By Samantha Prior
Asia has been a key driver of global economic growth in the 21st century, and will remain a key theatre for development in the coming decades as one of the fastest developing regions in the world. Economies in the region grew at a rate of 6.1% in 2013 and 2014, and growth is forecasted to increase to 6.2% for 2015. However, poverty levels remain troubling, with nearly one-third of the population of Asia living on less than $1.51 per day in 2010.
The President of the Asian Development Bank (ADB), Takehiko Nakao, recently put out his “Eight Key Actions for Economic Development in Asia”. Citing Asia’s “remarkable progress in development and poverty reduction,” Nakao seeks to explain why some Asian countries have developed more rapidly than others. He outlined eight key action areas that lead to success: infrastructure, human capital, macro-economy, investment and trade, governance, equality, vision for the future, and security and stability. While all eight categories of action are crucial for development, four of Nakao’s points should be highlighted:
High quality infrastructure is of utmost importance for development. Nakao highlights China’s high public investment to GDP ratio (22%) as a driver of economic growth, and he argues for better domestic resource mobilization (DRM), particularly through tax revenues. DRM is increasingly a development priority, as is explored in further detail in a December 2014 CSIS report, “The Promise of Domestic Resource Mobilization”.
Around $8 trillion will be required to meet the demand for infrastructure projects over the next decade in Asia. What is particularly interesting is that an estimated $1 trillion will be open to private investors under public-private partnerships (PPPs), and President Nakao recognizes the imperative for new vehicles, such as PPPs, to fund development projects.
- Human Capital Investments in human capital, especially in the areas of education and health, are vital for development. Nakao calls for higher quality secondary and tertiary education in Asian countries, and particularly noted the value of technical and vocational training. A recent OECD study warned that despite increased spending on education, there is a “widespread” lack of evaluation of the impact of reform in the education sector, which could hinder their effectiveness and hurt educational outcomes. This process will bear watching.
- Vision for the future Nakao argues that “governments have a responsibility to plan for their country’s future based on careful analysis of its comparative advantages and the evolving economic landscape,” while also emphasizing the need for flexibility and transparency. The issue of economic resiliency is highly relevant in the post-2008 economic environment. The effect of the drop in oil-prices on national economies all over the world— including Venezuela, Nigeria, Russia, and many more—is one current example of the need for countries to prioritize a plan for economic resiliency.
- Security and Stability Nakao makes a point that may seem obvious, but that has had increasing relevance to the discussion of best-practices in development, which is that “growth is underpinned by security and political stability.” He writes, “Conflict disrupts development, and ending it can yield tremendous benefits.” This point is crucial for the discussion on the need to synthesize long-term and short-term views of development. Development practices can play an important role in preventing, minimizing, ending, and recovering from conflict. Emerging data supports the argument that it is more effective and efficient to spend time and resources on prevention and long-term recovery, rather than spending to minimize or end an active conflict.
Samantha Prior is a researcher with the Project on U.S. Leadership in Development at CSIS.