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Regional economic cooperation in Asia key to maintain stability: Saifur,
(following are extracts from « keynote paper on “Asia: Development Agenda," presented by Finance Minister, M. Saifur Rahman, at a seminar in Auckland, New Zealand, yesterday. It was organised in . Hinection with the 28th annual meeting of the Board of Governors of the Asian Development Bank.)
Asia today is undergoing, what Charles Dickens would have described as. "the best of times" as well as "the worst of times." Much of this ancient continent is throbbing with new life enjoying growth rates perceptibly higher than the rest of the world. Hopes are so high that many believe that twenty first century will be
Asian era. Nevertheless. Asia today contains the deepest pockets of hardcore poverty. About 71 per cent of world's poor live in Asia: about 47 per cent in South Asia alone. The quiet violence of poverty has exacerbated environmental strains. With large scale degradation of land. - widespread pollution, tragic environmental disasters, pervasive deforestation, growing loss of biodiversity, and multiplication of urban nightmares known as rtiegacities. most of Asia is on the brink of envi-rotmien tai disaster. Many Asian , countries are sitting on the top of veritable volcanoes of social and political discontent. The ever-increasing number of jobless educated youth, especially in South Asia, is a potent four for socio-political desta-biUzatiOM/ The real challenge before Asia in the twenty first p6ntury is to reconcile the 'conuadictions that threaten to tear tier apart. The intensity of Asian dilemma varies from region to region. It is. however. most explosive in South • Asia and sonic transitional economies of Asia.
Dark shadows of poverty haunt South Asia and some transitional economies in Asia. The experience of East Asian countries supports the hypothesis that rapid economic gn.rvth can be an effective antidote to poverty. Economic growth, however, is a necessary but not a "sufficient condition for alleviation of poverty. Tliere is no single remedy for lioverty because it is a multi-: ace ted problem. The poor are not homogeneous. The wide heterogeneity of poverty clearly Indicates that a multiplicity of measures by diverse institutions are needed to ad-
dress the problems .of poverty. Safety nets for the target groups are sometimes useful but are too cosily for many countries. Various types of social investment programmes for improving education, health, nutrition and family planning can make a significant contribution to poverty alleviation. Markets, governments. people's organizations and civic groups will have to work in concert to alleviate poverty. An overwhelming majority of the poor in South Asia are young and impatient with their lot. The rates of unemployment in developing Asian countries like Bangladesh (about 37 per cent) far exceed the catastrophic heights of joblessness during the Great Depressionfabout 18.2 per cent in ' the USA). Furthermore, the effects of massive poverty do not remain confined to the family, the communitv.and the state to which the poor belong. Poverty silently crosses jxrliti-cal boundaries carrying In its wake drugs, diseases, terrorism. "Those whom you leave behind.' rightly warned poet Rabindra Nath Tagore "will drag you backwards." The endemic poverty in South Asia and some transitional economies In Asia is not only a reproach to world conscience but also a potent threat to global stability. The curse of hunger that receded with the
. advent of green revolution has not disappeared altogether. Growth of agricultural production is sluggish in many areas of South Asia. Continuous research and Investment in the agriculture sector is needed to ward off the Malthusian nightmare hovering over much of Asia.
The new international order based on the realities of globalization, information. ■ highways, as well as the recently concluded Uruguay round has posed new opportunities and challenges to Asia. Globalization has opened new windows of opportunities for resource-poor countries. For a nation with educated and skilled manpower, laek of natural resource is no longer a handicap but an advantage because it gives the entrepreneur the freedom to choose the best raw materlaFfrom the world market. The tide of free trade has swept away the cobwebs of big government. Structural reforms to provide the level field for all economic agents have significantly en-
hanced the efficiency of these eco.nomies. Nevertheless, there is in the Asian psyche a deep distrust of the foreigners who once caused devastating deindustrialization in different parts of Asia. These historical fears are reinforced by the hostile trading environmental where non-trade barriers offset most of the benefits of tariff reduction. The globalization of financial markets is a natural corollary of liberalization of goods market. There has been no doubt an upsurge in short term capital flows into a few South and South East Asian countries, but these may leave as quickly as they come.
Countries that fall to consolidate their domestic economy and •yet expose themselves to external financial markets may ultimately have to face destabilizing jolts as evidenced by the recent crisis in Mexico.
Despite these obstacles, there has been a growing trend towards migration of labour within Asia itself. The international migration of unskilled and semi-skilled workers from South and South East Asia to the Middle East accelerated in the early 70s during the oil boom. More recently, labour from surplus countries is. also moving to the rapidly growing Asian economies where labour shortages are felt in a number of occupations. Immigration policies age sensitive and involve controversial issues relating to illegal cross border movements, human rights, health and labour safety standards. These problems must be dealt within a cooperative framework if the region is to take Tull advantage of its human resource potential to mutual benefit of both sending and receiving countries. Formulation of internationally' accepted protocol should,prevent some of the existing abuses as well as better distribute the gains of a freer movement of labour.
An issue that Is closely related to trade, investment and technology transfer Is that of regional economic cooperation in Asia, This has become a distinctive feature of this region, particularly within East and Southeast Asia. Continued regional cooperation is clearly a key factor in maintaining stability in Asia, much needed for sustained economic growth. It provides the conducive framework within which military expenditure may be drastically reduced in favour of urgent development priorities. It Is also
the only way to harness common resources to mutual advantage and increase the volume of intra-regional trade. Another persuasive argument in favour of regional cooperation is that it fosters further multilateral liberalization by reducing the number of negotiating parties. My country. Bangladesh, has always been a staunch champion of regional cooperation and played a pioneering role in establishing the South Asian Association for Regional Cooperation (SAARC). There are obviously many challenges and constraints to regional cooperation but given the political will exercised through concerted efforts by all concerned, these can be overcome to pave the way to successful regional cooperation to the benefit of all our people.
The experience of East Asian countries clearly suggest that free enterprise provides the most effective mechanism for unleashing human creativity and for flowering of entrepreneurial ability. The removal of barriers to operation of market and putting the policy fundamental right are necessary but not sufficient conditions for growth.
The recent economic experience of" Bangladesh is a case In point. Structural reforms in Bangladesh in last few years significantly strengthened macro-economic balance. Over the past four years exports have beeq growing faster than imports, revenues are rising faster than current expenditure. inflation fate is one of the lowest in Asia, the external current account deficits are falling, national saving doubled a* a percentage of GDP and foreign exchange reserves exceed 8 months' total imports. Despite sound and prudent macroeconomic management, and market-friendly reforms. Bangladesh has not as yet achieved the desired level of growth. Stark deprivation continues to haunt at least thirty per cent of its population.
Of late there has been new debates on the efficacy of foreign aid. Markets would not be able to provide urgently needed physical and social infrastructure in much of developing economies; The countries which experienced East Asian miracle were also, at the initial stages of their de velopment. recipients of significant external assistance. The anecdotal evidence on
the misuse of foreign aid does not tell the whole story about aids constructive role. Instances of sub-optimal use of aid are attributable not merely to incapacity and rent seeking in the developing countries but also to- compulsions of donors themselves. First, official development assistance is often allocated on political considerations. 75 per cent of the world's poor receive only 25 per cent of official development assistance (ODA). About 40 per cent of aid is earmarked for strategically important countries. Twice as much ODA per capita goes to high military spenders compared to countries with moderate military budgets. Ironically democratic governments tend to receive less aid than authoritarian regimes. Only 7 per cent of ODA is earmarked for human priority concert®. Tied aid and technical assistance recycle much of the assistance back to donors themselves. Despite these limitations, aid had played a catalytic role in the development process of many countries, Bangladesh is a case in point. External assistance in Bangladesh has succeeded in promoting an effective population planning programme, in Increasing agricultural production, in construction of urgently needed rural infrastructure and in alleviation of poverty. What is needed is not the phasing out of, aid but an entirely new approach to aid based on productive partnership among the nations of the world.
Theoretically, direct foreign investment (DEI) could be an attractive alternative to ODA. In reality, direct foreign investment is a sort of zero sum game due to scarcity of resources : If some developing countries get access to DFI. others do not. The flow of DFI to developing countries is impeded by the fall in supply of resources as well as the unwillingness of investors to put their money In areas with unsatisfactory physical infrastructure which in turn requires considerable investment. The recent growth of foreign direct investment and portfolio investment flows has been re stricted to a very small group of larger and richer developing countries. Small developing economies like Bangladesh do not have easy access to global capital markets. Additional re-souyces will, therefore, have to come to a large extent from
official sources.
It is obvious that domestic resources and the anticipated flow of direct foreign investment will not be sufficient to combat poverty in South Asian and some transitional economies of Asia. Hence, there is an urgency for a steady flow of ODA to these regions. Unfortunately, the growth of ODA as a percentage of the gross national product (GNP) of the traditional donors has remained at less than 0.35 per cent half of the United Nations target of 0.7 per cent of GNP. Flow of concessional funds from the IDA and ADB also is plummeting. There is. therefore, a strong rationale for the bilateral and multilateral donors to raise their ODA allocations to the Asian region. In this context, aid conditionalities also need to be approached from the per spec- * tives of the recipient countries. Thus in democratic setups, Internal articulations rather than external impositions should be the real basis of policies on Issues such as human rights, . governance, environment, etc. Similarly, the developing member countries (DMCs) should be left alone to decide the timing and pace of agreed upon reform measures. Otherwise, serious backlash and undesirable socio-political fallouts maybe the outcome at the end of the day.
In this context, the ADB has a unique role to play in the Asia's development given its expertise, experience and multilateral character and regional focus. It is not only a planner and banker of useful projects and programmes but also a catalyst and advisor on economic policy-making in the region. However, these roles are not mutually exclusive. For example. ADB will not have the adequate leverage for catalytic action and economic policy making if its main role as pro Ject and program planner and banker diminishes. Similarly, there is also a need for ADB to have a proper mix of these roles for each DMC. depending on the country's specificities at a given point in time. It Is. therefore, imperative for the owners of this Bank to strengthen it on the lines Bug gested above.
No amount of aid can substL-tute a country's own efforts to break the vicious cycle of poverty However, the Internal efforts for modernization in many developing countries could not crystallize because of
wrong policies. Inspired by the initial success of planned economies and guided by Keynesianism which glorified interventionist role of the state and Structuralism that distrusted the markets. South Asian states opted for big governments with overwhelming concentration of power in the hands of the national government and an elaborate maze of rules and regulations. The perversities and futility of big government became evident from the success of market-friendly East Asian countries and colossal government failures in South Asia and transitional economies.
The process of rectifying the failures of omission and commission has already started in South Asia and transitional economies in Asia. Regulations have been mini>-mized. public sector enterprise are being privatized and the si»e of the government has been gradually reduced. The experience of some countries suggests that it is easier for the government to intervene badly than to intervene well. Developing countries need, not merely less government, but better government. Marked economy cannot function in an institutional vacuum. It presupposes a strong government that can ensure the rule of law, accountability, transparency and predictability In Its day to day operations.
Good governance has to grow from within, it can not be imported from outside. Disenchantment with the governmental system is not unique to developing countries. it is equally widespread in the industrial societies Who are also struggling to reinvent the government. Good governance emerges through a process of trial and error. Given the wide diversity of political forms, each society Should be allowed to find its own way.
Historical experience shows that tliere is no viable substitute for democracy. It is not, however, a one shot affair. It Is a long and arduous process. Even democratic institutions in nation-states have turned out to be too big for the small. There are always social groups who are left out wholly or par Hath Irom the political process: the children, the aged and the women. Affirmative actions are needed io offset the discriminations against the underprivileged Legal systems have to be changed io protect the rigfits ol the disadvantaged
group-. However, legal actions are not sufficient by them selves. The disadvantaged groups will have to be empowA ered through bojh formal and nonformal education.. Bangladesh has. therefore, undertaken special measures like the Food for Education and Stipend for Female Children to encourage the education of women and children.
Thomas Jefferson used to say that governments degenerate when all powers are ’concentrated in the hands of tlie one. tlie few. the well-born or the manyThe remedy for this degeiieiucx in his opinion. lies in breaking up the democratic majority into institutions wlyre every one” could count and be counted upon. Democratic government should, therefore, strengthen the power not of the many but of every one within the limits of his/her competence. Two measures are urgently needed to strengthen And nourish democratic institutions at grass-roots level. First, more authority needs to be trans-fered from national to local governments Secondly, an environment should be created where people's organizations. NGOs and civic groups are enabled to play their due rote. A few Innovative NGOs in Bangladesh have already made significant contribution to formulation of new strategies for poverty alleviation. However. NGOs can at best supplement the government, they can never be the substitute lor government.
The real challenge before the government* today is to harmonize the functioning of the big and the small and to weave the national government. focal governments, people's organisations. NGOs and other Independent civic societies into a cohesive system. Reforms will have to f carried out with the mandate of the people. This is not easy to achieve. Tlie implementation of the unfinished agenda lor South Asia and transitional economies In Asia is a loTig drawn process However, peo pie want instantaneous pros perMy and not the status quo of social repression and economic deprivation. Unlike the economists, the potHUlans do not have the’ laxury ol a long run. The politirtaiis very often meet their Waterloo In the short run Evert • week Is a too long lime In politics We hare no choice, we liave to act now or fair the grim rtaktie*