Report: country experience should drive new thinking on development in middle-income countries.

07 Jan 2014

Policy dialogue on middle-income countries held in Seoul in May 2013

A new Seoul Policy Centre report highlights the need to focus on country experiences to effectively tackle challenges faced by middle-income countries (MICs).

The report, ‘Challenges of the middle-income countries: Seoul Debates 2013’ argues that the over 100 MICs are not a homogenous group, despite some common challenges.

 Middle-income countries strongly differ in terms of size, resources and state capacity, social achievements and levels of environmental degradation. To provide reliable policy advice, they must be looked individually’ said Anne Marie Sloth Carlsen, Director of the UNDP Seoul Policy Centre.

Middle income countries are home to five of the world’s seven billion people and 73% of the world’s poor, with poverty rates ranging from around 2% to more than 60%. They represent about one-third of global gross domestic product (GDP) and are major engines of global growth.

China, Mexico, Peru, South Africa and Belarus are among the 103 countries considered to be MICs under the World Bank definition, which is based on Gross National Income (GNI).  Lower-middle-income countries fall between US$1,036 to $4,085 and upper-middle-income economies are between $US4,086 to $12,615.

The report recognizes the value of the country income classification, as it is widely used for aid allocation, but suggests including other aspects of development, such as access to services, inequality, environmental degradation and related costs.

Despite the focus on diversity, the report recognises that MICs face common challenges, including when countries get stuck in the ‘middle income trap’, in which rising labour costs mean countries can no longer compete by producing labour intensive, typically low-tech’goods, but cannot yet match developed countries that specialize in high value, hi-tech’ goods. This trap is often associated with problem of inequality and lack of social inclusion.

Korea’s development experience is central to the report’s findings. Having overcome the ‘middle income trap’ as well as ensuring access to quality health, education and other services, the country offers lessons for country’s tackling similar challenges today.

The report the also tackles challenges faced by MICs through falling rates of development assistance following graduation from lower-income status and the need to find new sources of financing for development.  

Findings are based on a series of policy dialogues hosted by the UNDP Seoul Policy Centre, Korea’s Ministry of Foreign Affairs and the Korea Institute for International Economic Policy (KIEP) in 2013. The Report includes submissions from prominent international thinkers, including Jayati Ghosh of India’s Jawaharlal Nehru University, the Overseas Development Institute’s Jonathan Glennie and Eva Paus of Mount Holyoke College, USA.

Read the full report 

For further queries on this topic, please contact Artemy Izmestiev (artemy.izmestiev@undp.org) 

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  • Challenges of the middle-income countries English