PRESS CONFERENCE ON ECONOMIC AND SOCIAL SURVEY FOR ASIA AND THE PACIFIC 2008
PRESS CONFERENCE ON ECONOMIC AND SOCIAL SURVEY FOR ASIA AND THE PACIFIC 2008
|Department of Public Information • News and Media Division • New York|
PRESS CONFERENCE on economic and social survey for asia and the pacific 2008
Two hundred and eighty million people in the Asia Pacific region could be lifted out of poverty if agriculture and labour productivity could be increased significantly there, Rob Vos, Director, Development Policy and Analysis Division, Department Economic and Social Affairs, said today in New York.
Mr. Vos, who was joined by Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development, Department of Economic and social Affairs, was addressing correspondents at a Headquarters press conference to present the Economic and Social Survey for Asia and the Pacific 2008.
He said doing that would help to reduce poverty, particularly in India, China, Bangladesh and Indonesia, much more strongly than had been done over the past decades. It would also reduce inequality.
He said the report also looked at the possible impact on the region when the Doha round of trade negotiations were completed and noted that it could lift another 5 million to 7 million people out of poverty. With more comprehensive measures, including the elimination of domestic subsidies on agricultural production in the rich countries, around 50 million more people could be lifted out of poverty.
The report recommends the focusing of further investment in research and development to create the basis for a new grain revolution, along with improvement in human capital, education and extension of rural services and infrastructure in order to help boost productivity of farmers, he continued. Infrastructure should also be established to connect the rural poor better to cities and markets, so as to enable them to get better prices and markets for their produce.
Mr. Vos said that the survey showed that the role of agriculture in creating jobs was diminishing in the region and was generating fewer new jobs today than it did in the 1970s and 1980s. That situation had put enormous pressure on farmers. Low yields, hyper-prices and low market prices for agricultural production had led to a vicious cycle of low income and stagnation, while a massive scale down on public services for the rural areas, such as irrigation schemes and services, had dealt another blow to the sector. As a result, in some areas farmers had fallen into debt and there had even been suicides in many countries, including in India. Thus, the rise in food prices worldwide was not benefiting a lot of the smaller producers in Asia.
The survey forecasts growth in the developing parts of the region to slow to 7.8 per cent in 2008, down from 8.2 per cent in 2007, he continued. Growth would continue to be led by north and north-east Asia -- meaning China, Republic of Korea and Mongolia -- but their exports were expected to suffer from the slowing of growth in the United States and other industrial countries. However, strong domestic demand would still support relatively strong growth.
Mr. Vos added that a great deal of uncertainty remained since the full impact of the sub-prime mortgage crisis in the United States remained unknown. Most countries of the region were expected to see a moderation of growth, except for India and Thailand.
On inflation, he said that the survey predicted a rate of 4.6 per cent in 2008, a slight decline from 2007. That was despite the high food and energy prices that were affecting inflation in the countries of the region. One of the major factors that had helped cushion that effect was currency appreciation. As the dollar slid, many of the currencies of the region that were partially or wholly tacked to the dollar became more expensive.
Continuing, he said another factor that would slow inflation a bit was likely to be the overall slowdown in the world economy at large. There was a major concern that inflation might become a bigger factor in determining the growth output beyond 2008, as energy, oil and food prices could remain high in the coming years.
He pointed out that, if the United States economy came to a standstill this year, there would be important implications for the countries of the region, particularly China, Taiwan, Singapore and Republic of Korea, whose growth was most strongly led by exports. In cases like India, there would also be impact, but that would be weaker because the domestic growth factors were stronger.
Another impact of the sub-prime crisis might be on the asset market, where large capital flows had contributed to significant increases in stock markets and asset values in many of the countries, most notably in equity prices and property markets, he went on. Further, the report mentions that it expected the poor to be hit hardest by negative economic shocks and it outlines a number of actions to rebuild economies. For example, more robust macroeconomic policies would be needed, while institutional development should be strengthened, including the strengthening of more transparent judicial systems, property rights and improved labour policies that were both flexible to adjust to changing economic situations and protective of the poor and vulnerable.
He said the report further calls for refocusing of social protection programmes, as the social protection mechanisms that were established in the aftermath of the Asian crisis had weakened and had received diminished attention of late, particularly with the growth recovery of recent years. In most countries, social protection systems were lacking, he noted, saying that the focus should be on the most vulnerable workers, in particular the less educated, women and less experienced.
He noted that for the past decade, all the economies of the region grew an average of 7 per cent and the economy of the region at large had doubled in size. While that growth had garnered applause, it needed to be recognized that 641 million people, or two thirds of the total number of the extreme poor in the world, still lived in poverty in the region. Thus, something was stopping the strong economic growth from trickling down to the poorest in the region. The report emphasised that the neglect of agricultural and rural development had been part of the main causes, particularly since the rural and agricultural sectors were the main livelihoods for the poor in the region.
Mr. Sundaram told correspondents that the uncertainty affecting the world economy over the past year had affected the availability of credit and resulted in increasing cost of credit to other parts of the world. There was concern that that situation would affect consumption, particularly in the United States. As the United States was the largest consumer of imported goods from Asia, that situation was a matter of grave concern for Asian economies, which produced many of the manufactured goods imported in to the United States.
Another concern was the likelihood of increased protectionism in the United States which could affect Asian growth, he continued. Trade protectionism could affect the import of manufactured goods from East Asia. Although, for many of the goods imported from there, domestic production capacity no longer existed in the United States, hence, there could be no easy substitution for such goods. However, for more high-tech products coming from Asia, there were grounds for concern. Trade protectionism had been threatened in the United States and in Europe.
There was also concern that there would be a great deal more protection in terms of ownership, particularly of financial assets, he said. That had been reflected in the ongoing debate on sovereign wealth funds. However, it was very unlikely that there would be increased protectionism on that particular front, since such funds offered availability of capital when it was very sorely needed.
He added that the survey also emphasised concerns regarding food price inflation, although it was a more general problem not confined to Asia. In the 7 of the last 10 years, output had been less than consumption at the global level. There were also concerns associated with climate change, as adverse weather conditions had affected agricultural output, and growing concern over climate change had increased the production of biofuels, particularly ethanol. That, however, had diverted from food production and reduced food availability, as a consequence.
Mr. Sundaram noted that, over a longer time, there had been a decline of emphasis on food security and greater emphasis on food production. There had also been a particular emphasis on industrialization and relative neglect of agricultural production generally, and food production, in particular. There was also concern that the decline in United States demand could affect the countries of the region by leading to a decline in employment growth, which had been important for reducing poverty there. Thus, the possibilities for international migration, which had also been important in the region, were also likely to be reduced. The survey put great emphasis on the benefits of international migration, particularly in the form of remittances, which far exceeded both official development assistance to Asia and foreign direct investment in some countries.
In response to a question, Mr. Vos said that India expected to grow at a rate of about 9 per cent, or around 7 per cent under a pessimistic assumption, in 2008. While that was a robust growth rate, the country still had along way to go in order to catch up with the United Sates, in terms of the size of the economy. Such catching up would require another couple of decades of very fast growth.
Mr. Sundaram added that there were a lot of myths about where India’s growth was coming from. Many people thought of India as a place where call centres were located and certain services were provided online. However, there had been a significant amount of industrialization going on there. Much of it, however, compared to East Asia, had been for the domestic market. India was not known as a significant exporter of manufactured goods, unlike the East Asian economies, including China.
In response to another question, Mr. Sundaram, said that he had participated in the financial disclosure initiated by the Secretary-General, but had chosen not to make his disclosure publicly available, due to personal issues.
On another question, he said that there was confusion about the developmental impact of remittances. An International Monetary Fund (IMF) study found three years ago that such remittances were counter-cyclical, so that when there was a downturn in the receiving country, remittances increased. The actual impact developmentally was modest. Remittances tended to help households tide over bad circumstances, rather than contribute to expansion of the economy. Over the last three decades, developing countries had been urged to reduce or eliminate capital controls, allowing capital to go in and to come out. As a result, more capital had flowed out than into those economies.
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