Publicación: Small Governments, Big Ambitions: Fiscal Policy in East Asia and Pacific

https://openknowledge.worldbank.org/entities/publication/b5843a5c-b7ab-41c3-9599-f8801bbd4a66 Over the last three decades, most economies in East Asia and the Pacific (EAP) have followed a “growth enabling” approach to fiscal policy, achieving high growth while taxing little and spending within their means. Limited revenues were directed toward public investment, especially in infrastructure. This strategy supported growth, macroeconomic stability and propelled much of the region to middle-income status. However, the fiscal stance led to underinvestment in education, health, social protection, and climate adaptation. As a result, growth is becoming slower, less resilient, and less inclusive, putting the region’s high‑income aspirations at risk. To achieve its development ambitions, the region must forge a new “growth enhancing” fiscal compact. The state will need to play a stronger role in enhancing human capital and upgrading infrastructure to support the shift toward more skill- and technology-intensive growth. It must also protect people and the economy from shocks in a region that is rapidly aging and increasingly exposed to extreme climate events. In each case, public spending must be paired with institutional and sectoral reforms that crowd in private investment, raise efficiency, and improve service delivery. The state’s enhanced role is feasible. Improvements in fiscal institutions and technologies can raise the return to every dollar spent and lower the cost of every dollar collected. Stronger public investment management - transparent procurement, standardized project appraisal, independent evaluation - can increase efficiency and improve project selection. Reforms in tax administration — simplified payment procedures, risk-based audits— can cut compliance costs and broaden the revenue base. Advances in data and digital technologies can help identify taxpayers more accurately, verify liabilities, and collect revenues owed. These advances can also improve service delivery in health and education and better target income support to those most in need. The current fiscal approach has served EAP well. Delivering on the region's higher ambitions will require a more efficient and proactive fiscal approach. https://openknowledge.worldbank.org/communities/79c9d774-f885-5a4c-9f78-edfebe6c646d