The Hindu Business Line : Encourage mobility of people, products: World Bank

Mr Somik V. Lall, Senior Economist, The World Bank, with Mr Indermit S. Gill, Director of the World Development Report and Chief Economist, Europe and Central Asia, releasing the ‘World Development Report 2009: Reshaping Economic Geography’ in the Capital on Thursday.

Our Bureau

New Delhi, March 12 Population shift from villages to cities is natural and should be encouraged, says a new economic report from the World Bank.

The World Development Report 2009: Reshaping Economic Geography was launched here today.

Citing India as an example of a country with densely populated lagging areas — where 60 per cent of the nation’s poor live in the central lagging States – the report calls for policies that promote mobility of people, products and ideas.

“Let markets pick the places. Markets favour some places over others. To fight this concentration is tantamount to fighting prosperity,” said Mr Indermit S. Gill, Director of the World Development Report (WDR) and Chief Economist, Europe and Central Asia.

The new WDR challenges the assumption that economic activities must be spread geographically to benefit the world’s most poor and vulnerable.

Mr Gill said that the Governments should facilitate the geographic concentration of production.

They must also institute policies that make the provision of basic needs — of schools, security, streets and sanitation — more universal, he added.

Trade integration

The WDR also makes a strong case for international integration through trade.

The protectionist tendencies following the financial crisis, in both developing and developed countries, could seriously jeopardise both the recovery and longer term progress.

SEZs

On special economic zones (SEZs), it noted that unlike China’s government-led SEZs, India’s are being developed by the sector.

It also said that the private sector SEZs are generally more profitable and have better social and environmental track records than public zones, except in East Asia’s government run zones.

The report also highlighted that location is the key.

It seems to matter more where the zones are located, not who owns and operates them.

The lesson from China and India is that spatially directed interventions are more likely to succeed when they exploit geographic advantages rather than try to offset them, according to WDR.

The report also noted that fiscal incentives, while politically efficient, have not transformed the economic fortunes of lagging areas.