Introducing the BCG Sustainable Economic Development Assessment

Introducing the BCG Sustainable Economic Development Assessment

          
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Introducing the BCG Sustainable Economic Development Assessment

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    Tying It Together: Identifying Development Opportunities

    The primary aim of BCG’s SEDA is to furnish policymakers with actionable insights that they can use to create development strategies to improve the well-being of all citizens over the long term. We believe that by using SEDA as a diagnostic and benchmarking tool, governments can better identify the socioeconomic dimensions that require the most urgent attention and that can have the greatest long-term impact on overall living standards.

    So far, we have explored how SEDA can be used to compare the overall performance of countries on the ten dimensions of development and the key sustainability factors needed for continued progress. The methodology can also help in assessing a country’s performance on specific dimensions compared with other nations. Below, we provide two illustrative case studies.

    Case Study: South Africa and Health

    How could South African policymakers use SEDA to help focus their efforts on converting economic growth into as much improvement in well-being as possible? They might start by selecting a peer group, such as the big developing BRIC economies—Brazil, Russia, India, and China. They could then compare South Africa’s performance with each of these countries on each dimension of social and economic development.

    This analysis would reveal that South Africa is performing well relative to the others in this peer group in terms of economic stability, civil society, and governance. But it is lagging in health, employment, income equality, and education. (See Exhibit 7.)

    exhibit

    SEDA could then be used to delve deeper into South Africa’s relative performance in health, for example. While the nation’s 2011 per capita GDP of approximately $11,000 is lower than Russia’s, it is roughly similar to that of China and Brazil and is much higher than that of India. Yet South Africa’s current-level health score is dramatically lower than that of all four BRIC countries. Indeed, South Africa’s performance in health lags even many Sub-Saharan African nations with dramatically lower per capita GDP. (See Exhibit 8.) South Africa scores last in almost every indicator of health compared with its BRIC peers. (See Exhibit 9.)

    exhibit
    exhibit

    The next question is how much conditions are improving. South Africa’s growth to well-being coefficient for health is 1.1, which means that improvements in the health of its citizens relative to economic growth are on par with those in India and better than those in Brazil, China, and Russia, which have a coefficient of slightly less than 1. But South Africa’s progress starts from an extremely low base. In fact, South Africa’s improvements lag far behind those of many poorer Sub-Saharan African countries.

    Does South Africa have the key sustainability factors in place to sustain or accelerate improvements in health into the future? Here the news is mixed. On the one hand, South Africa scores higher than India and China on several forward-looking indicators for health care. For example, the percentage of South Africans with access to sanitation facilities is higher than in every BRIC nation except for Brazil. South Africa also scores relatively well among these peers in terms of the rule of law and government debt, which also have a large impact on the sustainability of improvements in health care. These indicators suggest that the nation has the basic governance and financial wherewithal to sustain improved performance on the dimension of health.

    On the other hand, analysis of the key sustainability factors for health in South Africa highlights areas that warrant greater attention by policymakers. Compared with the BRIC countries, South Africa still has the potential to make considerable improvements through short-term measures, such as devoting more resources to immunization, distributing more food to children, and recruiting more doctors from other countries. Over the long run, however, the most dramatic gains in health are likely to come from greater progress in areas such as education, public spending, and investment capacity, which would provide more resources to invest in health care. (See Exhibit 10.) Thus, the long-term challenges facing South Africa in health are not unlike those faced by other large emerging markets.

    exhibit
    Case Study: Education in Malaysia

    Over the past five years, Malaysia has achieved tremendous progress in education. (See Exhibit 11.) Its growth to well-being coefficient on this dimension is not only the highest in Southeast Asia but also one of the highest in the world. Malaysia has achieved far greater progress than its neighbors Thailand, Indonesia, or the Philippines in increasing the number of years that children attend school and increasing enrollment rates at the tertiary level. Along with Thailand, Malaysia is the only Southeast Asian nation to register improvements in math and science scores.

    exhibit

    In fact, Malaysia has one of the best education systems among the developing economies of Southeast Asia. Compared with the low- and middle-income nations of Thailand, Indonesia, the Philippines, Vietnam, Laos, and Cambodia, Malaysia has twice as many teachers per primary-school student, and average math and science scores are 18 percent higher. Rates of tertiary enrollment and the average time spent in school (12.6 years) are also among the highest in this group.

    The Malaysian government acknowledges that despite the country’s success on several metrics, shortcomings in education remain. This is especially obvious from benchmarking of Malaysia’s education system against international standards and from its record in producing graduates that meet employers’ needs. The government’s draft Malaysia Education Blueprint, 2013–2025, calls for improvements in the quality of teaching and school leadership and in student proficiency in English.

    How well is Malaysia positioned for future improvement in education? The answer is one that many high-tech multinational companies considering long-term investments in the country would like to know. According to SEDA, the current reforms—if successfully enacted—could indeed lay the foundation for Malaysia to pull ahead of its Southeast Asian neighbors. (See Exhibit 12.)

    exhibit

    Like Thailand, Indonesia, the Philippines, Vietnam, Laos, and Cambodia, Malaysia has a high rate of primary-school enrollment for girls—one of the most important indicators of future improvement in overall education. It also has by far the most Internet users per capita. Finally, Malaysia scores at or near the top among its regional peers in government spending, health, levels of corruption, and the rule of law.

    What are Malaysia’s weaknesses compared with its peers? One is income equality, where it scores lowest of the seven. This income divide, and especially the attendant proliferation of private schools, will create further disparities in the quality of education received by children of the rich and poor. Another weakness is a high level of government debt compared with the nation’s peers.

    While Malaysian education officials appear to be addressing the right issues in the short term, the greatest potential for improving education over the long term lies in tackling the bigger challenges. This is particularly critical if Malaysia is to increase its GDP beyond the middle-income level and achieve its ambitious goal of becoming a “high-income economy” by 2020. It needs to produce millions of skilled workers, not just an elite at the top. The country’s larger challenges include improving incomes for the poor and strengthening government finances to ensure long-term investment in education. It is especially important that Malaysia improve in the field of vocational and technical education in order to provide a substantial, steady supply of employable skilled workers.

    SEDA can be a useful tool in developing short- and long-term strategies to improve the well-being of a population. Translating its insights into specific policies, however, requires deeper analysis. A country’s performance on specific dimensions must be assessed in the context of its overall circumstances. And it is necessary to look in detail at the programs already in place to determine how well they are working and to address shortcomings.