El factor demográfico en la proyección del desarrollo de los países emergentes – Parte I

Empujando la
soga

En la ciudad de Vicenza (Italia) está el
Teatro Olímpico, una magnífica obra
arquitectónica de Andrea Palladio (autor del manierismo,
Padua, 1508 – Vicenza, 1580) cuyo proscenio ofrece una
espectacular perspectiva imaginaria. Ofrece una ilusión
óptica asombrosa, recreando la profundidad y la
posición relativa de los objetos dando sentido real de
espacio en tres dimensiones.

Durante el reinado de Catalina la Grande
(1729-1796), su favorito, el príncipe Potemkin, tuvo la
brillante idea de construir fachadas palaciegas portátiles
a fin de colocarlas al paso de la emperatriz en sus giras por las
miserables aldeas de Rusia. Una vez cumplido el trayecto
imperial, las fachadas eran trasladadas a la siguiente aldea
prevista para una visita de la reina. Potemkin era bien
compensado por su manera extraordinaria de disfrazar la realidad
rusa.

¿Podrá el crecimiento de los países
emergentes compensar la debilidad de la economía de los
países desarrollados?

¿Podrán los nuevos (y ávidos)
consumidores de los países emergentes reemplazar a los
viejos (y sobre endeudados) consumidores de los países
desarrollados?

¿Pueden los países "vagones"
(BRICS…), hacer de "locomotoras" (EEUU,
UE…)?

¿Será alcanzable una evolución
comercial autónoma Sur-Sur?

¿Existen razones para esperar un desarrollo
sostenible de los países emergentes?

¿Llegaremos a ver la "grandeur" de los mega
países o pueden morir de éxito?

¿Estaremos ante un caso de "ignorancia
premeditada"?

¿Existirá una trampa estadística,
algún "punto ciego" de los mercados, o una nueva burbuja
promovida por los "arreadores de manada" de Wall Street? El
dividendo demográfico y los "emergentes
fantasma".

En las próximas páginas intentaré
"insinuar" (demostrar me parece una petulancia) que las
disparidades económicas pueden frustrar (¿me
permiten decir, "frustrarán"?) el progreso de los
países emergentes.

El factor demográfico como ilusión
(¿me permiten decir, "ficción"?) de progreso de los
países emergentes. De momento, tengo la impresión
que están buscando "abstemios" en "alcohólicos
anónimos". Mientras tanto, mantengo esa sensación
de "Gran Bazar".

El análisis económico se realiza sobre los
siguientes países: Brasil, Rusia, India, China y Malasia.
A efectos comparativos se utiliza información
estadística de EEUU, Japón y Unión Europea
(o Alemania, en su caso).

¿De
dónde sacan pa"tanto como destacan?

Todo empezó con la globalización.
Después de la "implosión" de la URSS (aventada
"metafóricamente" por la caída del Muro de
Berlín – 9/11/89), los EEUU (y sus grandes corporaciones,
muchos más), se sintieron los "amos del Universo". Ya
nunca más, se pondría en sol en el Imperio de
Washington S.A. Barra libre para los "mercaderes".

La desregulación, la privatización, la
deslocalización, el libre movimiento de capitales
(siempre), de mercancías (a veces) y de personas (nunca),
fueron las "cuentas" del Rosario laico, necesarias para orar ante
el Becerro de Oro. Todo sea por la pasta.

Así de rápido, así de inmoral y
así de falaz, se inició el proceso de traslado de
las fuentes de trabajo de los países desarrollados a los
países subdesarrollados (en adelante llamados
"emergentes"). La tierra plana, el fin de los ciclos
económicos, el crecimiento del comercio mundial, el
enriquecimiento global, la competitividad… y otras
mentiras (siniestras), fueron propaladas por muchos gurús
mediáticos (casi todos), los grandes organismos
internacionales (todos) y prestigiosos académicos
(según las donaciones de las multinacionales a la
universidad de turno). El mito del librecambio.

A los trabajadores del mundo desarrollado que
perdían su empleo los consolaban con la "sopa boba" del
crédito fácil. Las fábricas se instalaban en
países lejanos (todos, con mano de obra infinitamente
barata) y desde allí enviaban los mismos productos a sus
países de origen, donde vendían a crédito a
sus ex trabajadores, que compraban con dinero prestado, lo que
antes hubieran comprado con su propio salario. ¡Todo a
100!

Tanto fue el cántaro a la fuente que al final se
rompió. El "dinero plástico" se transformó
en "crédito subprime", los países subdesarrollados
(China principalmente), se transformaron de "bandera de
conveniencia", en prestamistas de última recurso. Los
países desarrollados están quebrados (y con ellos,
sus trabajadores) y los países subdesarrollados (ahora,
"emergentes") tiene que darles crédito para seguir el
juego.

Pero el juego se terminó. El hemisferio norte
está fundido (primero los trabajadores, después los
bancos y finalmente los gobiernos). No hay más de
dónde sacar. La locomotora de los consumos reventó.
Se jodió el invento. ¡El rey está
desnudo!

Entonces, ¿Wall Street cierra por
"liquidación? No señores. A rey muerto, rey puesto.
Si los países desarrollados, no dan más de
sí y no se puede continuar vendiendo humo por allí,
se "inventa" el nuevo mercado que ofrecen los países
emergentes y a "vivir que son dos días". Se crea una nueva
burbuja y a "cosechar" los próximos bonus (que de eso se
trata)… Los pobres de hoy serán los ricos de
mañana. Los "nuevos consumidores" (ansiosos),
incrementarán la demanda hasta alcanzar los (antiguos)
niveles de compra de los países desarrollados…
¿Millones de habitantes que se incorporan a la clase
media? ¿Millones de habitantes empujando el carrito de la
compra? ¿Millones de habitantes haciendo cola en
McDonald"s? ¿Millones de habitantes gastando y
gastando?

¿Será tan así? ¿De
dónde sacan los países emergentes para tanto como
destacan? ¿O hay "historias" inconfesables que la "banda"
de Wall Street nos quiere hacer creer? Veamos.

Buscando cierta
lógica económica: PIB vs. PIB per
cápita

Fuente: PNUD 2011

Dilema:
¿después del gasto en alimentación
quedará algo para grandes
alegrías?

Del Informe Cultivar un futuro mejor –
Intermon Oxfam – Junio 2011, se extraen los
siguientes gráficos:

Algunos
Indicadores comparativos (más allá del Producto
Interno Bruto)

Del Informe The EU"s place in the world
– A statiscal portrait – Eurostat 2010

Dejad que los
"gráficos" venga a mí… (no
comment)

Evolución del Producto Interno Bruto de
ciertos países o regiones (U. of G.)

Del Informe sobre Desarrollo Humano 2010 –
PNUD

Desigualdad (del Capítulo 4 – Las cosas buenas
no siempre vienen juntas)

Del Poverty Statistics – Regional
aggregates data – ONU 2011

"Going" -(vaya a
saber a dónde)- "for growth", según la
OECD)

Del Economic Policy Reforms 2011 – Going
for growth OECD 2011

La voz de los que
saben (I) (si ellos lo dicen…)

Del Tackling Inequalities in Brazil,
China, India and South Africa – OECD 2010

La voz de los que
saben (II) (si ellos lo dicen…)

Del Economic Policy Reforms – Going for growth – OCDE
2011

Nota aclaratoria: Las fichas de los países (o
regiones) desarrolladas se presentan a efectos comparativos, y
pueden servir como Introducción a la Parte II de este
Paper ("Abatidos por el fuego amigo").

UNITED STATES

GDP per capita continues to be among the highest in
the OECD, mainly reflecting high labour productivity. A surge in
labour productivity during the recent recession has increased the
performance of US workers relative to the OECD average, but
relative labour utilisation has declined. Health care and
financial sector reforms have recently been enacted, but more
needs to be done in the following areas.

Priorities supported by indicators

Improve primary and secondary
education

Despite high levels of expenditures per pupil,
international student test (PISA) scores are below the OECD
average.

Actions taken: The Race to the Top fund offers
competitive grants to encourage states to adopt education
standards, improve student assessment, and strengthen teacher
evaluations. The Blueprint for Elementary and Secondary Education
Act (ESEA) reform includes measures to improve early
education.

Recommendations: Improve teacher education and
development using evidence on approaches that have proven to be
effective in raising student achievement. Strengthen schools"
accountability for student progress.

Improve the efficiency of the health care
sector

Total health care expenditures are high and rising
quickly. There is considerable scope to improve the efficiency of
the system.

Actions taken: The 2010 health reform expands
coverage and pays for it through health expenditure savings and
additional taxes. The reform includes measures to reduce
expenditure in the long term but there is much uncertainty about
their effects.

Recommendations: Congress should not override the
Medicare expenditure restraints in the 2010 reform. Medicare
provider payment reforms that prove to be successful in pilot
tests should be adopted. The health tax exclusion (i.e.
the exclusion from taxable income and payroll tax of compensation
in the form of health insurance cover) should be limited further
than planned to reduce incentives to buy health plans with little
cost sharing.

Improve the efficiency of the tax
system

Large inefficient tax expenditures and a relatively low
reliance on consumption taxes increase the excess burden of
taxation.

Actions taken: No action taken.

Recommendations: Broaden the tax base by reducing
the value of the mortgage-interest deduction on owner-occupied
housing and limiting the health tax exclusion. Shift the weight
of taxation from personal income towards consumption-based taxes
such as a VAT.

Other key priorities

Reduce agricultural subsidies

Higher prices have reduced agricultural subsidies as a
share of gross farm receipts further below the OECD average, but
significant subsidies in the form of import restrictions and
price support remain.

Actions taken: No action taken.

Recommendations: Reduce support for agricultural
producers – notably tariffs on imported ethanol and sugar
– and dairy price supports.

Strengthen policies to promote social
mobility

Intergenerational mobility in the United States is
notably lower than in most other OECD countries with data. Lower
mobility may undermine the allocation of human capital across the
economy and thereby reduce productivity.

Actions taken: The Administration has set an
ambitious goal to increase the share of college graduates. The
Blueprint for ESEA Reform, the Race to the Top fund, and the
Investing in Innovation fund all provide incentives for states to
raise student achievement in low-achievement schools.

Recommendations: Improve equality of opportunity
in education by increasing participation in early childhood
education, increasing the socio-economic mix of students in
schools, giving schools incentives to reduce the impact of
socio-economic backgrounds on outcomes, reducing the large
disparities in funding per student across schools, and reducing
financial barriers to participation in tertiary education. Reduce
childhood poverty.

EUROPEAN UNION

There is a substantial income gap relative to the
upper half of the OECD as productivity and labour utilization
levels remain below the top performers. Progress has been made in
financial sector reform, notably in the area of macro prudential
regulation. Structural reforms in the following areas are needed
to limit the medium and longterm effects of the crisis on
potential output.

Priorities supported by indicators

Increase competition in the services
sector

Low competitive pressures in the services sector hold
back productivity.

Actions taken: The 2006 Services Directive should
bring a marked improvement in competition.

Transposition of the Directive is well advanced but
remains incomplete across EU countries. A Single European
Payments Area is being created.

Recommendations: Ensure complete and effective
implementation of the Services Directive and proper enforcement
of its legal and practical provisions. Ensure that the payments
area is completed swiftly.

Raise competition in network
industries

Competition in network industries is hindered by the
incompleteness of the single market and regulatory
barriers.

Actions taken: Postal services will be fully
liberalised in 2012.

Recommendations: Strengthen the evidence base for
single market initiatives by identifying specific barriers to
competition and efficiency. Ensure EU-level measures are fully
implemented in national markets, including functional separation
of supply and production activities in energy markets. Push ahead
with initiatives to reform and integrate the transport, postal,
telecommunications, port services and energy markets.

Reduce producer support to
agriculture

Agricultural support under the Common Agricultural
Policy (CAP) is distorting and thereby harmful for overall
productivity. It also disproportionately benefits large and
efficient farms.

Actions taken: CAP reforms have significantly
reduced linkages between payments and production.

Milk quotas are to be phased out by 2015. The use of
price support has been scaled back for many agricultural
commodities. However, the re-introduction of agricultural export
subsidies for dairy produce in 2009 was a step back.

Recommendations: Full decoupling of payment
should be extended to livestock meat production.

Payments across agricultural producers should be further
decoupled from production.

Barriers to market access for non-EU countries should be
reduced. Support prices should be lowered and biofuels subsidies
reduced.

Other key priorities

Reform financial regulation and deepen market
integration

Financial market regulation needs to be more effective
to promote stability and efficiency.

Actions taken: A wide range of reforms is
underway including measures to strengthen capital requirements,
liquidity management, deposit guarantee schemes, and oversight of
credit rating agencies and alternative investment funds. A new
framework for cross-border supervision and crisis management is
being put in place.

Recommendations: New regulation should be
designed to promote a robust and less cyclical financial system.
Newly-created European supervisory bodies should be given
sufficient powers and resources to ensure effective cross-country
supervision and management of systematic risk. More should be
done to integrate retail markets.

Improve the functioning of the labour
market

Structural unemployment is high, while hours worked and
labour force participation are relatively low.

Actions taken: The European Economic Recovery
Plan targeted European Social Fund Support spending on labour
market programmes. The Europe 2020 Agenda sets the objective of
an employment rate of 75% for those aged 20-64.

Recommendations: EU labour market objectives can
primarily be achieved using national policy instruments, but
reforms can also be facilitated by EU-level surveillance and peer
pressure. Measures at the EU level can contribute to facilitating
labour mobility by increasing the portability of occupational
pension and social welfare benefit rights.

JAPAN

The income gap relative to the upper half of OECD
countries has been persistent over the last decade, reflecting a
large productivity shortfall. The government has announced a
Growth Strategy aimed at boosting incomes, notably in the
environment, health care and tourism sectors, but it needs also
to focus more on the following regulatory reforms to boost demand
and productivity growth.

Priorities supported by indicators

Reform regulation in network
sectors

Regulation of network sectors is more stringent than in
the average OECD country, thus limiting competition and hindering
productivity.

Actions taken: The privatisation process of Japan
Post Bank and Japan Post Insurance, which were to be completed by
2017, has been stopped. The government proposed revising the
Broadcast Act to integrate broadcasting services and
communications.

Recommendations: Enhance efficiency in the
network sectors – particularly electricity – through
further deregulation and privatisation, while strengthening
competition policy. The privatisation of Japan Post should be
carried out as outlined in the 2005 law in order to encourage the
flow of funds towards more productive private-sector
investments.

Reduce producer support to
agriculture

Support for agricultural producers is still double the
OECD average, distorting trade and production, while boosting
consumer prices of agricultural products far above world
prices.

Actions taken: The government implemented a
direct income support programme for targeted cereals, including
rice, on a trial basis in 2010.

Recommendations: Further scale back the level of
support to agriculture. Shift its composition away from support
based on output and towards direct support for farmers to reduce
the distortion of trade and production decisions.

Reduce the dualism of job
protection

The large share of non-regular workers, at more than
one-third of total employment, discourages on the-job training,
while creating equity concerns due to inequality in pay and
coverage by the social security system.

Actions taken: The government revised the
Employment Insurance Act to relax the conditions for receiving
benefits in 2009 and expanded the number of workers covered by
the insurance in 2010.

Recommendations: Reduce employment protection for
regular workers, while expanding social insurance coverage for
non-regular workers to equalise social costs of employment among
different types of contracts.

Other key priorities

Lower restrictions on FDI

The low stock of inward FDI – the smallest in the
OECD area at 4% of GDP – limits competition, especially in
services.

Actions taken: The government decided to
establish a special zone system to revitalise local economies,
including by attracting foreign firms. In 2010, it announced a
programme to facilitate inward FDI to make Japan a hub in
Asia.

Recommendations: Promote inward FDI by reducing
legal and non-legal impediments, especially in services, and
nurture an attractive business environment to attract foreign
investors through tax and labour market reforms.

Improve the efficiency of the tax
system

Reduce corporate taxes and improve the efficiency of the
tax system. With the highest corporate tax rate among OECD
countries and the lowest consumption tax rate, tax structure in
Japan undermines productivity.

Actions taken: The government decided in 2010, in
principle, to reduce the effective corporate tax rate to the
average of major countries and to review tax expenditures to
expand the tax base.

Recommendations: Implement the planned reform of
the corporate tax, while increasing the consumption tax and
property-holding taxes to raise the necessary revenues to finance
growing welfare spending and to improve the fiscal
balance.

BRAZIL

The GDP per capita gap with OECD countries is now
diminishing but remains large and is largely due to comparatively
weak labour productivity performance reflecting in part fairly
low investment rates. Beyond the recent efforts to combat
inequality through the extension of anti-poverty programmes,
further actions are needed in the following areas to sustain
overall economic performance.

Priorities supported by indicators

Increase the quality of education at all
levels

Near-full enrolment has been achieved for primary and
secondary education, but student performance is comparatively
low. Attainment and performance also need to be improved in
private higher-education institutions.

Actions taken: Funding for basic and professional
education has been raised. Conditions for student loans have been
eased. An entrance examination for teaching, a National Plan for
Qualification and a wage floor for professionals in public
education have been established at the national level.

Recommendations: Increase the quality of
education at primary and secondary levels. Expand tertiary
vocational and professional training to overcome skill
shortages.

Improve the efficiency of financial
markets

Although they have shielded the economy during the
crisis, mandated credit provisions and excessive bank reserve
requirements may slow financial-market deepening and impair
economy-wide efficiency over the longer term.

Actions taken: Compulsory bank reserve
requirements have been strengthened further in the context of
rapid credit expansion. During the crisis, the lending capacity
of the public development bank, BNDES, was expanded.

Recommendations: Gradually phase out mandated
credit provisions to certain sectors, including agriculture and
housing, to improve resource allocation. Ease bank reserve
requirements to lower intermediation costs over the medium term,
in accordance with the objective of ensuring both the stability
and development of financial markets.

Improve infrastructure
provision

Past infrastructure programmes suffered from
implementation delays. Restrictions on trade and investment hold
back private investment.

Actions taken: In March 2010, the government
announced a five-year investment plan with the aim of increasing
private and public investment in transport, sanitation, energy
and housing.

Recommendations: Reduce financial costs, the
capital tax on productive investment and current expenditures in
the public sector to allow higher infrastructure investment.
Encourage States and municipalities to swiftly and efficiently
undertake infrastructure projects. Lower regulatory uncertainties
in the oil and gas sector and remove legal barriers to
competition to spur private investment.

Other key priorities

Reduce distortions in the tax
system

Brazil"s indirect tax system is cumbersome due to its
fragmentation, complexity and changing provisions. Onerous social
security contributions and additional levies on enterprise
payroll imply a large burden on labour income with adverse
effects on employment, especially on formal jobs.

Actions taken: A reform package was introduced
into Congress in 2008 to unify state-level VAT rates and bases
and alleviate the burden on labour income. The tax burden on
investment has been lowered.

Recommendations: The new government should follow
through with the proposed reform package and secure support from
State governments.

Improve incentives for formal labour force
participation

Informality is decreasing but remains widespread and can
be partly attributed to high labour taxes, the design of some
social schemes (including the unemployment and severance
insurance mechanisms) and low employability of low-skilled
workers.

Actions taken: A new law entered into force in
2009 to enlarge and reinforce institutional efforts to simplify
the tax and regulation systems for self-employed and micro and
small companies.

Recommendations: Encourage human capital
accumulation on and off the job and lower social contributions
for low-paid workers to help tackle informality. Remove
disincentives to formal labour force participation embedded in
social programmes.

RUSSIA

The income gap with OECD countries narrowed rapidly
until 2008, but remained large and widened in 2009, as Russia was
relatively hard-hit by the economic and financial crisis. This
income gap is almost entirely attributable to a labour
productivity shortfall, making productivity-enhancing reforms a
priority.

Priorities supported by indicators

Lower barriers to trade and foreign direct
investment

Barriers to international trade and FDI are high
compared to OECD countries, undermining competition and
technology diffusion.

Actions taken: The Law on Strategic Industries
came into force in 2008, defining 42 sectors in which foreign
acquisitions require prior government approval. Several
discriminatory trade measures were introduced during the crisis,
and some have been extended.

Recommendations: Discontinue discriminatory trade
measures introduced during the crisis. Reduce tariff levels and
dispersion. Shorten the list of strategic sectors.

Reduce state control over economic
activity

State control remains significant due to a high degree
of public ownership and influence on economic activity, which
depresses competition and thereby hinders innovation and
productivity growth.

Actions taken: The government stepped up
privatisation efforts in 2010. The list of strategic enterprises
for which privatisation requires presidential approval has been
reduced. The government has promoted the appointment of
independent directors to the boards of state-owned
enterprises.

Recommendations: Further reduce the list of
strategic enterprises. Increase the use of regulatory
alternatives to direct interventions.

Raise the effectiveness of innovation
policy

Innovation potential is substantial, reflecting a
well-developed science base, the high quality of science and
engineering education and significant public resources spent on
research and development; however, incentives for private
research and development are overly weak, limiting productivity
gains.

Actions taken: Five modernisation priorities were
chosen by the President: energy, IT, telecommunications,
biotechnology and nuclear technology. Plans were announced to
build an "innovation city" near Moscow with a special legal and
tax regime. Immigration procedures for highly qualified foreign
specialists were simplified.

Recommendations: Continue the reforms in the
state science sector. Monitor and regularly review the outcomes
of the special projects. Support private-sector innovation
activities through universally applied fiscal incentives and
legislative framework, avoiding "picking winners".

Other key priorities

Raise the quality of public
administration

The inefficient and often corrupt practices on the part
of government officials impose a significant burden on ordinary
citizens and create obstacles for entrepreneurship and,
ultimately, productivity gains.

Actions taken: A series of laws have been adopted
within the framework of the Concept of Administrative Reform
approved in 2005 and the anti-corruption initiative. A five-year
programme of reform and development of the civil service was
launched in 2009.

Recommendations: Continue with efforts to
simplify regulations and procedures and reduce the bureaucratic
interference in private sector activities. Reduce potential for
corruption by minimizing the need for subjective decision-making
by bureaucrats.

Reform the health care system

Efforts to reform health care provision need to be
stepped up to make significant progress in improving poor health
outcomes, which harm productivity and wellbeing more
broadly.

Actions taken: Some reforms have been undertaken
within the framework of the National Priority Programme "Health"
launched in 2005. The financing of the health care system has
been increased and a range of measures to improve prevention are
being put in place. A law was adopted in November 2010, reforming
the framework for operation of the mandatory health insurance
system.

Recommendations: Further increase public funding
of health care and enhance the efficiency of the health care
system. Focus prevention efforts on changing lifestyles.
Encourage a shift from hospital to primary care. Improve the
incentives for providers to deliver high-quality care.

INDIA

India continues to achieve one of the highest rates
of GDP per capita growth in the world. Nevertheless, the income
gap with OECD countries remains large, primarily reflecting low
levels of labour productivity, calling for further reforms to
support rapid and inclusive growth. Incremental reforms of
administrative regulation introduced by governments at all levels
have led to some improvement in the operating environment for
business.

However, more fundamental reforms are needed in the
following areas.

Priorities supported by indicators

Reduce trade and FDI barriers as well as
administrative burdens

Trade and FDI restrictions, along with administrative
red tape, still hinder investment and productivity.

Actions taken: Thresholds for FDI applications
requiring the consent of the central government cabinet have been
raised and existing FDI regulations consolidated to improve
transparency.

Recommendations: High FDI barriers in retail and
other service sectors should be reduced. Trade protection should
be reduced across the board, with a first priority on the most
heavily protected sectors. The use of ICT should be expanded to
improve government service delivery and transparency.

Improve education outcomes

Low graduation rates and relatively poor education
quality hamper human capital formation.

Actions taken: The 2009 Right to Free Education
Act stipulates that every child aged between 6 and 14 years has
the right to free and compulsory education.

Recommendations: Consider opportunities to
decentralise elements of school management and teacher
recruitment to either the local government or school level.
Strengthen school principal and teacher accountability and
improve the quality of, and access to pre and in-service teacher
training.

Allow greater university autonomy and reduce barriers to
entry in the university sector, including by relaxing entry of
foreign education providers.

Ease job protection

Rigid employment protection legislation undermines
employment and productivity growth in the formal
sector.

Actions taken: No action taken.

Recommendations: Reform employment protection
measures that discriminate against large firms and remove the
most restrictive provisions concerning the need for prior
government authorisation to terminate employment. Streamline
central and state government legislation to reduce uncertainty
and complexity.

Other key priorities

Enhance infrastructure
provision

Low provision and weak quality of infrastructure damages
the business operating environment and hurts
productivity.

Actions taken: Spending on key infrastructure has
risen sharply. The central government initiated the National Land
Records Modernisation Programme to consolidate and modernise land
record systems, which will provide greater certainty to investors
in infrastructure projects and help expedite project
applications.

Recommendations: Reduce regulatory uncertainty in
infrastructure sectors across states to enhance opportunities for
private sector participation. Eliminate cross-subsidies in
electricity and rail sectors.

Streamline land acquisition procedures to reduce
development costs and delays.

Undertake wide-ranging financial sector
reforms

The level of development of the financial sector is
insufficient to meet the needs of a rapidly developing
economy.

Actions taken: The government has announced the
formation of a Financial Stability and Development Council to
monitor macro prudential supervision of the economy and address
interregulatory coordination issues.

Recommendations: Allow greater participation by
foreign investors in the financial services sector and issue more
bank licenses to expand the coverage of banking services. Proceed
with plans to establish a new independent debt management
office.

CHINA

GDP per capita has soared over the past five years,
rising by close to 50% cumulatively, thereby substantially
narrowing the wide gap with OECD countries. As employment rates
remain quite high the difference in income per capita essentially
reflects lower productivity. A broad range of reforms have
occurred in recent years, supporting rapid productivity gains,
though progress in the following areas would help to ensure that
this continues.

Priorities supported by indicators

Reduce the importance of the state-owned sector
in the economy

The total factor productivity of state-owned enterprises
is lower than that of privately-funded companies, and many
state-owned companies are still encountering losses. Relative to
OECD countries, the role of state-owned enterprises is high,
especially in large parts of the services sector, harming
efficiency.

Actions taken: The government issued 36
guidelines for supporting and guiding non-public economic
development in April 2010, which encouraged private investment in
railways, power, telecommunications and rural banks.
State-controlled companies are expected to withdraw from some
competitive sectors and concentrate on sectors regarded as key,
such as coal, petroleum and metals.

Recommendations: The formation of large "private
equity" firms should no longer have to be approved by the
government, in order to increase the funds available for
restructuring poorly performing state-owned companies.

Improve educational
attainment

The graduation rates in upper secondary and tertiary
education are well below those in OECD countries. Moreover, there
are large regional disparities in school attendance.

Actions taken: Public spending on education rose
from 2.7% to 3.5% of GDP between 2004 and 2008 and may reach 4%
in 2012. In April 2010, the government introduced a new long-term
strategy designed to improve schooling for students under 6 and
over 15. The quality of teacher training will be improved and
entrance methods for higher education changed to reduce the
weight of memory-based tests.

Recommendations: Inequalities in the provision of
education need to be reduced both regionally and within urban
areas. Quick implementation of the provisions for improving
migrant education is important.

Reduce administrative burdens on
companies

The time taken to form companies and obtain regulatory
permits is unduly long, deterring the entry of new firms and
impairing competition.

Actions taken: The threshold beyond which an
investment project requires central government permission has
been raised.

Recommendations: Government institutions should
be required to conduct a regulatory impact analysis before
introducing new rules, and should progressively review all
regulations.

Other key priorities

Reduce barriers to
urbanization

Income differentials between rural and urban incomes are
very large, a result of significant barriers to migration.
Further enabling reallocation of labour to high-productivity
sectors of the economy should help boost productivity, as would a
reduction in human capital differentials across the
country.

Actions taken: Comprehensive health insurance and
social assistance systems have been introduced in the countryside
in 2009, while a new pension scheme is now being rolled out.
Pilot studies are underway to reform the length of land use
rights and household registration laws, potentially increasing
labour mobility.

Recommendations: Social expenditure should be
further increased to provide broader coverage and a stronger
social safety net. Provisions of the 2003 Land Management Law
need to be fully implemented to give all farmers full
documentation for their rights, thus widening the rental market.
The length of the use rights should be extended and household
registration laws revised.

Further enhance the rule of
law

The level of protection of IPRs is low by international
standards and the efficacy of contract enforcement procedures
varies across the country.

Actions taken: In June 2008, a new IPR strategy
was introduced and has resulted in a new Patent Law and a draft
revision to the Trademarks Law. Judicial hearings for IPR
violation cases are to be concentrated in selected courts.
Enforcement has begun to be stepped up.

Recommendations: The effectiveness of enforcement
should be enhanced further through the strengthening of the
judicial institutions.

INDONESIA

Per capita incomes are converging towards OECD
levels, but the gap remains very large mainly owing to a labour
productivity shortfall. Further actions in the areas below would
help to reduce this gap. In other areas, efforts have been made
recently in climate-change mitigation policies by committing to
greenhouse gas emission reduction

targets.

Priorities supported by indicators

Strengthen resources for secondary education and
improve the overall efficiency of the education
system

Public spending has risen markedly especially for
primary education but is still relatively low at higher levels of
education. Teaching quality is low especially in rural areas,
harming attainment.

Actions taken: The Ministry of Education launched
a 2005-09 strategy aimed at improving the governance, access to,
and quality of education.

Recommendations: Make income transfer programmes
conditional on children attending secondary school and finance
the secondary school enrolment fee for disadvantaged children in
order to boost enrolment rates. To improve teaching quality,
regularly assess teachers" pedagogical skills.

Improve the regulatory environment for
infrastructure