Globalization: Asia Pacific cushioning global economy while adding to its poor

Asia Pacific: Cushioning global economy while adding to its poor as rich and poor gap widens?

  • By Pooky, Thai Intel’s economics journalist

ESCAP, the UN’s economic and social development unit says that Asia Pacific economies is leading the global economy, but also that higher food and energy prices, have actually means adding of some 42 million poor people to the region.

What that means, is that the cost of living is rising faster than income is-pushing many below the poverty line.

But as that is occurring, also occurring in many Asia Pacific countries, is that the gap of rich and poor is widening-like in Thailand. And that is because of the political structure.

  • The bottom line here-is that the benefit of an economic expansion, in countries like Thailand, goes to the rich. And the cost of that economic expansion, goes to the poor. Meanwhile, Asia Pacific drives global growth.
  • In sum, the poor of the Asia Pacific region, carries the weight of the entire global economic development.

While those statement says a great deal, about the “Real Imbalances” and not just “Economic Imbalances” it is not just the poorest who is being hurt.

Here in Thailand, an agriculture giant, food price is sky-rocketing-hurting a cross section of people.

To give Thai Intel readers a picture of what is going on in Thailand-in Thailand there are two type of food the poorer Thais rely on to survive the hard times. First, it is instant noodles and the second, is rice and eggs. This is in fact, the source of calories to many Thais-on a daily basis. In Thailand, currently, the price of eggs is at historical high and instant noodles price has also gone up some 30%.

Meanwhile, to keep transportation cost low for the Thais, in cushioning higher energy prices impact, a host of subsidy is being made to the energy sector-to which the World Bank just issued a statement calling for Thailand to end these market distorting subsidy-which promote wasteful energy consumption.

What is the solution? Strong growth, supporting the global economy, but also at higher poverty-these factors seem contradictory.

But here in Thailand, the answer to why that is the situation can be seen by the gap between the rich and poor-which is one of the highest globally-meaning, the rich gets richer and the poor gets poorer.

Some economist, in Thailand, calls this the real “Economic Imbalances” and the real “Fault-Line” of Thailand’s economic development.

What units such as ESCAP promotes is mainly on the economic solution front-like sustainability income development methods and agricultural production improvements.

  • But what is missing, in countries like Thailand, again where the economy expand at full employment, but rich gets richer and the poor gets poorer to produce one of the highest gap globally, is just plainly “Political Emancipation.”

The following is from the Malaysisn Insider:

By Noeleen Heyzer and Nagesh Kumar

June 07, 2011 | The Malaysian Insider

JUNE 7 — Asia and the Pacific, more than any other region in the world, will experience greater transformation and change in the coming years, as the region’s economic strength plays a greater role in the global economy and as its population centers struggle to overcome the burdens of poverty, hunger, natural disasters and social inequalities.

The region’s economic growth figures, recently released in the UN ESCAP Economic and Social Survey of Asia and the Pacific 2011, indicate just how powerful Asia’s economy is for the world already.

The Asia-Pacific region recovered strongly in 2010 from the global financial crisis and recession of 2008-09 with the region’s developing economies growing at 8.8 per cent. In 2011, growth in developing economies of the region is forecast to be 7.3 per cent — lower than 2010’s high growth which represented a recovery from the low base of the 2009 recession.

Asia-Pacific remains by far the most dynamic growth region in the world, according to ESCAP, and the locomotive of global growth. Its growth rate this year will be nearly one and a half times more than any other region. While the region is led by the powerhouse developing economies of China and India, growing at 9.5 per cent and 8.7 per cent respectively, growth in 2011 is broad based at more than 5 per cent across Asia-Pacific’s sub-regions.

Despite these promising economic growth figures, Asia-Pacific still remains vulnerable to the risks posed by volatile short-term capital flows and the resurgence of food and fuel price inflation, and, as the tragic 11 March disaster in Japan underscores, natural disasters.

High food prices have direct impact on the region’s poor. ESCAP estimates show that as many as 42 million additional people in the region are impoverished by 2011’s high food and energy prices.

High oil prices could significantly reduce economic growth – lowering predictions by up to one percentage point for some Asia-Pacific economies in 2011, especially vulnerable economies are Singapore, Thailand, Philippines and India.

For the poorest and most populated countries, high food and fuel prices will slow the effects of high economic growth helping families out of poverty. Achieving the Millennium Development Goals for poverty alleviation by 2015 could be delayed by five years in many countries, especially in Bangladesh, India, Lao PDR and Nepal.

Countries can take immediate policy steps to moderate the impacts of rising food and fuel prices on our region’s poorest people:

At the national level, lowering tariffs and taxes will reduce prices and social protection measures should be undertaken in the form of food vouchers, income transfers and school feeding programs to reduce the burden on the poor. Government buffer stocks of commodities should be utilised when market supplies are low.

Over the longer term, all countries must focus on enhancing support for agricultural R&D and rural credit for fostering a new, knowledge-intensive green revolution. Such strategies will not only boost food supplies, but will also assist the poorest communities, where sustainable agricultural development remains a reliable anti-poverty strategy.

Global initiatives, regional and sub-regional groupings should back up national strategies. The G20, the world’s major economic policy forum, could act to discipline speculative activity in food and fuel commodities and conversion of cereals into biofuels. For oil price volatility, the G20, being the group of all major consumers, including eight members from Asia and the Pacific, may engage OPEC – the group of major oil producers – to demarcate a benchmark “fair” price of oil and seek an agreement to restrict oil price movements within a band around it, besides creating a global strategic oil reserve to moderate the volatility of oil prices.

Another challenge for Asia-Pacific economies is to generate more aggregate demand in the region to mitigate some loss of demand from developed economies as they restrain their debt-fuelled consumption.

Inclusive development policies like poverty reduction and social protection can enhance domestic demand.

Furthermore, the emergence of Asia-Pacific region as the growth pole of the world economy means the importance of regional economic integration cannot be over-emphasized. The time has come to take a broader approach which focuses not just on deepening integration within subregions but also in fostering trade and business links to build a seamless Asia-Pacific economic space.

Working together, the Asia Pacific region can shape the forces of the present economic recovery by investing in its people, and by implementing social protections as a mainstay of national development.

Asia Pacific is a leader in the global economy, and it now has the opportunity to safeguard the development gains of its people.

* Dr. Noeleen Heyzer is Under-Secretary-General of the United Nations and Executive Secretary of ESCAP and Dr Nagesh Kumar is Chief Economist of the Economic and Social Commission for Asia and the Pacific, Bangkok.

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