Asia’s economic boom could still be undercut if the region fails to address a growing income gap and the lack of strong financial and infrastructure links, a top official of the Asian Development Bank said yesterday.
Rajat M. Nag, managing director general of the Manila-based development lender, said the “glitz” of the continent’s prosperous new hubs such as Shanghai and Jakarta, Indonesia, should not obscure the fact that large parts of the region still face poverty levels and social and health problems that rival sub-Saharan Africa.
“We still must develop a broad prosperity that helps the poor,” Mr. Nag told reporters and editors at The Washington Times. “It’s not yet time to be popping the champagne bottles.”
The 41-year-old bank faces an unusual identity crisis in the wake of East Asia’s stunning economic emergence. Led by China, the region, which produced just 20 percent of global gross domestic product in 1980, is projected to be the source of almost half the world’s total economic output within 15 years.
Poverty rates in the region plummeted from 34.6 percent in 1990 to 18 percent in 2005 and are projected to go much lower over the next 15 years.
In addition, Asian exporters have built up huge capital surpluses and Asian consumers have some of the world’s highest savings rates, calling into question the need for an official development bank to supplement the private sector.
A blue-ribbon panel commissioned by ADB President Haruhiko Kuroda on the bank’s future — which included former U.S. Treasury Secretary Lawrence Summers — concluded that the traditional model of a development bank will “become redundant” by 2020 because of rising prosperity across the region.
“ADB must change radically and adopt a new paradigm for development banking” in order to stay relevant, the panel concluded, switching from poverty relief and national programs to growth support, environmentally sustainable projects and a regional and even global lending role.
Mr. Nag said bank officials agree with much of the panel’s findings. But he also noted that recent strong growth rates in China, India and elsewhere could flag, while recent economic advances have been skewed to the region’s wealthier classes.
In India and parts of South Asia, for example, rates on child malnutrition and access to clean water for millions of people are as high as in some of the poorest parts of sub-Saharan Africa.
“I think the glitzy face of Asia — which is real enough — has hidden to some extent the problems we still face,” he said.
Mr. Nag said ADB officials still see a large agenda for the bank in boosting financial, institutional and infrastructure ties across Asia, which has lagged behind Europe and North America in developing such links.
He said the ADB would also fashion itself as a “knowledge bank” to aid development in still-struggling economies such as Afghanistan and to focus attention across the region on balanced growth.
He acknowledged that “historical rivalries” among the region’s major players — Japan, India and China, in particular — have slowed past efforts to build a regional financial identity.
“Yes, there is a history of distrust, but I think in recent times there has been also a lot more common sense about the need to cooperate and coordinate economically for the good of the region,” he said.