Middle Income Countries
Thirteen Regional Member Countries (RMCs) are categorized as middle income countries (MICs). Among them, however, there are wide disparities in terms of economic development, as measured by, among other indicators, per capita income, economic competitiveness, private sector development, and the degree of integration into the global economy. Differences also exist in financial market development and the ease of doing business in the country. These divergences account for wide variations in incomes and income inequality, poverty levels, investment flows, and growth performance.
The income levels of MICs show a wide range, with Seychelles recording the highest per capita income at US$ 8,180 in 2005, while the level for Egypt was US$ 1,260. Per capita income for five other countries, namely, Botswana, Gabon, Libya, and Mauritius, stood just between US$ 5,000 and US$ 6,000. South Africa and Tunisia recorded per capita income levels of US$ 4,700 and US$ 2,800, respectively, during the same period.
With regard to global competitiveness, Tunisia was the highest ranked (4.7) in the2006 survey followed by South Africa (4.4) and Mauritius (4.2); Other countries scoring at least 4 points on the index included Egypt (4.1) and Morocco (4.0). In terms of diversification of the economies, Morocco emerged as the highest with an export diversification index of 36.2, followed by Tunisia (31), Egypt (29.3), and South Africa (27.7).
Other high rated countries include Swaziland (15.7) and Mauritius (11.8). The MICs also differ in terms of the ease of doing business domestically. In this category, South Africa emerges as the highest ranked country at 29th out of 175 countries, followed by Mauritius (32nd), Namibia (42nd) and Botswana (48th). Swaziland and Tunisia are ranked 76th and 80th, respectively.
As regards depth of the private sector (measured by banking system claims on the private sector), Mauritius and South Africa led the group, with more than 70 percent, whileEquatorial Guinea, Libya, and Gabon were at the bottom, with less than 10 percent. When looking at integration into the global economy as measured by total external trade, theSeychelles led the group with more than 250 percent of GDP, followed by Swaziland with 166 percent of GDP, while South Africa and Egypt were at the bottom with each at about 65 percent of GDP. Finally, when looking at integration into the global economy as measured by foreign direct investment, Equatorial Guinea led the group at 25 percent of GDP, followed by the Seychelles with 11 percent of GDP, while Libya, Mauritius, and Swaziland were at the bottom with less than 1 percent of GDP (the latter even with a net outflow of investment).
MICs’ development challenges
In spite of their status as MICs, these countries face many of the problems of the Low Income Countries (LICs), viz., slow growth and high unemployment; vulnerability to external shocks; and slow integration into the global economy, among others. MICs struggle in terms circle of opportunity, which endanger attaining the Millennium Development Goals (MDGs).
The issues require positive responses by development partners, and MICs should be attracted notably to the Bank, which stands ready to help them address these weaknesses.
Those MICs with significant financial inflows and windfalls from, for example, high commodity prices in the extractive industries, need support to deal with the large resource swings. Most African MICs are still vulnerable to external and internal shocks due to factors such as limited product/export market diversification and environmental conditions.
Impediments to “doing business” and enabling private sector investment exist among the MICs in the form of weak rule of law and corporate governance; ill-defined land tenure and property rights; inadequate financial market development; ineffective implementation of environmental regulations; and inefficient business processes.
Bank Group Strategy for MICs
The strategy to be proposed aims at making the Bank a favorite partner for MICs based on its financial products and comparative advantage in country knowledge and experience. To that end, it redefines the role of the Bank regarding MICs, emphasizing actions to achieve sustained growth and poverty reduction. The strategy should also addresses the Bank’s development challenges in countries that have graduated to MIC status but which are still experiencing problems of LICs, as well as the various challenges between and within the MICs, particularly as regards differing levels of development and inequality.
This new approach to MICs, which is being aligned with the Bank’s private sector strategy, sets out the following objectives:
- To build the competitiveness of MICs by supporting infrastructure development
- To deepen private sector investment and catalytic transactions by providing an interface between public and private investment through direct investment, equity participation, and by engaging private corporations, financial institutions, and state-owned enterprises
- To boost regional investment and trade by supporting partnerships between MICs and neighboring ADF countries through public/private (PPP) operations
- To enhance capacity building and knowledge by investing in productive sectors
- To disseminate best practices among development stakeholders to strengthen their institutional management and capacity.