Wednesday, April 25, 2012


By K P C Rao., 
Practicing Company Secretary

There are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015. They include eradicating extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS, and developing a global partnership for development.
The aim of the Millennium Development Goals (MDGs) is to encourage development by improving social and economic conditions in the world's poorest countries. They derive from earlier international development targets, and were officially established following the Millennium Summit in 2000, where all world leaders present adopted the United Nations Millennium Declaration.
The Millennium Summit was presented with the report of the Secretary-General entitled ‘We the Peoples: The Role of the United Nations in the Twenty-First Century’. Additional input was prepared by the Millennium Forum, which brought together representatives of over 1,000 non-governmental and civil society organisations from more than 100 countries. The Forum met in May 2000 to conclude a two-year consultation process covering issues such as poverty eradication, environmental protection, human rights and protection of the vulnerable. The approval of the MDGs was possibly the main outcome of the Millennium Summit. In the area of peace and security, the adoption of the Brahimi Report was seen as properly equipping the organization to carry out the mandates given by the Security Council
The MDGs originated from the Millennium Declaration produced by the United Nations. The Declaration asserts that every individual has the right to dignity, freedom, equality, a basic standard of living that includes freedom from hunger and violence, and encourages tolerance and solidarity.The MDGs were made to operationalize these ideas by setting targets and indicators for poverty reduction in order to achieve the rights set forth in the Declaration on a set fifteen-year timeline.
The MDGs also emphasize the role of developed countries in aiding developing countries, as outlined in Goal Eight. Goal Eight sets objectives and targets for developed countries to achieve a “global partnership for development” by supporting fair trade, debt relief for developing nations, increasing aid and access to affordable essential medicines, and encouraging technology transfer. Thus developing nations are not seen as left to achieve the MDGs on their own, but as a partner in the developing-developed compact to reduce world poverty.
The MDGs were developed out of the eight chapters of the United Nations, signed in September 2000. There are eight goals with 21 targets, and a series of measurable indicators for each target. The MDG Achievement Fund is an international cooperation mechanism whose aim is to accelerate progress on the Millennium Development Goals (MDGs) worldwide. It supports national governments, local authorities and citizen organizations in their efforts to tackle poverty and inequality.  The eight goals are briefly discussed below:
1)  Eradicate extreme poverty and hunger
The world is on track to meet the MDG target of halving the proportion of people living on less than $1 a day. Overall poverty rates fell from 46 per cent in 1990 to 27 per cent in 2005 in developing regions, and progress in many developing countries is being sustained. This is despite setbacks caused by the 2008-09 economic downturn and the effects of the food and energy crises. However, even if these positive trends continue, in 2015, roughly 920 million people would still be living under the international poverty line of $1.25 a day, as adjusted by the World Bank in 2008
Despite great strides in many countries, the target is unlikely to be met. Enrolment in primary education has continued to rise, reaching 89 per cent in the developing world in 2008. Between 1999 and 2008, enrolment increased by 18 percentage points in sub-Saharan Africa, and by 11 and 8 percentage points in Southern Asia and Northern Africa, respectively.
3)     Promote gender equality and empower women
Gender gaps in access to education have narrowed, but disparities remain high in university-level education and in some developing regions. Girls’ enrolment ratios in primary and secondary schools have significantly increased in recent years.
4)        Reduce child mortality
Child deaths are falling, but not quickly enough. Between 1990 and 2008, the death rate for children under five has decreased by 28 per cent, from 100 to 72 deaths per 1,000 live births. That means that, worldwide, 10,000 fewer under-fives die each day.
5)        Improve maternal health
Maternal mortality remains unacceptably high. New data show signs of progress in improving maternal health — the health of women during pregnancy and childbirth — with some countries achieving significant declines in maternal mortality ratios. But progress is still well short of the 5.5 per cent annual decline needed to meet the MDG target of reducing by three quarters the maternal mortality ratio by 2015.
6)     Combat HIV / AIDS, malaria and other diseases
The global response to AIDS has demonstrated tangible progress toward the achievement of MDG . The number of new HIV infections fell steadily from a peak of 3.5 million in 1996 to 2.7 million in 2008. Deaths from AIDS-related illnesses also dropped from 2.2 million in 2004 to two million in 2008. Although the epidemic appears to have stabilized in most regions, new HIV infections are on the rise in Eastern Europe and Central Asia. Globally, the number of people living with HIV is continuing to increase because of the combined effect of new HIV infections and the beneficial impact of antiretroviral therapy.
7)        Ensure environmental sustainability
The world will meet or even exceed the drinking water target by 2015 if current trends continue. By that time, an estimated 86 per cent of the population in developing regions will have gained access to improved sources of drinking water, up from 71 per cent in 1990. Four regions — Northern Africa, Latin America and the Caribbean, Eastern Asia and South-Eastern Asia — have already met the target.
8)     Develop a global partnership for development
Levels of official development assistance (ODA) continue to rise despite the financial crisis, but Africa is short-changed and aid remains below expectations. Net disbursements of ODA reached almost $120 billion in 2009, an all-time high. In real terms, this represents a slight increase of 0.7 per cent compared to 2008, even though in current US dollars ODA fell by over two per cent.
Progress towards reaching the goals has been uneven. Some countries have achieved many of the goals, while others are not on track to realize any. The major countries that have been achieving their goals include China (whose poverty population has reduced from 452 million to 278 million) and India due to clear internal and external factors of population and economic development.
India - Institutional   Framework
India’s progress over the next 20 years will be intimately linked to events within the region as well as around the world. Both opportunities and challenges will arise as the result of transformations in the regional and global political and security environments. World trade under WTO will determine access to markets and international competitiveness, particularly after the ascension of China. The economic growth rates of other regions will influence demand for exports and foreign capital flows. Some other developments that will influence India’s progress in the coming two decades are:
i)          Pressure on energy prices as a result of global economic growth;
ii)        Continued spread of the information revolution; and
iii)     Technological innovations, such as those with regard to disease prevention and treatment.
Although these external factors are too many and too complex for us to reliably predict their impact, what we can do is recall some of the most significant and broad global trends that are likely to exert a powerful influence on India’s progress over the coming two decades.
1)   Population Growth
Global population will continue to grow from 6 billion to around 7.5 billion people, fuelling a large increase in global demand for food, goods and services. Life expectancy will rise significantly, leading to a larger proportion of the aged in all regions. At the same time a swelling of the working age population will lead to a significant increase in the global labour force.
2)     Economic Expansion
The phenomenal achievements of the last half century have been the results of a fortuitous blend of forces—the absence of a world war, the spread of democracy to countries around the globe, rising levels of education everywhere, rising social aspirations and expectations, rapid technological development and diffusion, advances in the science and the practice of management, and development of a more efficient and sophisticated economic and financial organisation for global commerce. All of these driving forces should continue to exert strong positive pressure for global economic expansion in the next century. If world real GDP continues to expand at an average rate of 3.20 per cent per annum as it did over the past 12 years, real world GDP will increase by 85 per cent over the next 20 years. A substantial rise in incomes and living standards will act as an additional stimulus to global demand for food, manufactured goods, services and energy.
3)     Growth of World Trade
World trade grew by an average of about 6 per cent per annum in the last decade. By reducing and eventually eliminating all forms of trade barriers, the emerging institutional framework under WTO is likely to accelerate the expansion of world trade in the coming years. This will open greater opportunities for domestic producers while making them more vulnerable to international competition. At the same time, with the spread of new technologies and production capabilities, economies of scale are becoming increasingly important in reducing costs and prices. Increasingly, single countries or even single producers are becoming globally dominant in specific product categories. This trend has already resulted in global surpluses in categories such as steel, basic chemicals and computer memory chips. Growing surpluses will bring even greater competition between companies and countries producing the same products, as well as cheaper products for consumers, and higher standards of living. Opportunities in business will gradually shift from volume production to special value-added categories of products and services.
4)     Growth of Services Sector
The driving force for economic growth and employment will increasingly come from the services sector. Rising living standards will fuel the demand for commercial, social and community services. Construction, retailing, education, health, entertainment and tourism will expand more rapidly than ever before. The incorporation of services under the WTO framework has opened up enormous opportunities for hitherto non-tradable sectors to expand their horizons across borders.
This will enhance the quality, range and affordability of services to the domestic economy and add a further stimulus to a service-led economic growth around the world. At the same time, the efforts will be needed to secure a level playing field and fairness in the trading system.
5)      OECD Labour Shortages
Demographic trends in the OECD countries will create acute labour shortages, opening up unprecedented opportunities for countries that can provide skilled manpower and outsourcing services. A UN study released in March 2000 estimates that the 15-nation European Community would have to accept 150 million new immigrants over the next 25 years in order to maintain the present levels of working population. By 2013, labour force growth in the USA will be zero. The UN estimates that Japan would need to admit 600,000 immigrants annually for the next 50 years in order to maintain the size of its working population at the 1995 level. Significant labour shortages will develop in the OECD countries unless immigration policies are dramatically liberalised or large numbers of manufacturing and service jobs are shifted overseas. This trend will further accelerate the outsourcing of production of goods and services to locations where infrastructure, ease of doing business, quality, costs and availability of labour are most attractive, which will be beneficial for many labour surplus countries like India.
6)     Capital Flows
The new institutional framework will promote freer flow of capital and foreign investment, both direct as well as portfolio. Capital rich nations will seek out investment destinations generating higher returns. This trend will be reinforced by rising income levels and the aging of the OECD population, which will swell the size of pension, insurance and mutual funds, resulting in a continued increase in international capital flows in search of secure and attractive returns. At the same time, large manufacturing companies will increasingly move from national to global production strategies, resulting in further shifting of production and direct investment in countries or regions in which markets exist or in which production costs are lowest.
7)     Technology & Infrastructure
The TRIPS will promote even faster technological innovation. Application and diffusion of technologies in a wide range of fields across international borders will also accelerate. Agricultural technology, biotechnology, information & communications technology, computerised manufacturing technologies will transform the way human beings learn, communicate, produce, and care for their health. The most important technological breakthroughs of the coming decade are expected in areas such as precision farming, fuel cells, alternative energy, genetic engineering, portable information devices, robotics, mass customisation, and computerised health care. Application of computers will continue to spread rapidly, influencing all aspects of the global society, especially communication, manufacturing, finance and trade, scientific research, education, and medicine.
The cost of global communications will continue to decline rapidly, reducing barriers of distance and making global production, distribution and marketing strategies more viable.
Implications and Options for India
1)      Trade in goods
Liberalisation of trade will open up new opportunities for export of goods, while increasing pressures on India’s domestic industry to cope with competition from imports, especially from China. The global market for textiles and clothing will expand dramatically and the phasing out of quantitative restrictions will increase trade in these categories. But India’s ability to export will depend on its capacity to keep pace with the rising international standards of price, quality, productivity, and service. Global trade in agricultural products will also grow rapidly, though it is not yet clear to what extent the OECD countries will remove the barriers and subsidies that hinder exports to these markets. However, India’s ability to become a major exporter of agricultural products will depend most on its ability to improve crop quality and productivity, while lowering costs to international levels. India missed out on the boom in manufactured exports that occurred from the 1970s to 1990s. Increasing overcapacity in basic manufacturing industries, coupled with mechanization of processes, which eliminates the advantage of low cost labour, will limit future opportunities and benefits for export of manufactured commodity goods such as cars, TVs, and computers. Future opportunities for manufactured exports will be focused on the high end of the technology chain, computerised, customised manufacturing processes and sophisticated engineering and capital goods, areas in which India has not yet strongly positioned itself internationally.
2)     Trade in services
The World Bank estimates that India will possess the fourth largest economy in the world by 2020. The emerging global scenario will open up greater opportunities for countries with a surplus of well-educated, highly skilled labour that can provide an attractive commercial environment for the outsourcing of manufacturing and service businesses from high and even middle income countries. India’s recent boom in outsourcing of IT services, further facilitated by declining costs of international communication and transportation, only points to the wide range of economic opportunities existing in the manufacturing and service businesses. At the same time, the pressure for export of highly educated and highly skilled individuals will also increase, so that a significant migration of scientific, engineering and medical talent is likely to continue. Steps however need to be taken to ensure that such migration is not detrimental to the country’s development. Export of services is a field in which India can excel. Computerisation, coupled with low cost global telecommunications are generating rapid growth of trade in service businesses, such as software and IT enabled services. This trend will further accelerate, opening up vast opportunities for countries with the capacity to deliver low-cost, high-quality services. India already commands an impressive 18.5 per cent share in the global market for customised software and the Indian software industry is the fastest growing in the world. A NASSCOM-McKinsey report estimated that by 2008, the global market for IT enabled services alone will exceed $1,000 billion, and that India’s export of IT services will exceed $50 billion, which is double the country’s total export of goods and services in 2000. In addition, India’s established credentials in IT and IT enabled services can be leveraged to develop a competitive advantage in other fields, including other branches of engineering, branches of scientific research, especially biotechnology, medicine, pharmaceuticals, and agriculture, as well as education. Performance in these sectors will depend on the country’s capacity to generate larger numbers of well-educated and competent scientists, engineers and professionals.
3)      Capital Flows and FDI
The enlargement of the international capital market will open up increasing opportunities for India to attract foreign direct and institutional investment. Foreign direct investment (FDI) expanded globally from $159 billion in 1991 to $1,270 billion in 2000, but with an increasing proportion of these flows moving between developed nations. In the overall, inflows of FDI have increased substantially compared to the earlier regime in which the scope for FDI was quite restricted. As a result, the stock of FDI in India jumped from $1.66 bn at the end of 1990, to $17.5 bn by the end of 2000 and further to a little above $164 bn by the end of 2009. The amount of capital globally available will continue to grow, but improvements in infrastructure and elimination of bureaucratic barriers will be major determinants of India’s success in attracting a greater share of FDI flows. The size and prosperity of China’s non-resident population has been a vital link for the channelling of technology, investment and business back to the mainland. A similar mobilisation of India’s expatriate population could have momentous impact on the inflow of FDI in 2020. Likewise, multinational investments in India should be encouraged, especially in technology-intensive sectors where they can supplement and strengthen India’s technological capabilities.
4)     Technology
India’s technology policy needs to be reformulated in the light of the emerging international economic environment, to capitalise on the accelerated global development and diffusion of technologies, and keep pace with more demanding international standards for cost, quality and productivity. India will need to be far more aggressive in acquiring and applying advanced technologies in a wide range of fields, including agriculture, information technology, energy, health and education. At the same time, India can also aspire to become an important contributor to the expansion of global frontiers of technology by building upon and leveraging its already significant achievements in fields such as pharmaceuticals, biotechnology, software, space and energy. It can also revive, simultaneously, it's traditional knowledge and technologies through formal R&D efforts.

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