Social spending key to lifting national income levels: World Bank head

Middle-income economies must increase social spending if they wish to reach the income level of developed countries and end extreme poverty, the president of the World Bank said in an interview published on Sunday.

"We must change the relationship between growth and poverty reduction for growth to have more of an impact. How? It is important to invest in human beings, in health, education, social protection," Jim Yong Kim told top-selling Spanish daily El Pais.

"In Africa for example, improving the productivity of agriculture is key. To do this you have to invest in energy, transportation.... I am optimistic we can do it," he added.

The World Bank, a Washington-based international creditor for developing countries, has set the goal of ending extreme poverty -- lifting the livelihoods of those living on less than $1.25 a day -- by 2030.

Kim, who was born in Seoul and moved to the United States when he was five, said South Korea was an example of a nation that had managed to escape the "middle income trap" through increased social spending.

"South Korea started exporting basic goods -- black and white televisions, then in colour -- and now it exports electronics, they took measures for the second step," he said.

"But other nations do not do it, especially those that reach the first phase of middle income thanks to raw materials. At this stage, I insist, education is critical.

"You need different skills for the next phase of growth in Latin America," he added.

"Equality of opportunities comes through improving education from a very early age to create sophisticated industries."

Kim, a Harvard-trained physician, said the World Bank did not see China's new development bank, the Asian Infrastructure Investment Bank (AIIB), as a rival.

"We hope to cooperate closely with them," he told El Pais.

Despite Washington's resistance, China has received applications from more than 50 countries, including important US allies, to join the AIIB, which will aim at financing infrastructure development around Asia.

Washington sees the AIIB and a development bank planned by the BRICS emerging-market countries, the New Development Bank, as competitors to the World Bank and the Asian Development Bank, where the United States is the largest shareholder.