Adb Inks Blueprint To Make The Asian Tiger Roar

The Asian Development Bank has put out its blueprint for reforms which would at the end of 30 years put Asia right on top of the global economic order. And, if things go according to plan then South Asia would replace East Asia as the growth centre.

The seminal study carried out over the last two years, under the guidance of four external advisors including former finance minister Manmohan Singh, has spelt out that to achieve this prima dona status the continent would have to bite the bullet as it were to overcome complicated political and social legacies that would threaten the very basis of the envisaged reforms.

 

Externally, military conflict, a global financial crisis, or a surge in protectionism in the industrialised countries would prove as massively disruptive for Asia as it would for the rest of the world, it cautioned.

The study, titled Emerging Asia, identifies the challenges up front and the ideal responses for these countries. Broadly, the challenge to the Asian nations would be the process of globalisation, the explosive social challenge that is likely to follow and the threat to its already tenuous environment.

The process of globalisation while providing access to the state-of-the-art technology would also imply that countries are more susceptible to international shocks. Moreover, deeper integration through institutions like the World Trade Organisation will limit the freedom of policymakers.

Greater mobility of international capital will also mean less scope for macroeconomic policy autonomy. In the future, global capital markets will punish fiscal profligacy and monetary irresponsibility more quickly and more severely than in the past, the study warns.

To cope with these challenges, the study outlines several steps among which economic agility would be a basic ingredient for survival. In changing market conditions, firms will have to learn to alter their product-mix quickly which would in turn imply that labour has the ability and the freedom to move among occupations.

Further, labour relations too would be redefined in a major way and past practices would have to be dumped. Policymakers should increasingly focus on providing a legal framework within which labour relations can be rationally conducted in a decentralised fashion, the study says.

Similarly, countries embarking on the reforms process would have to undertake efforts to absorb the labour that will be displaced when traditional industries give way to the sunrise industries. Skill upgrading will not be an option. It will be a precondition for economic advance, the report states.

This would have to go hand-in-hand with social safety nets to mitigate the social stress and adjustment costs that accompany economic restructuring. Additionally, since occupational migration is bound to take place, the state will have to put in place an orderly housing market.

This cataclysmic change forecast by the ADB will inevitably be accompanied by a radical recast of governments as we understand them today. It would have to learn to cope with the pressures of an aging population which would require provisions of adequate health care facilities.