Washington DC – Asia is booming, but rising inequality in the distribution of wealth and a lack of good governance present significant challenges, according to a top development banking official from the region. Addressing a select audience of journalists, policy makers and academicians, Rajat Nag, Managing Director General of the Asian Development Bank (ADB), said Asians were richer and healthier today, but there is another face of Asia; two-thirds of the world’s poverty is sheltering there.
At a Newsmaker press conference at the National Press Club, Washington, DC, Nag said that the pictures of “glitzy towers” of Asia were real but the other face of staggering poverty and malnutrition was also just as real.
“In this region, 700 million people have no access to clean water,” he said. Calling them “doomed for life,” Nag pointed to the 83 million children under 5 years of age who are underweight.
“These two faces are diverging,” cautioned Nag, noting that inequality has worsened in Asia over recent years. Although the inequities could be viewed through a moral or social lens, Nag stressed that the increasing disparity could endanger Asia’s growth.
With current “robust growth rates,” in most Asian countries, the ADB is forecasting Asian economic growth of 6.9 percent this year, down from 7.2 percent last year, but expected to reach 7.3 percent in 2013.
Historically, Asia has shown tremendous sustainability through periods of change, with an “historical transformation” taking place since 1970. Forty years ago, half of Asians lived in poverty, but by 1990 only one-third were poverty stricken, and by 2005 the statistic had dropped to only one-fifth, an ADB official said.
“Asian growth is plausible but not pre-ordained,” said Nag, cautioning about the dampening effects of the current Euro crisis and low oil prices.
On a more optimistic note, he said the region was “rebalancing” toward internal demand, rather than dependence on exports to its two main customers, the US and the Euro area.
“Asia cannot be just a factory Asia, but over time must become a consuming Asia,” he stressed. There was also a shift to intra-region trade but Asian growth is still dependent on exports, he said.
Another major challenge Asia struggles with is not only the dearth of good governance, but also endemic corruption.
Nag outlined the methods the ADB was using to tackle these issues: by building accountability safeguards for funds used in its own projects, by fostering audit capacity in countries lacking it, and by talking about it openly.
Remembering a lesson from one of his teachers, Nag said good governance required both “niti,” the Sanskrit word for rules and regulation, and “nyaya,” the Sanskrit word for justice.
The population explosion in Asia could become a “dividend,” Nag said, if the masses were provided with the necessary education and good governing institutions, but lack of appropriate and pragmatic policies were set to make it a “demographic curse.”
Noting the shift in the Chinese population ratio from rural to urbanized, Nag said that urbanization could be helpful if proper services are provided in a planned way.
Noting the lack of fear over inflation in the region, Nag warned, however, that the Indian inflation forecast was something to watch, although Vietnam had experienced a decrease in its inflation.
With the demand for infrastructure in the region rising to a staggering $800 billion each year in the coming decade, Nag highlighted the need for PPP (Public-Private-Partnerships) as there are considerable financial resources in Asia, but to generate interest in investors, he said the ADB was vigorously pursuing the PPP models.