The Philippine Online Chronicles

The Asian Development Bank (ADB) unveiled its latest report predicting that Asia may become the wealthiest region in the world by 2050. The overview of the draft report was presented during the ADB’s 44th Annual Meeting in Ha Noi, Viet Nam and was a topic of discussion among participants at the Governors’ Seminar.

Entitled “Asia 2050-Realizing the Asian Century”, the report explains that Asia could account for up to 50% of the global GDP, trade and investment by 2050. The continent currently accounts for around 27% of these.

However, the report pointed out that for Asia to sustain its upward trajectory, it has to make efforts in reducing corruption and improving government accountability.

“The recent deterioration in the quality and credibility of national political and economic institutions [illustrated by rising corruption] is a serious concern,” the ADB said.

The World Bank Institute (WBI) concurred when its data showed a “clear retreat in voice, accountability and political stability” in the region between 2008 and 2009.

ADB’s recommendation, according to the report, is for Asia to “modernize governance and retool its institutions with an emphasis on transparency, accountability and enforceability”. It pointed to Japan, Singapore and South Korea as models for other Asian countries to follow.

Asian Century or Middle Income Trap?

If Asian countries are serious in pursuing success and sustainable growth, then their roadmap to 2050 affluence should include six key factors: technological change, labor, capital, the emerging middle class, climate change, and the communications revolution.

According to the report, Asian countries could only fall into two competing scenarios: the Asian Century and the Middle Income Trap.

In the more optimistic Asian Century scenario, the region’s contribution would be USD148 trillion or 51% of global output in 2050, while GDP per capita would rise to USD38,600 compared to the projected global average of USD36,600 in the same year.

Under this scenario, at least 3 billion Asians would benefit from the fruits of prosperity.

On the other hand, the Middle Income Trap would mean that Asia’s contribution to global GDP would be only around USD61 trillion or 32% of global output. GDP per capita would be around USD20,300, only half the possible amount under the Asian Century scenario. The “Trap” also signals slowing growth rates and stagnating income levels over the next 5 to 10 years.

In this scenario, an entire generation could fail to enjoy the benefits of prosperity, unlike in the Asian Century scenario.

“The difference in outcomes under the two scenarios and thus the opportunity cost of not realizing the Asian Century scenario is huge, especially in human terms,” said ADB president Haruhiko Kuroda.

To ground this dream of Asia further, the region must recognize that while it has done significant efforts in tackling income poverty, non-income poverty is still pervasive. Just to illustrate, half of all Asians live without basic sanitation while 900 million people in the region have no access to electricity.

Three categories of Asian economies

ADB said that based on Asia’s record over the last 25 years, there are three kinds of Asian economies.

Countries such as Hong Kong, Brunei, Japan, Macau, South Korea, Taiwan and Singapore have grown rapidly since the 1950s, "avoiding the middle income trap and becoming high-income developed economies in one generation."

The second group, composed of 11 countries including China and India, have posted high growth since the 1990s but possibly face the greatest risk of seeing per capita income stalling at middle-income levels.

This usually happens as countries try to shift from resource-driven economies reliant on cheap labor and capital to growth based high productivity and innovation. Other countries in this group are Armenia, Azerbaijan, Cambodia, Georgia, Indonesia, Kazakhstan, Malaysia, Thailand, and Vietnam. The report said that some larger economies in this group could easily derail the enticing prospect of the Asian Century.

On the other hand, 31 economies were reported to have achieved only modest or low long-term growth. These include Pacific Island nations and countries such as Iran, Uzbekistan, Myanmar and the Philippines.

The ADB report expects gross domestic product (GDP) per capita in the Philippines to increase to USD22,900 by 2050, which is lower than Indonesia’s USD37,400, India’s USD41,700 and Vietnam’s USD33,800.

Among the Asian countries that will purportedly lead Asia’s rise to a possible Asian Century are China, India, Indonesia, Japan, South Korea, Malaysia, and Thailand. These seven economies had a combined GDP of USD14.2 trillion in 2010, 87% of Asian GDP, and a total population of 3.1 billion, or 78 percent of Asia's people.

According to the ADB study, the seven identified economies could account for 90% of Asian GDP or 45% of global output by 2050.

In addition, the average per capita income across the seven countries would be USD45,800 in purchasing power parity terms -- 25% higher than the global average of USD36,600, the study found.

Environmental concerns

Apart from the problems of corruption and government accountability, Kuroda said that Asia should also address economic imbalances and the environmental degradation caused by the over-exploitation of resources to avoid the middle income trap.

But while ADB may have pointed to the need to address environmental degradation, it has been known to fund coal-fired power plants and other projects making use of “dirty technology” across Asia.

The NGO Forum on ADB released a compilation of critical analysis of projects funded by the ADB. The NGO Forum on ADB is an Asian-led network of civil society organizations and community groups that has been monitoring policies, projects and programs of the ADB.

In the summary findings, it said, “for the most recently approved projects by ADB, all summary Environment Impact Assessments (EIAs) show that components of climate risks or its vulnerability were not adequately addressed in the project design and implementation. As such ADB loan approvals were made without developing and fully integrating appropriate climate change mitigation and adaptation measures into the project and its surrounding impact areas.”

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