Where Even Ethiopia Is Doing Better Than Asia: William Pesek
March 7, 2007
Tokyo is rarely the best place to get an accurate snapshot of Asia. Economist Rajat Nag is vividly reminded of that as he sits high above the neon lights of the Japanese capital's glitzy Ginza district.
``In Asia, people get seduced by the bright lights, shiny towers and high growth rates,'' Nag, director general of the Manila-based Asian Development Bank, said in an interview on the top floor of the Imperial Hotel. ``We have growth and sleek towers, but it needs to be more inclusive growth.''
Investors are plenty interested in developing economies with their young, growing populations and middle-class consumer sectors. Yet poverty? Malnutrition? Not exactly issues on financiers' front burners.
That's a problem in the minds of economists such as Nag. He said investors rediscovering Asia would be wise to pay more attention to the potential pitfalls in an otherwise euphoric economic climate.
``There's a lot to celebrate in Asia,'' Nag said, pointing to the progress made in reducing poverty since the 1960s. ``But there's a lot to do. It's not time to get the champagne bottle out yet.''
Far from it, if a recent Unicef analysis of India's government statistics is any guide. Here you have India growing almost 10 percent, supposedly gaining on China and providing one of history's greatest investment stories. And yet, Indians figured even worse in the report than Ethiopia and on a par with Eritrea and Burkina Faso in the area of malnutrition.
The Unicef analysis, done in conjunction with India's Health Ministry, found that about 46 percent of children below the age of 3 suffer from malnutrition. That's a staggering figure, and one that compares with roughly 35 percent in sub-Saharan Africa and 8 percent in China. It's even more startling when you consider India predicts growth of 9.2 percent this year.
It's a vivid reminder of the hubris that sometimes emanates from officials in New Delhi and elsewhere in Asia. Too often, this is a region in which economic growth enriches the well- connected and, sometimes, the middle class, but few overall.
India clearly has vast potential. A young population, an enviable entrepreneurial spirit and a stable of globally competitive companies make it difficult to say which Asian power will dominate 25 years from now. It may be China; it may end up being India.
Yet the poverty part of India's economic equation is as daunting as it is embarrassing.
Unicef found that anemia has risen in India over the last seven years, afflicting about 56 percent of women and 79 percent of children younger than 3. There has been negligible improvement in the number of children aged less than 2 years who are fully immunized against diseases such as measles and polio.
That should be an abrupt warning regarding India's so-called demographic dividend. The dividend, predicated on the idea that more than half of India's population is less than 25 years old, may turn into a nightmare if India doesn't improve health care, access to education and create enough decent jobs fast.
``Asia is often thought of as a good news story, and it is when you consider how fast the region is growing and how much potential there is,'' Nag said. ``What is of great concern, though, is that two-thirds of the world's poor are still in Asia.''
Few investors realize that Asia has more people living on less than $2 a day than China's 1.3 billion population. According to the Asian Development Bank, 42 percent of Chinese and 78 percent of Indians live on that amount of money each day. It may put food on the table, but it won't go far to pay for school. Large portions of Asia's future workforces aren't being adequately trained to compete in the age of globalization.
One answer for Asia -- not to mention the environment -- is slower population growth. If all the people in the world had the same standard of living as in Australia, the demand for resources would exceed the planet's supplies fourfold, John Reid, a Melbourne neuroscientist, told Australia's ABC Radio on Dec. 10.
Yet Asia's populations are still growing apace, pressuring governments as never before to provide for them. It's a more pressing issue for markets than investors may realize.
The multinational companies in which they invest are depending on rising Asian incomes to bolster consumer spending and spur demand for cars, electronics, travel, and other goods and services. Persistent poverty makes an economy's underlying structure vulnerable. Weak economic links are a problem for the whole region.
Investors were reminded this week of how the emerging markets can affect the world's biggest bourses. Plunging shares in Shanghai sent equities falling around the globe.
The Asian Development Bank is working to accelerate poverty reduction, promote more inclusive growth, improve infrastructure, avoid environmental crises and increase regional cooperation. It's easier said than done, though, and the weaknesses that underlie Asia's rapid growth should be a bigger blip on investors' radar screens.
``The dividend from demographics isn't automatic,'' Nag said. ``It can be a major plus for Asia, but only if we work hard.''
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)