Leadership: What will it take in an Era of Shared Global Prosperity?

Speech | 17 October 2011

Speech by Rajat M. Nag, ADB Managing Director General, at the INSEAD Global Leader Series, Singapore

I. Introduction

Thank you very much for your warm welcome. To be invited by "the Business School for the World" to participate in the Global Leader Series is truly an honor and a privilege. I am particularly delighted to speak to an audience that so impressively represents the current and future leaders of the global economy.

When I was invited to speak here, I asked myself, how do I return the favor? What do I tell these bright young minds that they might find of some relevance? Something they can take away! With all humility, I would like to share with you some observations on what I consider are important aspects of leadership, and I will try to weave these into the context of the current and future challenges Asia faces.

II. Asia's Transformation and the Two Faces of Asia

Asia has done very well in recent decades. Its success was fuelled by the remarkable economic growth starting first with Japan, then Korea, and the NIEs starting in the 1950s. In late 1970s PRC joined the process, and then India in the early 1990s. Asia has had a remarkable economic journey. Asia has done well indeed.

In 1970, one in every two Asians was poor, living on less than one dollar a day. By 1990, this had come down to about one in every three, and by 2010, it was lower than one in five. Asia has achieved in 40 years what some other regions of the world took a century or even longer. Asians today are more prosperous, more educated, healthier, and they live longer. That's a tremendous achievement in just one generation and that's an achievement Asia can and should justifiably be very proud of.

But there is another Asia just as real, but much less shining. Two thirds of the world's poor still live in Asia. About 950 million people in Asia live on $1.25 a day. This is more than the population of the US and Europe combined. If you raise the bar a little higher, 2 billion people in the region live on less than $2 a day. About 1.8 billion people have no access to improved sanitation and 500 hundred million people are without ready access to clean water. Around 140,000 mothers die annually at childbirth. Four million children die before they reach the age of five, and 83 million children are underweight and malnourished. So amidst all the wealth and prosperity, there is this other Asia, the poor Asia. An Asia that is becoming more unequal. This is what we call the Two Faces of Asia.

III. Leadership to Achieve the Asian Destiny

So why do I tell you all this? Because these are facts. And as a leader, the first thing you must do is to seek out facts – cold, hard facts. But these numbers, these facts will remain exactly those – cold and hard – until they are seen through the prism of another very important attribute of leadership: empathy. Empathy makes cold facts come alive and makes them much more meaningful.

It's not good enough to know that 500 million people in Asia do not have ready access to clean water. What you need to know is that a girl child somewhere in the hills of Nepal probably has to trudge 3 hours a day each way to fetch a pail of water. You must not only know that but feel the wariness, the fatigue she must be feeling. It is not good enough to know that 83 million children in Asia are undernourished and underweight at the age of five. You need to know that, if they are underweight at the age of five, their growth is stunted forever intellectually and physically. You, as a leader, have to take that fact, pass it through the prism of empathy and internalize what it really means.

And then what do you do? It's good to know and feel, but there is a third attribute that's important for leaders, and that is the ability to rise above the immediate issues and problems and look into the distant horizon. This is vision. And for us at the Asian Development Bank, our vision is a very powerful one: an Asia Pacific region free of poverty.

In order to translate this vision into something that we can put some figures on, ADB has recently completed a study called "Asia 2050: Realizing the Asian Century". The study theorizes about what Asia and Pacific region could look like in the future. It lays out two possible 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. It foresees an Asia that accounts for 52 per cent of the world's GDP by the year 2050, up from the current 27 percent, and that has regained the position it held in the world some 300 years ago.

According to this so-called "Asian Century" scenario, we will see an Asia where an additional three billion people enjoy the same standard of living that Europeans enjoy today. Per capita income could rise six fold in PPP terms to nearly $40,000 a year. This is the scenario of an affluent Asia which would have eliminated the scourge of poverty.

This scenario postulates that we could achieve the vision of "The Asian Century" – and not only would Asia benefit, so would the rest of the world. In fact, I prefer to think of this as leading to a "global century" where Asia has a seat at the table, commensurate with its achievements.

An alternative, less positive scenario would be an Asia that has failed to realize its potential, with today's fast-growing economies falling into the so-called "middle income trap" and per capita income stalling out at about $20,000 a year, or just half of what it would be under the Asian Century scenario. Three billion people would have missed the opportunity of making it to affluence.

The key message we want to convey through this study is that the Asian Century is plausible but not preordained. There are fundamental challenges that Asia faces over the next few decades for the Asian Century to unfold.

Let me outline, in broad brush-strokes, the essence of these challenges.

The first ─ as I mentioned earlier – is the rising inequalities. 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 particularly hurt the poor.

For growth to be sustainable, it has to be inclusive. By inclusive growth, I do not mean growing the size of the pie and somehow assuming the trickle-down effect, but the kind of growth that people can participate in and benefit from. That means that people are educated enough, skilled enough and healthy enough to participate in the process of growth. For growth to be inclusive, there needs to be an emphasis on education and health. When we say that the rising tide lifts all boats, we assume that none of the boats have a leaking hull. But if they do, they cannot rise with the other boats or benefit from the process of growth.

The second challenge is climate change. Climate change has far reaching implications for how Asia will move forward. Asia needs to increase energy efficiency and reduce its reliance on fossil fuels. Asia needs to adopt a new approach to urbanization by building more compact and eco friendly cities. It needs to rely much more on mass transit and Asians must change their lifestyles to alleviate pressures on finite resources.

In no other area perhaps will Asia, and indeed global leadership be tested more than in the case of global warming and climate change. While on a per capita basis, Asia's (including PRC's and India‟s) greenhouse gas emissions are but a fraction of those in the more developed economies (particularly the US), it is also true that accounting for over half of the world‟s population and with the potential to account for over half the global GDP, Asians have more at stake in the well being of the planet than any other people.

Take sea-level rise, for example. A global temperature increase of 4.4°C would lead to sea levels rising by as much as 46 cms by 2100. Such a rise would threaten a large number of Asian cities. Measured by the size of the population that would be exposed to such a rise in sea levels, 15 of the 20 most exposed cities, and 9 out of the top 10, will be in Asia.

Asian leaders well recognize that the adverse effects of global climate change will affect Asia very significantly, even though, as I said earlier, their per capita greenhouse gas emissions are much lower than in the developed economies, and the accumulation of greenhouse gases in the atmosphere are a cumulative effect of greenhouse gas emissions over the past two centuries or so to which Asia had contributed only minimally.

Several large Asian economies, Japan, Korea, PRC, and India are already pursuing the technological developments and innovation necessary to promote green economies. Despite their expressed reservations about a binding treaty at global negotiations in Copenhagen and Cancun, they are moving ahead with improvements and unilateral greenhouse gas reduction targets of their own.

The third challenge is rapid urbanization. In the next 40 years, the urban population will almost double from about 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.

The last but perhaps the most important challenge is governance. Asia's move to prosperity will be severely compromised if we do not address governance much more aggressively than we have in the past. Throughout Asia, governments will be under pressure as a rising middle class exerts 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 has a severe impact on the poor and the vulnerable.

And this brings me to the last attribute I believe is needed of leadership: passion. Passion to help bring the vision to fruition. I believe that the most effective leadership is that which has, at its core, genuine care and respect for people, a commitment to build and nurture genuine partnerships for development, and a proclivity for engendering intense competition – not among individuals but among ideas and innovations, in a search for the best possible solutions.

To me, all this translates to a passion to promote a culture of inclusiveness and genuine concern for making the world a better place. Articulating a vision, setting goals to achieve it, and helping to sustain the passion necessary to bring people together and get the job done…

Asia needs to take greater ownership of global issues – the trading system, climate change, peace and security. It must gradually transform itself into a rule maker and thought leader on global issues, instead of being a rule taker and thought follower. Asia will also need to delicately "manage" its rapidly rising role as a major player in world politics – it will need to be seen as a responsible and collaborative global citizen.

I believe that the common feature of a desirable, inclusive style of leadership for a "Asian Century" would be leadership thinking that is visionary in setting the long term goals of the society, embracing decades if not a century as its horizon; nimble and agile to accommodate changing needs and demands of the society; pioneering and innovative while being socially and environmentally responsible. Asia's leaders will also have to be transparent and accountable, particularly in an age of social networks and information technology when information moves at the speed of light and an information monopoly is no longer conceivable. More than ever before, partnerships, communication and consensus building among all stakeholders – civil society, media, academia and citizens themselves – will be a crucial feature of leadership in dealing with the major challenges that lie ahead.

IV. Concluding Remarks

As young leaders from this very prestigious institute, you will be much sought after by the many vying for the best young managers and leaders. You are the leaders of tomorrow in a changing global economy in which Asia has a seat at the table.

You have a choice to do something for the poor at the bottom of the pyramid, and do something in a way that will address the issues I talked about – persistent inequalities, lack of access to education and health, environmental awareness and protection, and good governance.

There will be many who will say "what difference can one person make?" I say to you: ignore them because they have not seen the gleam in the eyes of the child who walks into her first school. They have not felt the joy of the father whose child has just recovered from a bout of illness. They have not felt the sheer relief of the young girl in Nepal, who does not have to walk for hours to fetch water.

For me, it all comes down to that little girl and what kind of legacy we will leave for her. Because if one person loses, nobody really wins. If one small child is left without hope, that is one less person to become a productive, self-sustaining, contributing member of society. And her story is but one among hundreds of millions in Asia and the Pacific.

As future leaders, you have a tremendous opportunity to drive Asia's transformation and steer it towards a path of greater and more widely shared prosperity. Prosperity in a broad sense, not just income but capabilities as well. Steer it towards an Asia where your girl child will prosper, where she will be educated, skilled, healthy and live longer. Make it happen. That, my young friends, is not just rhetoric. I believe that is your responsibility as well as your destiny.

Thank you very much.