Roaring Asia

The (Un)Sustainability of Growth

At a glance, significant economic indicators of Asian countries may seem to lead them to prosperous states. The medium and long term question is then whether the growth socially and environmentally sustainable? In the hindsight of the Asian financial crisis, Stiglitz and Yusuf (2001) rethink that particular miracle and acknowledge with some merit evidences contradicting the East Asian Miracle Report released in 1993. Even so, they conclude that despite the slowdown, prospects for continued robust growth are still at place. This deduction is still based on merely economic indicators but it is also recognized with caution that conservative economic growth indicators (e.g. GDP) are just means to broader mandate such that of sustainable development (Stiglitz and Yusuf, 2001: 523-525). Welfare is more than just dollars or yuans; it is also about the human and the nature – two elements that are not reaping much benefit from the vast growth in Asia . Concerns on ever-widening economic and social gap lurk in as well as environmental degradation.

The IMF (2006: 71) underlines two major developments that have dominated international economic landscape, both of which magnify the roles of Asian countries. They are the large global external imbalances and the rising energy prices that is much related to the scarcity of natural resources. Large global imbalances itself has emerged back since 1996 with United States being the world’s largest net debtor and currently running unprecendented current account deficit that is matched by surpluses in other economies notably emerging Asia . IMF is surely not alone in its concerns, the World Bank (2006c: 2-11) also expresses that global imbalances remain important medium-term problem. This positions Asia at the center of the constellation of global imbalances, thus the region will need to play proactive role in managing the risks associated with these imbalances. It requires achieving a better balance between externally and domestically led growth in countries with current account surpluses (IMF, 2006: 36, 71). However, there is no clear evidence in the region that signals demand-led growth replacing export-led growth (Felipe and Lim, 2005: 61) and as China has become further integrated into the world economy following its accession to the WTO, it is more interlinked on external markets and resources. Thus a variety of external shocks can more easily affect China ’s macroeconomic stability. It is imperative especially for China to incorporate opening policies with development strategy more effectively, so as to make better use of both external and domestic markets and resources (UNCTAD, 2005: 111).

Natural resources

The rising energy prices –driven by strengthening demand and concerns on future supply–exarcebated the imbalances and tends to reduce surpluses in non-oil-exporting developing countries, particularly in Asia (IMF, 2006: 91). Oil price has doubled since the past four years from $24.50 per barrel in 2001 to $55.00 in 2005 (UN ESCAP, 2006: 5). China and India with more than 2.2 billion lives are indeed gigantic energy consumers. In 2003 China surpassed Japan for the first time and currently its total petroleum demand of 6.5 million barrels a day while the domestic daily production is less than 4 million barrels makes China increasingly dependant on energy imports. India , also currently a net energy importer, by 2010 will have to imports almost three-quarters of its oil and gas needs.

On one hand almost half of India ’s trade deficit is already due to petroleum imports, and on the other the country’s high development requires rapid growth in the energy sector (Asif and Muneer, 2006: 16-18). More aggressive development on renewable energy sources can be the answer in the long run. Powers from solar, wind, geothermal, biomass, and hydro are to name a few sources that can be exploited in Asian countries to partially substitute dependency on fossil fuels. Gradual shift of importance from manufacturing industry to service sector is also relevant for a reduction in energy consumptions given the smaller amount of energy employed per unit GDP (Focaccio, 2005: 552).

Human concerns

Turning the spotlight to the human face of growth, UNESCAP (2006) indicates that inequality is of growing concern. A number of Asian countries are experiencing increasing inequality in tandem with high growth such as India and China as well as in middle-income developing economies of South Korea and Thailand . Until the late 1990s Asia has managed to retain a significant degree of equity along with income growth (UNESCAP, 2006: 21). Although it is difficult to compare different surveys across countries and time, there has been a clear trend over the past decade towards rising inequality within countries (UNDP, 2005: 55).

Part of the problem of inequal growth is the rising unemployment and underemployment. Underemployment is even more widespread but hidden in the region than unemployment. It reflects workers that work less than full time or under-utilized because the jobs are not available. Underemployment affect current and future income through adverse effects on their career development prospects (UNESCAP, 2006: 159-165). UNESCAP (2006) continues by charging that the economic growth in Asia is taking place at the expense of adequate employment creation because growth had resulted largely from increased labour productivity (pp.166-167). Statistics concur the increasing, and in some countries more than doubled, unemployment rate. China ’s unemployment rate was 2.9 in 1995 but became 4.2 in 2004. South Korea also observes increase from 2.0 in 1995 to 3.7 in 2004; Singapore from 2.7 to 5.4; and Taiwan from 1.8 to 5.0 (ILO, 2006). Increasing unemployment rate implies that the growth has not been enjoyed equitably by the population, instead more people have been jobless. Even for those who retain their (manufacturing) jobs, the development of China in the region is not particularly pleasing. China ’s vast supply of cheap labor and huge market potential (UNCTAD, 2005: 111) disrupts the process of maturing export economies to grow their wages (Felipe and Lim, 2006: 43).

A more discomforting fact is the increasing youth unemployment rate in the region. East Asia is experiencing a rise from 6.5 per cent in 1994 to 7.5 per cent in 2004, while South Asia from 8.7 percent to 10.8 per cent (UNESCAP, 2006: 175-176). Youth unemployment bears the cost of the exclusion of young people to participate in the economic, social and political life of the society. This has a wide impact from less consumptions by youth to inability to secure resources for living and social protection including pensions and savings. Moreover, the combination of unemployment and underemployment may lead to marginalization, alienation, and frustration of the massses, hence social unrest which in itself is a threat to growth.

Underemployment and inequality are even more obvious along the urban-rural divide within countries. Rural areas often lagged behind their urban counterparts in physical infrastructure and health and education opportunities. Residents of rural and urban areas in one country may live on totally different standards of living. In some countries, such as in China , India and Thailand , the income gap has a significant urban-rural bias and these income differences have increased over the 1990s (UN ESCAP, 2006: 21-22). Health inequalities contribute to the problem as well. Children living in the poorest provinces and in rural China face the highest death risks. Child mortality levels in urban areas average about one-third of those in rural areas. Under-five mortality rates range from 8 per 1,000 live births in Shanghai and Beijing (comparable to the United States ) to 60 in the poorest province of Guizhou (UNDP, 2005: 63).

Demographically, the growth may encounter ageing population a problem in some countries. China ’s 65+ population is estimated to reach 9.6 per cent in 2015 from 5.9 per cent in 2003 and in South Korea from 7 per cent to 13.2 per cent. The sharpest increase is in Singapore which will almost double its senior citizens from 6.5 per cent to 13.3 per cent. India , on the other hand, will only experience a modest increase from 4.1 to 6.2 percent (UNDP, 2005: 234).

Environmental concerns

Economic growth, especially in China and parts of Southeast Asia has unfortunately been accompanied by a corresponding rise in pollution and the degradation of natural resources. The region is rapidly becoming the largest source of greenhouse gas emissions (Asian Development Bank, 2005: ix). China alone accounts for 12.1 per cent of world’s total carbon dioxide emissions, second only to United States . Meanwhile India doubled its per capita emission from 0.5 metric ton in 1980 to 1.2 metric ton in 2002 making it responsible for 4.7 per cent of world’s total (UNDP, 2005: 289-291). These figures may not seen as alarming relative to the sheer population, nevertheless the rate in which pollution mounted and the potential to go further deserve utmost caution.

The environmental problem and climate change may have a wide range of impacts for East Asian region due to its geographical and economic diversity. The poor are most likely to be vulnerable to environmental hazard making it by definition not equitable (World Bank, 2006: 66-67) . Increasing health care costs associated with the effects of pollution, for instance, will be a major burden mostly for the poor (Asian Development Bank, 2005: ix).

 

Rotterdam , summer 2006,
Michael C. Putrawenas

 

References

Asian Development Bank (2005) Asian Environment Outlook 2005 – Making Profits, Protecting Our Planet: Corporate Responsibility for Environmental Performance in Asia and the Pacific , Manila : ADB.

Asif, M. and T. Muneer (2006) Energy supply, its demand and security issues for developed and emerging economies. Renewable and Sustainable Energy Reviews January 2006

Felipe, J. and J.A. Lim (2005) Export or Domestic-led Growth in Asia ? Asian Development Review 22(2): 35-75

Focaccio, A. (2005) Empirical analysis of the environmental and energy policies in some developing countries using widely employed macroeconomic indicators: the cases of Brazil , China and India . Energy Policy 33: 543-554

ILO (2006) Laborsta Internet http://laborsta.ilo.org/

IMF (2006) World Economic Outlook April 2006. Globalization and Inflation. Washington DC : International Monetary Fund

Stiglitz, J. and S. Yusuf (Eds) Rethinking the East Asian Miracle, Washington D.C. and New York : World Bank and Oxford University Press

UNCTAD (2005) China in a Globalizing World . New York/Geneva: United Nations

UNDP (2005) Human Development Report 2005. International Cooperation at Crossroads. Aid, trade and security in an unequal world. New York : United Nations Development Programme

UNESCAP (2006) Economic and Social Survey of Asia and the Pacific 2006 , New York : United Nations, p.30-31

World Bank (2006) Global Economic Prospects 2006, Washington D.C. : The World Bank

Yusuf, S. (2001) ‘The East Asian Miracle at the Millennium’, in: Stiglitz, J. and S. Yusuf (Eds) Rethinking the East Asian Miracle, Washington D.C. and New York : World Bank and Oxford University Press

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