Pernia urges review of mid-income country classification

MANILA, Philippines – Socioeconomic Planning Secretary Ernesto Pernia has called for a review of the classification of middle-income countries, saying this would guide developmental partners in providing “more targeted and relevant responses” to challenges faced by these economies.

In a keynote speech delivered at the first ministerial meeting of the Like-Minded Group of Countries Supporters of Middle-Income Countries (MICs) at the United Nations (UN) headquarters in New York, Pernia said the classification should not be solely based on gross national incomes (GNI) but should also consider poverty and inequality indicators, as well as vulnerability to economic shocks.

Development assistance provided by the UN as well as those of international development organizations are currently anchored on the World Bank’s classification of countries which measures only the GNI.

This has an immediate effect on development financing as this reflects the credit-worthiness of a country and provision of aid. As the same time, this affects the flow of foreign aid to middle-income countries.

The Philippines is currently classified as as a lower middle-income economy along with India and Indonesia, among others.

In his speech titled “Overcoming the middle-income classification through a multidimensional approach to development,” Pernia said applying a multidimensional approach to country classification would properly guide developmental partners in determining the type, mode, level and timeliness of assistance they should extend to each country.

He said this would also enable middle-income countries to implement more “responsive policies and programs to attain SDGs (Sustainable Development Goals).”

The Philippines is a founding member of MIC whose members include Armenia, Belarus, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Mexico and Panama.

In a statement, the National Economic and Development Authority (NEDA) said the meeting adopted a declaration stating the need to advance the following: establishment of a comprehensive UN-wide system and long-term strategy aimed at facilitating sustainable development cooperation and coordinated support towards MICs; conduct of an outreach strategy within the UN community to raise awareness on the needs of MICs; and promotion of MIC’s views on sustainable development-related processes within UN bodies, specialized agencies and funds.

In a concept paper prepared for the Sept. 23 meeting, the UN recognized the challenges faced by the the hundred or so middle income economies in job creation, diversification and transformation of their economies, access to technologies, integration of small and medium enterprises into global value chains, as well as structural gaps in terms of inequality and poverty.

The UN said belonging to this classification has significant implications for such countries. As a country moves up the income ladder, there is a natural tendency for international aid to slow down, therefore hampering growth in key areas.

As such, greater participation by middle-income countries in the international cooperation system—whether as donors or recipients—would have a positive impact on global development as this would facilitate the flow of international aid.