Asia must safeguard its growth by protecting its people

While European and North American leaders struggle to regain fiscal credibility by cutting back social entitlements, those of the Association of Southeast Asian Nations (ASEAN) meet in Bali this week at a historic turning point, an economic coming of age for their region, which may require them to move in the opposite direction.

Asia remains by far the most dynamic region in the world and the locomotive of global growth. Its growth rate is one and a half times that of any other region. But this growth has been accompanied by growing inequalities, and remains fragile. The region’s recovery has come under pressure in recent months from multiple crises – increases in food and energy prices, the continuing global financial crisis, and severe disruptions in Japan and six ASEAN countries caused by adverse climate conditions and natural disasters. Because of these multiple shocks 42 million additional people will fall into poverty by the end of 2011, according to estimates by the UN’s Economic and Social Commission for Asia and the Pacific (ESCAP).

Governments in the region have tried to insure against volatility and shocks by building up huge foreign reserves, investing in infrastructure and improving regional connectivity. But this is not enough. The fundamental challenge for the Asian economies is to quickly find new drivers of growth by creating a region-wide market which can replace the loss of demand from the debt-fuelled consumption of Western economies. In other words Asia must rebalance its own growth and become more self-sustaining by investing in itself.

No longer able to depend on rapidly expanding exports to the rest of the world, Asia will have to rely instead on meeting more of the needs and security of its own citizens.

Indeed, this represents a historic opportunity for the region to invest in its own future. If development in Asia is more inclusive, and if many more people can escape from poverty, those people’s consumption can create vibrant new markets to drive national and regional socio-economic progress.

The cost of not investing in inclusive development is high. No country in the region can fulfil its potential or remain stable if it jeopardises the life chances of its people by failing to protect them from external risks.

The financial crisis attacking the real economy has highlighted the damage and risks of rapid unequal growth, particularly when this is not accompanied by investment in basic social infrastructure and redistributive policies. The damage can be redressed only by investing in social protection systems and social policies that are not only directed at reducing poverty and vulnerability but also focused on developing resilient and productive societies capable of adapting creatively to the changes induced by globalisation, natural disasters and other external shocks.

These issues were discussed last week at the Salzburg Global Seminar in Austria, at a session which I chaired on ‘Economic Growth and Social Protection in Asia’. The participants, mainly experts and young leaders representing a wide range of Asian countries – from Afghanistan to Indonesia, from South Korea to Singapore – agreed that social protection must include the following: social insurance, to protect individuals against shocks or events that are likely to lower their living standards (such as ill-health, disability, unemployment, ageing); conditional or unconditional social assistance programmes to deliver certain benefits to selected vulnerable groups; and measures to ensure that individuals have access to labour markets and adequately remunerated employment. An effective social protection system needs to be anchored within a well-articulated social policy framework, technically sound and politically supported. It must also be carefully crafted so as to avoid the unsustainable fiscal burden that many western economies have incurred.

By building its social foundation as an integral part of sustaining its economic dynamism, Asia has a historic opportunity to rebalance its development and truly become the anchor of stability in the twenty-first century. At the Summit, ASEAN leaders could begin this vital process.

The writer is an Under-Secretary-General of the United Nations and Executive Secretary of ESCAP.