Asia's Path to Prosperity

Video | 21 August 2013

Industrialization must be an essential part of the growth formula if Asian countries are to prosper and avoid the 'middle income trap'.

Transcript

Title: Asia's Path to Prosperity

Description: Industrialization must be an essential part of the growth formula if Asian countries are to prosper and avoid the 'middle income trap'.

Changyong Rhee
Chief Economist
Asian Development Bank

Q: Why is an industrial phase critical for the economic transformation of developing Asian countries?
A: Our research found that historically virtually no country has become high income country without having 18% or higher share of employment output in manufacturing sector that research is quite intuitive. You can move from low income country to middle income country by moving from agricultural sector to low quality service sector. But in order to become high income country you need high paying service jobs in legal services, artists services, business related services that requires some experience and industrialization.

Q: Is the old model that helped Japan; Korea; Hong Kong, China; and Taipei, China to become wealthy still appropriate?
A: Maybe in the future it may be hard to expect that Asian countries can enjoy the high speed and high quality structure transformation that many newly industrial countries has enjoyed in the half century in the sense that enjoying high gross as well as high employment through industrialization considering the immense international competition and also the labor saving technique of progress maybe industrialization alone is not enough to observe all growing population. So that is why we are emphasizing that it is very important to make the spill over effect of industrization can enhance the productivity of service sector and agriculture sector in Asia.

Q: What is the way forward?
A: Regional diversity means that there is no one size fits all solution. The agricultural sector is still the largest employer hiring more than 700 million people. So massive modernization of agricultural sector is a key challenge for Asian countries specially for low income countries. Many middle income countries need to further diversify and deepen their industrial bases; and several high income Asian countries which already have diversified insdustrial base need to get rid off institutional barriers to make service sector more competitive and become a new engine of growth.