ADB urges developing Asia

Using crisis to spur economy and protect the poor:

As Asia begins to recover from the global economic crisis, Governments in the region should look to expand social safety nets that can both protect the poor and help spur economic growth, Asian Development Bank (ADB) President Haruhiko Kuroda said at the start of a three-day conference.

“Governments can use countercyclical stimulus packages not only to reinvigorate the economy, but also to put in place measures that promote more robust growth and reduce vulnerability,” Kuroda told the conference on “The impact of the global economic slowdown on poverty and sustainable development in Asia and the Pacific.”

It was organized by ADB, with the Governments of Vietnam and the People’s Republic of China, and the ASEAN Secretariat. It is the first major conference dedicated to the social impacts of the crisis in the Asia and Pacific region and has attracted around 350 delegates from 28 countries, 25 development agencies and embassies, and 13 non-governmental organizations.

Kuroda said that the crisis should be seen as an opportunity to take proactive measures that lay the groundwork for inclusive and sustainable development over the long-term.

“Crises such as this one provide the chance to initiate structural reforms for social development,” he said.

Protecting against huge health expenditure, for example, helps the poor directly, but also benefits the economy as people with less need for large “precautionary savings” are likely to increase consumption, or save and invest more productively, Kuroda said.

ADB estimates show that if the region’s growth had not been stalled by the crisis over the past year there would be 60 million fewer people living below the $1.25 a day poverty line, and around 100 million fewer ‘near poor’ or those living below $2 a day.

While the crisis decimated jobs across income lines, Asia’s poor have been especially hard hit, in part because of a lack of adequate social safety nets to cushion their fall from the slowdown in economic activity.

Many governments in Asia have responded swiftly to the crisis with a broad range of fiscal stimulus packages, typically focusing on major infrastructure rollouts, tax reductions, trade and industry promotions, as well as projects targeting the poor.

Kuroda said that in the long run, the key challenge for developing Asia will be to enhance its resilience to external shocks.

“It can do so through policies aimed at broadening the scope and structure of the region’s openness and strengthening national systems that support human development,” he said.

Practical steps include fostering intra-regional trade, managing financial globalization, maximizing the benefits of labor mobility, and investing more in education, health, and social protection.

ADB has set up a countercyclical support fund to help its developing member countries weather the consequences of the current global crisis.

ADB supports its developing member countries in ways that play to its comparative advantages and core business areas such as infrastructure, trade facilitation, education, financial reform and regional public goods.