In­clu­sive pol­icy for a fairer Asia-Pa­cific

China Daily (Hong Kong) - - VIEWS -

Against the back­drop of a slug­gish global econ­omy, lack­lus­ter trade growth and un­cer­tainty in ma­jor economies, coun­tries in the Asia-Pa­cific re­gion are still likely to have a growth rate of 4.9 per­cent this year.

The re­gion con­tin­ues to lead in global eco­nomic growth, mainly bol­stered by ma­jor economies such as China and In­dia. How­ever, if the re­main­ing chal­lenges are not ad­e­quately ad­dressed, they could scut­tle sta­bil­ity and un­der­mine the ef­forts to meet the am­bi­tious goals of the UN’s 2030 Agenda for Sus­tain­able De­vel­op­ment.

The year-end up­date of the Eco­nomic and So­cial Sur­vey for Asia and the Pa­cific 2016 — an an­nual as­sess­ment by the UN Eco­nomic and So­cial Com­mis­sion for Asia and the Pa­cific — pins the re­silience of the re­gion’s economies on on­go­ing fis­cal and struc­tural re­forms, but cau­tions that the pace of eco­nomic ex­pan­sion over the past years did not help cre­ate de­cent jobs in a num­ber of coun­tries. The re­sult is a high share of vul­ner­a­ble em­ploy­ment and widen­ing in­come in­equal­ity, which could lead to “economies of ex­clu­sion”. It is telling that the pop­u­la­tion-weighted Gini co­ef­fi­cient in the re­gion, based on house­hold in­come es­ti­mates, in­creased by 11 points or 30 per­cent, from 37 to 48, be­tween 1990 and 2014.

These de­vel­op­ments should be taken se­ri­ously, be­cause widen­ing in­equal­ity has had a dele­te­ri­ous im­pact on coun­tries and pop­u­la­tions, es­pe­cially the most vul­ner­a­ble.

In­cre­men­tal in­roads have been made in struc­tural trans­for­ma­tion through­out the re­gion, but they could be un­der­mined if mea­sures to en­hance work­ers’ skills are not put in place. In­deed, the gains de­rived from our col­lec­tive push to­ward tech­no­log­i­cal progress should trans­late into higher real wages, sup­ported by en­hanced so­cial pro­tec­tion. It is trou­bling that more than 1 bil­lion work­ers in the Asia-Pa­cific are in vul­ner­a­ble em­ploy­ment, of­ten without ac­cess to so­cial or le­gal pro­tec­tion. Much more should and can be done to en­sure greater in­clu­sion — a move away from a growth-cen­tric de­vel­op­ment frame­work to­ward a holis­tic ap­proach that takes into ac­count so­cial, en­vi­ron­men­tal and gov­er­nance would be a step in the right direc­tion.

The an­nual re­view is equally pru­dent about the re­gion’s neart­erm eco­nomic out­look. In par­tic­u­lar, there are con­cerns over the ef­fects of re­cent de­vel­op­ments on the world’s ma­jor economies, which could in­crease pro­tec­tion­ism and thus re­duce ex­ter­nal de­mand re­sult­ing in slow­ing down the in­te­gra­tion of de­vel­op­ing coun­tries into global and re­gional value chains.

While the ram­i­fi­ca­tions of Brex- it and cur­rent trade pol­icy sen­ti­ments in the United States are yet to be seen, we can­not af­ford to ig­nore the warn­ings they send out.

The re­port makes a strong ar­gu­ment for an ac­tive role of fis­cal pol­icy in sup­port­ing do­mes­tic de­mand and meet­ing long-term de­vel­op­ment goals. One of the ef­fec­tive ways of ad­dress­ing struc­tural bot­tle­necks in the cur­rent en­vi­ron­ment of weak ex­ter­nal de­mand, weak pri­vate in­vest­ment, low bor­row­ing costs and be­nign in­fla­tion­ary pres­sures is of course pub­lic in­fra­struc­ture out­lays. We have al­ready seen some mean­ing­ful in­ter­ven­tions by coun­tries to im­prove pub­lic fi­nan­cial man­age­ment by re­form­ing state-owned en­ter­prises and en­hanc­ing tax rev­enue, and these mea­sures have shown to con­trib­ute to a strength­en­ing of the fis­cal po­si­tion on a sus­tain­able ba­sis.

Not­with­stand­ing the in­her­ent chal­lenges, taxes and, in par­tic­u­lar, pro­gres­sive per­sonal in­come tax can be a piv­otal pol­icy tool for di­rect re­dis­tri­bu­tion of in­come and wealth. As a whole, the Asi­aPa­cific has one of the world’s low- est tax rev­enue lev­els, just 17.6 per­cent of GDP. Im­proved health­care, ed­u­ca­tion and other so­cial goods are di­rect ben­e­fi­cia­ries from this crit­i­cal pub­lic rev­enue, which if ef­fec­tively ad­min­is­tered, moves all closer to re­al­iz­ing both na­tional and the global as­pi­ra­tions set out by Agenda 2030.

As 2017 ap­proaches with its own chal­lenges, the out­look for the re­gion’s de­vel­op­ing economies seems broadly pos­i­tive with growth pro­jected at 5 per­cent. This over­all sta­bil­ity does pro­vide us with the op­por­tu­nity to make progress on pro­duc­tiv­ity and in­clu­sive­ness fronts. But much of this will come on the back of bet­ter eco­nomic gov­er­nance — a vi­tal el­e­ment in the process to­ward struc­tural trans­for­ma­tion.

Ef­fec­tive eco­nomic gov­er­nance would not only ac­cel­er­ate poverty re­duc­tion and mit­i­gate in­equal­i­ties, but also shift coun­tries to­ward a sus­tain­able de­vel­op­ment path.

CA I H O N G

The au­thor is the ex­ec­u­tive sec­re­tary of the United Na­tions Eco­nomic and So­cial Com­mis­sion for Asia and the Pa­cific.

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