The nexus between achieving the Millennium Development Goals and economic growth: the role of policy

Achieving the Millennium Development Goals is increasingly being accepted as a major development objective in Asian and Pacific countries. In this paper, it is argued that, in order to fulfill this objective, attention needs to be paid to the nexus between achieving the Goals and economic growth. Pro-growth MDGs are as important as pro-MDG growth. Appropriate macroeconomic and sectoral policies can help in achieving both objectives. In line with pro-poor economic growth and the pro-poor sectors, the concepts of pro-MDG economic growth and MDG economic sectors are introduced. The MDG sectors are agriculture and construction, which are traditional pro-poor sectors, three infrastructure sectors, namely transport, energy and water, and two social infrastructure sectors, health and education. The relevance of these sectors for achieving MDGs and as growth engines is discussed. In this regard, the contours of an MDG-consistent computable general equilibrium model, which can evaluate the effectiveness of alternate policy packages in fulfilling the dual objectives are cited. The role of policies and institutions in achieving MDGs is further investigated through an analysis of the track record of selected Asian and Pacific countries in implementing macroeconomic policies as well as the progress they are making towards achieving the Goals. Using a tracking exercise, it is shown that the MDG areas which need priority attention are underweight children, maternal mortality, carbon dioxide emissions, malnourishment and infant mortality. Through a corresponding exercise comparing macroeconomic indicators for the on-track and off-track countries it is found that the priority of the off-track group of countries is increasing financial inclusiveness, improving the expenditure on the education-to-GDP ratio and increasing the ratio of direct tax-to-total tax. While the policies leading to increases in the last two indicators will directly increase resources in two important MDG areas, health and education, those which will improve the financial inclusiveness index, leading to financial deepening, will help the off-track countries to benefit from globalization and sustain enhanced inclusive economic growth. This will go a long way towards helping countries to achieve the Goals. Altering the tax structure from an emphasis on indirect tax is a well-known pro-poor stance and will also contribute positively to such achievements.