The Hindu Business Line : Escap report: Core approach to growth

The Bangkok-based Economic and Social Commission for Asia and the Pacific (ESCAP) with a membership of 53 countries and associate membership of another nine, straddling Asia and the Pacific and encompassing Australia, China, India and Japan, may not be a high-profile institution of the United Nations (UN) group. But its analytical rigour in highlighting the problems plaguing its growing membership and documenting the development saga of its diverse members through its annual report, is impressive.

The ESCAP 2007 Annual Report, released in New Delhi on Wednesday by its Executive Secretary, Mr Kim Hak-Su, to mark the 60th anniversary of the UN body of which India was a founder-member, strikes the right chord when it contends that the Asian and Pacific nations are rapidly emerging as engines of global growth. The UN Secretary-General, Mr Ban Ki-moon, said that the 7.9 per cent increase in the size of the region's developing economies in 2006 signified one-third of worldwide growth.

Impressive performance despite odds

What is striking is that the region's impressive economic performance was against the backdrop of a riskier global milieu. Crude oil prices hit a record high in mid-2006, while stock markets crashed across the Asia-Pacific region, stoking concerns of a downturn. Global imbalances widened steadily, with the US' current account balance worsening by a further $100 billion in 2006, increasing the possibility of an abrupt depreciation of the dollar. Developing economies in the Asia-Pacific region kept inflation under control at 4.3 per cent in 2006.

The Escap report says that Asian currencies were strong, reflecting the larger-than-expected current account surpluses and capital flows, including those for speculative purposes. It is also noteworthy that developing countries in the region continued to add to their sizeable forex reserves, which had reached an unprecedented $2.5 trillion at end-2006. Another positive feature is that economic growth has been widespread, with all sub-regions performing robustly. For developing economies of the Asia-Pacific region, economic growth is projected at 7.4 per cent in 2007, slower than in 2006. The external environment is likely to be less favourable, mainly due to the slowing US economy. While a moderate decline in global electronics demand in 2007 could dampen the Asia-Pacific region's prospects, the easing of commodity prices, including that of crude oil, comes as "a mixed blessing".

Opening up opportunities

Even as the global economic milieu weakens, momentum in the region is expected to come from China, India and Japan. Together, these three economies contribute over 60 per cent of GDP of the Asia-Pacific region and close to 45 per cent of imports, thereby generating considerable opportunities for the rest of the region.

Sustaining growth

The region's prospects for sustaining growth both in the short and long run hinge on such factors as monitoring vulnerability to currency crises, boosting domestic demand through private investment, particularly in East Asia, reaping the one-off demographic dividend and managing urban growth. Over and above this, promoting green growth to sustain development is important, the Escap report says, explaining that "green growth" is the growth in GDP that maintains or restores environmental quality and ecological integrity in meeting the people's needs.

No doubt, many a government in the developing Escap region is grappling with infrastructure deficit — physical and social. The Escap report argues that infrastructure reduces poverty in two ways: By promoting growth, which, by and large, benefits the poor, and by improving their incomes and quality of life. It says physical infrastructure that directly benefits the poor is more likely to reduce poverty than mere growth . As most poor still live in the rural areas, rural infrastructure is key to reducing poverty. According to the report, in South Asia, only 65 per cent of the rural population lives within two km of an all-weather road, far lower than the 95 per cent in East Asia. Only 43 per cent of the population has access to electricity against the 80 per cent in East Asia.

Without alluding to the ongoing highway development and rural road programmes under Bharat Nirman in India, the report says, "in India, a million rupees spent on roads led to seven times the poverty reduction as a million rupees spent on specific anti-poverty programme."

Mega infrastructure projects may be essential to accelerate growth, but the report says, projects that directly benefit the rural poor should be given equal importance. The report adds that, in the absence of interest from the private sector, more public investment should go to rural infrastructure; physical infrastructure for the poor should be a donor priority. This is because the current situation is gloomy in that the share of transport and energy sector in Official Development Assistance (ODA) to South Asian countries plummeted from 27.1 per cent in 1990-95 to 15.3 per cent in 2000-04 ($15.4 billion to $7.6 billion).

Gender discrimination

This year's Escap report includes a detailed analysis of gender discrimination that has widespread ramifications and distinct economic and social costs. While the Asia-Pacific region has made good progress in reducing gender discrimination in recent years, "appalling disparities" remain. This is visible in the poor access for women and girls to education and health services, economic opportunities and political participation. Female primary school enrolment is 26 per cent lower than that of males.

The report draws the disconcerting picture that almost all South Asian countries, with the exception of Sri Lanka and the Republic of Korea, were among the bottom 25 in all four areas of economic participation and opportunity, educational attainment, health and survival, and political empowerment.

With India stepping into the first year of the Eleventh Plan (2007-12) against the backdrop of strong economic growth over the past couple of years, the Escap report's ringing message is that the Plan focus on "inclusive growth" should not merely mean bridging the growing divide between the poor and the rich but also addressing gender discrimination with emphasis on all-round progress of the nation.