2011 Aug 14
August 14, 2011

ADB’s Asia 2050 vision, roadmap

0 Comment

Empowering the Filipino People

(Last of Two Parts)

MANILA, Philippines — “While an Asian Century is certainly plausible, it is not pre-ordained.” — ADB Pres. Haruhiko Kuroda

The Asian Development Bank’s massive study, “Asia 2050: Realizing the Asian Century,” presents a strategic framework and related general strategies for our Asia-Pacific home region in the next 40 years. Most essential to any country’s successful transition to the world of 2050 are three fundamental dimensions: National action, regional cooperation, and collective global effort.

The national policy agenda retains its paramount importance, but Asian policy makers must look beyond their borders because:

• Inter-generational issues have national, regional, and global aspects.
• Asia has the most to gain (or lose) from the enhancement of these global virtues for future prosperity: An open trading system, a stable financial system, climate change mitigation, and peace/security/harmony.
• Diversifying markets to reduce heavy reliance on Western countries requires Asian leaders to work closely together to remove legal and other barriers to the free movement of goods and capital.
• Cross-country disparities lead to conflict, thus requiring coordinated/integrated action.

Growth and inclusion; Financial transformation

Growth and inclusion need not be mutually exclusive – they can be mutually reinforcing. To sustain growth over the long-term, almost all of Asia needs strategies to reduce inequalities to maintain social cohesion.

Asian countries must give much greater priority to inclusion and the elimination of inequalities – ethnic; rich/poor; rural/urban; educated/uneducated; etc. — throughout societies. Asia needs to improve policies on the distribution of benefits.

Rural development, particularly agriculture, remains crucial in all low/middle-income economies.

Asia must formulate its own financial model, avoiding overreliance on self-regulation by markets and excessive central government control of banks. It should be more open to institutional innovation and develop enabling arrangements to finance growing infrastructure needs through public-private partnerships.

Managing massive urbanization

As its urban population nearly doubles from 1.6 billion to 3 billion by 2050, Asia’s cities will become centers of higher education, technological advance, and also sources of huge carbon emissions. Consequently, the quality and efficiency of urban centers increasingly determine Asia’s long-term competitiveness.

Urban inequity must be addressed — slums have to be eliminated because islands of poverty cannot coexist with affluent areas.

Asia must adopt a new strategy to manage urbanization by promoting compact, energy-efficient, green, safe and livable cities, which will be more reliant on mass transit than on cars.

Better management of cities will require governments to further decentralize responsibility to lower levels with more local accountability.

Reduction in energy and natural resource use

Based on current trends, Asia will surpass the OECD long before 2050 to become the largest energy consumer grouping most affected by, and most responsible for, risks related to energy security and climate change.

Action is needed in many countries to eliminate energy subsidies and switch to renewables. The only way out is a combination of price increases and more stringent standards (for transport and buildings).

The key policy implication for Asian countries is that future competitiveness and well-being depend heavily on efficient natural resource use and reduced consumption.

The core requirement — where many Asian economies fall short — is high quality education that promotes creativity at all levels and systems that foster innovation and entrepreneurship.

Governance and institutional development

Asian countries must improve governance and transform their institutions.

The recent deterioration in the quality and credibility of national political and economic institutions (illustrated by rising corruption) is a key concern.

Throughout Asia, an expanding middle class will demand increased voice and participation, transparent allocation of resources, accountability for results, and enhanced personal space.

Eradicating corruption is critical for all countries to maintain social and political stability, and retain the legitimacy of governments.

On corruption as a risk, Philippine performance is perceived as among the worst.

Strategy shifts in the next 40 years

Over the next 40 years, all countries must make radical shifts in economic strategy.

Even for Asia’s NICs, “industrialization by replication” will be less efficacious. The more development progresses – in both quality and intensity – the greater a country’s need for individual creativity, entrepreneurship, and competitiveness – which only markets can stimulate.

Although the interventionist state (as enabler of development) has tremendously influenced Asian growth, command-driven regimes are now receding in importance because markets have assumed dominant roles.

In reality, government’s basic role is simple: To provide political stability/security, sound macroeconomic policies, and physical infrastructure that private enterprise needs but cannot itself provide.

For all countries, the challenge is to keep up their growth momentum in balance with expanding populations, limited natural resources, and global warming.

The Philippines: Still Laggard in 2050???

The challenges are greatest for those countries that have been stymied by poor governance. Historically, unbridled rivalries by elite groups for economic and political power have led to the widespread politicization of Philippine society.

Early on, the Philippine bureaucracy had become a prize of the spoils system as a result of deeply entrenched vested interests dating to colonial times. Even in the face of globalization, our economy stays governed more by politics than by markets. (Read Part I last week and discover the shocking prediction that the Philippines will still be a laggard by 2050).

The “Asia 2050” study concludes that to modernize backward economies, we need more competitive, more coherent, more efficient states. And if we are to correct socio-economic imbalances, countryside development must become a centerpiece of public policy. The bulk of investments in human capital must shift to disadvantaged communities through government “affirmative action.”

ASEAN and East Asia prospects

The East Asian states about to merge into an East Asian Economic Community — made up of ASEAN – 10 plus China, Japan, and South Korea – is unlikely to develop beyond a free-trade area.

If they are to deal equally with China in the “ASEAN-10 Plus” configuration, ASEAN as a whole must become more convergent economically and politically. Right now, ASEAN–10 is still a long way from reducing the trade barriers among themselves and creating a single home-market that can compete with China in its attractiveness to foreign investors.

For ASEAN, its immediate usefulness lies in the framework of rules and procedures to be adopted within which not just China, but also Japan, South Korea and eventually India must operate in all their regional dealings.

In another decade, we may expect regional integration to become the global norm. Given the WTO’s failure to open up global trade satisfactorily, regional blocs to create economic scale will likely become the main diplomatic activity these next few years.

From the American to the Asia-Pacific peace

“Asia 2050” asserts — repeatedly — that our continent’s rapid rise is not inevitable. And it is true that the bubble of stability underpinning Asian development continues to be tentative and fragile — due to big-power contests, local flashpoints of conflict, and the machinations of despots and rulers.

Over the foreseeable future, we of East Asia must live with a China driving for superpower status and an America asserting its Asia-Pacific “policeman’s” role.

Of all of these realities, the future of the US-China relationship is the most crucial. In fact, the struggles between them may no longer be military and coercive — but economic, intellectual and demographic. And the ultimate winner would be the life-system that ordinary people judge the best for them.

Over these next 10-15 years, the task for our statesmen should be to replace the American peace (Pax Americana) that has enforced stability in our region (through US military superiority) with a Pax Asia-Pacifica founded on the balance of mutual benefit, and through binding, burden-sharing, security partnership agreements.

Clearly, an “Asia-Pacific Peace” must be built on cooperative security forces bound by firm commitments among the powerful countries/blocs in our part of the world — the United States, China, Japan, South Korea, India, Russia, and ASEAN-10.

Summing up

In the past, durable peace and stability – even the flowering of civilizations – resulted from great-power dominance.

But, the age of hegemony has passed. Today, no single state – no matter how powerful – can act unilaterally because of the United Nations Charter. (Witness the beleaguered Khadaffy, the caged Mubarak, and the isolated Assad).

In a world more interconnected than it has ever been, nations large and small are virtually equal in the restraints the world community places on the behavior of their leaders.

Ultimately, relations among the countries of the Asia-Pacific will always be an interplay of competition and cooperation. The supreme challenge will be for our countries to ensure that the spirit of cooperation to prosper is always stronger than the competitive impulse to dominate.

And, in meeting such challenge, we of the Philippines cannot afford to be in default – for the sake of the younger ones after us. –Former Philippine President FIDEL V. RAMOS

Please send any comments to fvr@rpdev.org. Copies of articles are available at www.rpdev.org.