East Asia and Pacific remains the world’s growth engine despite a challenging external environment, with developing economies growing by 7.2% in 2013. The proportion of people living in poverty in the region has steadily declined—less than 10% of the population lives on $1.25 a day—but much more needs to be done as there are still close to half a billion people living on $2 a day.
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Twin goalsThe project did not just invest in infrastructure, it also provided access to micro loans for home improvement and income generation for households whose incomes are in the bottom 40%. ... Show More + So far, the repayment rate is almost 100%. “I borrowed 5 million dong [$250] to expand my small shop at home,” said Vo Thanh Khuong, a resident of Binh Thanh District, Ho Chi Minh City. “Our income has increased and I could take better care of the kids. Our living conditions are getting better.”“Having access to credit helps the poor benefit even more from improved infrastructures,” said Keiko Sato, Acting World Bank Country Director for Vietnam. “This approach really fits the World Bank’s twin goals in eradicating extreme poverty by 2030 and promoting shared prosperity by improving the living standards of the bottom 40% of the population in every country.”Community participationCommunities actively participated in project design and implementation. They attended numerous meetings and supervised the infrastructure upgrading work in their neighborhoods. They also contributed their time, efforts and even donated land to improve access in the upgraded areas.“Together with other members of our community, I frequently checked the project’s progress in our neighborhood to make sure everything was done in a timely manner with high quality,” said Nguyen Thanh Tu, Member of the community supervision board, District 4, Ho Chi Minh City.With $382 million financing from the World Bank and $140 million counterpart funding from the Government of Vietnam, the project has turned 200 low-income areas into vibrant, attractive communities, and transformed the lives of millions of urban poor. “Our family’s income has increased twofold since 2010,” said Mai. “We are very happy and we will maintain this clean and green environment for our own benefit.” Show Less -
ULAANBAATAR, December 18, 2014—Vulnerabilities in the Mongolian economy demand actions to bolster its resilience, according to the World Bank’s latest Mongolia Economic Update.Economic growth slowed i... Show More +n 2014 as high inflation and a persistent current account deficit weighed on domestic demand. Inflation eased recently as the economy has cooled, but remains in double digits.The current account deficit, which reached close to 30 percent of GDP in 2011-13, is expected to drop to around 11 percent of GDP in 2014. However, the balance of payments pressure remains high, due in part to declining foreign investment.Without a strong rebound in foreign investment, pressure on the balance of payments will increase vulnerabilities and continue to dampen economic growth next year. Domestic demand will continue to be under pressure, particularly affecting the non-mining sector.The report also cites a deterioration in the quality of bank loans and urges closer attention to the financial strength of the banking system because of its importance to the economy.“The measures needed to put the Mongolian economy on a firmer footing are not easy and will take time to show full effect, but they will strengthen the resiliency of Mongolia’s economy, providing the basis for prosperity in the future,” said James Anderson, the World Bank Country Manager for Mongolia. “We welcome the new government’s frank and forthright acknowledgement of the current state of the economy and its resolve to address Mongolia’s challenges, and we stand ready to assist in any way we can.”External factors could compound Mongolia’s challenges, according to the report. Global commodity markets are expected to remain weak, with prices of major commodities projected to decline further. Meanwhile, a slowing economy in China, Mongolia’s main trade partner, will also dampen demand.“The urgent priority now is to tighten economic policy to address the persistent pressure on the balance of payments,” said Taehyun Lee, the World Bank Senior Economist for Mongolia. “This will also help strengthen the capacity of fiscal and monetary policy to cope with headwinds in the future,”Lee cited an “overly expansionary” economic policy during a period of strong growth and foreign investment after 2011.“The pro-cyclical approach that was adopted fueled unsustainable pressure on the balance of payments and high inflation, and contributed to a weakening of the banking system,” he said.The report welcomed recent steps by the Central Bank to raise the policy interest rate and gradually reduce lending programs including the Price Stabilization Program. The Central Bank also strengthened some regulations on the financial sector to respond to the declining quality of bank assets, although the report called for more strengthening of prudential regulations. In the report, the World Bank urges further actions to tighten monetary policy, especially by avoiding direct Central Bank injections into the economy.The report calls for off-budget spending to be brought under control and recommends that that all spending by the Development Bank of Mongolia be included in the budget. It also calls for more realistic revenue projections than the overly optimistic predictions of the past, as well as a credible medium-term fiscal consolidation plan to strengthen confidence in deficit reduction.In particular, Mongolia needs to prepare now to refinance or repay its external public debt of $1.08 billion in 2017 and 2018. Without tighter economic policies and renewed foreign direct investment, the economy will remain vulnerable, the report noted. Show Less -
BEIJING, December 19, 2014 – China has the world’s largest and still expanding high-speed rail (HSR) network, but whether ridership would materialize has been the subject of much debate. A new World B... Show More +ank paper finds initial traffic volumes are promising, with traffic growing from 128 million trips in 2008 to 672 million trips in 2013 and over 2.9 billion passengers having taken a high speed train trip between April 2007 and October 1st 2014.The paper underlines that the circumstances in China in terms of long distances, high population density, well interspaced large cities, and its economic rebalancing strategies are propitious for the long-term success of HSR. By focusing on understanding and addressing passenger needs, as well as efficient and effective operation, traffic can be expected to continue rapid growth over the coming two decades.The paper titled High-Speed Railways in China: A Look at Traffic looks at China’ s HSR traffic in a global perspective and presents case studies of one of the country’s busiest routes and a relatively lightly used intercity route to illustrate how passengers have responded to new HSR services.China has over 12,000 kilometers of passenger-dedicated high-speed rail in operation. In the summer 2014, China Railways was running over 1,330 pairs of high-speed trains a day on both this dedicated network and on upgraded conventional lines. More lines are being built and upgraded to connect all cities of more than 500,000 people through rapid rail by 2015.In 2013, China’s high-speed rail lines carried more passenger-kilometers (214 billion) than the rest of the world combined, about 2.5 times the volume in Japan and four times the volume in France. Traffic densities of 22.5 million<sup></sup> in 2013 compare favorably to levels reached by Japan and France at the same stage of development.The paper examines who is using HSR, whether the service has benefitted ordinary citizens, and how it has affected personal mobility by using survey data collected from passengers along the Changchun-Jilin and Tianjin-Jinan corridors. The survey was carried out by the World Bank, China Railway Corporation and the Third Railway Survey and Design Institute.Survey findings indicate that a large proportion of high-speed train passengers are between the ages of 25 and 55, with many using the HSR for business travel. A broad range of travelers of different income levels choose HSR for its comfort, convenience, safety and punctuality over existing alternatives. The survey found that the average income of high-speed train passengers was 35-50 percent higher than that of conventional train passengers. The majority of surveyed passengers (50 to 70 percent of users in the two case studies) reported income of less than RMB5,000 per month. Users perceive HSR as facilitating reunions with family and friends, tourism, and access to job opportunities. High-speed rail also has had a marked impact on local businesses and personal mobility of their employees. “Understanding and addressing passenger needs are critical to achieving the full impact of the high-speed rail network. While initial results are encouraging, high-speed rail remains a major investment that requires high traffic density to be justified economically and financially,” said Gerald Ollivier, a World Bank Senior Transport Specialist and co-author of the paper.“This can be achieved by working closely with cities to develop areas around stations in a way that leverages the gain in accessibility that high speed rail provides. It also important to optimize train frequencies and city pairing, introduce flexible ticket prices reflecting peak and off-peak periods, and introduce convenient e-ticketing services. By focusing on these aspects, and on the efficient and effective operation of the network, high-speed rail in China can continue to experience substantial growth for many years to come,” he added. This paper is part of the China Transport Note Series produced by the World Bank in Beijing to share experience about the transformation of the Chinese transport sector. The World Bank has supported six railway projects with design speeds ranging from 200 km/h to 350 km/h in China. Passenger-kilometers per kilometer of line. Show Less -
World Bank approves US$47.5 million for the Palau-Federated States of Micronesia Connectivity ProjectWASHINGTON, December 17, 2014 – The World Bank’s Board of Executive Directors today approved the se... Show More +cond phase of the Pacific Regional Connectivity Program (PRCP) – addressing the need for more widespread access to Information & Communication Technology (ICT) in the Northern Pacific.The project will support more widely available broadband internet and associated value-added services needed to support social and economic development in the Federated States of Micronesia (FSM) by reducing the cost and increasing the capacity of international bandwidth.“This phase of the Pacific Regional Connectivity Program will assist the Federated States of Micronesia in overcoming its challenges of remoteness and dispersed geography,” said Franz Drees-Gross, Country Director for the World Bank in Timor-Leste, Papua New Guinea, and the Pacific Islands. “Increasing access to affordable ICT will allow individuals, businesses, government and nongovernment agencies in the FSM to take advantage of the benefits better connectivity can bring, including improved social and economic opportunities and better service delivery.”The project consists of a US$47.5 million grant to the FSM, to be co-financed by a planned US$25 million Asian Development Bank loan to the Republic of Palau. PRCP will support the construction of submarine cable systems to connect Palau with the FSM state of Yap and the US territory of Guam; and the FSM states of Chuuk and Pohnpei; as well as the provision of next generation satellite broadband for the FSM state of Kosrae.In addition to infrastructure investment, the project will provide technical assistance to the FSM to further improve the environment for ICT development, including a strengthened regulatory framework overseen by a new independent regulator – building on pro-competitive legislation enacted in April 2014. The MicroPal Fiber Optic Joint Committee established by the Governments of the FSM and the Republic of Palau will oversee planning and implementation of the project.The second phase of the Pacific Regional Connectivity Program is funded through a US$47.5 million grant from the International Development Association (IDA), the World Bank’s fund for the poorest countries. The first phase of this program was the Tonga-Fiji Connectivity Project, co-financed with the Asian Development Bank and Tonga Communications Corporation. The cable to Tonga became operational in August 2013. Show Less -
Although some gaps between ethnic groups remain, income inequality within groups now explains over 95 percent of overall income inequality. Gaps in access to post-secondary education are also more pro... Show More +nounced between income groups. While the agenda of closing gaps between ethnic communities is not yet complete, broad policies such as boosting pre-primary enrolments and raising the quality of the poorest-performing schools, are likely to have the largest payoffs.“Malaysia has been successful not only in stimulating the economy (with average GDP growth of 5.3 percent from 2011 to 2014), but also in boosting shared prosperity,” said Minister in the Prime Minister’s Department Dato’ Sri Wahid Omar. “All households experienced income growth, but growth was higher for those at the bottom. Moving forward, the Government will ensure such economic growth will translate into greater well-being for the people. This will be a key focus of the Eleventh Malaysia Plan.”Malaysia can also make fuller use of tax and transfers to reduce inequality, according to the report. Malaysia’s tax system has progressive features and Government transfers help reduce poverty--thanks to transfers, almost 50,000 households have been lifted from absolute poverty in 2014. However, the impact on inequality is small: In Malaysia, inequality of market incomes (as measured by the Gini index) is 0.43; after taxes and transfers it remains at 0.41. For OECD countries the inequality index after taxes and transfers is 0.32, 0.14 points less than the market based inequality index of 0.46. More progressive taxes, with higher tax rates for the upper income brackets, and more generous and targeted social safety nets can help reduce inequality further in Malaysia—while meeting fiscal objectives.Low oil prices present a short-term positive but also a key risk to the outlook: Malaysia has taken advantage of low oil prices to eliminate fuel subsidies, a welcome step and a triple win: for the economy, as resources are freed up for more productive purposes; for equity, as regressive benefits are removed; and for the environment. In the short term, the fiscal impact is estimated at about 0.3 percent of GDP gain, assuming crude oil prices recover to USD 75 per barrel in 2015. However, if oil prices fail to recover or fall further, this poses significant risks. LNG prices are expected to fall in tandem with crude oil prices and the current account could narrow further. Moreover, losses in oil-related revenues could exceed savings from subsidy rationalization, and greater pressure on PETRONAS cash flows may lead to a meaningful slowdown in capital expenditures or a revision of its dividend policy.The Malaysia Economic Monitor series provides an analytical perspective on the policy challenges facing Malaysia as it grows into a high-income economy. The series also represents an effort to reach out to a broad audience, including policymakers, private sector leaders, market participants, civil society, and academia. Show Less -
Key Findings Malaysia is projected to grow more slowly in 2015.Growth projections: 5.7% in 2014; 4.7% in 2015. Slowdown in China and uneven global recovery will dampen export growth.Fiscal consol... Show More +idation is on track and current account to stay in surplus, but risks to both if oil prices fall further.Malaysia has reduced poverty and vulnerability; inequality is still a challenge.Absolute poverty has nearly been eradicated.Vulnerability is limited and declining.However, inequality is still high compared to OECD countries (Gini = 0.42 in 2014).Some gaps between ethnic groups remain, but inequality within groups explains most (96 percent) of overall income inequality.Growing the middle class will promote shared prosperity in Malaysia.The challenge is for Malaysia to transition from a middle-income nation to a middle-class society.The middle class is an engine of economic growth and promotes social cohesion.The ‘aspirational group’ that’s neither poor or vulnerable, but has yet to join the middle class now makes up the majority (51%) of Malaysian society.It is largely urban and is comprised of smaller families. Their material asset ownership is similar to that of the middle-class.They lack post-secondary education: only 16%, compared to 55% of the middle/upper-class.Raising the aspirational group to the middle class will require helping them get jobs that earn “middle-class wages” and build up savings.Post-secondary education is the pathway for the aspirational class to join the middle class:Closing the existing large gaps in educational achievement at the post-secondary level will improve opportunities for higher-paying jobs.Education subsidies are not enough. Long-term factors, such as parents’ education level, account for most of educational achievement gaps.The government can further increase the pre-primary enrolment rate and raise the quality of the lowest performing schools.For those who are already in the work force, making skills development programs more demand-led by employers will help with the skills mismatch.Equity could be further enhanced by modernizing Government transfers, financed by more progressive taxes:Government programs have lifted 50,000 households from poverty, but fewer, better targeted and more generous program would have an even greater impact without additional resources.73% of the aspirational group have some form of financial assets (88% of middle-/high-income households) but average values are low and inadequate to support a middle-class life into retirement.The Government could consider making matching contributions to retirement account of some of the aspirational group to boost their balances.These could be financed through more progressive personal income taxes, namely considering higher rates for top earners and enlarging the number of tax payers. Show Less -