Country Economic Memorandum

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Papua New Guinea Country Economic Memorandum: Pathways to Faster and More Inclusive Growth

(Washington, DC: World Bank, 2023-07-13) World Bank

The Country Economic Memorandum (CEM) focuses on long-term growth, outlining the challenges Papua New Guinea (PNG) faces to achieve sufficient economic growth to expand the incomes of its rapidly growing population as well as what is required for PNG to make the transition to a higher, more stable, and more inclusive growth path. PNG’s modest headline economic growth has translated into limited per capita income growth in the past four decades. While the economy expanded by 3.2 percent on average during 1980-2021, per capita gross domestic product (GDP) recorded an average annual growth rate of only 0.9 percent. Moreover, the gap between PNG’s per capita income level and those of its peer countries has widened. Despite being at a similar level of development in the 1970s and having enormous natural wealth, PNG’s income level is diverging away from the East Asia and Pacific (EAP) region. This calls for a renewed policy focus on boosting economic growth, by addressing PNG’s excessive macroeconomic volatility, low productivity growth, and high reliance on natural capital as opposed to human and physical capital.
Timor-Leste: Pathways to Economic Diversification - Country Economic Memorandum 2023

(Washington DC, 2023-05-03) World Bank

Timor-Leste has made important development gains since independence in 2002 but is now at a critical juncture. The government has successfully rebuilt public infrastructure, reduced poverty, and quickly built from scratch a network of functional public institutions. Despite these achievements, there is an urgent need for private sector-centered development that is not dependent on the oil sector. Receipts from sales of hydrocarbons have been the main source of government revenues, but their contribution to the economy is decreasing, raising the urgency for economic diversification. High public spending has not translated into strong and sustained economic growth. Furthermore, depleting oil reserves signal an urgency to reduce economic dependence on oil. The public sector-driven growth model has run its course and is fiscally unsustainable. The excessive public spending level led to an astronomical fiscal deficit of 45.3 percent of non-oil gross domestic product (GDP) in 2021. This fiscal stance entails significant risks that bring the country toward a damaging fiscal cliff in 2035. Albeit narrowing, there is a window of opportunity for the government to urgently implement the much-needed reforms in the next five years. There are several potential drivers for increased regional integration. These include the operationalization of the Tibar Bay port, the modernization of the Dili airport, the internet submarine cable installation, and the World Trade Organization (WTO) accession progress. Success requires a concerted and persistent government effort to address supply-side constraints, kick-start economic diversification, and boost export. This report provides an in-depth analysis of Timor-Leste’s economic performance in recent decades and proposes policies to enhance growth. It highlights two key interrelated constraints to sustained and inclusive growth: the ‘missing’ private sector and the need to tap into the growth-enhancing benefits of international trade. Given the diminishing returns of public investments, pursuing a sustainable development path will require a shift toward a more dynamic, private sector-driven growth model. Furthermore, with the right combination of a supportive enabling environment and trade policies, Timor-Leste could capitalize on incipient and established comparative advantages for its exports. Accordingly, the reforms to support private sector development and expand exports have the potential to boost Timor-Leste’s international competitiveness and improve economic diversification.
Resilient Development - A Strategy to Diversify Cambodia’s Growth Model: Cambodia Country Economic Memorandum

(World Bank, Phnom Penh, 2021-12) World Bank

The devastating impact of the Covid-19 pandemic on the Cambodian economy—where the growth slowdown was among the most pronounced in the East Asia and Pacific (EAP) region—lies in the country’s growth generating process. Recent growth has been remarkable, but insufficiently diversified in products, markets, and factor inputs. The diversification problem is rooted in low and declining productivity; low quality and weak export linkages; and high foreign direct investment (FDI) but low domestic investment. Just when past success was fueling high ambitions for future growth—to become upper middle income by 2030 and high income by 2050—the pandemic threatens to put those targets out of reach. Cambodia’s policymakers have the opportunity to build a new and stronger growth path—by enabling productivity of firms and workers, diversifying exports, and harnessing domestic investment. But an ambitious reform agenda is needed—one that focuses on improving capabilities, strengthening regulations, and investing in infrastructure.
Republic of the Marshall Islands Country Economic Memorandum and Public Expenditure Review: Maximizing Opportunities, Enhancing Sustainability

(World Bank, Washington, DC, 2021-06-20) World Bank

This joint Country Economic Memorandum (CEM) and Public Expenditure Review (PER) aims to support the Government of the Republic of the Marshall Islands (GoRMI) to identify a prioritized and sequenced set of reforms to drive increased economic growth, resilience, and fiscal sustainability. The study has two objectives. First, to improve understanding of the challenges, opportunities, and risks to achieving sustainable economic growth and job creation in the Republic of the Marshall Islands (RMI). Second, to improve the management of public resources to support long-term economic development, fiscal sustainability, and service delivery. The assessment aims to balance the need for reform to drive higher prosperity and resilience with GoRMI’s limited capacity to design and implement reforms and provide public goods and services. The reform priorities identified are also consistent with the RMI’s National Strategic Plan 2020-30, which articulates the nation’s vision to build a resilient, productive, and self-supportive RMI. This Executive Summary is structured in three sections. The first section provides a brief background to RMI and the structure of the economy. The second section summarizes the key issues and challenges to achieving GoRMI’s long-term development objectives under five themes: (i) the management of public finances; (ii) public service delivery; (iii) the fisheries sector; (iv) the labor market and labor mobility; and (v) disaster resilience and climate change. The final section outlines key recommendations under the same five themes.
Aiming High: Navigating the Next Stage of Malaysia’s Development

(World Bank, Washington, DC, 2021-02-02) World Bank

Malaysia is likely to make the transition from an upper-middle-income economy to a high-income economy within the next five years, despite thesetback of the COVID-19-induced recession in 2020. This transition represents an important milestone in Malaysia’s development, having transformed living standards in less than a generation, slashing the extreme poverty rate to less than one percent of the population, and ending the country’s long tenure in the “middle-income trap”. However, Malaysia has been severely affected by COVID-19 and it will take several years beforethe scars of the pandemic are fully erased. The country experienced a “triple shock”: the direct health impact of the virus; the economic impact of movement restrictions; and the growth impact of a global recession. With Malaysia on the verge of achieving this transition, it is an opportune time to address a number of questions regarding the speed of Malaysia’s growth, its quality, and its sustainability. Malaysia is growing slower thanmany countries that achieved high-income status in recent decades. In addition, compared to many other countries that have graduated from middle-income status, it has a lower share of employment at high skill levels and higher levels of inequality. And, compared to countries in the OECD, Malaysia collects less in taxes, spends less on social protection, and performs relatively poorly in terms of measures related to environmentalmanagement and the control of corruption. Many of these fault lines have become exposed during the pandemic. Most significantly, there is a growing sense that despite economic growth, the aspirations of Malaysia’s middle-class are not being met and that the economy hasn’t produced enough well-paying, high-quality jobs. There is a widespread sense that the proceeds of growth have not been equitably shared and that increases in the cost-of-living are outstripping incomes, especially in urban areas, where three-fourths of Malaysians reside. Policies and institutions that have worked in the past may no longer be appropriate for the next stage of Malaysia’s development, with a different set of policies and institutions required at higher levels of income and development. The policies that enabled Malaysia to successfully make the transition from low- to middle-income need to be adapted to meet the challenges it will face in the future. At an earlier stage of its development, factor accumulation was a key driver of Malaysia’s growth. As it makes the transition, it will increasingly need to depend upon more knowledge-intensive and productivity-driven growth, closer to the technological frontier and with a greater emphasis on achieving inclusive and sustainable development. As Malaysia positions itself for the next phase of its development and beyond the pandemic, many of the issues related to this transformation are being addressed and discussed, including through the 12th Malaysia Plan and the Shared Prosperity Vision 2030. With the impact of the COVID-19 pandemic and its potential to depress growth into the future, issues related to Malaysia’s readiness for the future have become even more significant. The analysis in this report suggests that for Malaysia to fulfil its potential, to transition successfully to high-income and developed country status, and to sustain equitable growth beyond that point, reforms are needed in six broad and inter-linked areas: (i) revitalizing long-term growth; (ii) boosting competitiveness; (iii) creating jobs; (iv) modernizing institutions; (v) promoting inclusion; and (vi) financing shared prosperity.
Mines and Minds: Leveraging Natural Wealth to Invest in People and Institutions

(World Bank, Ulaanbaatar, 2020-09) World Bank

Mines represent Mongolia’s present, while minds - broadly defined to include people and institutions - are its future. Current policies are excessively focused on preserving the mining-driven prosperity at the risk of future stagnation. Such complacency is ill-timed when climate change concerns and the COVID-19 shock require an acceleration of structural transformation. Mongolia faces deep-rooted, interrelated challenges: macroeconomic policy mistakes have amplified external shocks, an oligopolistic ownership structure and limited competition have led firms to become more inward-looking and less inclined to innovate, and gross underutilization of human capital - evident by an unprecedented exodus of young and educated workers to foreign countries - has eroded the foundation of a diversified economy.
Vibrant Vietnam: Forging the Foundation of a High-Income Economy

(World Bank, Hanoi, 2020-05) World Bank Group

Vietnam’s development strategy requires an urgent upgrade. Past growth has been impressive. But as a favorable domestic and international environment changes, future growth must be productivity-driven—obtaining more and higher quality output from firms, infrastructure, workers and natural resources. The World Bank’s Vibrant Vietnam report discusses priorities for an upgraded growth model based on extensive consultations, international experience and academic findings.
Cambodia - Sustaining Rapid Growth in a Challenging Environment : Country Economic Memorandum

(World Bank, 2009-01-01) World Bank

Many countries succeed in generating high economic growth at some point in their history. But only a very few manage to sustain rapid growth for an extended period. Only such a prolonged period of rapid growth can have a significant impact on income per capita, and such an impact often brings with it many other important changes to people's lives. Cambodia has more than doubled its income per capita over the past decade, from US$285 in 1997 to US$593 in 2007. This doubling has been accompanied by the trappings of a profound structural transformation: integration into the global economy; a shift of jobs from agriculture to manufacturing; a demographic transition; and migration from rural to urban areas. Translating into jobs and better services, these outcomes have led to a significant reduction in poverty, as well as improvements in health and education. This report aims to contribute to policymakers' and citizens' thinking about growth in Cambodia in three ways: (i) it reviews the experience of the past decade and draws the Cambodia-specific lessons of this period; (ii) it sketches the major potential sources of growth with the aim of assessing the barriers to growth; and (iii) it outlines policy options for addressing these barriers.
Mongolia - Sources of Growth : Country Economic Report

(Washington, DC, 2007-07-26) World Bank

This economic report aims to inform the ongoing debate on the Government's long term development priorities in Mongolia. It discusses the key facts and potential implications the government would need to consider when determining its public spending, public investment program, fiscal space, and borrowing strategy going forward. The report begins by reviewing the Mongolian growth experience over the 1990s as a pre-requisite to understand the present endowments, and the circumstances under which one needs to think about the future. Chapter 2 applies the "growth diagnostics" approach to identify those factors that are "binding" constraints to growth and are areas in need of immediate policy interventions by the government. Chapter 3 discusses the issues that will need to be addressed in order to develop non-mining sector activities with the aim of economic and export diversification and suggests policies to encourage firm innovation'' and private sector growth. Chapter 4 discusses policies to relax infrastructure bottlenecks in the context of regional development and Mongolia's unique geography. Chapter 5 presents a menu of policies tailored to address the mismatch of skills workers bring to the market and those demanded by the market. Chapter 6 discusses issues related to appropriate management and development of its mineral wealth, as well as those arising from present practices in the livestock sector. Finally, in Chapter 7, the possibilities of governance failure, policy and other risks are analyzed to demonstrate their inhibiting effects on the achievement of much higher long-term growth rates in this natural resource dependant economy during a commodity price boom.
Country Economic Memorandum : Realizing the Development Potential of Lao PDR, Volume 2. Main Report

(Washington, DC, 2004-12-23) World Bank

To sustain or exceed the 1990s annual average growth rate of 6.3 percent, Lao will need to promote agricultural and manufactured exports, and increase the contribution of natural resources to development. This will require another round of reforms, and supportive public spending. These reforms should seek to create a more enabling environment for the private sector, and for exports, to raise revenue and maintain macroeconomic stability, as well as to improve the transparency, accountability and efficiency of public expenditure management, and public service delivery. To develop natural resources and mineral reserves, Lao will need to attract substantial international and domestic capital to meet the heavy front-end capital costs required to exploit mineral deposits. To bring in that investment, however, requires improvement in governance of the mining sector, particularly in regard to partnerships with the private sector. Looking specifically at growth and poverty reduction, three scenarios for growth - base, base plus and high - show aggregate GDP growth up to 2015, rising roughly by an annual average of 4-5 percent, 5-6 percent, and 6-8 percent respectively. These indicate that this long-term growth will be driven largely by manufacturing (industry) and services, with growth from agriculture though important in the initial years, its contribution declining in the long-term. These growth scenarios depend very much on the pace and depth of reforms the country implements. Additionally, rising government revenues from natural resources alone will not suffice to meet social needs. On current trends, for example, per capita recurrent expenditures in health hardly increase until 2015. The country will need to take additional revenue measures and reallocate expenditures to increase recurrent expenditures on social sectors. To be effective, such revenue and expenditure measures must also be accompanied by efficient improvements in the service delivery mechanisms, i.e., increasing the participation of the poor.