Press Conference to Launch ‘Economic and Social Survey of Asia and the Pacific’

Developing countries of the Asia-Pacific region would continue to drive the global economy in 2011 despite high food and fuel prices, volatile capital inflows and other challenges, senior United Nations officials said at Headquarters today.

“The Asia-Pacific region is both a growth driver and anchor of stability for the global economy,” said Amr Nour, Director of the Regional Commissions New York Office, at a press conference to launch the 2011 report of the Economic and Social Commission for Asia and the Pacific (ESCAP).  Accompanying him was Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the Department of Economic and Social Affairs.

Mr. Nour said that, among the main findings of the survey, titled Economic and Social Survey of Asia and the Pacific, was that the region’s 2011 growth rate had declined from 8.8 per cent in 2010.  The overall decline was due in part to inflationary pressures, which reflected, among other things, the withdrawal of financial stimulus packages and the “sluggish” recovery of many wealthy nations.  Other key challenges were increasing food and fuel prices, which had left an estimated 19 million people in poverty in 2010, and threatened an additional 42 million in 2011.  “The food price rises are outpacing inflation,” he explained.

Despite those challenges, he said, the survey projected that the Asia-Pacific economy would grow more than 1.5 times faster than that of any other region in 2011.  China and India were expected to lead the way with growth rates of 9.5 and 8.7 per cent, respectively, followed by Indonesia on 6.5 per cent.  The economic impact of the recent earthquake in Japan was likely to be much less severe than originally expected, accounting for a growth slowdown of only 0.1 per cent across the region, Mr. Nour added.

Highlighting two timely themes of the survey, he said that it stressed the centrality of regional connectivity, especially South-South linkages, for the continued growth of Asia and the Pacific; and the importance of regional productive capacity — and that of Asian least developed countries in particular — to sustaining growth and distributing it more evenly.  That was also one of the main themes of the Fourth United Nations Conference on the Least Developed Countries, beginning next week in Istanbul, Turkey, he noted.

Among several key recommendations, he continued, the report called for boosting and streamlining intraregional trade, an aim that would require stronger connectivity in both the “physical” elements of trade — including energy and transport, among others — and its “soft” elements, such as laws, regulations and procedures.  Pointing out, as an example, that an estimated 40 per cent of travel time between Asia and Europe was spent at national borders, he said that improving that “soft” aspect of trade would require Asian countries to work together in streamlining their border policies, and might also entail cooperation between intergovernmental agencies and countries in the region.  “Seamless trade requires stronger connectivity,” he emphasized, adding:  “This is a multifaceted task.”

To achieve a rebalancing of Asia’s dynamic economic growth, the report recommended focusing on building and diversifying the production capacities of the region’s least developed countries, he said.  It also advocated a pragmatic strategy of strategic diversification, carried out through the combined efforts of the State and the private sector, and supported by development partners.  It called for enhancing the quality and magnitude of foreign direct investment (FDI), official development assistance (ODA), market access and technical assistance from developed countries, and both South-South and triangular cooperation.  It would also be important to identify and utilize successful business models and to strengthen the national institutions of least developed countries, Mr. Nour said, emphasizing:  “The [least developed countries] cannot make it without a global partnership.”

For his part, Mr. Jomo stressed that both positive and negative lessons could be drawn from Asia’s recent economic changes.  For example, the Asia-Pacific region was now facing the challenge of managing large capital flows, which had created bubbles “that will eventually burst”.  Some Asian countries had put regulations in place to protect themselves from that economic turbulence, he said, adding that several of them were successfully moving away from an over-reliance on exports by creating alternative domestic sources of demand, while yet others were making strides in curbing high unemployment rates.

He went on to point out that the Asian economic experience was proving that “the connections involving Asia are no longer intra-Asian”, or only between Asia and the developed West.  Instead, trends across the region were increasingly “South-South” in nature, he said, stressing the need for a “more critical” discussion of Asia-Pacific regionalism, including a “much more open debate” about the failure of some past economic policies.  Inflation was another important challenge presented by the survey, he said, emphasizing that when it was caused by external forces, it became necessary to take a “very different look” at possible solutions.  In that case, there was no excuse to introduce deflationary policies that could slow down economic growth, he cautioned.

Responding to several questions about currency valuations across the Asia-Pacific region, in particular China, Mr. Jomo said there was little international agreement on what constituted the correct exchange rate.  With the advent of globalization, some economies had relocated their production facilities, which had resulted in a decline in their own industrial capacities.  While there was now a general recognition of the need to restore those capacities, that change would not happen overnight, he pointed out.

Mr. Nour added that the survey made clear that capital flows to Asia were leading to an appreciation of currency in most countries in the region, which impacted economic growth.  In that regard, recent actions by the G-20 Finance Ministers and Central Bank Governors to put in some general financial guidelines place was helpful, he said.

Asked about the sometimes differing positions of ESCAP and the International Monetary Fund, Mr. Jomo said there was a growing feeling within the latter that capital controls might work in some instances.  ESCAP believed that controls should only be used if all other options had been exhausted, and that they should be only one element of a comprehensive policy solution.  As for the differences of opinion between the two bodies, the gap was, in fact, narrowing, he said.  “The crisis brought us all together, if you will,” he concluded.

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