Asia remains by far the most dynamic region in the world and the locomotive of global growth. Its growth rate is one and a half times that of any other region. But this growth has been accompanied by growing inequalities, and remains fragile. The region’s recovery has come under pressure in recent months from multiple crises – increases in food and energy prices, the continuing global financial instability, and severe disruptions in Japan and six ASEAN countries caused by adverse climatic conditions and natural disasters. Because of these multiple upheavals 42 million additional people will fall into poverty by the end of 2011, according to estimates by the UN’s Economic and Social Commission for Asia and the Pacific (ESCAP).
Governments in the region have tried to insure against volatility and turmoil by building up huge foreign reserves, investing in infrastructure, and improving regional connectivity. But this is not enough. The fundamental challenge for the Asian economies is to quickly find new drivers of growth by creating a region-wide market that can replace the loss of demand from the debt-fuelled consumption of Western economies. In other words, Asia must rebalance its own growth and become more self-sustaining by investing in itself.
No longer able to depend on rapidly expanding exports to the rest of the world, Asia will have to rely instead on meeting more of the needs and security of its own citizens.
Indeed, this represents a historic opportunity for the region to invest in its own future. If development in Asia is more inclusive, and if many more people can escape from poverty, those people’s consumption can create vibrant new markets to drive national and regional socio-economic progress.
The cost of not investing in inclusive development is high. No country in the region can fulfill its potential or remain stable if it jeopardizes the life chances of its people by failing to protect them from external risks.
The financial crisis attacking the economy has highlighted the damage and risks of rapid unequal growth, particularly when this is not accompanied by investment in basic social infrastructure and redistributive policies. The damage can be corrected only by investing in social protection systems and social policies that are not only directed at reducing poverty and vulnerability but also focused on developing resilient and productive societies capable of adapting creatively and swiftly to the changes induced by globalization, natural disasters, and other external pressure.
These issues were discussed last week at the Salzburg Global Seminar in Austria, at a session titled “Economic Growth and Social Protection in Asia.” The participants, mainly experts and young leaders representing a wide range of Asian countries – from Afghanistan to Indonesia, South Korea to Singapore – agreed that social protection must include the following: social insurance, to protect individuals against sudden upheaval or events that are likely to lower their living standards (such as ill-health, disability, unemployment, ageing); conditional or unconditional social assistance programs to deliver certain benefits to selected vulnerable groups; and measures to ensure that individuals have access to labor markets and adequately remunerated employment. An effective social protection system needs to be anchored within a well-articulated social policy framework, technically sound, and politically supported. It must also be carefully crafted to avoid the unsustainable fiscal burden that many western economies have incurred.
By building its social foundation as an integral part of sustaining its economic dynamism, Asia has a historic opportunity to rebalance its development and truly become the anchor of stability in the 21st century. At the Summit, ASEAN leaders could begin this vital process.
By Noeleen Heyzer
The writer is an Under-Secretary-General of the United Nations and Executive Secretary of ESCAP