Opening Statement - Committee on Macroeconomic Policy, Poverty Reduction and Inclusive Development
Ladies and gentlemen,
It gives me a great pleasure to welcome all of you to the first session of the Committee on Macroeconomic Policy, Poverty Reduction and Inclusive Development. I would like to first start by expressing our appreciation to Dr Panas Simasthein for taking time off from his pressing duties to address this session of the Committee. I would also like to express our gratitude to Dr. Rahman and to Ambassador Kesavapany, for both kindly agreeing to address this session of the Committee on challenges of the global economic crisis.
ESCAP’s Committee on Macroeconomic Policy, Poverty Reduction and Inclusive Development is an important regional intergovernmental forum for reviewing and sharing experiences and practices in formulating and implementing macroeconomic policies to reduce poverty and foster inclusive and sustainable development. Your discussions at this session will provide guidance for the ESCAP’s ongoing work on macro-economic policy and development related issues. This Session takes place at a time when the region is struggling to recover from what has been billed as the worst crisis faced by the world economy since the 1930s.
Distinguished representatives, Ladies and gentlemen,
As one of the most trade dependent regions of the world, Asia-Pacific was deeply affected by the global financial crisis with exports of major economies declining at rates twice as sharp as in the aftermath of the 1997 crisis. The growth rates came down in all the economies although the depth of the impacts varied with a country’s degree of exposure to global finance and trade, as well as the ability to respond with expansionary fiscal policies. According to ESCAP’s estimates, developing countries in our region will be growing this year only at a rate of 3.4 percent, down from last year’s 5.7 percent, despite resilient growth of China and India at around 8 and 6% respectively.
But more importantly ladies and gentlemen, the crisis now threatens to roll back the development gains of the last decade including the achievement of millennium development goals and may trigger a human tragedy especially in Least Developed Countriess and Small Island Developing States of the Asia-Pacific region. As a result, more than 26 million workers could lose their jobs in the region, with many more slipping into underemployment and various forms of income insecurity. The people most at risk are the poor, women workers in the manufacturing sector, the young and old, and low-skilled migrants. Moreover, the financial crisis will diminish the chances of over 65 million people to move out of poverty in this region.
The latest trends suggest that the worst seems to be over as the region’s economies are beginning to recover from the recession. The growth rate of developing Asia-Pacific economies could recover to 6.3% in 2010 although it is subject to downside risks arising from premature withdrawal of fiscal stimulus packages, among others. The incipient recovery is bringing new challenges before this region. One such challenge centers around the need for the promotion of new drivers of growth that will compensate for weak demand from the developed world. This requires a rebalancing of the region’s economies in favour of domestic and regional demands and the creation of a larger Asian market. Another looming concern with incipient recovery is the possible return of high food and fuel prices that affect the poor who are already suffering from declining incomes. Another important challenge is one of maintaining stability in the face of excessive liquidity in the market and return of portfolio capital flows to the region’s emerging markets leading to the build up of asset bubbles and upward pressures on exchange rates.
Distinguished delegates, ladies and gentlemen,
A comprehensive and well-coordinated approach at the national and regional levels is needed to address these challenges. Such an approach can be facilitated by exchange of information and experiences, and a shared regional understanding of the nature of the challenges. There are opportunities in the region for rebalancing economies in favour of domestic and regional consumption. Large pockets of poverty in parts of the region provide important headroom for new demand generation. It is possible to increase the consumer power of the poor and emerging middle class through decent employment and social protection, among other inclusive policies, while unleashing their human potential and addressing growing inequalities. Investment in education, health and other social services is the most rewarding for all segments of society, particularly for women and children. Social protection systems not only create the foundations for more inclusive societies, they also make good economic sense. People without social protection hold on to their savings and are unlikely to spend. Providing decent wage and unemployment insurance will buffer people from financial risks and vulnerabilities and help drive economic recovery.
As the regional arm of the United Nations, ESCAP provides the comprehensive multilateral platform for exchange of experiences, the development of common understanding, and information sharing of good practices across the region to deal with challenges posed by the financial crisis. ESCAP organized jointly with the Bangladesh Bank a regional workshop for LDCs in July this year, with the participation of 17 countries sharing their experiences in addressing the crisis. I am pleased that the Governor of the Bank Dr. Rahman, who hosted the workshop is with us this morning and will brief us about this.
Another aspect of rebalancing of the region’s economies is to exploit the potential of regional economic and financial cooperation to share each other’s growth and generate additional aggregate demand by narrowing development gaps. The Chiang Mai Initiative was a pioneering attempt at regional cooperation for addressing balance of payment emergencies in the aftermath of the 1997 financial crisis. With over US$ 4 trillion dollars of foreign exchange reserves, the region now has the ability to foster a major programme of investing in itself. To exploit the full potential of financial cooperation, the region needs a comprehensive financial architecture mediating between emerging investment opportunities especially in regional public goods such as improving regional connectivity on the one hand, and rising foreign exchange reserves on the other. Regional financial architecture was one of the five priorities for the region that I proposed to the leaders of East Asia Summit last month in Hua Hin at their fourth Summit. Some elements of such an architecture were discussed at an expert group meeting organized by ESCAP jointly with the Institute of Southeast Asian Studies, in Singapore last month, and hosted by Ambassador Kesavapany, who is also present here this morning, and will brief us on some of its recommendations.
I know you will be addressing these issues and challenges while sharing the experiences of your countries on the impact of the crisis. I hope that this discussion will come up with some important policy lessons on how to quicken the recovery with benefits spreading to larger populations, especially to the LDCs.
Excellencies, ladies and gentlemen,
I look forward to the outcome of your discussions and I wish you a successful meeting.
I thank you.