UNITED NATIONS, June 30 (UPI) -- The United Nations says institutional reform is needed to bridge growing inequalities between lower income countries and the developed world.
"Small scale home made economic reform is the key to success for slow growing countries, rather than a big bang institutional change, which does more harm than good," U.N. Director for Policy and Analysis Rob Vos said Friday, launching the 2006 U.N. World Economic and Social Survey.
The figures suggest that among the developing countries only Asia and China have escaped the trend of poor growth performance.
"Both economic successes and collapses have tended to cluster in time and space," Vos said. "Asia and China have been catching up with the developed world, while lower income countries showed little structural evolution. More countries should adopt policies tailored to their national situations."
The study shows lagging infrastructural development accounts for as much as one-third of the income gap between East Asia and Latin America.
"Macroeconomic policies in developing countries have become excessively pro-cyclical, that is spending more when the economy is doing well and cutting strongly when the economy is down," Vos told reporters at U.N. World Headquarters in New York.
"This has exacerbated the volatility brought on by financial markets. It is not about giving tax breaks," he said. "It is about providing a sound institutional and political environment to invest in."
A four-point agenda the survey proposes for development of lower income countries includes fostering active trade and production sector policies for economic diversification; improving the trade environment; opening up more space for counter-cyclical macroeconomic policies and ensuring sustained levels of public spending.
Vos called for World Trade Organization negotiations in Geneva to review policies in light of the study and make structural changes to open trade in developing countries.
