Middle-income Trap Holds Back Asia's Potential New Tiger Economies: 12 Things to Know

After years of rapid growth, many countries in Asia have advanced to middle-income status. The transition from middle income to high income, however, can be a slow process. Here are 12 things to know about overcoming the so-called middle-income trap in the region.

  1. Out of 45 developing members of ADB, 33 Asian economies have achieved middle-income status, and 5 are in the high-income group.
    Source: ADB speech President Nakao’s Opening Remarks at the ADB Institute Annual Conference
  1. Countries fall into the middle-income trap if they are unable to move from a low-cost to a high-value economy, making it difficult for them to compete with both low-income and high-income countries.
    Source: ADB publication Growing beyond the Low-Cost Advantage: How the People’s Republic of China can Avoid the Middle-Income Trap
  1. Many countries experience a growth slowdown after achieving middle-income status. More than 15 countries globally have been “middle income” for at least the past 50 years, including three in Asia - Malaysia, the Philippines, and Thailand.
    Source: ADB publication Growing beyond the Low-Cost Advantage: How the People’s Republic of China can Avoid the Middle-Income Trap
  1. The People’s Republic of China (PRC) became an upper-middle-income country in 2010. While gross national income is rising quickly, it still has a long way to go before becoming a high-income country.
    Source: ADB publication Growing beyond the Low-Cost Advantage: How the People’s Republic of China can Avoid the Middle-Income Trap
  1. Industrialization must be an essential part of the growth formula if Asian countries want to prosper. Middle-income economies should focus on upgrading and diversifying their industrial base.
    Source: ADB report Key Indicators for Asia and the Pacific 2013
  1. The rise of technology in manufacturing requires “gray collar” or “knowledge workers”’ for higher value-added products that enable economies to avoid the middle-income trap.
    Source: ADB Briefs Skills for Competitiveness, Jobs, and Employability in Developing Asia-Pacific
  1. Innovation is necessary to avoiding the middle-income trap as it raises productivity and promotes structural change. To promote innovation, Asia must invest in education and research and development.
    Source: ADB speech President Nakao’s Opening Remarks at the ADB Institute Annual Conference
  1. The rapid expansion of secondary and tertiary education helps to explain the successful transition of the Republic of Korea from middle- to high-income status.
    Source: Op-Ed Avoiding the middle-income trap
  1. Economic slowdowns are less likely in countries where high-technology products account for a large share of exports.
    Source: Op-Ed Avoiding the middle-income trap
  1. Moving from a low-cost to a high-value economy requires a critical mass of firms with strong incentives for innovation, as well as the government to create a conducive environment.
    Source: ADB publication Growing beyond the Low-Cost Advantage: How the People’s Republic of China can Avoid the Middle-Income Trap
  1. ASEAN middle-income countries should strengthen research and development capability, emphasize the quality and appropriateness of human resources, and improve the institutional system for nourishing a dynamic private sector.
    Source: ADB Institute Working Paper The Middle-Income Trap: Issues for Members of the Association of Southeast Asian Nations
  1. For a lower-middle-income country such as Viet Nam, reforms and policies to increase the productivity of capital, land, and other resources are essential to avoid falling into the middle-income trap
    Source: ADB Institute Working Paper The Middle-Income Trap: Issues for Members of the Association of Southeast Asian Nations