United Nations General Assembly high-level meeting on middle income countries

Addressing structural barriers to sustainable development in middle-income countries

Your Excellency,

Mr. Philemon Yang, President of the 79th United Nations General Assembly,

Excellencies, distinguished delegates,

Ladies and gentlemen, colleagues and friends,

I am honoured to address you today on a subject of profound and lasting importance, a subject for which I have been an advocate for so many years coming from a region, Latin American and the Caribbean, that is mainly described as middle income but that continues to experience so many challenges. In many ways, these countries have been overlooked by the international community.

So it is so important to reflect today about the persistence of structural barriers that continue to hinder sustainable development in middle-income countries.

Last year, at the 9th Annual Meeting on Like-Minded Group of Middle-Income Countries, I delivered a message that I would like to reiterate. Middle-income countries are squeezed by the weight of their paradox. We are "too rich to be poor" but "too poor to be rich."

Too rich to receive special treatment in global policy like debt relief or long-term affordable concessional finance, yet too poor to weather economic storms and systemic shocks.

Since the 1970s, middle-income countries' median income per capita has never risen above one-tenth of the United States level. And fewer than 15% of nations have successfully climbed from middle to high-income status since 1960, so in more than six decades.

For many of our countries, middle-income has not been a status, but a trap; a trap marked by three factors.

First factor is poverty.

Middle-income countries are home to 75% of the global population and generate about 40% of global GDP. Yet we also shelter 60% of the world's poor. And it is not that the poor moved from poor countries to middle income ones. They live in the same place they lived before, but their countries got reclassified from low income to middle income. In 1987, 30% of all countries were low income according to the World Bank, today only 12% are. In 1987 in South Asia, 100% countries were low income; now only 13% of them are.

That is why the quest to end global poverty has to focus on the needs of poor people not only in the needs of poor countries, and that is why the quest to end poverty is inseparable from the quest to create sustained, productive growth in middle-income countries. Not to do so is to make billions of people invisible.

Now, is what middle-income countries require to overcome their structural problems different from other categories? Yes, it is. But at the same time, the middle-income category has such a diversity of countries that it is difficult to see what the common denominator is between them.

This takes me to the discussion of “Beyond GDP” that is so crucial for middle-income countries. Because GDP is about good and services; but development is about people and their wellbeing – and the wellbeing of the environment in which they live. Beyond GDP is about bridging this gap. About making the invisible visible. About measuring development with development.

The second factor is commodity dependence.

Many middle-income countries possess abundant natural resources and human capital, but the promise of structural transformation remains elusive. About 90 countries in the world remain commodity dependent, the vast majority – again – are middle income. The number of commodity-dependent countries around the world has barely budged in decades.

Trade and investment are essential for productive diversification and technology transfer, but investment at scale has gone only to a few emergent markets. At the same time, trade has been important for growth but has not helped as expected for development, industrialization and productive capacities.

Domestic good policies are no doubt an indispensable element of this mix, but fiscal and policy space are needed to ensure that public investments and much-needed economic diversification takes place.

Here, large debt burdens constitute a growing impediment.

Today, 3.3 billion people live in countries that spend more on debt servicing than on health or education. Of these, 3.1 billion live in middle-income countries. When more and more of our countries default on development to not default on debt, how much investment can we feasibly attract, how much industrial policy can we pursue, how much growth can we spark?

This is why the 4th International Conference on Financing for Development (FFD4) discussions are so important, and why we need to make clear that the issue around domestic versus international enabling environments is not an either/or question. Domestic resource mobilization and private sector finance don’t just materialize in a vacuum. They are not variables that “move independently”.

Domestic and international environments are joined at the hip. And the fact is, the high cost of capital and the growing external debt burdens currently constitute a large impediment in enabling our domestic environment. That is why a stable, transparent and efficient mechanism for debt restructuring has been called for in the Pact of the future and why long term, affordable and at scale financing from the global and regional development banks is so important and why this will only be possible if they take more risk, are strengthened and are able to crowd in private investment.

The third factor is trade.

For decades, growth in middle-income countries has been accompanied by greater trade integration.

Though trade is still growing, thanks in part to the robust performance of services exports, the future is extremely unclear in this area, as you all know.

Last year, even before the most recent trade frictions, we recorded over 3200 harmful trade restrictions – for reference, this is 3000 more than in 2012.

But we still need trade. We still need trade for energy and food. We still need trade for intermediate goods in manufacturing. We still need trade for life-saving medicines and vaccines.

We still need trade to develop the new clean energy supply chains that will power the energy transition, accelerate the digital transformation, incubate the AI revolution.

Middle-income countries have the most to lose and the most to gain from a universally agreed, rules-based trading system. Today, we need your voice and support more than ever before to pursue trade system reform for the benefit of all.

On trade, there are many things we can already do among ourselves. As I say, regionalism is back. Regional trade agreements are a historic high – open regionalism, where regional value chains deepen to better integrate with the world, not to retreat from the world, has great potential. So does South-South trade, which could provide a cushion to growing trade tensions, but still suffers high tariffs. South-South trade has grown faster and represent already 30% of the total trade the same as North-North trade.

Excellencies,

Later this year in October, UNCTAD will host its 16th Ministerial Conference (UNCTAD16). Let me, in closing, invite you all to join. As I mentioned to you last year, there is no way to escape the middle-income trap without multilateralism. We are working hard to ensure UNCTAD16 is a moment where multilateralism delivers.

Viet Nam – our host country – is a middle-income county. A country that embodies the many paradoxes we are addressing – a nation of remarkable progress through strategic trade engagement yet still striving to build the productive capabilities necessary for its next stage of development.

We are bringing an ambitious programme of action to Viet Nam, one that will seek to address many areas of huge importance for middle-income countries.

From critical minerals to the digital economy, from value addition to creative economies, from debt relief to resilient supply chains – this will be a conference that will not mix words or confuse terms when thinking of the challenges of middle-income countries, nor the ways in which we must work together to address them. Because of our membership, our history and our mandate, UNCTAD fundamentally understands you, and your challenges, and your aspirations.

Excellencies,

Looking beyond the specific challenges that we've discussed today, there is a deeper truth we must acknowledge: the development path of the 21st century cannot simply mimic that of the 20th.

Middle-income countries have a pivotal role to play in shaping this new path, as they account for a substantial share of the world’s population, output, consumption, and investment, serving as dynamic engines of global growth and innovation.

We live in a world transformed by digital technologies, climate imperatives and new patterns of globalization. This calls not for incremental adjustments but for reimagining development itself – development that is more sustainable, more digital and more equitable from the outset.

UNCTAD16 will embrace this forward-looking perspective, helping countries not just to overcome yesterday's barriers but to seize tomorrow's opportunities. I invite you all to join us in shaping this new development vision, one that works for all people, in all countries, at all income levels.

I thank you.