Earlier this year, the Boston Consulting Group unveiled its Sustainable Economic Development Assessment (SEDA). Douglas Beal talks about the index which seeks an innovative way to measure growth.
Q: Which sector is more likely to use the Sustainable Economic Development Assessment (SEDA) – the government or the private sector?
The SEDA has met the needs of both. Even if the matter involves the economic development of a particular region, private sector organizations have come to us on behalf of that region. This is most likely to happen in the west: in Europe and the United States. In the west, we are often approached by business and academic leaders from a particular community that have taken it upon themselves to say “we see some issues and opportunities in our region,” and they want to know what they can do, as business leaders, to support that.
Q: Where does China factor in as far as SEDA is concerned?
With SEDA we look at absolute well-being and we look at the improvement of well-being. We then compare it to the GDP and GDP growth, to see whether a country is doing better or worse than average at translating GDP growth into improvements of well being. So while China has done very, very well at improving the well-being of its population over the past several years, that improvement has been in line with its GDP growth, not better, not worse.
But if you compare it to a country like Poland where, according to this year’s data, it has done the best over the last seven years in translating its growth into improvements in well being, China doesn’t look as good. For example, SEDA looks at ten dimensions and one of these areas is the environment. Of the 148 countries and Hong Kong, a special administrative region of China in our study, and with respect to the environment, China is last and its further falling behind the rest of the world – this is one reason China doesn’t look as strong as it could.
I do think that at least publicly, China’s leadership is recognizing that there probably needs to be a rebalancing between the headlong economic growth, as measured by GDP, vs improvements in well-being as measured by some of these other dimensions. So you actively see an acknowledgement that 12.5 per cent per year growth is probably neither desirable nor possible, and that China is thinking about rebalancing, for example how to improve the environment at the same time.
Q: Does SEDA compare like with like? Are Asian countries compared to other Asian countries?
You don’t have to compare China to the west, you can compare China to other countries in an Asian setting. We look at all the countries across Asia, you can compare China to Vietnam; Vietnam for example has improved its well-being, and its wealth to well-being score is the same as China’s with about half the wealth.
Q: How does a country that has long made economic growth a priority shift gears so that it makes well being a priority?
It’s not always easy. Many of our dimensions, such as governance, civil society, environment, income equality, are not problems that can be solved simply by spending money on them. So if you look at where a lot of middle-income countries have improved over the last seven years – which is the time frame we use to measure improvements – these countries have not only improved areas in the economy, but also in infrastructure, health, education; so you can say you can take money from the improving economy and spend or invest that amount in these areas to get these benefits.
But (making improvements in) governance and civil society can be more difficult because these areas involve making tough decisions and spending political capital, and not just government budget. Spending political capital demands real leadership, and that’s what is most difficult.
So we’ve split these ten dimensions into these three elements, one of them being sustainability; and its made up governance, civil society, envrionment and income equality. If you do a regression of how countries are doing today, against their improvements, you actually see a positive correlation – so further divergence between those already doing well vs. those not. This means the countries that are not doing so well are actually falling further behind; as compared to the rest of the world.
The countries that are doing well already are actually pulling ahead. And this is not what you see with the other two elements. With the economic side, you see convergence, which you would expect (a lot of economists say development of countries should be converge), as well as with infrastructure and health and education.
Q: How do you measure what may appear to be unmeasurable?
You’re seeing a few things happen: data and availability, and transparency, such that its more difficult to hide from the facts. Two-three decades ago, all this data that we are using did not exist, or didn’t exist in a transparent way, but today, data is more and more available.
You’re also seeing governments are thinking more clearly and and in a more organized way about economic and socio-economic development. And there is a lot of diaspora coming back. So for instance you have bankers that worked in New York who are returning and taking up the post of Finance Minister in their developing countries. They are bringing an understanding and new levels of transparency, so you’re now actually starting to see government say: ok, what are our strengths and development needs, and how do we prioritize them, what are our priorities? And in a sense, what they are also doing, is that in developing countries there are a lot of these international organizations, and NGOS which have their own agendas. They are doing very very good things within the country, but often not in a very very coordinated way. So you’ll see separate organizations looking after children’s rights, an organization concerned about pandas, another one concerned about healthcare, and they’re all driving their individual agendas. Governments now are doing a better job of coordinating these NGO’s.
Q: Can you tie in SEDA with the United Nation’s Sustainable Development Goals (SDGs)?
The Sustainable Development Goals (SDGs) cover a very broad set of topics, all of which make sense. However they are not as focused as the eight Millennium Development Goals they are replacing, as they were very focused on core needs. Many MDGS were very very successful at being implemented. Now that you have 169 SDGs, every development organization can pick one and say: “I’m aligned with that goal.” The risk is that, among the international community, nobody has to change their behaviour, because there is not a smaller set of things to rally around.
This will then mean that governments themselves need to create their agenda, and focus the international organizations and the private sector within their country, on that agenda, and that requires real leadership from the governments.
And you may start to see this happen. Take Ethopia for example. Twenty years ago, it started a program to improve healthcare, and they said “look we don’t have a lot of money but we have a large population, we have lots rural communities, and they created the concept of the rural healthcare worker. They trained many people, mostly women, to be the healthcare workers that would go out into the field. They didn’t have to do this with a lot of budget. They also created the program and aligned the international organizations behind that program, such that they could get the most from that, rather than having the agenda dictated from outside. And if you look at the scores in SEDA, Ethopia has improved healthcare more than any other country (in that period of time).
So the SDG’s are quite aligned with SEDA. If you pick the individual goals, whether it be relate to better health, better income equality, environment; many of those show up in our sustainable development assessments. I think the way that governments would look at this, is that the Sustainable Economic Development Assessment is the first tool that they can use to prioritize which of the sustainable development goals might be most important to their country.
And they are going to have to prioritize because they are going to have to tackle all of these at the same time. So if they determine that the environment or healthcare is more important than sustianable tourism, for example, then they should do that, and they should prioritize them over what is less important. . SEDA can help governments create an agenda, identify what the private sector as well as the NGOs that are operating in those areas are doing, and create an integrated program for all to follow.
Douglas Beal is Global Leader, Economic Development for the Boston Consulting Group. He will be speaking on this topic at AGI’s Asia-Global Dialogue 2016. Click here to learn more about the event.