Low Income Countries
Countries in the low income category are concentrated primarily in sub-Saharan Africa and South Asia, with a few from other developing regions. These are countries that must carry out efforts across many areas to generate the productivity and growth that are necessary to underpin inclusive economies. Many have relatively low levels of inequality but from a very low income base, requiring a continued focus on widespread poverty alleviation to bring living standards above subsistence level. Policy must focus on addressing lower incomes more generally by increasing access to public services such as high-quality education, training, and healthcare, as they constitute long-term social investment to create greater equality of opportunity.
Companies in Bangladesh have better access to finance from banks and the equity market than most other countries at its income level, which is important for supporting business development. Yet across most other areas, significant efforts will be required to increase the country’s capacity to deliver inclusive growth. The education system falls short, with lower enrolment rates at all levels than in most other countries, poor quality, and great differences in school performance based on students’ income levels – all of which reinforces inequality. Bangladesh also needs to make business and job creation more attractive by reducing red tape, upgrading infrastructure and basic services, and tackling rampant corruption. This would help to bring more workers out of the informal economy and into official and less vulnerable employment.
Chad struggles in all of the areas measured by the inclusive growth and development framework. Over 80% of its population lives on less than $2 a day. Educational attainment is extremely low across all levels, with only 1.5 years of schooling received on average. The quality of education is poor, with a very low pupil-to-teacher ratio. Overall, this does not provide the economy with the skills needed even for basic activities, and greatly constrains social mobility. Chad has among the most burdensome requirements for starting a new business. It is therefore not surprising that the informal economy is extremely large, accompanied by one of the highest levels of vulnerable employment globally. Chad must also build up its infrastructure and basic services, which will require greater access to finance. Investment would also be encouraged by lower corruption and greater transparency.
Kenya has started to put in place some of the building blocks for an inclusive economy with a larger middle class than most countries in this group. Bank and equity finance is relatively more accessible and affordable compared with other countries at the same income level. The quality of the education system rivals that of economies at higher income levels, although efforts must be made to ensure it reaches more students and generates more equitable performance from them regardless of income level. This will be critical to lower the high levels of unemployment and particularly high youth unemployment, and to shrink the informal sector. Kenya must also continue to build its infrastructure and basic services, reduce the red tape faced by businesses, and tackle pervasive corruption.
Nepal has made some significant reductions in poverty and pre-transfer inequality, but its Gini remains high. It has relatively good employment outcomes – low unemployment, including youth unemployment, and strong female participation in the workforce. Yet the informal sector remains large and wages in general are too low to raise many workers out of poverty. Upgrading the education system and improving the provision of infrastructure and basic services will be critical for moving up the income and value chains, as will tackling corruption and reducing administrative barriers to business creation and development.
Rwanda has made more strides in driving inclusive growth than other countries in this income category, and in some areas even outperforms countries at higher income levels, although it still has a long way to go with median household incomes less than $2 a day and high income inequality. It ranks first in this group for business and political ethics, with effective measures in place to combat corruption and bribery. Rwanda has a high labor force participation rate and relatively low unemployment. Financing is more easily available for business development than in many similar countries. To further enhance the inclusiveness of its growth process and move up the value chain, Rwanda must upgrade its education system – improve access at all levels, improve the quality of what is learned, and narrow gaps in performance among students of different income levels. It must also continue to build infrastructure and increase social spending to improve adequacy of basic services.
Tanzania benefits from a rate of unemployment that is lower than that of many countries, and a high female participation rate, although a large proportion of workers are in vulnerable employment receiving subsistence wages (which is related to low levels of labor productivity). The education system has been expanded to reach a larger proportion of the population, although efforts must continue to attain universal access, improve quality, and reduce differences in performance outcomes across income groups, particularly in secondary school. Business development and employment creation would benefit from greater access to finance and reduction in corruption. This would also provide the resources and framework for further developing the infrastructure and basic services that Tanzania so greatly needs to improve living standards.
Zimbabwe has a relatively progressive tax code and should be able to deliver relatively good post-redistribution outcomes. Yet inequality remains high, social mobility is low, and many of those in the workforce are unable to pull themselves out of poverty. Education will be important for preparing the workforce to move into higher-wage activities. Zimbabwe does a decent job of getting children into primary school, although secondary and tertiary rates lag behind those of many low-income economies, and the quality of the overall education system is in great need of improvement. Finance is very difficult to obtain for business development, possibly related to the great administrative hindrances placed in the way of starting and operating businesses in the country. Further, Zimbabwe has one of the lowest performances among all countries in terms of corruption, with poor corporate and government ethics, and a high concentration of rents accruing to a small elite of companies and individuals. Its wealth Gini is one of the highest in the world.