Development

• Development
• Measuring Development
• Distribution of More & Less Developed Countries
• Development Issues
• Obstacles to Development

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Development: Terms

• Development: “the process of improving the material conditions of people through diffusion of knowledge and technology.”
• Every country lies at some point along a “continuum of development.”
• Many countries cluster at either the high or the low end of the continuum, so we can divide countries into groups:
• MORE DEVELOPED COUNTRIES (also called “MDCs,” “Relatively Developed Countries,” and “Developed Countries.”)
• LESS DEVELOPED COUNTRIES (also called “LDCs,” and “Developing Countries.”)

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Loaded Terms?

• Any discussion of development tends to get into issues of pride and resentment – after all, when we describe one place as “developed” and another as “less developed” – are we really saying that:
• “More Developed” ≈ “Developed” ≈ “Modern”??
• “Developing” ≈ “Less Developed” ≈ “Backward”??

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Measuring Development

• How do you measure “material conditions?” For around 200 countries??
• For many years the basic measure used to compare development was economic – gross domestic product (GDP: the total value of a country’s goods and services).
• But “material conditions” for a country as a whole aren’t well described by GDP alone.
• So, starting in 1990, building on the work of Indian economists Partha Dasgupta and Amartya Sen, the Pakistani economist Mahbub ul Haq worked to devise a better measure: the human development index.

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GNI vs. Gini

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• This map shows the Gini Coefficient – a measure of income inequality that varies from 0 to 1 (lower values indicate greater equality).
• “Average income” figures can be misleading if incomes are highly unequal.

Adapted from: http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD?display=map

• Please note: some of the statistics we’re going to look at use “Gross Domestic Product”; some use “Gross National Income.”
• GDP measures the total value of goods and services in a country.
• GNI measures the total value of goods and services PLUS money that leaves or enters a country.
• These are NOT identical – but for our purposes, the distinction isn’t very important.

Gross National Income

GINI Coefficient

The HDI

• The United Nations Development Programme creates the Human Development Index (HDI) using a combination of measures:
• One economic indicator of development.
• Two social indicators of development.
• One demographic indicator of development.
• A single value – an index number – is then computed, and every one of the nearly 200 countries in the world can be ranked.

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Possible Economic Measures

• Gross National Income (per capita, PPP)
• Total value of goods and services produced in a country.
• Sector of Employment
• Jobs fall into three categories: primary (agriculture, fishing), secondary (manufacturing) and tertiary (services). Workers in the secondary and tertiary sectors earn more than those in the primary sector; high numbers in the primary sector means getting food is a major difficulty.
• Availability of Consumer Goods
• After necessities are taken care of, “luxuries” drive an economy – more consumer goods means more manufacturing and a higher level of development.

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Possible Economic Measures: GNI

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Possible Economic Measures: Primary Employment Sector

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Adapted from: http://www.mapscd.com/world/world-primary-sector-map/

Possible Economic Measures: Consumer Goods

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Telephones (land lines) per thousand

Adapted from: http://www.sitesatlas.com/Thematic-Maps/Telephone-main-lines-per-capita.html

Possible Economic Measures: Consumer Goods

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Telephones (mobile) per thousand

Adapted from: http://www.sitesatlas.com/Thematic-Maps/Mobile-phone-subscribers-per-capita.html

Possible Social Measures

• Education & Literacy
• Generally, the higher the quantity of education and literacy, the higher the level of development.
• Measures of education:
• Years of schooling.
• Expected years of schooling.
• Student/teacher ratio.
• Literacy rate (percentage that can read and write).
• Education measures can also be analyzed for differences between male and female levels of education.
• Health and Welfare
• Measuring "healthiness" is tricky, so surrogate measures are used, such as:
• Ratio of people to hospitals, doctors and/or nurses.
• Hunger.

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Years of Schooling

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Average years of education

Expected years of education

Adapted from: http://hdr.undp.org/en/data/map/

Possible Social Measures: Pupil-Teacher Ratios

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Adapted from: http://data.worldbank.org/indicator/SE.PRM.ENRL.TC.ZS?display=map

Possible Social Measures: Literacy Rates

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Adapted from: http://leadingfromtheheart.org/2008/07/26/perpetuating-the-story-of-difference-or-literacy-revisited/

Possible Social Measures: Physicians per 10,000

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Adapted from: http://www.globalhealthfacts.org/data/topic/map.aspx?ind=74

Possible Social Measures: Hospital Beds per 10,000

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Possible Social Measures: Percent Undernourished

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Adapted from: http://www.grida.no/publications/other/geo3/?src=/geo/geo3/english/fig308.htm

Possible Demographic Measures

• There are many measurable demographic differences between MDCs and LDCs. Possible choices include:
• Life expectancy at birth (average number of years a newborn is expected to live).
• Child Mortality Rate
• Rate of Natural Increase
• Crude Birth Rate
• Crude Death Rate is not a good indicator:
• Better medical technology in LDCs means a low death rate may not indicate high development.
• MDCs have more elderly populations, so a high death rate doesn’t necessarily mean low development.

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Possible Demographic Measures: Life Expectancy

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Adapted from: http://hdr.undp.org/en/data/map/

Life expectancy at birth

Possible Demographic Measures: Under 5 Mortality

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Adapted from: http://hdr.undp.org/en/data/map/

Possible Demographic Measures: Natural Increase

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Adapted from: http://www.prb.org/DataFinder/Topic/Map.aspx?ind=16&fmt=16&tf=3&loct=3

Possible Demographic Measures: Birth Rate

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Adapted from: http://geodata.grid.unep.ch/mod_map/map.php

Computing the HDI

• The variables the UN currently uses:
• ECONOMIC: Gross National Income (per capita, Purchasing Power Parity).
• SOCIAL: Education (this is calculated based on mean years of schooling and expected years of schooling).
• DEMOGRAPHIC: Life expectancy at birth.

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HDI= (¹/₃ * economic)+(¹/₃ * social)+(¹/₃ * demographic)

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The 2011 HDI Figures

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Source: http://hdr.undp.org/en/media/HDR_2011_EN_Complete.pdf

2011 HDI Rankings

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The HDI: Criticisms

• Failure to include ecological considerations.
• Focusing exclusively on national performance and ranking.
• Ignoring the global/regional perspective.
• Redundant.
• Lacking year-to-year comparability.
• Lacking region-to-region comparability.

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For more information see: http://www3.interscience.wiley.com/journal/10005622/abstract;

http://ideas.repec.org/p/ags/aaea09/49763.html

The HDI: Is There Anything Else?

• The HDI is certainly a better measure of "material conditions" than GNI, but it may not measure what we are interested in.
• There are many, many other possible ways of looking at development.
• A sample of other possible measures could include:
• The Multidimensional Poverty Index (MPI)
• The Gender Inequality Index (GII)

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Multidimensional Poverty Index:�Components

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Source: http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf/

Multidimensional Poverty Index:�The Lowest Figures

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Source: http://hdr.undp.org/en/media/HDR_2011_EN_Complete.pdf

Multidimensional Poverty Index:�Ranks

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Source: http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf/

Multidimensional Poverty Index:�Locations

• Based on data from 98 developing countries.
• Most of the world’s poor are in South Asia (51%) or Sub-Saharan Africa (28%).
• The total percent of multidimensionally poor varies from less than 3% in South Africa to 93% in Niger.

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Source: http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf/

Multidimensional Poverty Index:�Ranks

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Source: http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf/

The GII: Gender Inequality Index:�Components

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Source: http://hdr.undp.org/en/media/HDR_2011_EN_Complete.pdf

Gender Inequality Index:�Table

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Source: http://hdr.undp.org/en/media/HDR_2011_EN_Complete.pdf

Note that HDI ranks do not always equal GII ranks!

Gender Inequality Index Map

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Source: http://chartsbin.com/view/4319

GEM: The Gender Empowerment Measure

• No longer calculated by the UN Development Programme (figures and data are available for 1995-2009).
• Focused on women’s opportunities in two areas:
• Political participation and decision-making power (women’s and men’s percentage shares of legislative seats).
• Economic participation and decision-making power:
• Women’s and men’s percentage shares of positions as legislators, senior officials and managers;
• Women’s and men’s percentage shares of professional and technical positions.
• Power over economic resources (women’s and men’s estimated earned income).
• Computing the GEM is complicated, but the results make comparisons among countries fairly simple.

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The 2007 GEM Rankings

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The Gender-Related Development Index (GDI)

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• No longer calculated by the UNHDP.
• Similar to the GEM, but using:
• Female & male life expectancy (at birth).
• Female & male literacy rates, and school enrollment ratios.
• Female & male income.

The “Hedonometer” – �“Gross National Happiness”?

• Proposed as a sort of thought exercise – instead of comparing “material well being,” comparing “happiness.”
• Uses six variables:
• Understanding and controlling one's environment
• Social support from family and friends
• Satisfaction of sex and parental drives
• Physical well-being
• Esthetic and sensory satisfaction
• Satisfaction of exploratory drives (learning)
• An interesting concept – but hard to get data!
• Perhaps in response to this, the UNHDP is now collecting data on “well-being and the environment.”

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For more information see: http://www.msu.edu/course/prr/213/Russell,ch5.doc;

See also: http://www.gnh-movement.org/

Bhutan’s Gross National Happiness Index

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Source: http://www.grossnationalhappiness.com/wp-content/uploads/2012/04/Short-GNH-Index-edited.pdf

Civic & Community Well-Being

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Source: http://hdr.undp.org/en/media/HDR_2011_EN_Complete.pdf

Note that HDI ranks do not always equal well-being ranks!

Worldwide HDI �Trends, 1970-2010

• The fastest progress has been in East Asia and the Pacific, followed by South Asia, then the Arab States.
• All but 3 of the 135 countries have a higher level of human development today than in 1970—the exceptions are
• Democratic Republic of the Congo
• Zambia
• Zimbabwe.

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Source: http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf/

The More and Less Developed Regions

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“North” vs. “South”

Development: Why? How?

• Why develop? Is it just some kind of cultural imperialism?
• Well yes, sometimes – but not necessarily!
• Economic, social and demographic measures indicate that people in MDCs are wealthier, healthier, better educated, and better off (in terms of material well being, anyway).
• How to Develop?
• Two basic approaches:
• Self-sufficiency
• International Trade

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The Self-Sufficiency Model of Development

• Emphasis on balanced growth, spreading investment evenly, in all regions, in all economic sectors.
• Emphasis on fairness and reducing poverty.
• Necessary to insulate domestic industries (“import substitution”) from outside competitors, through use of:
• Quotas (limits on numbers of imports)
• Tariffs (taxes on imports, increasing their costs, and making local goods more attractive to buyers)
• Problems with self-sufficiency:
• Inefficiency
• Bureaucracy
• The self-sufficiency model was very popular in Asia and Africa during much of the 20th century, but has been mostly replaced today by the international trade model.

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The International Trade Model of Development

• Countries should invest in “distinctive or unique” assets.
• Concentrate on developing local industries, exports, services. Selling on the world market brings in money, which can be used to finance other development.
• This model has been very successful for some countries.
• However, there are problems with this approach:
• Uneven resource distribution.
• What do you do if the only resources you have are pretty much the same as what your neighbors have?
• What do you do if you don't have much of anything?
• “The drive to the bottom”
• Market stagnation and saturation
• Sales take place mostly in the MDCs – where population isn't growing, and markets are already tight and highly competitive.
• Dependence on MDCs (as markets)

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Rostow's Development Model

• In the 1950s W.W. Rostow proposed a five-stage model of development based on international trade:
• “The Traditional Society”
• “Preconditions for Takeoff”
• “The Takeoff”
• “The Drive to Maturity”
• “The Age of Mass Consumption”
• Some would now add a sixth stage: “Post-Industrial”

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International Trade Model: Successful Examples

• The Four “Asian Dragons”
• South Korea, Singapore, Taiwan, Hong Kong
• Concentration on manufacturing, especially electronics and clothing.
• Middle-Eastern Oil States
• Saudi Arabia, Kuwait, Bahrain, Oman, UAE.
• Use revenue from oil exports to finance development (schools, housing, etc.)

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Sources: http://www.toursaudiarabia.com/images/riyadh-3.html;

http://www.edibek.com/2007/03/13/dubai/; http://stuckincustoms.com/index.php?tag=seoul; http://conneva.com/blog/archives/2006/04/

World Trade: The WTO

• As of 2012, the World Trade Organization has 157 members.
• The mission of the WTO: “to help trade flow as freely as possible — so long as there are no undesirable side effects — because this is important for economic development and well-being.”

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Source: http://www.wto.org/english/thewto_e/countries_e/org6_map_e.htm

Russia joined August 2012

Foreign Investment Flows

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• Most foreign investment flows from one MDC to another.
• Only about 30% goes from an MDC to an LDC.
• The main sources of foreign direct investment are transnational corporations.

Financing Development

• LDCs cannot afford to fund their own development – it would take too long, and it costs too much.
• LDCs have to get the money they need from the MDCs in one of two ways:
• Loans (from banks, individual countries, or from international organizations)
• Investment by transnational corporations

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Loans for Development

• The two major lenders for development are the World Bank and International Monetary Fund. Private banks and individual countries also make loans to LDCs for investment in projects such as dams, irrigation, etc.
• Total value of all loans to LDCs: more than two trillion dollars. But not all the loans have turned out well.
• Expensive failures (poor engineering, failure to attract investors).
• Corruption and mismanagement.
• The result: some LDCs are unable to repay their loans (or even the interest on their loans). So what happens?
• If you can't pay your off you loans, the bank seizes your assets, and you go bankrupt. Countries don't usually have those options.
• Banks are forced to restructure loans, and the LDCs find it harder and harder to get money for development.

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Debt Service as GDP%

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The Jubilee 2000 Proposal

• In the late 1990s an organization called Jubilee 2000 came up with an interesting idea:
• Total outstanding debt: $2,000,000,000,000
• Outstanding debt of poorest 41 nations: $200,000,000,000
• So the poorest of the poor only owe about 10% of the total – write it off.
• Idea endorsed (in some form) by Pope John Paul II, Archbishop Desmond Tutu, Bono, the G8 Nations at their 1999 meeting, etc.
• Lots of endorsements – but until 2004 little major action.
• Jubilee 2000 disbanded in 2001, but organizations such as Jubilee 2000 USA Network continue.

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Global Debt

• As of 2012, 36 “Highly Indebted Poor Countries” (HIPCs), mostly in Africa, have begun to have some or all of their debt cancelled:

• Afghanistan
• Benin
• Bolivia
• Burkina Faso
• Burundi
• Cameroon
• Central African Republic
• Chad*
• Republic of the Congo
• D.R. of the Congo
• Comoros*
• Ivory Coast

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• Ethiopia
• Gambia
• Ghana
• Guinea
• Guinea-Bissau
• Guyana
• Haiti
• Honduras
• Liberia
• Madagascar
• Mali
• Mauritania

• Mozambique
• Nicaragua
• Niger
• Rwanda
• São Tomé
• Senegal
• Sierra Leone
• Tanzania
• Togo
• Uganda
• Zambia

For more information see: http://www.imf.org/external/np/exr/facts/hipc.htm; Map source: http://en.wikipedia.org/wiki/Heavily_Indebted_Poor_Countries

Structural Adjustment Programs

• “The IMF, World Bank, and MDCs fear that granting, canceling, or refinancing debts without strings attached will perpetuate bad habits in LDCs.”
• LDCs who want to have debt reduced or eliminated must make structural adjustments its economy.
• Adjustments may involve “efficiency” and involve privatizing public institutions (water, power, etc.)
• This often means that Transnational Corporations take control of these resources.
• Critics say that this forces governments to cut health, education and social programs, and threatens national sovereignty. Lenders say that economic growth benefits everyone in the long run.

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Transnational Corporations

• Transnational (or "multinational") corporations are major private companies that operate in many countries.
• LDCs that seek investment from transnationals have several issues to deal with:
• Creating attractive infrastructure.
• Competition with other LDCs – “The Race to the Bottom”
• Problems of regulation.
• Keeping the company happy – making the job, environmental, tax and other laws as attractive as possible.
• Remember – a transnational corporation's primary loyalty must be to its stockholders, not to whatever countries it happens to be operating in at the moment.

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The Major Transnationals

• A recent study by Swiss researchers looking at the financial inter-relationships among the largest transnational corporations.
• Using a database of 37 million companies and investors worldwide, the researchers identified major 43,060 transnational corporations.
• Among these, 1,318 had ties to more than one other major transnational and controlled 60% of all global revenues.
• A smaller subset of just 147 companies, whose ownership was within the larger group, controlled 40% of all wealth within the network.

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Source: http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html

Companies Owning Companies: A Partial Example

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Data source: http://www.cjr.org/resources/

Fair Trade

• FLO International is the umbrella organization representing 23 national labeling organizations and several hundred producer organizations.
• Fairtrade commodities include handicrafts, coffee, cacao, tea, etc.

• Fair Trade is a social and a market-based movement to end poverty and promote sustainable development.
• Standards for worker and producer safety, rights and income are set by trading and Fairtrade labeling organizations. If a company does not meet producer does not meet the standard, they may not use the fair trade label.
• Critics say that fair trade labeling distorts markets and is bad for trade in the long run.

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For more information see: http://www.fairtrade.net/home.html

Micro-Credit Banks

• One of the most interesting approaches to development in recent years has been the development of “micro-credit” lending – lending tiny amounts of money (typically a few hundred dollars) to individuals (often women) in poor countries to start “micro-businesses.”
• The first micro-credit lender was the Grameen Bank in Bangladesh. Today similar institutions exist in 34 countries. For more information see:
• http://www.grameen-info.org/
• http://www.gfusa.org/
• The Grameen Bank received the Noble Peace Prize in 2006.
• Unfortunately, there has been recent criticism of Micro-Credit – that it can lead to increased poverty, that women are exploited by their families, that some institutions (not Grameen) have refused to adjust or restructure loans – even in the face of disasters.

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The Grameen Bank

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http://www.youtube.com/watch?v=HBBkoUHsBUg

Core and Periphery in �the World Economy Today

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Millennium Development Goals

• End poverty & hunger.
• Achieve universal primary education.
• Promote gender equality.
• Reduce child mortality.

• Improve maternal health.
• Combat disease (HIV, malaria, etc.)
• Ensure environmental sustainability.
• Develop a global partnership for development.

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