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