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Development Policy

Asia needs 'clean' growth

Sixty percent of the world's population lives in Asia. The economic growth of the region is impressive. But Managing Director of the Asian Development Bank Rajat Nag says there are many challenges ahead.

Experts have termed the 21st century the "Asian century." Besides the established power Japan, the two largest countries in the world China and India have developed into motors of the continent's economic boom. Since 1966, the Asian Development Bank (ADB), with its headquarters in Manila, helps the Asian countries in reducing poverty and in improving people's life.

DW: Sustainable growth is a big challenge for many countries in Asia. China is a good example. Many there are afraid of the fact that the growth and the wealth of many will diminish because of growing environmental problems. How can development and sustainability go together?

Rajat Nag: I think it is important to think of growth as meaningful only when it is inclusive, so that it is not just for a few. Inequality is rising in Asia. So the first thing that the countries will have to look at is how to make growth inclusive, how to make sure that people at the bottom of the pyramid participate in and benefit from the growth process, which means they have to be skilled enough to participate. They have to be physically well enough, that means they have to be healthy. You have to make sure that women participate. You can not keep fifty percent of the labor force out of this growth process. You have to make sure that the institutions are in place, that the rule of law is applied. This is very important to make sure that you get investments - both foreign and domestic - coming in, and also make sure that natural resources are used properly. Asia is going to need huge amounts of energy and natural resources. You can not extract more than there is. And you therefore have to think in terms of renewable energies, such as wind and solar power. You have to think about increasing the efficiency of current production processes. So there is going to be a whole raft of measures that Asian economies – India as well as China - will have to take to make sure that they don't damage the environment and not think "grow now and clean later."

You mentioned the topic of inequality which is a big problem for many societies. In India, for example, it seems that the gap between those who are benefiting from the growth and those who are left out is widening. What can be done to address this issue of inequality in an appropriate way?

The recipe is about the same for most countries. There are three components of inclusive growth. First you have to have growth. You have got to make sure that you have the infrastructure and the right investment environment. The second one is access to the opportunities created by growth. So people at every level have to be able to participate.

By being skilled enough, in India and many other places, people at the higher end of the education spectrum do well. The IT boom has been excellent for people who are educated. But what about those who don't even have a high school diploma? That is why there has to be a lot emphasis on education: primary, secondary, and also technical and vocational. The third pillar is what we call social protection. Despite all efforts by government and individuals, people may fall trough the cracks. For those people, the governments have to provide social protection, social security, pensions, etc. And I think in India, the government is addressing this issue. Many of the government schemes, for example the rural employment generation scheme, and the unique identification system that India is adopting, which will make it much easier to have cash transfers made to the beneficiaries. Through this, leakages in the system will improve. Corruption is a very serious issue in many countries. And it has to be addressed on many levels. It has to be recognized as a major socio-economic challenge. The governments in the region have very robust anti-corruption policies, laws and regulations. But the issue is not about laws, it is about implementation.

You said that education is the key for growth. We have two different scenarios in Asia. For example, if we look at India, we have a very young population. But if we look at Japan and China for example, the population is getting older, both countries have ageing societies. How can this challenge be addressed?

Asia as a whole is still a young continent. In India, the Median age is just around 25. China is just starting to age and the effect can be only seen in a few years. Japan and South Korea are ageing societies. Two things need to be done. For countries such as India, which have a huge young population, we have to make sure that the demographic dividend does not become a demographic curse. It becomes that if the youth does not have job opportunities. So we have to make sure that you have proper skills. The quality of education is important and not just quantity. So you just don't produce engineers en masse, but to make sure that they have skills that the market wants. For the countries with the ageing population, they have to look at ways to bring in young people from elsewhere. So obviously, mobility of labor becomes a very important thing. Immigration is a very sensitive issue. Ageing societies might also have to consider means to bring in health care workers from other countries which are young. A young population by itself can be a demographic curse if it is not channeled properly. An old and ageing population by itself does not have to be a curse if handled properly. That is why government policies have to be very well tuned to this situation.

You mentioned that it is very important to include women in all processes and in all measures taken to enhance the growth and in the development of a country. But many countries in Asia are quite conservative when it comes to women. We have seen in India, for example, after the gang rape of a young student, that even politicians and high-ranking personalities made very unfortunate comments after the incident. What can be done to change this mindset?

This whole gender issue, in my opinion, is first and foremost a mindset issue. In this age and century, we should not even have to argue for gender equity. It should be a given and a starting point. Unfortunately, it is not. I believe that those mindset changes, those cultural changes, have to begin with education. But that by itself won't be enough. I think it has to begin at home, how individual families look at and talk about gender issues at home. It is also an issue for governments not to tolerate in the slightest possible way whatever might be considered gender discrimination. Now, governments have several policies; many of them are very enlightened. In India, there are many schemes which encourage girls' education. Those are all good and important. But I think it almost has to be a social movement, when it comes to true change. But what I am encouraged by, for example in India, is that despite the horrible and unacceptable comments made by some, there also has been an outcry from others, I would even say the larger part of society. Is that a tipping point? Time will tell. Addressing gender inequity, violence against women, and deprivation of opportunities for women - all this has to be a matter of concern not only for the governments, but all the way through societies. Only then can societies move ahead.

We have seen how China and India have emerged as economic power houses, although both had to downgrade their expectations in terms of growth. Many people also hope that China or India might even help Europe out of its recession. In which ways is this true?

I think China and India as major economies in Asia are major sources of growth in Asia. And Asia is certainly a major source of growth in the world as a whole. So therefore, if Asia prospers, it obviously helps Europe and vice versa. I think this is the point. I don't think that it is a question of "Can China pull Europe out of recession." My feeling is that the Euro crisis has affected Asia and some of the estimates we have show that for every one percentage decline of growth in the euro zone, this reflects about a 0.4-percent decline in growth in China and the ASEAN region because of the trade linkages. But I think it is also true that as China grows, given its size, and as India grows, given its size, it will become more able to consume its own production and that from Europe, and to that extent, it will have some beneficiary effects. But it would be too much to expect China or India to help Europe grow out of the crisis. It has to be a combined effect of policies and measures in Europe which contribute to Europe's growth again, including to growth in China and India.

Interview: Priya Esselborn

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