1 . 10.6118 Kuwait C 22.4

Nonmarket industrialeconomies

119 Bulgaria120 Poland 4

121 Hungary 6.5 4.6 7.2122 USSR123 Czechoslovakia124 German Dem. Rep.

Table 5. Structure of Demand

142

Distribution of gross domestic product (percent)

Exports of goodsPublic Private Gross domestic Gross domestic and nonfactor Resource

consumption consumption investment saving services balance

19600 1979b 1960a 197gb 19600 1979b 1960 197gb 1960 197gb 19600 197gb

Low-income countries 9 iv 11 iv 78 iv 66 w 18 iv 26 iv 16 iv 23 iv 7 w 11 2 iv 3 ztChina and India 11 iv 77 iv 62 w 21 iv 29 iv 19 iv 27 iv 4w 1w 2wOther low-income 11 iv 1 2 iv 82 iv 76 iv 10 iv 1 8 iv 8 iv 1 5 iv 14w 20w 2w 3w

1 Kampuchea, Dem. .

2LaoPDR3 Bhutan .. .. .. .. .. ..4 Bangladesh 6 c 86 98 7 14 8 2 10 10 1 125 Chad 13 18 82 96 11 13 5 14 23 33 6 276 Ethiopia 8 17 81 87 12 10 11 4 9 10 1 147 Nepal c c 96 91 9 14 4 9 12 5 58 Somalia 8 19 89 79 10 16 3 2 11 12 7 149 Mali 12 23 79 82 14 15 9 5 12 16 5 20

10 Burma c c 89 85 12 20 11 15 20 8 1 511 Afghanistan c c 87 89 16 14 13 11 4 11 3 312 Viet Nam13 Burundi 3 16 92 80 6 12 5 4 13 13 1 814 Upper Volta 10 14 94 89 10 24 4 3 9 15 14 2715 India 7 10 79 70 17 24 14 20 5 . . 3 416 Mafawi 16 17 88 70 10 29 4 13 21 21 14 161] Rwanda 10 16 82 72 6 19 8 12 12 25 2 718 Sri Lanka 13 9 78 77 14 26 9 14 43 34 5 1219 Benin 16 12 75 87 15 21 9 1 12 27 6 2020 Mozambique 11 15 81 85 10 10 8 (.) 14 13 2 1021 Sierra Leone . 18 . . 78 . 15 . 4 . 24 . . 1122 China c 11 77 59 23 31 23 30 4 6 (.) 123 Haiti c 10 93 81 9 21 7 9 20 16 2 1224 Pakistan 11 11 84 83 12 18 5 6 8 11 7 1325 Tanzania 9 16 72 76 14 21 19 8 31 14 5 1326 Zaire 18 c 61 88 12 9 21 12 55 30 9 327 Niger 9 9 79 72 13 28 12 19 9 25 1 928 Guinea .. 16 .. 70 .. 15 .. 14 .. 24 .. 129 Central African Rep. 19 20 72 72 20 20 9 8 23 18 11 1230 Madagascar 20 17 75 73 11 22 5 10 12 17 6 1231 Uganda 9 c 75 96 11 4 16 4 26 4 5 (.)32 Mauritania . . 39 . . 47 . . 51 . . 14 . . 38 . . 3733 Lesotho 17 16 108 143 2 29 25 59 12 21 27 8834 Togo 8 15 88 74 11 39 4 11 19 32 7 2835 Indonesia 12 11 80 59 8 23 8 30 13 30 (.) 736 Sudan 6 11 85 84 9 14 9 5 12 9 (.) 9Middle-income countries 11 iv 13w 70w 62w 21 iv 26 iv 19 iv 25 iv 16w 20w 2 iv 1 w

Oil exporters 10 iv 13 iv 68 w 58 iv 20 w 30 iv 22 iv 29 iv 21 iv 25 w 2 w 1 ivOil importers 11 iv 14 iv 70w 64 iv 21 iv 25 w 19w 22w 14w 18w 2 iv -3w

37 Kenya 11 20 72 65 20 22 17 15 31 26 3 738 Ghana 10 9 73 86 24 5 17 5 28 12 7 (.)39 Yemen Arab Rep. .. .. .. .. .. .. .. .. ..40 Senegal 17 c 68 98 16 21 15 2 40 34 1 1941 Angola 9 26 77 56 12 9 14 18 20 43 2 942 Zimbabwe 11 13 67 63 23 15 22 24 . . . . 1 543 Egypt 17 19 71 65 13 31 12 16 20 31 1 1544 Yemen, PDR . . . . . . . . . . . . . . . . . . . . 4345 Liberia 7 15 58 62 28 27 35 23 39 53 7 446 Zambia 11 27 48 45 25 21 41 28 56 45 16 747 Honduras 11 12 77 64 14 28 12 24 22 38 2 448 Bolivia 7 12 86 74 14 20 7 14 13 17 7 649 Cameroon . . 10 . . 80 . . 25 . . 10 . . 25 . . 1550 Thailand 10 12 76 67 16 28 14 21 17 23 2 751 Philippines 8 9 76 67 16 29 16 24 11 19 (.) 552 Congo, People's Rep. 23 30 98 58 45 22 21 12 21 . . 66 1053 Nicaragua 9 17 79 71 15 1 12 12 24 37 3 1354 Papua New Guinea 28 27 70 55 13 15 2 18 17 52 11 355 El Salvador 10 12 79 68 16 19 11 20 20 36 5 1

56 Nigeria 6 10 87 58 13 31 7 32 15 25 6 1

57 Peru 9 10 64 66 25 14 27 24 20 27 2 1058 Morocco 12 23 77 68 10 23 11 9 24 18 1 1459 Mongolia60 Albania61 Dominican Rep. .& b th 7

62 Colombia 6 7 73 67 21 24 21 26 16 18 (.) 263 Guatemala 8 7 84 79 10 19 8 14 13 21 2 564 Syrian Arab Rep. 19 . . 71 28 10 20 . . 18

a. Figures in italics are for 1961, not 1960. b. Figures in italics are for 1978. not 1979. c. Separate figures are not available for public consumption, which istherefore included in private consumption.

143

Distribution of gross domestic product (percent)

Exports of goodsPublic Private Gross domestic Gross domestic and nonfactor Resource

consumption consumption investment saving services balance

196O 197gb 1960a 197gb 1960 197gb 1960a 197gb 196O 1g79b 196O 197gb

65 Ivory Coast 10 17 73 56 15 31 17 27 37 35 2 466 Ecuador 10 12 74 61 14 29 16 27 17 24 2 267 Paraguay 8 6 76 74 17 29 16 20 18 11 1 968 Tunisia 17 16 76 61 17 29 7 23 20 38 10 669 Korea, Dem. Rep,70 Jordan . . 33 . . 93 . 48 26 . . 51 . . 7471 Lebanon 10 . . 85 . 16 . . 5 . . 27 . 1172 Jamaica 7 20 67 63 30 18 26 17 34 49 4 173 Turkey 11 13 76 71 16 21 13 16 3 5 3 574 Malaysia 11 15 62 51 14 25 27 34 54 58 13 975 Panama 11 18 78 63 16 29 11 19 31 44 5 1076 Cuba .. .. .. .. .. .. .. .. ..77 Korea, Rep. of 15 11 84 61 11 35 1 28 3 30 10 778 Algeria 16 14 50 45 42 44 34 41 28 32 8 379 Mexico 6 12 76 62 20 28 18 26 10 12 2 280 Chile 11 14 75 71 17 16 14 15 14 23 3 181 South Africa 9 13 64 52 22 25 27 35 30 35 5 1082 Brazil 12 10 67 69 22 23 21 21 5 7 1 283 Costa Rica 10 18 77 69 18 25 13 13 21 27 5 1284 Romania . . . . . . . . . 35 . . . . . . 25 . . 385 Uruguay 9 13 79 76 18 17 12 11 14 17 6 686 Iran 10 .. 69 .. 17 .. 21 .. 19 .. 487 Portugal 11 15 77 73 19 21 12 12 17 26 7 988 Argentina 9 24 70 41 22 26 21 35 10 13 1 989 Yugoslavia 19 17 49 54 37 38 32 29 14 14 5 990 Venezuela 14 14 53 52 21 34 33 34 32 31 12 (.)91 Trinidad and Tobago 9 15 61 43 28 29 30 42 37 48 2 1392 Hong Kong 7 6 87 66 18 28 6 28 82 . 12 (.)93 Singapore 8 11 95 63 11 39 3 26 163 187 14 1394 Greece 12 16 77 63 19 30 11 21 9 17 8 995 Israel 18 32 68 58 27 26 14 10 14 41 13 1696 Spain 9 11 69 68 19 20 22 21 11 15 3 1

Industrial marketeconomies 15w 17w 63w 61 w 21 w 23w 22w 22w 12w 19w 1 w 1 w

97 Ireland 12 20 77 63 16 33 11 17 31 54 5 1698 Italy 12 16 64 61 24 22 24 23 15 28 (.) 1

99 New Zealand 13 16 65 61 24 22 22 23 23 27 2 1

100 United Kingdom 17 20 66 60 19 19 17 20 21 29 2 1

101 Finland 13 18 58 55 30 25 29 27 23 33 1 2

102 Austria 13 18 59 56 28 27 28 26 24 37 (.) 1103 Japan 9 10 57 59 34 33 34 31 11 12 (.) 2104 Australia 10 16 65 60 29 23 25 24 15 19 3 1

105 Canada 14 19 65 56 23 24 21 25 18 28 2 1

106 France 13 15 61 62 24 23 26 23 15 22 2 (.)107 Netherlands 14 19 57 60 27 22 29 21 50 52 2 1108 United States 17 18 64 64 18 19 19 18 5 9 1 1109 Norway 12 20 60 49 30 29 28 31 41 45 2 2110 Belgium 13 18 69 63 19 21 18 19 33 55 1 2111 Germany, Fed. Rep. 14 20 57 55 27 25 29 25 19 26 2 (.)112 Denmark 12 25 66 56 23 22 2? 19 34 29 1 3113 Sweden 16 30 60 53 25 20 24 17 23 31 1 3114 Switzerland 9 13 62 64 29 24 29 23 29 35 (.) 1Capital-surplus

oil exporters 22w 27w 28w 56w 65w 28w115 Iraq 18 c 48 41 20 33 34 59 42 63 14 26116 Saudi Arabia 23 26 33 51 60 18117 Libya 27 21 . 21 . . 52 . . 70 31118 Kuwait . . 14 17 12 69 79 . . 57

Nonmarket industrialeconomies 3w lOw 70w 72w 25w 25w 27w 26w 2w

119 Bulgaria 3 . . 69 . . 27 . . 28 . . 1

120 Poland 8 13 68 64 24 26 24 23 (.) 3121 Hungary 7 8 72 64 24 37 21 28 3 9122 USSR 2 c 70 74 26 24 28 26 2 2123 Czechoslovakia 6 7 75 67 17 24 19 26 2 2124 German Dem. Rep.

Table 6. Industrialization

Low-income countriesChina and IndiaOther low-income

144

Distribution of manufacturing value added (percent, 1975 prices)

MachineryTextiles and

Food and and transport Otheragriculture clothing equipment Chemicals manufacturing

1978a 1978a 1978a 1978a 1978a

GrossValue added manufacturing

in manufacturing output(millions of per capita

1975 dollars) (1975 dollars)

1970 1978a 1970 1977b

1 Kampuchea, Dem.2 Lao PDR3 Bhutan4 Bangladesh 729 8745 Chad 37 476 Ethiopia . . . . 236 273 19 217 Nepal . . . . . .

8 Somalia 22 37 12 229Mali .. .. .. . .. 44 66

10 Burma 35 16 1 5 43 285 40211 Afghanistan12 Viet Nam . . . . . . . . .

13 Burundi . . 23 3514 Upper Volta . . . . . . . . 63 7915 India 12 17 18 12 41 10397 15068 75 9116 Malawi 51 12 37 56 93 4317 Rwanda . . . . . . . . 113 90 7518 Sri Lanka 38 15 . . 4 43 556 64419 Benin . . . . . . . . . . 5320 Mozambique 48 14 . . 6 32 246 224 6621 Sierra Leone . . . . . . 25 3522 China . . . . . . . . . . . . 19023 Haiti 30 20 . . 1 49 .

24 Pakistan 41 17 . . 14 28 1,482 1,966 .

25 Tanzania 34 23 9 4 30 190 275 4426 Zaire 43 20 . . 9 28 186 18727 Niger . . . . 67 14628 Guinea . . . . . . . . . 5529 Central African Rep. 48 33 3 16 54 39 . . 4230 Madagascar 28 72 298 321 101 10231 Uganda 222 15032 Mauritania . . . . . . 30 3833 Lesotho 4 534Togo .. .. .. .. 32 57 3735 Indonesia 26 10 . . 64 1,517 3,755 50 7836 Sudan 49 29 3 19 305 477 62

Middle-income countriesOil exportersOil importers

37 Kenya 26 9 30 7 28 199 532 63 15738 Ghana 34 . . . . 66 601 815 13839 Yemen Arab Rep. . . . . . . . . 31 8440 Senegal 44 18 9 29 276 33841 Angola . . 158 8042 Zimbabwe 22 17 9 11 41 519 707 248 26443 Egypt 21 28 12 8 31 1,758 3,178 19444 Yemen, PDR .. ..45 Liberia . . . . . . . . . . 25 45 . .

46 Zambia 16 17 11 13 43 275 321 16347 Honduras 42 15 1 6 36 137 20948 Bolivia . . . . . . . . . . 238 391 14849 Cameroon 37 15 2 8 38 201 312 . .

50 Thailand . . . . . . . . . 1,545 3,795 19851 Philippines 38 11 8 10 33 2,805 4,761 192 54152 Congo, People's Rep. 22 . . . . 9 69 57 71 10753 Nicaragua 48 14 2 9 27 263 399 38154 Papua New Guinea . . . .

55 El Salvador 252 368 . . 18956 Nigeria . . . . . . . . . . 1,199 2,835 39 7357 Peru 28 14 11 11 36 2,911 3,685 525 54558 Morocco 33 15 9 9 34 1,084 1,80259 Mongolia 29 32 5 3460 Albania61 Dominican Rep. 483 843 234 40462 Colombia 31 17 11 12 29 1,784 3,078 198 27663 Guatemala64 Syrian Arab Rep. 28 36 2 333 887 164 407

a. Figures in italics are for 1977, not 1978. b. Figures in italics are for 1976, not 1977.

145

Distribution of manufacturing value added (percent, 1975 prices)Value added

in manufacturing(millions of

1975 dollars)

Grossmanufacturing

outputper capita

(1975 dollars)

MachineryTextiles and

Food and and transport Otheragriculture clothing equipment Chemicals manufacturing

1970 1978a 1970 1977b1978a 1978a 1978a 1978a 1978a

65 Ivory Coast . . . . . . . 398 707 . . 27866 Ecuador 31 14 9 7 39 424 888 186 24267 Paraguay 37 16 6 5 36 182 319 .

68 Tunisia 26 16 7 17 34 222 538 174 29869 Korea, Dem. Rep. .

70 Jordan . . . . . . .

71 Lebanon .. .. .. ..72 Jamaica 44 16 6 8 26 428 398 . 67473 Turkey 26 11 . . . . 63 3714 7,041 204 43874 Malaysia 21 9 17 5 48 923 2,363 30375 Panama 52 11 2 6 29 252 254 419 60376 Cuba .. .. .. .. .. ..77 Korea, Rep. of 19 20 19 11 31 2,346 9,064 182 56778 Algeria 29 20 8 4 39 967 2,22079 Mexico 22 11 17 14 36 15,416 24,856 .

80 Chile 19 7 13 9 52 2,456 2,561 438 36581 South Africa 15 11 17 10 47 . . . . .

82 Brazil 14 10 28 11 37 13,852 37,685 41083 Costa Rica . . . . . . . . . 261 51684 Romania 12 14 31 13 30 . . . . .

85 Uruguay 27 25 8 8 32 797 1,008 . . 91686 Iran 14 13 10 7 56 2,601 7,030 24387 Portugal 13 18 20 12 37 3,496 5,308 . . 1,57388 Argentina 11 13 26 13 37 9,174 10,641 .

89 Yugoslavia 15 14 21 8 42 6,556 11,740 833 1,68690 Venezuela 18 9 7 7 59 3,302 5,35591 Trinidad and Tobago 13 4 10 7 66 416 41392 Hong Kong . . . . . . . . 1,490 2,629 1,41393 Singapore 6 5 43 5 41 827 1,815 1,628 2,87494 Greece 20 26 8 9 37 2,540 4,348 77095 Israel 13 13 24 8 42 . .

96 Spain 11 18 20 10 41 18,331 32,808 1,704 2,650

Industrial marketeconomies

97 Ireland 26 14 11 15 34 2,079 . . .

98 Italy 10 14 27 9 40 51,192 66,696 2,204 2,94499 New Zealand 26 11 17 5 41 . . . . .

100 United Kingdom 14 8 29 11 38 55,997 61,743 2,436 2,796101 Finland 13 8 23 7 49 5,636 7,084 3,449 4,056102 Austria 14 9 22 7 48 9,402 12,400 3,292 4,836103 Japan 9 7 33 10 41 115,465 190,085 2,866 4,413104 Australia 18 8 21 9 45 15,895 . . 3,202105 Canada 13 7 23 8 49 26,023 36,834 3,016 4,021106 France 16 8 32 9 35 75,800 104,703 . . 4,546107 Netherlands 18 4 26 15 37 19,114 25,258 4,443 5,219108 United States 11 6 32 11 40 331,522 434,359 3,401 4,447109 Norway 13 4 28 7 48 5,322 6,031 3,500 5,165110 Belgium 17 8 28 12 35 14,403 18,749 . .

111 Germany, Fed. Rep. 9 6 3] 13 35 149,071 176,010 4,297 5,731112 Denmark 22 7 25 7 39 6,495 . . 3,111113 Sweden 10 3 33 6 48 17,038 17,963 4,640 4,760114 Switzerland 16 9 20 12 43

Capital-surplusoil exporters

115 Iraq 28 26 4 42 522 1,442 124116 Saudi Arabia . 1,726 2,782 . . .

117 Libya . . . 154 593 165 320118 Kuwait 7 16 77 . 199 .

Nonmarket industrialeconomies

i19 Bulgaria 27 16 15 5 37120 Poland 5 19 31 9 36121 Hungary 10 10 29 10 41122 USSR 13 12 27 6 42123 Czechoslovakia 8 9 34 9 40124 German Oem, Rep. 19 11 31 9 30

Table 7. Commercial Energy

146

Average annualgrowth rate (percent)

Energyconsumption

per capita(kilograms

of coalequivalent)

Energy importsas a

percentage ofmerchandise

exportsEnergy

productionEnergy

consumption

1960_74a 1974-79 1960-74 1974-79 1960 1979 1960b 1978C

Low-income countries 5.2 w 8.4 w 4.4 U) 8.1 w 356 w 463 w 8 a'China and India 4.5 w 8.8 w 4.3 w 8.5 w 439 w 594 wOther low-income 9.5 w 6.8 a' 6.4 w 4.5 w 86 w 129w w

1 Kampuchea, Dem. . . -0.7 -38.9 32 . . 92 Lao FOR 16.1 13.7 13.6 17 1023 Bhutan . . . . . . .

4 Bangladesh 10.1 . . 6.3 . . 41 . . 355 Chad . . . . 7.5 4.6 8 24 236 Ethiopia 14.1 2.3 14.0 -5.3 9 20 11 207 Nepal 26.8 4.6 12.4 2.3 5 148 Somalia . . 8.7 13.0 17 78 49 Mali . . 8.3 5.6 5.3 15 30 13

10 Burma 5.6 12.4 3.7 5.6 58 72 4

11 Afghanistan 38.8 -2.8 10.1 6.6 24 90 12 1212 Viet Nam 7.6 11.2 -4.0 99 14013 Burundi 22.0 . . 6.9 . . 1714 Upper Volta . . . . 7.7 10.2 5 29 3815 India 4.9 9.1 5.1 8.3 111 242 11 2716 Malawi 6.9 5.] 70 2217 Rwanda . . 3.5 . . 10.4 . . 30 .

18 Sri Lanka 10.1 8.2 3.9 3.8 114 140 8 1819 Benin . . . . 9.5 -0.6 40 68 1620 Mozambique 3.2 60.0 5.2 1.1 113 139 11

21 Sierra Leone . . . . 9.0 -1.1 31 89 1122 China 4.4 8.7 4,1 8.5 650 83523 Haiti . . 13.7 1.4 20.8 36 66 . . 1624 Pakistan 9.3 7.5 5,3 5.0 136 218 17 4025 Tanzania 10.6 10.4 9.4 -2.9 43 5326 Zaire 3.0 18.1 3.8 0.4 98 103 327 Niger . . . . 14.8 12.8 6 48 628 Guinea 16.0 (.) 3.2 1.6 67 87 729 Central African Rep. 14.1 4.1 7.6 8.5 38 55 12 1

30 Madagascar 6.7 4.1 9.0 3.9 40 94 9 1631 Uganda 5.2 -4.4 9.1 -8.2 43 39 532 Mauritania 21.2 5.5 18 185 3933 Lesotho . . . . . . . . . . .

34 Togo . . 22.3 12.7 11.8 23 117 10 1335 Indonesia 8.5 6.5 3.8 10.1 130 237 3 536 Sudan 13.7 13.1 -0.9 54 141 8 24

Middle-income countries 12.7w -0.5 w 8.4 w 6.3 w 509w 1,225w 10 iv 20wOil exporters 15.0w -2.1 w 9.0 w 6.1 w 362 w 893 w 5 w lOwOil importers 6.5w 3.8 w 8.2 w 6.4 w 576 w 1,388 a' 13 w 24 w

37 Kenya 9.6 17.6 3.3 3.5 150 180 18 3038 Ghana 2.6 12.2 2.3 105 265 7 1939 Yemen Arab Rep. 12.8 15.8 7 7340 Senegal 4.7 12.4 110 26641 Angola 35.5 -2.4 10.3 1.1 90 20842 Zimbabwe 2.5 -3.1 2.4 -0.3 1,346 79143 Egypt 9.4 27,1 3.6 10.3 299 565 12 644 Yemen, PDR . . . . 7.6 7.0 237 54545 Liberia 31.8 -1.3 18.9 -0.9 88 448 3 1746 Zambia . . 5.1 . . 5.2 . . 858 11

47 Honduras 29.4 6.4 7.7 1.5 157 248 10 1448 Bolivia 17.1 -3.0 6.8 9.3 185 470 4 1

49 Cameroor, 1.1 45.3 6.2 7.8 87 148 7 950 Thailand 28.2 0.8 16.2 7.6 63 376 12 2851 Philippines 2.4 24.9 8.3 5.6 159 356 9 3252 Congo, Peoples Rep. 15.8 5.1 5.3 7.0 125 213 25 1

53 Nicaragua 26.4 -16.3 10.3 2.7 183 455 12 1454 Papua New Guinea 12.3 16.2 16.4 4.9 51 299 755 El Salvador 5.1 15.6 7.7 8.3 150 351 6 1356 Nigeria 36.6 1.0 9.4 1.4 29 83 7 257 Peru 3.5 18.5 6.5 2.7 436 737 4 2058 Morocco 2.0 4.7 6.4 6.4 169 315 9 2859 Mongolia 10.4 14.6 7.3 13.1 553 1,667 .

60 Albania 9.7 5.0 11.3 8.6 327 1,103 .

61 Dominican Rep. 1.8 -5.1 14.4 -1.0 164 515 . . 3262 Colombia 3.5 2.0 5.7 7.0 510 938 3 763 Guatemala 9.9 2,5 6.2 1.6 175 251 12 1464 Syrian Arab Rep. 86.2 7.5 7.5 15.2 323 971 16

a. Figures in italics are for 1961-74, not 1960-74. b. Figures in italics are for 1961, not 1960. c. Figures in italics are for 1977, not 1978.

147

Average annualgrowth rate (percent)

Energyconsumption

per capita(kilog rams

of coalequivalent)

Energy importsas a

percentage ofmerchandise

exportsEnergy

productionEnergy

consumption

1960._74a 1974-79 1960-74 1974-79 1960 1979 1960b 1978C

65 Ivory Coast 9.7 -12.2 14.3 5.5 75 234 5 1066 Ecuador 19.4 5.0 8.7 14.9 208 654 2 1

67 Paraguay 6.7 8.2 10.7 85 25168 Tunisia 72.1 5.5 8.7 10.8 173 61869 Korea, Dem. Rep. 9.4 3.0 9.3 3.6 1,193 2,84670 Jordan71 Lebanon 16. 6.

5.98.6

13.3-3,7

197567

5521,083

7968

52

72 Jamaica -0.7 -2.0 11.0 -5.4 446 1,390 11 1473 Turkey 7.6 3.1 9.8 7.0 254 807 16 6374 Malaysia 37.3 27.2 10.5 4.1 253 767 2 975 Panama 14.7 35.9 9.0 4.3 438 947 9176 Cuba 21.2 5.6 4.5 6.0 896 1,14877 Korea, Rep. of 6.3 4.2 13.0 11.4 261 1,64278 Algeria 11.1 6.5 7:1 12.3 277 671 14 279 Mexico 5.8 15.5 7.7 7.8 769 1,673 3 4

80 Chile 3.9 0,1 6.1 0.7 824 1,193 10 1881 South Africa 3.8 8.1 5.0 4.4 2,320 3,479 982 Brazil 8.2 7.5 8.2 7.7 392 1,062 21 3983 Costa Rica 9.5 3.5 10.1 7.6 315 842 7 1384 Romania 5.8 3.1 8.2 6.9 1,469 4,81085 Uruguay 3.7 8.5 2.8 3.4 895 1,274 3 3486 Iran 14.6 -9.1 15.5 1.4 270 1,21487 Portugal 4.4 11.7 7.4 6.0 473 1,496 1788 Argentina 6.5 3.7 5.5 3.1 1,110 2,038 14 1789 Yugoslavia 4.9 4.1 7.2 5.2 875 2,440 8 25

90 Venezuela 1.1 -3.3 7.0 5.4 1,615 3,055 1 2291 Trinidad and Tobago 2.8 3.9 10.2 5.8 1,747 5,037 35 3992 Hong Kong 9.6 16.7 468 2,401 5 693 Singapore 13.4 17.1 518 6,211 17 3194 Greece 14, ê 16. 12.8 9.6 424 2,841 26 4295 Israel 41,8 -62.3 11.6 4.7 1,270 3,643 17 2096 Spain 2.6 6.0 8.8 3.8 892 2,822 22 40

Industrial marketeconomies 4.1 w 2.3w 5.3w 2,5w 4,486 w 7,892 w 11w 20w

97 Ireland 0.1 -1.2 4.9 4.3 1,922 3,819 17 1398 Italy 2.3 0.9 7.8 1.4 1,317 3,438 18 2499 New Zealand 5.7 5.6 6.0 1.7 2,699 4,891 7 13

100 United Kingdom -1.0 13.5 2.0 1.0 4,489 5,637 14 13101 Finland 3.3 2.9 8.7 2.4 1,925 6,259 11 20

102 Austria 1.4 0.4 5.0 2.6 2,523 5,206 12 14103 Japan -1.7 3.4 9.7 3.0 1,333 4,260 18 32104 Australia 10.9 4,9 5.6 2.8 3,935 6,975 12 9105 Canada 8.7 1.7 6.2 3.1 7,087 13,453 9 9106 France -1,3 2.9 5.5 2.3 2,674 4,995 16 21

107 Netherlands 16.1 0.3 9.0 2.7 2,500 6,745 15 16108 United States 3.5 1.0 4.4 2.3 8,228 12,350 8 31109 Norway 6.8 22.1 5.8 5.1 4,938 11,919 15 13110 Belgium -7.2 5,2 4.2 2.0 3,846 6,745 11 13111 Germany, Fed. Rep. 0.3 4.9 6.0 4.3 2,711 6,627 7 14

112 Denmark -20.4 39.5 8.1 0.8 2,767 5,978 15 20113 Sweden 3.6 6.0 4.7 2.5 4,599 8,502 16 15114 Switzerland 4.2 2.7 5.5 1.9 2,762 5,138 10 8

Capital-surplusoil exporters 12.7w 4.0w 7.6 w 10.4 w 771w 1,458w (.) zv

115 Iraq 5.0 9.2 6.0 2.6 494 692 (.) (.)116 Saudi Arabia 14.0 3.6 9.3 14.3 741 1,554 (.)117 Libya 29.1 6.9 16.7 27.2 251 2,360 83 (.)118 Kuwait 4.5 -0.2 4.0 9.2 10,584 6,348 (.)Nonmarket industrial

economies 5.3w 4.7w 5.2w 3.9w 2,990w 6,164w119 Bulgaria 3.3 2.0 9,7 4.1 1,366 5,403 7120 Poland 3.9 4.2 4.5 2.6 3,115 5,803121 Hungary 2.6 3,7 4.7 4.8 1,732 4,073122 USSR 5.9 5.2 5.2 4.4 2,866 6,122 4123 Czechoslovakia 1.4 -3.3 3.2 -0.4 4,509 6,830 18124 German Oem. Rep. 0.6 5.3 6.0 4.7 4,579 8,718

Table 8. Merchandise Trade

148

Merchandise trade(millions of dollars)

Average annual growth rat&(percent)

Terms of trade(1975 = 100)Exports ImportsExports Imports

1960-70 1970-79 1960-70 1970-79 1960 197gb197gb 197gb

Low-income countries 47,194 I 49699 5.0 m -1.0 in 5.2 11! 3.3 in 113rn 9711!China and India 20985 1 26307Other low-income 26,209 1 23,392 5.3m -1.1 m 5.4 in 4.2m lllni 99m

1 Kampuchea, Oem. . . . S . . . .

2LaoPDR 35 94 ..3 Bhutan4 Bangladesh

..662

..1,537

..6,5

.,-4.1

..7.0 0.6 201 90

5 Chad . . . . 5.9 -3.4 5.0 -0.1 98 1006 Ethiopia 418 567 3.6 -2.7 6.2 0.4 143 1427 Nepal 109 254 . . . . . . . . . . 1058 Somalia 111 287 2.3 5.6 2.6 7.7 145 979 Mali 177 180 3.0 6.7 -0.4 5.5 107 95

10 Burma 363 319 -11.6 -0.3 -5.7 -4.6 115 10211 Afghanistan 494 686 2.5 3.0 0.7 4.8 82 10212 Viet Nam . . . . .

13 Burundi 105 152 . . . . . . . . .

14 Upper Volta 81 254 15.9 3.1 8.5 5.2 88 9415 India 6,998 9,041 3.0 4.6 -0.9 2.3 134 8816 Malawi 233 399 11.6 4.6 7.6 4.3 115 8417 Rwanda 115 190 15.8 1.6 8.1 10.5 111 14518 Sri Lanka 981 1,448 4,7 -3.0 -0.2 -0.6 203 11619 Benin 190 357 5.0 -11.4 7.4 6.3 114 9720 Mozambique . . . . 6,0 -16.6 7.9 -14.4 90 7521 Sierra Leone 205 297 0.3 -6.5 1.9 -3.0 121 10822 China 13,987 17,266 . . .

23 Haiti 184 221 . . . . . . . . .

24 Pakistan 2,056 4,056 8.2 -0.9 5.3 4.2 102 9225 Tanzania 523 1,084 3.4 -6.6 6.0 -0.5 98 10226 Zaire 1,324 597 -1.8 -1.1 5.4 -11.9 122 9127 Niger28 Guinea

. ,

373. .

34]6.0

. .

11.7. .

11.9. .

6.5. .

98.

90

29 Central African Rep. 80 70 8.1 -0.5 4.5 -5.0 109 10830 Madagascar 394 641 5.3 -1.0 4.1 -1.7 136 10531 Uganda 427 230 5.0 -7.0 6.2 -10.5 123 13632 Mauritania 147 259 50.7 -1.1 4.5 5.5 149 7833 Lesotho .. .. .. .. ..34 Togo 251 441 10.5 -2.5 8.6 9,8 56 8235 Indonesia 15,590 7,225 4.0 6.5 2.0 12.8 63 11936 Sudan 581 1,200 0.1 -4.4 1.2 4.5 83 78

Middle-income countries 272,496 1 304,708 5.4 in 4.3 in 6.6 in 5.0 in 100 in 98 inOil exporters 94,803 1 77,204 4,5 in 1.7 rn 3.6 in 11.1 in 69 in 113 inOil importers 177,693 t 227,504 6.3 in 4.4 in 7,7 nI 3.7 in 109 in 94 in

37 Kenya 1,104 1,658 7.2 -0.5 6.6 -1.0 133 11038 Ghana 1,096 993 0.2 -7.2 -1.5 0,1 111 14439 Yemen Arab Rep. 14 1,492 . . . . . . . . .

40 Senegal 421 756 1.2 -0.8 2.3 4.5 71 7641 Angola . . . . 9.0 -7.9 11.5 -4.2 60 11342 Zimbabwe 1,194 940 . . . . . . . . .

43 Egypt 1,840 3,837 3.2 -2.1 -1.1 11.1 92 7544 Yemen, PDR 44 434 . . . . . . . . .

45 Liberia 506 487 18.4 2.3 2.9 2.3 255 8346 Zambia 1.377 755 2.2 -0.7 9.7 -8.1 115 10047 Honduras 733 830 11.1 4.3 11.6 1.0 119 8948 Bolivia 777 1.011 9.8 -1.6 8.2 11.8 56 13949 Cameroon 1,129 1,271 7.1 0.5 9.2 7.0 106 14450 Thailand 5.288 7,190 5.2 12.0 11.2 5.8 121 7351 Philippines 4,601 6.613 2.2 6.2 7.1 3.7 112 10752 Congo, People's Rep. 119 242 5.1 8.2 -1.0 3.3 87 9153 Nicaragua 774 848 9.7 4.5 10.5 -1.1 112 9854 Papua New Guinea55 El Salvador

9641,029

7881.024

. .

5.4S

4.2S

6.3 5.6' ,

109 9956 Nigeria 18,073 12,399 6.6 -0.3 1.6 20.6 32 11957 Peru 3,474 2,090 2.0 1.7 3.6 1.6 89 9758 Morocco 1.873 3.678 2.5 1.3 3.4 8.3 75 6259 Mongolia 281 417 . . . S

60 Albania .. .. .. .. .. .. ..61 Dominican Rep. 822 1.062 ----2.3 5.6 9.9 3,5 47 4062 Colombia 4062 3409 2.2 0.9 2.5 5.8 96 11863 Guatemala 1. 192 1.504 9.1 4.5 7.1 5.9 126 10764 Syrian Arab Rep. 1 644 3.329 3.4 7,4 4.0 13.9 69 102

149

Merchandise trade(millions of dollars)

Average annual growth rated(percent)

Terms of trade(1975 = 100)Exports Imports

Exports197gb

Imports197gb 1960-70 1970-79 1960-70 1970-79 1960 1979b

65 Ivory Coast 2,515 2,491 8.8 5.2 9.7 10.1 113 12966 Ecuador 2,013 1,986 2,9 8,2 11.5 10.5 83 11967 Paraguay 305 577 5.4 8.4 7,3 8.5 116 10168 Tunisia 1,766 2,830 4.2 4.8 1.9 11.2 64 81

69 Korea, Dem. Rep. . . 950 . . . . . . . . .

70 Jordan 402 1,949 10.1 19.6. 3.5 15.3 78 6371 Lebanon 773 2,700 14.2 2.3 5.1 0,5 87 8572 Jamaica 769 1,010 4.7 -6.8 8.1 -7.0 85 9373 Turkey 2,261 4,946 . . 1.7 . . 3.3 . . 8474 Malaysia 11,077 7,849 5.8 6.5 2.3 6.2 150 120

75 Panama 292 1,185 10.5 0.6 10.5 -3.6 117 8476 Cuba 4,456 4,687 4.0 3.9 5.5 3.4 58 6077 Korea, Rep. of 15,055 20,339 34.1 25.7 20.5 13.5 99 9478 Algeria 8,714 8,360 4.5 0.0 -0.9 14.2 39 11379 Mexico 8,768 11,829 2.8 10.9 6.4 5.0 97 84

80 Chile 3,766 4,219 0.6 10.7 4.7 0.6 126 8981 South Africa 18,396 8,989 5.4 8.1 8,2 -2.9 108 81

82 Brazil 15,244 19,804 5.1 7.0 4.9 5.6 114 9483 Costa Rica 923 1,392 9.6 4.4 9.9 4.6 132 10384 Romania 9,724 10,916 9.4 4.7 8.8 6.1 . . 98

85 Uruguay 788 1,206 2.2 4.3 -2.9 3.1 132 12686 Iran 19,872 9,738 12.6 -4.6 11.4 14.7 27 11887 Portugal 3,468 6,086 9,6 -0.3 14.2 3.3 97 9588 Argentina 7,810 6,713 3.4 10.7 0.3 (.) 109 7789 Yugoslavia 6,794 14,019 7.7 4.7 8.8 5,0 100 103

90 Venezuela 14,159 9,618 1.6 -10.3 4.2 12.0 36 11691 Trinidad and Tobago 2,507 2,086 4.9 -2.6 3.2 -5.5 100 10192 Hong Kong 15,156 17,137 12.7 8.3 9.2 8.4 94 10293 Singapore 14,233 17,635 4.2 11.0 5,9 8.0 100 101

94 Greece 3,855 9,640 10,8 12.3 10.8 6.0 109 91

95 Israel 4,301 7,333 11.0 9.8 8.7 5.3 109 9796 Spain 17,903 25,432 11.5 10.8 18.5 3.4 124 100

Industrial marketeconomies 1,028,279 1,106,534 t 8.4 m 5.9 ni 9.3 ni 4.5 in 100 in 98 ni

97 Ireland 7,175 9,858 7.1 8.4 8.3 6.6 96 9998 Italy 72,242 77,970 13.6 7.3 9.7 3.4 130 9999 New Zealand 4,694 4,542 4.6 3,4 2.9 1,0 135 124

100 United Kingdom 91,030 102,969 4.8 8.2 5.0 4,4 112. 107101 Finland 11,175 11,400 6.8 3.9 7.0 1.7 95 89

102 Austria 15,483 20,254 9.6 7.2 9.6 7.2 94 95103 Japan 103,045 110,670 17.2 9.1 13.7 4.8 150 98104 Australia 18,473 16,432 6.5 4.2 7.2 3.4 115 90105 Canada 55,336 52,230 10.0 4.6 9.1 6.7 92 98106 France 98,059 106,994 8.2 7.1 11.0 6.8 93 101

107 Netherlands 63,667 67,284 9.9 5.7 9.5 4,3 111 99108 United States 178,578 217,664 6.0 6.9 9.8 5.4 115 91109 Norway 13,271 13,818 9,1 7.2 9.7 4.5 89 101110 Belgium 56,258 60,410 10.9 5.2 10.3 5.8 102 97111 Germany, Fed. Rep. 171,540 157,747 10.1 6.0 10.0 6.0 90 95

112 Denmark 14,506 18,450 7.1 4.4 8.2 3.6 105 96113 Sweden 27,240 28,488 7.7 2.6 7.2 2.4 97 90114 Switzerland 26,507 29,354 8.5 4,2 9.0 4.1 85 107

Capital-surplusoil exporters 118,417 t 44,700 8.2 in -2.0 in 10.8 in 18.0 in 26 in 118 in

115 Iraq 21,502 7,028 5.4 2.5 1.4 18.3 25 117116 Saudi Arabia 63,427 24,254 10.9 5.6 10.9 39.0 27 109117 Libya 15,236 8,214 67.5 -6.5 15.4 16.8 31 121118 Kuwait 18,252 5,204 5. 2 -8.5 10.6 17.6 23 118

Nonmarket industrialeconomies 126,079 t 122,992 t 9,0 in 7.5 in 7.9 in 7.6 In

119 Bulgaria 8,869 8,514 14.4 11.2 12.9 10.3 .

120 Poland 16,249 17,584 -0.3 7.3 -0.4 7,7 . . 103121 Hungary 7,938 8,674 9.7 8.6 9.1 6,7 83122 USSR 64,762 57,744 9.7 7.3 7.1 9.6123 Czechoslovakia 13,198 14,262 6.7 6.6 7.0 6.0 .

124 German Dem. Rep. 15,063 16,214 8.3 7.6 8.6 7.4 .

a. See the technical notes, b. Figures in italics are for 1978, not 1979.

Table 9. Structure of Merchandise Exports

150

Percentage share of merchandise exports

Fuels,minerals

and metals

Otherprimary

commoditiesTextiles

and clothing

Machineryand

transportequipment

Othermanufactures

1960a 1978 1960a 1978 1960a 1978 1960a 1978 1960a 1978

Low-income countries 13 w 32w 69w 38w 13w 12w (.)w 3w 5 w 15 wChina and India 12w 35w 22w 4w 27wOther low-income 49w 79w 40w 3w 6w (.)w 1w 3w 4w

1 Kampuchea, Dem. 0 0 100 83 0 4 0 1 0 122 Lao FOR 18 64 0 1 173 Bhutan4 Bangladesh 1 36 50 1 125 Chad 3 0 94 96 0 1 0 0 3 3

6 Ethiopia 0 4 100 95 0 (.) 0 0 0 1

7 Nepal 0 87 6 (.) 78 Somalia 0 0 88 99 0 0 8 1 4 09 Mali 0 (.) 96 99 1 (.) 1 (.) 2 1

10 Burma 4 11 95 77 0 0 0 1 1 11

11 Afghanistan (.) 17 82 70 14 11 3 0 1 212 Viet Nam 6 32 38 (.) 2413 Burundi . . 8 . . 91 . . 0 0 . . 1

14 Upper Volta 0 (.) 100 95 0 (.) 0 1 (.) 415 India 10 10 45 30 35 20 1 6 9 3416 Malawi (.) 95 3 .

. (.) 217 Rwanda . . 10 . . 90 . 0 . . 0 . (.)18 Sri Lanka (.) 11 99 81 0 4 0 (.) 1 419 Benin 10 6 80 85 7 2 (.) 0 3 720 Mozambique 0 12 100 86 0 2 0 0 0 (.)21 Sierra Leone 15 8 20 48 0 0 0 0 65 4422 China . 13 . . 38 . . 24 . 3 . 2223 Haiti 0 5 100 40 0 18 0 12 0 2524 Pakistan 0 4 73 38 23 44 1 2 3 1225 Tanzania (.) 4 87 90 0 1 0 (.) 13 526 Zaire 42 71 57 21 0 0 0 1 1 7

27 Niger . 40 100 25 0 1 0 0 0 3428 Guinea 42 98 58 2 0 0 0 (.) 0 029 Central African Rep. 12 (.) 86 62 (.) (.) 1 (.) 1 3830 Madagascar 4 8 90 85 1 2 1 2 4 331 Uganda 8 1 92 99 0 (.) 0 (.) (.) (.)32 Mauritania 4 87 69 9 1 (.) 20 (.) 6 433 Lesotho . 32 . . 31 . . 1 . . 6 . . 3034 Togo 3 49 89 45 3 3 0 2 5 1

35 Indonesia 33 72 67 26 0 (.) (.) 1 (.) 1

36 Sudan 0 5 100 95 0 (.) 0 (.) 0 (.)Middle-income countries 27w 35w 60w 29w 3w 9w 2w 12w 8w 17w

Oil exporters 46w 78w 50w 14w 1w 3w (.)w 2w 3w 3wOil importers 16w 11w 67w 37w 4w 12w 2w 15w 11w 25 o'

37 Kenya 1 19 87 6] 0 1 0 1 12 1238 Ghana 7 16 83 80 0 (.) 0 (.) 10 439 Yemen Arab Rep. . . (.) . . 90 . . 3 . . 1 . . 640 Senegal 3 13 94 80 1 1 1 (.) 1 641 Angola . 64 . . 28 . . 0 . . 1 . . 7

42 Zimbabwe 71 25 25 62 1 10 (.) 3 3 043 Egypt 4 33 84 38 9 21 (.) 1 3 744 Yemen, PDR .. 92 .. 7 .. (.) .. (.) .. 1

45 Liberia 45 62 55 35 0 () 0 1 0 246 Zambia 94 . . 2 . . 0 . . 0 . . 4

4] Honduras 5 (.) 93 90 0 1 0 0 2 948 Bolivia . . 88 . . 10 . . 1 . . (.) . . 1

49 Cameroon 19 6 7] 90 0 1 2 1 2 250 Thailand 7 11 91 64 0 10 0 3 2 1251 Philippines 10 14 86 52 1 6 0 2 3 2652 Congo, People's Rep, 7 60 84 24 (.) 0 5 2 4 1453 Nicaragua 3 1 95 82 0 2 0 1 2 1454 Papua New Guinea 0 37 92 62 0 0 0 (.) 8 1

55 El Salvador 0 3 94 63 3 12 (.) 3 3 1956 Nigeria 8 91 89 8 0 0 0 (.) 3 1

5] Peru 49 46 50 43 0 3 0 1 1 758 Morocco 38 41 54 36 1 11 1 1 6 11

59 Mongolia 8 81 7 (.) . 460 Albania . 49 . . 33 . . 6 . . 1 . . 11

61 Dominican Rep. 6 4 92 75 0 (.) 0 1 2 20

62 Colombia 19 5 79 78 0 5 (.) 2 2 1063 Guatemala 2 1 95 78 1 5 0 1 2 1564 Syrian Arab Rep. 0 66 81 26 2 3 0 2 17 3

a. Figures E italics are for 1961, not 1960.

151

Percentage share of merchandise exports

Fuels,minerals

and metals

Otherprimary

commoditiesTextiles

and clothing

Machineryand

transportequipment

Othermanufactures

196O 1978 1960a 1978 1960 1978 196O 1978 1960a 1978

65 Ivory Coast 1 4 98 89 0 2 (.) 2 1 366 Ecuador 0 41 99 57 0 1 0 0 1 1

67 Paraguay 0 0 100 89 0 0 0 0 0 1168 Tunisia 24 44 66 18 1 20 1 3 8 1569 Korea, Oem. Rep, . . 31 . . 29 . . 5 . . 5 . . 3070 Jordan 0 32 96 30 0 5 0 2 4 3171 Lebanon . . 4 . . 32 . . 10 . . 17 . . 3772 Jamaica 50 22 45 46 2 1 0 1 3 3073 Turkey 8 6 89 72 0 15 0 1 3 674 Malaysia 20 27 74 52 (.) 2 (.) 11 6 875 Panama . . 24 . . 64 . . 4 . . 2 . 676 Cuba 2 5 93 94 1 0 (.) (.) 4 1

77 Korea, Rep. of 30 1 56 10 8 32 (.) 21 6 3678 Algeria 12 97 81 2 0 0 1 0 6 1

79 Mexico 24 39 64 31 4 3 1 10 7 17

80 Chile 92 74 4 21 0 (.) 0 (.) 4 581 South Africa 29 29 42 29 2 1 4 6 23 3582 Brazil 8 11 89 55 0 4 (.) 15 3 1583 Costa Rica 0 (.) 95 71 0 3 0 3 5 2384 Romania 12 18 10 24 . . 3685 Uruguay . . 1 71 56 21 20 . . 3 8 2086 Iran 88 95 9 2 0 2 0 (.) 3 1

87 Portugal 8 4 37 23 18 29 3 14 34 3088 Argentina 1 2 95 72 0 3 (.) 8 4 1589 Yugoslavia 18 9 45 19 4 8 15 32 18 32

90 Venezuela 74 97 26 1 0 (.) 0 (.) (.) 291 Trinidad and Tobago 82 90 14 3 0 1 0 1 4 592 Hong Kong 5 1 15 2 45 46 4 15 31 3693 Singapore 1 31 73 23 5 5 7 25 14 1694 Greece 9 18 81 36 1 17 1 3 8 2695 Israel 4 1 35 17 8 6 2 10 51 6696 Spain 21 5 57 22 7 6 2 25 13 42

Industrial marketeconomies 11 w 8 w 23w 15w 7 w 5 w 29 w 38w 30w 34 w

97 Ireland 5 3 67 43 6 9 4 14 18 3198 Italy 8 7 19 8 17 12 29 33 27 4099 New Zealand (.) 6 97 72 0 3 (.) 7 3 12

100 United Kingdom 7 9 9 10 8 5 44 37 32 39101 Finland 3 6 50 20 1 6 13 24 33 44102 Austria 26 5 22 11 10 10 16 28 26 46103 Japan 11 2 10 2 28 4 23 57 28 35104 Australia 13 29 79 43 (.) 1 3 5 5 22105 Canada 33 23 37 23 1 1 8 34 21 19106 France 9 6 18 18 10 6 25 36 38 34107 Netherlands 15 19 34 26 8 5 18 18 25 32108 United States 10 6 27 25 3 2 35 43 25 24109 Norway 22 34 34 13 2 1 10 30 32 22110 Belgium 15 9 9 12 12 8 13 24 51 47111 Germany, Fed. Rep. 9 6 4 6 5 44 47 39 36112 Denmark 2 4 63 41 3 5 19 25 13 25113 Sweden 10 6 29 13 1 2 31 43 29 36114 Switzerland 2 3 8 5 12 7 30 33 48 52

Capital-surplusoil exporters 96w 98w 4w (.)w Ow (.)w Ow 1w Ow 1w

115 Iraq 97 99 3 1 0 (.) 0 (.) 0 (.)116 Saudi Arabia 95 100 5 0 0 (.) 0 0 0 0117 Libya 100 100 0 (.) 0 (.) 0 (.) 0 (.)118 Kuwait 90 1 1 3 .. 5

Nonmarket industrialeconomies 18w 25w 33w 11w 25w 34w 21w 27w

119 Bulgaria 3 2 75 32 12 4 6 42 4 20120 Poland 20 . . 11 . 7 41 . 21121 Hungary 6 8 28 24 7 8 38 35 21 25122 USSR 24 42 28 9 1 (.) 21 20 26 29123 Czechoslovakia 20 6 11 6 (.) 5 45 53 25 30124 German Dem. Rep. 3 3 5 61 28

Table 10. Structure of Merchandise Imports

Percentage share of merchandise imports

152

1960 1978b 1960a 1978b 1960 1978b 1960a 1978b 1960a 1978b

Low-income countriesChina and IndiaOther low-income

22w

w

17w17w18 w

6w

6w

11wlOw12w

16w

6w

20w32w6w

25w

w

24w18 w30 w

31 w 28 w23 w34w

1 Kampuchea, Dem.2 Lao PDR3 Bhutan4 Bangladesh 21 15 i4 .. 325 Chad 19 12 19 466 Ethiopia 6 . 12 4 35 437 Nepal 13 10 16 20 418 Somalia 27 4 0 18 519Mali 20 5 4 18 .. 53

10 Burma 14 . 4 9 . . 17 . . 5611 Afghanistan 14 14 7 8 4 0 14 7 61 7112 Viet Nam . . . . 0 . . 0

13 Burundi . . 23 . 11 . . 8 . . 27 . . 3114 Upper Volta 21 19 4 9 1 0 24 43 50 2915 India 21 16 6 26 28 15 30 19 15 2416 Malawi 5 . . 12 . . 2 . . 37 . 4417 Rwanda . . . . . . . . . . .

18 Sri Lanka 39 30 7 16 5 4 15 24 34 2619 Benin 17 15 10 15 1 2 18 22 54 4620 Mozambique . . . . . . S

21 Sierra Leone 23 21 12 12 5 1 15 24 45 4222 China . 17 . 0 43 18 2223 Haiti . . 28 . . 11 . 4 . . 20 . . 3724 Pakistan 22 19 10 19 2 7 27 25 39 3025 Tanzania . S S S S S

26 Zaire . . 17 . . 18 . . . . . 38 . . 2727 Niger 24 . . 5 4 18 4928 Guinea .. .. .. .. .. .. ..29 Central African Rep. 15 17 9 2 2 2 26 38 48 4130 Madagascar 17 17 6 14 3 3 23 31 51 3531 Uganda 6 8 8 25 5332 Mauritania 5 3 3 . . 39 5033 Lesotho .. .. .. .. .. .. ..34 Togo 16 8 6 14 3 4 32 37 43 3735 Indonesia 23 18 5 9 10 6 17 36 45 3136 Sudan 17 19 8 1 3 2 14 36 58 42

Middle-income countries 15w 12w 9w 17w 13w 8w 28 w 32w 35w 31 wOil exporters 18w 16w 7w 6w 8w 5w 27 iv 42w 40 iv 31 ivOil importers 14w 11w lOw 19w 16 w 9 w 29 iv 28 iv 31 iv 33 iv

37 Kenya 12 7 11 18 8 3 27 41 42 3138 Ghana 19 9 5 16 4 5 26 26 46 4439 Yemen Arab Rep. .. .. .. .. .. .. ..40 Senegal 30 23 5 12 2 21 19 18 44 2641 Angola S S S S S S .

42 Zimbabwe . . 2 . . 30 . . 5 . 5 34 . . 2943 Egypt 23 26 11 2 16 7 25 37 25 2844 Yemen, PDR .. .. S .. .. .. ..45 Liberia 16 17 4 18 7 1 34 32 39 3246 Zambia . . 6 16 . . 3 . . 71 . . 447 Honduras 13 9 9 12 3 2 24 31 51 4648 Bolivia .. .. .. .. .. .. .. ..49 Cameroon 20 10 8 7 3 2 17 39 52 4250 Thailand 10 4 11 21 11 9 25 31 43 3551 Philippines 15 8 10 21 5 7 36 27 34 3752 Congo, Peoples Rep. 18 21 6 1 1 1 31 32 44 4553 Nicaragua 9 10 10 15 5 2 22 24 54 4954 Papua New Guinea 30 . 5 . S 4 . . 23 . . 3855 El Salvador 17 11 6 8 6 4 26 30 45 4756 Nigeria 14 14 5 2 6 2 24 44 51 3857 Peru 16 16 5 19 5 4 37 33 37 2858 Morocco 27 20 8 15 7 8 19 30 39 2759 Mongolia . S . . . . . . . S

60 Albania 17 . . 2 . . 3 . . 45 . . 3361 Dominican Rep. . . 17 22 4 . 23 3462 Colombia 8 11 3 7 15 7 43 36 31 3963 Guatemala 12 15 10 16 7 39 26 23 45 764 Syrian Arab Rep. 24 12 8 25 5 4 15 22 48 37

MachineryOther and

primary transport OtherFood Fuels commodities equipment manufactures

a. Figures in italics are for 1961, not 1960. b. Figures in italics are for 1977, not 1978.

153

Percentage share of merchandise imports

Food Fuels

Otherprimary

commodities

Machineryand

transportequipment

Othermanufactures

1960a 1978b 1960a 1978b 1960a 1978b 196O 1978b 196O 1978b

65 Ivory Coast 18 13 6 10 2 2 27 39 47 3666 Ecuador 13 7 3 1 9 4 33 50 42 3867 Paraguay68 Tunisia 2o 9 10 23 31 44 2069 Korea, Dem. Rep.70 Jordan 22 10 3 30 3571 Lebanon

. .72 Jamaica73 Turkey 7 1 11 32 16 5 42 31 24 3174 Malaysia 29 17 16 13 13 7 14 34 28 2975 Panama 15 10 10 24 1 1 22 23 52 4276 Cuba77 Korea, Rep. of iô 2678 Algeria 26 17 4 2 2 3 14 45 54 3379 Mexico 4 13 2 3 10 7 52 45 32 32

80 Chile 15 . . 16 . . 13 . . 22 . . 3481 South Africa 6 6 7 1 9 7 37 52 41 3482 Brazil 14 10 19 33 13 6 36 26 18 2583 Costa Rica 13 7 6 10 6 3 26 30 49 5084 Romania85 Uruguay 5 7 24 32 46 9 17 25 8 2786 Iran 14 . . 1 . . 1 . . 23 . . 61

87 Portugal 15 16 10 16 28 11 26 28 21 2988 Argentina 3 6 13 12 11 9 44 39 29 3489 Yugoslavia 11 7 5 14 25 11 37 37 22 31

90 Venezuela 18 12 1 1 10 4 36 52 35 31

91 Trinidad and Tobago 16 11 34 40 7 2 18 22 25 2592 Hong Kong 27 15 3 5 16 7 10 19 44 5493 Singapore 21 10 15 24 38 9 7 29 19 2894 Greece 11 9 8 19 16 7 44 42 21 23

95 Israel 20 11 7 13 18 7 28 22 27 4796 Spain 16 16 22 29 25 13 22 19 15 23

Industrial marketeconomies 22 w 13w 11w 19 zv 24 o' 10 w 16 w 25 o' 27 w 33 o'

97 Ireland 18 12 12 10 11 5 21 30 38 4398 Italy 20 18 14 24 31 14 13 20 22 2499 New Zealand 8 7. 8 14 16 7 29 31 39 41

100 United Kingdom 36 16 11 12 27 10 8 26 18 36101 Finland 13 9 10 22 20 8 33 30 24 31

102 Austria 16 8 10 11 20 8 29 31 25 42103 Japan 17 17 17 40 49 20 9 7 8 16104 Australia 6 6 10 9 16 5 31 39 37 41105 Canada 12 8 9 9 12 5 36 50 31 28106 France 25 14 17 20 25 9 14 23 19 34

107 Netherlands 18 16 13 16 14 6 22 24 33 38108 United States 24 10 10 24 25 8 10 27 31 31

109 Norway 12 8 9 12 13 6 36 34 30 40110 Belgium 15 13 10 12 26 9 21 26 28 40111 Germany, Fed. Rep. 26 15 8 16 28 10 10 21 28 38

112 Denmark 18 12 12 16 11 7 23 27 36 38113 Sweden 13 9 14 16 13 6 26 30 34 39114 Switzerland 18 10 8 8 13 6 21 28 40 48

Capital-surplusoil exporters 12 w 1w 2w 42w 43w

115 Iraq 15 3 54 28116 Saudi Arabia 11 2 43 43117 Libya 13 17 1 10 2 40 42 32 38118 Kuwait 12 2 45 40

Nonmarket industrialeconomies

119 Bulgaria120 Poland121 Hungary . è th 34

122 USSR 12 . . 4 18 30 36 .

123 Czechoslovakia 10 20124 German Oem. Rep.

Table II. Destination of Merchandise Exports

154

Destination of merchandise exports (percentage of total)

Origin 1960

51 w39w63w

1979 1960 1979

29w33w26w

1960

19w36w3w

1979

5w9w2w

1960

1w(.)w1w

1979

5w6w3w

Low-income countriesChina and IndiaOther low-income

61 to52w69w

29w25w33w

1 Kampuchea, Dem.2 Lao PDR 55 453 Bhutan4 Bangladesh . 55 30 10 55 Chad 73 30 27 65 0 0 56 Ethiopia 69 72 24 11 6 107 Nepal . 60 . 408 Somalia 85 18 15 2 (.) (.)9 Mali 93 68 7 32 0 (.) (.) (.)

10 Burma 23 37 74 61 3 (.) (.) 211 Afghanistan 48 48 24 26 28 23 0 312 Viet Nam13 Burundi . 89 10 014 Upper Volta 4 75 96 25 0 015 India 66 54 25 20 7 14 2 1216 Malawi 84 1617 Rwanda 80 2018 Sri Lanka 75 50 22 35 3 519 Benin 90 89 8 10 2 1 0 (.)20 Mozambique 29 43 71 49 (.) 1 (.) 7

21 Sierra Leone 99 98 1 2 0 0 (.)22 China 14 51 25 39 61 7 (.) 323 Haiti 98 97 2 3 () 024 Pakistan 56 47 38 35 4 4 2 1425 Tanzania 74 57 25 40 1 2 0 1

26 Zaire 89 64 11 36 (.) (.) (.) ()27 Niger 74 97 26 1 0 0 228 Guinea 63 69 19 29 18 (.) 229 Central African Rep. 83 78 17 22 0 (.) 0 (.)30 Madagascar 79 67 20 33 1 (.) (.) (.)31 Uganda 62 67 38 30 0 1 0 232 Mauritania 89 88 11 11 0 0 1

33 Lesotho34 Togo 74 j37 25 n35 Indonesia 54 76 42 23 11 1 (.) (.)36 Sudan 59 36 29 45 8 9 4 10

Middle-income countries 68w 67w 24w 26w 8w 4w (.) w 3wOil exporters 68w 73w 27w 26w 5w 1w (.) w (.) wOil importers 68w 64w 23w 27w 9w 6w (.) w 3w

37 Kenya 77 63 23 36 0 (.) (.) 1

38 Ghana 88 70 5 17 7 13 (.) (.)39 Yemen Arab Rep. 46 34 36 46 18 (.) (.) 2040 Senegal 89 59 11 41 0 (.) 0 (.)41 Angola 64 33 34 66 2 0 0 1

42 Zimbabwe43 Egypt 24 33 2144 Yemen, PDR 42 44 56 49 (.) (.) 2 745 Liberia46 Zambia

100 8682

(.).

1418

0 (.)(.)

0 (.)(.)

47 Honduras 77 84 23 16 0 0 (.)48 Bolivia 88 70 12 30 0 049 Cameroon 93 84 6 14 1 2 (.) (.)50 Thailand 47 58 48 37 2 1 3 451 Philippines 94 81 6 16 0 2 (.) 1

52 Congo, People's Rep. 93 72 .7 28 0 (.) 0 (.)53 Nicaragua 91 65 9 35 (.) (.) 0 (.)54 Papua New Guinea 90 1055 El Salvador 88 74 12 26 0 (.)56 Nigeria 95 87 4 13 () 0 (.)57 Peru 84 76 16 20 () 4 0 (.)58 Morocco 74 72 23 20 3 6 (.) 259 Mongolia60 Albania 6 93 061 Dominican Rep. 92 7 7 13 0 1

62 Colombia 94 75 5 22 1 3 0 (.)63 Guatemala 94 70 6 29 0 (.) 0 1

64 Syrian Arab Rep. 39 65 31 20 19 8 11 7

Industrialmarket Developing

economies countries

Nonmarketindustrial Capital-surplus

economies oil exporters

155

Origin

Destination of merchandise exports (percentage of total)

Industrialmarket

economiesDevelopingcountries

Nonmarketindustrial

economiesCapital-surplusoil exporters

1960 1979 1960 1979 1960 1979 1960 1979

65 Ivory Coast 84 78 16 17 0 5 0 (.)66 Ecuador 91 56 8 42 1 2 0 (.)67 Paraguay 61 64 39 36 0 . . 068 Tunisia 76 69 19 27 3 1 2 369 Korea, Dem. Rep. . . . . . . . .

70 Jordan 1 15 62 45 11 3 26 3771 Lebanon 21 11 39 29 8 9 32 5172 Jamaica 96 78 4 20 0 2 0 (.)73 Turkey 71 62 17 19 12 11 (.) 874 Malaysia 58 62 35 34 7 3 0 1

75 Panama 99 77 1 22 0 (.) 0 1

76Cuba 72 .. 9 .. 19 .. (.)77 Korea, Rep. of 89 73 11 20 0 (.) 0 778 Algeria 93 94 7 5 0 1 (.) (.)79 Mexico 93 80 7 20 (.) (.) 0 (.)80 Chile 91 63 9 36 (.) (.) (.) 1

81 South Africa 71 83 28 17 1 (.) (.)82 Brazil 81 66 13 26 6 6 (.) 283 Costa Rica 93 73 7 25 (.) 1 (.) 1

84 Romania 20 31 14 24 66 43 (.) 2

85 Uruguay 82 48 11 47 7 4 0 1

86 Iran 62 64 34 35 3 (.) 1 1

87 Portugal 56 79 42 18 2 2 (.) 1

88 Argentina 75 51 20 42 5 6 (.) 1

89 Yugoslavia 48 38 20 17 31 39 1 690 Venezuela 62 62 38 38 0 (.) 0 (.)91 Trinidad and Tobago 80 78 20 22 0 (.) (.) (.)92 Hong Kong 54 68 45 29 (.) (.) 1 393 Singapore 38 44 57 49 4 2 1 594 Greece 65 59 13 21 21 8 1 1295 Israel 76 79 23 21 1 (.) 0 (.)96 Spain 80 62 18 30 2 3 (.) 5

Industrial marketeconomies 67w 69w 30w 24w 3w 3w (.)w 4w

97 Ireland 96 89 4 8 (.) 1 (.) 298 Italy 65 68 29 22 4 3 2 799 New Zealand 95 72 4 21 1 5 (.) 2

100 United Kingdom 57 70 38 23 3 2 2 5101 Finland 69 72 12 10 19 16 (.) 2102 Austria 69 70 18 16 13 12 (.) 2103 Japan 45 46 51 43 2 3 2 8104 Australia 75 61 21 32 3 4 1 3105 Canada 90 88 9 9 1 2 (.) 1

106 France 53 67 44 25 3 4 (.) 4107 Netherlands 78 84 20 12 1 2 1 2108 United States 61 57 37 36 1 3 1 4109 Norway 80 84 16 14 4 2 (.) (.)110 Belgium 79 84 18 12 2 2 1 2111 Germany, Fed. Rep. 70 73 25 20 4 4 1 3112 Denmark 83 83 13 13 4 2 (.) 2113 Sweden 79 80 17 12 4 4 () 4114 Switzerland 72 69 24 19 3 8 1 4

Capital-surplusoil exporters 83 w 70 w 16w 29w 1w (.)w Ow 1w

115 Iraq 85 55 14 45 1 (.) (.) (.)116 Saudi Arabia 74 75 26 25 0 (.) 0 (.)117 Libya 67 80 26 20 7 (.) 0118 Kuwait 91 65 9 30 0 (.) 0 5

Nonmarket industrialeconomies 19w 22w 59w (.)w

119 Bulgaria 13 . . 7 80 . . (.)120 Poland 29 . 17 54 . . (.)121 Hungary 22 17 . . 61 . (.)122 USSR 18 31 . . 51 . (.)123 Czechoslovakia 16 17 67 . . 0124 German Dem. Rep. 19 . . 13 68 . . (.)

Table 12. Trade in Manufactured Goods

156

Origin

Destination of manufactured exports (percentage of total) Value ofmanufactured

exports(mu lions

of dollars)

Industrialmarket

economiesDevelopingcountries

Nonmarketindustrial

economies

Capital-surplus

oil exporters

1962a

56 w

58w

1978

45 w43w52w

1962a

38w

40w

1978

48w52w33w

1962a

4w

1w

1978

5w3w

11w

1962a

2w..1w

1978

2w2w4w

1962a 1978b

Low-income countriesChina and IndiaOther low-income

1 Kampuchea, Dem. 30 21 69 79 1 0 0 0 1 22 Lao PDR 35 88 65 12 0 0 0 0 (.) 33 Bhutan 0

4 Bangladesh 46 43 8 3 3465 Chad 19 31 75 69 0 0 6 0 1 3

6 Ethiopia 47 68 51 27 1 1 1 4 2 37 Nepal 79 21 0 0 11

8 Somalia 60 77 36 18 0 5 4 0 (.) 1

9 Mali 34 29 66 71 (.) 0 0 0 (.) 210 Burma 58 82 42 18 (.) 0 0 0 3 2811 Afghanistan 96 82 3 10 1 7 0 1 9 4312 Viet Nam 9 3 91 38 0 58 0 1 1 29713 Burundi . . 100 . . 0 . . 0 . . 0 . . 1

14 Upper Volta 19 46 81 54 0 0 0 0 1 215 India 56 60 37 32 5 4 2 4 630 400616 Malawi . . 26 74 . . 0 0 . . 1417 Rwanda . . 0 . 100 . . 0 . 0 (.) (.)18 Sri Lanka 63 74 35 20 2 0 (.) 6 6 6519 Benin 19 26 78 70 3 4 0 0 1 520 Mozambique . . 67 . . 27 . . 0 . 6 . . 3

21 Sierra Leone 100 100 0 0 0 0 0 0 23 7222 China . . 27 70 3 .

. (.) . 4,51023 Haiti 0 0 95 . . 5 . . 0 . . 0 . . 8824 Pakistan 45 51 52 33 1 6 2 10 97 86325 Tanzania 85 85 15 15 0 0 (.) 0 20 23

26 Zaire 93 89 7 11 0 0 0 0 12 7027 Niger 8 89 93 11 0 0 0 0 1 7628 Guinea . . 27 . . 73 . 0 . . 0 . . 5529 Central African Rep. 74 89 24 11 2 0 0 0 3 2730 Madagascar 80 88 20 12 0 0 0 0 5 27

31 Uganda . . 100 . . 0 . . 0 . . 0 . . 232 Mauritania 77 84 23 16 0 0 0 0 2 433 Lesotho .. .. .. .. .. .. ..34 logo 44 45 56 50 0 5 0 0 1 2135 Indonesia 52 47 46 52 1 0 1 1 2 22636 Sudan 35 90 54 10 0 0 11 0 (.) 4

Middle-income countries 51 w 58 w 44w 33w 4w 5w 1w 4wOil exporters 71 w 61 w 28w 31w (.) w 6w 1w 2wOil importers 47 w 58 w 47w 33w 4w 5w 1w 4w

37 Kenya . S 9 . . 90 . . 0 . . 1 12 15538 Ghana 38 56 50 44 11 0 1 0 12 4039 Yemen Arab Rep. . . . . . . . . . . . . . . 1

40 Senegal 76 50 24 50 0 0 0 0 5 2841 Angola 80 20 . . 0 . . (0) 6042 Zimbabwe . . . . . . . . . . . S . . 1643 Egypt 21 . . 14 . . 55 . . 10 88 50444 Yemen, PDR . . 64 . . 36 . . 0 . . 0 . . 245 Liberia 100 45 0 55 0 0 0 0 3 946 Zambia . . 67 . . 33 . . 0 . . 0 . . 3547 Honduras 3 30 97 70 0 0 0 0 2 5848 Bolivia 82 . . 18 . . 0 . . C . . 4 2249 Cameroon 25 64 75 36 0 0 0 0 4 3150 Thailand. 51 62 49 33 (.) 0 (.) 5 21 103951 Philippines 91 78 9 20 0 (.) (.) 2 26 1,13652 Congo, People's Rep. 85 62 15 38 0 0 0 (.) 14 4253 Nicaragua 1 99. . . 0 0 . . 14254 Papua New Guinea . . 100 . . 0 . . 0 . . 0 2 1655 El Salvador 1 5 99 95 0 0 0 0 18 21756 Nigeria 91 88 9 12 0 0 0 (.) 34 162

57 Peru 53 42 47 56 0 2 0 (.) 5 20558 Morocco 49 73 49 20 2 2 (.) 5 28 34559 Mongolia (.) . . 46 54 . . 0 3360 Albania 33 . . 67 . . 0 . . 0 . . 4461 Dominican Rep. 93 . . 7 . . 0 . . 0 127

62 Colombia 57 43 43 56 0 1 0 (.) 16 43063 Guatemala O 0 6 . . 94 0 . . 0 . . 23064 Syrian Arab Rep. 11 33 33 . . 23 21 89

a. Figures in itaHcs are for 1963, not 1962. b. Figures n itahcs are for 1977, not 1978

157

Origin

Destination of manufactured exports (percentage of total) Value ofmanufactured

exports(millions

of dollars)

Industrialmarket

economiesDevelopingcountries

Nonmarketindustrial

economies

Capital-surplus

oil exporters1962a 1978 1962a 1978 1962a 1978 1962a 1978 1962a 1978b

65 Ivory Coast 58 33 42 67 0 0 0 0 2 15566 Ecuador 46 21 54 79 0 0 0 0 2 2767 Paraguay 83 46 17 54 0 0 0 0 4 2968 Tunisia 59 77 33 15 0 1 8 7 10 42969 Korea, Dem. Rep. . . 5 41 . . 45 . . 9 . . 24270 Jordan . . 15 26 . . 0 . . 59 1 13471 Lebanon 9 . . 32 . . (.) . . 59 8 40272 Jamaica 72 80 28 18 0 2 0 0 20 47573 Turkey 73 70 10 15 1] 4 (.) 11 4 50174 Malaysia 11 55 89 44 0 (.) (.) 1 58 1,71475 Panama 24 17 76 83 0 0 0 0 1 3076 Cuba . . 39 . 49 . 12 . . 0 . . 3977 Korea, Rep. of 83 74 17 17 0 0 (.) 9 10 11,22078 Algeria . . 68 . . 22 . . 6 . . 4 . . 3579 Mexico 71 69 29 31 0 (.) 0 (.) 122 1,62080 Chile 44 38 56 62 0 0 0 (.) 20 11881 South Africa . . 67 . . 29 . . 0 . 4 318 2,57682 Brazil 54 50 44 47 2 1 0 2 39 4,33583 Costa Rica 27 73 . . 0 0 . . 26384 Romania 36 52 . . 11 . . 1 . . 5,71285 Uruguay . . 65 . . 34 . . 1 .

. (.) . . 29086 Iran 64 82 28 7 1 6 7 5 33 59787 Portugal 53 80 46 18 (.) 2 1 (.) 205 1,15788 Argentina 61 40 36 56 3 4 (.) (.) 39 1,67489 Yugoslavia 31 28 40 19 28 46 1 7 344 4,05490 Venezuela 93 55 7 45 0 0 0 0 158 14491 Trinidad and Tobago 34 64 66 36 0 0 0 0 13 14792 Hong Kong 62 71 37 26 0 (.) 1 3 642 10,69393 Singapore 5 48 95 48 0 (.) (.) 4 328 4,67994 Greece 52 61 41 18 4 3 3 18 27 1,54395 Israel 66 61 32 39 2 0 0 0 184 3,19596 Spain 57 59 41 34 1 2 1 5 205 9,620

Industrial marketeconomIes 62w 64w 33w 28w 3w 3w 2w 5w

97 Ireland 76 90 24 8 0 1 (.) 1 134 3,09398 Italy 64 65 29 24 5 4 2 7 3,490 47,49399 New Zealand 90 67 10 32 0 0 0 1 23 850

100 United Kingdom 57 63 38 28 3 2 2 7 8,947 57,872101 Finland 55 63 13 11 31 24 1 2 608 6,413102 Austria 65 66 17 16 16 16 1 2 931 10,238103 Japan 44 45 50 45 4 3 2 7 4,340 93,954104 Australia 61 29 39 70 (.) (.) (.) 1 263 4,198105 Canada 89 89 11 9 (.) 1 (.) 1 1,959 23,922106 France 58 63 38 29 4 4 (.) 4 5,317 58,238107 Netherlands 76 78 20 16 2 2 2 4 2,443 27,434108 United States 47 55 51 39 (.) 1 2 5 13,957 99,083109 Norway 79 74 19 21 2 4 (.) 1 442 5,346110 Belgium 82 82 15 13 2 2 1 3 3,257 35,498111 Germany, Fed. Rep. 73 69 23 22 3 5 1 4 11,623 125,246112 Denmark 75 77 17 17 7 3 1 3 627 6,417113 Sweden 76 75 19 18 5 4 (.) 3 1,958 17,590114 Switzerland 72 66 25 26 2 4 1 4 2,005 21,653

Capital-surplusoil exporters 20w 72w 1w 7w

115 Iraq (.) 18 21 82 (.) 0 79 0 5 53116 Saudi Arabia . . 16 . . 73 . . 1 . . 10 . . 237117 Libya 68 46 32 54 - 0 (.) 0 0 (.) 40118 Kuwait . . . . . 0 959

Nonmarket industrialeconomies 13u' 36w 49w 2w

119 Bulgaria 5 35 0 57 . . 3 . . 4,926120 Poland . 19 38 . . 42 . . 1 9,836121 Hungary 20 42 . . 34 . . 4 . . 4,329122 USSR 25,456123 Czechoslovakia 13 17 . . 68 . . 2 . . 10,296124 German Dem, Rep. 9 49 . . 41 . . 1 . . 11,412

Table 13. Balance of Payments and Debt Service Ratios

158

Current accountbalance before

interest paymentson external public

debt(millions of dollars)

Interestpayments on

external publicdebt

(millions of dollars)

Debt service as percentage of:

GNP

Exports ofgoods and

services

1970 1979a 1970 1979 1970 1979a 1970 1979a

Low-income countries 1.1 w 1.8w 12.6w 10.8wChina and IndiaOther low-income 1.4w 2:8w 9.1 w 10.8w

1 Kampuchea, Dem. . . . . . . . . . 0

2LaoPDR .. .. .. ..3 Bhutan . . . . . . . . .

4 Bangladesh -60 -1,269 . . 41 . . 0.9 . . 8.45 Chad 2 -72 (.) 4 1.0 3.3 3.9 14.46 Ethiopia -26 -79 6 13 1.2 0.7 11.4 4.97 Nepal . . -7 (.) 2 0.3 0.2 . . 1.48 Somalia -5 -205 (.) 1 0.3 0.2 2.1 1.19 Mali -2 -64 (.) 3 0.2 0.7 1.2 8.5

10 Burma -61 -328 3 31 0.9 1.8 15.8 22.011 Afghanistan . . 9 4 2,5 1.4 S

12 Viet Nam .. .. .. .. ..13 Burundi 2 -38 (.) 1 0.3 0.4 2.3 3.114 Upper Volta 9 -68 (.) 4 0.6 0.8 4.0 3.815 India -205 1,395 189 375 0.9 0.8 20.9 9.516 Malawi -32 -185 3 16 1.8 2.1 7.0 9.417 Rwanda 6 44 (.) 1 0.2 0.1 1.4 0.618 Sri Lanka -47 -203 12 28 2.0 2.3 10.3 6.519 Benin -1 -87 (.) 3 0.7 1.4 2.2 5.120 Mozambique . . . . . . . . 0 0

21 Sierra Leone -14 -109 2 12 2.9 8.6 10.1 22.222 China .. .. .. .. ..23 Haiti 2 -57 (.) 3 1.0 0.7 5.8 2.924 Pakistan -591 -984 76 213 1.9 2.3 23.6 12.025 Tanzania -29 -457 6 23 1.2 0.9 8.2 7.426 Zaire -55 -463 9 95 2.0 2.3 4.4 9.127 Niger 1 -96 1 7 0.6 0.8 3.8 3.628 Guinea . . . . 4 24 2.4 5.7 26.7 22.229 Central African Rep. -11 -9 (.) (.) 1.1 (.) 3.3 0.130 Madagascar 12 -425 2 8 0.8 0.7 3.5 3.931 Uganda 24 32 4 5 0.6 0.3 3.4 7.432 Mauritania -5 -70 (.) 16 2.0 13.6 3.2 32.433 Lesotho . . -22 (.) 1 0.5 0.3 . . 0.634 Togo 4 -219 1 16 0.9 6.9 3.0 24.435 Indonesia -286 1,711 24 772 0.9 4.5 6.9 13.436 Sudan -29 -151 13 86 1.3 4.5 10.7 33.0

Middle-income countries 1,5w 3.2 w 9.0w 14.2wOil exporters 2.0 w 5.3 w 11.2w 20.1wOil importers 1.3w 2.4 w 8.1 w 11.5 aj

37 Kenya -38 -419 11 60 1.7 1.8 7.9 7.538 Ghana -56 282 12 26 1.1 0.5 5.2 4.239 Yemen Arab Rep. . . -118 . . 6 0.2 1.2 . . 1.840 Senegal -14 -394 2 43 0.8 5.0 2.7 13.741 Angola . . . . , . .

42 Zimbabwe -13 -61 . . . . . . . . .

43 Egypt -116 -1,316 38 237 4.1 5.5 28.7 15.844 Yemen, PDR -4 -31 . . 2 . . 1.3 2.845 Liberia . . -91 6 22 5.5 8.1 . . 13.846 Zambia 131 264 23 93 3.2 9.7 5.8 19.747 Honduras -61 -154 3 45 0.8 5.3 2.8 12.748 Bolivia -16 -350 6 116 2.2 5.4 10.9 29.649 Cameroon -26 -290 4 65 0.8 2.5 3.2 9.550 Thaland -234 -1,945 16 146 0.6 1.0 3.3 4.251 Philippines -23 -1,266 25 298 1.4 2.7 7.5 12.652 Congo, People's Rep. . . -144 3- 38 3.4 10.1 . . 7.353 Nicaragua -32 202 7 41 3.2 3.2 11.1 8.154 Papua New Guinea . . 87 1 26 0.1 2.3 . . 4.355 El Salvador 12 1,128 4 22 0.9 1.0 3.6 3.256 Nigeria -348 1,429 20 205 0.7 0.4 4.2 1.557 Peru 284 1,055 44 437 2.1 6.6 11.6 22.358 Morocco -101 -1,110 23 411 1.5 5.2 7.7 21.859 Mongolia60 Albania61 Dominican Rep. -287 4 0.e H 13.962 Colombia -249 759 44 231 1.7 2.4 11.6 12.563 Guatemala -2 -187 6 19 1.4 0.5 7.4 2.264 Syrian Arab Rep. -63 173 6 86 2.1 3.8 11.0 16.5

Current accountbalance before Interest Debt service as percentage of:

interest payments payments onon external public external public Exports of

debt debt goods and(millions of dollars) (millions of dollars) GNP services

2.2

Nonmarket industrialeconomiesb

119 Bulgaria120 Poland121 Hungary122 USSR123 Czechoslovakia124 German Dem. Rep.

a. Figures in italics are for 1978, not 1979. b. See the technical notes.

159

1970 1979a 1970 1979 1970 1979

65 Ivory Coast -26 -560 11 225 2.8 6.066 Ecuador -106 -424 7 161 1.5 7.467 Paraguay -13 -239 4 22 1.8 1.568 Tunisia -35 -134 18 163 4.5 4.869 Korea, Dem. Rep. . . . S ' . . . .

70 Jordan -15 31 2 39 0,7 3.571 Lebanon . . . . 1 4 0.2 . .

72 Jamaica -145 -47 8 95 1.1 8.773 Turkey -28 -752 42 253 1.3 1.174 Malaysia 29 1,564 21 189 1.7 2.9

75 Panama -57 -113 7 202 3.0 15.776Cuba .. .. .. .. ..77 Korea, Rep. of -553 -3216 70 937 3.1 4.478 Algeria -116 -568 10 1,162 0.8 8.679 Mexico -844 -1,672 216 2,874 2.1 8.880 Chile -13 -522 78 354 3.1 6.281 South Africa -1,156 4,447 59 890 1.2 4.182 Brazil -704 -7,600 133 2,865 0.9 3.183 Costa Rica -67 -498 7 80 2.9 6.684 Romania . . . . . .

85 Uruguay -29 -248 16 69 2.6 1.886 Iran -422 3,084 85 394 3.0 . .

87 Portugal 98 373 28 235 1.3 1.988 Argentina -37 158 121 584 1.9 1.589 Yugoslavia -276 -3,442 72 219 1.7 0.8

90 Venezuela -64 366 40 655 0.7 3.291 Trinidad and Tobago -74 327 6 39 1.9 1.292 Hong Kong . . -810 . . 11 (.) 0.193 Singapore -566 -1,091 6 86 0.6 2.594 Greece -364 -1,591 41 301 1.0 1.9

95 Israel -600 -1093 13 379 0.7 4.796 Spain 151 2,309 72 853 0.5 0.9

Industrial marketeconomlesb

97 Ireland -189 -1,28398 Italy 902 5,11099 New Zealand -29 -545

100 United Kingdom 1,881 -3,814101 Finland -239 -284102 Austria -23 -1,782103 Japan 1,980 -8,695104 Australia -832 -1,932105 Canada 1,078 -4,358106 France 72 1,535

107 Netherlands -520 -2,348108 United States 2,357 -685109 Norway -242 -1156110 Belgium 715 -3,810111 Germany, Fed. Rep. 850 -6,357112 Denmark -544 -2,983113 Sweden -266 -2,619114 Switzerland 70 2,434

Capital-surplusoil exporters

115 Iraq 110 3,250 9 37 0.9 1.0116 Saudi Arabia 71 10857117 Libya 645 7364 . . . .

118 Kuwait 14,219 . . . . . .

1970 1979a

6.8 15.29.1 29.6

11.8 8.518.5 11.8

.

3.6 5.3.

2.5 15.916.3 12.93.6 4.77.7 18.8

19.4 13.53.2 25.6

24.1 64.1

18.9 26.25.1 10.6

12.4 3469.9 23.1.

25.2 9.912.24.4 5.3

21.5 15.58.3 4.22.9 9.44.4 2.3

.

0.6 1.37.1 8.42.6 10.33.6 5.6

Table 14. Flow of External Capital

160

Public and publicly guaranteed medium- and long-term loans(millions of dollars)

Net directprivate

investment(millions

of dollars)Gross inflowRepaymentof principal Net inflow

1970 1979 1970 1979 1970 1979 1970 1979a

Low-income countriesChina and IndiaOther low-income

1 Kampuchea, Dem. .

2LaoPDR3 Bhutan 0

4 Bangladesh 543 . 43 5005Chad 6 27 2 15 4 12 31

6 Ethiopia 27 122 15 13 12 109 47 Nepal 1 41 2 2 1 398 Somalia 4 87 (.) 1 4 86 5 (.)9 Mali 21 79 (.) 6 21 73 5

10 Burma 16 409 18 60 2 349 .

11 Afghanistan 31 41 15 5 16 36 . .

12 Viet Nam . . . . . S

13 Burundi 1 38 (.) 2 1 3614 Upper Volta 2 68 2 4 (.) 64 1

15 India 890 1:164 307 588 583 576 6

16 Malawi 38 138 3 11 35 127 9 1317 Rwanda (.) 42 (.) 1 (.) 41 (.) 1318 Sri Lanka 61 187 27 48 34 139 (.) 4719 Benin 2 51 1 10 1 41 720 Mozambique . . .

21 Sierra Leone 8 96 10 42 2 54 8 11

22 China .. .. .. .. .. .

23 Haiti 4 42 4 5 (.) 37 3 1524 Pakistan 484 882 114 272 370 610 31 61

25 Tanzania 50 215 10 17 40 198

26 Zaire 31 216 28 73 3 143 42 3027 Niger 12 85 1 7 11 78 1 1228 Guinea 90 131 10 59 80 72 .

29 Central African Rep. 2 12 2 (.) (.) 12 1 2230 Madagascar 10 81 5 10 5 71 10 731 Uganda 26 35 4 22 22 13 4 232 Mauritania 4 79 3 51 1 28 1 8433 Lesotho (.) 19 (.) 1 (.) 1834 Togo 5 290 2 52 3 238 1

35 Indonesia 441 1,945 59 1,335 382 610 83 22636 Sudan 54 384 22 191 32 193

Middle-income countriesOil exportersOil importers

37 Kenya 30 370 15 44 15 326 14 6538 Ghana 40 143 12 23 28 120 8 139 Yemen Arab Rep. . . 141 . . 25 . . 116 . . 540 Senegal 15 219 5 79 10 140 5 4541 Angola . . . . . .

42 Zimbabwe . . . . . . . . . . . . .

43 Egypt 302 2,293 247 804 55 1,489 . . 1,21144 Yemen, PDR 1 102 . . 10 1 9245 Liberia 7 173 12 54 5 119 .

46 Zambia 351 369 32 208 319 161 .

47 Honduras 29 211 3 63 26 148 8 1048 Bolivia 54 330 17 142 37 188 76 1849 Cameroon 28 506 4 62 24 444 16 5450 Thailand 55 1,124 23 132 32 992 43 5251 Philippines 132 1,677 73 506 59 1,171 29 7552 Congo, People's Rep. 35 101 6 68 29 33 . 0 453 Nicaragua 44 112 17 14 2] 98 15 354 Papua New Guinea 25 53 (.) 20 25 33 . . 41

55 El Salvador 8 77 6 13 2 64 4 2356 Nigeria 62 1,583 36 60 26 1,523 205 30457 Peru 148 1,113 101 482 47 631 70 7058 Morocco 163 1,434 36 388 127 1,046 20 3959 Mongolia . 0

60 Albania . . 0 . . . . . . . . .

61 Dominican Rep. 36 228 7 105 29 123 72 1362 Colombia 235 1,036 75 433 160 603 39 12463 Guatemala 3] 129 20 14 17 115 29 11764 Syrian Arab Rep. 59 571 30 264 29 307 52

Nonmarket industrialeconomiesb

119 Bulgaria120 Poland121 Hungary122 USSR123 CzechoslovakFa124 German Dam. Rep.

a. Figures in italics are for 1978, not 1979. b. See the technical notes.

161

Public and publicly guaranteed medium- and long-term loans(millions of dollars)

Net directprivate

investment(millions

of dollars)Gross inflowRepaymentof principal Net inflow

1970 1979a 1970 1979 1970 j979a 1970 1979a

65 Ivory Coast 77 967 27 307 50 660 31 3666 Ecuador 42 1148 16 553 26 595 89 5067 Paraguay 15 82 7 29 8 53 4 5368 Tunisia 89 765 45 174 44 591 16 4969 Korea, Dem. Rep. . . . . S .

70 Jordan 14 249 3 56 11 193 2671 Lebanon 12 51 2 6 10 45 .

72 Jamaica 15 227 6 113 9 114 161 -2673 Turkey 328 4,150 128 387 200 3,763 58 12974 Malaysia 43 793 45 386 -2 407 94 87375 Panama 67 407 24 192 43 215 33 4076 Cuba .. .. .. .. ..77 Korea, Rep. of 440 4648 198 1,699 242 2,949 66 1778 Algeria 292 4,172 33 1,525 259 2,647 45 7279 Mexico 772 10,667 476 7,484 296 3183 323 66880 Chile 397 1,315 163 904 234 411 -79 23381 South Africa 519 2,129 146 1,266 373 863 145 -35982 Brazil 882 8,760 254 3,387 628 5,373 407 2,22083 Costa Rica 30 501 21 175 9 326 26 4684 Romania . . . . . . . . . . .

85 Uruguay 3] 173 47 54 -10 119 . . 21686 Iran 940 1,752 235 663 705 1,089 2587 Portugal 21 1,014 62 175 -41 839 50 5988 Argentina 487 3,018 342 902 145 2,116 11 23489 Yugoslavia 180 526 168 344 12 182 .

90 Venezuela 224 3,836 42 890 182 2.946 -23 8191 Trinidad and Tobago 8 20 10 10 -2 10 83 13092 Hong Kong (.) 180 (.) 11 (.) 169 .

93 Singapore 58 353 6 133 52 220 93 81594 Greece 164 798 61 440 103 358 50 1995 Israel 410 1,199 25 477 385 722 40 996 Spain 268 1,788 122 850 146 938 179 623

Industrial marketeconomiesb

97 Ireland 32 38198 Italy 496 -18299 New Zealand 22 26

100 United Kingdom -440 -3,091101 Finland -34 -98102 Austria 84 107103 Japan -261 -2,662104 Australia 787 1,092105 Canada 566 -373106 France 248 508107 Netherlands -14 -1,092108 United States -6,130 -14,638109 Norway 32 399110 Belgium 162 -278111 Germany, Fed. Rep. -290 -3,527112 Denmark 75 103113 Sweden -105 -526114 Switzerland

Capital-surplusoil exporters

115 Iraq 63 308 18 195 45 113 24116 Saudi Arabia 20 -1,173117 Libya . . . . . . . . 139 -319118 Kuwait . . . S S . . . . . . 145

Table 15. External Public Debt and International Reserves

162

External public debtoutstanding and disbursed Gross international reserves

Millions of dollarsAs percentage

of GNP Millions of dollarsIn monthsof importcoverage

1979a1970 1979 1970 1979a 1970 1979a

Low-income countries 22.2 w 29.5 w 4.2 wChina and IndiaOther low-income 17.9w 21.3w 2.8 w

1 Kampuchea, Oem.2 Lao FOR3 Bhutan4 Bangladesh . 2,842 . . 29.6 . . 4125 Chad 32 172 11.8 30.8 2 17 0.56 Ethiopia 169 620 9.5 15.7 72 321 5.47 Nepal 3 125 0.3 6.9 95 241 8.98 Somalia 77 546 24.4 40.4 21 54 1.49 Mali 238 545 88.1 44.2 1 17 0.5

10 Burma 101 1141 4.7 23.2 98 331 4,811 Afghanistan 454 1,143 48.2 29.1 50 93312 Viet Nam . . . . . . . . . . .

13 Burundi 7 103 3.1 12.9 15 95 5.714 Upper Volta 21 256 6.4 25.4 36 67 2.015 India 7,935 15641 14.8 12,3 1,023 11,816 10.2

16 Malawi 121 423 38.7 33.1 29 75 1.717 Rwanda 2 124 0.9 13.0 8 153 5.818 Sri Lanka 317 1086 16.1 32.4 43 547 4.119 Benin 41 186 16.0 19.2 16 2020 Mozambique . . . . . . .

21 Sierra Leone 59 289 14.3 33.4 39 47 1.322 China .. .. .. ..23 Haiti 40 209 10.3 18.0 4 66 2.324 Pakistan 3059 7,998 30.5 38.5 194 1,120 2.525 Tanzania 248 1,153 19.4 25.3 65 69 0.926 Zaire 311 3780 17.1 51.8 189 335 1,427 Niger 32 234 8.7 14.4 19 13728 Guinea 314 990 51.7 68.6 13 35 1.029 Central African Rep. 19 150 11.2 24.0 1 49 2.730 Madagascar 93 348 10.8 12.6 37 5 0.131 Uganda 128 245 9.8 2.6 57 .

32 Mauritania 27 590 16.8 120.9 3 118 3.633 Lesotho 8 52 9.2 11.1 . . .

34 Togo 40 851 16.0 85.9 35 71 2.035 Indonesia 2443 13,326 27.1 28.3 160 4,205 3.436 Sudan 309 2,114 11.6 34.5 22 67 0.7

Middle-income countries 10.4w 17.4w 5.2 wOil exporters 10.9w 24.5w 4.9 wOil importers 10.2w 14.8w 5.4 w

37 Kenya 313 1,427 20.3 24.3 220 669 3.738 Ghana 489 977 22.6 9.6 58 404 4.839 Yemen Arab Rep. . . 466 . . 11.9 . . 1,433 10.340 Senegal 98 786 11.6 32.3 22 3541 Angola42 Zmbabwe . . . . . . . . . . .

43 Egypt 1,644 11,409 23.8 60.4 165 1,794 2.644 Yemen, PDR 1 441 . . 49.0 60 230 5,745 Liberia 158 454 49.6 48.4 . . 5546 Zambia 596 1,559 34.5 505 515 193 1.847 Honduras 90 746 12.8 36.3 20 215 2.448 Bolivia 477 1,835 46.4 38.7 46 526 4.549 Cameroon 131 1,634 12.1 32.9 81 141 0.550 Thailand 322 2,699 4.9 9.9 911 3,102 4.251 Philippines 633 5,180 9.2 17.3 255 3,120 4.652 Congo, People's Rep. 143 799 54.5 75.8 9 47 0.253 Nicaragua 155 1101 20.6 62.9 50 58 0.954, Fapua New Guinea 36 393 6.2 19.5 . . 555 5.855 El Salvador 88 397 8.6 11.5 63 401 3.556 Ngeria 478 3,744 6.4 5.0 223 5,870 4.557 Peru 856 5,931 12.7 42.9 338 2,114 7.058 Morocco 711 6,227 18.6 40.3 141 916 2.159 Mongolia . . .

60 Albania . . . . . . . . . , . . .

61 Dominican Rep. 212 828 14.6 16.2 32 295 2.262 Colombia 1,249 3,426 18.1 12.6 207 5,032 12.763 Guatemala 106 482 5.7 7.0 80 963 6.164 Syrian Arab Rep. 232 2283 13.6 24.9 57 1,006 3.2

Nonmarket industrialeconomiesb

119 Bulgaria120 Poland121 Hungary122 USSR123 Czechoslovakia124 German Dem, Rep.

a. Figures in italics are for 1978, not 1979. b. See the technical notes.

163

External public debtoutstanding and disbursed Gross international reserves

Millions of dollarsAs percentage

of GNP Millions of dollarsIn monthsof importcoverage

1970 1979a 1970 1979a 1970 1979a 1979a

65 Ivory Coast 256 3,647 18.3 40.3 119 168 1.666 Ecuador 213 2,207 13.3 22.8 85 932 3,767 Paraguay 112 491 19.1 14.4 18 629 8.868 Tunisia 545 3,057 38.5 43.5 60 667 2,569 Korea, Dem. Rep. . . . . . . . .

70 Jordan 118 1,047 . . 38.1 258 1,586 7,771 Lebanon 64 93 4.2 . . 405 6,25372 Jamaica 154 1,182 11.5 49.4 139 68 0.673 Turkey 1,854 10,972 14.4 19.0 440 2697 5.374 Malaysia 390 3,004 10.0 15.4 667 5,006 5.675 Panama 194 2,106 19.0 83.9 16 119 0.676 Cuba .. .. .. ..77 Korea, Rep. of 1,797 14,694 20.9 24.5 610 3,112 1.578 Algeria 937 15,330 18.5 49.1 352 5505 5,479 Mexico 3,206 28,805 9.7 24.5 756 3406 1.780 Chile 2,066 4,767 26.4 23.6 392 2,716 5,781 South Africa 1,089 7,399 6.3 13.9 1,057 5569 3,982 Brazil 3227 35092 7.2 17.7 1,190 9,837 4.183 Costa Rica 134 1,277 13.8 33.0 16 165 1.284 Romania . . . . . . . . . . 233885 Uruguay 267 914 11.0 13.3 186 2331 17.886 Iran 2,193 7,372 20.8 . . 217 17,20587 Portugal 471 3,708 7.0 16.8 1,565 12,262 19.288 Argentina 1,878 8,716 7.6 8.6 682 11,625 13.489 Yugoslavia 1,198 3,700 8.5 5.2 144 2,13790 Venezuela 728 9,797 6.6 20.0 1,047 13,152 9,791 Trinidad and Tobago 101 422 12.5 10.5 43 2,164 14.692 Hong Kong 2 405 0.1 2.2 . . .

93 Singapore 152 1,323 7.9 14.8 1,012 5,819 4.194 Greece 905 3,531 8.9 8.9 318 2,902 3.295 Israel 2,274 9,954 41.3 55.1 451 3,694 3.796 Spain 1,209 8,656 3.3 4.4 1851 20,705 8.2

Industrial marketeconomiesb 5.0 w

97 Ireland 698 2,408 2.798 Italy 5547 52,353 7.099 New Zealand 258 476 1.0

100 United Kingdom 2,918 29,087 2.7101 Finland 456 2,047 1.8102 Austria 1,806 15,395 6.8103 Japan 4,876 31,927 2.9104 Australia 1,709 5484 2.8105 Canada 4,732 14220 2.4106 France 5,199 59523 5.5107 Netherlands 3,362 30,104 4.4108 United States 15,237 143,259 6.1109 Norway 813 4,820 2.6110 Belgium 2,947 22,930 3,7111 Germany, Fed. Rep. 13,879 101,316 5.9112 Denmark 488 4,075 2.0113 Sweden 775 6,412 2.2114 Switzerland 5,317 59,074 19.9

Capital-surplusoil exporters 6.9 zt'

115 Iraq 274 878 8.8 3.9 472116 Saudi Arabia 670 21,614117 Libya , . 1,596 7,604 11.0118 Kuwait 209 4,171 6.5

Table 16. Official Development Assistancefrom OECD and OPEC Members

164

Amount

1960 1965 1970 1975 1976 1977 1978 1979 1980a

OECD Millions of US dollars

98 Italy 77 60 147 182 226 186 375 279 60099 New Zealand . . 14 66 53 52 55 62 63

100 United Kingdom 407 472 500 910 885 1120 1,456 2,067 1,766101 Finland 2 7 48 51 49 55 86 106102 Austria . 10 11 79 48 108 166 127 174

103 Japan 105 244 458 1,148 1,105 1,424 2,215 2,638 3,300104 Australia 59 119 212 552 377 400 588 620 653105 Canada 75 96 337 848 763 945 1,060 1,042 1,035106 France 823 752 971 2,093 2,146 2,267 2,705 3,358 4,041107 Netherlands 35 70 196 608 728 908 1,074 1,404 1,577

108 United States 2,702 4,023 3,153 4,161 4360 4,682 5,664 4,567 7,091109 Norway 5 11 37 184 218 295 355 428 472110 Belgium 101 102 120 378 340 371 536 631 575111 Germany, Fed. Rep. 223 456 599 1689 1,592 1,717 2,347 3,350 3,512112 Denmark 5 13 59 205 214 258 388 448 464

113 Sweden 7 38 117 566 608 779 783 956 928114 Switzerland 4 12 30 104 112 119 173 205 246

Total 4,628 6,478 6,967 13,820 13,829 15,680 19,994 22,267 26,603

OECD As percentage of donor GNP

98 Italy .22 .10 .16 .11 .13 .10 .14 .09 .1599 New Zealand . . . . .23 .52 .41 .39 .34 .30 .27

100 United Kingdom .56 .47 .41 .39 .40 .46 .48 .52 34101 Finland .02 .06 .18 .17 .16 .17 .21 .22102 Austria . . .11 .07 .21 .12 .22 .29 .19 .22

103 Japan .24 .27 .23 .23 .20 .21 .23 .26 .32104 Australia .37 .53 .59 .59 .41 .42 .54 .52 47105 Canada .19 .19 .41 .52 .39 .48 .52 .47 .42106 France 1,35 .76 .66 .62 .62 .60 .57 .59 .62107 Netherlands .31 .36 .61 .75 .83 .86 .82 .93 .99

108 United States .53 .58 .32 .27 .26 .25 .27 .19 .27109 Norway .11 .16 .32 .66 .70 .83 .90 .93 .82110 Belgium .88 .60 .46 .59 .51 .46 .55 .56 .48111 Germany, Fed. Rep. .31 .40 .32 .40 .36 .33 .37 .44 .43112 Denmark .09 .13 .38 .58 .56 .60 .75 .75 .72

113 Sweden .05 .19 .38 .82 .82 .99 .90 .94 .76114 Switzerland .04 .09 .15 .19 .19 .19 .20 .21 .24

OECD National currencies

98 Italy (billions of lire) 48 38 92 119 188 148 318 233 50599 New Zealand (millions of dollars) . . . . 13 55 53 54 53 61 64

100 United Kingdom (millions of pounds) 145 168 208 411 490 642 759 974 762101 Finland (millions of markkaa) 6 29 177 195 196 226 335 392102 Austria (millions of schillings) 260 286 1376 861 1,785 2,411 1,698 2,214

103 Japan (billions of yen) 38 88 165 341 328 383 466 578 767104 Australia (millions of dollars) 53 106 189 422 308 361 514 555 575105 Canada (millions of dollars) 73 104 353 863 752 1,005 1,209 1,221 1,203106 France (millions of francs) 4,063 3,713 5,393 8,975 10,255 11,762 12,207 14,287 16,797107 Netherlands (millions of gullders) 133 253 710 1538 1,925 2,229 2,323 2,817 3,086108 United States (millions of dollars) 2,702 4023 3,153 4,161 4,360 4,682 5,664 4,567 7,091109 Norway (millions of kroner) 36 78 264 962 1,190 1,570 1,861 2,167 2,313110 Belgium (millions of francs) 5,050 5,100 6,000 13,903 13,129 13,234 16,836 18,500 16,511111 Germany, Fed. Rep. (millions

of deutsche marks) 937 1,824 2,192 4,156 4,009 3,987 4,715 6,140 6,276112 Denmark (millions of kroner) 35 90 443 1,178 1,294 1,549 2,140 2,357 2,575113 Sweden (millions of kronor) 36 196 605 2,350 2,647 3,504 3,538 4,098 3,897114 Switzerland (millions of francs) 17 52 131 260 281 284 309 341 408

OECD Summary

ODA (billions of US dollars,nominal prices) 4.6 6.5 7.0 13.8 13.8 15.7 20.0 22.3 26.6

ODA as percentage of GNP .51 .49 .34 .36 .33 .33 .35 .34 .37ODA (billions of US dollars,

constant 1978 prices) 13.1 16.7 14.9 17.9 17.3 18.0 20.0 20.3 22.2GNP (trillions of US dollars,

nominal prices) .9 1.3 2.0 3.8 4.2 4.7 5.6 6.5 7.1ODAdefiatorc .35 .39 .47 .77 .80 .87 1.00 1.10 1.20

165

Amount

1981 1982a 1983a 1984a 1985a 1975 1976 1977 1978 1979 1980d

OPEC Millions of US dollars

821 1020 1248 1515 1749 54 Nigeria 14 83 64 38 31 4271 76 81 86 91 78 Algeria 41 54 47 44 272 83

2777 2689 2,971 3,199 3,440 86 Iran 593 752 221 278 21 29150 194 245 321 402 90 Venezuela 31 103 52 109 82 130208 252 292 336 385 115 Iraq 218 232 61 172 868 854

3,595 4,107 4,807 5,437 6323 116 Saudi Arabia 1,997 2,407 2,409 1,470 2,298 3,033798 897 1,002 1,116 1,240 117 Libya 261 94 115 169 108 281

1213 1,400 1,564 1,741 1,934 118 Kuwait 976 616 1,517 1,268 1,053 11864,490 4,968 5,500 6,157 6,861 United Arab1,808 2,060 2,280 2,463 2,730 Emirates 1,046 1,059 1,175 684 1,113d 1,062

7,295 7,885 8,437 8,588 9,070 Qatar 339 195 197 106 277 299

561 669 777 889 993 Total OAPECe 4,878 4,65] 5,521 3,913 5,989 6,798729

3,726888

416310104,595

1,1425,043

1,2645,504

Total OPEC 5,516 5,595 5,858 4,338 6,123 6999

548 598 667 731 810OPEC As percentage of donor GNP

1,214 1,431 1,599 1,779 1,970260 357 422 480 544 54 Nigeria .04 .19 .13 .06 .04 .05

30,264 33,654 37,497 41,023 45,310 78 Algeria .28 .33 .24 .18 .87 .2186 Iran 1.12 1.16 .29 .37 .03 .0390 Venezuela .11 .33 .14 .27 .17 .23

115 Iraq 1.64 1.44 .33 .76 2.60 2.19.18 .20 .22 .24 .25 116 Saudi Arabia 5.62 5.13 4.09 2.27 3.01 2.60.26 .25 .24 .23 .22 117 Libya 2.30 .63 .65 .99 .46 .92.48 .42 .42 .41 .40 118 Kuwait 8.11 4.52 10.02 7.36 4.08 3.87.26 .30 .34 .40 .45 United Arab.25 .27 .28 .29 .30 Emirates 11.68 9.21 8.05 4.82 6.1] 3.96.31 .31 .32 .32 .33 Qatar 15.62 7.95 7.90 3.56 5.89 4.50

' ' '

' Total OAPECe 4.99 3.83 3.75 2.39 2.80 2.34.62 .62 :62 :63 .64 Total OPEC 2.59 2.14 1.91 1.29 1.49 1.36

1.02 1.04 1.03 1.00 1.00

.26 .25 .24 .22 .21

.90 .95 .98 1.00 1.00

.55 .60 .61 .62 .62

.43 .44 .45 .45 ..4574 .73 .73 .72 .72

.90 .95 .95 .95 .95

.25 .31 .33 .34 .35

Net bilateral flow to low-income countries

1960 1965 1970 1975 1976 1977 1978 1979696 864 1,058 1,284 148273 78 83 88 93

1,172 1,135 1,254 1.350 1,452 OECD As percentage of donor GNP550

2,638711

3,196898

3,7031,1764,261

1,4734.883 98 Italy .03 .04 .06 .01 .01 .02 .01 .01

99 New Zealand .......14 .06 .04 .03 .02100 United Kingdom .22 .23 .15 .11 .14 .11 .15 .16807 922 1,079 1,221 1.420

690 775 866 964 1,072 101 Finland 06 .07 .06 .04 .061,406 1,623 1.813 2.018 2,242 102 Austria . . .06 .05 .02 .02 .01 .01 .02

18,6343,525

20,6184,016

228264,445

255534,802

28.4755,322 103 Japan .12 .13 .11 .08 .08 .06 .07 .11

104 Australia . . .08 .09 .10 .07 .07 .08 .097,295 7,885 8,437 8,588 9,070 105 Canada .11 .10 .22 .24 .14 .13 .17 .132,730 3,256 3,782 4.327 4,833 106 France .01 .12 .09 .10 .10 .07 .08 .08

20,875 25,428 28,921 32. 701 36,195 107 Netherlands .19 .08 .24 .24 .26 .33 .34 .30

66703,034

7.4533,311

8,2253.693

9,0274.047

9,8534,484

108 United States .22 .26 .14 .08 .05 .03 .04 .03109 Norway .02 .04 .12 .25 .22 .30 .39 .34110 Belgium .27 .56 .30 .31 .26 .24 .23 .28

5,069 5,975 6,676 7,428 8.226 111 Germany, Fed. Rep. .13 .14 .10 .12 .09 .07 .10 .10429 589 697 793 898 112 Denmark . . .02 .10 .20 .21 .24 .21 .26

113 Sweden .01 .07 .12 .41 .40 .44 .37 .40114 Switzerland . . .02 .05 .10 .07 .05 .08 .06

Total .18 .20 .13 .11 .09 .07 .09 .0930.3 33.7 37.5 41.0 453b

.38 .38 .38 .38 370

23.1 23.7 24.5 24.9 25.7 a. Estimated. b. These figures are based on exchange rates of Ocobe 98O. f theexchange rates of May 1981 had been usec, the figure for ODA fl '985 woud be $39.8

7.9 8.8 9.8 10.9 12.1 bii.ion. that for ODA as a oercentage of GNP .36 pecent c. See he techn Ca notes,1.31 1.42 1.53 1.65 1.76 d. Prov'sionaL e. Oganzation of Arab Petroleum Export.ng Countr es.

Table 17. Population Growth, Past and Projected,and Hypothetical Stationary Populationa

166

Average annualgrowth ofpopulation(percent)

Projectedpopulation(millions)

Hypotheticalsize of

stationarypopulation

Assu medyear of

reaching netreproduction

Yearof reachingstationary

1960-70 1970-79 1980 2000 (millions) rate of 1 population

Low-income countries 2.2w 2.1w 2,300 t 3,275 1China and India 2.1w 1.9w 1,6501 2,2141Other low-income 2.4w 2.6w 650 I 1,061

1 Kampuchea, Oem. 2.72 Lao PDR 2.2 1. 11 2035 21303 Bhutan 2.0 2.1 1 2 4 2035 21304 Bangladesh 2.4 3.0 92 148 338 2035 21055 Chad 1.8 2.0 4 7 19 2045 21406 Ethiopia 2.4 2.1 31 53 162 2045 21407 Nepal 2.0 2.2 14 21 44 2035 21308 Somalia 2.4 2.3 4 6 17 2040 21309 Mali 2.4 2.6 7 12 35 2040 2130

10 Burma 2.2 2.2 34 50 90 2020 211011 Afghanistan 2.3 2.6 16 25 59 2040 213512 Viet Nam 3.1 2.9 54 88 153 2015 207513 Burundi 1.6 2.0 4 7 17 2040 213514 Upper Volta 1.6 1.6 6 10 28 2040 213015 India 2.3 2,1 673 975 1,621 2020 211516 Malawi 2.8 2.8 6 11 36 2040 211017 Rwanda 2.8 2.8 5 9 29 2040 211018 Sri Lanka 2.4 1.7 15 21 31 2010 206519 Benin 2.6 2.9 4 6 19 2040 211020 Mozambique 2.2 2.5 10 20 51 2040 213021 Sierra Leone 2.2 2.5 3 6 17 2040 213022 China 1.9 1.9 977 1,239 1,564 2005 207023 Haiti 1.5 1.7 5 8 17 2030 209024 Pakistan 2.8 3.1 82 141 340 2035 210025 Tanzania 2.7 3.4 19 35 97 2035 210026 Zaire 2.0 2.7 28 49 139 2040 213027 Niger 3.3 2.8 5 10 29 2040 213028 Guinea 2.8 2.9 5 9 23 2040 213029 Central African Rep. 2.2 2.2 2 3 9 2040 213030 Madagascar 2.1 2.5 9 15 45 2040 211031 Uganda 3.7 3.0 13 24 67 2035 210032 Mauritania 2.5 2.7 2 3 9 2045 213533 Lesotbo 2.0 2.3 1 2 5 2035 210534 Togo 2.7 2.4 2 4 13 2040 211035 Indonesia 2.0 2.3 146 220 388 2020 211036 Sudan 2.2 2.6 18 31 86 2040 2105

Middle-income countries 2.5w 2,4w 1,008 1 1,569Oil exporters 2.7w 2.7w 3341 5651Oil importers 2.3w 2.2w 6741 10041

37 Kenya 3.2 3.4 16 34 109 2035 209538 Ghana 2.4 3.0 12 21 52 2035 210039 Yemen Arab Rep. 1.8 1.8 6 9 22 2040 213040 Senegal 2.4 2.6 6 10 30 2045 213541 Angola 1.5 2.3 7 12 35 2045 213542 Zimbabwe 3.9 3.3 7 15 42 2035 209543 Egypt 2.2 2.0 40 60 104 2020 208044 Yemen, PDR 1.9 2.3 2 3 8 2040 211045 Liberia 3.1 3.3 2 4 11 2035 209546 Zambia 2.8 3.0 6 11 31 2035 212547 Honduras 3.1 3.3 4 7 16 2030 209048 Bolivia 2.3 2.5 6 9 20 2035 209549 Cameroon 1.8 2.2 8 14 37 2040 213050 Thailand 2.9 2.4 46 68 103 2005 207051 Philippines 3.0 2.6 48 75 125 2015 207552 Congo, People's Rep. 2.1 2.5 2. 3 7 2040 213053 Nicaragua 2.9 3.3 3 5 11 2030 209054 Papua New Guinea 2.1 2.3 3 4 9 2035 2125'55 El Salvador 2.9 2.9 5 8 15 2020 208056 Nigeria 2.5 2.5 85 161 459 2035 210557 Peru 2.8 2.7 18 28 55 2025 208558 Morocco 2.5 2.9 20 36 81 2030 209059 Mongolia 2.9 2.9 2 3 5 2020 208060 Albania 2.8 2.5 3 4 6 2005 206061 Dominican Rep. 2.9 2.9 5 9 16 2015 2075

62 Colombia 3.0 2.3 27 40 61 2010 207063 Guatemala 2.8 2.9 7 12 23 2025 208564 Syrian Arab Rep. 3.2 3.6 9 16 33 2020 2080

a. For the assumptions used in the projections, see the technical notes. b. Excludes countries with populations of less than one million.

167

Averagegrowthpopulation(percent)

annualof Projected

population(millions)

Hypotheticalsize of

stationarypopulation

Assumedyear of

reaching netreproduction

Yearof reachingstationary

1960-70 1970-79 1980 2000 (millions) rate of 1 population

65 Ivory Coast 3.7 5.5 9 15 45 2040 211066 Ecuador 3.1 3.3 8 14 28 2025 208567 Paraguay 2.6 2.9 3 5 9 2020 208068 Tunisia 1.9 2.1 6 9 16 2020 207069 Korea, Dem. Rep. 2.8 2.5 18 28 47 2020 208570 Jordan 3.0 3.4 3 6 13 2025 208571 Lebanon 2.8 0.8 3 4 6 2010 207072 Jamaica 1.4 1.6 2 3 5 2005 206573 Turkey 2.5 2.5 45 69 114 2015 207574 Malaysia 2.9 2.2 13 20 30 2010 212075 Panama 2.9 2.3 2 3 4 2010 207076 Cuba 2.0 1.4 10 13 15 2000 204577 Korea, Rep. of 2.4 1.9 38 53 72 2005 206578 Algeria 2.8 3.3 19 34 79 2030 209079 Mexico 3.2 2.9 67 109 188 2015 207580 Chile 2.1 1.7 11 15 19 2005 207081 South Africa 2.6 2.7 29 50 107 2025 209082 Brazil 2.9 2.2 119 177 281 2015 207583 Costa Rica 3.4 2.5 2 3 5 2005 206584 Romania 1.0 0.9 22 26 29 2000 207585 Uruguay 1.1 0.3 3 4 4 2010 207586 Iran 2.7 2.9 38 64 140 2030 209087 Portugal -0.2 1.4 10 11 14 2000 207088 Argentina 1.4 1.6 28 34 43 2010 207589 Yugoslavia 1.0 0.9 22 26 29 2005 206590 Venezuela 3,4 3.3 15 24 41 2015 207591 Trinidad and Tobago 2.0 1.3 1 2 2 2000 206592 Hong Kong 2.5 2.6 5 6 8 2000 203593 Singapore 2.4 1.4 2 3 4 2000 203594 Greece 0.5 0.6 9 10 11 2000 206595 Israel 3.4 2.7 4 5 7 2010 208096 Spain 1.1 1.0 37 43 50 2000 2065

Industrial marketeconomies 1.0w 0.7 w 675 t 744

97 Ireland 0.4 1.1 3 4 5 2000 206098 Italy 0.6 0.6 57 61 63 2000 203099 New Zealand 1.7 .1.5 3 4 5 2000 2070

100 United Kingdom 0.5 0.1 56 58 60 2000 2025101 Finland 0.4 0.5 5 5 5 2000 2020102 Austria 0.6 0.1 7 8 8 2000 2025103 Japan 1.0 1.1 117 130 133 2000 2015104 Australia 2.0 1.5 14 17 19 2000 2075105 Canada 1.8 1.1 24 28 31 2000 2030106 France 1.0 0.6 54 58 61 2000 2030107 Netherlands 1.3 0.8 14 16 16 2000 2025108 United States 1.3 1.0 22] 259 283 2000 2030109 Norway 0.8 0.5 4 4 5 2000 2030110 Belgium 0.5 0.2 10 10 10 2000 2025111 Germany, Fed. Rep. 0.9 0.1 61 62 62 2000 2000112 Denmark 0.7 0.4 5 5 5 2000 2020113 Sweden 0.7 0.3 8 8 8 2000 2000114 Switzerland 1.6 0.3 6 7 7 2000 2005

Capital-surplusoil exporters 3.6 w 4.0 w 26 t 45

115 Iraq 3.1 3.3 13 23 52 2030 2090116 Saudi Arabia 3.4 4.5 9 15 37 2035 2095117 Libya 3.8 4.1 3 5 12 2030 2090118 Kuwait 9.8 6.0 1 . 2 5 2030 2085

Nonmarket industrialeconomies 1.1 iv 0.8w 355t 410t

119 Bulgaria 0.8 0.6 9 10 10 2000 2055120 Poland 1.0 0.9 36 41 47 2000 2060121 Hungary 0.4 0.4 11 11 12 2000 2030122 USSR 1.3 0.9 267 314 356 2000 2060123 Czechoslovakia 0.5 0.7 15 17 19 2000 2085124 German Dem. Rep. -0.1 -0.1 1] 17 18 2000 2015

Totalb 4,364 6043

Table 18. Demographic and Fertility-related Indicators

168

PercentageCrude Crude Percentage of marriedbirth death change in: Percentage women

rate perthousand

rate perthousand Total

of women inreproductive

usingcontra-Crude Crude

population population birth deathrate rate

fertilityrate

age group(aged 15-44)

ceptivesa

1960 1979 1960 1979 1970 19781960-79 1960-79 1979 1979

Low-income countries 40w 29w 18w 11w -27.5w -38.2w 4.5w 46 wChina and India 38 w 24 w 16 w 9 w -35.7 w -40.8 w 4.0 w 47wOther low-income 47 w 42w 24w 16w -11.6w -35.0w 5.7w 42 w

1 Kampuchea, Dem. 49 . . 22 . . . . .

2 Lao PDR 44 42 23 21 -3.4 -6.7 6.2 403 Bhutan 46 41 28 20 -9.4 -29.3 6.0 434 Bangladesh 49 44 23 16 -11.6 -30.2 5.7 445 Chad 45 44 29 24 -2.4 -18.4 5.9 426 Ethiopia 51 50 28 24 -1.8 -13.2 6.7 423 Nepal 46 42 29 20 -8.3 -29.7 6.2 418 Somalia 49 46 29 20 -5.9 -30.0 6.1 419 Mali 50 49 27 22 -0.8 -18.9 6.7 41

10 Burma 43 37 22 14 -13.1 -38.5 5.3 4211 Afghanistan 50 47 30 23 -6.4 -23.6 6.7 4212 Viet Nam 47 36 21 9 -21.8 -58.2 5.3 4213 Burundi 47 45 27 22 -3.2 -15.8 5.9 4314 Upper Volta 49 48 27 21 -1.4 -19.2 6.5 41 .

15 India 44 34 23 14 -23.1 -40.5 4.8 45 12 2316 Malawi 53 51 27 19 -3.6 -31.0 7.0 4017 Rwanda 51 50 27 19 -2.9 -30.5 6.9 40 ,

18 Sri Lanka 36 28 9 7 -22.3 -18.7 3.8 47 8 4119 Benin 51 49 27 19 -3.6 -30.2 6.7 4120 Mozambique 46 45 26 18 -2.4 -29.5 6.1 41

21 Sierra Leone 47 46 27 19 -2.8 -30.5 6.1 4122 Chinab 34 18 11 6 -47.4 -42.6 2.7 4923 Haiti 45 41 19 14 -8.7 -27.5 5.7 42 , , 524 Pakistan 48 44 23 14 -8.3 -36.7 6.5 42 4 625 Tanzania 47 46 22 15 -0.6 -31.5 6.5 40 .

26 Zaire 48 46 24 18 -4.6 -25.2 6.1 42 (.)27 Niger 52 52 27 22 -0.6 -18.1 7.1 4128 Guinea 47 46 30 20 -1.9 -32.8 6.2 4229 Central African Rep. 43 44 28 21 3.0 -23.8 5.9 41

30 Madagascar 47 46 27 18 -1.9 -31.6 6.5 41

31 Uganda 45 45 20 14 -0.4 -32.0 6.1 4132 Mauritania 51 50 27 22 -0,8 -19,4 6.9 4133 Lesotho 40 40 23 16 -1.7 -30.7 5.4 4234 Togo 51 48 27 18 -5.3 -30.9 6.5 4135 Indonesia36 Sudan

47 36'45 46

25 1325 18

-22.5 -46.40.9 -26.2

4.86.6

4342

(.) ,

Middle-income countries 41 w 34 w 15w lOw -16.9w-32.]w 4.8 w 43wOil exporters 47 w 41 w 19w 12w -12.6w -35.8w 5.8 w 42wOil importers 38 w 31 w 14w 9w -20.0w -31.3w 4.4 w 43 rv

37 Kenya 52 51 24 13 -1.3 -42.7 7.8 37 1

38 Ghana 49 48 24 17 -1.4 -30.0 6.7 41 2 439 Yemen Arab Rep. 50 47 29 23 -5.0 -19.5 6.5 4140 Senegal 48 48 26 21 0.2 -18.0 6.5 41

41 Angola 50 48 31 22 -4.0 -27.5 6.4 42 , ,

42 Zimbabwe 47 47 19 13 0.6 -30.9 6.6 40 . . 1443 Egypt 44 37 19 12 -14.7 -35.1 4.9 44 9 1744 Yemen, PDR 50 46 29 20 -7.9 -30.1 6.8 4145 Liberia 50 48 21 14 -4.2 -33.0 6.9 4046 Zambia 51 49 24 17 -2.8 -31.4 6.9 40 , ,

47 Honduras 51 46 19 11 -10.6 -39.5 6.8 4048 Bolivia 46 43 22 16 -6.7 -25.5 6.2 4249 Cameroon50 Thailand

43 4244 31

27 1916 8

-1.2 -30.2-29.8 -50.0

5.74.3

4144 e

51 Philippines 46 34 16 8 -24.7 -47.4 4.8 45 8 3752 Congo, People's Rep. 46 45 27 18 -2.2 -29.8 6.0 41 . .

53 Nicaragua 51 45 19 12 -10,3 -37.4 6.3 41 1954 Papua New Guinea 44 37 23 15 -15.5 -32.5 5.3 42 355 El Salvador 48 39 17 9 -19.1 -48.2 5.8 41 . . 3456 Nigeria 52 50 25 17 -4.2 -31.6 6.9 41

57 Peru 46 38 20 11 -18.5 -43.7 5.3 43 . .

58 Morocco 50 44 21 13 -12.0 -38.5 6.6 41 1 559 Mongolia 41 36 15 8 -12.4 -46.9 5.2 4260 Albania 41 30 11 6 -26.8 -44.0 3.9 45 . . .

61 Dominican Rep. 50 36 16 9 -27.9 -45.6 4.8 43 . . 31

62 Colombia 46 30 14 8 -33.8 -41.0 3.9 45 4663 Guatemala 48 40 18 11 -16.8 -41.8 5.5 43 . . .

64 Syrian Arab Rep. 47 45 18 8 -4.7 -52.0 7.0 40 . . (.)

a. Figures in itaios are for years other than those specified See the technica' nofes. b. igures in :ta.ics are for 1957 or 1957-- 79. not for 1960 or 1960-79.

169

PercentageCrude Crude Percentage of marriedbirth death change in: Percentage women

rate perthousandpopulation

rate perthousandpopulation

Totalfertility

rate

of women inreproductiveage group

(aged 15-44)

usingcontra-

ceptivesa

Crude Crudebirth deathrate rate

1960 1979 1960 1979 1970 19781960-79 1960-79 1979 1979

65 Ivory Coast 50 47 26 18 -6.4 -32.0 6,7 4166 Ecuador 47 40 14 10 -13.3 -29.9 6.1 42 . . 667 Paraguay 43 38 13 8 -11.0 -36.3 5.5 42 . . 1668 Tunisia 47 31 19 11 -33.5 -43.4 4.4 43 10 2169 Korea, Dem. Rep. 41 32 13 8 20.6 -37.8 4.4 4470 Jordan 47 45 20 10 -5.5 -50.3 7.0 4071 Lebanon 43 30 14 8 -30.3 -40.4 4.1 43 1472 Jamaica 39 29 9 7 -27.8 -30.9 3.9 41 . . 4073 Turkey 43 34 16 10 -19.5 -37.4 4.8 43 3 3874 Malaysia 39 28 9 6 -27.6 -37.4 3.8 45 7 3675 Panama 41 31 10 6 -24.4 -42.0 4.0 44 . . 4776 Cuba 32 18 9 6 -45.1 -29.7 2.2 47 .

77 Korea, Rep. of 43 25 14 8 -39.9 -41.5 3.3 48 32 4978 Algeria 51 46 20 14 -9.1 -32.8 7.0 4079 Mexico 45 36 12 7 -20.0 -36.0 5.0 41 . . 4080 Chile 37 23 12 7 -36.3 -42.3 2.8 4781 South Africa 39 38 15 10 -2.6 -33.1 5.1 4282 Brazil 43 29 13 9 -27.1 -32.6 4.1 45 283 Costa Rica 47 29 10 5 -38.1 -46.4 3.5 47 . . 6484 Romania 20 18 9 10 -5.7 5.6 2.5 40

85 Uruguay 22 20 9 10 -9.5 4.3 2.8 40 .

86 Iran 47 43 21 13 -8.1 -36.4 6.1 42 3 238] Portugal 24 18 8 10 -24.5 28.0 2.4 4288 Argentina 24 21 9 8 -11.5 -9.3 2.8 4389 Yugoslavia 23 18 10 9 -24.6 -13.3 2.2 44 59

90 Venezuela 45 35 10 6 -22.1 -37.3 4.7 4491 Trinidad and Tobago 38 22 8 6 -40.3 -30.5 2.6 48 4492 Hong Kong 35 19 7 5 -44.2 -28.8 2.3 48 50 7993 Singapore 38 18 8 5 -50.3 -33.8 2.1 54 45 71

94 Greece 19 16 8 10 -16.1 30.3 2.3 40

95 Israel 27 26 6 7 -2.3 18.0 3.4 4296 Spain 21 18 9 9 -17.3 -4.4 2.6 41 .

Industrial marketeconomies 20 w 15w lOw lOw -27.5w -2.2 w 1.9 w 43w

97 Ireland 22 21 12 10 -1.9 -16.8 3.3 4098 Italy 18 14 10 10 -27.0 3.1 2.0 4199 New Zealand 26 18 9 8 -31.0 -12.2 2.2 45

100 United Kingdom 17 12 12 12 -29.1 0.8 1.8 40 72101 Finland 19 14 9 10 -26.6 3.3 1.7 44 77102 Austria 18 12 13 13 -32.0 0.8 1.7 40 .

103 Japan 18 15 8 7 -17.6 -12.0 1.8 45 56 61104 Australia 22 17 9 8 -24.8 -9.2 2.1 45 66105 Canada 2] 1] 8 7 -36.9 -8.9 1.9 48 .

106 France 18 14 12 11 -23.1 -5.3 1.9 41 64 79107 Netherlands 21 13 8 9 -38.9 13.0 1.6 45 59 75108 United States 24 17 9 9 -29.8 -3.2 1.9 45 65 68109 Norway 18 13 9 11 -24.9 16.3 1.9 40 . . 84110 Belgium 17 13 12 12 -25.1 -0.8 1.8 41 . . 87111 Germany, Fed. Rep. 17 10 11 12 -40.2 9.7 1.5 41 .

112 Denmark 17 13 9 11 -24.9 13.7 1.8 42 67113 Sweden 15 12 10 12 -20.0 19.4 1.7 40114 Switzerland 18 12 10 10 -34.8 2.1 1.6 43

Capital-surplusoil exporters 49 w 45w 21 w 12w -8.9w -39.9w 6.8w 41 w

115 Iraq 49 45 20 12 -8.1 -37.5 6.7 41 23116 Saudi Arabia 49 44 23 14 -10.2 -39.0 7.0 40117 Libya 49 45 19 12 .-].0 -36.5 7.1 40118 Kuwait 44 42 10 4 -6.3 -54.2 6.3 42

Nonmarket industrialeconomies 23 w 18 o 8 or 9 w -20.2 or -14.1 w 2.3 w 43 w

119 Bulgaria 18 15 9 11 -14.2 23.5 2.2 41

120 Poland 24 19 8 9 -17.9 9.8 2.3 44 57121 Hungary 16 15 10 12 0.7 16.7 2.1 41 73122 USSR 24 18 7 9 -22.1 17.6 2.3 43123 Czechoslovakia 17 18 10 11 2.9 14.6 2.3 41 66124 German Dem. Rep. 17 14 13 13 -20.1 0.0 1.8 41

Table 19. Labor Force

170

Percentage ofpopulation ofworking age(15-64 years)

Percentage of labor force in: Average annual growthof labor force

(percent)Agriculture Industry Services

1960 1979 1960 1979 1960 1979 1960 1979 1960-70 1970-80 1980-2000

Low-income countries 56w 59w 76w 71w lOw 14w 14w 15w 1.6w 1.9w 1.6wChina and India 61w 71w 15w 14w 1.8w 1.3wOther low-income 55w 54w 79w 70w 8w 11w 13w 19w 2.3 w 2.3 w

1 Kampuchea, Dem. 53 . 82 . . 4 . . 14 . . 2.1 .

2 Lao PDR 56 51 83 76 4 6 13 18 1.4 0.3 2.03 Bhutan 56 55 95 93 2 2 3 5 1.7 2.0 2.04 Bangladesh 53 54 87 74 3 11 10 15 2.1 3.3 2.65 Chad 57 54 95 85 2 7 3 8 1.5 1.8 2.46 Ethiopia 54 53 88 80 5 7 7 13 2.0 1.7 2.67 Nepal 57 55 95 93 2 2 3 5 1.5 2.1 2.18 Somalia 54 54 88 84 4 8 8 8 1.7 2.2 2.09 Mali 54 52 94 88 3 5 3 7 2.0 2.2 2.9

10 Burma 59 55 . . 67 . . 10 . . 23 1.1 1.5 2.011 Afghanistan 55 53 85 79 6 8 9 13 2.0 2.1 2.412 Viet Nam . . . . 81 71 5 10 14 19 . . . . 2.613 Burundi 55 55 90 84 3 5 7 11 1.2 1.5 2.214 Upper Volta 54 53 92 83 5 12 3 5 1.2 1.2 2.715 India 57 56 74 71 11 11 15 18 1.5 1.7 2.016 Malawi 52 49 92 86 3 5 5 9 2.3 2.2 3.317 Rwanda 53 51 95 91 1 2 4 7 2.4 2.4 3.218 Sri Lanka 54 59 56 54 14 14 30 32 2.1 2.0 2.019 Benin 53 51 54 46 9 16 37 38 2.1 2.3 2.620 Mozambique 56 53 81 67 8 17 11 16 1.9 1.7 2.421 Sierra Leone 55 53 78 66 12 19 10 15 1.5 1.8 2.722 China . . 64 . . 71 . . 17 . . 12 . . 1.9 0.923 Haiti 55 53 80 74 6 7 14 19 0.7 1.2 2.524 Pakistan 52 51 61 57 18 20 21 23 1.9 2.6 3.025 Tanzania 54 51 89 83 4 6 7 11 2.1 2.7 3.1

26 Zaire 53 53 83 75 9 13 8 12 1.4 2.1 2.727 Niger 53 51 95 91 1 3 4 6 3.0 2.6 3.428 Guinea 55 53 88 82 6 11 6 7 2.5 2.2 2.329 Central African Rep. 58 55 94 88 2 4 4 8 1.7 1.7 2.330 Madagascar 55 53 93 87 2 4 5 9 1.7 2.0 2.831 Uganda 54 52 89 83 4 6 7 11 3.3 2.5 3.332 Mauritania 53 52 91 85 3 5 6 10 2.2 2.4 2.833 Lesotho 57 55 93 87 2 4 5 9 1.6 1.9 2.434 Togo 53 51 80 68 8 15 12 17 2.2 1.7 2.935 Indonesia 56 56 75 59 8 12 17 29 1.7 2.5 2.036 Sudan 53 53 86 78 6 10 8 12 2.2 2.4 2.7

Middle-income countries 55 w 55 w 58w 43w 17w 23w 25w 34w 1.9w 2.3 w 2.6 wOil exporters 52 w 52 w 60w 44w 16w 24w 24w 32w 2.1 w 2.5 w 3.2 wOil importers 56 w 57 w 57w 42w 17w 23w 25w 35w 1.9w 2.2 w 2.3 w

37 Kenya 50 48 86 38 5 10 9 12 2.7 2.8 3.938 Ghana 53 51 64 54 14 20 22 26 1.6 2.4 3.239 Yemen Arab Rep. 54 51 83 76 7 11 10 13 1.1 0.7 2.740 Senegal 54 53 84 76 5 10 11 14 1.9 1.9 2.541 Angola 55 53 69 60 12 16 19 24 1.0 1.9 2.742 Zimbabwe 52 50 69 60 11 15 20 25 3.2 2.6 3.543 Egypt 55 57 58 50 12 29 30 21 1.9 2.0 2.544 Yemen, PDR 52 51 70 4] 15 15 15 38 1.4 1.6 2.945 Liberia 52 50 80 71 10 14 10 15 2.4 2.6 3.546 Zambia 53 50 79 68 7 11 14 21 2.3 2.4 3.047 Honduras 52 50 70 63 11 14 19 23 2.5 3.1 3.548 Bolivia 55 53 61 50 18 24 21 26 1.7 2.3 2.949 Cameroon 57 54 87 83 5 7 8 10 1.3 1.3 1.850 Thailand 53 54 84 77 4 9 12 14 2.0 2.7 2.251 Philippines 52 53 61 47 15 17 24 36 2.2 2.4 2.852 Congo, Peoples Rep. 56 53 52 35 17 26 31 39 1.5 2.0 2.953 Nicaragua 50 50 62 40 16 14 22 46 2.6 3.3 3.854 Papua New Guinea 57 55 89 82 4 8 7 10 1.6 1.8 1.555 El Salvador 52 51 62 51 17 22 21 27 2.6 2.8 3.556 Nigeria 52 50 71 55 10 18 19 27 1.8 1.7 3.357 Peru 52 54 53 38 19 20 28 42 2.0 3.0 3.158 Morocco 53 50 63 53 14 21 23 26 1.6 3.0 3.559 Mongolia 54 53 70 56 13 22 1] 22 2.1 2.5 3.360 Albania 54 57 71 61 18 25 11 14 2.3 2.8 2.461 Dominican Rep. 49 52 67 50 12 18 21 32 2.3 3.4 3.362 Colombia 50 59 51 27 19 21 30 52 3.0 3.6 2.563 Guatemala 51 53 67 56 14 21 19 23 2.5 3.0 2.964 Syrian Arab Rep. 52 48 54 32 19 31 27 37 2.1 3.3 3.7

171

Percentage ofpopulation ofworking age(15-64 years)

Percentage of labor force in: Average annual growthof labor force

(percent)Agriculture Industry Services

1960 1979 1960 1979 1960 1979 1960 1979 1960-70 1970-80 1980-2000

65 Ivory Coast 54 54 89 79 2 4 9 17 3.6 5.0 2.866 Ecuador 52 52 57 52 19 18 24 30 3.0 3.3 3,367 Paraguay 51 52 56 50 19 19 25 31 2.4 3.1 3.468 Tunisia 53 55 56 35 18 32 26 33 0,7 3.0 2.769 Korea, Dem. Rep. 53 56 62 50 23 32 15 18 2.3 2.9 2.870 Jordan 52 51 44 21 26 19 30 60 2.8 3.1 3.471 Lebanon 53 55 38 12 23 26 39 62 2.1 1.3 2.872 Jamaica 54 52 39 22 25 25 36 53 0.4 2.2 3.373 Turkey 55 56 78 54 11 13 11 33 1.4 2.2 2.474 Malaysia 51 55 63 51 12 16 25 33 2.8 2.6 2.975 Panama 52 56 51 34 14 18 35 48 3.4 2.4 2.676 Cuba 61 60 39 24 22 31 39 45 0.8 2.0 1.977 Korea, Rep. of 54 61 66 36 9 30 25 34 3.0 2.8 2.178 Algeria 52 49 67 32 12 24 21 44 1.0 3.4 3.579 Mexico 51 51 55 37 20 26 25 37 2.8 3,0 3.680 Chile 57 62 30 20 20 20 50 60 1.4 1.9 2.181 South Africa 55 54 32 30 30 29 38 41 3.2 2.6 3.282 Brazil 54 55 52 40 15 22 33 38 2.8 2.2 2.783 Costa Rica 50 57 51 30 19 23 30 47 3.5 3.6 2.784 Romania 65 64 65 33 15 34 20 33 0.9 0.6 0.785 Uruguay 64 63 21 11 29 32 50 57 0.9 0.1 1,186 Iran 51 52 54 40 23 33 23 27 2.5 2.7 3.287 Portugal 63 63 44 25 29 36 27 39 (.) 1.1 0.988 Argentina 64 63 20 13 36 28 44 59 1.3 1.4 1.289 Yugoslavia 63 66 63 31 18 33 19 36 0.6 0.6 0.690 Venezuela 51 55 35 19 22 27 43 54 2.8 4.0 3.291 Trinidad and Tobago 53 61 22 16 34 36 44 48 2.4 2.6 2.192 Hong Kong 56 65 8 3 52 57 40 40 3.2 3.8 1.293 Singapore 55 66 8 2 23 38 69 60 2,8 2.7 1.494 Greece 65 64 56 38 20 28 24 34 (.) 0.5 0.595 Israel 59 59 14 7 35 36 51 57 3.6 2.5 2.196 Spain 64 63 42 15 31 40 27 45 0.2 1.1 0.9

Industrial marketeconomies 63w 66w 16w 6w 39w 38w 45w 56w 1.2w 1.2w 0.6w

97 Ireland 58 58 36 19 25 37 39 44 (.) 1.0 1.598 Italy 66 65 31 11 40 45 29 44 -0.1 0.7 0.499 New Zealand 59 63 15 9 37 35 48 56 2.2 2.1 1.2

100 United Kingdom 65 64 4 2 48 42 48 56 0.6 0.3 0.3101 Finland 62 68 36 12 31 35 33 53 0.4 1,1 0.4102 Austria 66 64 24 9 46 37 30 54 -0.6 0.8 0.4103 Japan 64 68 33 13 30 38 37 49 1.9 1.3 0.8104 Australia 61 65 11 6 40 33 49 61 2.6 1.8 1.0105 Canada 59 67 13 5 35 29 52 66 2.6 2.0 0.9106 France 62 64 22 9 39 39 39 52 0.6 1.0 0.6107 Netherlands 61 66 11 6 42 45 47 49 1.6 1.3 0.6108 United States 60 66 7 2 36 32 57 66 1.8 1.8 0.9109 Norway 63 63 20 8 37 38 43 54 0.5 0.7 0.6110 Belgium 65 65 8 3 48 41 44 56 0.3 0.7 0.2111 Germany, Fed. Rep. 68 66 14 4 48 47 38 49 0.2 0.7 (.)112 Denmark 64 65 18 7 37 36 45 57 1.1 0.6 0.5113 Sweden 66 64 14 5 45 35 41 60 1.0 0.3 0.3114 Switzerland 66 66 11 5 50 46 39 49 2.0 0.5 0.3

Capital-surplusoil exporters 53w 51 w 58w 44w 16w 22w 26w 34w 3.2w 3.6w 3.1 w

115 Iraq 51 51 53 43 18 26 29 31 2.9 2.9 3.3116 Saudi Arabia 54 52 71 62 10 14 19 24 3.1 4.5 2.7117 Libya 53 51 53 20 17 27 30 53 3.6 3.7 3.1118 Kuwait 63 52 1 2 34 34 65 64 7.5 4.5 3.1

Nonmarket industrialeconomies 63w 66w 41 w 17w 31w 44w 28w 39w 0.8w 1.2w 0.6 w

119 Bulgaria 66 66 57 38 25 38 18 24 0.7 0.4 0.4120 Poland 61 66 48 31 29 39 23 30 1.8 1.5 0.8121 Hungary 66 66 38 16 35 52 27 32 0.5 0.4 0.2122 USSR 63 66 42 15 29 44 29 41 0.7 1.3 0.6123 Czechoslovakia 64 64 26 11 46 48 28 41 0.9 0.8 0.7124 German Dem, Rep. 65 64 18 10 48 50 34 40 -0.2 0.5 0.3

Table 20. Urbanization

31 w33 w23 w

42 w42 w42 w

172

Percentage of urban population

35w32w36w

48w46w48w

In citiesof over500,000persons

1960 1980

'o 'a

Number ofcitiesof over500,000persons

As percentageof total

population

Average annualgrowth rate

(percent)

Inlargest

city

1960

15w

12 w

1980

17w17w19w

1960-70 1970-80

3.8 w 3.7 ?'3.2w

4.7 w 5.0 w

1960 1980

11w 13 w7w 6w

24 w 27 w

Low-income countriesChina and IndiaOther low-income

1 Kampuchea, Dem. 11 3.62 Lao PDR 8 14 4.1 4.8 69 483 Rhutan4 Bangladesh

35

411

4.1 4.56.3 6.8 Ô 3Ô

5 Chad 7 18 6.7 6.5 39

6 Ethiopia 6 15 6.1 6.6 30 377 Nepal 3 5 4,3 4,7 41 278 Somalia 17 30 5.3 5.0 349 Mali 11 20 5.4 5.5 32 34

10 Burma 19 27 3.9 3.9 23 23

11 Afghanistan 8 15 5.5 5,9 33 1712 Viet Nam 15 19 5.3 3.3 32 21

13 Burundi 2 2 1.6 2.514 Upper Volta 5 9 5,3 3.815 India 18 22 3.3 3.3 6

16 Malawi 4 10 6.6 6.8 19

17 Rwanda18 Sri Lanka

218

427

5.6 5.94.3 3.6 ?è

19 Benin 10 14 5.3 3,9 6320 Mozambique 4 9 6.6 6.8 75 83

21 Sierra Leone 13 25 5,5 5.6 37 4722 China23 Haiti 16

1328

3.14. ó 4.9

642

656

24 Pakistan 22 28 4.0 4.3 20 21

25 Tanzania 5 12 6.3 8.7 34 50

26 Zaire 16 34 5.2 7.2 14 2827 Niger 6 13 7.0 6.8 31

28 Guinea 10 18 6.2 5.5 37 8029 Central African Rep. 23 41 5.3 5.0 40 3630 Madagascar 11 18 5.0 5.2 44 36

31 Uganda 5 12 7.8 7.0 38 5232 Mauritania 3 23 15.8 8.6 3933 Lesotho 2 5 7.5 7.734 Togo 10 .20 5.6 6.6 6035 Indonesia 15 20 3.6 4.0 20 2336 Sudan 10 25 6.9 6.8 30 31

Middle-income countries 37 w 50 w 4.1w 3.8w 28w 29 wOil exporters 33w 45 w 4.5w 4.3w 29 w 30wOil importers 39 w 52 w 4.0 w 3.5 w 28 w 27 w

37 Kenya 7 14 6.4 6.8 40 5738 Ghana 23 36 4.6 5.1 25 3539 Yemen Arab Rep. 3 10 7.5 7.2 2540 Senegal 23 25 2.9 3,3 53 6541 Angola 10 21 5.1 5.7 44 64

42 Zimbabwe 13 23 6.8 6.4 40 5043 Egypt 38 45 3.3 2.8 38 3944 Yemen, PDR 28 37 3.2 3.7 61 4945 Liberia 21 33 5.6 5.646 Zambia 23 38 5.4 5.5 35

47 Honduras 23 36 5.4 5.5 31 3348 Bolivia 24 33 3.9 4.1 47 4449 Cameroon 14 35 5.6 7.5 26 21

50 Thailand 13 14 3.5 3.3 65 6951 Philippines 30 36 3.8 3.6 27 30

52 Congo, People's Rep. 30 45 4.7 4.1 77 5653 Nicaragua 41 53 4.2 4.5 41 4754 Papua New Guinea 3 20 15.2 8.7 2555 El Salvador 38 41 3.2 3.3 26 2256 Nigeria 13 20 4.7 4.7 13 17

57 Peru 46 67 4.9 4.3 38 3958 Morocco 29 41 4.2 4.6 16 2659 Mongolia 36 51 5.2 4.1 53 5260 Albania 31 37 3.7 3.4 27 2561 Dominican Rep. 30 51 5.8 5.3 50 54

62 Colombia 48 70 5.2 3,9 17 2663 Guatemala 33 39 3.6 3.7 41 3664 Syrian Arab Rep. 37 50 4.8 5.0 35 33

0 1

0 20 00 1

0 1

0 1

2 20 00 00 1

0 00 1

0 1

1 1

1 2

0 00 1

0 00 02 91 21 40 00 00 1

3 41 1

1 2

0 020 51

0 0

0 370 00 00 0

23 29

0 1732 50

0 00 0

26 390 00 00 160 630 83

0 042 45

0 5633 51

0 5014 380 00 800 00 360 520 00 00 0

34 500 31

0 570 480 00 650 64

0 5053 53

0 00 00 35

0 00 440 21

65 6927 34

0 00 470 00 0

22 58

38 4416 500 00 00 54

28 51

41 3635 55

0 00 0

30 0

000 00 0

2

0 1

1 40 00 0

11 36

0 00 00 1

0 1

0 1

0 038 70

0 1

2 7

0 1

1 20 00 1

0 00 1

0 1

0 00 0O 03 90 1

56 f 125 t9t 31 t

47 t 94 t

1960 1980

58 t 14448 106 t10 38 t

Urban population

173

Urban populationPercentage of urban population

Number ofcities

of over500,000persons

Inlargest

city

In citiesof over500,000persons

As percentageof total

population

Average annualgrowth rate

(percent)

1960 1980 1960-70 1970-80 1960 1980 1960 1980 1960 1980

65 Ivory Coast 19 38 7.3 8.5 27 34 0 34 0 1

66 Ecuador 34 45 4.5 4.5 31 29 0 51 0 267 Paraguay 36 39 3.0 3.5 44 44 0 44 0 1

68 Tunisia 36 52 3.8 3.9 40 30 40 30 1 1

69 Korea, Dem. Rep. 40 60 5.0 4.3 15 12 15 19 270 Jordan 43 56 4.5 4.7 31 37 0 37 C 1

71 Lebanon 44 76 6.2 2.8 64 79 64 79 1 1

72 Jamaica 34 50 3.5 3.4 77 66 0 66 C 1

73 Turkey 30 47 5.1 4.6 18 24 32 42 3 474 Malaysia 25 29 3.6 3.1 19 27 0 27 0 1

75 Panama 41 54 4.4 3.6 61 66 0 66 0 1

76 Cuba 55 65 2.9 2.2 38 32 38 32 1 1

77 Korea, Rep. of 28 55 6.3 4.8 35 41 61 77 3 778 Algeria 30 44 3.9 5.8 27 12 27 12 1 1

79 Mexico 51 67 4.8 4.2 28 32 36 48 3 780 Chile 68 80 3.1 2.3 38 44 38 44 1 1

81 South Africa 47 50 2.8 3.1 16 13 44 53 4 782 Brazil 46 65 4.8 3.7 14 16 35 52 6 1483 Costa Rica 37 43 4.2 3.3 67 64 0 64 0 1

84 Romania 34 48 2.8 2.5 22 17 22 17 1 1

85 Uruguay 80 84 1.3 0.6 56 52 56 52 1 1

86 Iran 34 50 4.7 4.9 26 28 26 47 1 687 Portugal 23 31 1.3 2.9 47 44 47 44 1 1

88 Argentina 74 82 2.0 2.1 46 45 54 60 3 589 Yugoslavia 28 42 3.2 2.9 11 10 11 23 1 390 Venezuela 67 83 4.7 4.2 26 26 26 44 1 491 Trinidad and Tobago 22 22 1.7 1.3 . . . . 0 0 0 092 Hong Kong 89 90 2.6 2.7 100 100 100 100 1 1

93 Singapore 100 100 2,4 1.4 100 100 100 100 1 1

94 Greece 43 62 2.6 2.2 51 57 51 70 1 1

95 Israel 77 89 4.3 3.2 46 35 46 35 1 1

96 Spain 57 74 2.6 2.2 13 17 37 44 5 6

Industrial marketeconomies 68w 73w 1.8w 1.3w 18w 18w 48w 55w 991 1461

97 Ireland 46 58 1.6 2.2 51 48 51 4898 Italy 59 69 ' 1.5 1.3 13 17 46 52 799 New Zealand 76 85 2.4 1.9 25 30 0 30 0

100 United Kingdom 86 91 0.9 0.3 24 20 61 55 15 17101 Finland 38 62 3.2 2.7 28 27 0 27 0102 Austda 50 54 0.9 0.5 51 39 51 39 1 1

103 Japan 62 78 2.4 2.0 18 22 35 42 5 9104 Australia 81 89 2.5 1.9 26 24 62 68 4 5105 Canada 69 80 2.7 1.7 14 18 31 62 2 9106 France 62 78 2.4 1.4 25 23 34 34 4 6107 Netherlands 80 76 1.0 0.6 9 9 27 24 3 3108 United States 67 73 1.7 1.5 13 12 61 77 40 65109 Norway 32 53 3.5 2.8 50 32 50 32 1 1

110 Belgium 66 72 1.2 0.4 17 14 28 24 2 2111 Germany, Fed. Rep. 77 85 1.4 0.4 20 18 48 45 11 11

112 Denmark 74 84 1.5 0.9 40 32 40 32 1 1

113 Sweden 73 87 1.8 1.0 15 15 15 35 1 3114 Switzerland 51 58 2.2 1.0 19 22 19 22 1 1

Capital-surplusoil exporters 37 w 69 w 7.4 w 6.7 w 33 w 42 w 22 w 53 w 1! 61

115 Iraq 43 72 6.2 5.4 35 55 35 70 1 3116 Saudi Arabia 30 67 8.4 7.6 15 18 0 33 0 2117 Libya 23 52 8.0 8.3 57 64 0 64 0 1

118 Kuwa4 72 88 10.4 7.4 75 30 0 0 0 0

Nonmarket industrialeconomies 49 u' 64 w 2.5 w 2.1 w 9 w 7 w 23 w 32 w 35 1 64

119 Bulgaria 39 64 3.8 2.6 23 18 23 18120 Poland 48 57 1.8 1.] 17 15 41 47121 Hungary 40 54 1.7 2.1 45 3] 45 37122 USSR 49 65 2.8 2.2 6 4 21 33 25 50123 Czechoslovakia 47 63 2.1 2.0 17 12 17 12124 German Dem. Rep. 72 77 0.1 0.3 9 9 14 17 2 3

Table 21. Indicators Related to Life Expectancy

174

Lifeexpectancy

at birth(years)

Infantmortality

rate(aged 0_1)a

Childdeathrate

(aged 1-4)1960 1979 1960 1978 1960 1979

Low-income countries 42 w 57 29 w 17 wChina and India 59wOther low-income 51 w 31w 18w

1 Kampuchea, Dem. 43 272 Lao PDR 40 42 30 273 Bhutan 36 44 36 254 Bangladesh 43 49 25 195 Chad 35 41 45 356 Ethiopia 36 40 172 43 367 Nepal 3] 44 35 258 Somalia 36 44 43 309 Mali 37 43 41 31

10 Burma 44 54 24 1311 Afghanistan 34 41 . . 237 40 2912 Viet Nam 43 63 62 26 513 Burundi 37 42 . . 41 3314 Upper Volta 37 43 263 . . 41 3115 India 42 52 125 27 1516 Malawi 37 4] . . 41 2517 Rwanda 37 47 . . . . 41 2518 Sri Lanka 62 66 55 49 6 319 Benin 37 47 206 . . 41 2520 Mozambique 37 47 . . 41 2521 Sierra Leone 3] 47 . . 41 2522China .. 64 5623 Haiti 44 53 . . 36 2124 Pakistan 44 52 135 24 1525 Tanzania 42 52 . . 32 1826 Zaire 40 47 36 2527 Niger 37 43 200 41 3128 Guinea 35 44 141 45 2829 Central African Rep. 36 44 43 3030 Madagascar 37 47 41 2531 Uganda 44 54 159 29 1632 Mauritania 37 43 186 41 2933 Lesotho 42 51 33 2034 Togo 3] 47 41 2535 Indonesia 39 53 15 a 31 1436 Sudan 39 47 47 29

Middle-income countries 53 w 61 w 19w 10 wOil exporters 47w 57w 27 w 14wOil importers 55 w 63w 16w 8w

37 Kenya 41 55 126 91 34 1538 Ghana 40 49 141 36 2239 Yemen Arab Rep. 36 42 . 54 4140 Senegal 37 43 . . . 41 3141 Angola 33 42 . . 49 3342 Zimbabwe 45 55 . . . S 28 1543 Egypt 46 57 109 85 32 1544 Yemen, PDR 36 45 54 3445 Liberia 44 54 29 1646 Zambia 40 49 . . . 36 2247 Honduras 46 58 130 118 32 1448 Bolivia 43 50 150 . . 39 2349 Cameroon 37 4] 172 157 41 2550 Thailand 51 62 68 16 651 Philippines 51 62 98 65 16 652 Congo, Peoples Rep. 37 4] . 41 2753 Nicaragua 4] 5 . . . 30 1654 Papua New Guinea 41 51 159 . . 29 1655 El Salvador 50 63 60 23 856 Nigeria 39 49 . . 36 2257 Peru 48 58 . . 86 29 1458 Morocco 4] 56 30 1659 Mongolia 52 63 . . 15 560 Albania 62 70 83 . 6 261 Dominican Rep. 51 61 . 37 23 1062 Colombia 53 63 77 65 20 863 Guatemala 47 59 113 30 1364 Syrian Arab Rep. 50 65 25 7

a. Figures n italics are for years other than those spec!fied. See the technical notes.

175

Lifeexpectancy

at birth(years)

Infantmortality

rate(aged 0_1)a

Childdeathrate

(aged 1-4)1960 1979 1960 1978 1960 1979

65 Ivory Coast 37 47 . . . . 41 2566 Ecuador 51 61 140 66 23 1067 Paraguay 56 64 . . . . 16 768 Tunisia 48 58 148 90 28 1369 Korea, Dem. Rep. 54 63 . . 12 5

70 Jordan 4] 61 . . 9] 30 1071 Lebanon 58 66 . . . . 13 672 Jamaica 64 71 52 16 7 373 Turkey 51 62 194 . . 23 974 Malaysia 53 68 . . 32 13 2

75 Panama 62 70 90 47 9 376Cuba 63 72 .. 25 8 277 Korea, Rep. of 54 63 62 37 12 578 Algeria 47 56 . . S S 30 1679 Mexico 58 66 78 60 13 5

80 Chile 5] 6] 108 65 15 681 South Africa 53 61 . . . . 17 982 Brazil 55 63 128 92 17 883 Costa Rica 62 70 80 28 9 384 Romania 65 71 76 31 4 1

85 Uruguay 68 71 47 34 4 386 Iran 46 54 . . . . 22 1287 Portugal 63 71 78 39 5 1

88 Argentina 65 70 62 . . 6 389 Yugoslavia 63 70 88 34 5 290 Venezuela 59 6] 72 40 12 591 Trinidad and Tobago 64 70 45 29 7 392 Hong Kong 65 76 42 12 4 (.)93 Singapore 65 71 35 13 4 1

94 Greece 69 74 40 20 2 1

95 Israel 69 72 31 18 4 296 Spain 68 73 44 15 2 1

Industrial marketeconomies 70w 74w 29w 13w 1w 1w

97 Ireland 70 73 29 16 2 1

98 Italy 69 73 44 18 2 1

99 New Zealand 72 73 23 14 1 1

100 United Kingdom 71 73 22 14 1 1

101 Finland 68 73 21 9 2 1

102 Austria 69 72 38 15 1 1

103 Japan 68 76 30 9 2 (.)104 Australia 71 74 20 13 1 1

105 Canada 71 74 27 12 1 1

106 France 70 74 27 11 1 1

107 Netherlands 73 75 18 10 1 (.)108 United States 70 74 26 14 1 1

109 Norway 73 75 19 9 1 (.)110 Belgium 70 72 31 12 1 1

111 Germany, Fed. Rep. 70 73 34 16 2 1

112 Denmark 72 75 22 9 1 1

113 Sweden 73 76 17 8 1 (.)114 Switzerland 71 75 21 10 1 (.)Capital-surplus

oil exporters 46w 56w 32w 16w115 Iraq 47 56 92 30 16116 Saudi Arabia 43 54 38 19117 Libya 47 56 30 16118 Kuwait 60 70 11 3

Nonmarket industrialeconomies 68w 72w 36w 20w 2w 1w

119 Bulgaria 69 73 45 22 2120 Poland 67 72 56 22 3121 Hungary 68 71 48 24 2122 USSR 68 73 33 . . 2123 Czechoslovakia 70 71 24 19 2124 German Oem. Rep. 69 72 39 13 2

Table 22. Health-related Indicators

176

Population per:Percentage

of populationwith accessto safe water

1975

Daily per capitacalorie supplya

As percentageTotal of requirement1977 1977

Physiciarla Nursing persona

1960 1977 1960 1977

Low-income countries 11,680w 6,150w 5,700w 6,200w 29w 2,231 w 98wChina and India 3,730w 2,160w 5,510w 2,900w 2,279 w 99wOther low-income 39,290w 16,380w 7,370 w 14,890 w w 2,108w 96 w

1 Kampuchea, Dem. 34,830 . . . . 1,926 852 Lao PDR 54,140 20,060 3,040 2,082 943 Bhutan . . . . . . 2,028 884 Bangladesh . . 8,780 . . 56,880 53 2,100 915 Chad 72,190 41,940 8,040 4,810 26 1,762 74

6 Ethiopia 100,470 75,320 14,920 5,400 6 1,754 757 Nepal 72,870 35,250 . . 53,540 9 2,002 918 Somalia 36,570 . . 6,220 . . 33 2,033 889 Mali 67,050 25,150 4,980 3,230 9 2,117 90

10 Burma 15,560 5,120 . . 6,120 17 2,286 106

11 Afghanistan 28,140 20,550 23,210 25,920 6 2,695 11012 Viet Nam . . 5,620 . . 900 1,801 8313 Burundi 96,570 45,020 6,770 6,180 . 2,254 9714 Upper Volta 81,650 49,810 4,090 4,510 25 1,875 7915 India 4,850 3,620 9,630 6,430 33 2,021 91

16 Malawi 35,250 40,680 12,920 2,790 33 2,066 9017 Rwanda 138,100 38,920 11,200 10,490 35 2,264 9818 Sri Lanka 4,490 6,750 4,150 2,050 20 2,126 9619 Benin 23,030 26,880 . . 3,040 21 2,249 9820 Mozambique 20,390 33,980 4,720 1,906 81

21 Sierra Leone 20,420 . . 5,900 . . 2,150 9322 China 3,010 1,160 2,850 480 . 2,453 10423 Haiti 9,230 5,940 10,340 4,230 14 2,100 9324 Pakistan 11,000 3,760 . . 9,980 29 2,281 9925 Tanzania 18,220 17,550 10,440 3,080 39 2,063 89

26 Zaire 37,620 15,530 3,510 1,940 16 2,271 10427 Niger 82,170 42,720 8,450 6,270 27 2,139 9128 Guinea 48,000 16,630 3,260 2,490 10 1,943 8429 Central African Rep. 41,580 17,610 2,760 1,560 16 2,242 9930 Madagascar 8,900 10,240 3,110 3,470 26 2,486 115

31 Uganda 14,060 27,600 9,420 4,300 35 2,110 9132 Mauritania 40,400 15,160 7,320 3,430 . . 1,976 8633 Lesotho 23,510 18,640 . . 4,340 17 2,245 9934 Togo 35,760 17,980 5,340 2,000 16 2,069 9035 Indonesia 46,780 13,640 . . 8,850 12 2,272 10536 Sudan 33,500 8,690 3,040 1,280 46 2,184 93

Middle-income countries 10,430 w 4,380 w 3,390w 1,820w 58w 2,581 w 109 wOil exporters 22,320 w 5,940 w 4,820w 2,120w 60w 2,458 w 103 wOil importers 4,570w 3,580w 2,790w 1,610w 57 w 2,641 w 112w

37 Kenya 10,690 11,630 2,230 1,090 17 2,032 8838 Ghana 21,600 9,920 5,430 860 35 1,983 8639 Yemen Arab Rep. . 12,460 . . 5,660 4 2,192 91

40 Senegal 24,540 15,710 4,110 1,660 37 2,261 9541 Angola 14,910 . . . . . . 2,133 91

42 Zimbabwe 4,790 7,030 1,010 1,380 . . 2,576 10843 Egypt 2,560 1,050 2,730 1,100 66 2,760 10944 Yemen, PDR 13,760 7,760 . . 1,620 24 1,945 81

45 Liberia 12,600 9,260 5,810 2,900 20 2,404 10446 Zambia 9,540 10,190 9,920 1,930 42 2,002 87

47 Honduras 12,610 3,290 1,240 46 2,015 8948 Bolivia 3,830 1,850 . . 3,070 38 1,974 8349 Cameroon 48, 110 16,500 6,150 2,230 26 2,069 8950 Thailand 8,000 8,150 4,900 3,540 22 1,929 10551 Philippines 6,930 2,760 . . 3,110 43 2,189 108

52 Congo, People's Rep. 16,430 7,290 1,510 800 17 2,284 10353 Nicaragua 2,740 1,670 5,460 800 70 2,446 10954 Papua New Guinea 14,390 14,040 2,450 1,930 20 2,268 8555 El Salvador 5,260 3,600 . . 1,310 53 2,051 9056 Nigeria 73,710 15,740 6,020 4,030 . . 1,951 83

57 Peru 2,010 1,550 2,210 750 48 2,274 9758 Morocco 9,410 11,040 . . 1,690 55 2,534 10559 Mongolia 1,070 480 300 250 2,523 10460 Albania 3,630 960 540 370 . . 2,730 11361 Dominican Rep. 55 2,094 93

62 Colombia 2,640 1,970 3,740 1,250 64 2,364 10263 Guatemala 4,410 2,490 9,040 . . 40 2,156 9864 Syrian Arab Rep. 4,630 2,570 6,660 3,890 75 2,684 108

a. Figures in italics are br years other than those specified. See the technical notes,

177

Population per:Percentage

of populationwith access

to safe water1975

Daily per capitacalorie supplya

Physiciana Nursing persona As percentageTotal of requirement1977 19771960 1977 1960 1977

65 Ivory Coast 29,190 15,220 2,920 2,370 19 2,517 10566 Ecuador 2,660 1,620 2,280 . . 42 2104 9267 Paraguay 1,800 2,150 2,260 13 2824 12268 Tunisia 10,030 4,800 1,070 70 2,674 11269 Korea, Dem. Rep. . . . . . . . . 2,837 121

70 Jordan 5,800 1,960 1,650 820 61 2,107 6271 Lebanon 1,210 . . . . . . . . 2,495 10172 Jamaica 2,590 3,520 1,990 550 86 2,660 11973 Turkey 3,000 1,770 . . 1,460 75 2,907 11574 Malaysia 7,470 8,730 1,780 1,290 62 2,610 11775 Panama 2,730 1,220 3,460 1,410 79 2,341 10176 Cuba 1,060 1,110 970 . . . 2,720 11877 Korea, Rep. of 3,540 1,990 3,220 550 71 2,785 11978 Algeria 5,230 5,330 1,480 77 2,372 9979 Mexico 1,800 1,820 . . 1,400 62 2,654 11480 Chile 1,780 1,620 640 440 84 2,656 10981 South Africa 2,180 . . 540 . . 2,831 11682 Brazil 2,560 1,700 2,770 . . 77 2,562 10783 Costa Rica 2,700 1,390 710 590 77 2,550 11484 Romania 780 740 620 640 . . 3,444 13085 Uruguay 960 540 . . 3,700 84 3,036 11486 Iran 4,090 . . 8,160 . . 51 3,138 13087 Portugal 1,200 700 1,430 500 65 3,076 12688 Argentina 740 530 . . . . 66 3,347 12689 Yugoslavia 1,620 760 1,350 410 3,445 13690 Venezuela 1,510 930 1,890 380 . . 2,435 9991 Trinidad and Tobago 2,390 1,970 . . 580 2,694 11192 Hong Kong 3,070 1,180 2,950 1,090 . . 2,883 12693 Singapore 2,360 1,250 650 380 100 3,074 13494 Greece 790 450 2,080 600 3,400 13695 Israel 400 310 360 . . 3,141 12296 Spain 820 560 1,290 900 . . 3,149 128

Industrial marketeconomies 830 w 620 w 450 w 220 w 3,377 w 131 w

97 Ireland 950 830 190 200 . . 3,541 14198 Italy 640 490 920 330 . . 3,428 13699 New Zealand 690 . 740 . . 200 . . 3,345 127

100 United Kingdom 1,090 750 420 300 . . 3,336 132101 Finland 1,570 630 220 110 3,100 114

102 Austria 550 430 600 260 3,535 134103 Japan 930 850 460 290 2,949 126104 Australia 860 650 . . 120 3,428 129105 Canada 910 560 300 130 . . 3,374 127106 France 930 610 530 170 . . 3,434 136107 Netherlands 900 580 . . 270 . . 3,338 124108 United States 750 570 340 750 3,576 135109 Norway 850 540 330 100 3,175 118110 Belgium 780 440 450 250 . . 3,583 136111 Germany, Fed. Rep. 670 490 450 260 . . 3,381 127112 Denmark 810 510 270 150 3,418 127113 Sweden 1,150 560 . . 130 . . 3,221 120114 Switzerland 740 510 390 220 . . 3,485 130

Capital-surplusoil exporters 8,920w 1,810w 5,810w 1,860w 68w 2,407w 93w

115 Iraq 5,270 2,190 6,680 2,990 62 2,134 89116 Saudi Arabia 16,370 1,700 5,850 950 64 2,624 88117 Libya 6,580 900 2,390 280 100 2,985 126118 Kuwait 1,150 790 790 290 89

Nonmarket industrialeconomies 660 w 350 w 360 w 210 w 3,489w 136w

119 Bulgaria 710 440 550 240 3,611 144120 Poland 1,070 610 490 270 3,656 140121 Hungary 720 430 350 200 3,521 134122 USSR 560 290 340 210 3,460 135123 Czechoslovakia 620 390 280 760 3,340 139124 German Dem. Rep. 1,180 530 . . 3,641 139

178

1960 1978 1960 1978 1960 1978 1960 1978 1960 1977 1960 1976

Low-income countries 76 w 83 w 71 w 92 w 37 w 63 w 14 w 36 w 2 w 3 w 28w 51wChina and India 86 w 87 w 42 w 4w 54wOther low-income 46 w 74 w 59 w 89 w 33 w 63 w 6 w 20 w w 2 w 27 u' 43 w

1 Kampuchea, Dem. 64 82 46 3 (.) 362 Lao PDR 25 92 34 99 16 85 1 14 (.) 283 Bhutan 3 12 5 16 (.) 7 .. 1 .. (.)4 Bangladesh 47 72 66 103 26 40 8 22 1 3 22 265 Chad 17 35 29 51 4 19 (.) 3 S

S (.) 6 15

6 Ethiopia 7 38 11 .. 3 .. (.) 9 (.) (.) .. 157 Nepal 10 69 19 104 31 6 14 1 2 9 198 Somalia 9 44 13 57 5 32 1 4 (.) 1 2 609 Mali 10 28 14 36 6 20 1 9 .. 1 3 10

10 Burma 56 84 61 87 52 81 10 22 1 2 60 67

11 Afghanistan 9 20 15 33 2 6 1 7 (.) 1 8 1212 Viet Nam . 122 . . 128 . . 116 . . 51 .. 3 . . 8713 Burundi 18 21 27 26 9 17 1 3 (.) (.) 14 2514 Upper Volta 8 17 12 21 5 12 (.) 2 . . (.) 215 lnda 61 79 80 94 40 63 20 28 3 8 28 3616 Malawi . S 59 . . 73 .. 51 1 4 . (.) . 2517 Rwanda 49 64 68 68 30 59 2 2 . (.) 1618 Sri Lanka 95 94 100 98 90 90 27 52 1 1 75 8519 Benin 26 60 38 78 15 42 2 12 . . 1 820 Mozambique 48 . 60 . . 36 . . 2 . . . . (.) 11

21 Sierra Leone 23 37 30 45 15 30 2 12 (.) 1 722 China 102 93 . . . . . 51 . . 1 . . 6623 Haiti 46 58 50 . . 42 . 4 9 (.) 1 1524 Pakistan 30 51 46 69 13 32 11 17 1 2 15 2425 Tanzania 25 70 33 80 18 61 2 4 . (.) 10 6626 Zaire 60 90 88 103 32 77 3 19 (.) . . 31 1527 Niger 5 23 7 29 3 17 (.) 3 (.) 1 828 Guinea 30 34 44 46 16 22 2 16 . . 7 2029 Central African Rep. 32 78 53 101 12 55 1 9 . . 1 730 Madagascar 52 94 58 100 45 87 4 12 (.) 2 . . 5031 Uganda 49 50 65 58 32 41 3 5 (.) 1 3532 Mauritania 8 26 13 34 3 17 (.) 5 .. (.) 5 1733 Lesotho 83 101 63 82 102 122 3 17 (.) . . . . 5234 Togo 44 102 63 129 24 75 2 25 . . 1 10 1835 Indonesia 71 94 86 100 58 89 6 22 1 2 39 6236 Sudan 25 50 35 58 14 42 3 16 (.) 2 13 20

Middle-income countries 79 w 95 w 85 w 103 w 72 w 94 w 16 w 41 w 4 U) 11 w 53 w 72 wOil exporters 60w 91 w 71 w 110w 50w 91 w 11 w 34w 3 w 8w 34w 64wOil importers 8] w 97 w 92 w 100 w 83 w 95 w 19 w 44 w 5w 13 w 62 w 76 w

37 Kenya 47 99 64 105 30 94 2 18 (.) 1 20 4538 Ghana 38 71 52 80 25 61 5 32 (.) 1 2739 Yemen Arab Rep. 8 29 14 50 (.) 7 (.) 4 . . 1 3 1340 Senegal 2] 41 36 50 1] 32 3 10 1 2 6 1041 Angola 21 . . 28 . . 13 . . 2 . . (.) . . 542 Zimbabwe 96 97 107 105 86 90 6 9 (.) . . 3943 Egypt 66 74 80 88 52 58 16 47 5 14 26 4444 Yemen, PDR 13 72 20 92 5 51 5 28 . . 2 . . 2745 Liberia 31 64 45 80 18 48 2 20 (.) 2 9 3046 Zambia 42 98 51 106 34 89 2 16 . . 2 . . 3947 Honduras 67 85 68 85 67 84 8 13 1 7 45 6048 Bolivia 64 86 78 96 50 76 12 29 4 13 39 6349 Cameroon 65 101 87 42 43 91 2 16 . . 1 1950 Thailand 83 82 88 85 79 78 13 28 2 5 68 8451 Philippines 95 105 98 102 93 107 26 56 13 24 72 8852 Congo, Peoples Rep. 78 156 103 163 53 148 4 69 1 3 1653 Nicaragua 66 85 65 83 66 88 7 26 1 11 . . 9054 Papua New Guinea 32 60 59 70 7 49 1 13 . . . . 2955 El Salvador 80 79 82 80 77 77 13 23 1 8 49 6256 Nigeria 36 62 46 . . 27 . . 4 13 (.) 1 15

57 Peru 83 112 95 116 71 106 15 50 4 16 61 8058 Morocco 4] 72 67 90 27 54 5 20 1 4 14 2859 Mongolia 79 108 79 111 78 105 51 81 8 860 Albania 94 . . 102 . . 86 . . 20 . . 5 . . . S

61 Dominican Rep. 98 96 99 95 98 96 7 28 1 10 65 6762 Colombia 77 124 77 122 77 127 12 43 2 10 6363 Guatemala 45 64 50 68 39 58 7 15 2 5 3264 Syrian Arab Rep. 65 89 89 105 39 73 16 50 4 14 30

Table 23. Educationa

Numberenrolled in

Numberenrolled in

Number enrolled in primary school secondary higher education Adultas percentage of age group school as as percentage literacy

percentage of of population rateTotal Male Female age group aged 20-24 (percent)

a. Figures in italics are years other than those specified. See the technical notes.

179

Number enrolled in primary schoolas percentage of age group

Numberenrolled insecondaryschool as

percentage ofage group

Numberenrolled in

higher educationas percentageof populationaged 20-24

Ad u Itliteracy

rate(percent)Total Male Female

1960 1978 1960 1978 1960 1978 1960 1978 1960 1977 1960 1976

65 Ivory Coast 46 71 68 88 24 54 2 14 (.) 2 5 2066 Ecuador 83 108 87 110 79 106 12 46 3 29 68 7767 Paraguay 98 85 105 87 90 84 11 25 2 8 75 8468 Tunisia 66 100 88 116 43 83 12 30 5 16 6269 Korea, Oem. Rep. 113 115 112

70 Jordan 77 102 94 103 59 101 74 1 7 32 7071 Lebanon 102 96 105 103 99 89 19 46 672 Jamaica 92 98 92 97 93 97 45 58 2 8273 Turkey 75 105 90 115 58 95 14 41 3 8 38 6074 Malaysia 96 94 108 95 83 92 19 48 1 4 53 60

75 Panama 96 88 98 89 94 86 29 116 5 21 7376 Cuba 109 122 109 125 109 119 14 51 3 16

77 Korea, Rep. of 94 111 99 112 89 111 27 74 5 11 71 9378 Algeria 46 99 55 114 37 82 8 29 (.) 4 10 3579 Mexico 80 116 82 119 77 114 11 39 3 11 65 82

80 Chile 109 118 111 118 107 117 24 52 4 13 8481 South Africa 89 94 85 15 3 5782 Brazil 95 88 97 87 93 88 11 24 2 13 61 7683 Costa Rica 96 107 97 108 95 107 21 46 5 19 9084 Romania 98 106 101 109 95 103 24 84 5 10 98

85 Uruguay 111 105 111 103 111 108 37 64 8 18 9486 Iran 41 101 56 121 27 80 12 44 1 5 16 5087 Portugal 117 119 115 55 4 11 62 7088 Argentina 98 110 98 110 99 111 23 41 11 29 91 9489 Yugoslavia 111 99 113 100 108 98 58 82 9 23 77 85

90 Venezuela 100 106 100 106 100 106 21 38 4 21 63 8291 Trinidad and Tobago 88 99 89 98 87 101 24 39 1 4 93 9592 Hong Kong 87 115 93 116 79 114 20 57 4 10 70 9093 Singapore 111 109 121 111 101 107 32 57 6 9

94 Greece 102 104 104 104 101 103 37 79 4 19 81

95 Israel 98 97 99 96 97 97 48 68 10 25 8496 Spain 110 110 106 110 116 110 23 76 4 22 87

Industrial marketeconomies 114 w 100w 109w 102w 108 w 102w 68w 89w 17 w 37 99 w

97 Ireland 110 104 107 105 112 104 35 92 9 19 9898 Italy 111 103 112 104 109 103 34 73 7 27 91 9899 New Zealand 108 108 110 109 106 108 73 82 13 28 99

100 United Kingdom 92 106 92 105 92 106 66 83 9 19 99101 Finland 97 85 100 86 95 85 74 89 7 20 99 100

102 Austria 105 100 106 100 104 99 50 72 8 21 99 99103 Japan 103 98 103 98 102 98 74 93 10 32 98 99104 Australia 103 94 103 94 103 93 51 73 13 26 100105 Canada 107 101 108 101 105 100 46 89 16 38 99106 France 144 112 144 113 143 111 46 83 10 26 99

107 Netherlands 105 101 105 100 104 102 58 92 13 28 99108 United States 118 98 . . . . . 86 97 32 56 98 99109 Norway 100 100 100 100 100 100 57 90 7 24 . 99110 Belgium 109 102 111 101 108 102 69 86 9 23 99111 Germany, Fed. Rep. 133 90 . . . . . 94 6 25 99

112 Denmark 103 103 103 102 103 104 80 10 32 99113 Sweden 96 99 95 99 96 99 55 73 9 35 99114 Switzerland 118 86 118 86 118 87 26 55 7 16 99

Capital-surplusoil exporters 48w 97w 7lwllOw 25w 85w 13w 45w 2w 8w 14w

115 Iraq 65 117 94 130 36 103 19 50 2 9 18

116 Saudi Arabia 12 59 22 74 2 44 2 26 (.) 7 3

117 Libya 59 123 92 128 24 119 9 67 7 50118 Kuwait 117 104 131 110 102 98 37 74 13 47 60

Nonmarket industrialeconomies 101 w 97 iv 101 a 97 w 101 w 97 w 47w 71w 11w 21w 93w

119 Bulgaria 93 96 94 96 92 95 55 90 11 22 91 .

120 Poland 109 100 110 102 107 99 50 67 9 18 95 98121 Hungary 101 97 103 96 100 97 46 69 7 12 97 98122 USSR 100 97 100 97 100 97 49 72 11 22 98 100123 Czechoslovakia 93 94 93 94 93 95 25 40 11 15 95 .

124 German Dem. Rep. 112 94 111 92 113 95 39 92 16 29

Table 24. Defense and Social Expenditure

180

Defense expenditureas percentage of:

Central government expenditureper capita (1975 dollars)

GNP

Centralgovernmentexpenditure Defense Education Health

1972a 1978b 1972a 1978b 1972a 1978b 1972a 1978b 1972a 1978b

Low-income countries 3.7 w 4.0 w 19.4 w 16,2 w 6w 7w 3w 4w 2w 2wChina and India .. 4.0 w .. 15.9 w 7w .. 4wOther tow-income 3.7 w 3.9 w 19.4 zv 18.9 w 6w 7w 3w 3w 2 w 2 w

1 Kampuchea, Dem. . . . . . . . . .

2LaoPDR . .. ..3 Bhutan .. .. .. .. .. ..4 Bangladesh 0.5 . . 5. 1 . . (.) .

. 1 (.)5 Chad 4.5 . . 24.6 . . 6 . . 3 . . 1

6 Ethiopia 2.0 . . 14.3 . . 2 . . 2 2 1 1

7 Nepal 0.6 0.8 7.1 6.4 1 1 2 (.) 1

8 Somalia 6.2 7.3 23.3 20.1 7 7 2 5 2 29 Mali . . 3.3 . . 18.6 . . 4 . . 5 . . 1

10 Burma 6.3 3.7 31,6 26.3 7 5 3 2 1 1

11 Afghanistan . . . . . . . . . . . . .

12 Viet Nam .. .. .. .. .. .. ..13 Burundi 2.0 2.5 10.3 11.2 2 3 6 6 1 1

14 Upper Volta 1.3 3.2 11.5 21.8 1 4 3 3 1 1

15 India . . 2.8 . . 18.7 . . 4 .. (.) . . (.)

16 Malawi 0.6 2.8 3.2 11.2 1 4 4 4 1 217 Rwanda 3.0 1.7 25.6. 12.4 4 2 3 3 1 1

18 Sri Lanka 1.3 0.7 4.1 1.9 4 2 12 8 6 519 Benin20 Mozambique

.. . .

. .

..

. .

.. ...

,

.

21 Sierra Leone . . 1.7 . 7.8 . . 3 . . 7 . . 322 China 4.8 15.1 9 623 Haiti .. .. .. .. .. .. ..24 Pakistan 6.6 5.3 39.9 31.4 10 10 (.) 1 (.) 1

25 Tanzania 2.3 4.0 11.9 14.7 4 7 5 7 2 4

26 Zaire . . . . . . .

27 Niger 0.9 6.1 . . 2 628 Guinea , . .

29 Central African Rep. . . . . . . . . , . . . .

30 Madagascar 0.8 . . 3.6 . . 2 . . 5 2

31 Uganda32 Mauritania33 Lesotho34 logo 1235 ndonesia36 Sudan 3.5 3.5 23.5 13.5 8 15 4

Middle-income countries 2.9 w 2.8 w 13.6 w 12.1 w 27 w 29w 22w 33 w 9 zv 15 ZL

Oil exporters 3.0 w 2.6 w 16.4 w 10.8 w 31 w 22 w 25 w 32w lOw 8wOil importers 2.8 w 2.9 w 12.6 w 12.6 w 24 w 32w 20w 34w 9w 20 w

37 Kenya 1.3 4.0 6.0 16.0 3 10 11 12 4 538 Ghana 1.6 0.8 8.0 5.3 8 4 20 11 6 539 Yemen Arab Rep. . . 4.1 . . 30.6 . . 15 5 240 Senegal . . , . . . .

41 Angola .. . . .. .. .. , . ..42 Zimbabwe .. .. .. .. .. .. ..43 Egypt . . 3.7 . . 8.2 . . 17 . . 24 744 Yemen, PDR .. .. .. .. ..45 Liberia 1.2 . . 4.1 5 . . 20 . . 1046 Zambia . . . . . . . . . . . . 33 23 13 11

47 Honduras 1.9 . . 12.4 . . 7 . . 13 . . 648 Bolivia 1.5 2.0 16.1 16.1 7 10 13 18 4 549 Cameroon . . 1.4 . . 8.3 . . 5 . . 11 . . 350 Thailand 3.5 3.1 19.5 18.1 11 13 11 15 2 351 Philippines 1.5 2.8 10.1 19.0 5 11 7 7 1 3

52 Congo, People's Rep.53 Nicaragua

. .

1.9 . .

. .

12.3.

. .

. .

12 . .

. .

16. ,

. . 454 Papua New Guinea . . 1.5 . . 4.3 . . 6 . . 26 . . 1255 El Salvador 0.8 1.0 6.6 6.8 4 5 11 14 6 656 Nigeria 5.2 4.0 40.2 17.9 20 20 2 11 2 2

57 Peru 2.5 2.1 14.8 13.1 23 18 35 23 10 858 Morocco 2.8 6.8 12.3 16.3 13 41 21 34 5 759 Mongolia . . . . .

60 Albania . . . . . . . . . . . . .

61 Dominican Rep. 1.5 8.5 11 18 15 .

62 Colombia .. . . .. .. . . .. .. .. . .

63 Guatemala 1.1 1.2 11.0 11.0 3 8 5 9 2 564 Syrian Arab Rep. 10.9 15.3 37.2 34.9 64 121 19 22 2 3

Nonmarket industrialeconomies

119 Bulgaria120 Poland121 Hungary122 USSR123 Czechoslovakia124 German Dem. Rep.

a. Figures in italics are for 1973, not 1972. b. Figures in italics are for 1977. not 978.

181

Defense expenditureas percentage of:

Central government expenditureper capita (1975 dollars)

GNP

Centralgovernmentexpenditure Defense Education Health

1972 1978b 1972a 1978b 1972 1978b 1972a 1978b 1972a 1978b

65 Ivory Coast .. . .. . .. .. ..66 Ecuador 2.0 2.2 16.9 19.2 11 15 20 20 3 667 Paraguay 1.8 1.3 13.8 11.3 9 9 8 11 2 268 Tunisia 1.1 1.5 4.8 4.3 7 13 46 62 11 2169 Korea, Dem, Rep. . . . . . . . . . .

70 Jordan .. .. .. .. .. ..71 Lebanon . . . . . . . . . . .

72 Jamaica . . 1.0 . . 2.6 . . 12 . . 83 . . 3573 Turkey 3.4 3.1 15.4 12.1 27 16 32 27 6 374 Malaysia 5.1 4.0 18.5 14.7 33 35 42 51 12 1575 Panama . . . . 64 . . 4776 Cuba .. .. .. .. .. .. ..77 Korea, Rep. of 4.9 6.3 25.8 38.0 22 49 14 21 1 278 Algeria .. .. . . . . .. .. .. .

79 Mexico 0.6 0.6 4.9 3.4 8 8 27 47 8 980 Chile 2.6 4.4 6.1 12.0 4 37 9 40 5 2081 South Africa .. .. .. .. .. .. .. .

82 Brazil 1.4 1.1 8.3 5.8 13 14 11 14 10 2083 Costa Rica 0.5 0.] 2.6 2.7 5 8 48 68 6 1084 Romania . . . . . . . . . . . . .

85 Uruguay 1.4 2.5 5.6 10.5 16 17 28 15 5 886 Iran 7.4 24.1 104 45 1687 Portugal .. .. .. .. .. .. ..88 Argentina 1.5 2.5 9.0 11.9 22 36 29 25 8 689 Yugoslavia 4.1 4.1 20.5 19.0 54 72 . . . . 66 9890 Venezuela 2.1 2.3 9.7 7.8 41 55 73 101 27 3591 Trinidad and Tobago92 Hong Kong .. .. .. .. .. .. ..93 Singapore 6.0 5.4 35.3 26.8 126 164 56 88 28 5294 Greece 7.8 5.7 14.6 19.0 90 145 54 77 44 7395 Israel 17.6 23.4 39.8 35.8 620 861 141 222 55 10996 Spain 1.3 1.0 6.5 4.2 34 32 43 66 5 5

Industrial marketeconomies 5.1 w 2.9 w 21.6 w 13.4 or 301 w 281 w 80 w 120w 152 w 229 u

97 Ireland .. .. .. .. ..98 Italy 2.0 . . 6.3 . . 70 . . 178 . . 15099 New Zealand 1.5 1.6 5.8 4.4 69 70 215 231 195 241

100 United Kingdom 5.5 . . 16.7 . . 21] . . 34 . . 158101 Finland 1.5 1.4 6.1 4.7 80 83 203 272 140 196102 Austria 1.0 1.2 3.0 3.1 47 67 160 215 156 272103 Japan .. .. . . .. .. .. .. ..104 Australia 2.8 3.0 14.5 9.4 188 175 55 171 108 193105 Canada 1.8 8.0 135 75 129106 France 2.6 7.0 . . 181 . . 251 . . 375107 Netherlands . . 3.4 . . 6.4 . . 223 . . 520 . . 19108 United States 6.3 3.1 32.2 21.2 453 374 45 52 120 179109 Norway 3.4 3.3 9.4 8.1 201 236 206 264 255 319110 Belgium 2.6 2.9 6.6 5.8 157 202 364 514 34 63111 Germany, Fed. Rep. 3.0 2.8 12.4 9.8 200 216 24 21 281 433112 Denmark 2.3 2.5 7.0 6.5 169 200 377 307 231 50113 Sweden 3.6 3.3 12.2 8.0 283 280 335 364 81 86114 Switzerland 2.0 2.0 15.1 10.0 184 182 51 68 122 197

Capital-surplusoil exporters

115 Iraq116 Saudi Arabia117 Libya118 Kuwait 1 8 11.2 26

Table 25. Income Distribution

182

Percentage share of household income, by percentile groups of householdsa

YearLowest

20 percentSecondquintile

Thirdquintile

Fourthquintile

Highest20 percent

Highest10 percent

Low-income countriesChina and IndiaOther low-income

1 Kampuchea, Oem.2 Lao PDR3 Bhutan4 Bangladesh5 Chad6 Ethiopia7 Nepal8 Somalia9 Mali

10 Burma

1976-77 11.. 1 59.2 46.5

11 Afghanistan12 Viet Nam13 Burundi14 Upper Volta15 India 1975-36

. .

.

. .

7.0

. .

. .

. .

9.2

S

. 0

13.9 20.5 49.4 33.616 Malawi17 Rwanda18 Sri Lanka19 Benin20 Mozambique

1967-68

1969-70

10.4. .

7.5

. .

11.1.

11.7

13.1. 0

15.7

14.8

21.7

50.6

43.4

40.1

28.2

21 Sierra Leone22 China23 Haiti24 Pakistan25 Tanzania 1969 5.8 10.2 13.9 19.7 50.4 35.626 Zaire27 Niger28 Guinea29 Central African Rep.30 Madagascar31 Uganda32 Mauritania33 Lesbtho34 Togo35 Indonesia36 Sudan

1976 6.6 7.8 12.6 23.6 49.4 34.0

Middle-income countriesOil exportersOil importers

37 Kenya38 Ghana39 Yemen Arab Rep.40 Senegal41 Angola42 Zimbabwe43 Egypt44 Yemen, PDR45 Liberia46 Zambia47 Honduras48 Bolivia49 Cameroon50 Thailand51 Philippines

1967

1930-71

2.3

5.2

5.0

9.o

8.0

12.8

16.9

19.0

67.8

54.0

50.0

38.552 Congo, Peoples Rep.53 Nicaragua54 Papua New Guinea55 El Salvador56 Nigeria57 Peru58 Morocco59 Mongolia60 Albania61 Dominican Rep.

1972 1.9 5.1 11.0 21.0 61.0 42.9

62 Colombia63 Guatemala64 Syrian Arab Rep.

65 Ivory Coast66 Ecuador67 Paraguay68 Tunisia69 Korea, Dem. Rep.70 Jordan71 Lebanon72 Jamaica73 Turkey74 Malaysia75 Panama76 Cuba77 Korea, Rep. of78 Algeria79 Mexico80 Chile81 South Africa82 Brazil83 Costa Rica84 Romania85 Uruguay86 Iran87 Portugal88 Argentina89 Yugoslavia90 Venezuela91 Trinidad and Tobago92 Hong Kong93 Singapore94 Greece

115 Iraq116 Saudi Arabia117 Libya118 Kuwait

119 Bulgaria120 Poland121 Hungary122 USSR123 Czechoslovakia124 German Dem. Rep.

Percentage share ot household income, by percentile groups of householdsa

Lowest Second Third Fourth Highest HighestYear 20 percent quintile quintile quintile 20 percent 10 percent

19731970

1976

1977

1968

19721971

3.43.3

5 11.2

4.4

. a3.3

a. These estimates should be treated with caution. See the technical notes.

. a7,3

7 Ô

9.0

a. a8.7

1 a. a

12.2

102 Austria . . . . .

103 Japan 1969 7.9 13.1 16.8104 Australia 1966-67 6.6 13.5 17.8105 Canada 1969 5.0 11.8 17.9106 France 1970 4.3 9.8 16.3107 Netherlands 1975 8.5 13.6 17.8108 United States 1972 4.5 10.7 17.3109 Norway 1970 6.3 12.9 18.8110 Belgium . . . . .

111 Germany, Fed. Rep. 1973 6.5 10.3 15.0112 Denmark . . . . .

113 Sweden 1972 6.6 13.1 18.5114 Switzerland . .

15.4

1 a. a

13.8

a.13.3

Industrial marketeconomies

97 Ireland . . . . . .

98 Italy 1969 5.1 10.5 16.299 New Zealand . . . . . . .

100 United Kingdom 1977-78 7.4 11.7 17.0101 Finland . . . . . .

Capital-surplusoil exporters

Nonmarket industrialeconomies

183

1 a. a 56.5 40.720.7 56.6 39.6

22.4 45.3 27.5

20.4 57,7 40.621.4 51.4 34.8

11. ó 66.6 50.619.9 54.8 39.5

21.5 50.3 35.223.9 38.7 22.922.8 54.0 35.722.8 50.0 31.8

23.1 42.2 26.7

. . . .

21.7 46.5 30.9. . . .

24.7 39.5 23.3

21.2 41. 27.223.4 38.8 23.724.3 41.0 25.122.7 46.9 30.423.0 37.1 22.524.7 42.8 26.624.7 37,3 22.2

22.0 46.2 30.3

24.8 37. ó 21.3

95 Israel96 Spain 1974 6. a 11.8 16.9

a.12.1

4

6.63.04.2

14118.7

19701978

12.913.9

7.39.1

19701975-76

Technical NotesTable 1. Basic Indicators

The estimates of population formid-1979 are primarily from theUN Population Division. In somecases the UN population datawere adjusted by using morerecent data from the World Bankand the US Bureau of the Census.

The data on area are from theFAO Production Yearbook, 1979.

Gross national product (GNP)measures the total domestic andforeign output claimed by resi-dents of a country. It comprisesgross domestic product (see thetechnical notes for Table 2) andfactor incomes (such as invest-ment receipts and workers' remit-tances) accruing to residents fromabroad, less the income earned inthe domestic economy accruingto persons abroad. It is calculatedwithout making deductions fordepreciation. For some countriesthe estimates of GNP are adjustedfrom data on net material product.

The GNP per capita figures werecalculated according to the WorldBank Atlas method: GNP innational currency units wasexpressed first in weighted aver-age prices for the base period1977-79, converted into dollars atthe GNP-weighted averageexchange rate for this period, andadjusted for US inflation. Theresulting estimate of GNP wasthen divided by the population inmid-1979. This method reducesthe effect of temporary under-valuation or overvaluation of acurrency and generally assuresgreater comparability of the esti-mates of GNP per capita acrosscountries.

The average annual rate of infla-tion was calculated from the"implicit gross domestic product(GDP) deflator," which is calcu-lated by dividing, for each year of184

the period, the value of GDP incurrent market prices by thevalue of GDP in constant marketprices, both in national currency.This measure of inflation has lim-itations, especially for the oil-pro-ducing countries in the light ofsharp increases in oil prices.

The adult literacy rate is the per-centage of persons aged 15 andover who can read and write.These rates are based primarilyon information from the UN Edu-cational, Scientific and CulturalOrganization (UNESCO), supple-mented by World Bank data. Forsome countries the estimates arefor years other than, but gener-ally not more than two years dis-tant from, those specified. Thusthe series are not strictly com-parable for all countries.

Life expectancy at birth indicatesthe number of years newbornchildren would live if subject tothe mortality risks prevailing forthe cross-section of population atthe time of their birth. Data arefrom the UN Population Division,supplemented by World Bankestimates.

The index of food production percapita shows the average annualquantity of food produced percapita in 1977-79 in relation tothat in 1969-71. The estimateswere derived from those of theFood and Agriculture Organiza.tion (FAO), which are calculatedby dividing indices of the quan-tity of food production by indicesof total population. Food is con-sidered to comprise cereals,starchy roots, sugar cane, sugarbeet, pulses, edible oils, nuts,fruits, vegetables, livestock andlivestock products. Quantities offood prodtiction are measurednet of animal feed, seeds for usein agriculture and food lost inprocessing and distribution.

The country-group averages inthis table are weighted by coun-try population.

The accompanying table showsbasic indicators for 31 countriesthat have a population of lessthan a million and are membersof the United Nations, the WorldBank or both.

Tables 2 and 3. Growth andStructure of Production

Most of the definitions used arethose of the UN System of NationalAccounts.

Gross domestic product (GDP)measures the total final output ofgoods and services produced byan economythat is, within acountry's territory by residentsand nonresidents, regardless ofits allocation to domestic and for-eign claims It is calculated with-out making deductions fordepreciation. For most countries,GDP by industrial origin is mea-sured at factor cost, but for somecountries without completenational accounts series at factorcost, market price series wereused. GDP at factor cost is equalto GDP at market prices, less indi-rect taxes net of subsidies.

The agricultural sector comprisesagriculture, forestry, hunting andfishing. The industrial sectorcomprises mining, manufacturing,construction, and electricity,water and gas. All other branchesof economic activity are cate-gorized as services.

National accounts series indomestic currency units wereused to compute the indicators inthese tables. The growth rates inTable 2 were calculated from con-stant price series, the shares ofGDP in Table 3 from current priceseries.

The average growth rates forthe country groups in Table 2 areweighted by country GDP in 1970in dollars. The average sectoralshares in Table 3 are weighted bycountry GDP in current dollars.

Tables 4 and 5. Growth ofConsumption and Investment;Structure of Demand

GDP is defined in the technicalnotes for Table 2.

Public consumption (or generalgovernment consumption) in-cludes all current expenditurefor purchases of goods and ser-vices by all levels of government.Capital expenditure on nationaldefense and security is regardedas consumption expenditure.

Private consumption is the mar-ket value of all goods and servicespurchased or received as incomein kind by households and non-profit institutions. It includesimputed rent for owner-occupied

dwellings.Gross domestic investment

consists of the outlays for addi-tions to the fixed assets of theeconomy, plus the net value ofinventory changes.

Gross domestic saving shows theamount of gross domestic invest-ment financed from domesticoutput. Comprising public andprivate saving, it is the differencebetween gross domestic invest-ment and the deficit on the currentaccount of goods and nonfactorservices, excluding net currenttransfers.

Exports of goods and nonfactorservices represent the value of allgoods and nonfactor services soldto the rest of the world; they

include merchandise, freight,insurance, travel and other non-factor services. The value of factorservices, such as investmentreceipts and workers' remittancesfrom abroad, is excluded.

The resource balance is the dif-ference between exports andimports of goods and nonfactorservices.

National accounts series indomestic currency units wereused to compute the indicators inthese tables. The growth rates inTable 4 were calculated from con-stant price series, the shares ofGDP in Table 5 from current priceseries.

The country-group averages inTable 5 are weighted by countryGDP in current dollars.

Table 6. Industrialization

The percentage distribution ofvalue added among manufacturingindustries was calculated fromdata obtained from the UN Indus-trial Development Organization(UNIDO), with the base valuesexpressed in 1975 dollars.

The classification of manufac-turing industries is in accord withthe UN International StandardIndustrial Classification of AllEconomic Activities (ISIC). Foodand agriculture comprise ISICMajor Groups 311, 313 and 314;Textiles and clothing 321-24;Machinery and transport equipment382-84; and Chemicals 351 and352. Other manufacturingcomprises ISIC Major Division 3,less all of the above.

The figures for value added inmanufacturing are from the WorldBank's national accounts series innational currencies, converted to1975 dollars.

To calculate gross manufacturingoutput per capita, ratios of grossoutput to value added in man-ufacturing, derived from variousissues of the UN Yearbook of Indus-

185

UN/World Bank memberswith a populationof less than I million

Population(millions)Mid-1979

Area(thousandsof square

kilometers)

GNPper

capita(dollars)

1979

Lifeexpectancy

at birth(years)1979

Average indexof food

productionper capita

(1969-71 100)1977-79

Guinea-Bissau 0.8 36 170 42 94Maldives 0.2 (.) 200 47Comoros 0.4 2 220 47Gambia, The 0.6 11 250 42 77Cape Verde 0.3 4 260 61

Equatorial Guinea 0.4 28 . . 47Western Samoa 0.2 3 68Solomon Islands 0.2 28 . . 124Dominica 0.1 1 400Djibouti 0.3 22 420 45

Sao Tome and Principe 0.1 1 450Guyana 0.8 215 580 68 97Grenada 0.1 (.) 620 69

Swaziland 0.5 17 650 47 109Botswana 0.8 600 720 49 89

St. Lucia 0.1 1 780 .

Mauritius 0.9 2 1,030 65 100Seychelles 0.1 (.) 1,400Fiji 0.6 18 1,680 72 124Barbados 0.2 (.) 2,440 71 81

Suriname 0.4 163 2,590 68 148Malta 0.3 (.) 2,610 72 126Bahamas 0.2 14 2,750 69Oman 0.9 300 2,970 48Cyprus 0.6 9 3,110 73 94

Gabon 0.6 268 3,280 45 94Bahrain 0.4 1 5,270 67Iceland 0.2 103 10,400 75 115Luxembourg 0.4 3 12,670 72 104United Arab Emirates 0.8 84 15,590 62

Qatar 0.2 11 16,670 58

trial Statistics, were applied to theWorld Bank's data on value addedin manufacturing. Per capita val-ues were then calculated by usingmid-year estimates of countrypopulation.

Table 7. Commercial Energy

All data on energy are from UNsources. They refer to commercialforms of primary energy: coal andlignite, petroleum, natural gasand natural gas liquids, andhydroelectricity and nuclearpowerall converted into coalequivalents. The use of firewoodand other traditional fuels, thoughsubstantial in some developingcountries, is not taken intoaccount because reliable and com-prehensive data are not available.

The country-group averages ofgrowth rates of energy productionare weighted by volumes of coun-try production in 1974; those ofgrowth rates of energy consump-tion, by volumes of country con-sumption in 1974; those of energyconsumption per Ca pita, by countrypopulation.

Energy imports refer to the dol-lar value of energy importsRevised Standard InternationalTrade Classification (SITC) Sec-tion 3and are expressed as apercentage of earnings from mer-chandise exports. The country-group averages are weighted bycountry merchandise exports incurrent dollars.

Because data on energy importsdo not permit a distinctionbetween petroleum imports forfuel and for use in the petro-chemicals industry, these percent-ages may be overestimates of thedependence on imported energy.

Table 8. Merchandise Trade

The statistics on merchandisetrade are from UN publicationsand the UN trade data system,186

supplemented by statistics fromthe UN Conference on Trade andDevelopment (UNCTAD), Inter-national Monetary Fund (IMF),Direction of Trade, InternationalFinancial Statistics and in a fewcases from World Bank countrydocumentation.

Merchandise exports and importscover, with some exceptions, allinternational changes in owner-ship of merchandise passingacross the customs borders of thereporting countries. Exports arevalued f.o.b. (free on board),imports c.i.f. (cost, insurance andfreight), unless otherwise specifiedin the foregoing sources. Thesevalues are in current dollars.

The growth rates of merchandiseexports and imports are in realterms and calculated from quan-tum (volume) indices of exportsand imports. For the majority ofdeveloping countries theseindices are from the UNCTADHandbook of International Trade andDevelopment Statistics and supple-mentary data that show revisions.For industrialized countries theindices are from the UN Yearbookof International Trade Statistics andUN Monthly Bulletin of Statistics.

The terms of trade, or the "netbarter terms of trade," are calcu-lated as the ratio of a country'sindex of export unit values to thatof import unit values. The terms-of-trade index numbers shownfor 1960 and 1979, with 1975=100,thus indicate changes in exportprices in relation to import prices.The unit value indices are fromthe same sources cited above forthe growth rates of exports andimports.

Tables 9 and 10. Structure ofMerchandise Trade

The shares in these tables arederived from trade values in cur-rent dollars reported in UN tradetapes and the UN Yearbook of Inter-

national Trade Statistics.Merchandise exports and imports

are defined in the technical notesfor Table 8.

In the categorization of exportsin Table 9, fuels, minerals and met-als are the commodities in SITC(Revised) Section 3, Divisions 27and 28, and the nonferrous met-als of Division 68. Other primarycommodities comprise SITC Sec-tions 0, 1, 2 and 4 (food and liveanimals, beverages and tobacco,inedible crude materials, oils, fatsand waxes) less Divisions 27 and28 (minerals, crude fertilizers andmetalliferous ores). Textiles andclothing represent SITC Divisions65 and 84 (textiles, yarns, fabricsand clothing). Machinery andtransport equipment are the com-modities in SITC Section 7. Othermanufactures, calculated as theresidual from the total value ofmanufactured exports, representSITC Sections 5 to 9 less Section 7and Divisions 65, 68 and 84.

In the categorization of importsin Table 10, food commodities arethose in SITC (Revised) Sections0, 1 and 4 and in Division 22 (foodand live animals, beverages andtobacco, oils and fats). Fuels arethe commodities in SITC Section3 (mineral fuels, lubricants andrelated materials). Other primarycommodities comprise SITC Sec-tion 2 (crude materials excludingfuels), less Division 22 (oilseedsand nuts) plus Division 68 (non-ferrous metals). Machinery andtransport equipment are the com-modities in SITC Section 7. Othermanufactures, calculated as theresidual from the total value ofmanufactured imports, representSITC Sections 5 to 9 less Section 7and Division 68.

The country-group averages inTable 9 are weighted by countrymerchandise exports in currentdollars; those in Table 10, bycountry merchandise imports incurrent dollars.

Table 11. Destination ofMerchandise Exports

Merchandise exports are defined inthe technical notes for Table 8. Alltrade shares in this table arebased on statistics on the value oftrade in current dollars in IMF,Direction of Trade. Unallocatedexports are distributed among thecountry groups in proportion totheir respective shares of alloca-ble trade. Industrial market econo-mies also include Gibraltar, Ice-land and Luxembourg; capital-surplus oil exporters also includeOman, Qatar and United ArabEmirates.

The country-group averagesare weighted by country merchan-dise exports in current dollars.

Table 12. Trade in ManufacturedGoods

The data in this table are from theUnited Nations and are amongthose used to compute specialTable B in the UN Yearbook ofInternational Trade Statistics. Man-ufactured goods are the com-modities in SITC (Revised) Sec-tions 5 through 9 (chemicals andrelated products, manufacturedarticles, machinery and transportequipment) excluding Division 68(nonferrous metals).

The country groups are thesame as those in Table 11. Thecountry-group averages areweighted by country manufac-tured exports in current dollars.

Table 13. Balance of Paymentsand Debt Service Ratios

The current account balance is thedifference between (i) exports ofgoods and services plus inflowsof unrequited official and privatetransfers and (ii) imports of goodsand services plus unrequitedtransfers to the rest of the world.Excluded from this figure are all

interest payments on external publicand publicly guaranteed debt, whichare shown separately. Theseinterest payments representthose on the disbursed portion ofoutstanding public and publiclyguaranteed debt plus commit-ment charges on undisburseddebt. The current account esti-mates are from IMF data files;estimates of interest paymentsare from the World Bank DebtReporting System.

Debt service is the sum of inter-est payments and repayments ofprincipal on external public andpublicly guaranteed debt. Debtservice data are from the WorldBank Debt Reporting System.The ratio of debt service toexports of goods and services isone of several rules of thumbcommonly used to assess the abil-ity to service debt. The debt ser-vice ratios in the table do notcover unguaranteed private debt,which for some countries is sub-stantial; the debt contracted forpurchases of military equipmentis also excluded because it usuallyis not reported. The averageratios of debt service to GNP forthe country groups are weightedby country GNP in current dol-lars. The average ratios of debtservice to exports of goods andservices are weighted by countryexports of goods and services incurrent dollars.

The World Bank Debt Report-ing System is concerned solelywith developing countries anddoes not collect data on externaldebt for other groups of coun-tries. Nor are comparable data forthose countries available fromother sources.

Table 14. Flow ofExternal Capital

Data on the gross inflow and repay-ment of principal (amortization) ofpublic and publicly guaranteed

medium- and long-term loans arefrom the World Bank Debt Report-ing System. The net inflow is thegross inflow less the repayment ofprincipal.

Net direct private investment isthe net amount invested or rein-vested by nonresidents of thecountry in enterprises in whichthey or other nonresidents exer-cise significant managerial con-trol. These net figures also takeinto account the value of directinvestment abroad by residents.IMF data files were used in com-piling these estimates,

Table 15. External Public Debtand International Reserves

External public debt outstanding rep-resents the amount of public andpublicly guaranteed loans thathave been disbursed, net of can-celed loan commitments andrepayments of principal. The datarefer to the end of the year indi-cated and are from the World BankDebt Reporting System. In es-timating external public debt as apercentage of GNP, GNP was con-verted from national currencies todollars at the average officialexchange rate for the year in ques-tion. The country-group averagesare weighted by country GNP incurrent dollars.

Gross international reserves com-prise a country's holdings of gold,special drawing rights (SDRs), thereserve position of IMF membersin the Fund and holdings of for-eign exchange under the control ofmonetary authorities. The goldcomponent of these reserves isvalued throughout at year-endLondon prices: that is, $37.37 anounce in 1970 and $512.00 anounce in 1979. The data for hold-ings of international reserves arefrom IMF data files. The reservelevels for 1970 and 1979 refer to theend of the year indicated and arein current dollars. The reserve

187

holdings at the end of 1979 are alsoexpressed in the number ofmonths of imports of goods andservices they could pay for, withimports at the average level for1978 or 1979. The country-groupaverages are weighted by countryimports of goods and services incurrent dollars.

Table 16. Official DevelopmentAssistance from OECD andOPEC Members

Official development assistance (ODA)consists of net disbursements ofloans and grants made at conces-sional financial terms by officialagencies of the members of the De-velopment Assistance Committee(DAC) of the Organisation for Eco-nomic Co-operation and Develop-ment (OECD) and members of theOrganization of Petroleum Export-ing Countries (OPEC) with the ob-jective of promoting economic de-velopment and welfare. It includesthe value of technical cooperationand assistance.

Amounts shown are net disburse-ments to developing countries andmultilateral institutions. The dis-bursements to multilateral institu-tions are now reported for all DACmembers on the basis of the date ofissue of notes; some DAC memberspreviously reported on the basis ofthe date of encashment. Net bilateralflows to low-income countries excludeunallocated bilateral flows and alldisbursements to multilateral insti-tutions.

Figures for 1960 to 1980 weresupplied by the OECD. All othersare projections by World Bank staff,based on OECD and World Bankestimates of GNP growth, informa-tion on budget appropriations foraid, and statements on aid policyby governments. They are projec-tions based on present plans ratherthan predictions of what will occur.

The nominal values shown in thesummary for ODA from OECD188

countries were converted into 1978prices using the dollar GNP defla-tor. This deflator is based on priceincreases in OECD countries (ex-cluding Greece, Portugal, Spainand Turkey) measured in dollars. Ittakes into account the paritychanges between the dollar andnational currencies. For example,when the dollar depreciates, priceincreases measured in national cur-rencies have to be adjusted upwardby the amount of the depreciationto obtain price increases in dollars.

The projections are sensitive toexchange rates, which affect thedollar values of ODA and GNPand the relative weights of coun-tries in the total. No attempt hasbeen made to project changes inexchange rates.

The table, in addition to show-ing totals for OPEC, shows totalsfor the Organization of ArabPetroleum Exporting Countries(OAPEC). The donor members ofOAPEC are Algeria, Iraq, Kuwait,Libya, Qatar, Saudi Arabia andUnited Arab Emirates. ODA datafor OPEC and OAPEC were alsoobtained from the OECD.

Table 17. Population Growth,Past and Projected, andHypothetical StationaryPopulation

The growth rates of population areperiod averages calculated frommid-year country populations.The country-group averages areweighted by country populationin 1970.

The projections of population for1980 and 2000, and to the year inwhich it will eventually becomestationary, were made for eachcountry separately. Starting withinformation on total population,fertility rates and mortality rates inthe base year 1979, these param-eters were projected to 1980 andthereafter for five-year intervals onthe basis of generalized assump-

tions until the population becamestationary. The base-year estimatesare from UN, World PopulationTrends and Prospects by Country,1950-2025, and from the WorldBank, the Population Council, theUS Bureau of the Census, andrecent national censuses.

The net reproduction rate (NRR) in-dicates the number of daughtersthat a newborn girl will bear duringher lifetime, assuming fixed age-specific fertility rates and a fixed setof mortality rates.

The NRR thus measures theextent to which a cohort of new-born girls will reproduce them-selves under given schedules of fer-tility and mortality. An NRR of 1indicates that fertility is at replace-ment level: at this rate child-bearingwomen, on the average, bear onlyenough daughters to replace them-selves in the population. A popula-tion continues to grow afterreplacement-level fertility has beenreached because its past higherbirth rates will have produced anage distribution with a relativelyhigh proportion of women in, orstill to enter, the reproductive ages.The time taken for a country'spopulation to become stationaryafter reaching replacement-levelfertility thus depends on its age struc-ture and previous fertility patterns.

A stationary population is one inwhich age- and sex-specific mor-tality rates have not changed over along period, while age-specific fer-tility rates have simultaneouslyremained at replacement level(NRR= 1). In such a population,the birth rate is constant and equalto the death rate, the age structurealso is constant and the growth rateis zero.

For all the projections, it wasassumed that international migra-tion would have no effect.

The estimates of the hypotheti-cal size of the stationary popula-tion, the assumed year of reachingreplacement-level fertility and the

year of reaching a stationary popu-lation are speculative. They shouldnot be regarded as predictions. Theyare included to provide a sum-mary indication of the long-runimplications of recent trends onthe basis of highly stylizedassumptions. A fuller descriptionof the methods and assumptionsused to calculate the estimates isavailable from the Population andHuman Resources Division of theWorld Bank.

Table 18. Demographic andFertility-related Indicators

The crude birth and death rates indi-cate the number of live births anddeaths per thousand population ina year. They are from the samesources mentioned in the techni-cal notes for Table 17. Percentagechanges are computed fromunrounded data.

The total fertility rate representsthe number of children that wouldbe born per woman, if she were tolive to the end of her child-bearingyears and bear children at each agein accord with prevailing age-spe-cific fertility rates. The rates givenare from the same sources men-tioned in the technical notes forTable 17.

The percentage of women in thereproductive age group refers towomen of child-bearing age(15-44 years) as a percentage ofthe total female population. Theestimates were derived from thepopulation estimates in Table 1.

The percentage of married womenusing contraceptives refers only tomarried women of child-bearingage (15-44 years). These data aremainly derived from DorothyNortman and Ellen Hofstatter,Population and Family Planning Pro-grams: A Factbook (New York: Pop-ulation Council, various issues);Dorothy Nortman, "ChangingContraceptive Patterns: A GlobalPerspective,"Population Bulletin,

vol. 32, no. 3 (Washington, D.C.:Population Reference Bureau,August 1977); and Office of Popu-lation, Family Planning Service Sta-tistics, Annual Report 1976 (Wash-ington, D.C.: US Agency for Inter-national Development). The datarefer to a variety of years, gener-ally not more than two years dis-tant from those specified.

All country-group averages areweighted by country population.

Table 19. Labor Force

The population of working age refersto the population aged 15-64. Theestimates for 1979 are based on thepopulation estimates in Table 1;those for 1960 are from the UNPopulation Division. The country-group averages are weighted bycountry population.

The labor force comprises eco-nomically active persons, includ-ing the armed forces and theunemployed, but excludinghousewives, students and eco-nomically inactive groups. Agri-culture, industry and services aredefined in the same manner as inTable 2. The estimates of the sec-toral distribution of the labor forcein 1960 are from InternationalLabour Office (ILO), Labour ForceEstimates and Projections,1 950-2000; most of those for 1979are geometric extrapolations ofILO estimates for 1960 and 1970 inthe same source. The country-group averages are weighted bycountry labor force.

The labor force growth rates werederived from the Bank's popula-tion projections and ILO data onactivity rates, again from thesource cited above. The country-group averages for 1960-70 and1970-80 are weighted by countrylabor force in 1970; those for1980-2000, by projections of coun-try labor force in 1980.

The application of ILO activityrates to the Bank's latest popula-

tion estimates may be inappropri-ate for some countries in whichthere have been importantchanges in levels of unemploy-ment and underemployment, ininternational and internal migra-tion or in both. The labor forceprojections for 1980-2000 shouldthus be treated with caution.

Table 20. Urbanization

The data on urban population as apercentage of total population arefrom the UN (Patterns of Urban andRural Population Growth, PopulationStudies, no. 68, 1980), supple-mented by data from the WorldBank and from various issues ofthe UN Demographic Yearbook.

The growth rates of urban popula-tion were calculated from theWorld Bank's population esti-mates; the estimates of urbanpopulation shares were calculatedfrom the sources cited above.

Data on urban agglomerationare also from the United Nations.

Because the estimates in thistable are based on differentnational definitions of what is"urban," cross-country compari-sons should be interpreted withcaution.

The country-group averages forurban population as a percentageof total population are weightedby country population; the othercountry-group averages in thistable are weighted by countryurban population.

Table 21. Indicators Related toLife Expectancy

Life expectancy at birth is defined inthe technical notes for Table 1.

The infant mortality rate is thenumber of infants who die beforereaching 1 year of age, per thou-sand live births in a given year.The data are from a variety ofsources, including differentissues of the UN Demographic

189

Yearbook and the US Bureau of theCensus publication, World Popula-tion: 1977; they refer to a variety ofyears, generally not more thantwo years distant from thosespecified.

The child death rate is the num-ber of deaths of children aged 1-4per thousand children in thesame age group in a given year.For countries with reliable deathregistration, these rates are fromdifferent issues of the UNDemographic Yearbook; they refer toa variety of years, generally notmore than two years distant fromthose specified. For other coun-tries, the rates were derived fromthe appropriate Coale-DemenyModel life tables to correspond tothe expectation of life at birth for1960 and 1979; see Ansley J. Coaleand Paul Demeny, Regional ModelLife Tables and Stable Populations(Princeton, N.J.: Princeton Uni-versity Press, 1966).

The country-group averages inthis table are weighted by coun-try population.

Table 22. Health-relatedIndicators

The estimates of population perphysician and nursing person werederived from World HealthOrganization (WHO) data, someof which have been revised toreflect new information suppliedby reporting countries. They alsotake into account revised esti-mates of population, which areshown in Table 1. Nursing per-sons include graduate, practicaland assistant nurses. Becausecountry definitions of nursingpersonnel varyand because thedata shown are for a variety ofyears, generally not more thantwo years distant from thosespecifiedthe data for these twoindicators are not strictly com-parable across countries.

The percentage of total population190

with access to safe water, estimatedby the WHO, is the proportion ofpersons with reasonable access tosafe water, which is defined asincluding treated surface waterand such untreated but uncon-taminated water as that fromboreholes, springs and sanitarywells.

The daily calorie supply per capitawas calculated by dividing thecalorie equivalent of the food sup-plies in a country by its popula-tion. Food supplies comprisedomestic production, importsless exports, and changes instocks; they exclude animal feed,seeds for use in agriculture andfood lost in processing and dis-tribution. The daily calorie require-ment per capita refers to the calo-ries needed to sustain a person atnormal levels of activity andhealth, taking into account ageand sex distributions, averagebody weights and environmentaltemperatures. Both sets of esti-mates are from the Food andAgriculture Organization.

The country-group averages inthis table are weighted by coun-try population.

Table 23. Education

The data in this table refer to avariety of years, generally notmore than two years distant fromthose specified, and are mostlyfrom UNESCO.

The data on number enrolled inprimary school refer to estimates oftotal, male and female enrollmentof students of all ages in primaryschool; they are expressed as per-centages of the total, male, orfemale populations of primary-school age to give "gross primaryenrollment ratios." Although pri-mary-school age is generally con-sidered to be 6-11 years, the dif-ferences in country practices inthe ages and duration of school-ing are reflected in the ratios

given. For countries with univer-sal primary education, the grossenrollment ratios may exceed 100percent because some pupils maybe below or above the officialprimary-school age.

The data on number enrolled insecondary school were calculated inthe same manner, with second-ary-school age generally 'consid-ered to be 12-17 years.

The data on number enrolledin higher education are fromUNESCO.

The adult literacy rate is definedin the technical notes for Table 1.

The country-group averages inthis table are weighted by coun-try population.

Table 24. Defense and SocialExpenditure

All data on the central govern-ment transactions are from theIMF Government Finance StatisticsYearbook and IMF data files. Thesetransactions include current andcapital (development) expendi-ture. The inadequate statisticalcoverage of state, provincial andlocal governments and the non-availability of data for these lowerlevels of government has dictatedthe use of only central govern-ment data. This may seriouslyunderstate or distort the statisticalportrayal of the allocation ofresources for various purposes,especially in large countrieswhere lower levels of governmenthave considerable autonomy andare responsible for a large num-ber of social functions.

Central government expenditurecovers that by all governmentdepartments, offices, establish-ments and other bodies that areagencies or instruments of thecentral authority of a country. Itdoes riot necessarily comprise allpublic expenditure.

Defense expenditure covers allexpenditure, whether by defense

or other departments, for themaintenance of military forces,including the purchase of militarysupplies and equipment, con-struction, recruiting and training.Also falling under this category isexpenditure for strengthening thepublic services to meet wartimeemergencies, for training civildefense personnel and for foreignthilitary aid and contributions tointernational military organiza-tions and alliances.

Education expenditure com-prises expenditure for the provi-sion, management, inspectionand support of preprimary, pri-mary and secondary schools, ofuniversities and colleges and ofvocational, technical and othertraining institutions by centralgovernments. Also included isexpenditure on the generaladministration and regulation ofthe education system, onresearch into its objectives,organization, administration andmethod, and on such subsidiaryservices as transport, schoolmeals and medical and dentalservices in schools.

Health expenditure covers pub-lic expenditure on hospitals,medical and dental centers, andclinics with a major medical com-ponent; on national health andmedical insurance schemes; andon family planning and preven-tive care. Also included is expen-diture on the general administra-tion and regulation of relevantgovernment departments, hospi-tals and clinics, health and sanita-tion, and the national health andmedical insurance schemes.

It must be emphasized that thedata presented, especially thosefor education and health, are notcomparable across countries for anumber of reasons. In manycountries private health and edu-cation services are substantial; inothers, public services representthe major component of total

expenditure. Great cautionshould therefore be exercised inusing the data for cross-countrycomparisons.

The country-group averages fordefense expenditure as a percent-age of GNP are weighted bycountry GNP in current dollars;those for defense expenditure asa percentage of central govern-ment expenditure, by countrycentral government expenditurein current dollars. The othercountry-group averages in thistable are weighted by countrypopulation.

Table 25. Income Distribution

The data in this table refer to thedistribution of total disposablehousehold income accruing topercentile groups of householdsranked by total householdincome. The distributions coverrural and urban areas and refer todifferent years between 1966 and1978.

The estimates for Latin Amer-ican countries other than Mexicocome from the preliminaryresults of a joint project of theWorld Bank and the UN Eco-nomic Commission for LatinAmerica (ECLA) or from theBank's adjusted data on incomedistribution. Those for Mexico arethe results from the 1977 House-hold Budget Survey. The esti-mates for most developing coun-tries in Asia and Africa are fromthe preliminary results of a jointproject of the World Bank and theEconomic and Social Commissionfor Asia and the Pacific (ESCAP)or from the Bank's adjusted dataon income distribution. The esti-mates for otherdeveloping coun-tries are from data gathered bythe World Bank from nationalsources but not adjusted.

Data for the Netherlands andthe United Kingdom are fromcountry statistical offices. Those

for the other industrial marketeconomies are from MalcolmSawyer, Income Distribution inOECD Countries (OECD Occa-sional Studies, July 1976); theyrefer to posttax income and con-ceptually are roughly comparablewith the distributions fordeveloping countries.

Because the collection of dataon income distribution has notbeen systematically organizedand integrated with the officialstatistical system in many coun-tries, estimates were typicallyderived from surveys designedfor other purposes, most oftenconsumer expenditure surveys,which also collect some informa-tion on income. These surveysuse a variety of income conceptsand sample designs. Further-more, the coverage of many ofthese surveys is too limited toprovide reliable nationwide esti-mates of income distribution.Thus, although the estimatesshown are considered the bestavailable, they do not avoid allthese problems and should beinterpreted with extreme caution.

The scope of the indicator issimilarly limited. Because house-holds vary in size, a distributionin which households are rankedaccording to per capita householdincome, not according to theirtotal household income, is supe-nor for many purposes. The dis-tinction is important becausehouseholds with low per capitaincomes frequently are largehouseholds, whose total incomemay be relatively high. Informa-tion on the distribution of percapita household income exists,however, for only a few countries.The World Bank has launched theLiving Standards MeasurementStudy to develop procedures andapplications that can assist coun-tries in improving their collectionand analysis of data on incomedistribution.

191

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