Factory Asia. These two simple words can define Asia’s phenomenal growth performance over the last two decades. Supported by a growing population that provide cheap and abundant labor, Asia surged ahead in the last decade of the last century and the first one of the current, producing much of the manufactured consumer goods that the world needed. East Asia’s exports, particularly trade in final goods to the United States and Eurozone economies, surged. The map of products produced and traded by Asian economies rapidly changed, from agriculture to (low value) manufacturing and to services, in a few cases.
The beginning of East Asia’s remarkable transition in the 1980s was powered by large investments made by Japanese multinational companies to set up factories in Asia. Subsequently, the pivot to Asia’s shift was the unprecedented economic reforms unleashed in the People’s Republic of China (PRC) in the late 1980s. The term “production networks” was born and along with it a complex web of intermediate products being produced and traded between developing countries in Asia. PRC led the charge, as the final assembler of manufactured goods. Southeast Asia benefited considerably from the regional production networks. Along with growth came job creation and prosperity. Millions of people were lifted out of poverty. The progress made thus far has put Asia firmly on the global map, and as noted in Asia 2050, the region can realize the Asian Century if it sustains the growth momentum and continues its transformation. Key to the transformation will be to adopt policies that will help Asia ensure it is not caught in the middle income trap.
Is the global financial crisis likely to change that story? While the concept of “Double Track of Growth” – with Asia and G2 (US and Eurozone) economies growing at vastly different rates – is now commonly accepted, what is also clear is that Asia’s trade patterns will shift in remarkable ways. Clearly, there is much more intra-regional trade taking place within Asia, as well as increased South-South trade.
The recent changes pose a number of interesting and complex questions:
In summary, an appropriate leading overall question would be: What is beyond Factory Asia? Given that developing Asia is home to over 2.6 billion people, it is a very important question as the region needs to continuously grow and create new jobs. It has to do so as the global economy readjusts. And in parallel, Asia also needs to allocate large financial resources toward productive and socially equitable investments.
These are ambitious questions. Yet they are worth investigating. The 2013 ADB Annual Meeting Governors’ Seminar (GS) aims to stir debate and analyze a range of policy, institutional, legal and regulatory issues relating to reforms that will drive Asia’s economic and social transformation in its quest for a New Factory Asia model.
Hon. Armida Alisjahbana
Minister of State for National Development Planning, Alternate Governor for Indonesia in ADB
Hon. Taro Aso
Deputy Prime Minister, Minister of Finance, Minister of State for Financial Services, Governor for Japan in ADB
Jorge Paulo Lemann Professor, Harvard Business School
Chief Economic Advisor, Ministry of Finance, India
Hon. Anne Marjaana Sipiläinen
Undersecretary of State, Ministry for Foreign Affairs, Governor for Finland in ADB
Moderator: Nik Gowing
International Journalist and Broadcaster