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p. 5 of 5 BACK | NEXT Special Theme: Law and Institutional Reform: Catalysts for Inclusive Development in the Asia and Pacific Region The Challenge: Unleashing Human Capability in Asia The Role of Institutions in Inclusive Development ADB's Experience and Lessons Learned Conclusions and Challenges for the Future

Annual Report 2003

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Conclusions and Challenges for the Future

The Asia and Pacific region has developed a large skill base and the capacity to harness new technology, adapt it, and generate more. It has a growing potential to reach new markets inside and outside its boundaries. An unprecedented nearly $2 trillion in foreign exchange reserves provide new vigor to pursue development goals. Such a confluence of development factors is a unique historical opportunity. DMCs must ensure that the benefits of prosperity help improve the lives of all. Inclusive development must be pursued vigorously; legal reforms and institutions have a critical role in this pursuit.

What is clear is that there is no one path to inclusive development; each DMC needs to devise its own course and fully tailor and own its institutional reform agenda. Nevertheless, there are some general principles that experience and analysis suggest transcend the particular.

Accelerating Economic Growth in an Inclusive Environment

As the experience of the East Asian economies and the PRC demonstrates, rapid economic growth provides the essential wherewithal for reducing poverty. At the same time, the sudden escalation of poverty levels in the wake of the Asian financial crisis demonstrated that unless broad-based, the benefits of growth can be fleeting, especially for vulnerable groups. To make economic growth the most effective and enduring engine for inclusive development, excluded groups must fully participate in and meaningfully benefit from it. Legal and institutional reforms must provide new channels through which those who have been historically left behind can overcome their individual and common predicament.

In a global economy where education, particularly higher education, is increasingly becoming the arbiter of competitive success, educational opportunities must be expanded at levels not tried before. Barriers to labor mobility must be addressed to ensure best returns. Social protection such as minimum wage, old age pensions, disability insurance, and adequate health services will help make graduation from poverty a sustained achievement.

Calibrating Laws and Building Institutions

As the speed of change accelerates, the role and nature of institutions and laws must also adapt to take advantage of newly available opportunities, to withstand new threats, and to overcome persistent problems. Country after country in the region has adapted institutional and legal frameworks in the face of crises, but the cost of crisis-led reform is often high. The region’s prospects will be improved if reforms anticipate demands and pave the way for changes. With greater movement of people, goods, capital, and even communicable diseases across boundaries, there is an urgent need to re-align frameworks to maximize the benefits and minimize the consequences of new opportunities.

Strengthening Governance

The challenge of creating economic prosperity in a hugely competitive and increasingly more open global system imbues governance institutions and markets with new, complex responsibilities. Their capacity and effectiveness have a direct impact on the prospects for prosperity. The failure of the state to create and sustain robust public institutions will deter economic growth and will disable attempts to achieve inclusive development. Investments in good governance need to be an integral part of poverty reduction strategies.

Regional Cooperation and Convergence

While Asia’s great diversity does not easily lend itself to wholesale application of best practices, experiences in the region do suggest some common principles. Countries must learn from each other and must recognize how common principles are at work in each context. More efforts will have to go to reducing barriers to learning and sharing of experiences for ultimately, regional convergence in policies, practices, and institutional norms will spur greater economic cooperation, peace, and stability.

Pursuing Inclusive Globalization

While the merits of economic globalization continue to be debated, there is no denying the greater integration of the global economy. Asia as a whole has greatly benefited from its early engagement. As the structure of global trade changes because of technological innovation and other factors, globalization will present new challenges. Working together with development partners, the region must be prepared to seek and to realize every opportunity, to anticipate changes and to adjust national economic directions to meet them. To the extent economic globalization creates new vulnerabilities, both the countries and the region as a whole must be prepared to detect them early on and to take protective measures. The state, civil society, and markets will play a central role in these efforts.

The region faces the twin challenges of (i) strengthening state capacity for development effectiveness, and (ii) enhancing the legal and institutional framework through which state action is bounded by legitimacy, commitment to inclusive development, and fairness. Reforming laws and institutions can be a catalyst for meeting these challenges.

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