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The Asian Century: Plausible but not Preordained
Remarks by Rajat M. Nag, ADB Managing Director General, at the School of Public Policy and Management, Tsinghua University, Beijing, People's Republic of China
Distinguished guests and colleagues: thank you very much for your warm welcome. It is an honor to speak at this prestigious university again. I would like to take this opportunity to congratulate your university for reaching a significant milestone ─ its hundredth anniversary ─ earlier this year. Under its motto of 'Self-discipline and Social Commitment', I am sure Tsinghua will continue to make important contributions to the People's Republic of China (PRC) ─ and the world ─ for the next 100 years.
So with one hundred years having just passed for Tsinghua… what about the next 100? The great Chinese thinker, political figure and educator Confucius wrote: "Study the past, if you would divine the future." Thus to shed light on Asia's future, we should first reflect on ourselves and where we are now.
II. Asia's Transformation
In recent years, Asia has undergone and is still undergoing a truly historic transformation. It is a time of rising incomes with a decline in absolute poverty. The middle classes are blossoming and have money to save and to spend. The region has shown resilience throughout the global recession─ largely bolstered by the strong performance of PRC and India ─and is now consolidating its recovery. PRC, in fact, has played a key role in pulling the world out of recession. After an impressive expansion of 10.3% in 2010, PRC's GDP is forecast to grow by 9.6% in 2011, and 9.2% in 2012.
Following its quick rebound from the recent financial crisis, there is undoubtedly a sense of optimism in the Asia and Pacific region, which is slowly becoming the epicenter of the world's global economy. So if we were to study our past to divine our future, we could say that things are looking up for Asia. It is, therefore, not surprising that there is a lot of talk about this being Asia's century. This could very well turn out to be the case. But while it is plausible, it is not certainly pre-ordained.
III. The Two Faces of Asia
We need to be mindful that there are still hundreds of millions of people who are not enjoying the fruits of success at all. In fact, they are suffering.
The seriousness and extent of this suffering is articulated in the eight Millennium Development Goals, which were devised in 2000. They include big picture poverty issues such as eradicating extreme poverty and hunger, reducing child mortality and improving maternal health. These MDGs have provided momentum and kept the world ─ including the Asian Development Bank ─ focused on improving social and economic conditions for the poor by the year 2015.
The region's dynamism has already helped achieve much. The incidence of poverty has been slashed by half since 1990. Nearly all children of primary school age are likely to attend school by 2015. Gender parity will be achieved in education. Targets for providing safe drinking water and halting the spread of diseases such as tuberculosis will also be met.
Unfortunately, severe challenges remain if we are to achieve the MDGs. In Asia and the Pacific alone, an estimated 1.8 billion people still eke out a living on less than $2 a day. Two billion people live without basic sanitation. One hundred million children are undernourished. One child in 20 dies before the age of five. A quarter of a million mothers still die each year at childbirth, despite the region's advances in medicine and science.
These numbers are shocking and tragic, and highlight what we refer to as the "two faces of Asia." It is simply wrong that the poor are the ones most likely to be sick and uneducated, to have a child that dies. Every person on this planet is entitled to access goods, services, assets, opportunities, healthcare and education.
Eradicating poverty is not just a moral imperative, but also part of a much larger, complex agenda for Asia's prosperity in the long term.
IV. Toward An "Asian Century"
A recent ADB study called "Asia 2050: Realizing the Asian Century" theorizes about what the Asia and Pacific region could look like in the future. It lays out two rough sketch scenarios of where the region could be in 40 years time. It makes for inspiring, challenging … yet at times worrying reading.
The first scenario is upbeat, and one of great affluence. If the region keeps growing at its current rate and the next generation conquers a number of enormous challenges which I will outline later in this talk, we could be living in a totally different Asia.
An Asia that produces over half the world's GDP and trade and investment.
An Asia where three billion of its people enjoy the same standard of living that Europeans enjoy today.
And an Asia where people in the region have a per capita income of nearly $40,000 a year.
This scenario shows we could achieve the vision of "The Asian Century" – and not only would Asia benefit, so would the rest of the world.
But how? Put simply, we need to act. And all of us – as individuals, as members of families, as workers, members of governments and as leaders – know how hard it is to plan for the future. But this is what Asia needs to be doing – and now.
If the region doesn't act now, the chance for European-style affluence could slip away and the cost in human terms would be enormous.
Middle income trap
In the Asia 2050 study, the less optimistic vision is a scenario where the presently fast-growing economies in the region fall into the middle income trap over the next 5 to 10 years, resulting in GDP per capita of only $20,300 or slightly more than half of that under the optimistic scenario. The middle income trap phenomenon refers to countries that stagnate because they fail to move from resource-driven growth that is dependent on cheap labor and capital to growth based on high productivity and innovation. Countries that successfully make the leap to high-income economies are those that invest in, among others, their people's skills, infrastructure and technological innovations.
Given Asia's diversity, the precise actions to be taken will vary among countries. Still, it is possible to paint a picture ─ with broad brush strokes ─ of what needs to be done on a national, regional and global level.
The first of these is ─ as I mentioned earlier – is to ensure that growth is inclusive. There are currently worrying disparities of well-being and wealth within and across countries in the region that must be tackled. Inequalities not only limit the opportunities to which every human is entitled but they also pose threats to social cohesion and political stability, and hurt the potential for long-term economic growth. For these reasons, it is to the benefit of all that we fight inequality together.
Across Asian nations, inclusive growth must focus on divides between the rural and urban, the educated and uneducated, along ethnic lines. The quality of education needs to be improved, with greater emphasis on women's access to learning opportunities. At the same time, countries growing more slowly today need to improve their performance to join the ranks of successful economies.
Global warming and climate change, and subsequent severe water shortages and natural disasters, pose serious threats to our future. The risks associated with climate change extend not only to the vast populations that inhabit coastal areas but also to areas that rely heavily on agricultural production.
We need to realize that intense competition for scarce natural resources will be unleashed as the region grows, and exacerbated as some 2 billion additional Asians become increasingly affluent and seek to emulate current Western lifestyles.
As a result, Asia must radically reduce its use of energy and natural resources, and find alternatives. I cannot stress to you enough that our future well-being and competitiveness will depend heavily on improving how efficient we are in using our water and land for our utilities, industries and habitation, and our sun and wind for its natural energy.
In the next 50 years, the urban population will double from 1.5 billion to 3 billion as cities become the epicenter of economic life, higher education, innovation and technological development. Asia must adopt a new strategy to manage rapid urbanization by promoting more compact, energy efficient, safer and livable cities. I hope in this audience today there are some students who are undertaking degrees in urban planning management – you are the sorts of souls who will be in high demand in the future.
Innovation as a key factor
I am also hoping that sitting in this audience today are large numbers of innovators, entrepreneurs and those with a taste for technological development. Do you have ideas on clean energy? Low carbon? Solar power for the masses? Let me tell you – Asia needs you. In the past, Asia has relied too much on copying the good ideas that come from the West and we have to change this thinking. Asia can have the world's best talent pool – we just need to be strategic in making it happen.
We also need to improve our governance structure and transform our institutions if we are to live up to higher standards our future will require us to meet.
Throughout Asia, governments will be under increasing pressure as a rising middle class will exert new demands. They will want to be heard, they will want to participate, and they will expect greater accountability for results. There will be greater pressure on eradicating corruption, which for some Asian nations is a daunting challenge.
The ultimate challenge for Asia is to realize effective governance that provides (i) quality health care and education; (ii) the infrastructure to move goods, services and people; (iii) the creation of efficient, livable cities; (iv) stable banking financial systems; and (v) reliable and fair legal structures that protect citizens' rights.
Greater regional cooperation in Asia and the Pacific region will become more important for a number of reasons. First, regional cooperation has the potential to be an important bridge between the interactions of individual Asian countries and the rest of the world. Second, Asia will need to increasingly rely on "internal" demand and open its markets to neighboring countries in the region to sustain region-wide economic growth.
Third, regional cooperation will be crucial to reduce cross-country disparities in income and opportunities that, if left unchecked, could intensify tensions in parts of Asia. And fourth, joint management of several regional commons such as energy and food security, infrastructure connectivity and water resources utilization will become increasingly important for Asia's long-term stability and prosperity.
As countries keep watch on internal issues such as drugs, terrorism and security, they must also intensify regional collaboration efforts to contain potential spill-overs. Big picture regional issues such as avoiding conflict between the larger economies and curbing fundamentalism are also critical.
Nations working together to (i) improve connections between borders; (ii) expand regional trade and investment, (iii)channel regional savings into regional investments; (iv) and better control communicable diseases can contribute to fostering a stable and prosperous Asia. These processes will take many decades, but nothing stops us from starting now.
Finally, Asia's future global footprint carries with it new responsibilities and obligations. Asia needs to take greater ownership of global issues – free trade, financial system stability, climate change, peace and security. These are responsibilities that we must embrace to show the world our willingness to be constructive in advancing the global commons. As an emerging global leader, Asia should act and be seen as a responsible global citizen. Instead of being a rule taker and thought follower on global issues, Asia should gradually transform itself into a rule maker and thought leader.
For example, developing Asia's stance on climate change and global warming requires a fundamental reassessment. Early and aggressive action on the problem is in Asia's own self-interest.
Across Asia, ADB is advancing low-carbon growth through an extensive range of multi-million dollar initiatives ranging from clean energy investments, now targeted at $1 billion per year, to forest conservation schemes, which places a value of forest carbon. Sustainability with transport and urban planning is also key, as is getting the private sector investing in climate-friendly projects.
While a prosperous outcome is plausible, the path to this prosperity is fraught with many uncertainties, challenges and risks. Asia's future is in its own hands and it is up to all of us to rise to those challenges.
The march to prosperity will largely require heavy-lifting by Asian countries to undertake the multi-generational, bold and innovative efforts to sustain high levels of growth, address widening inequalities, mitigate environmental degradation and cope with the challenges of climate change and global warming.
Our first port of call is achieving the MDGs by 2015. I believe our concerted efforts to achieve those goals will be a stepping stone that will inspire us again to work hard towards achieving a 2050 that is not just "Asia's Century" but one of "Shared Global Prosperity".
Thank you very much. I would be happy to hear your questions, comments and thoughts on these or any other issues you would like to raise.