Inclusive Wealth for Sustainable Development and Social Progress

Oct 20, 2014

Tan Sri Dr Jeffrey Cheah

Fellow panellists Dr Saiful Mahdi and Prof Dr Jamal Othman

Distinguished guests

Ladies and gentlemen,

A very good morning to all of you. Selamat Pagi.

Global Evolution of the Inclusive and Sustainable Development Agenda leading to the Post-2015 Development Agenda

The human development paradigm has long guided UNDP’s work and has been at the core of our inclusive and sustainable development work in supporting countries on their reform journey, guided by the country’s own priorities and by our mandate.  In 1990, human development was given a firmer conceptual, quantitative and policy emphases through the first global Human Development Report published by UNDP.

Human development combines the capabilities and basic needs approaches and is anchored in the idea that while economic prosperity may help people lead freer and more fulfilling lives, education and health, among other factors, influence the quality of people’s freedoms.  It is about enlarging people’s choices and opportunities in ways which are economically, socially, and environmentally sustainable, in order to benefit present generations without compromising the prospects of future generations.

Around the same time, on the sustainability front, the Brundlant Report, Our Common Future published by the United Nations World Commission on Environment and Development (WCED) in 1987, defined and made popular the notion that sustainable development is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

In 2000, representatives of 191 nations attended the Millennium Summit and unanimously adopted the Millennium Declaration, which called on the world community to achieve the eight Millennium Development Goals (MDGs).  While the MDGs do not reflect all dimensions of human development, they represent the most comprehensive set of human development goals and targets ever adopted by UN member states.  Progress towards achieving the MDGs is progress towards human development that is both inclusive and sustainable.

More than a decade have passed since the MDGs were announced, and great achievements have been made across the world, among which stand the remarkable changes in Malaysia that we all take pride in.  The question remains what needs to be done next.

In July 2012, Secretary-General Ban Ki-moon announced the 27 members of a High-level Panel to advise on the global development framework beyond 2015, the target date for the achievement of the MDGs.  The Panel discussed two of the world’s biggest challenges – how to end poverty and how to promote sustainable development.

In the same year, the UN Conference on Sustainable Development (UNCSD), also known as Rio+20, renewed calls for political commitment to the sustainable development agenda and provided an opportunity for the global community to remain engaged in this agenda as a top priority in the new and rapidly changing global development landscape.  Twenty five years after the Brundlant Report, Rio+20 served as a timely opportunity to critically assess progress and identify gaps in the implementation of sustainable development.  The resulting outcome document is The Future We Want, a report that reinforces the principles of sustainable development and calls for countries to adopt clear and focused practical measures to address remaining, as well as emerging development challenges.

Today, the Post-2015 agenda has seen a robust process of consultation with civil society organizations, businesses, academia and policy makers from more than 120 countries, where five (5) transformative shifts were put forward:

                               i.            Leave no one behind;

                             ii.            Put sustainable development at the core;

                          iii.            Transform economics for jobs and inclusive growth;

                          iv.            Build peace and effective, open and accountable institutions;

                             v.            Forge a new global partnership.

All these emerging positions put forward a wider set of objectives than covered by the MDGs, which equally emphasize the pursuit of an ‘equity’ agenda focusing on inclusiveness, human rights, and governance in the spirit of the Millennium Declaration, and the ‘sustainable development’ narrative in the spirit of the SDGs.  They are seen as essential elements of the social contract for inclusive and sustainable development.

“Malaysianizing” the Inclusive and Sustainable Development Discourse

Aspects of these approaches and similar objectives have guided Malaysia’s development progress.  Malaysia’s implementation of the New Economic Policy (NEP) between 1971 and 1990 through national programmes of growth with redistribution and the subsequent National Development Policy (1991-2000) and National Vision Policy (2001-2010) has resulted in remarkable strides in eradicating poverty and reducing inequalities in the country.

Malaysia also has to tread the delicate balance between socio-economic and environmental goals.  At the Rio Earth Summit in 1992, Malaysia pledged to set aside 50% of land as forest, while the remaining 50% is to be used for development of cities, towns, villages, industrial parks and planting of agricultural crops.  From 1970 up until then, a fifth of the country’s natural forest was converted to agricultural crops, oil palm and rubber.

As Malaysia continues to advance its own national development project, it is rightly seeking a more inclusive, balanced and sustainable development approach.  Faced with remaining and emerging challenges, Malaysia continues to embrace the inclusive and sustainable agenda in its New Economic Model (2010-2020), which outlines a triangular platform consisting of:

                               i.            A high income economy with a GNI per capita US$15,000–20,000 by the year 2020;

                               i.            An inclusive society that “enable[s] all communities to fully benefit from the wealth of the country”; and

                             ii.            Growth and development that is sustainable, i.e., that “meet[s] present needs without compromising future generations”.

The United Nations team here in Malaysia is committed to support the country’s aspirations to achieve its NEM objectives and to make growth work for development; and as such, UNDP has been increasingly working together with Government on mainstreaming these three development dimensions in all sectors of the economy.  

From UNDP’s perspective, “inclusive growth is both an outcome and a process.  On the one hand, it ensures that everyone can participate in the growth process, both in terms of decision-making for organizing the growth progression, as well as in participating in the growth itself.  On the other hand, it makes sure that everyone shares equitably the benefits of growth.  Inclusive growth implies participation and benefit-sharing.  Participation without benefit sharing will make growth unjust and sharing benefits without participation will make it a welfare outcome.” UNDP International Policy Centre for Inclusive Growth, Brasilia

Echoing the Brundlant Report for sustainability, the core idea is that development aspirations of humanity must be balanced with, and met within the natural limits of our planet.  Placing human beings at the center of the development discourse, it brings into consideration inter-generational equity, as well as stresses the need for a holistic, balanced and coherent approach in addressing the three development pillars of economic development, social development and environmental protection.

In accordance with this session’s subtheme and the larger global and national context of inclusive and sustainable development, I’d like to propose three key ideas for our discussion and deliberation:

                   i.            Inclusive wealth for sustainable development and social progress requires the expansion of the concept and measurement of well-being from income accounting to wealth accounting;

                 ii.            Urbanization is a key variable in the drive for inclusion and sustainability and cities will be main battlegrounds where this will be won or lost;

              iii.            Subnational governance - stake and local government - have a core role to play in moving the inclusive and sustainable development agenda forward especially in upper-middle income Malaysia.

Inclusive wealth for sustainable development and social progress requires the expansion of the concept and measurement of well-being from income accounting to wealth accounting

As discussed above, the true achievement of sustainable development must focus on human well-being.  However, when we talk about human well-being, it is not just limited to present day conditions but our definition of human well-being – and, indeed, our efforts to achieve it – must entail the well-being of future generations.

UNU-IHDP and UNEP has published “The Inclusive Wealth Report 2012: Measuring Progress towards Sustainability” that demonstrates a different perspective for assessing the performance of an economy – this by switching the policy focus from flows (income) to stock metrics (wealth).  Wealth is defined as the social worth of an economy’s assets: reproducible capital; human capital; knowledge; natural capital; population; institutions; and time.  Inclusive wealth therefore stresses the importance of preserving a portfolio of capital assets to ensure that the productive base can ultimately be maintained to sustain the well-being of future generations.

Wealth accounting means that a country wealth measurements should include all natural assets that are under a country’s jurisdiction and that contribute to human well-being, whether those assets are privately owned or not.  More work is still required on understanding and measuring the relationship among assets, environmental externalities, and poverty in an effort to advance human well-being.  Estimates of inclusive wealth can be improved significantly with better data on the stocks of natural, human and social capital and their values for human well-being.

It is essential that governments collect capital stock data so that inclusive wealth accounting can become increasingly accurate, comprehensive, and useful.  This is pertinent for subnational governments where a lot of capital stock information fall under its jurisdiction.  More complete data would enable states to measure their rate of inclusive investment.  Such data would also make it clear to policy-makers whether current GDP growth rates are sustainable in the long-run.

An important conclusion drawn here is that if states with an inclusive wealth per capita annual growth rate that is less than their GDP per capital annual growth rates for the long term, increased inclusive investment will be required.  This means the state governments would have to encourage education, reduce the extraction of natural resources, and increase the construction of public infrastructure.

Urbanization remains the most important driver for inclusion and sustainability and cities will be main battlegrounds where this will be won or lost

As we move towards a Post-2015 world, one of the mega-trends that is providing both the setting for inclusive and sustainable development and momentum for global change, and yet so inadequately understood and addressed, is the urbanization factor.

According to the UN Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report in 2013, “Urbanization is a global trend and is associated with increases in income, and higher urban incomes are correlated with higher consumption of energy and GHG emissions.” IPCC points out that the global urban population will account for a large percentage of energy use and energy-related CO2 emissions and that urban land cover is projected to expand by 56-310% between 2000 and 2030.

While urbanization is not a new phenomenon, and cities have existed thousands of years ago, what stands out in contemporary urbanization trends and patterns is the speed and size of urbanization happening in developing countries.  Cities drive much of the unsustainable patterns of production and consumption that lead to environmental degradation, climate change, and strain services, including water.  

What this means for the global development community is that the center stage for the next phase of the development agenda will be in urban areas, whether megacities, large urban conurbations, secondary cities or small towns.  In the words of the UN Secretary General Ban Ki-moon, “Our struggle for global sustainability will be won or lost in cities.”

Compared to more than half a century ago when urban population is higher in the developed world, today, more than 70% of the urban population resides in developing countries.  UN-Habitat reports by 2050 it will be 70 per cent.  95 per cent of this expansion will happen in developing countries, mostly in Asia and Africa.  This is an astonishing figure that reflects on an urbanization that is of a degree and complexity never known before.  A startling statistics provided by UN Habitat states that "of the 187,066 new city dwellers that will be added to the world's urban population every day between 2012 and 2015, 91.5 per cent, or 171,213, will be born in a developing country."

The question of how to achieve inclusive and sustainable cities should be at the center of our current debates about achieving a better world - one in which we all want to live.  This is not to suggest, in any way, a lesser priority for development challenges in rural areas but rather about emphasizing the need to understand urbanization and as highlighted by the urban theorist, Mike Davis, it is a process of structural transformation along, and intensified interaction between, every point of an urban-rural continuum.

The urban-rural continuum is where social and political relations are shaped, advances and setbacks in modes of production are determined and social norms, culture and aesthetics are provided.  Urban spaces will be the locus of power and politics as well as where risks and vulnerabilities are concentrated.  

The concept of the urban-rural continuum is important because, while it acknowledges the importance of statistical classification of urban and rural, in terms of programme design and interventions, it brings to focus the need to drive at the range of processes that shape the urban-rural continuum which may not fit neatly into statistical categories.  Hence, besides the need to strengthen linkages between different urban centers, between large agglomerations and smaller towns, between rural and urban areas, there's also a pertinent need to strengthen linkages between development planning and spatial planning.

Subnational governments have a core role to play in moving the inclusive and sustainable development agenda forward especially in upper-middle income Malaysia

Against this backdrop, from a governance angle, the question then becomes, how can institutional change i.e. governance and government keep pace with this changing development landscape?

Very often, governance of the development agenda falls within the remit of subnational governments.  Globally, and particularly in Asia Pacific, the quality of subnational governance and institutional change is the single most important barrier to improving the sustainability and inclusion at local levels.  Governments in developing countries in this region often have inadequate capacity and resources for localized management. Without major improvement in approaches, the problems and negative externalities of today will be magnified by large scale megatrends such as urbanization in the coming decades.

The impact on institutional resilience, flexibility and effectiveness is compounded by the fact that information and communication technology has amplified changing attitudes, cultures and expectations of the populace, where more often than not, people have higher expectations on the quality of public goods and efficiency of public service delivery in the local areas.  Many communities no longer passively accept the planning decisions of politicians or technocrats but would want to be included when such decisions have impact on their living environments.

The complexities of our society, especially in cities, also mean that top-down, centralized planning cannot possibly capture all facets of social exclusion.  These challenges are increasingly presenting obstacles which the public sector cannot surmount alone. The participation of stakeholders from across the different levels of government, private sector, community organizations, networks of citizens, and other groups is in many cases essential.

However, many subnational governments in particular local authorities also face the difficulty of achieving and delivering consensus due in part to an increasingly fragmented and divided society, precipitated by growing inequalities in wealth, income and opportunities, made worse when they intersect with ethnic and religious identities and complicated by international migration when there’s insufficient integration and inclusive policies.

Therefore, the challenge for government and the public sector, on top of having to build nimble institutions that are responsive to change, is to consistently deliver public goods and services that meet evolving demands and at the same time put in place a system that involves all layers of society, especially the powerless, vulnerable and excluded, which can aggregate conflicting demands with the least political costs, and would create a sense of ownership in both the processes and outcomes of development.

UNDP has seen how participatory governance can deepen ownership, build trust, and inspire volunteerism.  These are the building blocks of stable, cohesive societies so essential for resilient and sustainable development.

To build such institutions requires resolute, visionary and adaptable leadership to shift the role of government from being merely regulatory to a developmental one.  Far-sighted and progressive leadership is also needed to expand the political system from government to governance as a response to the growing complexity of governing cities and the urbanization process in a globalizing, inter-connected and multi-level context where subnational governments and non-state actors would also have a crucial role to play in the process


On this note, and with these three ideas, I hope that what I have shared with you today will stimulate further conversations and better ideas about how we can collectively advance inclusion and sustainability in the Malaysian development context.  Consistent with our mission, UNDP in Malaysia will continue to work alongside government bodies and civil societies in Malaysia, and hopefully increasing our engagement with subnational governments, to realize the full potential of the Malaysian people.  I look forward to our discussion to seek the best approaches to achieve this common mission.

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