Asia’s Economies Must Build Resilience to Sustain Growth, Says ADB

Emerging risks and destabilizers as diverse as widening income inequality, slower growth, and climate change are reshaping Asia’s economic landscape so rapidly that governments must build far greater resilience into their national plans, says the Asian Development Bank’s (ADB) Independent Evaluation Department.

“The urgency for countries to adapt to the new environment is growing,” concluded Independent Evaluation’s 2016 Annual Evaluation Review (AER), a message underscored at “Innovating for Economic and Environmental Sustainability in the Asia and Pacific Region,” a seminar hosted recently by the Independent Evaluation Department at ADB’s 49th Annual Meeting in Frankfurt, Germany.

Countries in Asia and the Pacific are already grappling with slower economic expansion and falling international trade, and need to find new growth drivers while maximizing the contributions of existing industries.

The region’s economic prospects are increasingly linked to the ability of the People’s Republic of China (PRC) and India to address their economic, environmental, and climate challenges. Asia today is also more exposed to external shocks through the closer integration of global markets.

As observed by one panelist at the seminar, external shocks—irrespective of their origin—quickly push vulnerable people below the poverty line and the poor even deeper into poverty.

The AER highlighted the scale of this challenge. Latest data put the number of people living in extreme poverty in Asia and the Pacific—based on a person living on less than $1.90 a day in 2011 purchasing power parity terms—at just over 450 million.

More than 1.3 billion people living on less than $3.10 a day are at high risk of falling back into poverty due to vulnerability to shocks and the proximity of their incomes to the poverty line. Meanwhile, inequality is rising in a number of the region’s more populous countries, such as the PRC, India, and Indonesia.

Private sector involvement

In response, the panel agreed that countries must vigorously promote social inclusion and environmental sustainability, both involving private sector solutions, to ensure that Asia’s economic growth does not peter out.

Likewise, the panel concurred with the AER’s message that development gains can be eroded by the rising frequency and ferocity of natural disasters and the degradation of the natural environment.  For the Pacific Island states in particular, as observed by one panelist, the effects of climate change are immediate and devastating.

The benefits and costs of Asia’s growth are becoming increasingly clear in its cities. The region already has 13 or the world’s 23 megacities, and its urban population is expected to nearly double from 1.6 billion in 2010 to 3 billion by 2050. These trends highlight the vital importance of addressing urban issues such as water supply, sanitation, and, arguably most important of all, pollution.

In the face of growing inequalities, the realities of continued environmental degradation, and runaway climate change, the region’s key challenge is to generate innovative ways of sustaining progress, the panel concluded.

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