Economic and Social Survey of Asia and the Pacific 2007: Surging Ahead in Uncertain Times

196 Pages·2007·1.65 MB·English

by  United Nations

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United Nations
ESCAP
1947-2007
ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC
The secretariat of the Economic and Social Commission for Asia and the Pacific
(ESCAP) is the regional development arm of the United Nations and serves as the main
economic and social development centre for the United Nations in Asia and the Pacific.
Its mandate is to foster cooperation between its 53 members and 9 associate
members. It provides the strategic link between global and country-level programmes
and issues. It supports Governments of countries in the region in consolidating
regional positions and advocates regional approaches to meeting the region’s unique
socio-economic challenges in a globalizing world. The ESCAP secretariat is located in
Bangkok, Thailand. Please visit the ESCAP website at <www.unescap.org> for further
information.
The shaded areas of the map indicate ESCAP members and associate members.
Cover design by Tjerah Leonardo and Bryan Joseph Granados Sabroso
Economic and Social Survey of
Asia and the Pacific
2 0 0 7
Surging Ahead in Uncertain Times
New York, 2007 ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC
ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2007
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Surging Ahead in Uncertain Times
United Nations publication
Sales No. E.07.II.F.4
Copyright © United Nations 2007
All rights reserved
Manufactured in Thailand
ISBN: 978-92-1-120494-0
ISSN: 0252-5704
ST/ESCAP/2429
This publication may be reproduced in whole or in part for educational or non-profit purposes
without special permission from the copyright holder, provided that the source is acknowl-
edged. The ESCAP Publications Office would appreciate receiving a copy of any publication
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No use may be made of this publication for resale or any other commercial purpose
whatsoever without prior permission. Applications for such permission, with a statement of
the purpose and extent of reproduction, should be addressed to the Secretary of the
Publications Board, United Nations, New York.
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CHAPTER 3. GENDER INEQUALITY CONTINUES-AT GREAT COST
FOREWORD
Asian and Pacific nations are rapidly emerging as engines of global growth. In 2006, the 7.9 per cent increase in
the size of the region’s developing economies represented a third of worldwide growth. Significantly, these gains
were broadly distributed among all subregions. The area’s developed economies expanded by a healthy 2.2 per
cent, while even countries affected by the 1997 Asian financial crisis reported robust 5 per cent growth and a
reassuring macroeconomic outlook, with inflation under control, improved external accounts and stronger financial
systems.
These encouraging trends are set out in the Economic and Social Survey of Asia and the Pacific 2007. However,
the Survey cautions against complacency. Deeper integration into the global economy offers exciting opportunities
for Asian and Pacific nations, but it also poses its own unique challenges. This year’s Survey identifies some of
these concerns, and analyses the near- and medium-term policy implications.
The Survey also addresses the issue of gender discrimination. Restrictions on women’s choices and opportunities
carry significant socio-economic costs at all levels of society. The Survey proposes action in four basic sectors:
economic participation; education; health; and empowerment. In each area, examples of best practices illustrate
the proven efficacy of the recommendations.
This publication is a timely and valuable contribution towards a better understanding of the many development
challenges faced by the nations of Asia and the Pacific. I hope it will prove particularly useful to policymakers as
they work to grow their economies and achieve the Millennium Development Goals.
Ban Ki-moon
Secretary-General
March 2007
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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2007
ACKNOWLEDGEMENTS
This report was carried out under the general direction of the Executive Secretary of the Economic and Social
Commission for Asia and the Pacific (ESCAP), Kim Hak-Su. A team under the overall guidance of Ravi Ratnayake,
Director of the Poverty and Development Division, prepared this report. The core team, led by Shamika Sirimanne,
included Amarakoon Bandara, Shuvojit Banerjee, Somchai Congtavinsutti, Michael Francis, Eugene Gherman,
Juthathip Jongwanich, Nobuko Kajiura, Muhammad H. Malik and Hirohito Toda.
Many others within ESCAP provided inputs and helpful comments. Valuable advice was received from the Advisory
Committee on the Survey. Substantive contributions were made by Tiziana Bonapace, Daniel Esser, Bhakta
Gubhaju, Siliga Kofe, Mia Mikic, Aneta Nikolova and Syed Nuruzzaman, and other inputs were received from Lisa
Ainbinder, Adnan Aliani, Kelly Hayden and Marie Sicat. Comments are noted with thanks from Aynul Hasan,
Beverly Jones, Amitava Mukherjee, Hitomi Rankine, Hiren Sarkar, and Yap Kioe Sheng. Pietro Gennari and the
Statistics Division (tables 10-29), and Somchai Congtavinsutti (tables 1-9), of the Poverty and Development Division
were responsible for the preparation of the Statistical Annex.
Written inputs were provided by the following external consultants: Mushtaq Ahmad, Tarun Das, Ron Duncan,
Sushma Kapoor, Muhammad Allah Malik Kazemi, Mohammad Kordbache, Panom Lathouly, George Manzano,
Hang Chuon Naron, Penjore, Prakash Kumar Shrestha and Vo Tri Thanh.
The team appreciates the excellent logistical support in processing and administration provided by Woranut
Sompitayanurak. Support from Dusdeemala Kanittanon on financial matters and Anong Pattanathanes on proof-
reading is appreciated. Research assistance was provided by Kiatkanid Pongpanich, Amornrut Supornsinchai and
Nuankae Wongthawatchai.
The report benefited from the comments and suggestions of an external peer review meeting held in Bangkok.
Participants in the meeting were a group of prominent Asian policymakers and scholars: G.K. Chadha, Member,
Prime Minister’s Economic Advisory Council, Government of India; Stephen Y.L. Cheung, Professor (Chair) of
Finance, City University of Hong Kong; Jovi Dacanay, Professor, University of Asia and the Pacific, Philippines;
Saman Kelegama, Executive Director, Institute of Policy Studies, Sri Lanka; Ashfaque H. Khan, Director-General,
Debt Office, and Economic Adviser, Ministry of Finance, Pakistan; Shoaib Sultan Khan, Chairman, Rural Support
Programme Network, Pakistan; Santosh Mehrotra, Senior Consultant and Advisor, Rural Development Division,
Planning Commission, Government of India; Pichit Patrawimolpon, Director, Department of Central Banking Studies,
Bank of Thailand; Tilak Rawal, Former Governor, Central Bank of Nepal; Andrey E. Shastitko, Director-General,
Bureau of Economic Analysis Foundation, Russian Federation; and Pawadee Tonguthai, Associate Professor,
Faculty of Economics, Thammasat University, Thailand.
Substantive editing of the manuscript was performed by Communications Development Incorporated, headed by
Bruce Ross-Larson. The Editorial Unit of ESCAP edited the manuscript. The layout and printing were provided by
TR Enterprise. Special thanks to Tjerah Leonardo who contributed to the design of the report, and Margaret
Hanley, Hak-Fan Lau and other members of the ESCAP communications team, who organized the launching of
the report.
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CHAPTER 3. GENDER INEQUALITY CONTINUES-AT GREAT COST
EXECUTIVE SUMMARY
Impressive growth in 2006 amid rising risks
Developing economies in the Asia-Pacific region grew at 7.9% in 2006, up from 7.6% in 2005. The continuing
buoyancy of external demand remained a source of growth for many countries. Exports of electronics continued to
be a key source of growth, while oil and gas exports remained strong in the Islamic Republic of Iran and the oil
and gas exporters of North and Central Asia, and South-East Asia. Domestic demand drove gross domestic
product (GDP) growth in South and South-West Asia, particularly on the back of high investments.
The region’s impressive economic performance was against the backdrop of a riskier global environment. Oil
prices hit a record high in the middle of 2006, while stock markets plummeted across the Asia-Pacific region,
raising fears of a downturn. Global imbalances steadily widened, with the current account balance of the United
States of America deteriorating by a further $100 billion in 2006, increasing the possibility of an abrupt
depreciation of the United States dollar. The sharp appreciation of major currencies in the region against the
United States dollar made it difficult to keep exchange rates competitive while addressing inflationary pressure.
The suspension of the Doha Development Round in July 2006 did not bode well for a region driven by trade and
ready to gain from further liberalization.
Despite high and volatile oil prices in 2006, developing economies in the Asia-Pacific region kept inflation under
control at 4.3%, similar to that of the previous year. Asian currencies were strong, reflecting larger-than-expected
current account surpluses and capital flows, including those for speculative purposes. Developing countries in the
region continued to add to their sizeable foreign exchange reserves, which had reached an unprecedented $2.5
trillion at the end of 2006. The large increase in reserves points to continuing efforts to push down the region’s
currencies by official intervention. Current account balances deteriorated across the region in 2006, mainly a result
of rising oil imports. Strong exports in many countries offset some of the effects of rising oil prices. The region’s
exports grew at an impressive 18%, benefiting from healthy global demand.
Subregional performance – led by East and North-East Asia
Economic growth has been widely shared, with all subregions performing robustly. In keeping with the region’s
rapid integration into the global economy and the sectors in which it is most competitive internationally, the
process of expansion has been concentrated in the industrial and services sectors.
East and North-East Asia had stronger than expected growth of 8.5%. Investment continues to accelerate in
China, while investment and consumption posted healthy gains in Hong Kong, China and Macao, China. Except
in China, some significant impediments still constrain domestic demand, leaving the subregion dependent on
global growth to sustain its expansion. The challenges and opportunities emerging for Asia-Pacific economies from
China’s reshaping of global and regional trade patterns is examined in a policy research feature.
Averaging around 7.5%, economic growth was also strong in North and Central Asia in 2006, its seventh
consecutive year of rapid growth. High oil prices continued to fuel inflation and the rapid growth of net oil
exporters, such as Azerbaijan, Kazakhstan and the Russian Federation. The oil boom raises concerns about
“Dutch disease”, however, and this is examined in a policy research feature.
With few exceptions, Pacific island countries showed positive economic growth, ranging from slightly less than 2%
in Tonga to more than 6% in Vanuatu. Growth was led by the primary sector in Papua New Guinea and the
services sectors in the smaller countries. Pacific island developing countries are urbanizing at an alarmingly rapid
pace, and the challenges associated with their urbanization are examined in a policy research feature.
Strong economic growth continued in South and South-West Asia, with industry and services the major
contributors. India led the growth momentum by expanding 9.2%. Exports increased in all countries in the
subregion, but imports grew even faster, partly due to higher oil prices. The Islamic Republic of Iran, the only net
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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2007
exporter of oil in the subregion, grew by 6.1%, the result of higher oil prices. The lack of physical infrastructure is
constraining growth in the subregion, so investment in physical infrastructure is a priority, which is examined as a
policy research feature.
Driven by strong external demand, economic growth in South-East Asia stood at a robust 5.9% in 2006. Strong
external demand, especially for electronics, was the principal driver of growth. As a result, the current accounts
of major economies in the subregion are estimated to have remained in surplus. Recognizing the importance of
having well-functioning bond markets, a policy research feature focuses on corporate bonds, and re-examines the
role of public policy.
All three developed countries in the region enjoyed modest growth. Capacity constraints tightened in Australia and
New Zealand, creating inflationary pressure. Japan still looked for firm signs of graduating from deflation with
limited growth in wages despite signs of labour shortages. The issue of poverty and inequality in Japan which
came to prominence during the recession is highlighted in a policy research feature.
Outlook for 2007 – continuing dynamism
For developing economies in the Asia-Pacific region, economic growth is projected at 7.4% in 2007, slower than in
2006. The external environment is expected to be less favourable, mainly due to the slowing United States
economy. A moderate decline in global electronics demand in 2007 may dampen the Asia-Pacific region’s
prospects. And the easing of commodity prices, including that of oil, comes as a mixed blessing.
As the international economic environment weakens, momentum in the region is expected to come from China,
India and Japan. Together, these three economies contribute over 60% of the GDP of the Asia-Pacific region and
close to 45% of imports, thereby creating considerable opportunities for the region.
Inflation will be less of a problem in 2007. For developing Asia-Pacific economies, it is projected at 3.8% for 2007,
down from 2006. The fall in oil prices is expected to lessen inflationary pressures, while tight monetary policies
across the region are also expected to help. Exchange rates, expected to appreciate further in 2007, would be
an added brake on inflationary pressure. The current account surplus for emerging Asian economies is expected
to fall slightly in 2007, though it will remain high. Further appreciation of exchange rates and reduced global
demand in electronics and information technology components together with a rebound in domestic demand
would contribute to the decline in current account surpluses.
Currency appreciation is expected to continue in 2007. It will be increasingly difficult for monetary authorities to
pursue an independent monetary policy in response to shocks, as was the case in 2006, while targeting exchange
rates against the backdrop of more open capital accounts. Monetary authorities can choose any two of three
policy options: monetary autonomy, exchange rate targeting and capital convertibility – but not all three.
Greater exchange rate flexibility is one sustainable solution. It should take away the “one-way bet” that encourages
even more capital inflows than otherwise because markets would quickly realize that the currency could move in
either direction. In those economies where the central bank has not made a commitment to price stability, they
could continue to manage their nominal exchange rates, but they would have to forego the practice of sterilized
intervention and allow the real exchange rate to appreciate through increases in the price level.
Downside risks not to be ignored
The growth forecast of Asia-Pacific economies in 2007 is rather robust but the increased level of vulnerability
observed in some of the major economies over the last 12 months suggests that the baseline forecast will be
increasingly tilted towards the downside risks. Six downside risks merit attention:
• An oil price shock
• An abrupt cooling of housing markets in the United States
• A disorderly unwinding of global imbalances
• A reversal of the sustainability of the Japanese economic recovery
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CHAPTER 3. GENDER INEQUALITY CONTINUES-AT GREAT COST
• Economic “overheating” in China
• An avian flu pandemic
Key economic issues on the watch list
The region’s prospects, in both the short and long run, are naturally tempered by numerous forces. Considered in
the report are five issues for policymakers to keep on their economic watch list:
Monitoring vulnerability to currency crises: Today’s uncertainty in financial markets warrants careful monitoring
of economic vulnerability to recognize danger signals as early as possible. Relying on economic growth as an
indicator can be misleading, masking the build-up of vulnerability and lulling policymakers into inaction. The 1997
East Asian financial crisis shows, in the run-up to the crisis, that good growth did precisely that. To assess a
country’s vulnerability to a currency crisis through a sudden reversal of capital flows, ESCAP developed a
composite vulnerability index with data from nine emerging countries in the Asia-Pacific region: five East Asian
countries affected by the 1997 crisis and four other emerging countries. Crisis-affected countries, except for
Malaysia, are displaying renewed vulnerability in 2006. Vulnerability is also a concern in some of the region’s other
emerging economies.
Boosting domestic demand through private investment, especially in East Asia: The relatively low domestic
demand in East Asian economies indicates that these economies have increased their reliance on exports to drive
economic growth, exposing them to declines in external demand. Except in China, investment was the brake on
demand, rather than domestic consumption, which remained fairly stable. Especially in crisis-affected economies,
the decline in investment was due to a drop in private investment’s share in GDP, which has not yet recovered to
its pre-crisis level. Shortages of capital funds are found to be hindering the recovery of private investment in
these economies. A decisive policy response is needed to promote private investment in East Asian economies.
Two critical reforms in the financial sector warrant attention. First, an improved system of risk management should
be put in place so that banks are no longer excessively cautious when lending for investment activities. Second,
to curb excessive growth of consumer credit, authorities should adopt minimum payment and income require-
ments for credit cards. Capital markets, which increased in importance after the crisis, should be further
developed as an alternative source of funds for investors. Governments should also take measures to improve the
investment climate for private investment, particularly in addressing corruption and improving customs clearance
systems.
Reaping the one-off demographic dividend: The rapid decline in fertility and increase in life expectancy in the
region is opening an historic, one-time only “demographic window” that provides an opportunity to spur economic
growth. Whether countries capture this opportunity will depend on the social and economic policies and
institutions they adopt to absorb a rapidly growing labour force. Not exploiting the demographic dividend can be
costly. The report finds that a few key policies will help determine the ability of a country to exploit the
demographic dividend: expanding access to basic education and improving its quality, more flexible labour
markets, openness to trade and foreign investment, and well-developed financial markets.
Managing urban growth: Over the past three decades, many urban centres and surrounding areas in the Asia-
Pacific region have been engines of economic growth. Yet, 570 million slum-dwellers in the region – more than
half the world’s total – experience the cumulative impact of labour oversupply, tenure insecurity, poor infrastructure,
pollution and congestion. If these challenges are not managed, economic growth will be offset by the higher costs
of keeping urban centres functioning. The report examines what policy actions need to be undertaken to arrest the
problem before it explodes.
Promoting green growth to sustain development: The Asian and Pacific region’s contribution to global GDP
has been steadily rising over the past decade. As a result, the region shoulders a greater share of regional and
global environment-related burdens. National policy failure to address the growing environmental pressures will
eventually take their toll on economic growth. “Green growth” is a solution. It is the growth in GDP that maintains
or restores environmental quality and ecological integrity, while meeting the needs of all people. ESCAP proposes
a five-track approach to green growth: introducing green taxation and budget reform, developing sustainable
infrastructure, promoting sustainable consumption and production, promoting green business, and monitoring
progress through eco-efficiency indicators.
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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2007
Gender inequality continues – at great cost
Gender discrimination has widespread ramifications and clear economic and social costs. The Asia-Pacific region
has made good progress in reducing gender discrimination in recent years, but appalling disparities remain. The
region is losing $42-$47 billion per year because of restrictions on women’s access to employment opportunities –
and another $16-$30 billion per year because of gender gaps in education. Those are just the economic costs –
added to them are social and personal costs.
Gender discrimination in the region is most visible in the low access of women and girls to education and health
services, to economic opportunities and to political participation. Female primary school enrolment can be as
much as 26% lower than that of males. Such disparities are also reflected in access to health. The female-to-male
ratio in the population is deteriorating, particularly in North and Central Asia, South Asia and the Pacific island
countries, partly reflecting women’s inadequate access to health services. In some countries, one in every 10 girls
dies before reaching the age of one, and one in every 50 women dies during pregnancy and delivery. Meanwhile,
violence against women continues, unabated, indicating how voiceless women are in households and in countries.
One of the fundamental reasons women are subject to discrimination is that they do not have a voice in decision-
making at home or in society, even when the matters are directly related to themselves. They are powerless
intellectually, materially and politically. With women accounting for half of the population, one would naturally
expect that they should have at least equal representatives in elected bodies at the local, regional and national
levels. However, the reality in the region is starkly different. Only seven countries had parliaments in which more
than 20% of representatives were women, with New Zealand having the highest rate, at 28%.
The report proposes several specific recommendations in four critical dimensions: economic participation,
education, health and empowerment. Best practices highlighted from across the region and elsewhere show that
gender balance can be achieved with limited resources, but this requires changes at the household, societal and
national levels. In particular, political leadership and commitment will go a long way towards correcting abject
discrimination against women.
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