The World Bank has highlighted that power markets remain monopolistic in many middle-income countries. In its latest report, “The World Development Report 2024: The Middle Income Trap,” the Bank stated that over 100 countries, including China, India, Brazil, and South Africa, face significant obstacles that could hinder their progress towards becoming high-income nations in the coming decades.
The report emphasized that in many middle-income countries, power markets are still dominated by state-owned enterprises (SOEs) operating under vertically integrated utilities. These SOEs control generation, transmission, distribution, and retail supply, stifling competition and leading to inefficient resource use. Countries such as Pakistan, Poland, South Africa, and Türkiye have SOEs accounting for 84 percent of total installed capacity, whereas the private sector owns approximately 80 percent of the installed capacity of renewable energy.
The World Bank also pointed out the disparity in skilled labor across income levels. While the share of skilled workers is very low in low-income countries, it increases as nations transition from lower-middle-income to upper-middle-income and eventually to high-income status. For instance, Pakistan would need to double its share of skilled workers to match Chile’s level, and China would also need a significant increase. As countries move towards high-income status and need to innovate rather than just adopt existing technologies, the demand for sophisticated talent grows.
The report also touched on social issues, noting that in Pakistan, female physicians are often regarded as “trophy brides” in the marriage market. Despite women making up over 70 percent of medical school graduates in Pakistan, only 23 percent of them continue to practice their profession after graduation.
Moreover, the World Bank highlighted the impact of economic policies on productivity. In Pakistan, increases in upstream markets’ tariff duties have reduced the productivity of firms in downstream markets. Conversely, in Peru, firms that received support to enhance their capabilities in the early 2000s experienced a 17 percent higher export growth rate compared to those that did not participate.
These findings underscore the importance of fostering competition, improving talent allocation, and ensuring equitable access to opportunities to promote growth and social welfare in middle-income countries.