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Economic and Social Survey of Asia and the Pacific 2015 ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2015 MAKING GROWTH MORE INCLUSIVE FOR SUSTAINABLE DEVELOPMENT ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2015 MAKING GROWTH MORE INCLUSIVE FOR SUSTAINABLE DEVELOPMENT United Nations publication Sales No. E.15.II.F.7 Copyright © United Nations 2015 All rights reserved Printed in Bangkok ISBN: 978-92-1-120690-6 e-ISBN: 978-92-1-057374-0 ISSN: 0252-5704 ST/ESCAP/2714 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 acknowledged. The ESCAP Publications Office would appreciate receiving a copy of any publication that uses this publication as a source. 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. ii FOREWORD The 2015 edition of ESCAP’s Economic and Social Survey of Asia and the Pacific covers an issue that is of special international importance this year: inclusive growth. This issue has direct bearing on the three global priorities for 2015: completing the Millennium Development Goals; adopting an ambitious new sustainable development agenda, including a set of sustainable development goals (SDGs); and reaching a meaningful, universal agreement on climate change. The developing economies of the Asia-Pacific region continue to lead the global economic recovery. However, the economic expansion remains lower than pre-crisis levels and is not commensurate with growing populations and incomes of the region. Despite success in reducing poverty, the Survey shows an increase in income inequality. There are also inequalities in terms of opportunities between the richest and the poorest, between urban and rural areas, and between regions within the same country. The Survey also demonstrates that while access to health, education, clean drinking water and other basic public services improved between the 1990s and the 2000s, the opportunity for every citizen to benefit from them actually shrank due to such factors such as gender and the level of income of one’s parents. This growing inequality can be partially explained by the unequal distribution of capital, and the Survey contains useful proposals to improve the pattern of public expenditures and increase access to financial services. This analysis is especially timely as negotiations on the post-2015 development agenda and regional consultations on financing for development move into high gear. These two processes will culminate in an agreement to rethink strategies to mobilize financing for development in Addis Ababa in July ahead of the adoption of a universal and transformative post-2015 development agenda, including a set of sustainable development goals, in New York in September. It can also contribute to the negotiations that will culminate at the Conference of the Parties to the United Nations Conference on Climate Change, to be held in Paris in December. I commend ESCAP for its insightful analysis, practical advice and recommendations for policymakers in Asia and the Pacific and beyond. These proposals should be factored into global efforts to build the more inclusive, resilient and sustainable future we want. April 2015 BAN Ki-moon Secretary-General of the United Nations iii PREFACE As we transition globally from the Millennium Development Goals (MDGs) to a more ambitious path of sustainable growth and development, inclusiveness must be integrated and mainstreamed in policy- making. There is ample evidence that economic growth is necessary, but definitely not sufficient for shared and sustainable prosperity. Asia and the Pacific is no exception, even as the region continues to lead global growth. ESCAP’s Economic and Social Survey of Asia and the Pacific 2015 underscores the need for the adoption of policies necessary for inclusive growth, which is both a prerequisite for meeting the outstanding MDG commitments and critical for effective implementation of an ambitious sustainable development agenda in the post-2015 era. Taking a multidimensional approach, and tracking 15 indicators of inclusiveness, the Survey for 2015 assesses the extent to which the Asia-Pacific region’s rapid economic growth over the past two decades has improved welfare for different groups. The region stands out for its accomplishments in achieving high growth and leading progress on the MDGs since the 1990s. However, two major trends remain worrisome: (i) several countries lag behind in their economic and social transformation; and (ii) significant disparities remain across gender, urban-rural sectors, and income quintiles. Particularly worrying is the fact that multiple forms of deprivation tend to reinforce each other. For instance, high income inequality worsens the distribution of opportunities in gaining access to quality education, adequate healthcare services, improved sanitation, clean drinking water and reliable energy. Similarly, deteriorating environmental conditions make it more difficult for socioeconomic progress to be sustained. Renewed emphasis on how “inclusiveness” works, and which policies will achieve a deeper and lasting impact on human welfare, is warranted. The Asia-Pacific growth trajectory, while encouraging in some areas, lags behind in others, and is in a process of adjustment in major economies of the region. Augmenting and enhancing inclusiveness will only be achieved if accompanied by a multidimensional strategy that recognizes the need for simultaneous advances in the economic, social and environmental aspects of development. When such advances are backed by good policies, supportive legal and regulatory frameworks and effective political governance, the likelihood of success increases even further. ESCAP’s 71st session is squarely focused on balancing and integrating the three core elements of sustainable development. Our work emphasizes that inclusive growth reinforces sustainable development in all areas, and that exploiting synergies across these elements is critical. To achieve better sustainable development outcomes, it will also be critical for governments to launch integrated and well-designed packages of inclusive policies, auguring well for decent employment, job security, adequate access to basic services such as health, education and water, as well as the imperative to stay within critical environmental boundaries. Among others, the Survey for 2015 identifies small and medium enterprises and the agricultural sector as high-priority areas, given their high employment-intensity and potential for productivity gains from policy interventions such as fiscal and labour market policies, together with the importance of financial inclusion and infrastructure investment. v Change is, however, warranted across the board. The latest macroeconomic outlook for the Asia-Pacific region points to only a slight pick-up in economic growth and to a deceleration in the rate of expansion. Also, there will be a noticeable decline in inflation during 2015 in developing economies of the region. Declining growth in oil-dependent economies, subdued global trade and likely volatility in capital flows are all expected to pose challenges to the sustainability of economic growth. Commodity-dependent economies may face further difficulties from negative terms of trade shocks. Beyond these immediate challenges, longer-term barriers to inclusive growth include structural barriers to women’s participation in both the economy and wider society, persistently high levels of vulnerable employment, infrastructure shortages, as well as environmental and climate-related challenges. Addressing these challenges will position the region well to adopt a more sustainable development path. However, this will require strong macroeconomic management, with the right mix of macroprudential policies to support monetary policies in managing large capital flows; mobilization of resources through public and private channels to boost infrastructure investment; policies to address pro-cyclicality and promote diversification in commodity-dependent economies; as well as climate change adaptation and mitigation measures. Any effective analysis of the Asia-Pacific region must consider the enormous diversity and different levels of development across countries and subregions. The macroeconomic outlook and policy challenges differ at the disaggregated level, and call for policies to be redesigned to better align with subregional and country circumstances. Examples of these include: the spill over impact of the Russian Federation’s slowdown on North and Central Asian economies; the employment- and climate-related challenges in Pacific island developing economies; and the macroeconomic imbalances coupled with severe power shortages in South and South-West Asia. The impact of China’s rebalancing for East and North-East Asia; as well as ways to control credit-driven consumption and boost investment in infrastructure and skills in South-East Asia, are some of the other critical areas of concern. 2015 is a year of global action, when the international community is expected to adopt a universal and transformative post-2015 development agenda and a meaningful agreement on climate change action. Other major events include landmark international conferences on disaster risk reduction and on financing
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