The IPC-IG hosts the Launch of the UN Economic and Social Survey of Asia and the Pacific 2015
The Seminar held in Brasilia discussed Perspectives for Cooperation and Inclusive Growth for Asia and Brazil
Brasilia, May 15th 2015 – The International Policy Centre for Inclusive Growth (IPC-IG) hosted on May 14th the Seminar “Asia-Brazil: Perspectives for Cooperation and Inclusion”, which marked the official launch of the United Nations Economic and Social Survey of Asia and the Pacific 2015 in Latin America and the Caribbean region, at the Brazilian Institute for Applied Economic Research (IPEA, Brasilia). This is the third time that the IPC-IG launches the report, which is the annual flagship publication of the U.N. Economic and Social Commission for the Asia and the Pacific (UNESCAP). The key messages of the 2015 survey are the following: Policy focus on economic growth is necessary, but it is not sufficient for achieving development. Economic growth in Asia-Pacific developing economies will experience only a slight increase in 2015. Inflation has declined and is expected to remain low, thus leading to interest rate reductions. And finally, economic growth has not meant inclusive growth.
The event gathered Jorge Chediek , UN Resident Coordinator, UNDP Resident Representative in Brazil and IPC-IG Director, Jessé José Freire de Souza , President of IPEA, Renato Baumann, Director of International Economic and Political Studies and Relations, IPEA, and Carlos Henrique Fialho Mussi, Director of the Economic and Social Commission for Latin America and Caribbean – ECLAC – Office in Brazil. The launch was closed by interventions made by members of the audience, which included the Ambassadors and diplomatic representatives of Afghanistan, China, Guinea Bissau, India, Japan, Malaysia, Morocco, Nepal, Pakistan, Sri Lanka, Russia, and Timor-Leste. The IPC-IG was chosen to host the event on account of the close relations between Asia and Brazil, and more precisely due collaborative research between Asian countries and the IPC-IG, explained Jorge Chediek in his opening remarks, followed by Mr. Souza.
Renato Baumann commenced the launch by sharing his compelling analysis of the report, exposing the similarities and differences between Asia and Latin America. He first highlighted the apparent similarity – the middle-income trap challenge – demonstrating how both regions can learn from each other, considering they have approached this challenge in opposing directions and reached different results: East Asia has pursued strong economic growth and a peculiar model of productive complementarity, while Latin America has succeeded in implementing social policies aimed at reducing poverty and income concentration. Baumann then pointed out the basic historical differences between the Latin American and Asian economic models: unlike Latin America, Asia has the highest saving rates in the world. In the event of an external shock, Latin America typically turns to the IMF, while Asian countries traditionally favour regional solutions. Unlike Latin America (Brazil, Chile, Mexico), Asia is striving to extract the funds it has invested abroad; including several “deep pockets” (Japan, China, South Korea, Thailand).
From a socio-economic point of view, Latin America’s terms of trade are dependent on variations in natural resource movements, which impact commodity prices. Conversely, Asia’s terms of trade remain relatively stable. Furthermore, in the 1990s, wealth generated in Latin America during the trade boom was employed to finance social policies instead of investment or infrastructure. This resulted in stagnation in the disparities between the continent’s stronger and weaker economies for two decades. In the meantime, due to the type of productive structures employed, Asian countries achieved 2 digit growth, resulting in a substantial reduction in inequality according to Baumann.
Baumann also mentioned the Asian inclination to implement pro-active monetary policies based on American, European and Japanese economic models, while combining low interest rates with pumping money into the economy (although such an approach is not necessarily enough to trigger economic recovery). He also highlighted the use of the currency (the Chinese Yuan Renminbi) as a tool for trade and a reserve of value; he stated that 40% of trade between Russia and China is already being billed in Yuan, thus highlighting the need for Latin American countries to promote regional complementarity.
Carlos Mussi followed, basing his insights on a presentation prepared by Dr. Shamshad Akhtar (United Nations Under-Secretary-General and ESCAP Executive Secretary of the UNESCAP). He commenced with a quote from the UN Economic and Social survey applicable to the Latin American context:
“The growth potential of economies is being held back by structural weaknesses including infrastructure shortages and the excessive commodity-dependence of some economies. The fragile global economic recovery is not helping growth prospects either. Unless reforms are vigorously pursued, downside risks to the growth trajectory could increase”
Therefore in his opinion, although both continents have many differences, they currently face similar challenges.
He went on to point out how Latin America suffers from an infrastructure shortage. Asian countries are not as urbanised as Latin America meaning they also need to invest in infrastructure on several fronts: logistics, housing and urbanisation. According to Mussi, Asia needs to invest 900 billion dollars in infrastructure. The question is how to finance this need? Will savings be enough? Will it be necessary to resort to foreign funding? How can public-private partnerships (PPP) be coordinated? What regulatory environment should be adopted? Mussi then stressed the negative implications of excessive commodity dependence for exchange rates, inflation rates and the budget. For instance, Iran and Kazakhstan’s dependence rates are higher than 30%. He then stated that 38% of international Foreign Direct Investments (FDI) is in the Asia-Pacific region (545 billion dollars
At a macro-economic level, the focus of the survey is less on (multidimensional) poverty and more so on inclusiveness. This can be defined as a combination of better standards of living, less income inequality, more opportunities and less extreme poverty. It has been observed in some countries (China, India and Indonesia) that if overall inequality rates decreased, the Gini index increased, raising the following issue: if growth is necessary, which kind of development should be pursued? The Economic and Social Survey of Asia and the Pacific provides an inclusiveness index which serve as a basis for a country ranking, within which Kazakhstan and the Russian Federation come first and India and Pakistan came last.
In his conclusion, Mussi highlighted the policy recommendations formulated in the survey: address the neglect of the rural sector (increase agricultural productivity by focusing on quality and standards, investments in R&D and develop the non-farm sector through rural industrialization); strengthen financial development, foster financial inclusion; foster the creation of small and medium-sized enterprises; and strengthen the developmental role of macroeconomic policy by making existing expenditure more development-oriented (reduce non-development expenditure, increase access to and the affordability of health systems, strengthen social protection programmes and expand investment in education).
Jorge Chediek closed the session by reiterating how economic growth does not automatically generate social progress or human development and that alternative indicators of development are necessary. He welcomed UNESCAP’s call for inclusive growth and more investments (at the public, private and household levels). He concluded by referencing Brazilian President Dilma Rousseff’s pride in Brazilian policies lifting 36 million Brazilians out of poverty and enabling 44 million to enter the middle class. Considering such results in the midst of weak economic growth, the main challenge for the future is ensuring the consolidation of such advances and further inclusive growth.
Author: Amélie Courau, UNDP’s International Policy Centre for Inclusive Growth (IPC-IG)
The full report and the Executive Summary can be downloaded on the ESCAP website.
The presentation can be seen here.
See past collaborations with ESCAP:
Short URL: http://pressroom.ipc-undp.org/?p=16959