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ASIA’S JOURNEY TO PROSPERITYPolicy, Market, and Technology over 50 Years
A presentation on ADB’s new book
1. 50 years of Asian development
2. The role of markets, the state, and institutions
3. Dynamics of structural transformation
4. Modernizing agriculture and rural development
5. Technological progress as key driver
6. Education, health, and demographic change
7. Investment, savings, and finance
8. Infrastructure development
Table of Contents
9. Trade, foreign direct investment, and openness
10. Pursuing macroeconomic stability
11. Poverty reduction and income distribution
12. Gender and development
13. Environmental sustainability and climate change
14. The role of bilateral and multilateral development finance
15. Strengthening regional cooperation and integration in Asia
2
• Phenomenal economic growth led to rising share in global GDP and improvement in broad development indicators.
4
PRC1.1%
India1.3%
Indonesia0.5% Rest of DA
1.2%
Japan7.0%
AUS & NZL
2.2%
Latin America & the Caribbean
7.1%
MENA3.9%
Sub-Saharan Africa2.2%North America
30.6%
European Union36.2%
Rest of the World6.6%
1960
Developing Asia (DA)’s share in global GDP increased from 4% to 24% in 1960-2018; including Japan, Australia and New Zealand, Asia’s share rose from 14% to 34%.
PRC13.1%
India3.4%
Indonesia1.4%
Rest of DA6.1%
Japan7.5%
AUS & NZL
1.9%
MENA4.3%
Sub-Saharan Africa2.2%
North America23.9%
European Union23.2%
Rest of the World5.6%
2018
Latin America and the Caribbean 7.4%
Asia’s key development achievements
68.1
33.1
6.9
0
10
20
30
40
50
60
70
80
1980 2000 2018
Poverty rate, Developing Asia(% of population)
• Half century of Asian development shows sustained growth and poverty reduction require efficient markets, an effective state, and strong institutions
• In Asia, development policy shifted from state-led industrialization to pragmatic, market-oriented growth
Late 1940s to late 1950s:Post-war political independence, reconstruction, and start of state-ledIndustrialization and import substitution.
Late 1950s to late 1970s:Export promotion and market-led growth in Japan and “four tigers”, and state control and inward orientation in PRC, India and many other countries.
Late 1970s to early 1990s: “ East Asian Miracle” fully recognized , and first wave of opening and market-oriented reform in PRC, Viet Nam, India, and Central Asia.
Early 1990s to 2007:Broadening of opening and market-oriented reform, growing trade and capital flows, Asian financial crisis, and post-crisis reform.
2008 to present: Global financial crisis, Asia leading global growth, promotion of inclusive growth and good governance, and rethinking positive role of the state in overcoming market failure.
Relying on markets, with proactive state support
7
• Modernizing agriculture and promoting rural development
Land reform improved land distribution and incentivized farmers, especially in East Asia
Green revolution led to increased use of modern varieties and inputs such as fertilizers Asia-wide
It significantly improved agricultural productivity, solving Asia’s food problem, and kicking-started its structural transformation
1.31.8
1.3
3.1
2.2
4.0
2.7
5.3
3.2
4.6
3.7
6.3
3.7
5.4
3.9
6.9
0
1
2
3
4
5
6
7
8
India Indonesia Philippines PRC
Rice Yield, tons/ha
1966 1986 2006 2016
Promoting structural transformation (1)
8
• Industrialization by developing manufacturing and promoting exports
NigeriaUSAVenezuela
Brazil
Colombia
Egypt
Australia
Bangladesh
India
Indonesia
PRC
Japan
Pakistan
Nepal
New Zealand
Philippines
Sri Lanka
Papua New Guinea
Rep. of KoreaSingapore
Hong Kong, China
Fiji
MalaysiaTaipei,China
Thailand
0
1
2
3
4
5
6
7
8
9
10
0 2 4 6 8 10 12 14 16 18
GD
P g
row
th (
ann
ual
ave
rage
, %)
Export Growth and Economic Growth, 1960–2017
Bubble size: Population (2017). Color gradient: Trade/GDP (2017)
Growth in export of goods and services (annual average, %)
71.0%
33.5%
14.1%
25.5%
14.9%
41.0%
1970s
2018
Agriculture Industry Services
Employment share (%), developing Asia
Promoting structural transformation (2)
0
5
10
15
20
25
30
35
India PRC NIEs ASEAN4
Manufacturing Employment (% of total)
1970-1979 1980-1989 1990-1999 2000-2009 2010-2018
9
• Technology adoption and innovation led to large improvement in productivity
Contribution to Asia’s GDP Growth (% of total)Many Asian economies first
adopted foreign technologies, then began to innovate their own
They used a variety of ways:
inviting experts; sending missions and students
abroad; Buying foreign licenses; importing machinery; engaging in trade; conducting reverse engineering; attracting FDI; receiving technical assistance; investing in R&D.
Number of patents granted in US
935
1,416
1,524
2,739
3,810
8,116
11,690
16,549
17,924
52,409
Canada
Japan
France
United Kingdom
Germany
PRC
Taipei,China
Germany
Republic of Korea
Japan
20
15
Top 5 patent grantees in US
Ave
rage
19
65
—1
96
9 60.448.2
41.8
31.2
17.7
8.1
15.0
12.3
9.2
(6.6)
21.9
40.8
1970-1985 1995-2005 2010-2017
Physical input Labor Human capital TFP
Promoting structural transformation (3)
10TFP = Total factor productivity
• Large investment in education and health boosted both productivity and human well-being.
Life Expectancy at Birth, 1960–2018 (years)
1960 2018Increase
1960–2018
Developing Asia 45.0 71.8 26.7
Central Asia 58.7 71.8 13.0
East Asia 44.6 76.9 32.3
PRC 43.7 76.7 33.0
South Asia 42.3 69.2 26.9
India 41.4 69.4 28.0
Southeast Asia 51.3 72.1 20.8
The Pacific 42.5 65.9 23.4
Developed Asia 68.3 84.1 15.8
Australia 70.7 83.3 12.5
Japan 67.9 84.5 16.6
Latin America and
the Caribbean56.2 75.5 19.3
Sub-Saharan Africa 40.2 61.3 21.1
OECD 67.8 80.5 12.7
World 50.1 72.4 22.2
Building human capital
0 2 4 6 8 10 12 14 16
Developing AsiaAfghanistan
Papua New GuineaNepal
Lao PDRPakistan
CambodiaMyanmarViet Nam
BangladeshPRC
IndiaBrunei Darussalam
MaldivesIndonesia
PhilippinesTajikistanMongoliaThailandArmenia
Kyrgyz RepublicKazakhstan
FijiSri Lanka
TongaMalaysia
SingaporeTaipei,China
Republic of KoreaHong Kong, China
1960
Change from 1960to 2010
Mean Years of Schooling, for Population Aged 20 to 24 Years
Year 13
Investing in productive capacity
• Infrastructure investment alleviated production bottlenecks and improved living standard.
117
134
1,398
165
343
4,247
3,648
4,120
321
1,215
2,722
3,501
5,092
5,277
8,615
8,709
10,363
11,491
0 2,000 4,000 6,000 8,000 10,000 12,000
India
Thailand
World
PRC
Malaysia
OECD
Japan
Australia
Republic ofKorea
Electricity Generation per Capita (kWh/capita)
1971
2018
0 20 40 60 80 100 120
Bangladesh
Indonesia
Papua New Guinea
Myanmar
Mongolia
Cambodia
Pakistan
Sri Lanka
Philippines
Viet Nam
India
Nepal
Maldives
Lao PDR
Turkmenistan
Thailand
PRC
Kazakhstan
Kyrgyz Republic
Malaysia
Bhutan
Access to Improved Sources of Piped Water (% of population)
2000
2017
12
• Good macro management provided basis for sustained growth, and reforms in response to the Asian financial crisis laid foundation for future resilience.
Average annual GDP growth by decade (%)
Maintaining macroeconomic stability
9.0
5.5 6.6
5.5 4.1
3.2
2.6
3.3
0
2
4
6
8
10
12
PRC India NIEs ASEAN5 Rest ofDeveloping
Asia
LatinAmerica
Sub-Saharan
Africa
OECD
1970–1979 1980–1989 1990–1999 2000–2009 2010–2018 __ Full period average
__ Full period average
15
4.0
7.3
5.1
8.7
9.1
7.4
22.6
12.2
0
5
10
15
20
25
PRC India NIES ASEAN5 Rest ofDeveloping
Asia
LatinAmerica
Sub-Saharan
Africa
OECD
Average Inflation by decade (%)
1970–1979 1980–1989 1990–1999 2000–2009 2010–2018
70
61.9
_ Full period average
• Developing Asia benefited
from engaging with bilateral
partners and MDBs in
implementing development
projects, especially
infrastructure, education,
and health.
Engaging with development partners and promoting RCI
18
-5
0
5
10
15
20
25
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2017
Net Capital Inflows by Nonresidents to Developing Asia, 1970-2017
(% of gross domestic investment)
Net FDI inflows Net official flows Net bank lending and bonds Net portfolio equity inflows
ASEAN has beena success story of RCI and is moving toward an ASEAN Economic Community
10 policy recommendations of the Washington Consensus
Fiscal discipline
Public expenditure reform
Tax reform
Financial liberalization & market-determined interest rates
Competitive exchange rates
Import liberalization
FDI liberalization
Privatization of state-owned enterprises
Deregulation
Protection of property rights
• Successful Asian economies implemented policies and reforms that are not very different from standard economic theories and the so-called “Washington Consensus”.
Is there an Asian development model or Asian consensus?
20
• What made many Asian economies unique is their gradual approach to and pragmatism in implementing policy reforms, including the practice of testing or piloting major policy changes before full-scale implementation, and ability to learn lessons from its own and others’ achievements and mistakes.
Thank you!
The soft copy of the book can be downloaded at
https://www.adb.org/publications/asias-journey-to-prosperity
30
•Appendix:
Identifying challenges for Indonesia
15
Ito, Takatoshi (2017) “Growth Convergence and the Middle-Income Trap,” Asian Development Review34(1), 1-27.
Middle-Income Trap
16
50.0
55.5
10.3
21.9
11.4
12.8
28.3
9.8
0 20 40 60 80 100
Middle incomerising to high
Middle incomestaying there
Physical capital Labor
Human capital Productivity
Contributions to Growth, 1960–2014 (%)
Transcending Middle-Income Trap: Productivity
Asian Development Outlook 2017
AdoptionStudents/people abroadLicensing design/patent
Reverse engineeringMachinery imports
FDI, TC aidTrade
InnovationHuman capital
Research institutesPrivate R&DCompetition
Drivers of Technological Progress
Technology and Exports
Technology and Exports
Research & development stock per labor hour
Patent applications (resident)per million persons
44
182
0 50 100 150 200
Upper-middle incomestaying there
Upper-middle incomerising to high
0.3
0.9
0 0.3 0.6 0.9
Upper-middle incomestaying there
Upper-middle incomerising to high
20
Transcending Middle-Income Trap: Innovation
Asian Development Outlook 2017
0.05
0.20
0.57
0.0 0.5 1.0
Low
Middle
High
Tertiary Schooling
2.9
6.1
9.7
0 2 4 6 8 10 12
Low
Middle
High
Total Schooling
Average Schooling Years by Income Group
21
Transcending Middle-Income Trap: Tertiary Education
Asian Development Outlook 2017
Transcending Middle-Income Trap: STEM Education
16.2
18.5
39.5
44.6
48.6
52.7
57.5
71.8
77.4
79.2
81.0
82.7
87.3
89.2
90.5
92.6
92.8
93.5
93.5
93.8
0.1
0.1
0.3
0.4
0.3
1.4
1.4
1.1
5.8
11.6
10.5
2.7
24.6
20.7
28.6
24.0
11.6
22.2
20.8
37.0
0 20 40 60 80 100
India*
Kyrgyz Republic
Philippines
Indonesia
Azerbaijan
Georgia
Thailand
Mongolia
Malaysia
OECD
US
Armenia
PRC*
ROK
Taipei,China
Japan
Viet Nam
Hong Kong, China
Kazakhstan
Singapore
Average Science/Mathematics Test Scores (% of student participants achieving 400+ and 600+)
600+ 400+
Notes: People's Rep. of China includes only Beijing, Shanghai, Jiangsu, and Guangdong. India includes only Himachal Pradesh and Tamil Nadu. The test scores are standardized to range from zero to 1,000. Sources: 2015 PISA / TIMSS scores except for Armenia and Philippines (TIMSS 2003); Mongolia (TIMSS 2007); Azerbaijan, India, and Kyrgyz Republic (PISA 2009). 24
94.2
56.5
0 20 40 60 80 100
Upper-middleincome rising to
high
Upper-middleincome staying
there
Kilowatt hoursper 100 people
Electricity-generating capacity
28.1
10.2
0 20 40
Upper-middleincome rising
to high
Upper-middleincome
staying there
Per 100 people
Internet users
23
Transcending Middle-Income Trap: Advanced Infrastructure
Asian Development Outlook 2017
Sources: ADB estimates.
Baseline Climate adjusted
Total % of GDP Total % of GDP
Central Asia 492 6.8 565 7.8
East Asia 13,781 4.5 16,062 5.2
South Asia 5,477 7.6 6,347 8.8
Southeast Asia 2,759 5 3,147 5.7
The Pacific 42 8.2 46 9.1
Asia and the Pacific 22,5515.1
26,1665.9
Annual Average 1,503 1,744
Developing Asia’s investment needs, 2016–2030 ($ billion in 2015 prices)
Reducing large infrastructure gaps
23
4th
Industrial Revolution
blockchain
deep robotics
Go-Jek
Grab
Alibaba
fintech
biotech
nanotech
AI
machine learning
Softbank
AWS5G
driverless vehicles
dronesIoT
energy storage
smart factoriessmart cities
gig economy
flycarstech startups
disruptors
4th Industrial Revolution
4th Industrial Revolution
Impact of 4th IR on Jobs
Asian Development Outlook 2018
28
Note: Percentages refer to Frey and Osborne (2017)
estimates on probability of automation. Framework is based
on Acemoglu and Autor (2011).
Source: Asian Development Outlook 2018: How Technology
Affects Jobs.
Impact of 4th IR on Jobs
0
20
40
60
80
100
Non-routine
cognitive
Manual Non-routine
cognitive
Manual Non-routine
cognitive
Manual Non-routine
cognitive
Manual
INDIA INDONESIA THAILAND VIET NAM
US$
Change in average monthly wages, constant prices (in US$)
Asian Development Outlook 2018
Note: The time frames vary across countries, with Viet Nam the shortest (2007‒2015), followed by Thailand
(2000‒2010), India (2000‒2012), and Indonesia (2000‒2014). Developing Asia refers to the five countries included in
this analysis. Source: Asian Development Outlook 2018: How Technology Affects Jobs
Addressing rising income inequality
Gini coefficients change in 1990s-2010s End-year value
RegionPre-tax and Pre-transfer Gini (mean)
Post-tax and Post-transfer Gini (mean)
% Difference
Developing Asia 40.0 37.4 (6.3)
Japan, Australia, and
New Zealand45.7 32.6 (28.6)
Latin America and the
Caribbean47.1 43.4 (7.7)
Sub-Saharan Africa45.9 45.0 (1.8)
European Union 46.8 29.9 (36.0)
North America 48.6 34.5 (29.1)
OECD 46.4 31.0 (33.2)
Asia’s inequality in the Global Context
-10 -5 0 5 10 15
PRC (1990-2017)
Sri Lanka (1990-2016)
Indonesia (1990-2017)
Bangladesh (1991-2016)
India (1993-2012)
Lao PDR (1992-2012)
Pakistan (1990-2015)
Viet Nam (1992-2016)
Mongolia (1995-2016)
Nepal (1995-2010)
Philippines (1991-2015)
Thailand (1990-2017)
Malaysia (1992-2015)
46.7 (I)
39.8 (C)
38.1 (C)
32.4 (C)
35.7 (C)
36.4 (C)
33.5 (C)
35.3 (C)
32.3 (C)
32.8 (C)
40.1 (C)
45.3 (I)
41.0 (I)
25
8.1
26.5
20.3
29.9 29.8
25.0 23.2 24.7
30.8
35.7
44.246.2
0
10
20
30
40
50
1995 2007 1993 2009-10 1990 2010 2002 2008 1994 2009 1995 2005
PRC India Indonesia Pakistan Philippines Thailand
Shar
e o
f b
etw
ee
n-g
rou
p in
eq
ual
ity,
%
Income inequality decomposition by educational attainment of household head
30Source: Asian Development Outlook 2012.
Addressing rising income inequality
• Pressure from rapid economic development has created many environmental problems.
• Environmental policy responses were initiated and expanded in recent 2-3 decades.
• But much more action is needed to make the region’s development sustainable and contribute to global efforts.
Greenhouse Gas Emissions Average Annual Growth, 1990-2014
Tackling environmental challenges
-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Developing Asia
Middle East and NorthAfrica
Sub-Saharan Africa
Latin America and theCaribbean
Japan, Australia and NewZealand
North America
Europe
27
Disaster impacts in developing Asia by type (2000–2018) Highest death tolls from disasters in Asia since 1990
Source: EM-DAT
Four in five people affected by natural hazards live in Asia…
…and disasters from natural hazards occur across the region
Asia’s Share in Global Total
32
Asia is particularly susceptible to disaster risk
Asian Development Outlook 2019
Direct Indirect Spillovers
#1. Mainstream disaster risk reduction #2. Take a risk-layered approach to disaster risk financing#3. Build Back Better (BBB) to enhance resilience
Mortality
Displacement
Asset damage
Foregone economic activity
Time• Industrial
shifts• Inter-
generational
Space• Supply chains• Migration
Vulnerability
Exposure
Hazards
33
Strengthening disaster resilience
Asian Development Outlook 2019
