Asia reaches economic crossroads - East Valley Tribune: Business

Asia reaches economic crossroads

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Posted: Monday, May 14, 2007 5:14 am | Updated: 7:24 pm, Fri Oct 7, 2011.

KYOTO, JAPAN - The dual realities speak for themselves. Asia’s poverty rate has plummeted from about 50 percent to less than 19 percent in the past four decades and the average income has grown nearly sixfold, but nearly 2 billion people still live on less than $2 a day.

Asia stands at the crossroads of poverty and prosperity — and its arrival is widening divisions over how to manage the economic boom and ensure that no one is excluded.

The debate climaxed May 7 as the Asian Development Bank wrapped up its annual meeting with no clear consensus. The bank, founded in 1966 to end poverty, now says prosperity poses the newest threat to the continent.

On one side are those saying development must now meet the needs of an increasingly wealthy region; on the other are voices warning that the fight against poverty is far from won. Activists, meanwhile, accuse institutions like the ADB of pushing “slash-and-burn” policies that prioritize growth over the environment or traditional culture.

According to the ADB’s own figures, extreme poverty is projected to be all but wiped out in Asia within 15 years. Whereas famine and disease used to be top worries in developing Asia, industrial pollution, overstrapped infrastructures, weak financial systems and a growing urban-rural divide are now key concerns.

“The challenges are considerable but they are challenges partly born in the ADB’s own accomplishments,” said Kenneth Peel, head of the U.S. delegation at the ADB conference in Kyoto.

Which way development heads next is important because it will shape the future of a region that accounts for about a quarter of international trade, a third of the global economy and more than half the world’s people.

To solve the new onslaught of problems and stay relevant, the ADB is hoping to give itself a face-lift for the 21st century. Recommendations include focusing more on sustainable growth, emphasizing environmentally friendly development and drawing on Asian capital instead of foreign funds.

Many of the 3,000 delegates agreed on a need for the Manila, Philippines-based bank to change with the times.

But the four-day annual meeting ended with the region’s poor countries and their richer neighbors disagreeing over how the bank should be reformed.

The United States, one of the ADB’s top shareholders, said the bank should stick to its original task of helping the poor and not seek new mandates that stray from that mission.

“We should celebrate when countries no longer need ADB to finance their development needs, not seek ways to artificially create incentives to lend to them,” Peel said. “The ADB should step aside and declare victory.”

Poor countries, meanwhile, are afraid of being left behind. Some questioned the ADB’s forecast that 90 percent of the region’s population will be “middle income” by 2020.

“There will still be a significant number of poor,” said Keat Chhon, Cambodia’s governor to the ADB. “The ADB should continue to focus on poverty alleviation in these low-income economies until this mission is accomplished.”

Afghanistan’s governor, Anwar-ul-Haq Ahady, said the ADB needs to boost its engagement with its poorest members, which he called “fragile states” so far bypassed by Asia’s rapid growth.

Indonesian Finance Minister Sri Mulyani Indrawati warned the ADB against expanding too rapidly into areas in which it has no expertise and said it risks duplicating tasks of the World Bank and International Monetary Fund.

South Korea, Thailand and other so-called Asian Tiger economies that were battered hardest by the 1997 Asian financial crisis supported a stronger ADB.

They envision a bank that might help manage part of the region’s vast foreign currency reserves and protect against wildly fluctuating exchange rates.

Some even want the ADB to help set up a regional bond market to finance development spending.

ADB president Haruhiko Kuroda said many nations pointed out issues that were “missing or merit more careful consideration.” The ADB hopes to hammer out a consensus before its next annual meeting in Madrid, Spain.

“We must respond to the changing needs of the region,” Kuroda said. “But that does not mean the bank can dilute its devotion to poverty reduction.”

One area of agreement was concern about the environmental impact of Asian development.

The ADB is now making energy efficiency and green energy a top priority of its development programs.

And in Kyoto, the Japanese government donated $100 million to help the ADB fight global climate change and fund environmentally friendly investment.

But even that drew fire from activists who condemn the ADB’s continued funding of affordable coal energy, a top producer of the greenhouse gases that fan global warming.

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