Uneven Development and Economic Integration in Asia

1
Uneven Development and Economic Integration in
Asia
GDN 8th Global Development Conference, Beijing,
14-16 January 2007 Panel Discussion on
Disparities in Development Patterns in Europe and
Asia

• Sudipto Mundle
• Advisor, Strategy and Policy Department
• Asian Development Bank

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Growth Rates and Variations in Asia

• Average growth in Asia high and accelerating
• Exceeded 7 during last three years
• Forecast at over 7 for 2007
• The high average growth masks large internal
  variations in growth
• lt3 (Nepal) - gt13 (Azerbaijan)

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GDP Growth Rates (5-yr Ave, 2001-05)
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Per Capita Income (2005)

• Equally large variations in per capita income.

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Poverty Index (2003)

• Large variation also reflected in levels of
  poverty incidence.

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Poverty and Disparity in Asia

• In developing Asia, the large majority are poor,
  nearly 1.9 billion persons live on less than 2 a
  day.
• Recent ILO study estimated that working poor
  lives on less than 2 a day from 87 of work
  force in South Asia, 58 in Southeast Asia, 67
  in East Asia.
• See similar disparity across developing Asia for
  other MDG indicators
• Disparity within countries as much as across
  countries in developing Asia for per capita,
  poverty incidence and other MDG indicators.
  Recall Rosenstien-Rodans seminal work on
  development theory in 1950s based on uneven
  development between northern and southern Italy.

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Subnational Per Capita Income Variations in China
55,307 Yuan
4,215 Yuan
Subnational Per Capita Income Variations in India
67,370 Rupee
5,772 Rupee
8
Uneven Development in Asia

• High rates of growth along with low rates of
  growth elsewhere.
• Similarly, high levels of per capita income
  combined with very low per capita income and
  large poverty incidence within and across
  countries.
• An inverse relationship between per capita income
  and growth?
• The two faces of Asia or uneven development
• Some call it dualism, others refer to
  core-periphery paradigm
• Implicit concept of integration or organic
  linkage between the core and periphery

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Integration Mechanisms

• Several dimensions of linkage or mechanisms of
  integration
• Trade Inter-regional trade in Asia over 50 of
  regions total trade. Most powerful integration
  driver
• Investment flows between rich and poor
  countries/regions
• Labour migration between poor and rich
  countries/regions
• Question Are the linkages benevolent or
  malevolent?
• Is integration a threat or an opportunity?
• Underdevelopment theorists of 1960s-1970s
  believed that integration was an exploitative
  structure impoverishing Latin America and Africa
  Celso Furtado, Paul Baran, Andre Gunder Frank,
  Emmanuel Arghiri and others.
• What does integration imply in Asia today?

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Integration Mechanisms...Contd

• Product Flows
• Trade has led Asian growth
• Intra-regional trade gt50 of total trade
• Both final goods as well as supply chain
  deliveries
• Very positive outcome
• Land Resources Fixed no loss or gain
• Labor Resources
• Guest worker phenomenon, migration from poor
  regions/countries to richer areas
• Entry barriers overcome through capital flows in
  opposite direction
• Either way, very positive outcome lifting
  employment and wage income in periphery

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Integration Mechanisms...Contd

• Capital Resources
• Significant capital flows from developed Asia to
  developing Asia
• However, net capital outflow from developing Asia
  (excluding China) about 3 of GDP annually
• Reflects not a mechanism of surplus extraction
  but poor investment climate in developing Asia.
  Mixed outcome.
• ? On balance integration benevolent not
  malevolent
• Promotes growth convergence
• Some empirical support in possible inverse
  relationship between per capita income and growth

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GDP Growth and Per Capita Income
?
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Challenges to Integration

• Poor investment climate, trade barrier, migration
  barrier
• Poor investment climate
• Weak Infrastructure highways, power,
  communications, ports, airports, urban
  infrastructure, especially in 11 megacities
• Weak Governance policy uncertainty, weak
  regulation, inefficiency, corruption
• Immature Financial Markets missing market for
  long-term investment financing, 200 billion
  annual gap for infrastructure alone

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Challenges to Integration...Contd

• Trade Barrier
• Multiplicity of regional and bilateral FTAs, some
  excluded.
• Need to rationalize the spaghetti bowl
• Need to ensure consistency with WTO arrangements
• Migration Barrier
• Administrative barrier to labour migration
• Capital flows from rich to poor countries can
  offset this

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Regional Cooperation

• Coordination failure a risk in absence of
  regional cooperation arrangements
• Several initiatives in addition to ASEAN
• Rationalize FTAs and border arrangements for
  movement of goods and people
• Integrated regulation, surveillance and
  development of financial markets
• Cross border infrastructure projects

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Additional Challenges and Questions on Integration

• The high environmental cost of economic and
  demographic growth. Is a sustainable development
  paradigm feasible?
• Regional public bads HIV/AIDS, Avian Flu,
  natural disasters (tsunami), water and air
  pollution (haze)
• Need for coordinated intervention
• Non-income dimensions of poverty in the periphery
• Health deprivation (high infant and maternal
  mortality)
• Gaps in literacy and educational deprivation
• Gender inequality
• Growth alone will not address these challenges
  adequately
• Central Asian Republic
• Where are their strongest linkages?
• Among themselves, with Europe, with Asia?

17
Thank You

• For More Information Contact
• Sudipto Mundle
• smundle_at_adb.org
• Website www.adb.org

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Infant Mortality Rate (2004)
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Maternal Mortality Rate (2000)
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Life Expectancy Rate (2004)
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Literacy Rate (2004)
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Enrollment in Secondary Education (2004)
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Sub-national Level
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India Sub-national Poverty Index 1999-00
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India Sub-national Literacy Rate (2001)
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India Sub-national Infant Mortality Rate (2003)