Growing Together: Economic Integration for an Inclusive and - escap

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CHAPTER FIVE 129 Economic cooperation for addressing shared vulnerabilities and risks externalities provide a strong economic case for aiming to build the broadest possible networks, encompassing the whole Asia- Pacific region. A similar argument can be made for a regionwide response to the challenges of food insecurity, disasters and pressures on natural resources. Because the three challenges pose potentially large economic costs to countries in the region, it is important to seek ways to minimize these costs. For this purpose, regionwide cooperative mechanisms could be the most effective, because of their effectiveness in disseminating knowledge, sharing good practices and supporting the build-up of capabilities across all countries in the region. The three challenges of food insecurity, disasters and pressures on natural resources are fundamental aspects of sustainability, and are interrelated. The concept of sustainability implies that, at a minimum, the same degree of access to food, protection from disasters, and natural resources must be ensured for future generations. To meet this enormous challenge, it is critical to build capacities and promote technological innovations and research and development to improve eco- and resource efficiency. Technological innovations are also needed to ensure food security through the development of sustainable agriculture practices and to enhance the effectiveness of monitoring and early warning systems to reduce disaster risks. To maximize the effectiveness of the region’s response to these interlinked challenges, the creation of a region-wide body named “Asia- Pacific Technology Development Council” (APTECH), could be considered. APTECH would serve as a regional apex body of national innovation institutions. Its main functions would entail fostering innovation that addresses shared problems and promoting cooperation in pre-competitive research and development. For that purpose, it could establish a regional innovation fund to finance joint innovation proposals, the intellectual property of which would be owned by APTECH and shared among members. Such intellectual property could be subsequently made available to national and regional enterprises for competitive research. The funding of a potential regional innovation fund would come from one of the regional development funds proposed below. Addressing social risks Despite the region’s economic dynamism, the number of people living in extreme poverty, suffering from hunger and lacking insufficient access to sanitation, education, health and financial services is still enormous. 48 While economic growth is creating vast opportunities, growth alone is insufficient to correct the region’s huge socioeconomic and developmental disparities within and between countries, and such disparities could pose serious threats to national economic, social and political stability. The fast economic growth of the last two decades has been accompanied by rising inequalities, with the population-weighted mean Gini coefficient for the entire region increasing from 32.5 per cent in the 1990s to 37.5 per cent in the mid-2000s. 49 These rising income inequalities are a manifestation of deeper inequalities in the access to fundamental resources, such as sanitation, education, health services, food security and electricity. Such access has tended to be more widespread in urban areas, where most of the region’s development has been taking place, leaving rural areas behind. At the same time, persistent disparities have continued between women and men, and between different social and ethnic groups. 50 While it might appear that economic growth, like a tide that lifts all boats, would eventually provide employment opportunities for all, even the poorest and most deprived segments of society, this is not necessarily the case. Trickle down cannot be taken for granted. First, economic growth in the twenty-first century places a premium on educated individuals who are not only literate but also able to take advantage of modern ICT effectively. When professionals and skilled workers are scarce in rapidly growing economies, their real wages tend to increase significantly faster than average, contributing to increased income inequalities. Second, there is much evidence that poverty and social deprivations, such as the lack or insufficient access to basic sanitation, education or health
services, play a large role in determining health outcomes – and, thus, the potential to engage fully in employment activities – across the population. 51 Persistent poverty and inequality in the world’s most dynamic region represents, as argued in chapter one, a missed opportunity. If the ”bottom one billion” inhabitants of Asia and the Pacific had similar access to sanitation, health, education and social protection as the ”top three billion”, they would be able to enhance the size of what is already the largest and most rapidly expanding market, contributing to sustaining growth in decades to come. Moreover, social justice considerations make the exclusion of a quarter of the region’s population from the fruits of its growing prosperity morally unacceptable. Furthermore, social exclusion creates downside risks to stability and growth itself. Studies on the relationship between poverty and violent conflict usually find that causality runs from conflict to poverty, but the reverse relationship is not as clear. However, when poverty coincides with ethnic, religious, language or regional boundaries, underlying grievances can explode into open conflict, often triggered by external shocks, such as a sudden increase in the price of food or other necessities. The potential for conflict is more likely when basic human needs, such as the need for physical security and well-being, communal and cultural recognition, participation and distributive justice are repeatedly denied, threatened, or frustrated, especially over long periods of time. 52 According to the Commonwealth Commission on Respect and Understanding, remembered injustices, including those that occurred decades, even centuries before, play an important role in justifying and sustaining many conflicts. 53 As shown in figure V.6, social exclusion appears to have an adverse consequence on foreign direct investment. The horizontal axis shows a Millennium Development Goals capabilities index developed by ESCAP for the year 1990. 54 It measures the levels of country’s capabilities to provide services in the areas of health and education. The vertical axis shows cumulative inflows of foreign direct investment per capita during the period 2003-2010. The relationship between these two variables is positive and statistically significant. The countries in the bottom half of the distribution of the index have an average cumulative foreign direct investment (FDI) per capita of $415 over the period 2003-2010, compared to $1,065 for those in the upper half of the distribution of the Millennium Development Goals capabilities index. The relationship between social exclusion and FDI could be explained by two possible factors: (i) the reduced size of the domestic market resulting from the lower purchasing power of the excluded; and (ii) potential risks to social and political stability which could affect the return of FDI. An important objective of regional economic integration schemes is to narrow development gaps and bring about convergence in the levels of economic development of different participants through the optimal deployment of the region’s resources. The objective of achieving a balanced and equitable regional development also creates conditions for a more enthusiastic participation of all partners, including those with scarce productive capacities. Some studies suggest that increased trade by itself, even if balanced, does not ensure economic development. Thus, growth in trade must be accompanied by complementary development policies to promote investment in infrastructure, education and research and development in lower-income countries and less-developed regions. Many existing regional trading arrangements include balanced regional development and social cohesion policies. 55 For instance, the European Union has extensive programmes, to support lagging regions through structural funds under the social cohesion policy. The Southern Common Market (MERCOSUR) is considering proposals for a regional social fund. SAARC has created the SAARC Development Fund which includes a social window to fund poverty alleviation programmes and projects, an infrastructure window to finance infrastructure projects, and an economic window to fund other noninfrastructure commercial projects. 130
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ii Photo by Warren Field
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iv Growing Together articulates a n
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vi The following experts prepared t
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viii CONTENTS (continued) Page Chap
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x FIGURES I.1. Real rates of growth
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xii TABLES I.1. Transitions from mi
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xiv ABBREVIATIONS (continued) CEPA
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xvi ABBREVIATIONS (continued) RCM R
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xviii The term “Pacific” in thi
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xx opportunities for all social gro
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xxvi development agencies and priva
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xxviii weighted mean Gini coefficie
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CHAPTER ONE 1 UNDP Photo The case f
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CHAPTER ONE 3 FIGURE TITLE The case
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CHAPTER ONE 5 The case for regional
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CHAPTER ONE 11 The case for regiona
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CHAPTER TWO 19 Towards a broader in
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CHAPTER TWO 21 FIGURE TITLE Towards
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CHAPTER THREE 63 Building seamless
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Page 176 and 177: References 145 Photo by Warren Fiel
Page 178 and 179: References 147 __________ (2009). E
Page 180 and 181: References 149 Brenner, Cath (2009)
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Page 184 and 185: References 153 Hertel, T., ed. (199
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Page 188 and 189: References 157 Quah, Danny (2010).
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Page 192 and 193: References 161 United Nations, Econ
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