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Economic and Social Survey of Asia and the Pacific 2010

2010
SUSTAINING
RECOVERY AND DYNAMISM
FOR INCLUSIVE DEVELOPMENT


ESCAP is the regional development arm of the United Nations and serves as
the main economic and social development centre for the United Nations in
Asia and the Pacific. Its mandate is to foster cooperation between its 53
members and 9 associate members. ESCAP provides the strategic link
between global and country-level programmes and issues. It supports
Governments of countries in the region in consolidating regional positions and
advocates regional approaches to meeting the region’s unique socio-economic
challenges in a globalizing world. The ESCAP office is located in Bangkok,
Thailand. Please visit the ESCAP website at www.unescap.org for further
information.
The shaded areas of the map indicate ESCAP members and associate members.
The cover design concept
The vertical structures (red and green) represent patterns of development
pursued in the past.  The inability to return to ‘business as usual’ in the
aftermath of the crisis has led to a discussion on the need for a rebalancing in
favour of greater domestic and regional demand.  The Survey argues that this
could be achieved through more inclusive and sustainable growth.  This is
represented by the orange structure which is horizontal and wider, thus more
stable and durable, signifying inclusiveness and sustainability whereas vertical
structures strive upwards monolithically, leaving out people, ideas and issues.
Design by Marie Ange Sylvain-Holmgren

2010
SUSTAINING RECOVERY AND DYNAMISM
FOR INCLUSIVE DEVELOPMENT

ECONOMIC AND SOCIAL SURVEY
OF ASIA AND THE PACIFIC 2010
Sustaining Recovery and Dynamism 
for Inclusive Development

United Nations publication
Sales No. E.10.II.F.2
Copyright © United Nations 2010
All rights reserved
Manufactured in Thailand
ISBN: 978-92-1-120592-3
ISSN: 0252-5704
ST/ESCAP/2547
This publication may be reproduced in whole or in part for educational or non-profit 
purposes without special permission from the copyright holder, provided that the 
source is acknowledged.  The ESCAP Publications Office would appreciate receiving 
a copy of any publication that uses this publication as a source.
No use may be made of this publication for resale or any other commercial purpose 
whatsoever without prior permission.  Applications for such permission, with a 
statement of the purpose and extent of reproduction, should be addressed to the 
Secretary of the Publications Board, United Nations, New York.
ii


FOREWORD
The Asia-Pacific region leads the process of recovery from the global financial 
and economic crisis and emerges as a focus of global growth and stability.
However, the recovery of the world economy at large remains fragile.  This 
poses risks for sustained recovery in Asia as well, given its export dependence.  
A more balanced recovery is needed and this will require more globally concerted 
policy efforts.
As we embrace the emerging role of the region as a significant driver of 
economic growth, we should not lose sight of the challenges ahead.  In parts 
of Asia, unemployment rates are still up and poverty remains widespread.  
Without addressing the poverty and climate change challenges, economic growth 
will prove elusive over time.
The challenges are linked.  Our solutions must be, too.  We must recognize our 
interdependence; no nation can hope to find economic security without taking 
into account the well-being of others.  Therefore our strategies must address 
both global and regional imbalances, and must do so in many spheres at once: 
economic, social and environmental.
The United Nations will convene a Summit in September 2010 to review progress 
in achieving the Millennium Development Goals (MDGs).  The Asia-Pacific region 
has made remarkable headway, which demonstrates that the MDGs are indeed 
achievable.  But more needs to be done to scale up successes and identify and 
remove barriers and obstacles.  Five years before the 2015 deadline, the Summit 
provides us with a timely opportunity to address major interconnected 
development challenges and to give the MDGs a final push, including in the 
Asia-Pacific region.
iii


In this regard, the 2010 Economic and Social Survey of Asia and the Pacific 
provides a comprehensive analysis of the challenging policy landscape and offers 
recommendations for the way forward.  In the aftermath of the crisis, we see clear 
momentum for regional economic cooperation.  ESCAP, as the only intergovern-
mental forum which brings together all the countries and territories in the Asia-
Pacific region, will be playing a critical role in leading the deliberations over next 
steps.
As it turns out, the global crisis may give new impetus for establishing a robust 
regional framework for economic cooperation that will help us build more equal 
and sustainable economies in Asia and the Pacific.  This would not only be the 
region’s gain, but essential for the sustainable development of the world at large.
    BAN 
Ki-moon
    Secretary-General 
of 
the 
United 
Nations
April 2010
iv


EXECUTIVE
SECRETARY’S
PREFACE
By early 2010, following the first global economic contraction in modern 
history, the contours of a V-shaped rebound were evident in the Asia-Pacific 
economies – assisted in large part by a number of unprecedented fiscal 
stimulus packages. But the rebound remains fragile and uneven, with a 
number of downside risks. While 2009 was a year of emergency crisis 
management, 2010 will be a year when economic policy making will be even 
more complex. Turning the rebound into a sustained recovery will mean 
keeping up the momentum while maintaining macroeconomic stability in the 
face of rising inflationary tendencies and the potential for asset bubbles. 
The crisis has also drawn attention to the underlying global and regional 
structural imbalances built up over decades. Redressing these multiple 
imbalances and development gaps, and achieving a sustained recovery after 
the withdrawal of the fiscal stimuli, will require moving towards fairer, more 
balanced and sustainable patterns of development.  Asia and the Pacific is 
unlikely to be able to return to business as usual. Instead it will increasingly 
have to drive its own development and create new sources of economic 
growth from within the region. 
In this radically altered global panorama, the Asia-Pacific region is now 
emerging as a central participant in international economic relations. To fulfil 
this potential, however, it will need to implement an ambitious set of policies. 
The  Economic and Social Survey of Asia and the Pacific 2010 explores this 
complex environment and – lest the V-shaped rebound induces complacency 
– outlines the elements of a coherent regional policy agenda.
v

2009: an uneven pattern of impacts
Even at the height of this crisis, Asia and the Pacific displayed a new-found resilience. Its 
developing economies achieved an annual growth rate of 4.0%, making it the fastest-growing region 
in the world. However, almost all of this growth came from the two most populous countries: China, 
which grew by 8.7%, and India, by 7.2%. Indeed, excluding these fast-growing sub-continental 
economies, the Asia-Pacific developing economies contracted in 2009 by 0.6%. 
These contrasting performances resulted from many different factors. The first concerned the extent 
of dependence on developed country markets. All the worst-affected countries had shares of exports 
to GDP that exceeded 60%, and the greater the share of these exports that were absorbed by the 
developed markets the greater was the economic contraction. Related to this, the countries most 
exposed to global trade perturbations were those, including many in East and South-East Asia, 
whose exports involved regional production networking arrangements – for products such as 
 
 
apparel, machinery, electronics, and motor vehicles.  They saw their exports plummet almost twice 
as rapidly as in the 1997 crisis. On the other hand, countries such as Bangladesh, which exported 
simpler products such as low-cost garments, became more competitive and gained market share. 
There is also evidence that intra-regional trade has continued to expand, especially through exports 
to China and India. 
The second factor concerned the extent of exposure to the exit of portfolio capital as investors 
sought to cover their losses in the western capital markets. This brought pressures on exchange 
rates and created financial instability as well as liquidity problems in countries that did not have 
adequate reserves. Although, compared with the 1997 crisis, more countries had strong foreign 
exchange reserves, some had to arrange bilateral swaps, as the Republic of Korea and Singapore, 
or seek liquidity from the IMF, as Pakistan and Sri Lanka. Nevertheless, it is by no means clear 
what is an optimum stock of foreign reserves since, as the crisis revealed, holding foreign reserves 
idle also entails both costs and risks. Survey 2010 proposes a yardstick for gauging such 
vulnerabilities.
The third factor explaining the contrasting experiences was the varying capacity to respond. The 
countries best able to mount rapid and large counter-cyclical spending programmes were those that 
entered the crisis with strong macroeconomic fundamentals; in particular, stable inflationary trends, 
sound fiscal balances and low ratios of public debt to GDP. The massive additional fiscal spending 
helped reduce the impact of lower exports and the falling demand for services such as tourism, as 
well as reduced growth of migrant remittances. Even more important, the stimulus also afforded 
some protection to the vulnerable workers who had lost their jobs, typically the unskilled and very 
often women in the manufacturing sector and in the informal economy. 
A quantitative analysis reported in Survey 2010 shows that the stimulus packages certainly had an 
impact – offsetting to some extent the loss of exports. For the key economies of the region, Survey 
2010
 shows that for each $1.00 lost in exports there was an average loss of $0.88 in GDP – 
though the figure ranged from $1.1 in Japan, to $0.4 in Malaysia and Singapore, and to $0.7 for 
China. If the only variable affecting GDP had been a shortfall of exports, then GDP growth in 2009 
would have dropped by 7.8 percentage points. However, the actual shortfall in 2009 was only 4.2 
percentage points – thanks largely to the region’s fiscal stimulus packages. The forecasts also 
suggest that Asia and the Pacific is unlikely to see a return to pre-crisis export growth rates. In the 
medium term the region will need to look beyond expansionary policies and instead seek new 
engines to sustain the region’s dynamism.
vi

The outlook for 2010: a sharp rebound, with downside risks 
The outlook for 2010 has improved significantly. The Asia-Pacific developing economies are forecast 
to grow by 7.0% in 2010 compared to 4.0% in 2009, led by the self-sustaining motors of China, 
growing at 9.5%, and India at 8.3%. 
But the road ahead has a number of potential pitfalls. One concerns protectionism. Many developed 
countries, facing anaemic growth coupled with high unemployment, may restrict trade. This has led 
to prominent trade disputes that pit developed countries against large exporters from this region. 
Another concern is that greater liquidity in the global financial system is finding its way to 
 
 
 
 
 
 
 
 
Asia-Pacific emerging markets  –  causing exchange rates to appreciate, stoking inflationary 
pressures, and leading to the formation of asset bubbles. There are also echoes of the food-fuel 
crisis of 2007, with food prices rising again in some countries and causing special hardship for the 
poor. 
Policy-makers are thus faced with tough balancing acts on both monetary and fiscal policy. While 
they will want to tighten monetary policy to restrain inflationary pressures they will need to maintain 
real interest rates at par with global levels – to keep their exchange rates competitive and to 
encourage domestic economic growth. And while they will inevitably have to move toward fiscal 
consolidation they will have to judge the timing and sequencing carefully if they are not to choke off 
economic recovery and trigger the need for further stimulus packages. Another policy consideration 
will be to manage portfolio capital inflows through various types of capital controls. The benefits of 
maintaining open capital accounts, if any, are ambiguous. Instead there is a growing consensus that 
capital controls should be seen as important components of the policy toolkit. 
As argued by the APEC leaders at their November 2009 Summit in Singapore, the advanced 
economies are unlikely to be able to return to ‘growth as usual’ or ‘trade as usual’. Even if the 
advanced countries achieve a substantial economic recovery their demand for imports from Asia and 
the Pacific will not return to pre-crisis levels. This is because in order to unwind the global 
imbalances, many of the developed economies will need to restrain debt-fuelled consumption. The 
Asia-Pacific countries, for their part, will therefore need to seek new sources of growth – 
 
‘rebalancing’ their economies in favour of greater domestic and regional consumption. 
Survey 2010 explores different imbalances  and gaps – macroeconomic, social, developmental, and 
ecological – and considers the potential of closing them for creating additional aggregate demand 
that could serve as new regional impulses for growth. 
Imbalances, gaps and new sources of growth
In the past, the global imbalances have assisted the Asia-Pacific region by providing expanding 
markets for exports, and augmenting foreign exchange reserves. But these imbalances are not 
sustainable. They have resulted in growing trade and current account imbalances which the United 
States in particular, with its high levels of accumulated debt, will have to unwind. 
There are also macroeconomic imbalances within the region – notably between the economies of 
East and South-East Asia and those of South Asia. In East and South-East Asia net exports have 
been increasing as a proportion of GDP growth while in South Asia they have been increasingly 
negative. In the case of East Asia this reflects a declining share of consumption in long-term 
growth, and in the case of South-East Asia, a declining share of fixed investment. In South Asia’s 
case, on the other hand, the share of investment has been rising along with growing net imports.
vii

Perhaps the most disturbing aspect of the global imbalances is the anomaly of capital flowing from 
Asia-Pacific developing countries to finance consumption and investment in rich countries such as 
the United States. This has happened largely because Asia and the Pacific lacks a well developed 
regional financial architecture that might have enabled the countries running current account 
surpluses to deploy these productively in other parts of the region.
At the same time, Asia and the Pacific has large socioeconomic and development gaps. Although 
the region as a whole has achieved rapid economic growth that has helped lift millions of people 
out of poverty it is still home to over 950 million people living under the $1.25 per day poverty line. 
Moreover, development has been very uneven, across subregions and between countries. This is 
reflected in varying patterns of progress towards the Millennium Development Goals – with 
South-East Asia leading the way and South Asia and the Pacific Island economies lagging behind. 
There are similar gaps in the levels of infrastructure development; this is evident from the composite 
infrastructure development scores presented in Survey 2010. Some economies register high scores, 
including: Singapore; Japan; New Zealand; Republic of Korea; Australia; Brunei Darussalam; Hong 
Kong, China; and Macao, China.  Others still have considerable infrastructure gaps, particularly the 
least developed, landlocked and small island economies, such as Papua New Guinea, Nepal, Lao 
People’s Democratic Republic, Solomon Islands, Cambodia, Bhutan, Vanuatu, and Mongolia.  If the 
countries of the region invest in closing these socio-economic development gaps they cannot only 
lift levels of human development but also boost regional aggregate demand – making economic 
growth more inclusive and sustainable. This will demand high and sustained levels of investment 
that will rely on creating a new regional financial architecture that can be used to mobilize the 
necessary resources – from within the region and beyond. 
The Asia-Pacific region also has serious ecological imbalances. These are evident, for example, in 
the degradation of key natural resources, such as forests and fresh water, the unsustainable use of 
energy, and a rapid growth of carbon emissions. Although some of these imbalances may not 
appear to have immediate economic consequences, they will make it much more difficult to sustain 
economic growth in the long term. If countries can invest in addressing these imbalances they will 
not only preserve the natural environment, on which so many poor people depend, but also 
maintain the basis for long-term growth. And in the short term they will also provide an immediate 
economic stimulus and thus further alleviate poverty. 
In sum, therefore, as the countries of the region take steps to address macroeconomic, 
developmental and ecological imbalances they have an opportunity to create new motors of 
inclusive growth that will help them regain their economic dynamism. The region has close to one 
billion people living in poverty, which combined with wide development gaps, gives it considerable 
headroom for augmenting aggregate demand through boosting private consumption and investment. 
Similarly, the Asia-Pacific economies have the opportunity to develop new and greener industries 
and businesses based on innovations that will save energy and materials. In so doing they can 
provide more affordable products for the poor while maintaining growth and promoting environmental 
sustainability. 
Survey 2010 argues, therefore, that in the aftermath of the global economic crisis, inclusive 
and sustainable growth is not only desirable but also a necessary condition for regaining the 
region’s dynamism
. It then goes on to outline a policy agenda at national and regional levels that 
might assist in unleashing the latent potential of domestic and regional demand to address the three 
imbalances in an integrated manner.
viii

A regional policy agenda for inclusive and sustainable growth
Survey 2010 explores ways of increasing aggregate demand and supply – establishing the region 
on a more inclusive and sustainable path of development and boosting regional connectivity. For 
this purpose it proposes an agenda with five prongs. The first four may assist in expanding 
domestic consumption while addressing socio-economic and ecological imbalances. The fifth deals 
with regional consumption.
1. Strengthening social protection 
If poor households can rely on systems of social protection that will automatically trigger social 
safety nets at times of adversity they will be able to maintain food intake and continue to use 
education and health services. Just as important, at normal times they will have less need to 
maintain precautionary savings and can use more of their income for consumption. By serving as 
automatic stabilizers, systems of social protection not only support households at times of crisis but 
also enhance opportunities for individual development. 
The Asia-Pacific region now has a number of examples of ambitious social security programmes. 
Thailand has a universal health-care programme – formerly called the ‘30 baht’ scheme, but now 
free. India has the National Rural Employment Guarantee Act (NREGA) which provides a 
guaranteed 100 days of employment each year to adult members of rural households and also has 
gender-sensitive provisions. The Philippines has the Pantawid Pamilyang Pilipino Program (4Ps), 
which provides conditional cash transfers to poor households for their health and educational needs. 
Despite these efforts, a common agenda built around social protection has been slow to emerge. 
Social policy institutions often remain rooted in out-dated assumptions about the household, how 
individuals are cared for, and its coping mechanism in times of crises. Rather than using short-term 
measures, interventions need to sustain a trajectory from poverty to security, as basic rights.
2. Promoting agriculture and rural development: fostering a second green revolution 
In Asia and the Pacific the majority of poor people live in the rural areas and derive most of their 
income from agriculture – so are likely to benefit from agricultural growth. Since the 1970s such 
growth was based largely on the Green Revolution which helped the region achieve significant yield 
increases – though the high input intensity also caused well documented problems. Now, as the 
region aims for more balanced economic growth, it needs a second, more knowledge-intensive 
green revolution that combines advances in science and agricultural engineering with the region’s 
unique traditional knowledge to make agriculture more environmentally resilient. But countries will 
also need to make agriculture more socially inclusive by returning ownership of land and resources 
to farmers, especially women, and economically empowering the poor. This will mean setting 
appropriate prices for key inputs and establishing institutions to help small producers achieve 
economies of scale in marketing and in accessing international markets. In the past, governments 
may have tried to achieve this through state or parastatal agencies, but in future they may choose 
to encourage community-based organizations and farmers’ self-help groups. International 
partnerships and South-South cooperation can also help foster such a green revolution while also 
addressing concerns for food security.
3. Supporting new engines of growth: green innovations 
Green Growth emphasizes environmentally sustainable consumption and production that foster 
low-carbon, socially inclusive development. For this purpose, countries can take an industrial policy 
approach – encouraging strategic collaborations between government and industry to promote 
ix

investments in environmentally-friendly technologies and products. Because of market failures such 
investments may not be immediately profitable, so many environmentally-friendly technological 
innovations will initially need government support. The public support can also help develop and 
commercialize products that serve to raise the wellbeing of the poor and the rural areas generally 
by encouraging affordable and environmentally-friendly technologies such as the rural solar home 
electricity systems popularized by Grameen Shakti in Bangladesh. A number of Asia-Pacific 
countries including Japan, China, India, and the Republic of Korea are promoting such innovations 
as a part of their national action plans on climate change. China, for example, has become the top 
investor in clean energy, with investments reaching $34.6 billion in 2009, while the Republic of 
Korea plans to spend $84 billion over five years to develop environmentally-friendly industries and 
use them as engines of growth. Governments can also encourage the adoption of 
environmentally-sound practices and technologies through appropriate regulations and systems of 
incentives and taxes. 
In the developing countries the introduction of these innovations can be accelerated if the 
developed countries that already have a range of environmentally-friendly technologies, transfer 
them and relax some of the provisions of intellectual property rights, and also provide some of the 
necessary finance – following the principle of common but differentiated responsibilities established 
in the United Nations Framework Convention on Climate Change. 
But the developing countries can also help each other in the area of sustainable consumption and 
production by sharing experiences and best practices. A number of Asia-Pacific developing countries 
now have capabilities in a range of technologies, such as biofuels production, waste management 
and solar and wind power. For example, Waste Concern, an NGO in Bangladesh which has 
developed a system of decentralized treatment plants for managing solid waste, with ESCAP 
support, is promoting similar approaches in cities in Pakistan, Sri Lanka, and Viet Nam.
4. Enhancing financial inclusion 
A well functioning financial system is crucial to economic growth, but this will not be enough to 
ensure expanded aggregate demand. If the poor are to release their pent-up demand they will    
need access to a more diverse and appropriate range of financial products and services. This    
would include savings, credit and insurance products tailored to their requirements – on more 
favourable terms and with less stringent demands for collateral. This has been shown to have clear 
benefits. Households that can take advantage of micro-finance and micro-insurance, for example, 
are in a much stronger position to increase their incomes – and boost their levels of nutrition and 
standards of education. Moreover, women in such households tend to have greater autonomy in 
decision making and are better able to improve the well being of their families. To date however, 
across most developing countries in Asia and the Pacific, financial services are used by only a 
small proportion of the population. The poor are typically excluded from the formal financial sector 
and from the services of commercial banks. Barriers exist on both the demand and supply sides. 
Governments will therefore need to ensure an institutional and regulatory environment that fosters    
an inclusive, fairer and more efficient banking system and expands and safeguards the options for 
the poor. 
5. Evolving a regional framework for cooperative action
With some of the world’s largest and fastest-growing economies, Asia and the Pacific can become 
an even greater economic powerhouse if it develops a more integrated regional market. But this 
should be on the basis of a new development paradigm that is more inclusive and sustainable. 
x

Thus far, for historical, political and topographical reasons, the region has been better connected 
with Europe and North America than it has been with itself. Survey 2010 identifies four priorities 
that can leverage complementarities across the region and lay the foundations for a more inclusive 
and sustainable path of development:
(a) Regional economic integration – The Asia-Pacific region is home to a complex network of 
political groupings, whose leaders in recent times have consistently envisioned the evolution of a 
unified economic space. The time has come to move from vision to action. For this purpose they 
can accelerate progress on two current overlapping proposals. The first is the East Asia Free Trade 
Agreement (EAFTA) which brings together the ASEAN+3 grouping. The second is the 
Comprehensive Economic Partnership of East Asia (CEPEA) of the East Asia Summit (EAS) whose 
members include those in the ASEAN+3 grouping plus Australia, India, and New Zealand (or   
ASEAN+6). These proposals can serve as stepping stones to an even broader, unified Asia-Pacific       
market and an economic community. 
(b) Integrated trade and transport policies – The region has improved its highway and railway 
networks, but it cannot use the infrastructure effectively without the legal and regulartory bases for 
vehicles, goods, and people to move across borders and transit countries. Currently, many 
international movements are hindered by slow and costly processes, formalities and procedures. 
The cost of red tape is considerable and often wipes out the benefits of tariff reductions enacted 
over the past two decades. In future the region will need an integrated, multimodal transport 
system. For this purpose, it can, for example, build intermodal transfer points, also known as dry 
ports, where goods, containers or vehicles can be transhipped using the most efficient mode of 
transport – along with facilities for product grading, packaging, inspections and the processing of 
trade documentation. The areas surrounding dry ports can then emerge as growth poles, bringing 
new investment and employment opportunities to impoverished hinterlands while reducing the 
pressure on coastal areas. Building on its Asian Highway and Trans Asian Railway Networks, the 
ESCAP secretariat is now helping the region develop a network of dry ports while improving trade 
and transport facilitation. ESCAP, along with the ADB is collaborating with ASEAN in developing a 
connectivity master plan.
(c) ICT superhighways – Expanding markets and business opportunities and creating a more unified 
economic space will depend crucially on better intraregional ICT connectivity to reduce the digital 
divide and accelerate cross-border information and communication flows. One of the main tasks will 
be to offer greater international bandwidth – particularly for the landlocked developing countries and 
the Pacific island developing countries. As well as boosting economic development such connectivity 
can also be used to establish systems for emergency early warnings and disaster response. 
(d) Regional financial architecture – The economic crisis highlighted the lack of regional response 
options. Most of the measures had to be taken by national governments. So far the cooperation 
has been largely limited to the Chiang Mai Initiative that has now been multilateralized with a 
reserve pool of $120 billion for meeting the temporary liquidity needs of the ASEAN+3 countries. 
The region now needs to further develop its financial architecture, which would include systems of 
intermediation between its large savings and its unmet investment needs. One option would be to 
create an infrastructure development fund managed by a regional institution. If this secured just 5% 
of the region’s reserves of nearly $5 trillion it could have start-up capital of $250 billion, as well as 
the ability to borrow from the region’s central banks. This pooling of reserves could assist the region 
in meeting some of its investment needs for transport, energy, water and telecommunications – 
estimated at more than $800 billion per annum. 
xi

Another area where regional financial architecture could make a positive contribution is in exchange 
rate coordination. As the economies of the region increasingly trade with each other they will need 
a currency management system that facilitates trade and macroeconomic stability.
If governments had access to a well endowed regional crisis response and prevention facility they 
would feel less need to build up large foreign exchange reserves to protect their economies against 
speculative attacks and liquidity crises, and could thus free up reserves for more productive 
investments. Enhanced regional cooperation should not, however, be regarded as an alternative to 
full participation in global economic relations. Rather it should be seen as a complement to it, filling 
in the gaps and establishing the building blocks for global multilateral cooperation. 
The development of a regional financial architecture would also assist in policy coordination and in 
providing an Asia-Pacific  perspective on various global proposals that are emerging in the G-20, 
the United Nations and other forums. These include, for example, an SDR-based global reserve 
currency, a global tax on financial transactions to moderate short-term capital flows, and 
international regulations for the financial sector to curb excessive risk taking.
Asia and the Pacific now has an historic opportunity for cooperation, and in recent months some of 
the region’s major economies have started a process of deeper mutual engagement – though if they 
are to carry through their more ambitious plans they will need to add greater detail to general 
statements of intent.
Noeleen Heyzer
Under-Secretary-General of the United Nations and 
Executive Secretary, United Nations Economic and 
Social Commission for Asia and the Pacific
xii

ACKNOWLEDGEMENTS
This report was prepared under the overall direction and guidance of Noeleen Heyzer, Under-
Secretary-General of the United Nations and Executive Secretary of the Economic and Social
Commission for Asia and the Pacific (ESCAP), and under the substantive direction of Nagesh
Kumar, Chief Economist and Director of the Macroeconomic Policy and Development Division.  The
core team, led by Tiziana Bonapace, included Shuvojit Banerjee, Somchai Congtavinsutti, Eugene
Gherman, Yejin Ha, Alberto Isgut, Nobuko Kajiura, Muhammad H. Malik, George Manzano and Amy
Wong.
ESCAP staff who contributed substantively include:  Amitava Mukherjee of Macroeconomic Policy
and Development Division (MPDD); Aneta Nikolova and Hitomi Rankine of the Environment and
Development Division; Jorge Martinez-Navarrete, Atsuko Okuda and Nokeo Ratanavong of the
Information and Communications Technology and Disaster Risk Reduction Division; Yu Kanosue and
Sarah Lowder of the Social Development Division;  Clovis Freire, Erik Hermouet and Ilpo Survo of
the Statistics Division;  Yann Duval of the Trade and Investment Division;  John Moon of the
Transport Division; and Krishnamurthy Ramanathan, N. Srinivasan and Krishnan Srinivasaraghavan
of the Asian and Pacific Centre for Transfer of Technology (APCTT).
Valuable advice, comments and inputs were received from many staff of the United Nations which
include:  Kee Beom Kim and Gyorgy Sziraczki of the International Labour Organisation;  Pingfan
Hong and Matthias Kempf of the Department of Economic and Social Affairs, United Nations, New
York; and Aynul Hasan, Syed Nuruzzaman, Seung Hun Jung, Ouk Heon Song, and Marin Yari of
MPDD.  Iosefa Maiava, Michal Kuzawinski and David Smith of the ESCAP Pacific Operations Centre
of ESCAP.
The following experts provided country reports and other inputs:  Zamir Ahmed, Rajeev Malhotra,
Ron Duncan, Mohammad Kordbache, Ramkishen S. Rajan, Prabir De and Prakash Shrestha.
The report benefitted from an external peer review, comments and suggestions from an eminent
group of Asian policy makers, scholars and development practitioners, namely:  Yilmaz Akyuz,
Special Economic Advisor, South Centre, Switzerland; Mohamed Ariff, Executive Director, Malaysian
Institute of Economic Research (MIER), Malaysia; Ramgopal Agarwala, Distinguished Fellow, Re-
search and Information System for Developing Countries, India; Md. Mosharraf Hossain Bhuiyan,
Additional Secretary, Economic Relations Division, Ministry of Finance, Bangladesh; Michael Busai,
Acting Director/Principal Economist, Ministry of Finance and Economic Management, Vanuatu;  Abdul
Wassay Haqiqi, Senior Advisor to the Minister of Economy, Ministry of Economy, Afghanistan;
Mohamed Imad, Assistant Executive Director, Department of National Planning, Maldives; Saman
Kelegama, Executive Director, Institute of Policy Studies of Sri Lanka, Sri Lanka; Ambassador K.
Kesavapany, Director, Institute of Southeast Asian Studies, Singapore;  Norman Lenga, Policy
Analyst, Ministry of Finance and Treasury, Solomon Islands; Ashfaque H. Khan, Dean & Professor,
National University of Sciences and Technology, NUST Business School, Pakistan;  Gombosuren
Khandtsooj, Officer, Financial and Economic Policy Department, Mongolia; Martin Khor, Executive
Director, South Centre, Switzerland; Tin Htut Oo, Director-General, Department of Agricultural
Planning, Ministry of Agriculture and Irrigation, Myanmar;  Pichit Patrawimolpon,  Director, Office of
the Governor, Bank of Thailand, Thailand;  Kim Phalla, Director, Economic and Public Finance
Department, Ministry of Economic and Finance, Cambodia;  Prabowo, Strategic Asia (Indonesia),
Indonesia;  Atiur Rahman, Governor, Bangladesh Bank, Bangladesh;  Reteta Rimon-Nikuata, Kiribati
xiii

High Commissioner, Fiji; João Mariano Saldanha, Senior Management Adviser for Policy Analysis and
Research, Timor-Leste; Pushpa Lal Shakya, Joint Secretary of National Planning Commission, Nepal;
Vo Tri Thanh, Vice President, Central Institute of Economic Management, Viet Nam; and Tandin
Wangchuk, Planning Officer, Perspective Planning Division, Bhutan.
Erik Huldt and Amornrat Supornsinchai of the Macroeconomic Policy and Development Division,
ESCAP provided research assistance.
Orestes Plasencia, Kim Atkinson and Chirudee Pungtrakul of the Editorial Unit of ESCAP and Peter
Stalker edited the manuscript.  The graphic design was created by Marie Ange Sylvain-Holmgren,
and the layout and printing were provided by TR Enterprise.
Woranut Sompitayanurak, supported by Metinee Hunkosol, Anong Pattanathanes and Sutinee
Yeamkitpibul of the Macroeconomic Policy and Development Division, ESCAP, proofread the manu-
script and undertook all administrative processing necessary for the issuance of the publication.
Paul Risley, Mitchell Hsieh, Bentley Jenson, Thawadi Pachariyangkun and Chavalit Boonthanom of
the United Nations Information Services, coordinated the launch and dissemination of the report.
xiv

CONTENTS
Page
Foreword .....................................................................................................................................
i i
Executive Secretary’s preface ..................................................................................................
v
Acknowledgements ....................................................................................................................
xiii
Abbreviations ..............................................................................................................................
xxvii
Sources of quotations ...............................................................................................................
xxix
Chapter 1. The beginnings of recovery and policy responses ...........................................
3
Coping with vulnerability .................................................................................
5
Vulnerable to trade and financial exposure ...................................................
5
Exposure to developed-country demand .......................................................
7
Exposure to capital flows ...............................................................................
17
Capital markets and exchange rates:  renewed inflows bring instability ......
22
Emerging reorientation of foreign direct investment ......................................
25
Evolving impacts on jobs and income ...........................................................
27
Migration and remittances:  bucking the pressures ......................................
31
Domestic demand and fiscal space shaping responses ...............................
33
Growth outlook for 2010 .................................................................................
41
Recovery underway ........................................................................................
41
Backdrop for 2010 forecast ...........................................................................
41
Different paces of expansion .........................................................................
44
Downside risks persist ...................................................................................
45
Balancing growth with stability ......................................................................
46
Inflation threatens from demand and supply sides .......................................
46
Asset bubbles build up ...................................................................................
49
Avoiding premature exit ..................................................................................
52
Sustaining Asia’s dynamism ...........................................................................
53
Chapter 2. Crisis and rebound:  the differentiated impacts, policy responses
and outlook at the subregional level ..................................................................
57
East and North-East Asia ................................................................................
58
Impact of the crisis .........................................................................................
60
Policy responses.............................................................................................
65
Outlook and policy challenges .......................................................................
68
North and Central Asia ...................................................................................
69
Impact of the crisis .........................................................................................
71
Policy responses.............................................................................................
73
Outlook and policy challenges .......................................................................
77
xv

CONTENTS (continued)
Page
Oceania ....................................................................................................................
78
Impact of the crisis ..............................................................................................
78
Policy responses ..................................................................................................
86
Outlook and policy challenges ............................................................................
88
South and South-West Asia .................................................................................
89
Impact of the crisis ..............................................................................................
89
Policy responses ..................................................................................................
95
Outlook and policy challenges ............................................................................
98
South-East Asia ......................................................................................................
100
Impact of the crisis ..............................................................................................
100
Policy responses ..................................................................................................
105
Prospects .............................................................................................................
109
Chapter 3. Multiple imbalances and development gaps as new engines of growth ........
115
Macroeconomic imbalances ............................................................................
118
Sources of imbalances ...................................................................................
121
Socio-economic imbalances and development gaps ...................................
125
Poverty reduction: remarkable but uneven ....................................................
125
Poverty-inequality-household consumption nexus ..........................................
126
Poverty and multiple deprivations ..................................................................
129
Infrastructure and other development gaps ...................................................
133
Growing ecological imbalances ......................................................................
136
Linkages between the three imbalances .......................................................
140
Annex I ................................................................................................................
142
Annex II ...............................................................................................................
143
Chapter 4. A regional policy agenda for regaining the dynamism ....................................
147
Redressing socio-economic and environmental imbalances
for expanding domestic consumption 
...........................................................
148
Strengthening social protection ......................................................................
148
A “Green revolution” for food security and poverty reduction .......................
151
“Green growth”: new green industries as engines of growth ........................
154
Enhancing financial inclusiveness ..................................................................
158
xvi

CONTENTS (continued)
Page
Expanding demand through cooperation .......................................................
160
Evolving a broader framework for economic integration ...............................
161
Developing regional transportation networks and improving
trade facilitation ...........................................................................................
162
Strengthening connectivity through information and communications
technology (ICT)..........................................................................................
165
Developing financial architecture for crisis prevention and narrowing
the gaps ......................................................................................................
167
References and further readings .............................................................................................
179
Statistical annex .........................................................................................................................
195
xvii

BOXES
Page
1.
Assessing the impact of expected downturns in export growth ........................................
35
2.
Potential for economic cooperation:  the Democratic People’s Republic of Korea ..........
69
3.
Creating a “Eurasian Union”:  the Russian Federation, Kazakhstan, and Belarus ..........
77
4.
Connectivity in the Pacific ..................................................................................................
89
5.
Indian National Rural Employment Guarantee Scheme ....................................................
96
6.
The changing direction of ASEAN trade ............................................................................
111
7.
Sensitivity of the results to alternative methods to compute the contribution of
aggregate demand components to GDP growth ...............................................................
123
8.
Pro-poor investments in renewable energy and beyond ...................................................
156
9.
Connectivity for improved disaster preparedness, response and management ...............
166
xviii

FIGURES
Page
1.
World economic growth:  a post-war story of rising prosperity, 1930 to 2010 ................
4
2.
The Asia-Pacific region is the fastest growing of all, 2009 and 2010 ..............................
4
3.
Real GDP growth, year-on-year, in selected developing and developed countries,
2008 and 2009 ...................................................................................................................
6
4.
Spread of overnight LIBOR rates to overnight United States Federal Reserve
effective fund rates, February 2007 to January 2010 .......................................................
7
5.
Real GDP growth of six export-oriented developing economies, by quarter,
2008 and 2009 ...................................................................................................................
8
6.
Comparative growth performance of goods exports of major developing economies
during three crises, 1997 to 2009 ......................................................................................
9
7.
Index of total United States imports and United States imports from Asian
and Pacific developing and developed economies, by quarter, 2007 to 2009 .................
9
8.
Export dependence in subregions of Asia and the Pacific, in three-year
averages, in percentage shares of GDP, 1994 to 1996 and 2005 to 2007 .....................
13
9.
Net private capital flows to “emerging” Asia, 1991 to 2010 ..............................................
18
10.
Loan-to-deposit ratios in major Asian developing economies, third quarter of 2009 .......
19
11.
Vulnerability yardstick as a percentage of foreign reserves in major
developing economies, 2008 ..............................................................................................
22
12.
Exchange rate movements in major developing economies, 2007 to 2009 .....................
23
13.
Change in nominal effective exchange rates from peak to trough in major developing
economies during two crises, 1997 to 1998 and 2008 to 2009 .......................................
24
14.
Foreign reserves in six developing economies, December 2007 to December 2009 ......
24
15.
Gross inward direct investment in major developing economies, 2007 to 2009 ..............
26
16.
Social expenditure as a percentage of GDP, worldwide, during most
recent year available ..........................................................................................................
28
17.
Labour market trends in four Asian economies, 1996 to 2008 ........................................
30
18.
Monthly and quarterly unemployment rates in six Asian economies,
2008 and 2009 ...................................................................................................................
31
xix

FIGURES (continued)
Page
19.
Annual growth rate in overseas workers’ remittances in four developing economies,
2007/08 and 2008/09 ..........................................................................................................
32
20.
Contributions of domestic demand, exports and imports to real GDP
growth in major Asian developing economies, 2008 and 2009 ........................................
34
21.
Real exports of 11 major Asian economies .......................................................................
37
22.
Interest rates in major Asian developing economies, 2008 and 2009 ..............................
40
23.
Economic growth rates of Asian and Pacific developing economies and world
developed economies, 2003 to 2010 .................................................................................
41
24.
Average growth rates and forecasts of Asian and Pacific economies by subregion,
2003 to 2010 ......................................................................................................................
44
25.
Consumer price inflation, year-on-year, in major Asian developing economies,
2008 and 2009 ...................................................................................................................
47
26.
Credit growth, year-on-year, in major Asian developing economies,
January 2007 to October 2009 ..........................................................................................
50
27.
Equity market performance in major Asian developing economies,
January 2008 to December 2009 ......................................................................................
50
28.
Equity market behaviour peak-to-trough during two crises, 1997 to 1998 and
2008 to 2009 ......................................................................................................................
51
29.
Performance indices of regional emerging-market equities, 15 September 2008 to
8 January 2010 ...................................................................................................................
52
30.
Real GDP growth of Asian and Pacific developing and world developed
economies, 2003 to 2010 ...................................................................................................
58
31.
Map of growth deceleration among Asian and Pacific economies:
Comparison of crisis-period growth with pre-crisis growth trends.....................................
59
32.
Real GDP growth, year-on-year, of major East and North-East Asian economies,
2008 and 2009 ...................................................................................................................
61
33.
Export growth, year-on-year, of major East and North-East Asian economies,
2008 and 2009 ...................................................................................................................
63
34.
Import growth, year-on-year, of major East and North-East Asian economies,
2008 and 2009 ...................................................................................................................
63
xx

FIGURES (continued)
Page
35.
Current account balance as a percentage of GDP in major East and North-East
Asian economies, 2007 to 2009 ........................................................................................
64
36.
Interest rates in major East and North-East Asian economies, 2008 and 2009 ..............
66
37.
Budget balance as a percentage of GDP of major East and North-East Asian
economies, 2007 to 2009 ...................................................................................................
67
38.
Current account balance as a percentage of GDP in North and Central Asian
economies, 2007 to 2009 ...................................................................................................
72
39.
Budget balance as a percentage of GDP in North and Central Asian economies,
2007 to 2009 ......................................................................................................................
75
40.
Index of exchange rates movements in selected North and Central Asian
economies, 2007 to 2009 ...................................................................................................
76
41.
Current account balances as a percentage of GDP of the countries in Oceania,
2007 to 2009 ......................................................................................................................
83
42.
Current account balance as a percentage of GDP in South and South-West
Asian economies, 2007 to 2009 ........................................................................................
94
43.
Budget balance as a percentage of GDP in selected South and South-West
Asian economies, 2007 to 2009 ........................................................................................
97
44.
Combined share of United States and European Union purchases of merchandise
exports of selected South-East Asian economies, 2006 to 2007 and 2008.....................
101
45.
Export share of electronics, machinery, motor vehicles and apparel in total
exports, selected South-East Asian economies, 2006 to 2008 .........................................
102
46.
Budget balance as a percentage of GDP in selected South-East Asian economies,
2007 to 2009 ......................................................................................................................
106
47.
Current account balance as a percentage of GDP in selected South-East Asian
economies, 2007 to 2009 ...................................................................................................
107
48.
Index of exchange rate movements in selected South-East Asian economies, 2009 .....
109
49.
Trends in the real GDP of selected regions and countries ..............................................
116
50.
Real GDP per capita adjusted by purchasing power parity ..............................................
117
51.
Trade and current account balances .................................................................................
119
xxi

FIGURES (continued)
Page
52.
Share of net exports of goods and services in long-term real GDP growth ....................
120
53.
Share of gross fixed investment in long-term real GDP growth .......................................
121
54.
Share of consumption in long-term real GDP growth .......................................................
122
55.
Paths of poverty rates and GDPs per capita in selected countries .................................
126
56.
Per capita household consumption and per capita GDP in 15 Asian and Pacific
developing countries ...........................................................................................................
128
57.
Headcount poverty and employment in the informal sector in the
Asia-Pacific region ..............................................................................................................
130
58.
Headcount poverty and underweight children in the Asia-Pacific region ..........................
131
59.
Headcount poverty and primary education survival rate in the Asia-Pacific region ..........
131
60.
Headcount poverty and access to improved sanitation in the Asia-Pacific region ...........
132
61.
Infrastructure composite scores in Asia and the Pacific, 2007 .........................................
135
62.
Net loss or increase in forest area between 1990 and 2005 ...........................................
136
63.
Proportion of total renewable freshwater resources withdrawn .........................................
138
64.
A schematic view of the three imbalances ........................................................................
141
65.
FAO food price index and Brent crude oil price, January 2004 to February 2010 ..........
152
66.
Asian Highway and Trans-Asian Railway Networks ..........................................................
162
xxii

TABLES
Page
1.
Share of Asian and Pacific developing and developed economies in total
United States imports, by quarter, 2007 to 2009 ...............................................................
10
2.
Trade intensity indices of Asian and Pacific economies, 2007 .........................................
15
3.
Intra-industry trade indices of Asian and Pacific economies, by sector, 2007 .................
17
4.
Foreign reserve adequacy, 1996 to 2009:  outstanding year-end reserves position ........
20
5.
Impact of the 2009 shortfall in exports on GDP of major Asian economies ....................
36
6.
Estimated multiplier effects of aggregate demand components ........................................
38
7.
Rates of economic growth and inflation of Asian and Pacific economies,
in percentages, 2008 to 2010 ............................................................................................
42
8.
Rate of economic growth and inflation in East and North-East Asian economies,
2008 to 2010 ......................................................................................................................
61
9.
Rate of economic growth and inflation in North and Central Asian economies,
2008 to 2010 ......................................................................................................................
70
10.
Trade performance of North and Central Asian economies, in percentages,
2007 to 2009 ......................................................................................................................
73
11.
Receipts of workers’ remittances in major North and Central Asian economies,
2006 to 2008 ......................................................................................................................
74
12.
Rate of economic growth and inflation in countries in Oceania, 2008 to 2010 ...............
79
13.
Recent international primary commodity prices, 2007 to 2009 .........................................
84
14.
Total visitor arrivals in selected Pacific island economies, in thousands of people,
2004 to 2009 ......................................................................................................................
85
15.
Remittances inflows as a percentage of GDP in selected Pacific island economies,
2000 to 2008 ......................................................................................................................
86
16.
Rate of economic growth and inflation in South and South-West Asian economies,
2008 to 2010 ......................................................................................................................
90
17.
Rate of economic growth and inflation in South-East Asian economies,
2008 to 2010 ......................................................................................................................
101
18.
Percentage changes of real GDP of major South-East Asian economies,
year-on-year, 2007 to 2009 ................................................................................................
103
xxiii

TABLES (continued)
Page
19.
Import growth by ASEAN economies, by source, 2008 and 2009, in percentages .........
108
20.
Percentage shares of imports by ASEAN economies, by source, 2004 to 2008, in
percentages.........................................................................................................................
108
21.
Foreign exchange reserves minus gold, selected South-East Asian economies, 2009,
in billions of United States dollars ......................................................................................
110
22.
ASEAN export growth, 2008 and 2009, in percentages ...................................................
111
23.
Percentage shares of ASEAN exporters in destination markets, in selected years .........
111
24.
Contributions of consumption, investment and exports to GDP growth ...........................
124
25.
Poverty reduction between 1990 and the mid-2000s ........................................................
125
26.
Inequality and household consumption growth between 1990 and the
mid-2000s ...........................................................................................................................
127
27.
Country groups on and off track for the Millennium Development Goals ........................
134
28.
Carbon dioxide emissions from selected major economies ..............................................
139
29.
Regional currency swings during the crisis .......................................................................
171
xxiv

EXPLANATORY NOTES
Staff analysis in the Survey 2010 is based on data and information available up to the end of March 2010.
The term “ESCAP region” is used in the present issue of the Survey to include Afghanistan; American Samoa; Armenia;
Australia; Azerbaijan; Bangladesh; Bhutan; Brunei Darussalam; Cambodia; China; Cook Islands; Democratic People’s  Republic of
Korea; Fiji; French Polynesia; Georgia; Guam; Hong Kong, China; India; Indonesia; Iran (Islamic Republic of); Japan;
Kazakhstan; Kiribati; Kyrgyzstan; Lao People’s Democratic Republic; Macao, China; Malaysia; Maldives; Marshall Islands;
Micronesia (Federated States of); Mongolia; Myanmar; Nauru; Nepal; New Caledonia; New Zealand; Niue; Northern Mariana
Islands; Pakistan; Palau; Papua New Guinea; Philippines; Republic of Korea; Russian Federation; Samoa; Singapore; Solomon
Islands; Sri Lanka; Tajikistan; Thailand; Timor-Leste; Tonga; Turkey; Turkmenistan; Tuvalu; Uzbekistan; Vanuatu; and Viet Nam.
The term “developing ESCAP region” excludes Australia, Japan and New Zealand. Non-regional members of ESCAP are
France, the Netherlands, the United Kingdom of Great Britain and Northern Ireland and the United States of America.
The term “Central Asian countries” in this issue of the Survey refers to Armenia, Azerbaijan, Georgia, Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.
The term “East and North-East Asia” in this issue of the Survey refers to China; Hong Kong, China; Japan; Macao, China;
Mongolia; Republic of Korea; and Russian Federation.
The designations employed and the presentation of the material in this publication do not imply the expression of any
opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory,
city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.
Mention of firm names and commercial products does not imply the endorsement of the United Nations.
The abbreviated title Survey in footnotes refers to the Economic and Social Survey of Asia and the Pacific for the year
indicated.
Many figures used in the Survey are on a fiscal year basis and are assigned to the calendar year which covers the major
part or second half of the fiscal year.
Growth rates are on an annual basis, except where indicated otherwise.
Reference to “tons” indicates metric tons.
Values are in United States dollars unless specified otherwise.
The term “billion” signifies a thousand million.  The term “trillion” signifies a million million.
In the tables, two dots (..) indicate that data are not available or are not separately reported, a dash (–) indicates that the
amount is nil or negligible, and a blank indicates that the item is not applicable.
In dates, a hyphen (-) is used to signify the full period involved, including the beginning and end years, and a stroke (/)
indicates a crop year, fiscal year or plan year.  The fiscal years, currencies and 2010 exchange rates of the economies in
the ESCAP region are listed in the following table:
Rate of exchange
Country or area in the ESCAP region
      Fiscal year
Currency and abbreviation
for $1 as at
January 2010
Afghanistan .......................................
21  March to 20 March
afghani (Af)
48.74a
American Samoa ..............................
            ..
United States dollar ($)
1.00
Armenia .............................................
1  January to 31 December
dram
376.69
Australia ............................................
1  July to 30 June
Australian dollar ($A)
1.12
Azerbaijan .........................................
1 January to 31 December
Azeri manat (AZM)
0.80
Bangladesh .......................................
1 July to 30 June
taka (Tk)
69.20
Bhutan ...............................................
1 July to 30 June
ngultrum (Nu)
46.37
Brunei Darussalam ...........................
1 January to 31 December
Brunei dollar (B$)
1.40
Cambodia ..........................................
1 January to 31 December
riel (CR)
4 165.00a
China .................................................
1 January to 31 December
yuan renminbi (Y)
6.83
Cook Islands .....................................
1 April to 31 March
New Zealand dollar ($NZ)
1.42
Democratic People’s Republic
of Korea ........................................
            ..
won (W)
139.00
Fiji .....................................................
1 January to 31 December
Fiji dollar (F$)
1.94
xxv

Rate of exchange
Country or area in the ESCAP region      Fiscal year
Currency and abbreviation
for $1 as at
January 2010
French Polynesia ..............................
            ..
French Pacific Community franc
(FCFP)
85.92
Georgia .............................................
1  January to 31 December
lari (L)
1.74
Guam ................................................
1 October to 30 September
United States dollar ($)
1.00
Hong Kong, China ............................
1 April to 31 March
Hong Kong dollar (HK$)
7.76
India ..................................................
1 April to 31 March
Indian rupee (Rs)
46.37
Indonesia ..........................................
1 April to 31 March
Indonesian rupiah (Rp)
9 365.00
Iran (Islamic Republic of) ................
21 March to 20 March
Iranian rial (Rls)
10 008.00
Japan ................................................
1 April to 31 March
yen (Y
=)
89.85
Kazakhstan .......................................
1 January to 31 December
tenge (T)
148.21
Kiribati ...............................................
1  January to 31 December
Australian dollar ($A)
1.12
Kyrgyzstan ........................................
1 January to 31 December
som (som)
44.28
Lao People’s Democratic Republic .
1 October to 30 September
new kip (NK)
8 484.25a
Macao, China ...................................
1 July to 30 June
pataca (P)
8.01
Malaysia ............................................
1 January to 31 December
ringgit (M$)
3.41
Maldives ............................................
1 January to 31 December
rufiyaa (Rf)
12.80
Marshall Islands ...............................
1 October to 30 September
United States dollar ($)
1.00
Micronesia (Federated States of) ....
1 October to 30 September
United States dollar ($)
1.00
Mongolia ...........................................
1 January to 31 December
tugrik (Tug)
1 442.84a
Myanmar ...........................................
1 April to 31 March
kyat (K)
5.43a
Nauru ................................................
1 July to 30 June
Australian dollar ($A)
1.12
Nepal .................................................
16 July to 15 July
Nepalese rupee (NRs)
74.20
New Caledonia .................................
          ..
French Pacific Community franc
(FCFP)
85.92
New Zealand ....................................
1 April to 31 March
New Zealand dollar ($NZ)
1.42
Niue ...................................................
1 April to 31 March
New Zealand dollar ($NZ)
1.42
Northern Mariana Islands ................
1 October to 30 September
United States dollar ($)
1.00
Pakistan ............................................
1  July to 30 June
Pakistan rupee (PRs)
84.73
Palau .................................................
1 October to 30 September
United States dollar ($)
1.00
Papua New Guinea ..........................
1 January to 31 December
kina (K)
2.70a
Philippines .........................................
1 January to 31 December
Philippine peso (P)
46.75
Republic of Korea ............................
1 January to 31 December
won (W)
1 156.50
Russian Federation ..........................
1 January to 31 December
ruble (R)
30.43
Samoa ...............................................
1 July to 30 June
tala (WS$)
2.53
Singapore ..........................................
1 April to 31 March
Singapore dollar (S$)
1.40
Solomon Islands ...............................
1 January to 31 December
Solomon Islands dollar (SI$)
8.06a
Sri Lanka ..........................................
1 January to 31 December
Sri Lanka rupee (SL Rs)
114.55
Tajikistan ...........................................
1 January to 31 December
somoni
4.37
Thailand ............................................
1 October to 30 September
baht (B)
33.10
Timor-Leste .......................................
1  July to 30 June
United States dollar ($)
1.00
Tonga ................................................
1 July to 30 June
pa’anga (T$)
1.89
Turkey ...............................................
1 January to 31 December
Turkish lira (LT)
1.49
Turkmenistan ....................................
1  January to 31 December
Turkmen manat (M)
2.85
Tuvalu ...............................................
1 January to 31 December
Australian dollar ($A)
1.12
Uzbekistan ........................................
1 January to 31 December
som (som)
1 510.00
Vanuatu .............................................
1 January to 31 December
vatu (VT)
97.93
Viet Nam ...........................................
1 January to 31 December
dong (D)
17 941.00
Note:  a December 2009.
Sources: United Nations, Monthly Bulletin of Statistics website, http://unstats.un.org/unsd/mbs/app/DataSearchTable.aspx, 9 March 2010; CEIC Data
Company Limited; and national sources.
xxvi

ABBREVIATIONS
AADMER
ASEAN Agreement on Disaster Management and Emergency Response
ABMI
Asian Bond Market Initiative
ADB
Asian Development Bank
ADBI
Asian Development Bank Institute
AFTA
ASEAN Free Trade Agreement
APCAEM
Asian and Pacific Centre for Agricultural Engineering and Machinery
APEC
Asia-Pacific Economic Cooperation
APTA
Asia-Pacific Trade Agreement
ASEAN
Association of Southeast Asian Nations
BIMSTEC
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
BIS
Bank for International Settlements
CAPSA
Centre for Alleviation of Poverty through Secondary Crops’
Development in Asia and the Pacific
c.i.f.
cost, insurance, freight
CAREC
Central Asia Regional Economic Cooperation Corridors
CD-ROM
compact disk read-only memory
CEPEA
comprehensive  economic partnership of East Asia
CMI
Chiang Mai Initiative
CNG
compressed natural gas
CPI
consumer price index
EAFTA
East Asia Free Trade Agreement
EAS
East Asia Summit
ECE
Economic Commission for Europe
EIU
Economist Intelligence Unit
ERIA
Economic Research Institute of ASEAN and East Asia
EU
European Union
EurAsEC
Eurasian Economic Community
FAO
Food and Agriculture Organization of the United Nations
FDI
foreign direct investment
xxvii

ABBREVIATIONS (continued)
f.o.b.
free on board
FTA
Free trade area
GDP
gross domestic product
GMS
Greater Mekong Subregion
HIV
Human immunodeficiency virus
ICT
information and communication technology
ILO
International Labour Organization
IMF
International Monetary Fund
IPCC
Intergovernmental Panel on Climate Change
MDG
Millennium Development Goal
NGOs
non-governmental organizations
NREGA
National Rural Employment Guarantee Act
ODA
official development assistance
OECD
Organisation for Economic Cooperation and Development
PPP
purchasing power parity
R&D
research and development
SAARC
South Asian Association for Regional Cooperation
SARS
severe acute respiratory syndrome
SDRs
special drawing rights
TRIPs
Trade-Related Aspects of Intellectual Property Rights
UNCTAD
United Nations Conference on Trade and Development
UNDP
United Nations Development Programme
UNFCCC
United Nations Framework Convention on Climate Change
WTO
World Trade Organization
xxviii

SOURCES OF QUOTATIONS
(a) Page 1: an excerpt from the message of President Hu Jintao (China) at the APEC meeting on
the theme “Sustaining Growth, Connecting the Region” on 15 November 2009 (source: http://
english.gov.cn/2009-11/15/content_1465068.htm).
(b) Page 55: an excerpt from the message of Prime Minister Manmohan Singh (India) at the G-20
Meeting at Pittsburgh: Plenary Session, 25 September 2009 (source: http://pmindia.nic.in/
speeches.htm).
(c) Page 113: an excerpt from a speech by President Susilo Bambang Yudhoyono (Indonesia),
Speech at the APEC CEO Summit, Rebuilding the Global Economy: Crisis and Opportunity,
Singapore, 13 November 2009 (source: http://www.globalentrepolis.com/downloads/President
SBYSpeech-CEOSummit.pdf).
(d) Page 145: an excerpt from a speech by Prime Minister Edward Natapei (Vanuatu), Speech at
the Global Economic Crisis Conference, Port Vila, Vanuatu, 10-12 February 2010 (source: http://
vanuatu2010.un.org.fj/pages.cfm/press-corner/speeches-statements/speech-by-hon-edward-
natapei-prime-minister-of-vanuatu.html).
(e) Page 177: an excerpt from a speech by Under-Secretary-General of the United Nations and
Executive Secretary of ESCAP, Noeleen Heyzer, Innovative Government: Innovation on the
Road To Economic Recovery in Singapore, 3 December 2009.
(f)
Back cover: an excerpt from an article by BAN Ki-moon, Secretary-General of the United
Nations,  Daily News (Egypt), 4 July 2009 (source: http://www.un.org/sgarticleFull.asp?TID=103&
Type=Op-Ed).
xxix








“We should all the more get 
united, follow the principle of 
openness, cooperation and mutual 
benefit, strengthen coordination 
and work together to secure the 
momentum of world economic 
recovery and promote balanced 
and orderly economic growth”

Hu Jintao
President, People’s Republic of China



THE BEGINNINGS OF
RECOVERY AND POLICY 1
RESPONSES
A year and a half after the global economic crisis hit Asian and Pacific shores, 
the region faces rapidly evolving challenges that underline the need for policy 
reforms geared to more inclusive and sustainable modes of economic growth. 
While the crisis did not originate here, Asian and Pacific economies have 
been significantly impacted because of their vulnerability to extraregional 
developments, primarily through trade and financial channels. This chapter 
reviews the differentiated impact of the crisis on countries and the challenges 
to recovery.
Some six decades of stable world economic growth had appeared to confirm 
that policymakers had mastered the art of fine-tuning countercyclical policies 
(figure 1). Then in 2008 financial crisis propelled a synchronized decline in 
world economic growth, calling into question many of the premises on which 
market economies had functioned since the Second World War.
Policy response at the global level was swift and unprecedented in size. 
Financial meltdown was averted. Emerging from the crisis, Asian and Pacific 
economies have shown greater resilience with faster and higher growth than 
have the developed world and all the other developing regions (figure 2).



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 1.  World economic growth: a post-war story of rising
prosperity, 1930 to 2010
20
15
10
-on-year)
5
0
ages (year
– 5
– 10
Percent
– 15
1930
1940
1950
1960
1970
1980
1990
2000
2010
United States
Japan
World
Sources: Data on United States GDP growth come from the United States Department of Commerce, Bureau of Economic
Analysis,  National Income and Product Accounts Table, available from www.bea.gov/national/nipaweb/TablePrint.asp?FirstYear
=1930&LastYear=2009&Freq=Year&SelectedTable=1&ViewSeries=NO&Java=no&MaxValue=48.9&MaxChars=5&Request3
Place=N&3Place=N&FromView=YES&Legal=&Land= (accessed 26 Feb. 2010), including updates from IMF, World Economic
and Financial Surveys: World Economic Outlook Database
, Oct. 2009 ed., available from www.imf.org/external/pubs/ft/weo/
2009/02/weodata/index.aspx (accessed 26 Feb. 2010); data on world GDP come from IMF, International Financial Statistics,
Vol. 61, 2008 (Washington, D.C.: IMF, 2008) with updates from IMF, World Economic Outlook Database; data of Japan are
based on data from the Economic and Social Research Institute, Cabinet Office, Government of Japan accessible at
www.esri.cao.go.jp/ (accessed 26 Feb. 2010).
FIGURE 2. The Asia-Pacific region is the fastest growing of all, 2009 and 2010
Asia-Pacifica
Africa
Middle East
Latin America and Caribbean
Europeb
Percentages
– 4
– 2
0
2
4
6
8
2009
2010
Notes:  a Only developing economies in the ESCAP region (excluding countries of the Commonwealth of Independent
States).  b Developed and developing member countries of the European Economic Commission.
Sources: ESCAP calculations based on data from the United Nations regional commissions.
4

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
The impact of the crisis has revealed the vul-
the fourth quarter of 2008 onwards, as exports
nerability of the region to external shocks – its
declined with contracting consumption in devel-
excessive dependence on import demand gen-
oped countries. Export-dependent economies,
erated by extraregional markets, principally the
particularly those in East and South-East Asia,
European Union and the United States of
suffered large reductions in growth of gross
America, and exposure to financial and ex-
domestic product (GDP; figure 3).
change-rate instabilities. The degree of expo-
sure depended on demand structure in each of
The first blows of the crisis in the Asia-Pacific
the economies, their fiscal space and the extent
region fell in the financial sector from the third
of foreign exchange reserves.
quarter of 2008, following the collapse of
Lehman Brothers in September 2008 and the
arrest in global financial flows. Capital exited
Asian and Pacific asset markets as a result of
In the aftermath of the crisis, a
risk aversion and the need for investors in
return to “business as usual”
developed countries to settle losses in their
is unlikely
home markets. The initial macroeconomic effects
were, however, limited to substantial declines in
exchange rates in some economies, buttressed
by the use in many cases of substantial foreign
In the aftermath of the crisis, a return to “busi-
exchange reserves. Severely affected, Pakistan
ness as usual” is unlikely, however tempting that
and Sri Lanka had to go to the International
might be with the current rebound. Debt-fuelled
Monetary Fund for balance of payments support.
(both governmental and private) economies, age-
Singapore and the Republic of Korea arranged
ing populations and a slowdown in technological
credit lines with the United States Federal
innovations all point to a long period of stagnation
Reserve. The Republic of Korea also arranged
in developed countries. The axis of growth may
bilateral credit lines with Japan and China.
have shifted in a defining manner towards devel-
oping economies, with those of Asia and the
Asia and the Pacific as a whole survived the
Pacific particularly well placed.
financial shock of the crisis far better than the
other developing regions of the world, largely
The challenges and opportunities present in the
because of the risk management measures and
altered economic balance of the world require
prudent macroeconomic management that the
critical policy decisions in the year ahead. While
region has followed after the 1997 Asian crisis.
national policies remain important, the Asia-
Pacific experience of the crisis has stoked recog-
The blockage in global financial markets im-
nition of the need for regional coordination in
proved over the course of 2009 as the massive
economic and financial policymaking to provide
liquidity provided by Governments in developed
the supportive structure for growth from within the
countries began to show results. By mid-2009,
region. The region needs to adopt a new toolkit of
the spread of bank-offered credit in comparison
policies while participating in creating new inter-
with United States Treasury Bill rates had
national financial and economic architecture.
narrowed to levels seen before the crisis
(figure 4).
COPING WITH VULNERABILITY
While the region generally weathered the finan-
cial storm, the export slowdown was more dra-
Vulnerable to trade and financial
matic in some countries and, concomitantly, had
exposure
far greater impact on their GDP growth. The
double-digit export growth up to the third quarter
As in other parts of the world, growth in the
of 2008 turned into double-digit contractions in
Asia-Pacific region was severely curtailed from
subsequent quarters. Exporting powerhouses of
5


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 3. Real GDP growth, year-on-year, in selected developing and
developed countries, 2008 and 2009
(a) Major Asian developing countries
15
10
5
ages
0
Percent
– 5
– 10
– 15
2008Q1 2008Q2
2008Q3 2008Q4 2009Q1 2009Q2 2009Q3
2009Q4
China
India
Indonesia
Malaysia
Philippines
Republic of Korea
Singapore
Thailand
(b) Major developed countries
4
2
0
– 2
ages
– 4
Percent
– 6
– 8
– 10 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4
United States
European Union
Japan
Developed countries
Source: Basic data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 5 Mar. 2010).
6


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
FIGURE 4. Spread of overnight LIBOR rates to overnight United States Federal
Reserve effective fund rates, February 2007 to January 2010
400
350
300
s
250
200
150
Basis point
100
50
0
Feb-07
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jan-10
Sources: ESCAP calculations based on data from the British Banker’s Association, available from www.bbalibor.com/bba/jsp/
polopoly.jsp?d=1661 (accessed 5 Mar. 2010); and the United States Federal Reserve, Federal Reserve Statistical Release,
available from www.federalreserve.gov/releases/h15/data.htm (accessed 18 Feb. 2010).
North-East and South-East Asia were hit hard
expansionary policies in the Asia-Pacific region
(figure 5) and consequently suffered severe
took effect during the latter half of the year.
contractions in growth – excepting China where
exports accounted for a relatively small share of
While the crisis impacted growth in GDP across
GDP and where fiscal stimulus supported do-
the board, the experience of individual countries
mestic demand.
varied in the region. Dependence on exports to
developed countries and exposure to global fi-
By the second quarter of 2009, the export con-
nancial flows were key determinants. Re-
traction reached a turning point and exports
sponses to the crisis also depended very much
began to pick up again in many major econo-
on country circumstances. In particular, domes-
mies of the region, causing the contraction in
tic demand and the availability of fiscal space
GDP growth to bottom out. Driving this
drove the differences in impacts and responses
stabilization and turnaround, the consumption
to the crisis between countries, as the following
slowdown in the world’s developed countries
paragraphs show.
had stabilized as governmental stimulus meas-
ures began to yield results. Personal consump-
tion expenditure in the United States increased
Exposure to developed-country demand
in the first quarter of 2009 by 0.6%; whereas it
had sharply fallen in the last two quarters of
The impact of the crisis was transmitted through
2008. By the third quarter of 2009 that rise had
trade shocks to the highly export-oriented econo-
multiplied more than fivefold to 3.4%.1  In tan-
mies in the Asia-Pacific region. Exports dropped
dem with the export turnaround, governmental
especially in the first half of 2009 at rates nearly
1
United States Department of Commerce, Bureau of Economic Analysis, “Gross domestic product: third quarter
2009 (advance estimate)”, press release, 29 Oct. 2009; available from www.bea.gov/newsreleases/national/gdp/
gdpnewsrelease.htm.
7


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 5. Real GDP growth of six export-oriented developing economies,
by quarter, 2008 and 2009
15
10
5
-on-year)
0
ages (year
– 5
– 10
Percent
– 15
Hong Kong, Philippines Republic of Singapore
Taiwan
Thailand
China
Korea
Province of
China
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 5
Mar. 2010).
twice as much as and more widespread than
oped Asian and Pacific economies to the United
those that followed the crisis of 1997 and the
States fell by much more than the total imports
recession in 2001 after the “dot-com bubble”
of the United States, particularly during the first
(figure 6). Monthly contraction rates of around
three quarters of 2008. The exports of develop-
40% in the Philippines, the Russian Federation,
ing Asian and Pacific economies fared better,
Singapore and others were observed over that
improving their market share towards the third
period. As income growth rates in the region
quarter of 2008 relative to their share in first
waned, imports dropped even more sharply. The
quarter of 2007. By the first quarter of 2009,
decline of imports in the wake of the export
exports from those developing economies were
collapse was further evidence of the high import
falling in tandem with the fall in total United
content of regional exports.
States imports, but an improvement was
recorded for the second quarter of the year.
The share in United States imports of the devel-
oped economies of the region continued to fall
Exports dropped at rates nearly
into the second quarter of 2009, before starting
to rebound. Meanwhile those developing econo-
twice as much as those that
mies had hit bottom earlier and begun growing
followed the crisis of 1997
again by the end of the first quarter of 2009.
How selected Asian and Pacific developing
The relative movements of total imports of the
economies fared in terms of competitiveness
United States of America and its imports from
during the downturn in United States import
the ESCAP region reveal vulnerability to trade
demand can be seen more directly from the
shocks as well as the capacity to recover from
relative movement in market share (table 1).
them (figure 7). Clearly the exports of devel-
Remarkably, despite the sharp drops in exports
8



THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
FIGURE 6. Comparative growth performance of goods exports of major
developing economies during three crises, 1997 to 2009
25
20
15
10
5
0
ages
– 5
– 10
Percent
– 15
– 20
– 25
– 30
– 35
China
India
Taiwan
Republic
of Korea
Province
of China
Indonesia
Malaysia
Thailand
Bangladesh
Philippines
2008-2009 global economic crisis
2001 dot-com crisis
1997-1998 Asian financial crisis
Note: Growth rates of 2008 and 2009 were computed using data of the first half of 2009 and the first half of 2008; those of 2001
dot-com were computed on the basis of 2001 over 2000; and those of 1997 and 1998 were computed on the basis of 1998 over
1997.
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 16
Feb. 2010).
FIGURE 7. Index of total United States imports and United States imports from Asian
and Pacific developing and developed economies, by quarter, 2007 to 2009
140
120
100
80
Index (2007Q1 = 100)
60
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
US total imports
imports from Asian-Pacific developing
imports from Asian-Pacific developed
imports from all Asian and Pacific economies
Source: Basic data from IMF database, Direction of Trade Statistics, available from www2.imfstatistics.org/DOT/ (accessed
16 Feb. 2010).
9


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 1. Share of Asian and Pacific developing and developed economies in
total United States imports, by quarter, 2007 to 2009
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
China
16.2
16.2
17.7
17.2
14.8
15.1
17.2
18.8
18.7
19.2
19.7
Indonesia
0.8
0.7
0.8
0.7
0.7
0.7
0.8
0.8
0.9
0.9
0.8
Malaysia
1.8
1.6
1.7
1.6
1.6
1.5
1.4
1.4
1.4
1.4
1.6
Philippines
0.5
0.5
0.5
0.5
0.4
0.4
0.4
0.4
0.5
0.4
0.4
Republic of Korea
2.7
2.6
2.3
2.3
2.3
2.3
2.2
2.4
2.8
2.6
2.4
Thailand
1.2
1.2
1.2
1.2
1.2
1.1
1.1
1.2
1.2
1.2
1.2
All ESCAP-region
developing economies 28.4

28.0
29.5
28.7
26.5
26.3
28.6
30.6
31.3
31.7
32.4
All ESCAP-region
developed economies

8.6
7.9
7.8
7.8
8.0
7.3
6.6
7.3
6.9
6.4
6.7
Total ESCAP region
37.0
35.9
37.3
36.5
34.6
33.6
35.3
37.9
38.3
38.1
39.1
Source: IMF database, Direction of Trade Statistics, available from www2.imfstatistics.org/DOT/ (accessed 16 Feb. 2010).
since the second quarter of 2008, almost all of
exports from the rest of the world. Further study
those developing economies actually increased
over a longer time period could determine the
their market share in the import market of the
causes.
United States during the ensuing year. China,
despite the fall in total exports to the United
States, saw its share in that import market
increase from about 15% in the second quarter
Heightened risk aversion led to
of 2008 to 19.7% in the third quarter of 2009.
financial institutions increasing
While total imports into the United States fell
during that period, the fall in imports from the
the cost of trade finance
developing economies of the ESCAP region
was less than that of imports from other suppli-
ers to the United States market.
The asset bubble burst that set off the world-
One implication is that those developing econo-
wide economic crisis did not damage trade only
mies did not lose market competitiveness
on the demand side. The supply side, particu-
against suppliers from the rest of the world
larly through the trade credit squeeze, was also
during the downturn in the United States import
affected. Large financial institutions scaled back
market, they actually gained in market share.
from dealing with emerging market risks, such
Market competitiveness here refers to the com-
as financing exports, and instead focused on
bined effects of cost structure and exchange rate
bolstering their capital bases. That heightened
movements on export values. Asian currencies,
risk aversion, coupled with the overall credit
in general, appreciated less than the United
squeeze, led to financial institutions increasing
States dollar around the first quarter of 2009,
the cost, as well as scaling down the volume, of
thus supporting Asian market competitiveness
trade finance.  On the other hand, the case may
during that period. Alternatively, the outcome
be that a decrease in trade caused the reduc-
could simply have been due to the product
tion of trade finance. Hence, a drop in demand
mix of exports from those developing countries
by the United States, European Union and Ja-
to the United States which could have had
pan for Asian exports might naturally lead to
relatively lower income elasticity than have
reduced demand for trade credit, directly and
10

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
along the interregional supply chain.2  Yet
as to what extent the regulatory and supervisory
another explanation3 for the reduction of trade
framework could be adjusted to take into ac-
credit may lie in the impact of the International
count the effect of trade finance on developing
Convergence of Capital Measurement and
country exports in an environment of shrinking
Capital Standards: a Revised Framework (Basel
trade.
II) on trade flows, through increased procycli-
calness of trade finance.  According to observ-
The changes experienced in 2009 have resulted
ers, though not specific to trade finance, the
in decreases in current account surpluses in
way in which Basel II classifies risk (i.e., focus-
the region, in tandem with decreases in current
ing on counterparty risk – which is normally
account deficits in developed countries. Whether
taken simply as country risk – rather than per-
they are temporary reversals driven in many
formance risk) penalizes trade finance as the
Asian economies by even sharper falls in
risk premiums on international transactions tend
imports, or the beginning of a long-term process
to be relatively high, despite the low perform-
of rebalancing, remains to be seen. In
ance risk of trade finance.4  Thus, during crises,
any case, the current account deficit of the
when country risks (particularly with developing
United States has decreased quite sharply, while
China has significantly pared down its trade
countries) are elevated, trade finance costs
surplus.
escalate, further curtailing export performance.
Given the scarcity of trade finance, the immedi-
ate response was to increase the volume of
The crisis has sparked a debate on
trade finance facilitation programmes of all re-
gional development banks and the International
the role of trade in development
Finance Corporation. Increased financial com-
mitments for trade finance were similarly ech-
oed by the Group of 20 (G-20) leaders at the
London Summit of April 2009. Initiatives in the
The global crisis, having impacted Asian and
Asia-Pacific region included partnership agree-
Pacific economies through international trade,
ments between the Asian Development Bank
exposed the vulnerability of the export sector of
(ADB) and private banks (for example,
the region to developed country demand. The
Wachovia) to allow them to share risk in ex-
crisis has sparked a debate on the role of trade
tending trade finance. Guarantees were ex-
in development and the importance of market
tended as well as loans to trading parties.  Sub-
diversification.
sequent to the pledges, the concern5 arose that
the additional commitments might not be new
Trade in a modernizing economy has always
and that the amounts cited included ongoing
been a reliable engine of growth in much of
commitments.  In addition, it was not very clear
Asia, if not in most parts of the world. The shift
2
IMF,  World Economic and Financial Surveys, Regional Economic Outlook: Asia and the Pacific: Global Crisis: the
Asian Context,
 May 2009 ed. (Washington, D.C.); available from www.imf.org/external/pubs/ft/reo/2009/APD/ENG/
areo0509.htm.
3
Caliari, Aldo, The Financial Crisis and Trade in Asia: Towards an Integrated Response in Asia. Proceedings of
the ESCAP Regional High-level Workshop on “Strengthening the Response to the Global Financial Crisis in Asia-
Pacific: The Role of Monetary, Fiscal and External Debt Policies”, 27 to 30 July 2009, Dhaka, Bangladesh, p. 7;
citing WTO Working Group on Trade, Debt and Finance, 2008, reporting on the complaints by developing
countries regarding the negative effects of biases embedded in the Basel II framework.
4
Chauffour, Jean-Pierre and Thomas Faroll, “Trade finance in crisis: Market adjustment or market failure?”, Policy
Research Working Paper 5003 (Washington, D.C.: World Bank, 2009), p. 15; available from: www-wds.worldbank.
org/external/default/WDSContentServer/IW3P/IB/2009/07/20/000158349_20090720085356/Rendered/PDF/
WPS5003.pdf.
5
Caliari,  The Financial Crisis and Trade in Asia, p. 8.
11

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
to export-led industrialization, epitomized by the
servers9 say that the structure of the global
“Asian Tigers”, created a demonstration effect in
production chains exacerbates the decline in
most of developing Asia. Over the 40 years
merchandise trade during recessions. Trade fi-
from 1956 to 1996, the per capita incomes of
nance might be able to provide another, partial
the “rapidly integrating economies”6 of Asia grew
explanation of why trade has contracted much
by 5%, in comparison with the world average of
more than global output.
1.9%.7
Furthermore, during the 1997 crisis, the affected
Asian economies managed to export their way
The responsiveness of trade to
to recovery. Innovative production schemes like
a global downturn depends
the regional tie-in to global supply chains funda-
on the mix of products
mentally changed the composition of trade as
well as its direction. The strategy paid off be-
cause the erstwhile growth engine of the world,
the United States, maintained robust demand.
Given the fragmentation in production systems,
Historically, growth in trade in goods has always
countries increasingly specialize in a particular
outstripped global output growth.
process or component (that is, intermediate
products) rather than a whole or final product.
Unfortunately, the reverse has also held true. As
Countries that want to export such products
global growth has moved into negative territory,
need to import the parts and components. For
trade has plummeted more sharply. For some
example, China imports semiconductors from
Malaysia, hard disks from the Philippines and
sectors the downturn will be harder to overcome
other components from elsewhere, and assem-
than in the past. Since the global economy is
bles them into computers that are shipped to
interlinked through trade more than ever before,
the United States. Chinese imports and exports
the impact of a fall in output on trade has
are thus higher than if China were to produce
become magnified. Empirical estimates8 put the
the computers wholly from within its borders. So
elasticity of world trade to output at 3.35, from
the responsiveness of trade of a country to a
under 2 in the 1960s. East Asia has the largest
global downturn depends, in part, on its mix  of
elasticity for the 12 years from 1995 to 2007,
products. The greater the proportion of products
as well as the largest increase in elasticity
destined for exports that need imported inputs,
compared to the 12-year period 1982 to 1994.
the more sensitive the trading sector is to
With export elasticity to global growth at 4.45,
changes in global incomes. Such trade among
the East Asian trading sector is indeed very
countries linked through international production
sensitive to changes in global growth relative to
networks tends to be “double-counted” in
other regions in the world.
trade statistics10 as corroborated by the rapid
increases in manufactured imports and exports
What could account for the increasingly higher
in countries, such as China and Malaysia, that
elasticity measures of the current decade in
are heavily involved in international production
comparison with the earlier periods? Some ob-
networks.
6
The ADB characterization of “integrating Asia” comprises the 10 countries of ASEAN and China, India, Japan,
the Republic of Korea, Taiwan Province of China and Hong Kong, China.
7
ADB,  Emerging Asian Regionalism: A Partnership for Shared Prosperity (Manila, 2008), p. 27; available from
www.aric.adb.org/emergingasianregionalism (accessed 12 Oct. 2009).
8
Freund, Caroline, “The trade response to global downturns: Historical evidence”, Policy Research Working Paper
5015 (Washington, D.C.: The World Bank, 2009), p. 6; available from http://econ.worldbank.org.
9
Freund, “The trade response to global downturns”, p. 9.
10
UNCTAD,  Trade and Development Report 2003: Capital Accumulation, Growth and Structural Change, (United
Nations publication, Sales No. E.03.II.D.7), p. 49.
12


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Consequently, how vulnerable to the worldwide
8). The subregional groupings exhibit some strik-
slump in income did Asia and the Pacific be-
ing differences, however. South-East Asia, and
come? That would depend on (a) the degree of
East and North-East Asia, are the most export-
openness of the economies in the region, (b)
dependent, while South and South-West Asia
the market orientation of exports and (c) the
have less export dependent economies.
product mix of trade.  On the demand side, the
fall in import demand of the affected economies
The phenomenal Chinese export performance
of the United States, Europe and Japan has a
during the past five years accounts for much of
direct bearing on exports from the region be-
the increase in the ratio of exports to GDP in
cause of its large share of developed-country
the East and North-East Asian subregion. By
imports.
contrast, despite doubling its own ratio of ex-
ports to GDP, India with just 1% of world ex-
Since the crisis was transmitted through the
ports does not significantly alter the correspond-
trade channel, obviously the greater the share of
ing ratio in the South Asian subregion.11
the trade sector in the economy, the greater was
the impact. The Asia-Pacific region is highly
The destination market of exports has also be-
open and export dependent: the export sector of
come an indicator of vulnerability as it came to
Asian and Pacific developing economies com-
reflect the exposure of an economy to the
prises close to 38% of GDP, which is two and a
source of market disturbance. Measures of
half times larger than the corresponding share of
trade intensity are revealing here, indicating
the developed economies in the region (figure
whether a region or country exports more (as a
FIGURE 8. Export dependence in subregions of Asia and the Pacific, in three-year
averages, in percentage shares of GDP, 1994 to 1996 and 2005 to 2007
South and South-West Asia
14.0
North and Central Asia
31.0
East and North-East Asia
42.7
Pacific islands
48.3
South-East Asia
71.1
Developed Asia-Pacific
15.1
Developing Asia-Pacific
38.4
India
21.0
China
39.6
0
10
20
30
40
50
60
70
80
Percentages
1994-1996
2005-2007
Source: ESCAP, Asia-Pacific Trade and Investment Report 2009: Trade-led Recovery and Beyond (United Nations
publication, Sales No. E.09.II.F.19), p. 6.
11
ESCAP,  Asia-Pacific Trade and Investment Report 2009: Trade-led Recovery and Beyond (United Nations
publication, Sales No. E.09.II.F.19), p. 6; and ADB, Asia Economic Monitor: July 2009 (Manila, 2009), available
from www.aric.adb.org/asia-economic-monitor.
13

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
percentage) to a given destination than the
looms even larger in the region as its exports
world does on average. More specifically, the
and imports account for a growing proportion of
trade intensity index measures the ratio of the
the regional trade. With China emerging as the
trade share of a particular country to a partner
world’s factory, particularly of manufactured ex-
or region and the world trade share to the
ports, Asian and Pacific economies that have
same country or region. An index value greater
embarked on a similar export-based growth
than 1.0 would indicate that the country’s export
strategy could feel threatened. At the same time
volume to a given destination is greater than
China’s emergence, accentuated by its resil-
the world average. The country would thus be
ience to the global crisis, presents the opportu-
said to have a more intense export trade rela-
nity of a growing market when growth in the
tion with that partner than does the rest of the
rest of the world is anaemic, as evinced by
world (table 2).
trade deficits in 2008 with Japan, the Republic
An increasing value in the index with China
of Korea, South-East Asia and Australia.
might therefore indicate greater trade in compo-
nents and parts with China whose final destina-
tion is the United States, rather than increased
If China imports from Asian sources
Chinese dependency on itself as final consumer.
Thus, one limitation of this measure is that it
for its own consumption, its domestic
does not account for the trade pattern based on
spending would become an important
the intermediate goods from global production
source of external demand
chains. For that reason, an index that deals
with the product mix could be used to comple-
ment the analysis.
To what extent can China be expected to be an
engine of growth in the post-crisis period for
Asian and Pacific economies? Much depends
Economies that trade intensively
on whether China imports from developing Asia
with the United States and Japan
for consumption purposes or simply to source
are more vulnerable than others
inputs for its assembly operations. If China
to the collapse in external demand
were to import from Asian sources for its   own
consumption, its domestic spending would
become an important source of external
demand. Here a few caveats should be consid-
Given the outlook for 2010, economies that tend
ered in using the trade intensity indicators. First
to trade intensively with the United States and
of all, the trade intensity index also picks up the
Japan are rendered more vulnerable than others
trade with China in parts and components of
to the collapse in external demand. In favourable
countries but does not distinguish it from trade
contrast, the Chinese and Indian economic
in goods for own consumption. Thus, exports of
growth rates during 2008 and much of 2009 are
intermediate goods from other countries to
quite remarkable given the backdrop of the global
China could well end up as part of Chinese
recession. Will those two large economies be the
exports to the affected economies, such as
next engines of growth in Asia and the Pacific?
the United States. Some estimate the foreign
content of China’s aggregate merchandise ex-
China recently surpassed Germany as the larg-
port at between 25 to 46% in 2002 depending
est exporter in the world. The Chinese profile
on the methodology used.12 Furthermore,
12
Dean, J., K.C. Fung and Z. Wang, “How vertically specialized is Chinese trade?”, Bank of Finland Discussion
Papers 31 (Helsinki: Bank of Finland Institute for Economies in Transition, 2008), available from www.bof.fi/NR/
rdonlyres/0F367D7B-DA85-4D13-8788-9E2EF25DFBCB/0/dp3108.pdf.
14


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
TABLE 2.  Trade intensity indices of Asian and Pacific economies, 2007
Trade with US
with Japan
with China
Developing economies
China
1.39
2.01

Hong Kong, China
1.25
0.51
6.44
Macao, China
2.96
0.28
2.13
Mongolia
0.25
0.16
15.60
Republic of Korea (the)
0.90
1.71
4.60
Russian Federation (the)
0.15
0.57
0.99
Bangladesh
1.89
0.29
0.17
India
1.02
0.56
1.35
Maldives
0.08
1.11
0.00
Pakistan
1.62
0.16
0.73
Sri Lanka
2.07
0.66
0.13
Cambodia
4.28
0.75
0.25
Indonesia
0.76
5.04
1.79
Malaysia
1.14
2.22
1.86
Philippines
1.58
4.22
1.03
Singapore
0.68
1.18
2.13
Thailand
0.92
2.83
2.06
Viet Nam
1.62
2.89
1.34
Developed economies
Australia
0.37
4.09
2.56
Japan
1.50

3.11
New Zealand
0.85
2.29
1.16
United States

1.36
1.23
Notes: The index takes a value between 0 and +∞. Values greater than 1.0 indicate an “intense” trade relationship. The
index utilizes export data.
Source: ESCAP, Asia-Pacific Trade and Investment Agreements Database (APTIAD) Interactive Trade Indicators; available
from www.unescap.org/tid/artnet/artnet_app/iti_aptiad.aspx (accessed 6 Oct. 2009).
a study13  estimates that the share of parts
recent pattern of trade between China and the
and components in total imports into China
East and South-East Asian economies provides
has doubled from 17.6% in 1992 to 34.3% in
limited evidence that China “is becoming more
2003.
of a consumer and less of an assembler”.14
The study reveals that China increased its im-
Secondly, the strength of realignment in trade of
ports from East and South-East Asia from $9.9
Asian and Pacific developing economies with
billion to $17.9 billion over the period from
China will depend on the import intensity of the
January to June 2009, when exports of the
latter’s domestic demand. In other words, it will
region were declining, indicating that China is
depend on whether the share of final goods in
providing additional external demand to its re-
the imports of China will increase relative to
gional trading partners. Given the disparity in
imports of parts and components. A study of the
the magnitude of consumption spending be-
13
Athukorala, P-C. and N. Yamashita, “Production fragmentation and trade integration: East Asia in a global
context”,  North American Journal of Economics and Finance (Dec. 2006), vol. 17, no. 3, p. 8.
14
ADB,  Asian Development Outlook Update: Broadening Openness for a Resilient Asia (Manila: ADB, 2009),
available from www.adb.org/Documents/Books/ADO/2009/Update/ado2009-update.pdf (accessed 5 Oct. 2009).
15

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
tween the developed countries and China, how-
cant imported inputs that are, in turn, character-
ever, China could not be expected to substitute,
ized as having rather high intra-industry trade
in the short term, for the United States or
(IIT) indices. IIT measures the degree of over-
European Union, in generating external demand
lap between imports and exports in the same
for Asian and Pacific economies.
commodity category, with a value of 1.0 indicat-
ing pure “intra-industry” trade and a value of 0
indicating pure “inter-industry” trade.  Export
commodities, such as electronics or motor vehi-
India has become an attractive and
cles that use significant quantities of imported
growing market for the region
electronic and automotive parts and components
as intermediate goods, have high IIT. The
higher the share of such items in a country’s
export profile, the more vulnerable that country
In addition, by virtue of its economic perform-
to the crisis.
ance during the crisis, India has become an
attractive and growing market for the region.
Unlike China, which tends to dominate in manu-
factured exports of finished goods, India has
The surge in intra-industrial trade
always been a net importer of goods with coun-
in electronic parts and components
tries in the region, excepting with the Republic
has underpinned much of the
of Korea with which it has a positive trade
balance. In 2008, for example, its trade deficit
growth in intraregional trade
with the ASEAN countries and China ap-
in the region
proached $15 billion and $21 billion, respec-
tively. Furthermore, Indian imports of goods
from ASEAN countries grew annually by more
than 25% in 2007 and 2008. As India continues
Many economies in South-East Asia exhibit high
to grow, its imports will provide buoyant demand
IIT in the sectors that are cited in table 3 under
in the region.
categories of the Harmonized Commodity De-
scription and Coding System (HS); the extent of
Even more significant than net trade figures
outsourcing in each sector is indicated for ma-
in the region’s trade with India might be
chinery (HS Code 84), electronics (HS Code
the sharp contrast in complementarities of
85), motor vehicles (HS Code 87) and knitted
competitive structure. India is a world leader
apparel (HS Code 61). Motor vehicle production
in services exports, especially commercial
in Malaysia, the Philippines, Thailand and Indo-
services; whereas the comparative advantage
nesia is subject to extensive parts and compo-
for many of the region’s trading partners lies in
nents trade that is facilitated under the ASEAN
manufactures and commodities. Hence, the
Free Trade Agreement (AFTA). Those same
ASEAN-India Trade in Goods Agreement that
South-East Asian economies exhibit very high
came into effect on 1 January 2010 and con-
IIT in electronics (HS Code 85), indicating a
tinuing negotiations in services and investments
high degree of outsourcing activity. The surge in
appear promising for regional integration. The
intra-industrial trade in electronic parts and com-
agreement marks intensification of the “Look
ponents (as intermediate goods) has under-
East” strategy of India and the need for ASEAN
pinned much of the growth in intraregional trade
countries to engage with rapidly growing
in the region. A softening in demand would
markets and to balance its relations with all
certainly take a heavier toll on items marked by
major Asian economic powers.
extensive trade in parts and components.
Economies with high proportions of those sec-
Product mix is also important. Expected to fall
tors in their export profiles were thus more
first is trade in export items that require signifi-
vulnerable to the crisis.
16


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
TABLE 3. Intra-industry trade indices of Asian and Pacific economies,
by sector, 2007
Sector/Commodity Group (HS codes)
Economy
HS 84
HS 85
HS 87
HS 61
Developing economies
China
0.55
0.55
0.81
0.04
Hong Kong, China
0.02
0.03
0.00
0.71
Macao, China
0.46
0.37
0.22
0.48
Mongolia
0.03
0.03
0.04
0.58
Republic of Korea (the)
0.83
0.67
0.23
0.71
Russian Federation (the)
0.26
0.22
0.16
0.00
Bangladesh
0.06
0.05
0.16
0.01
India
0.38
0.41
0.87
0.04
Pakistan
0.04
0.07
0.07
0.18
Sri Lanka
0.06
0.27
0.47
0.22
Cambodia
0.01
0.05
0.27
0.03
Indonesia
0.46
0.72
0.68
0.22
Malaysia
0.78
0.93
0.47
0.96
Philippines
0.98
0.74
0.91
0.40
Singapore
0.79
0.66
0.06
0.63
Thailand
0.80
0.92
0.55
0.12
Viet Nam
0.46
0.76
0.25
0.08
Developed economies
Australia
0.35
0.32
0.29
0.11
Japan
0.52
0.61
0.18
0.03
New Zealand
0.49
0.50
0.07
0.19
United States
0.82
0.66
0.62
0.10
Notes: The index ranges from zero to 1.0, with zero indicating pure inter-industry trade and 1.0 indicating pure intra-industry
trade. The Harmonizing Commodity Description and Coding System (HS) codes are:
61 Articles of apparel, accessories knit or crochet.
84 Nuclear reactors, boilers, machineries, etc.
85 Electrical, electronic equipment.
87 Vehicles other than railway and tramway.
Source: ESCAP, Asia-Pacific Trade and Investment Agreements Database (APTIAD) Interactive Trade Indicators; available
from www.unescap.org/tid/artnet/artnet_app/iti_aptiad.aspx (accessed 7 Oct. 2009); descriptions of commodity codes come
from www.trademap.org/stCorrespondingProductCodes.aspx.
Exposure to capital flows
case in 1997. At that time, the problem with
capital flows lay more in excessive short-term
The region experienced the first impact of the
foreign debt of domestic banks and other private-
crisis through short-term capital flows, which
sector operators. However, the past decade has
brought instability, not unlike in 1997.
been notable for another aspect of capital flow
Policymakers had attempted to mitigate the risk
build-up – that of foreign portfolio capital. Looking
of instability by building up foreign reserves to
at net capital flows (figure 9), the collapse of
levels that could cope with expected capital
1997 and 1998 was due largely to the reversal in
outflows. Notwithstanding policy, the manner in
short-term bank loans. The global crisis of 2008
which the channel of capital flows operated
and 2009 was driven more by sharp reversals in
during the global crisis was different from the
portfolio flows, although inevitably there were also
17


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 9. Net private capital flows to “emerging” Asia, 1991 to 2010
4
3
2
1
0
age of GDP
– 1
– 2
Percent
– 3
– 4
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Direct investment
Private portfolio flows
Other private financial flows
Net private capital flows
Notes: Data of 2009 and 2010 are projections by IMF, “Emerging” Asia comprises 26 developing countries and newly
industrialized economies of Asia.
Source: Based on data from IMF, World Economic and Financial Surveys: World Economic Outlook Database, Oct. 2009
ed., available from www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx (accessed 25 Feb. 2010).
retrenchments in lending by many international
Korea, were also impacted by the crisis through
banks in response to the financial stresses faced
the channel of the global credit crunch. Notably,
by their headquarters in the United States and
the corporate sector in India used significant
Europe. In contrast to the 1997 crisis, the re-
foreign borrowings to fund expansion;15  external
versal in capital flows was driven by pressures
commercial borrowing in India during the first
emanating from outside the region, from the
quarter of FY2009 was $2.711 billion, in compari-
problems of the financial institutions in developed
son with $4.052 billion in the first quarter of
countries and the increase in global risk aversion.
FY2008. Banks in the Republic of Korea relied
on global borrowing to fund credit-dependent
household spending; the country’s loan-to-de-
posit ratio of close to 120% was the highest in
The region experienced the first
the region. Reduced availability of international
impact of the crisis through
credit impacted growth through increased pricing
of loans to fund consumption and investment,
short-term capital flows
despite easing of monetary policy that all coun-
tries engaged in. The continuing dependence on
foreign financing of consumption by some coun-
Some major economies relatively more reliant on
tries after the crisis (figure 10) has meant that
external borrowing for financing domestic credit
the resumption of international credit flows
creation, such as India and the Republic of
remains an important factor in recovery.
15
The Hindu Business Line, “Overseas borrowing gets easier for India Inc.”, Chennai, India, 31 July 2009, available
from www.thehindubusinessline.com/2009/07/31/stories/2009073151870100.htm.
18


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
FIGURE 10. Loan-to-deposit ratios in major Asian developing economies,
third quarter of 2009
250
200
150
ages
100
Percent
50
0
India
China
Thailand
Malaysia
Singapore
Indonesia
Kazakhstan
Philippines
Republic of Korea
Russian Federation
Hong Kong, China
Notes: Data of Kazakhstan and the Philippines refer to April 2009 and May 2009, respectively. Data of Indonesia refer to
May 2009. Data of India refer to Q2 2009. Data of India refer to the credit-to-deposit ratio of scheduled commercial banks.
Data of Thailand refer to the consolidated-loan-to-deposit ratio.
Sources: ESCAP staff estimation based on data from CEIC Data Company Ltd., available from http://ceicdata.com/
(accessed 29 Jan. 2010); and IMF, Republic of Kazakhstan: 2009 Article IV Consultation – Staff Report; Supplement; and
Public Information Notice on the Executive Board Discussion,
 IMF Country Report No. 09/300 (Washington, D.C., 17 June
2009).
India and Indonesia, which experienced some of
the sharpest declines in reserves and exchange
The critical lesson is that countries
rates. Even in those economies the current-
that have experienced massive
account deficits were fairly small, suggesting
portfolio capital inflows are at
that the need for net capital flows to finance the
risk of a sudden outflow
deficit was fairly modest. The critical lesson is
that even countries that do not require foreign
capital to finance current account imbalances
but have experienced massive portfolio capital
Any region that experiences a slowdown or
inflows in previous years, and thus have a stock
reversal in foreign portfolio capital flows will
of gross external liabilities that could potentially
inevitably suffer from a negative balance-of-pay-
be reversible, are at risk of a sudden outflow.
ments shock in the form of exchange-rate de-
For example, countries with large current-ac-
preciation, sharp decline in foreign exchange
count surpluses, such as Singapore and Malay-
reserves and/or interest rate hike with deleteri-
sia, have also experienced downward pressure
ous effects on the domestic economy. While the
on their reserves due to a reversal of some
Asia-Pacific region did see a sudden stop in
portfolio capital inflows from previous years.
capital flows, those economies that were running
current-account surpluses were not as vulner-
Exposure to a high level of foreign portfolio
able as the Republic of Korea, in particular, and
capital inflows can thus create a crisis even
19


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
when economic fundamentals are sound, or it
of reserve holdings, the appropriate size
can make a bad situation worse when the
of reserves remains unclear; i.e., reserve
fundamentals are weak. Foreign portfolio capital
adequacy. Asia as a whole clearly holds
is volatile for a host of reasons, some of which,
adequate reserves in terms of its imports and
as demonstrated by the present crisis, are
short-term debt (table 4). However, as shown by
driven by developments outside of the country
the Republic of Korea and other countries, other
or region in question. Moreover, once the out-
forms of mobile capital such as portfolio flows
flow of foreign portfolio capital becomes a
are a concern. No proper yardstick has yet
problem, it further undermines the confidence of
been developed to account for the potential
international capital markets. While the current
reversibility of those other types of capital
financial crisis has confirmed the importance
flows.16
TABLE 4. Foreign reserve adequacy, 1996 to 2009: outstanding year-end reserves position
Foreign reserves as a percentage of:
Foreign reserves
Regiona and
(in billions of US dollars)
GDP
Short-term external debtb
Imports
country
1996
2007
2008
2009
2008
1996
2007
2008
2009
1996
2007
2008
2009
Developing Asiac
483.1 2 916.8 3 328.5 3 355
39.6
170
449
589
595
49.0
103.6 100.0 116.8
China
107.0 1 530.3 1 949.0 1 954
45.1
376 1 249 1 865 1 873
69.4
147.9 172.0 193.4
India
20.2
267.0
247.4
242
20.3
260
339
333
324
53.2
123.2
84.8
91.9
Republic of
Korea
34.0
262.2
201.1
212
21.6
45
176
173
177
22.6
73.5
46.2
63.7
Other developing
Asiad
321.9
857.3
931.0
948
48.1
145
389
502
511
48.9
66.6
63.3
74.9
Latin America
143.0
399.9
442.7
410
11.4
145
238
369
300
63.6
65.2
59.5
62.4
Brazil
58.3
179.4
192.8
186
12.0
111
292
342
329
102.7
141.8 105.5 109.5
Chile
15.0
16.8
23.1
24
13.6
201
86
113
114
78.0
35.7
37.3
46.1
Mexico
19.4
87.1
95.1
84
8.8
60
256
241
218
20.7
29.5
29.4
31.0
Central and
Eastern Europe
52.6
224.2
230.4
211
15.7
504
114
107
92
38.1
34.3
29.6
38.9
Middle East
18.5
59.8
57.1
47
8.0
111
98
112
90
47.5
44.9
34.9
34.0
Russian Federation
11.3
466.8
412.5
368
25.7
42
486
509
446
16.4
208.8 141.3 144.4
Memo:
Net oil exporters
180.5
959.5
946.3
..
19.8
200 1 050 1 862
..
67.2
108.8
89.5
..
Notes: a Regional aggregates are the sum of the economies listed. For 2009, data are the latest available (up to August 2009).
b Consolidated cross-border claims of all Bank of International Settlements reporting banks for countries outside the
reporting area with a maturity of up to one year plus international debt securities outstanding with a remaining
maturity of up to one year.
c Economies listed and other Asian developing countries.
d Taiwan Province of China; Hong Kong, China; Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Sources: Based on data from the World Bank, World Economic Outlook Database, October 2009, available from
www.imf.org/external/pubs/ft/weo/2009/02/weodata/weoselgr.aspx (accessed 15 Dec. 2009); Economist Intelligence Unit,
Country Analysis and Forecasts, EIU CountryData, accessible at http://countryanalysis.eiu.com/ (accessed 15 Dec. 2009);
and Bank for International Settlements, “BIS Quarterly Review: March 2010”, Table 9A (available from www.bis.org/statistics/
hcsv/hanx9a_1y.csv) and Table 17B (available from www.bis.org/statistics/qcsv/anx17b.csv).
16
For example, see Wijnholds, J. Onno de Beaufort, and Arend Kapteyn, “Reserve adequacy in emerging market
economies”, IMF Working Paper WP/01/143 (Washington, D.C.: IMF, 2001), pp. 9-11.
20

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
flows has been liberalized in several countries
across the region.
A more precise yardstick of vulnerability
could encompass the measurement
At the end of 2008, after the worst of the financial
of overall gross external liabilities of
impact of the crisis, the vulnerability yardstick was
a country that are most clearly
not covered in full (100%) by foreign reserves in a
number of countries. Of those for which data are
reversible and measurable
available (figure 11), the vulnerability yardstick
exceeds the stock of reserves in the Republic
of Korea, Indonesia, Malaysia, Philippines and
A more precise yardstick of vulnerability could
Kazakhstan. In each of those countries, the
encompass the measurement of overall gross
stock of foreign portfolio inflows accounted for
external liabilities of a country that are most
the greatest part of the vulnerability yardstick,
clearly reversible and measurable. The compo-
followed by short-term debt.
nents of such an approach are short-term debt,
the stock of portfolio inflows and the magnitude
The lesson to be drawn here is that the analy-
of imports over three months.  The quantum of
sis of the risks of a sudden reversal in foreign
short-term debt and the stock of portfolio capital
capital flows should be broadened. The tradi-
inflows are relevant because they can exit the
tional view of short-term debt being the main
country at any time, resulting in currency devalu-
component of such flows should be tempered
ation pressure. Similarly, the quantum of imports
with the finding that portfolio capital has become
over three months represents the amount of
increasingly important in the region, with the
reserves that flows out as financing for imports.
potential to destabilize currencies by flowing out
“Gross” rather than “net” is appropriate because,
in a similar short-term fashion.
if foreigners should choose to withdraw their
funds, the country might not be able to coordi-
The next question that arises is how best to
nate accounts in order to remit its gross external
deal with portfolio capital flows – a matter of
assets back to the country simultaneously –
much debate. An uncontrolled inflow requires a
particularly if the investments to and from the
sufficient build-up of reserves to buffer sudden
country are made by unconnected parties.
outflows. Building up of reserves is costly, how-
ever, because of potential exchange-rate losses
One hundred per cent of foreign reserves is
as well as the loss in interest income from
taken as the threshold. However, the threshold
having to invest the funds in low-interest-earning
is subject to a number of caveats. It may be an
foreign currency assets. An option would be to
overestimate because the portfolio market price
manage the quantum of inflow of such funds
in distress periods may be much less than its
through various capital controls. The potential
historical value, while exchange-rate deprecia-
benefits of such controls have come increas-
tions during crisis may also lessen the stock of
ingly under discussion owing to the lessons
outflow. On the other hand, the threshold may
from this crisis about the risks of short-term
be an underestimate because some countries
capital inflows.17 A completely open capital
are also susceptible to “internal drain” – a run
account is not necessarily appropriate from a
against domestic currency by residents. The
cost-benefit analytical viewpoint,18 particularly
likelihood of internal drain has increased in re-
since research has suggested that the benefits
cent years because regulation of financial out-
of such openness are ambiguous.19 Further-
17
Ostry, J. D. and others, Capital Inflows: The Role of Controls, Staff Position Note No. 2010/04 (Washington, D.C.:
IMF, 2010), available from www.imf.org/external/pubs/cat/longres.cfm?sk=23580.0.
18
Rodrik, D., “The social cost of foreign exchange reserves”, International Economic Journal  20, 2006.
19
For example, Kose, M.A. and others, “Financial globalization: a reappraisal”, NBER Working Paper No. 12484
(Cambridge, Massachusetts: National Bureau of Economic Research, 2006); and Eichengreen, B., Capital Flows
and Crisis
 (Cambridge, Massachusetts: MIT Press, 2003).
21


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 11. Vulnerability yardstick as a percentage of foreign reserves
in major developing economies, 2008
300
250
200
150
100
age of foreign reserves
50
Percent
0
an
India
China
Republic
of Korea
Russian
Indonesia
Malaysia
Thailand
Philippines
Kazakhst
Federation
Notes: Vulnerability yardstick is the sum of short-term debt, imports of the last quarter of the year and stock of equity and
debt portfolio capital. Data on stock of foreign portfolio investments of Indonesia, Malaysia and Philippines refer to figures of
2007.
Sources: ESCAP calculations based on data from IMF, International Financial Statistics (IFS) Online Service, available from
www.imfstatistics.org/imf/ (accessed 24 Oct. 2009) and World Economic and Financial Surveys: World Economic Outlook
Database,
 Oct. 2009 ed., available from www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx (accessed 24 Oct.
2009); World Bank, Quarterly External Debt  Statistics databases, available from http://web.worldbank.org/WBSITE/EXTER-
NAL/DATASTATISTICS/EXTDECQEDS/0,,menuPK:1805431~pagePK:64168427~piPK:64168435~theSitePK:1805415,00.html
(accessed  13 Oct. 2009); and CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 24 Oct. 2009).
more, the relevance of an international tax to
in a flight to safety. For highly leveraged inves-
moderate the volatility of portfolio flows, along
tors, declining equity values abroad also trig-
the lines of the so-called Tobin tax, has been
gered margin calls. That outflow of capital led to
discussed in the context of problems inherent in
particularly sharp falls in markets where, taking
imposing capital controls at national level.20
advantage of high global liquidity, foreign inves-
tors had acquired an increasing presence. The
Capital markets and exchange rates:
entry of foreign capital has been encouraged by
the liberalization of capital markets in the region
renewed inflows bring instability
since the 1997 crisis.21 Financial markets in the
region have seen a sharp upturn during 2009
The initial impact of the crisis on the region was
after reaching their troughs in the early part of
felt through the financial markets as investors
the year, due to renewed inflows of foreign
withdrew capital from equity and debt markets
capital. Markets have also been supported by
20
Epstein, Gerald, “Should financial flows be regulated? Yes”, United Nations DESA Working Paper No. 77, ST/
ESA/2009/DWP/77, available from www.un.org/esa/desa/papers/, July 2009; and Persaud, Avinash, “We should
put sand in the wheels of the market”, Financial Times, Comment/Opinion, London, 27 Aug. 2009, available from
www.ft.com/cms/s/0/08523a6a-934c-11de-b146-00144feabdc0.html.
21
See Akyuz, Yilmaz, The Current Global Financial Crisis and Asian Developing Countries, ESCAP Series on
Inclusive and Sustainable Development 2 (Bangkok: ESCAP, 2008), p. 3.
22


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
buoyant domestic buying spurred by borrowing
their lowest point for countries in the region was
in a number of countries such as China and
generally far less than in the 1997 crisis (figure
India.
13). One factor responsible in maintaining cur-
rency values was the use by the central banks
of foreign exchange reserves in supporting cur-
rencies across the region (figure 14).
Financial markets in the region have
seen a sharp upturn due to renewed
inflows of foreign capital
Exchange rates have come under
upward pressure after substantial
depreciation since the onset
As capital inflows have returned to the region,
exchange rates have come under upward pres-
of the crisis
sure after substantial depreciation since the on-
set of the crisis (figure 12). Notably, the Korean
won appreciated around 8% over the period
beginning in January 2009 to the time of this
As recovery gains momentum in the region,
writing. Other currencies such as the Thai baht,
concerns about the future strength and role of
Indian rupee and Singaporean dollar appreci-
the United States dollar as a reserve currency
ated slightly. A number of currencies, particularly
grow, given the build-up of governmental debt
those most affected by the crisis such as the
and lacklustre growth. The need to engage in
Korean won and Russian rouble, still remain
policies in the coming months to manage ap-
substantially below values seen in September
preciation of currencies in order to encourage
2008. In any case, the fall in currency values to
nascent export recovery will require Asian and
FIGURE 12. Exchange rate movements in major developing economies, 2007 to 2009
120
110
100
90
80
70
Index (January 2007 = 100)
60
Jan-07
Jun-07
Nov-07
Apr-08
Sep-08
Feb-09
Jul-09
Dec-09
China
Republic of Korea
Singapore
India
Indonesia
Malaysia
Pakistan
Russian Federation
Thailand
Note: A positive trend represents appreciation and vice versa.
Source: Based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 15 Feb. 2010).
23



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 13. Change in nominal effective exchange rates from peak to trough in major
developing economies during two crises, 1997 to 1998 and 2008 to 2009
0
– 10
– 20
– 30
– 40
– 50
age of change
– 60
– 70
Percent
– 80
– 90
India
Taiwan
Republic
of Korea
Indonesia
Malaysia
Province
of China
Thailand
Philippines
Singapore
1997-1998 Asian financial crisis
2008-2009 global economic crisis
Notes: Declines during the 1997-to-1998 crisis measure the nominal effective exchange-rate movement from peak to trough
during that period. Declines for the recent crisis (2008 to 2009) measure the corresponding movement from the recent peak
in 2008 to November 2009.
Source: Based on data from Bank of International Settlements databases, available from www.bis.org/statistics/eer/
broad1002.xls (accessed 15 Feb. 2010).
FIGURE 14. Foreign reserves in six developing economies, December
2007 to December 2009
180
160
140
120
100
80
60
40
20
Index (December 2007=100)
0
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
China
India
Indonesia
Malaysia
Pakistan
Republic of Korea
Source: Based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 25 Feb. 2010).
24

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Pacific Governments to make important deci-
sources of FDI, as more investment comes
sions about how to reduce exposure to losses
from enterprises of countries within the region
in any future investment in dollar assets. Losses
that are relatively profitable.
would arise from reduction in values of assets
due to any future dollar depreciation and from
the interest rate spread between investment in
dollar-denominated debt instruments compared
In the medium term, the crisis is likely
with the interest rate paid on domestic bonds
to increase the relative importance
issued as part of any accompanying “steriliza-
of FDI from the region
tion”. China was at the forefront of implemen-
ting alternative approaches in 2009. The central
bank signed swap arrangements with numerous
countries in Asia as well as farther afield in
Reorientation in FDI is one aspect of a general
Latin America, allowing those countries to
increase in the importance of outbound FDI
extend credit in yuan to their own importers
from the region. FDI outflows from South, East,
and exporters and their trade with China to be
and South-East Asia in 2008 increased by 7%
invoiced in yuan rather than dollars.
to $186 billion.24 Here, again, the history of
China’s outbound investment flows is spectacu-
lar, albeit short.25 Until 2004 it had remained
Emerging reorientation of foreign direct
insignificant, but by 2007 had increased to $25
investment
billion, only to double to more than $50 billion in
2008.  There was some fall in outbound FDI in
In common with other capital flows, foreign
late 2008 and early 2009 due to the crisis, as
direct investment (FDI) in the region was signifi-
the credit crunch made financing of such acqui-
cantly impacted during the crisis (figure 15).
sitions more difficult. Outbound FDI from India
China, for example, attracted 20% less FDI
in 2008, for example, was down by 7% to
from January to July 2009 compared with the
under $17 billion, the first absolute fall in out-
corresponding period in 2008.22 Similarly, FDI in
bound FDI from the country since 1999. Simi-
India from April to June 2009 was down 30%
larly the first half of 2009 saw outbound invest-
compared with the corresponding period in
ments from the country fall by 65% to under $3
2008.23 Developed-country foreign enterprises
billion compared with the corresponding period
did not pursue investments abroad for several
in 2008.26 In the medium term, the crisis is
reasons – downward adjustment in expectations
likely to increase the relative importance of FDI
of profitability of the investment, the need to
from the region as companies exploit the rela-
save funds for difficulties faced in their home
tive weakness of enterprises in the developed
markets in developed countries, and difficulty in
world to acquire some of their assets, either in
obtaining financing due to the credit crunch.
the developed world or of subsidiaries in devel-
There will therefore be some reorientation in the
oping countries. Some of the largest invest-
22
Terence Poon, “Foreign direct investment in China continues to slide”, Wall Street Journal,  Asia ed., Economy
sec. (online), 18 Aug. 2009; available from http://online.wsj.com/article/SB125047781996935959.html?KEYWORDS
=%22foreign+direct+investment+in+china+continues+to+slide%22.
23
Economic Times, “FDI increased 8% in June to $2.58 bn”, News sec., Delhi, 19 Aug. 2009, available from http://
economictimes.indiatimes.com/News/Economy/Finance/FDI-increased-8-in-June-to-258-bn/articleshow/4909780.cms.
24
UNCTAD,  World Investment Report 2009: Transnational Corporations, Agricultural Production and Development
(United Nations publication, Sales No. E.09.II.D.15), p. xxiii.
25
Rosen, Daniel H., and Thilo Hanemann, “China’s changing outbound foreign direct investment profile: drivers and
policy implications”, Policy Brief No. PB09-14 (Washington, D.C.: Peterson Institute for International Economics,
2009).
26
Emirates Business 24-7,  “Domestic growth may help India’s outward FDI”, Dubai, available from www.business
24-7.ae/Articles/2009/8/Pages/18082009/08192009_feb4d07748b44a9da4abc69e871fac2c.aspx.
25


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 15. Gross inward direct investment in major developing
economies, 2007 to 2009
110
100
90
80
70
60
50
40
30
Billions of US dollars
20
10
0
an
China
India
Thailand
iet Nam
Pakist
Singapore
V
Indonesia
Malaysia
Philippines
Hong Kong, China
Republic of Korea
Russian Federation
Taiwan Province of China
2007
2008
2009
Note: Inward direct investment figures for 2009 are estimates.
Sources: UNCTAD, World Investment Report 2009: Transnational Corporations, Agricultural Production and Development
(United Nations publication, Sales No. E.09.II.D.15), p. 249; Economist Intelligence Unit, Country Analysis and Forecasts,
EIU CountryData, accessible at http://countryanalysis.eiu.com/ (accessed 22 Feb. 2010).
ments made during this window of opportunity
chain by increasingly investing abroad. For ex-
have been in the financial sphere, with banks
ample, in China, outbound FDI is improving
and sovereign wealth funds from the region
trading infrastructure through the establishment
acquiring developed-country assets. Examples
of foreign offices that will improve logistical
include the purchase of ING’s Asian operations
services for China’s trading firms. At the same
by Overseas-Chinese Banking Corporation Lim-
time, other aspects driving the increase in out-
ited of Singapore in October 2009 and China
bound FDI from the region, such as the ambi-
Investment Corporation’s purchase of additional
tion to secure natural resource assets to drive
shares in Morgan Stanley in June 2009. Fur-
high economic growth and to capture production
thermore, as the limits of the region’s old
in the lower-wage countries, will continue both
growth model based on exports of manufactures
within the region and beyond. For example,
become apparent, companies will try to capture
flows to Africa grew to a record $88 billion in
a greater share of the most lucrative value-
2008, driven by natural resource investment and
added activities in the international production
with an increasing role of Asian investors.27
27
AFP [Agence France-Presse], “Global crisis hits African investment: UN”, News on African Politics, AFP global
ed., 18 Sept. 2009, available from www.africanpoliticsinfo.com/article/674708/?k=j83s12y12h94s27k02.
26

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Evolving impacts on jobs and income
months or even days, if their personal savings
evaporate. Even before the crisis, the proportion
As a region with heavy trade dependency, the
of working poor in terms of employed workers
collapse in aggregate demand from developed
earning less than $2 per day as a share of total
countries has led to factory closures and
employment was as high as 80.1% in South
massive job losses in many of the key export
Asia in 2007.30 Although the Asia-Pacific region
manufacturing industries in the region, including
has made great strides in reducing absolute
textiles, garments, electronics and autos.
poverty during the past two decades, most
By 2009 the number of unemployed in the
workers earn an income just above the poverty
Asia-Pacific region had increased by 10
line and are in danger of falling back into
million in comparison with 2007, bringing the
poverty. On the basis of estimated GDP
unemployment rate up to 5.0%.28 While the
growth rates in the region, the current crisis
average unemployment rate of the region is
could trap an additional 21 million people below
below that of the countries of the Organisation
the poverty line of $1.25 per day and 25 million
for Economic Cooperation and Development
based on the $2-per-day poverty line between
(OECD), which recorded an average rate of
2009 and 2010.31 When societies are under
8.2% in the second quarter of 2009,29  unem-
stress, abuse and violence against women,
ployment in developing economies of Asia has
children and youth are exacerbated.32 Often
particularly worrisome features.
girls, more than boys, bear the brunt of
social fallout that can last far beyond the crisis
itself.
As the region with the lowest level of
public expenditure on social protection
millions could slip back into poverty
Recently available data from
within months or even days
the region confirm that more workers
shifted into vulnerable employment
during the crisis
Increases in unemployment in developing coun-
tries exert far greater socio-political repercus-
sions than in developed countries because of
Unemployment is untenable for many workers
insufficient social protection programmes. As the
who have lost their jobs or whose income is
region with the lowest level of public expendi-
reduced in the absence of social protection
ture on social protection (figure 16), the millions
systems. Shifting to vulnerable and informal em-
who have spent decades working their way out
ployment is often the only means of survival for
of poverty could slip back into poverty within
low-skilled workers at the bottom of the income
28
ILO, Economic and Labour Market Analysis Department, Trends Econometric Models (information available from
www.ilo.org/empelm/what/projects/lang--en/WCMS_114246/index.htm), October 2009.
29
OECD, “Harmonised unemployment rates: news release, January 2010” (Paris: OECD, 2010), p. 2.
30
ILO, Economic and Labour Market Analysis Department, Key Indicators of the Labour Market (KILM), 6th ed.,
available from http://kilm.ilo.org/KILMnetBeta/default2.asp (accessed 4 Feb. 2010).
31
ESCAP, ADB and UNDP, Achieving the Millennium Development Goals in an Era of Global Uncertainty, Asia-
Pacific Regional Report 2009/10
 (United Nations publication, Sales No. E.10.II.F.10), p. 31; available from
www.mdgasiapacific.org/regional-report-2009-10.
32
See Heyzer, N. and M. Khor, “Globalization and the way forward”, Development Outreach  “Speaker’s Corner”
(Washington, D.C.: World Bank, 2009); and Knowles, J.C., E.M. Pernia and M. Racelis, “Social consequences of
the financial crisis in Asia: the deeper crisis”, Economic and Development Resource Center Briefing Notes no.16
(Manila: Asian Development Bank, 1999).
27


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 16. Social expenditure as a percentage of GDP, worldwide,
during most recent year available
Advanced economies
14.2
Central and Eastern Europe and
11.5
former Soviet Republics
Northern Africa
6.4
Latin America and the Caribbean
4.5
Africa
2.8
Middle East
2.2
Asia and Pacific
2.2
0
2
4
6
8
10
12
14
16
Percentage of GDP
Source: ILO, The Financial and Economic Crisis: A Decent Work Response (Geneva, 2009).
ladder who need to support families. People try
failing to find jobs in the city.33  Also, recently
to cope by shifting from urban to rural employ-
available data from the region confirm that more
ment and to informal and short-term itinerant
workers shifted into vulnerable employment dur-
jobs, many of them falling prey to exploitative
ing the crisis. For example, first quarter 2009
and abusive employment. Unemployment figures
figures for Thailand show that the number of
in Asia and the Pacific are a crude measure
wage employees grew by 0.6% (solely as a
that grossly underestimate the fallout from the
result of expansion in Government employment),
crisis. Lack of timely and reliable information
whereas the number of own-account and con-
compounds the challenge of assessing the la-
tributing family members increased by 3.2% and
bour market impacts of the crisis. Many coun-
3.3% respectively.34 Similarly in Indonesia, the
tries in the region still do not have labour
number of casual workers not in agriculture
market surveys; some like India might conduct
increased by approximately 7.3% between Feb-
such surveys infrequently, but even then the
ruary 2008 and February 2009.35 For the region
task can be complicated by geographic vast-
as a whole, vulnerable employment could have
ness or large populations. Information that likely
increased by as much as 47.5 million between
reflects the real nature of the desperation that
2007 and 2009, adding to the estimated 1.07
has followed the crisis emerges from reports,
billion workers (60.7% of all workers in the
such as the example from China that over 20
region) who are classified as having been in
million rural migrants have returned home after
vulnerable employment in 2008.36
33
Xinhua News, “20 million jobless migrant workers return home”, 2 February 2009, available from http://
news.xinhuanet.com/english/2009-02/02/content_10750749.htm.
34
ILO, “Protecting people, promoting jobs: A survey of country employment and social protection policy responses
to the global economic crisis”, presented to the G-20 Leaders’ Summit, Pittsburgh, 24-25 September 2009; p. 12.
35
Chatani, Kazutoshi and Kee Beom Kim, Labour and Social Trends in Indonesia 2009: Recovery and Beyond
through Decent Work
 (Jakarta: ILO, 2009), p. 9; available from www.ilo.org/jakarta/whatwedo/publications/lang--en/
docName--WCMS_119134/index.htm.
36
ILO,  Trends Econometric Models, October 2009.
28

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
As export-oriented manufacturing of garments
whose growth and development depend on uti-
and electronics was among the sectors hardest
lizing human resources optimally.
hit by the global crisis, women workers in the
region, who represent a disproportionately large
share of the workers in manufacturing, are es-
pecially vulnerable to unemployment. In the Phil-
Historically, severe economic recessions
ippines female workers account for more than
have often led to irreversible changes
half the total workforce in electronics manufac-
in the labour market and
turing, while in Bangladesh they form 85% of
permanent job losses
the workforce in garment manufacturing.37 In
Thailand, female workers in manufacturing de-
creased by close to 130,000 (year-on-year) in
the fourth quarter of 2008, accounting for 63.2%
Historically, severe economic recessions have
of the total decrease in employment in that
often led to irreversible changes in the labour
industry.38 Even in the Republic of Korea, where
market and permanent job losses. Figure 17
the increase in unemployed men was higher
shows the labour market trends of selected
than that for women from June 2008 to June
Asian economies that were most affected by the
2009, the unemployment rate for women was
Asian financial crisis in 1997; namely Hong
catching up with that for men in the latter
Kong, China; and Thailand, Indonesia and the
months of 2009. For all of Asia and the Pacific,
Republic of Korea. Since that crisis, unemploy-
the number of unemployed women is estimated
ment rates in Hong Kong, China; and Republic
to have increased during 2009 by at least 5.7%,
of Korea and Indonesia have never fully recov-
in comparison with 4.9% for men.39
ered to their pre-crisis levels. Between 1998 and
2007 a number of negative shocks contributed to
Joblessness among youth is also a major chal-
fluctuation in unemployment rates in those
lenge as labour markets become increasingly
economies, including the outbreak of severe
hostile. Besides reducing overall family income
acute respiratory syndrome (SARS; especially in
levels, prolonged unemployment of young peo-
Hong Kong, China) and the bursting of the dot-
ple can exacerbate social tensions, including
com bubble; however, the evidence strongly sug-
gests that the Asian financial crisis triggered and/
rises in suicide and crime rates. In countries
or accelerated structural changes in those
with young populations, youth unemployment
economies that have led to a permanent in-
has risen from already high levels. In the Philip-
crease in the natural rate of unemployment. In
pines, for example, youth unemployment in-
the current crisis, slow recovery in the United
creased by 5.9% in January 2009 year-on-year.
States and Europe may compound cyclical un-
In Japan, notwithstanding its narrow youth base,
employment with structural unemployment that
the year-on-year increase in youth unemploy-
arises from excess capacity in the export manu-
ment was 23.4% in April 2009.40 An estimated
facturing sectors. In the long run, structural
51 million new jobs need to be created to
adjustments in the labour market generate effi-
absorb Asian labour force growth over 2009 and
ciency and gains in productivity; however, short-
2010; Asian youth may hence be heading into a
run policy instruments will be needed during the
period of prolonged unemployment that holds
transition period to support training requirements
negative consequences not only for the unem-
and provide a social safety net for disadvantaged
ployed themselves, but for the economies
and vulnerable populations.
37
Newfarmer, Richard, “The financial crisis, trade and effects on women”, Presentation at workshop on “Women
leading change: Traction for change”, Geneva, 4 March 2009.
38
ILO, “Protecting people, promoting jobs”, p. 8.
39
Ibid.
40
Ibid., p. 9.
29


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 17. Labour market trends in four Asian economies, 1996 to 2008
12
10
8
6
age unemployed
4
Percent
2
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Hong Kong, China
Indonesia
Republic of Korea
Thailand
Source: ILO, Laborsta database, available from www.laborta.ilo.org (accessed 18 Jan. 2010).
The ILO estimates that the G-20 countries used
spending, by using labour-intensive methods in
discretionary fiscal expansion policies in 2009,
half of the projects.44
together with automatic stabilizers, to create or
save between 7 and 11 million jobs; that repre-
sents between 29 and 43% of total unemploy-
ment in G-20 countries in the first half of
Recovery in the labour market can
2009.41   A similar study by the OECD on the
trail behind economic recovery by as
impact of fiscal stimulus policies on employment
long as 4 or 5 years. Making up for
presents similar findings.  In 2010, for the 19
lost ground in the struggle against
OECD countries in the study, the employment
poverty could take even longer
impact ranged between 0.8 and 1.4%, repre-
senting between 3.2 and 5.5 million jobs.42 In
Latin America, infrastructure spending, which
is a large component of most fiscal stimulus
From the onset of the global economic crisis,
packages, is said to have the potential to create
many Governments in Asia and the Pacific have
up to 200,000 direct jobs for every $1 billion
responded to the worsening employment situa-
spent, whereas 500,000 new jobs can be
tion with a wide range of measures. Recent
created by spending the same amount on
data from the region show signs of stabilization
labour-intensive rural projects.43  In the Asia-
in the labour market with unemployment rates
Pacific region, the ILO estimates that one
having reached a peak in 2009 (figure 18);
million jobs can be created in Indonesia with
previous financial and economic crises, none-
the $1.2 billion allocated for infrastructure
theless, indicate that recovery in the labour
41
ILO, “Protecting people, promoting jobs”, p. 12.
42
OECD, OECD  Employment Outlook 2009: Tackling the Jobs  Crisis (Paris: 2009), p. 31.
43
ILO, “Protecting people, promoting jobs”, p. 25.
44
Ibid., p. 26.
30


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
FIGURE 18. Monthly and quarterly unemployment rates in six Asian
economies, 2008 and 2009
9
8
7
6
5
4
3
Unemployment rate
2
1
0
Jan
Mar May
Jul
Sep
Nov
Jan
Mar May
Jul
Sep
Nov
2008
2009
Hong Kong, China
Indonesia
Malaysia
Philippines
Republic of Korea
Thailand
Source: ILO, Laborsta database, available from www.laborta.ilo.org (accessed 18 Jan. 2010).
market can trail behind economic recovery by
healthcare needs and they foster entrepreneurial
as long as 4 or 5 years. Making up for lost
development through investments in businesses,
ground in the struggle against poverty could
especially during economic crises and natural
take even longer, since increases in informality
disasters. In the major remittance-recipient
are difficult to reverse. Real wages as well as
economies of the Philippines, Bangladesh and
labour productivity take time to recover. The
Nepal, remittances grew strongly in 2008 and
appropriate mix of macroeconomic policies is
continued to grow throughout 2009 despite the
therefore an essential prerequisite, with labour
economic crisis, although at a much slower rate
market reforms and allocation of resources for
in comparison with 2008 rates (figure 19).  Paki-
building effective social protection systems.
stan curiously experienced an accelerated
growth rate of remittances in 2009, which was
Migration and remittances: bucking the
first thought to have come from migrant workers
returning home with their savings after losing
pressures
their jobs in host countries. However, no evi-
dence of large-scale return of workers supported
During the past two decades, remittances have
that assumption, so the jump in remittances is
become an increasingly important source of ex-
more likely to have been a result of Government
ternal development finance, supporting the bal-
intervention such as the Pakistan Remittance
ance of payments and contributing to the gross
Initiative, which encouraged transmittal of remit-
national product. For poor households they pro-
tances through formally recorded channels. Also,
vide a vital lifeline – they help in developing
the depreciation of the Pakistan rupee attracted
human capital by contributing to education and
remittance inflows for investment purposes.45
45
Khan, Ashfaque, “Role of remittances”, The News International (Pakistan), 8 Sept. 2009, available from
www.thenews.com.pk/editorial_detail.asp?id=197238.
31


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 19. Annual growth rate in overseas workers’ remittances in four
developing economies, 2007/08 and 2008/09
60
52.3
50
40
36.9
ages
30
23.9
19.4
Percent
20
17.2
13.7
14.8
10
5.6
0
Philippines
Bangladesh
Pakistan
Nepal
2007/08
2008/09
Source: World Bank database; compiled by Migration and Remittances Team, Development Prospects Group, World Bank,
available from http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21122856~page
PK:64165401~piPK:64165026~theSitePK:476883,00.html (accessed 5 Mar. 2010).
In the major remittance-recipient
As labour-market conditions are
economies, remittances grew
expected to remain depressed in most
strongly in 2008 and continued
destination countries, pressure may
to grow throughout 2009
grow in those countries to protect
despite the economic crisis
domestic jobs from migrants
Owing to the global reach of the crisis and the
The resilience of remittance flows to Asian and
severe economic recession affecting the major
Pacific countries has been attributed to the
remittance-sending countries, total remittances
comparatively stable migrant populations in a
to the Asia-Pacific region are expected to fall by
wide spread of destination countries, including
1.5% in East Asia and the Pacific and 1.8% in
neighbouring Asian or Pacific economies and
South Asia in 2009.46 Nonetheless, remittances
countries of the Cooperation Council for the
are proving to be by far the most resilient
Arab States of the Gulf (GCC) that fared better
source of foreign-exchange earnings, in com-
during the economic crisis than did the United
parison with other capital flows to developing
States and developed Europe. Given the growth
countries which have fallen dramatically since
in unemployment in most of those countries,
the beginning of the crisis.
however, the critical question is what will hap-
46
Ratha, D., S. Mohapatra and Ani Silwal, “Migration and remittance trends 2009: a better-than-expected outcome so
far, but significant risks ahead”, Migration and Development Brief 11 (Washington D.C.: World Bank, 2009), p. 14.
32

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
pen to those workers. So far, no evidence
such support programmes need to be sustained
suggests that the recession is leading to a
well into the economic recovery process.
mass return of workers.47 The latest available
data from the Philippines and Nepal show a
Domestic demand and fiscal space
reduction in departures of new workers from
their home country, and, for Bangladesh, a vast
shaping responses
reduction in the growth rate of migrant worker
outflows (5% increase in 2008 compared to
Many Asian and Pacific economies have had
118% increase in 2007).48 As labour-market
either substantial domestic demand or healthy
conditions are expected to remain depressed in
fiscal resources to mitigate the impact of the
most destination countries, pressure may grow
global crisis. Where domestic demand accounts
in those countries to protect domestic jobs from
for a large share of GDP growth,52 such as in
migrants. Already an increasing number of
India, the Philippines, Viet Nam and Indonesia,
countries have introduced policies to restrict mi-
the economy has displayed relatively robust and
grant workers’ access to labour markets. For
positive growth performance (figure 20). China, a
example, in January 2009, Malaysian authorities
major exporter, has been cushioned by the sec-
instituted a freeze on the issue of work permits
ond largest governmental spending programme of
to foreign workers in manufacturing and serv-
the world in absolute terms and the largest as a
ices; in February 2009, the Government of the
percentage of GDP, permitted by the State’s
Republic of Korea stopped issuing new visas to
sound fiscal position and accumulated reserves.
temporary migrant workers.49 The Russian Fed-
The exceptionally large fiscal stimulus in China
eration and the United Kingdom have enacted
has been crucial in global efforts to combat global
similar legislation.50
recession. Other Governments in the region have
also managed to contain the depth of their
Recognizing how devastating could be the conse-
slowdowns through public spending programmes
quences of large numbers of returnees, Govern-
aimed at employment creation and support to
ments in some of the major migrant-sending
domestic demand. A quantitative analysis re-
countries in the region have taken measures to
ported in box 1 shows that fiscal stimulus pro-
counteract negative impacts on migrant workers.
grammes indeed helped in offsetting to some
The Philippines has responded with an aggres-
extent the loss of exports. In the absence of
sive labour-export strategy to identify areas with
these packages the GDP growth in 2009 would
a high demand for labour and negotiate new
have dropped by 7.8 percentage points but actu-
bilateral labour migration agreements with those
ally dropped by only 4.2 percentage points.
countries. The Government opened the Filipino
Expatriate Livelihood Support Fund51 to help
The unprecedented scale of Government spend-
returning migrants find new jobs. As patterns of
ing coupled with declining tax revenues, typical
migration from and within Asia and the Pacific will
of recessions, led to decline among all major
continue to be affected by the growth slowdown,
developing economies53 in the region in their
47
Awad, Ibrahim, The Global Economic Crisis and Migrant Workers: Impact and Response (Geneva: ILO, 2009),
p. ix.
48
Fix, M. and others, Migration and the Global Recession (Washington, D.C.: Migration Policy Institute, 2009), p. 41.
49
Abella, Manolo and Geoffrey Ducanes, “The effect of the global economic crisis on Asian migrant workers and
Governments’ responses”, Technical Note (Bangkok: ILO Regional Office for Asia and the Pacific, 2009), pp. 9-10.
50
Awad,  The Global Economic Crisis and Migrant Workers, pp. 47-48.
51
Philippine Information Agency, “Gov’t earmarks P1-B for Fil-Expat Livelihood Support Fund, PGMA tells OFWs in
Riyadh”, press release, 5 Feb. 2009, available from www.pia.gov.ph/?m=12&sec=reader&rp=1&fi=p090205.htm&no
=8&date=.
52
See chapter 3 for a discussion on the lacunae in using net exports as a measure of contribution to GDP.
53
Regarding the data on fiscal balances, the major developing economies refer, because of limited data availability,
to 11 major developing economies in the ESCAP region.
33


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 20. Contributions of domestic demand, exports and imports to real GDP
growth in major Asian developing economies, 2008 and 2009
40
30
20
2008
2009
10
ages
0
– 10
Percent
– 20
– 30
– 40
an
China
India
iet Nam
Indonesia
V
Pakist
Malaysia
of China
Thailand
Philippines
Singapore
Taiwan Province
Hong Kong, China
Republic of Korea
Domestic demand
Exports
Imports
Note:  Calculations for contributions excluded statistical discrepancy.
Source: ESCAP calculations based on Economist Intelligence Unit, Country Analysis and Forecasts, EIU CountryData,
accessible from http://countryanalysis.eiu.com/ (accessed 5 Feb. 2010).
fiscal balances as a percentage of GDP in the
last quarter of 2008. Rising budget deficits re-
Governments in the region have
quired increasing funding of Government spend-
managed to contain the depth of
ing by the issuance of Government bonds. The
value of local currency bonds outstanding
their slowdowns through public
across emerging markets in East Asia rose by
spending programmes aimed at
12.8% to $3,940 billion in the first half of 2009
employment creation and support
in comparison with the corresponding period of
to domestic demand
the year before.54 Apart from Government fund-
ing of stimulus spending, local currency bonds
were issued by corporate borrowers wishing to
raise funds for relatively robust domestic opera-
Common elements in fiscal packages across the
tions in some economies in the region and to
region have been infrastructure spending, cash
reduce exposure to possible volatility from dollar
transfers and tax cuts. While large infrastructural
and euro funding.
projects featured prominently in the package for
54
Cookson, Robert, “East Asia debt market ‘underdeveloped’”, Financial Times, 15 Sept. 2009, available from
www.ft.com/cms/s/0/95b0bbce-a225-11de-9caa-00144feabdc0.html.
34


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
BOX 1. Assessing the impact of expected downturns in export growth
As a first approximation, the impact of the 2009 downturn in export growth on GDP is estimated for a selection of economies in
the Asian and Pacific region. The exercise utilizes estimates of short-term multiplier effects from the Global Macro Model of Oxford
Economics Ltd.a Those effects take into account (a) import leakages and knock-on effects of changes in aggregate demand
components in various sectors of the economy and (b) feedback effects from other economies included in the model. As shown in
the appendix for a group of 11 Asian economies, GDP declines on average $0.88 for each $1.00 lost in exports. Similarly, every
$1 increase in public spending, private consumption and private investment is associated with GDP increases of, respectively,
$0.99, $0.98 and $0.83. The multiplier effects of exports and private investment are lower because of the higher import content of
such expenditures.
The estimated GDP impacts of the 2009 drop in exports in the selected Asian economies are calculated in table 5. The figures in
column 4 of the table represent how much GDP would have dropped in 2009 as a consequence of the shortfall in exports from
their past trends. This exercise is one of comparative static in which the shortfall in exports is the only factor affecting output that
is considered.
The estimated impact of the export shortfall on GDP growth, as shown in column 4, is estimated for each country as
GDP
D
éæ X
D ö
æ X
D ö
ù ,
ç
÷
- ç
÷
GDP
êëè ø2009 è X
ú
ø -
2001 07 û GDP
where   is the export multiplier shown in the appendix table 6 and the term in brackets is the shortfall in the rate of growth of
x
exports between 2009 and the average for 2001 to 2007, shown in column 3. Column 5 shows the impact on GDP in billions of
United States dollars of 2008.b
Table 5 shows that if the shortfall of exports had been the only adverse effect on GDP, and if there had been no compensatory
policy measures, GDP growth should have dropped by 7.8% in 2009. However, the actual shortfall in GDP growth that year was
only 4.2%, compared to the higher levels of the trend from 2001 to 2007. The disparity is partly explained by the implementation
of large fiscal stimulus packages in several of the 11 Asian countries. The sizes of such packages (column 6) were roughly
sufficient or exceeded the GDP shortfall in China, India, Japan, the Republic of Korea and Thailand. In just the first two of those
countries, however, the packages managed to keep GDP growth at relatively high levels in 2009 (8.7% in China and 7.2% in
India). A possible explanation is that other components of aggregate demand, such as autonomous consumption and investment,
were adversely affected by the crisis in Japan, the Republic of Korea and Thailand.
a
The Global Macro Model is a traditional Mundell-Fleming type of global macroeconomic model with the standard demand and supply
equations. The major linkages of this type of model are external trade, financial markets, monetary aggregates (such as interest rates) and
commodity prices (such as oil prices). In the long run, each of the economies behaves like the textbook description of a single-sector
economy under Cobb-Douglas technology in equilibrium.
b
Column 5 is obtained by multiplying column 4 by the nominal GDP of 2008.
(Continued on next page)
35



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
BOX 1.  (continued)
TABLE 5. Impact of the 2009 shortfall in exports on GDP of major
Asian economies
Average annual
growth rate of real
Shortfall
Estimated impact
Memo
exports of goods
in exports
on the 2009 GDP:
item: size
and services
due to
 Comparative statics
of fiscal
(per cent)
crisis
exercise
stimulus
(1) – (2)
packages
2001-07
2009
(per cent)
(per cent)
($ billion)
($ billion)
1
2
3
4
5
6
China
17.8
– 8.8
– 26.6
– 9.9
430
585
Hong Kong, China
10.7
– 10.5
– 21.3
– 28.8
62
11
India
16.0
– 2.8
– 18.8
– 3.2
40
38
Indonesia
9.3
– 10.4
– 19.7
– 7.7
39
12
Japan
9.1
– 24.6
– 33.7
– 5.8
287
336
Malaysia
8.0
– 11.3
– 23.6
– 11.7
26
19
Philippines
8.1
– 12.7
– 20.7
– 6.1
10
7
Republic of Korea
12.3
– 1.2
– 9.3
– 3.5
33
53
Singapore
12.3
– 11.5
– 23.8
– 27.2
49
14
Taiwan Province of China
10.5
– 12.2
– 22.7
– 9.2
37
15
Thailand
7.6
– 13.8
– 21.4
– 10.4
29
44
Weighted average/ Sum
12.8
– 13.9
– 26.8
– 7.8
1 042
1 134
Memo item: Increase in demand side components to make up for the impact on GDP
Public spending
1 074
Private consumption
1 123
Private investment
1 256
Notes: Estimates for 2009 figures. GDP in United States dollars of 2008 used as weights in weighted averages.
Figures for public spending, private consumption and private investment are estimates of increases needed to
compensate for the estimated GDP shortfall for the 11 countries; calculations use estimated the multipliers for
each of those domestic demand components shown in the appendix.
Sources: ESCAP calculations based on data from the United Nations Statistics Division, National Accounts Main
Aggregates Database
 (accessed 24 Feb. 2010); and Economist Intelligence Unit, Country Analysis and Forecasts,
EIU CountryData, accessible at http://countryanalysis.eiu.com/ (accessed 24 Feb. 2010).
The 2009 shortfall in exports was extreme and is unlikely to be repeated. Notwithstanding, a return to business-as-usual export
growth rates is also very unlikely. From 2001 to 2007, real exports of the 11 selected countries in table 5 grew at an annual
average rate of 12.8%. In constant 2008 prices they more than doubled in value from $2.3 trillion in 2001 to $4.8 trillion in 2007.
They fell, however, to $4.5 trillion in 2009, as shown in Figure 21, and are expected to grow at slower rates in coming years.
Figure 21 displays two recent forecasts: one by the Economist Intelligence Unit (EIU, in red) and another by Oxford Economics
Ltd. (OE, in blue) that take into consideration average annual rates of export growth of, respectively, 7.0% and 9.3% from 2011 to
2014. To highlight the impact of the expected slowdown in export growth, a projection of exports from 2011 onward growing at the
historical average of the 2001-to-2007 growth rates is also shown in the figure (in grey).
(Continued on next page)
36



THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
BOX 1.  (continued)
FIGURE 21. Real exports of 11 major Asian economies
8
Projection of 2001-2007 trend from 2010
7
OE forecast
EIU forecast
6
5
4
3
2
US$ of 2008 (trillions)
1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Notes: The selected Asian economies are those of China, Taiwan Province of China and Hong Kong, China; and
India, Indonesia, Japan, Malaysia, the Philippines, the Republic of Korea, Singapore and Thailand.
EIU = Economist Intelligence Unit
OE = Oxford Economics Ltd.
Black line represents historical data up to 2009 and a forecast for 2010 (based on EIU estimate of $4.9 trillion and
close to OE of $5.0 trillion). Forecasts thereafter from EIU (red) and OE (blue). Grey line is a projection of exports
from 2011 onward based on the assumption that exports grow at the average 2001-to-2007 rate from 2010.
Sources: ESCAP calculations based on data from the United Nations Statistics Division, National Accounts Main
Aggregates Database
 (accessed 24 Feb. 2010); Economist Intelligence Unit, Country Analysis and Forecasts, EIU
CountryData,
 accessible at http://countryanalysis.eiu.com/ (accessed 24 Feb. 2010); and Oxford Economics Ltd.,
The Oxford World Macroeconomic Model, Feb. 2010.
According to those forecasts the annual average growth rate in real exports of goods and services is expected to decline by
between 3.1% and 5.4%, in comparison with 2001-to-2007 trends. In nominal terms such a slowdown in export growth represents
a drop in aggregate demand of between $200 billion and $324 billion per annum, or between 1.4% and 2.1% of the GDP of the
11 countries, which is rather significant.
To conclude, the 2009 drop in exports is estimated to have accounted for a 7.8% drop in GDP that year. Part, but not all, of that
impact was compensated by the implementation of fiscal stimulus packages. Those packages were insufficient in some countries,
however, while in others they were insufficient to sustain economic growth because the crisis seems to have impacted other
components of aggregate demand besides exports, such as autonomous consumption and investment.
In appraising future prospects, the available forecasts indicate that exports will be unlikely to recover to the pre-crisis levels in
growth trends by a significant margin in the medium term. ESCAP continues to monitor the situation and intends to assess
potential impacts on GDP in greater detail in future.
(Continued on next page)
37



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
BOX 1.  (continued)
Appendix: Estimated short-term multiplier effects
Table 6 displays the estimated short-term multiplier effects of different aggregate demand components in 11 different Asian
economies. Those effects are calculated from the Global Macro Model of Oxford Economics Ltd. as the average increase in real
GDP during a single year in response to an increase of $1 in each demand component during the four quarters of that year. For
instance, the 0.66 multiplier for exports in the case of China means that a $1 increase in exports in a given year contributes an
additional $0.66 to the country's GDP during that year.
TABLE 6. Estimated multiplier effects of aggregate demand components
Public
Private
Private
Exports
spendinga
consumption
investment
China
0.66
1.10
1.05
0.89
Hong Kong, China
0.65
0.89
0.86
0.88
India
0.79
1.00
0.63
0.58
Indonesia
0.79
0.76
0.66
0.71
Japan
1.08
0.98
1.14
0.85
Malaysia
0.42
1.13
1.03
0.91
Philippines
0.63
1.03
0.75
1.01
Republic of Korea
0.82
0.87
0.74
0.80
Singapore
0.44
0.65
0.58
0.63
Taiwan Province of China
0.58
0.68
0.56
0.70
Thailand
0.67
1.02
0.88
0.95
Weighted averageb
0.83
0.99
0.98
0.83
Notes: a Governmental consumption expenditure and public gross fixed-capital formation.
b GDP in current United States dollars of 2008 used as weights.
Source: ESCAP calculations based on Oxford Economics Ltd., The Oxford World Macroeconomic Model, Feb.
2010.
38

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
China, as well as in subsequent packages intro-
exports, developed economies can spur some of
duced, by among others, Thailand, Malaysia
their own revival through the export channel.
and Viet Nam, the focus so far has been on
Such is the case particularly for commodities
spending measures that can be delivered
producers like Australia. However, import de-
quickly. China implemented significant spending
mand from the region, most importantly from
on social sectors and introduced measures that
China and especially import demand for goods
helped sustain domestic private consumption at
used for infrastructure development in the coun-
a level comparable to that in 2008, including tax
try supported by fiscal stimulus, is also sustaining
breaks and other forms of incentives for auto-
exports of manufactured goods from developed
mobile and electronics purchases, increases in
countries. For example, China overtook the
pensions and introduction of a rural pension
United States as the leading export market for
programme. Income and business taxes were
Japan during the first half of 2009,55 indicating a
also cut by, among others, Viet Nam, Indonesia,
notable realignment in the relative importance to
Malaysia, Thailand, India, Japan, the Republic of
Japan of the Chinese and American markets.
Korea and Singapore. Cash transfer pro-
While Chinese demand for imports from Japan
grammes have been undertaken by the Philip-
fell during the period, import demand from the
pines, Thailand, Japan, Singapore, and Taiwan
United States for Japanese products fell even
Province of China. Subsidies for transport, tech-
more. Recovery in Europe has also been aided
nical innovation and the poor have increased, as
by demand from the region. Exports of the 16
well as spending on education and healthcare.
Euro Zone economies to East Asia rose by
Measures to increase consumption have had the
16.3% in the second quarter of 2009, in compari-
greatest growth multiplier effect in consumption-
son with a 14.4% drop during the first quarter.56
led economies, as they are proportional to the
size of consumption as a portion of GDP in an
economy. Thus, consumption-boosting measures
in such export-dependent economies as those of
Monetary policies played a far smaller
China and South-East Asia would not have as
role than fiscal policies in supporting
great an effect. Small, open trading economies
domestic demand
also experience significant leakage of any stimu-
lus spending through increased imports, implying
that stimulus can play only a limited role in
reviving growth until global demand recovers.
Apart from wide-ranging fiscal measures, central
Other than the impact of reduced private
banks have adopted very loose monetary poli-
consumption in developed countries on exports of
cies. Apart from interest rates set at near-zero
the Asia-Pacific region, the choice of component
levels in many cases (figure 22), Government
of fiscal spending in developed countries also
guarantees have been extended on bank depos-
has an impact on import demand as well as
its and direct interventions to increase money
in comparison with direct measures to increase
supply have emerged in countries experiencing
private consumption spending. Government
deflationary pressures. While monetary policies
spending on public investment would have a lower
have been accommodative across most of the
impact on imports due to the import composition
region, they played a far smaller role than fiscal
of such spending, whereas spending on Govern-
policies in supporting domestic demand, for the
ment salaries would feed through to consumption,
following reasons. First, interest rates in many
as would direct cash transfers to consumers.
countries were already low before the crisis,
thus reducing policy leverage to stimulate the
To the extent that comparatively robust consump-
economy, while in some other countries rela-
tion in the region is directed to developed country
tively high inflationary pressures remained, de-
55
IMF,  Direction of Trade Statistics, available from www2.imfstatistics.org/DOT/ (accessed 7 Jan. 2010).
56
Ibid., East Asia refers to China; Hong Kong, China; Macao, China; Japan; Republic of Korea; and Mongolia.
39


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 22.  Interest rates in major Asian developing economies, 2008 and 2009
10
9
8
7
6
ages
5
4
Percent
3
2
1
0
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
Jul-09
May-09
Sep-09
Dec-09
China
Hong Kong, China
India
Republic of Korea
Malaysia
Philippines
Singapore
Taiwan Province of China
Thailand
Notes: China: Central Bank base rate less than 20 days. Hong Kong, China: Discount Window base rate. India: Repo rates
(Reserve Bank of India). Republic of Korea: Base rate (Bank of Korea). Malaysia: Interbank overnight, weighted average.
Philippines: One-week interbank rate. Singapore: Overnight interbank rate, period average.  Taiwan Province of China:
Interbank rate. Thailand: Interbank overnight rate.
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 25
Feb. 2010).
spite the economic slowdown. Second, despite
sustaining. Furthermore, the base effect of year-
greater availability of liquidity, banks remained
on-year comparisons with sharp GDP contrac-
unwilling to lend, for example to exporters, in an
tions late in 2008 and early in 2009 will result in
uncertain external environment.
data that show strong rebounds. The key ques-
tion is whether the rebound can be converted to
sustained recovery. Growth in recent years for
many export-led economies was supported by
The key question is whether the
the debt-fuelled excessive consumption of de-
rebound can be converted to
veloped countries, particularly the United States.
Such consumption is unlikely to return to its
sustained recovery
previous levels, as consumers work off their
debt overhang in coming years and subse-
quently are not able to acquire debt burdens of
While growth has started to recover in the
the scale seen in the past.  Total outstanding
region, the concern is that much of the recovery
consumer credit in the United States reversed
remains dependent on support policies of Gov-
its expansion in the fourth quarter of 2008 and
ernments and growth has yet to become self-
thereafter decreased throughout 2009.57 The fis-
57
Data as of third quarter of 2009 from United States Federal Reserve, Federal Reserve Statistical Release,
available from www.federalreserve.gov/releases/g19/20091207/ (accessed 7 Dec. 2009).
40


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
cal and monetary policies which sustained much
expected to grow by 7.0% in 2010, following an
of the early part of the recovery seen in devel-
estimated growth of 4.0% of the previous year
oped countries are by their nature time-limited
(figure 23 and table 7).
measures. A long-term consumption slowdown
in developed countries can therefore be ex-
pected. Furthermore, given the enormity of the
global macroeconomic imbalances and their
Strong support from expansionary
convergence with environmental stresses and
policies helped Asian and Pacific
growing social disparities and geopolitical ten-
economies to reverse their declines
sions, a return to business-as-usual scenarios
may eventually bring about the systemic col-
by the second half of 2009
lapse that was so narrowly averted in 2008.
Fundamental changes to unwind global macro-
economic, social and environmental imbalances
of the past are inevitable and desirable.
Backdrop for 2010 forecast
GROWTH OUTLOOK FOR 2010
The foregoing forecasts are based on the as-
sumption that the world economy can stay firmly
on its current track of stabilization. The assump-
Recovery underway
tion is that the United States can resume
growth, at around 2.5% in 2010, after the se-
Strong support from expansionary policies
vere setback of -2.4% estimated for 2009. The
helped Asian and Pacific economies to reverse
European Union faced a steeper decline in
their declines by the second half of 2009. A
2009, at an estimated rate of -4.0%. In 2010,
notable recovery is expected in 2010. For the
the European Union is assumed to be able to
developing economies of the region, GDP is
recover growth of around 0.8%. The economic
FIGURE 23. Economic growth rates of Asian and Pacific developing economies
and world developed economies, 2003 to 2010
10
8
6
Asian and Pacific developing economies
4
ages
2
World developed economies
Percent
0
– 2
– 4
2003
2004
2005
2006
2007
2008
2009
2010
Note: GDP growth for 2009 and 2010 are estimates and forecasts, respectively.
Sources: ESCAP calculations based on data from national sources; IMF, International Financial Statistics (IFS) Online
Service,
 available from www.imfstatistics.org/imf/ (accessed 29 Sep. 2009); ADB, Key Indicators for Asia and the Pacific
2009,
 available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 1 Oct. 2009); website of the
Interstate Statistical Committee of the Commonwealth of Independent States, www.cisstat.com (accessed 22 Mar. 2010); and
ESCAP estimates. Figures for world developed economies come from United Nations, World Economic Situation and
Prospects 2010
 (United Nations publication, Sales No. E.10.II.C.2.).
41


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 7. Rates of economic growth and inflation of Asian and Pacific
economies, in percentages, 2008 to 2010
Real GDP growtha
Inflationb
2008
2009c
2010d
2008
2009c
2010d
East and North-East Asiae
2.1
–1.1
4.0
 3.5
–0.3
1.0
China
9.0
8.7
9.5
 5.9
–0.7
2.5
Democratic People’s Republic of Korea (the)
3.7
..
..
..
..
..
Hong Kong, China
2.4
–1.9
4.5
 4.3
0.5
1.9
Japan
–1.2
–5.2
1.3
 1.4
–1.4
–0.5
Macao, China
12.9
1.3
..
 8.6
1.2
..
Mongolia
8.9
0.5
6.5
 28.0
7.0
7.9
Republic of Korea (the)
2.2
0.2
5.2
 4.7
2.8
2.5
Russian Federation (the)
5.6
–7.9
3.5
 14.1
11.7
8.1
Taiwan Province of China
0.7
–1.9
4.5
 3.5
–0.9
1.3
North and Central Asia
5.8
–5.8
3.7
 14.4
10.7
7.9
Armenia
6.8
–14.4
1.5
 9.0
3.4
4.0
Azerbaijan
10.8
9.3
7.0
 20.8
1.5
6.0
Georgia
2.1
–4.0
2.0
 10.0
1.7
5.5
Kazakhstan
3.3
1.0
2.0
 17.0
7.3
7.0
Kyrgyzstan
7.6
2.3
3.0
 24.5
6.8
8.6
Russian Federation (the)
5.6
–7.9
3.5
 14.1
11.7
8.1
Tajikistan
7.9
3.4
3.5
 20.4
6.4
8.0
Turkmenistan
9.8
6.1
7.0
 13.0
10.0
12.0
Uzbekistan
9.0
8.1
8.0
 12.7
8.0
8.5
Oceaniae
2.0
1.0
2.3
 4.4
1.9
2.5
Australia
2.3
1.2
2.4
 4.4
1.8
2.5
Cook Islands (the)
–1.2
–0.1
0.8
 7.8
6.5
6.3
Fiji
–0.1
–2.5
1.9
 7.7
3.7
3.4
Kiribati
3.4
1.5
0.8
 18.6
6.6
5.9
Marshall Islands (the)
–2.0
0.5
0.5
 17.5
9.6
5.9
Micronesia (Federated States of)
–1.0
0.5
0.5
 6.8
2.9
7.4
Nauru
1.0
1.0
2.0
 4.5
1.8
2.3
New Zealand
–0.5
–0.5
1.8
 4.0
2.1
2.0
Palau
–1.0
–3.0
–1.0
 12.0
5.2
6.7
Papua New Guinea
6.7
4.5
8.5
 10.6
6.9
7.1
Samoa
–4.9
–0.8
0.5
 11.5
6.1
6.9
Solomon Islands
6.9
0.4
2.4
 17.2
8.0
7.0
Tonga
1.2
0.4
0.4
 10.4
1.6
1.9
Tuvalu
1.5
1.0
1.6
 5.3
3.8
3.5
Vanuatu
6.6
3.0
4.6
 4.8
4.5
5.0
South and South-West Asiaf
4.7
2.9
6.1
11.5
11.2
8.4
Afghanistan
3.4
15.1
7.6
  26.8
–10.0
8.4
Bangladesh
6.2
5.9
6.0
 9.9
6.7
6.0
Bhutan
5.0
5.7
6.6
6.3
7.2
8.4
India
6.7
7.2
8.3
 9.1
11.9
7.5
Iran  (Islamic Republic of)
3.3
2.0
5.0
 25.5
16.0
15.0
Maldives
5.8
–2.6
2.1
 12.3
8.5
6.0
Nepal
5.3
4.7
3.5
 7.7
13.2
7.5
Pakistan
4.1
2.0
3.2
 12.0
20.8
12.0
Sri Lanka
6.0
3.5
6.0
22.6
3.4
8.6
Turkey
0.9
–6.0
3.0
 10.4
6.3
7.2
(Continued on next page)
42


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
TABLE 7.  (continued)
Real GDP growtha
Inflationb
2008
2009c
2010d
2008
2009c
2010d
South-East Asia
4.0
0.6
5.1
 8.6
2.1
4.1
Brunei Darussalam
–1.9
–0.5
0.6
 2.7
1.2
1.2
Cambodia
6.7
0.0
4.0
  25.0
–0.8
5.0
Indonesia
6.1
4.5
5.5
 10.1
4.6
5.3
Lao People’s Democratic Republic (the)
7.9
5.4
6.0
 7.6
0.2
5.0
Malaysia
4.6
–1.7
5.0
 5.4
0.6
2.0
Myanmar
2.0
2.0
3.1
 26.8
6.5
10.4
Philippines (the)
3.8
0.9
3.5
 9.3
3.3
4.7
Singapore
1.1
–2.0
7.0
 6.6
0.6
2.3
Thailand
2.5
–2.3
4.0
 5.5
–0.8
3.5
Timor-Leste
12.8
7.4
7.5
 7.6
1.3
4.0
Viet Nam
6.2
5.3
5.8
 23.1
7.0
10.3
Developing economiesg
5.7
4.0
7.0
 7.3
3.1
4.1
- " - " -  excluding China and India
2.7
–0.6
4.7
 8.0
3.8
4.5
Developed economiesh
–0.9
–4.6
1.4
 1.7
–1.1
–0.2
Pacific island developing economiesi
3.8
1.9
5.3
 10.1
6.3
6.4
Notes: a Calculations are based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices) used
as weights to calculate the regional  and subregional growth rates.
b Changes in the consumer price index.
c Estimates.
d Forecasts (as of 15 April 2010).
e Estimates for 2009 and forecasts for 2010 are available for selected economies.
f
The estimates and forecasts for countries relate to fiscal years defined as follows: 2008 refers to the fiscal
year spanning 1 April 2008 to 31 March 2009 in India; 21 March 2008 to 20 March 2009 in the Islamic Republic
of Iran; 1 July 2007 to 30 June 2008 in Bangladesh and Pakistan and 16 July 2007 to 15 July 2008 in Nepal.
g Developing Asian and Pacific economies comprise 37 independent economies in the region, excluding North and
Central Asia (the Commonwealth of Independent States).
h Developed Asian and Pacific economies comprise Australia, Japan and New Zealand.
i
Pacific island developing economies refers to 13 economies listed under Oceania, excluding Australia and
New Zealand.
Sources: ESCAP calculations based on data from national sources; IMF, International Financial Statistics (IFS) Online
Service,
 available from www.imfstatistics.org/imf/ (accessed 29 Sep. 2009); ADB, Key Indicators for Asia and the Pacific
2009,
 available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 1 Oct. 2009); CEIC Data
Company Ltd., available from http://ceicdata.com/; website of the Interstate Statistical Committee of the Commonwealth of
Independent States, www.cisstat.com (accessed 22 Mar. 2010); and ESCAP estimates.
contraction in Japan was equally pronounced in
are clear. The United States Federal Reserve
2009, with GDP falling by an estimated 5.2%.
Board is expected to keep its target rate at a
The Japanese economy is expected to resume
very low level, from 0 to 0.25%, during the first
growth in 2010 of 1.3%.
half of 2010 and gradually increase it during the
second half. Similarly, the European Central
Monetary policy has remained loose since the
Bank is expected to hold the main refinancing
outbreak of the global financial crisis. The loose
rate at 1%. The European Central Bank is not
stance is expected to prevail until mid-2010,
expected to raise interest rates ahead of the
with authorities not likely to make bold moves
United States. The Bank of Japan has been
on interest rates before signs of solid recovery
keeping its uncollateralized overnight call rate at
43


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
0.1% since December 2008. Given the deep
to $80 per barrel on average during 2010,
setback in economic performance, the Bank of
reflecting increased economic activity and
Japan is unlikely to revert to monetary tighten-
hence increased demand for oil but still a weak
ing until the end of 2010.
dollar.
Regarding key exchange rates, the United States
Different paces of expansion
dollar weakened notably during 2009, falling to an
average of 90 yen and 0.67 euro in the fourth
Against such a background, the forecast is that
quarter of 2009, from 96 yen and 0.76 euro in
growth in the developing economies of Asia and
the same quarter of 2008. The dollar is expected
the Pacific will pick up to 7.0% in 2010, signify-
to appreciate, albeit very mildly and gradually,
ing a notable recovery from growth of 4.0% in
in 2010, owing to the economic recovery. The
2009 (figure 24). Yet, the pace of recovery will
dollar should edge up to around 100 yen by the
vary across the subregions as will be discussed
end of 2010 and hover around 0.7 euro during the
in chapter 2. South and South-West Asia will
year.
lead the recovery and is forecast to grow by
6.1% in 2010, after a growth of 2.9% in 2009,
Oil prices have corrected noticeably during
while North and Central Asia will experience the
2009, notwithstanding fluctuations. During 2009
largest rebound. The sharp downturn of the
the oil price averaged around $62 per barrel or
Russian Federation saw growth in the subregion
37% below its average level of 2008. The
decelerate in 2009, to -5.8%, but positive
oil price is expected to pick up to around $75
growth is expected to return in 2010, at 3.7%.
FIGURE 24. Average growth rates and forecasts of Asian and Pacific
economies by subregion, 2003 to 2010
Asian and Pacific
developing economies
East and North-East Asia
North and Central Asia
Oceania
South and South-West Asia
South-East Asia
0
1
2
3
4
5
6
7
8
9
Percentages
Average 2003-2007
Average 2008-2009
2010
Notes: Rates of real GDP growth for 2009 are estimates and those for 2010 are forecasts (as of 15 April 2010). Asian and
Pacific developing economies comprise 37 economies (excluding North and Central Asia). The calculations are based on
the weighted average of GDP figures in United States dollars in 2007 (at 2000 prices).
Sources: ESCAP calculations based on national sources; IMF, International Financial Statistics (IFS) Online Service,
available from www.imfstatistics.org/imf/ (accessed 29 Sep. 2009); ADB, Key Indicators for Asia and the Pacific 2009,
available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 1 Oct. 2009); CEIC Data Company
Ltd., available from http://ceicdata.com/; and website of the Interstate Statistical Committee of the Commonwealth of
Independent States, www.cisstat.com (accessed 22 Mar. 2010); and ESCAP estimates.
44

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Downside risks persist
additional reserves in case of bond defaults. If
growth fails to recover in affected countries, debt
While recovery in the developed world will likely
payments would swallow an increasing share of
be well managed by policymakers, deep uncer-
Government budgets, resulting in a vicious down-
tainties persist about the pace of recovery in the
ward growth cycle as Governments were left with
United States. Economic activities continue to
fewer resources to stimulate their economies.
pick up, but some indicators, notably rising un-
employment, have increased the complexity of
On the other hand, if expansionary policies in
managing macroeconomic policies. Continued
Asia and the Pacific turn out to be pro-cyclical,
inflation will neutralize the incipient growth
fiscal expansion will not be sustainable and has
process, moving economies into recession as
been exerting pressure on fiscal balances. How-
Governments normalize exceptionally loose mon-
ever, as the Government turns off the fiscal
etary policy and raise interest rates. Similarly
throttle, private-sector growth drivers may not be
with the exit strategy needed for fiscal policy, the
strong enough and the economy could fall back
timing and magnitude of monetary policy reversal
quickly into a double-dip recession, thereby
would also affect the prevailing forecast.
sparking a new cycle of fiscal expansion.
Countries across the Asia-Pacific region have
begun to reverse their monetary stance in re-
cent months. The dilemma for the region is that
Pressure is growing for protectionist
if they adopt a much tighter monetary policy
measures in developed countries but
than their major trading partners, in particular
the United States, it will attract capital inflows
also potentially in developing countries,
and further fuel the appreciation of Asian cur-
which is of great concern for recovery
rencies against the United States dollar. As a
in Asia and the Pacific
result, exports may experience renewed difficul-
ties that would, given the importance of external
demand in the region, negatively affect the
overall forecast of economic growth.
A growing concern is the impact of sharply
increased Government borrowing in major devel-
Pressure is growing for protectionist measures
oped economies. Early in 2010 the perceived
in developed countries but also potentially in
difficulties of Greece in repaying its Government
developing countries, which is of great concern
debt came to the fore; in coming years other
for recovery in Asia and the Pacific. The first
economies in the European Union may be facing
protectionist initiative during the crisis was the
similar problems. The impact on Asian and Pa-
“Buy American” clause in the stimulus package
cific countries would emerge through reduced
of the United States. One novel aspect of pro-
import demand from developed economies,
tectionism in the crisis has been the role of
because of curtailment of their GDP growth. Belt-
subsidies to financial institutions and manufac-
tightening policies would be imposed as part of
turing companies, particularly the automotive
measures to pare Government debt; that would
sector, in the United States and Europe. Sub-
bring on a slowdown and borrowing costs would
sidy programmes and other forms of preferential
likely increase through fears of default. Further-
treatment given as part of bailout packages
more, growth would be impacted if financial
could significantly alter competitive conditions of
institutions in Europe, which hold a substantial
trade for some time to come by skewing the
amount of Government debt, cut lending to the
playing field against Asian and Pacific enter-
corporate sector in Europe in order to retain
prises that do not benefit from such subsidies.58
58
Khor, Martin, Trade: Protectionism on the rise hits developing countries hardest, Third World Network Info Service
on WTO and Trade Issues, Penang, Malaysia, 11 February 2009; available from www.twnside.org.sg/title2/
wto.info/2009/twninfo20090208.htm.
45

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
As the impact on developed countries has in-
recovery trend prematurely. Critical decisions for
creased, a number of prominent trade disputes
each economy will be when and how to turn off
have arisen, for example, one has been the
fiscal stimulus and accommodative monetary
imposition of duties on tyres from China by the
policy.
United States in September 2009, which will be
adjudicated at the World Trade Organization.
Another threat, albeit one that has receded more
Critical decisions for each economy
recently, is the H1N1 influenza and the possibil-
ity that it could become more virulent some time
will be when and how to turn off
in the fufure. Following the outbreak of H1N1
fiscal stimulus and accommodative
influenza, the World Health Organization raised
monetary policy
its pandemic flu alert to level 6, its highest level,
in mid-2009. There is still no sign that the alert
will be lifted in the near future, signifying the
continued presence of the risk of spread of
Inflationary pressure has fallen significantly
pandemic flu. Should the pandemic intensify, it
since the last quarter of 2008 in tandem with
would inevitably destabilize economic recovery
the downturn in domestic economic activity (fig-
by dampening consumer and investment behav-
ure 25). The level and degree of fall in inflation
iour. Impacts on tourism and related industries
diverged considerably across economies, de-
and services would also be detrimental.
pending on the degree to which they had been
exposed to the global slowdown. Export-oriented
BALANCING GROWTH WITH
economies such as those of South-East Asia
experienced the lowest levels of inflation,
STABILITY
whereas more domestic-demand-led economies
such as India and Indonesia continued to dis-
Beyond the immediate risks to the speed and
play comparatively higher levels. Other than
sustainability of recovery, fundamental concerns
country-dependent, demand-side factors, reduc-
exist about the nature of the recovery process
tion in price growth across all countries was
and whether it will resurrect old challenges as
attributable to lower imported inflation from de-
well as create new obstacles for years to come.
clining global oil and food prices in the early
A complex set of policy challenges lie ahead.
part of 2009. The crude oil price averaged
They are discussed below and in chapter 3 in
around $52 per barrel in the first half of 2009,
the context of inclusive and sustainable devel-
in comparison with an average of $97 in 2008.
opment.
The continuing existence of fuel subsidies in
such economies as India, Indonesia, Malaysia
Inflation threatens from demand and
and China has, however, diminished the magni-
supply sides
tude of oil price falls for consumers. Interna-
tional food prices also fell, by around 30%
The main short-term threat to growth in Asia
during the first half of 2009 in comparison with
and the Pacific is the return of inflationary pres-
levels of the preceding year.59 Nevertheless, as
sures as recovery gathers steam. Countries will
food prices remain dependent on domestic
have to balance the risks of setting off an
factors in many cases, countries such as India
inflationary spiral with long-term negative conse-
experienced food price rises even when food
quences and of halting the short-term growth
was falling in price elsewhere.
59
Food and Agriculture Organization of the United Nations, World Food Situation, available from www.fao.org/
worldfoodsituation/FoodPricesIndex/en/ (accessed 20 Dec. 2009).
46


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
FIGURE 25. Consumer price inflation, year-on-year, in major Asian
developing economies, 2008 and 2009
15
10
5
ages
0
Percent
– 5
– 10
– 15
Jan-08
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
China
India
Indonesia
Malaysia
Philippines
Republic of Korea
Singapore
Thailand
Source: CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 20 Feb. 2010).
Economies such as those of Singapore, Thai-
quirements and increased interest rate for three-
land and Taiwan Province of China experienced
month and one-year Government bills. In March
deep GDP contractions with various degrees of
2010, Malaysia increased its overnight policy
deflationary pressure early in 2009. That phe-
interest-rate while Australia raised its cash inter-
nomenon proved to be short-lived as economic
est rate.
recovery led to rising domestic demand and
assuaged earlier fears of a deflationary spiral.
Inflation rates had fallen from the start of the
crisis but by July of 2009 had stabilized in many
A key factor behind rising prices is the
countries and began moving upward in subse-
return of supply-side pressure from
quent months. India was the first major
commodity price volatility
economy to witness rising prices, since March
2009. In view of the growing inflationary pres-
sures, the Reserve Bank of India increased the
statutory liquidity ratio of commercial banks in
Other than the increasing demand-side inflation-
October 2009, increased the reserve require-
ary pressures, a key factor behind rising prices
ment of banks in January 2010, and increased
is the return of supply-side pressure from com-
the repo and reverse repurchase rates in March
modity price volatility. The Economic and Social
2010. In January 2010, China also moved to
Survey of Asia and the Pacific 200960 high-
tighten monetary policy in response to increas-
lighted that issue for policymakers to beware of
ing inflation through an increase in reserve re-
in the post-crisis phase. Oil prices increased
60
ESCAP,  Economic and Social Survey of Asia and the Pacific 2009 (United Nations publication, Sales No.
E.09.II.F.11).
47

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
dramatically during 2009. Since its lowest point
sections of the population. Higher food prices
at the end of December 2008, benchmark Brent
would have a far more direct impact on the
crude oil had more than doubled in price to
poorest people of the region, impacting poverty,
over $70 by the end of August 2009. Conse-
exacerbating inequality and levels of malnutri-
quently the food-fuel link could influence key
tion, illness, infant and maternal mortality
food prices upwards. The reasons for the rise in
that would extend the poverty trap for long
oil prices are open to debate, especially when
periods. The question will be how the region
recessionary forces prevail. The increase has in
would respond to any situation of sudden
part been attributed to speculation in the oil
and excessive food price rise. In the previous
market.61 The large amount of liquidity available
episode immediately before the economic crisis,
to financial investors, coupled with the belief
food producing countries suspended trade in
that oil prices should be moving upwards on
some cases to safeguard domestic supply. Such
fundamental demand-supply factors, have also
reactive responses do not solve fundamental
played their part. The absence of a clear
demand and supply imbalances. They aggravate
endpoint in the current situation might feed
hoarding, rent-seeking and self-perpetuating
speculative forces further.
price rises.
A return to high food prices would follow quickly,
a possibility that merits close monitoring. Other
possible influences to a return of high food
Increases in food prices would be
prices would include the weather – India,
especially damaging for the poorest
among other countries, has witnessed a disap-
and most vulnerable in the region
pointing monsoon season. Sugar prices have
climbed to record highs in India owing to the
shortfall in the sugar crop and to production
decrease in Brazil, the world’s other leading
One option to deal with such a risk is a re-
producer. The impact on rice production could
gional rice bank. A permanent East Asian emer-
be even more significant – Asian and Pacific
gency rice reserve is being discussed by
demand for rice as a consequence of harvest
ASEAN+3 as a follow-up to its ongoing East
shortfalls would be a key concern for prices.
Asia Emergency Rice Reserve Pilot Project.62
While governmental rice stocks exist in some
The pilot project, which has existed since 2004,
countries, they are finite; the impact on
is a system of mutual assistance for sharing of
intraregional rice trade will depend on the im-
rice stocks among the 13 countries of
pact of decreased rains on the crop.
ASEAN+3 that aims as well to contribute to rice
price stability in the region. Another positive
Prices may also be affected by increased food
initiative is the agreement, since 2007, to estab-
demand in line with economic recovery. As the
lish the South Asian Association for Regional
recovery may arrive at different times across
Cooperation (SAARC) Food Bank. It would
the region, early recovery in large economies
maintain food reserves and support national as
that are not food-self-sufficient could stimulate
well as regional food security through collective
increases in food prices that, in combination
action among member countries. The SAARC
with declining growth, would be especially
Food Bank would also foster intercountry part-
damaging for the poorest and most vulnerable
nerships and regional integration.
61
For example, see Paul Krugman, “Oil speculation”, New York Times, Opinion sec., 8 July 2009; and UNCTAD,
Trade and Development Report 2009: Responding to the Global Crisis, Climate Change Mitigation and
Development
 (United Nations publication, Sales No. E.09.II.D.16).
62
Chairman’s statement at the 10th ASEAN Plus Three Foreign Ministers Meeting, 22 July 2009, held at Phuket,
Thailand; available from www.aseansec.org/PR-42AMM-Chairman-Statement-ASEAN+3.pdf.
48

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Nonetheless, as ESCAP has observed in a
borrowings at low dollar interest rates for invest-
previous edition of the Survey,63 the region has
ment in economies where appreciation expecta-
yet to take adequate measures to encourage
tions are strong and interest rates comparatively
long-term increase in food production. Rising
higher. The situation resembles that in Japan
populations and increased consumer wealth in
from mid-2005 onwards, where near-zero inter-
developing countries will continue to advance
est rates in support of domestic recovery led to
thus raising the policy imperative of reversing
the use of the yen as the carry trade currency
the long-term neglect of agriculture that was
of choice. Countries in this region have been
clear immediately prior to the crisis in 2008.
particularly susceptible to the carry trade as
expectations of recovery earlier than in other
Asset bubbles build up
parts of the world have caused interest rate and
exchange rate rises, thereby offering more
Abundant foreign capital buoyed by liquidity sup-
attractive differentials for carry trades than exist
port provided to financial institutions in devel-
in other regions.
oped countries has been attracted to the Asia-
Pacific region in recent months because of its
comparatively strong growth prospects. Looking
forward, as the inflows grow in scale, the risk
Asset price bubbles are bringing
also grows that unexpected change in interest
risks for domestic financial sectors
rates, or a sudden appreciation of the dollar,
and overall macroeconomic stability
could simultaneously cause capital to exit from
target countries and financial asset classes in
the region, precipitously bringing down asset
prices and exchange rates. How to manage the
Domestic capital has also been attracted to
benefits from foreign portfolio investments and
regional asset markets by liquidity addition at
minimize the risks that they bring to macroeco-
the national level in a number of developing
nomic stability remains a huge challenge for the
countries in the region as part of monetary
region. The risk remains of asset price bubbles
forming in particular sectors with consequent
stimulus policies during the crisis. Credit provi-
risks for domestic financial sectors and overall
sion (figure 26) and asset prices in a number
macroeconomic stability.
of economies have increased substantially fol-
lowing declines early in the crisis, notably in
Liquidity has been injected into the United
China, India and the Russian Federation (figure
States financial sector with the Federal Reserve
27). For example, during February 2010 the
purchases of mortgage-backed securities and
value of property sales in 70 major cities in
other agency debt. The scale of such liquidity
China surged 10.7% year-on-year.65 In compari-
support is seen from the Government targets
son with the figures at the year’s end in 2008,
for such purchases, of $1.25 trillion and $175
the Chinese Shanghai Composite Index and
billion respectively by the first quarter of 2010.64
Indian BSE30 had jumped by 67.6% and
Foreign capital has been abundant as well due
70.3%, respectively, by the end of February
to the rise of the dollar “carry trade”, with
2010.
63
ESCAP,  Economic and Social Survey of Asia and the Pacific 2008 (United Nations publication, Sales No.
E.08.II.F.7), chap. 3, “Unequal benefits of growth – agriculture left behind”; and ESCAP, Sustainable Agriculture
and Food Security in Asia and the Pacific,
 Theme Study 2009 (Bangkok: 2009).
64
United States Federal Reserve, “Minutes of the Federal Open Market Committee”, 3-4 November 2009
(Washington, D.C.: Board of Governors of the Federal Reserve System), available from www.federalreserve.gov/
monetarypolicy/files/fomcminutes20091104.pdf.
65
China Daily, “Real estate prices rise at record pace”, Beijing, 11 Mar. 2010, available from www.chinadaily.com.
cn/china/2010-03/11/content_9570137.htm.
49



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 26. Credit growth, year-on-year, in major Asian developing economies,
January 2007 to October 2009
60
50
40
30
ages
20
Percent
10
0
-10
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
China
India
Indonesia
Malaysia
Republic of Korea
Russian Federation
Singapore
Thailand
Note: Data used in the chart refer to domestic credit comprising claims on Central Government, claims on the private
sector and claims on other financial institutions.
Source: ESCAP calculations based on data from IMF, International Financial Statistics (IFS) Online Service, available from
www.imfstatistics.org/imf/ (accessed 20 Jan. 2010).
FIGURE 27. Equity market performance in major Asian developing economies,
January 2008 to December 2009
140
120
100
80
60
40
20
Index (January 2008=100)
0
Jan-08
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
China (Shanghai composite)
Hong Kong, China (Hang Seng)
India (BSE30)
Republic of Korea (KOSPI)
Philippines (PSEi)
Russian Federation (RTS)
Singapore (SGX Strait times)
Thailand (SETI)
Note: The equity market of each country is noted in parentheses in the legend.
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 20
Feb. 2010).
50


THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
Other than credit being directed to domestic
stock markets have since come close to peak
asset purchases, there are risks from excessive
levels seen immediately before the crisis. Fur-
lending to export enterprises, a sector that was
thermore, falls in the region’s major markets
previously regarded as dependable but may be
before the beginning of their recovery were far
less so in coming years. With the outlook for
less, except for China, than those witnessed in
exports possibly less favourable than in the
the 1997 crisis (figure 28). Consequently, in
past, the failure of such enterprises in any large
global terms, Asian equity markets have seen
number could jeopardize domestic banking sec-
one of the greatest post-crisis recoveries of
tors, similar to a sharp downturn in domestic
all developing country regions (figure 29),
asset prices. Such a development would mark-
reflecting investor expectations of comparatively
edly increase non-performing loans of domestic
healthy growth prospects in relation with other
banks and in turn put their operations in jeop-
regions.
ardy.
Asset markets are considered to be a leading
Riding on the expectations of an early and
indicator of future economic performance;
strong recovery, equity markets began to climb
hence, the recovery in prices appears to reflect
during the early part of 2009. In some cases,
investors’ anticipations that growth will return to
FIGURE 28. Equity market behaviour peak-to-trough during two crises,
1997 to 1998 and 2008 to 2009
0
– 10
– 20
– 30
– 40
– 50
– 60
– 70
Percentage of change
– 80
– 90
– 100
an
India
China
Thailand
Malaysia
Pakist
Philippines
Indonesia
Singapore
Republic of Korea
Russian Federation
Hong Kong, China
Taiwan Province of China
1997-1998 Asian financial crisis
2008-2009 global economic crisis
Notes: Declines during the 1997-to-1998 crisis measure major stock market index falling from peak to trough during that period.
Declines for the recent crisis (2008 to 2009) measure the corresponding movement from peak in 2008 to November 2009.
Source: Based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 15 Feb. 2010).
51


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 29. Performance indices of regional emerging-market equities,
15 September 2008 to 8 January 2010
Eastern Europe
Middle East and Africa
Latin America
Asia
– 15
– 10
– 5
0
5
10
15
20
25
30
35
Percentages
Source: Based on data from MSCI Barra, available from http://www.mscibarra.com/products/indices/international_equity_
indices/gimi/stdindex/performance.html (accessed 11 Jan. 2010).
the Asia-Pacific region. The optimism of inves-
and fiscal pressures, the overwhelming priority
tors66 about future recovery may be excessive,
for policymakers should be to continue stimulat-
being driven by the need to invest buoyant
ing economies until the self-perpetuating motors
funds available from the unprecedented govern-
of growth are firmly entrenched.
mental injection of liquidity into the financial
sector in developed countries as well as by
Risks have accompanied the incipient growth
excessive domestic liquidity creation. Conse-
recovery, the most acute being inflationary pres-
quently, volatility may continue in financial mar-
sures. The other consequence of the substantial
kets carrying risks for domestic financial sectors
government support has been increases in
and overall macroeconomic stability. Hence, the
budget deficits across the region. Resolving the
governments may consider managing capital
consequences of deficits will be a medium-term
flows through various types of capital controls.
challenge; for most of the region such deficits
were, in any case, an aberration from otherwise
Avoiding premature exit
prudent fiscal policies. The relatively stable
macroeconomic fundamentals of most countries
mean that their increased levels of borrowing
The recovery phase for economies in the region
are sustainable and can be paid off over time.
presents the critical challenge for policymakers
So, while fiscal pressure is undoubtedly a chal-
of deciding when and how to exit from the
lenge, the key short-term concern for the region
stimulus programmes that have supported
remains inflationary pressures.
growth since the crisis. While continuing with
stimulus policies in a climate of incipient growth
The recovery cannot be said to have been re-
recovery would likely lead to some inflationary
ignited in full measure as yet. Growth still de-
66
Pilling, David, “Mixed signals from Asia’s animal spirits”, Financial Times, 14 May 2009, available from
www.ft.com/cm/s/0/2ba14cd2-3fef-11de-9ced-00144feabdc0.html.
52

THE BEGINNINGS OF RECOVERY AND POLICY RESPONSES     CHAPTER 1
pends largely on government spending and in-
serve to increase inflationary pressures. Foreign
vestment from stimulus policies. With continued
portfolio inflows would also lead to exchange-
weakness in developed-country markets, the
rate pressure that would endanger the recovery
previous growth engine of exports remains sub-
of exports.
dued for many economies. In such a climate, a
premature withdrawal of fiscal stimulus could
Sustaining Asia’s dynamism
have severe consequences for the growth of
economies in the region, and therefore for the
The fundamental long-term challenge for
livelihoods of their poorest and most vulnerable
maintaining growth in the Asia-Pacific region
citizens.
is to complement the engine of exports to
developed countries, especially the United
States. Under current projections, the import
demand of the United States is unlikely to
The overwhelming priority for
resume its pre-crisis growth trajectory, as its
policymakers should be to continue
debt-driven consumption is constrained (see box
stimulating economies until the
1). The effects in the region will vary according
self-perpetuating motors of
to the degree of export-dependence of each
country and its exposure to the United States
growth are firmly entrenched
market.
Countries that can boost their domestic demand
to significant levels may use that channel to
In the balance of risks, Asian and Pacific
replace the loss in the export contribution to
economies should aim to sustain growth rather
growth. For smaller export-dependent econo-
than manage inflation. Policymakers should
mies in the region, a clear route for mitigating
guard against premature exit from stimulus
the decline in the role of exports to developed
policies until growth becomes more self-
countries is to increase their share of
sustaining. When exit policies are enacted, the
intraregional trade to benefit from the domestic
mix between fiscal and monetary policies will be
demand of their larger neighbours. Stimulus
important for the twin tasks of sustaining growth
while managing inflation. In that pursuit, mon-
measures have temporarily increased govern-
etary tightening could play the most effective
mental investment and consumption in a
role in controlling price pressures because it
number of countries. Fiscal stimulus in some
could act directly on credit build-up.
has also increased private consumption through
the provision of funds directly to consumers.
While decisions on timing the exit from stimulus
However, for domestic and regional demand to
policies depend on national circumstances, a
increase its contribution beyond such temporary
key role remains for regional coordination: to
fillips, policy measures are needed that can
prevent negative macroeconomic repercussions
induce long-term structural rebalancing of
due to regional diversity in policies. For exam-
economies. Such a strategy would address a
ple, monetary tightening through an increase in
number of critical global and regional imbal-
interest rates in the absence of such a rise in
ances and begin to chart the way forward, as
other economies will attract portfolio flows and
discussed in Chapter 4.
53





Photo: Stockxpert






“The prospects of convergence, which seemed 
bright before the crisis, have receded. We 
must take steps to counter these developments 
and restore the momentum of growth in the 
developing world”

Manmohan Singh
Prime Minister of India



CRISIS AND REBOUND:
THE DIFFERENTIATED IMPACTS,
POLICY RESPONSES AND OUTLOOK 2
AT THE SUBREGIONAL LEVEL
As the first global economic contraction in modern times hit Asia and the 
Pacific late in 2008, economic growth among developing economies of the 
region decelerated sharply from a pre-crisis level of 9.1% in 2007 to 4.0% 
in 2009. That the growth rate remained positive was due to continuing 
rapid growth in China (8.7%) and India (7.2%). However, if those two 
powerhouses are excluded, growth of developing economies in the rest of 
the region contracted to 0.6%, much the same as in the rest of the world. 
The synchronized impact of the global crisis is shown in figure 30.
Comparison of crisis-period growth (2008 and 2009) with pre-crisis growth 
trends (that is, the five-year average annual growth from 2003 to 2007) 
reveals that almost all economies experienced various degrees of 
deceleration in growth from their pre-crisis performance (figure 31). Japan, 
Fiji, Palau and Samoa were the most severely hit, followed by Armenia, 
Cook Islands, Georgia, the Marshall Islands, New Zealand, the Russian 
Federation, Taiwan Province of China, Singapore and Turkey.


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 30. Real GDP growth of Asian and Pacific developing and world
developed economies, 2003 to 2010
10
8
Asian and Pacific developing economies
6
Asian and Pacific developing economies
4
ages
(excluding China and India)
2
World developed economies
Percent
0
–2
–4
2003
2004
2005
2006
2007
2008
2009
2010
Note: GDP growth for 2009 and 2010 are estimates and forecasts, respectively.
Sources: ESCAP calculations based on national sources; IMF, International Financial Statistics (IFS) Online Service,
available from www.imfstatistics.org/imf/ (accessed 29 Sept. 2009); ADB, Key Indicators for Asia and the Pacific 2009,
available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 22 Mar. 2010); Interstate Statistical
Committee of the Commonwealth of Independent States, available from www.cisstat.com (accessed 22 Mar. 2010); and
ESCAP estimates and forecasts. Figures for developed economies from United Nations, World Economic Situation and
Prospects 2010
 (United Nations publication, Sales No. E.10.II.C.2.).
The grim performance notwithstanding, clear
hinged on a number of factors, including its
signs of a rebound emerged across the region
initial conditions, the breadth and depth of its
towards the end of 2009. Central to such better-
integration with the global economy, and the
than-expected performance was the domestic
speed and intensity of the Government’s
demand response to aggressive pump-priming.
countercyclical measures.
Business should not simply resume as usual –
Governments have helped prevent a meltdown,
but they will find it much trickier to steer their
EAST AND NORTH-EAST ASIA
economies back to their pre-crisis growth rate.
They first need to address imbalances and shift
The East and North-East Asian subregion spans
to a more sustainable and inclusive develop-
diverse economic systems as well as the develop-
ment paradigm.
ment spectrum: from the centrally planned Demo-
cratic People’s Republic of Korea to three econo-
mies in transition away from centrally planned
systems, to market economies at advanced
Central to such better-than-expected
stages of development; and, at its eastern ex-
performance was the domestic demand
treme, Asia’s only developed country, Japan.
response to aggressive pump-priming
The diversity enhances economic comple-
mentarity and generates a potential for expand-
ing and deepening a wide range of economic
As a basis for understanding the range of re-
relations: from the Japanese capital-  and tech-
quired policy responses, this chapter examines
nology-intensive economy, to Chinese labour-
the patterns of crisis impact and recovery
intensiveness to Mongolian and Russian Federa-
across five subregions of Asia and the Pacific.
tion resource-abundant economies. China is the
The extent of the impact in each economy
subregional growth engine as well as one of the
58




CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL        CHAPTER 2
h of
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59

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
world’s fastest-growing economies – consistently
Monetary authorities have also enjoyed greater
so. While vertically and horizontally integrated
flexibility, since lower food and energy prices
production networks have deepened economic
have helped reduce inflation. Japan, however,
relations among China, Japan and the Republic
remained under greater pressure because its
of Korea, linkages with the other economies of
previous decade of recession has left it with
the subregion are much less developed and
high levels of accumulated debt.
harbour a huge potential for future growth. Im-
portantly, perhaps as a sign of more to come, in
Rebound under way. Between 2008 and 2009,
October 2009 China and the Russian Federation
growth in the subregion decelerated into nega-
signed a $4 billion trade and investment agree-
tive territory, from 2.1% to -1.1% (table 8 and
ment that included oil, gas, raw materials and
figure 32). Much of the slowdown took place in
engineering. The two Governments envisage ex-
the first half of 2009, at the peak of the global
panding Russian oil and gas exports to China
financial crisis. A further dampener, in the sec-
and cooperation between them in extracting and
ond quarter of 2009, was the outbreak of H1N1
processing raw materials. The Russian Federa-
influenza, whose severity at that time was un-
tion is one of the main suppliers of hydrocar-
known. Figure 32 reveals the scale of the de-
bons to China, while its technology and invest-
celeration, with GDP growth declining rapidly
ment agreement with China will help modernize
during the first and second quarters of 2009.
its own Far East region.
In China, the deceleration brought the slowest
growth since records of quarterly growth began
in the 1990s. However, urban fixed-asset invest-
ment, which had increased by 26% during both
After being hit by the global financial
2007 and 2008, rose even more quickly – by
crisis, the developing economies
31% in 2009 – after the Government responded
in East and North-East Asia, led
with its fiscal stimulus package. Household con-
by China, recovered swiftly in
sumption also continued to grow, though retail
sales growth decelerated from 22% in 2008 to
the latter part of 2009
16% in 2009. The pronounced rebound of 80%
in the stock market brought recovery of all the
ground it had lost due to the crisis, spurring
growth to reach 8.7% in 2009.
Other economies are likewise extending their
links outside the subregion; for example, the
Mongolian Government has agreed with the
Ivanhoe Mines/Rio Tinto consortium a develop-
In China, the deceleration brought
ment scheme for the giant Oyu Tolgoi copper-
the slowest growth since records of
gold deposit. The 2009 ASEAN-China Invest-
ment Agreement aims to promote investment
quarterly growth began in the 1990s
flows and create a liberal, facilitative, transpar-
ent and competitive investment regime.
The four economies of Taiwan Province of
Impact of the crisis
China; Hong Kong, China; Macao, China; and
the Republic of Korea also experienced their
After being hit by the global financial crisis, the
worst contraction since the Asian financial tur-
developing economies in East and North-East
moil of 1998 (table 8). Nevertheless, by the
Asia, led by China, recovered swiftly in the
second half of 2009, a rebound was clearly
latter part of 2009. Their inherent resilience and
under way in their subregion. By the end of
their unprecedented expansionary macroeco-
2009, the Korea Composite Stock Price Index
nomic policies are key. Although the export sec-
was 50% higher than a year earlier and 56%
tor has continued to struggle, the downturn has
above its trough of November 2008, while much
largely been cushioned by domestic demand.
smaller declines were recorded than during the
60



CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 8. Rate of economic growth and inflation in East and North-East Asian
economies, 2008 to 2010
(Percentages)
Real GDP growth
Inflationa
2008
2009b
2010c
2008
2009b
2010c
East and North-East Asiad
2.1
– 1.1
4.0
3.5
– 0.3
1.0
China
9.0
8.7
9.5
 5.9
– 0.7
2.5
Democratic People’s Republic of Korea
3.7
..
..
..
..
..
Hong Kong, China
2.4
– 1.9
4.5
4.3
0.5
1.9
Japan
– 1.2
– 5.2
1.3
1.4
– 1.4
– 0.5
Macao, China
12.9
1.3
..
8.6
1.2
..
Mongolia
8.9
0.5
6.5
28.0
7.0
7.9
Republic of Korea (the)
2.2
0.2
5.2
4.7
2.8
2.5
Russian Federation (the)
5.6
– 7.9
3.5
14.1
11.7
8.1
Taiwan Province of China
0.7
– 1.9
4.5
3.5
– 0.9
1.3
Notes:  a Changes in the consumer price index. b Estimates. c Forecasts (as of 15 April 2010). d Subregional calculations
based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices), used as weights to calculate the
subregional growth rates.
Sources: ESCAP calculations based on national sources; IMF, International Financial Statistics (IFS) Online  Service,
available from www.imfstatistics.org/imf/ (accessed 29 Sep. 2009); ADB, Key Indicators for Asia and  the Pacific 2009,
available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 1 Oct. 2009); Interstate Statistical
Committee of the Commonwealth of Independent States, available from www.cisstat.com (accessed 22 Mar. 2010); and
CEIC Data Company Ltd., available from http://ceicdata.com/; and ESCAP estimates.
FIGURE 32. Real GDP growth, year-on-year, of major East and North-East Asian
economies, 2008 and 2009
40
30
20
ages
10
Percent
0
– 10
– 20
China
Hong Kong,
Japan
Macao,
Republic
Russian
Taiwan
China
China
of Korea Federation Province
of China
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 5
Mar. 2010).
61

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
previous year in both consumption and invest-
Japan, while consumer price inflation hovered
ment. Similarly, in Hong Kong, China, the fall in
around 0%, producer price inflation swung from
GDP was 7.5% during the first quarter but had
4.5% in 2008 to an estimated -5.2% in 2009,
narrowed down to 3.7% in the second quarter;
bringing back deflationary pressures that had
by the third quarter it was down to 2.2%. In
plagued the Japanese economy for more than a
Macao, China, revenue from the gaming and
decade. Mongolia exhibited a relatively high in-
entertainment sector fell by 10% within the first
flation rate, estimated at 7.0%, a significant
seven months of 2009, with a 15% year-on-year
deceleration in comparison with 28.0% of 2008.
drop in GDP in the second quarter of 2009. By
the third quarter however, a number of
multibillion-dollar investment projects that had
been put on hold, started to pick up slowly.
The Russian Federation and Mongolia
were affected not only by the volume
Although the economy of Mongolia is relatively
decreases but also by the sharp fall
less integrated with the rest of the subregion, it
in international commodity prices
also experienced a sharp drop in economic
growth, from a robust 8.9% to 0.5% between
2008 and 2009. Lower commodity prices for
some of its principal exports contributed to the
The crisis largely impacted East and North-East
sharp deceleration.
Asia through trade channels, with plunges in
import demand from developed countries
Japan experienced average pre-crisis growth of
amounting to over 25% for Japan and the United
2.1% during the period 2003 to 2007; but
States, and the European Union. Furthermore,
growth started to fall as early as the second
the Russian Federation and Mongolia were af-
quarter of 2008, when it was 0.4% lower than in
fected not only by the volume decreases but also
the previous year, and continued to slide in the
by the sharp fall in international commodity prices
first quarter of 2009, by 8.9% year-on-year.
(figures 33 and 34). The decline in exports was
Over the whole of 2009, the economy shrank
already evident by the end of 2008 and exports
by 5.2%, with deterioration in almost all eco-
fell steeply in the first half of 2009. Year-on-year
nomic indicators – not only in exports, but also
in private consumption, which makes up almost
decreases in merchandise trade were around
60% of GDP. Already weak prior to the crisis,
20% in China, the Republic of Korea and Hong
consumption fell steadily along with wage in-
Kong, China; in Japan and Taiwan Province of
come and employment. Private investment con-
China they reached over 30%; in Mongolia, 40%,
tracted at an unprecedented pace.
and in Macao, China a notable 55%. The export
of services also declined, evident in a slowing
Deflationary pressures key concern. Lack of
in the growth in tourist arrivals. The sharpest
inflationary pressure in the subregion going into
decline was in transport-related and other
the crisis permitted accommodative monetary
services that also reflected the drop in merchan-
policies as part of stimulus measures. Deflation-
dise trade, since in the more advanced econo-
ary pressures were much more evident in this
mies an important share of merchandise trade is
subregion than in others, following marked cor-
captured by services.
rections in oil and food prices (table 8) and
excess capacity. In February 2009, consumer
The major products of East and North-East Asia
prices in China fell to -1.6% from a year earlier,
were clearly sensitive to the slowdown in demand
while over the whole year prices declined to
from developed countries, to a much greater
-0.7%. Housing costs showed the greatest
extent than in economies in other subregions that
downward adjustment among major expenditure
weathered the export contractions better because
items, owing to the consolidation in the property
of their exports of low-cost/low-technology manu-
market. In Hong Kong, China, deflation
factured goods, or because of windfall gains in
emerged in mid-2009, after months of down-
commodity price rises. Cases in point are Bang-
ward price adjustments. More dramatically, in
ladeshi garment exports and Uzbekistani gold
62



CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
FIGURE 33. Export growth, year-on-year, of major East and North-East Asian
economies, 2008 and 2009
80
60
40
20
ages
0
Percent
– 20
– 40
– 60
Jan-08
Mar-08
Jul-08
Jul-09
May-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Sep-09
Dec-09
China
Hong Kong, China
Japan
Republic of Korea
Russian Federation
Taiwan Province of China
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 26
Feb. 2010).
FIGURE 34. Import growth, year-on-year, of major East and North-East Asian
economies, 2008 and 2009
80
60
40
20
ages
0
– 20
Percent
– 40
– 60
– 80
Jan-08
Mar-08
Jul-08
Jul-09
May-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Sep-09
Dec-09
China
Hong Kong, China
Japan
Republic of Korea
Russian Federation
Taiwan Province of China
Note: Data of 2009 are estimates.
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 26
Feb. 2010).
63


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
exports. East and North-East Asian specialization
seen robust FDI growth of 15% in 2007 and
in medium- and high-technology manufactured
30% in 2008. But in 2009, FDI declined by
goods as well as fuel and metal commodity
13%. Thanks to the current account surplus,
products led to the initial severity of the negative
however, reserves built up even more rapidly;
export impact of the global crisis.
by the end of 2009, Chinese foreign assets
surpassed $2.4 trillion, the highest in the world.
On the import side, in tandem with export de-
clines, demand for raw materials and intermedi-
The Republic of Korea also received net capital
ates for export-oriented production saw sharp
inflows, attributable mainly to massive inflows of
declines. Commodity prices fell at the same
portfolio investment that more than offset the net
time, so current accounts were only moderately
outflows related to direct investment, derivatives
affected (figure 35). All economies remained in
and other investments. In 2008, the country had
positive territory with the exception of Mongolia,
net portfolio outflows of $2.4 billion. In 2009 net
portfolio inflows reached $51 billion, helping
because of the unfavourable world prices for its
foreign reserve assets rise by over $65 billion, in
principal exports and import dependence. Some
conjunction with the current account surplus.
economies, notably the Republic of Korea, even
improved while others experienced modest dete-
Other economies of the subregion are also
rioration.
faced with the challenge of how to maximize
the benefits of capital inflows while reducing
Renewed inflows challenge policy. The global
their destabilizing effects. In 2009, for example,
crisis affected inward flows of foreign direct
Hong Kong, China recorded net capital inflows
investment (FDI) in East and North-East Asia.
associated with financial derivatives and other
China has exhibited the most dynamism, having
investments that exceeded the net outflows in
FIGURE 35. Current account balance as a percentage of GDP in major East and
North-East Asian economies, 2007 to 2009
20
15
10
5
age of GDP
0
– 5
Percent
– 10
– 15
China
Hong Kong, Japan
Mongolia Republic
Russian
Taiwan
China
of Korea Federation Province
of China
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: ESCAP calculations based on data from IMF, International Financial Statistics (IFS) Online Service, available from
www.imfstatistics.org/imf/ (accessed 3 Nov. 2009); and World Economic and Financial Surveys: World Economic Outlook
Database,
 Oct. 2009 ed., available from www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx (accessed 3 Nov.
2009); and ESCAP estimates.
64

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
direct and portfolio investment. Combined with
dampened intraregional trade in 2009. The New
its current account surplus, by 2009 foreign
Taiwan dollar experienced mild appreciation of
reserve assets had exceeded $250 billion.
3% over 2009 against the United States dollar.
Under the Linked Exchange Rate system, the
Hong Kong dollar remained stable. The largest
appreciation – almost 20% during 2009 – was
Mongolia also witnessed capital
that of the Russian rouble, reflecting the Gov-
inflows that enabled it to offset a
ernment’s monetary policy which helped avoid
current account deficit in the second
uncontrolled currency depreciation.
quarter of 2009. By mid-2009, foreign
On the other hand, towards the end of 2008,
reserves stood at about $650 million
the Mongolian tugrik lost over 25% of its value
against the United States dollar. The Bank of
Mongolia responded with a rise in interest rates.
By end-2009 the tugrik was 8% higher than its
In the case of Taiwan Province of China, net
capital inflows in the first half of 2009 came
March trough.
mainly from the net inflows of other investment
and financial derivatives. They offset the net
Policy responses
outflows of direct and portfolio investment that
had resulted from increased investment over-
Low inflation levels enabled Governments to
seas. Coupled with current account surplus,
support aggressive fiscal spending with accom-
foreign reserve assets continued to accumulate
modative monetary policies. At the end of 2008,
to over $300 billion by mid-2009.
Japan, for example, lowered the policy interest
rate by 0.5% to a token 0.1%. From October
Mongolia also witnessed capital inflows that
2008, the Bank of Korea cut its policy rate six
enabled it to offset a current account deficit in
times in a row, reducing it by 325 basis points
the second quarter of 2009. By mid-2009, for-
to a record low of 2%. Similarly, Hong Kong,
eign reserves stood at about $650 million.
China and Taiwan Province of China kept
interest rates at rock-bottom levels – at 0.5%
Appreciating currencies. In China, in the first
and 0.1%, respectively (figure 36).
half of 2008, the Central Bank ceased floating the
yuan within a band, that had led to notable
appreciation. During 2009, however, despite the
increase in capital inflows, the yuan remained
Low inflation levels enabled
largely stable at around 6.8 per United States
dollar. Stability in the exchange rate, as the US
Governments to support aggressive
dollar weakened, helped maintain export competi-
fiscal spending with accommodative
tiveness in third markets. However, with continuing
monetary policies
surpluses in capital and current accounts, China
continues to face pressures for appreciation.
The Korean won, by contrast, regained value
At such rates, little room remains for further
during 2009, rising by 18% – a consequence of
cuts to support private lending. China is a spe-
surplus in the current account, inflows of portfo-
cial case – the Government could direct in-
lio capital and improved access to foreign credit
creases in bank lending. In general each coun-
markets. The Japanese yen appreciated by over
try’s capacity to undertake effective stimulus
20% from its low in mid-2008. Both Japan and
was due to the considerable fiscal space avail-
the Republic of Korea, however, became less
able before the crisis for Government spending.
competitive in the Chinese market and else-
The subregion displayed some of the largest
where because of the stability of the yuan.
fiscal spending programmes in the world as a
China takes a major share of exports of both of
percentage of GDP, particularly those of China,
those countries, so exchange rate movements
the Republic of Korea and Japan.
65


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 36. Interest rates in major East and North-East Asian economies,
2008 and 2009
18
16
14
12
ages
10
8
Percent
6
4
2
0
Jan-08
Mar-08
Jul-08
Jul-09
May-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Sep-09
Dec-09
China
Hong Kong, China
Japan
Republic of Korea
Russian Federation
Taiwan Province of China
Notes: China: Central Bank base rate of less than 20 days; Hong Kong, China: Discount Window base rate; Japan:
Interbank rate of one month; Republic of Korea: Base rate (Bank of Korea); Russian Federation: Overnight interbank rate;
Taiwan Province of China: Interbank overnight rate.
Source: CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 25 Feb. 2010).
tainable demand. The Republic of Korea and
China have been notable for including significant
The Republic of Korea and China have
initiatives to achieve the twin goals of promoting
been notable for including significant
the emerging field of “green” technology as well
initiatives to achieve the twin goals
as shifting domestic consumption and produc-
of promoting the emerging field of
tion patterns to a more environmentally sustain-
“green” technology as well as shifting
able path. The Republic of Korea had the
domestic consumption and production
world’s largest component of a stimulus
patterns to a more environmentally
programme dedicated to environment-related
projects, accounting for 79% of its total stimulus
sustainable path
spending, China was second globally with
34%.67  Also in 2009 the Republic of Korea
initiated a five-year plan to move its economy
Stimulus policies across the subregion have dis-
decisively towards a low-carbon, “green-growth”
played some positive signs of moving econo-
vision of development. Earlier China had incor-
mies to a new growth trajectory based on new
porated significant environment-related spending
industrial sectors and more inclusive and sus-
into its 11th Five-Year Plan (2006 to 2010).
67
UNEP,  Global Green New Deal: An Update for the G20 Pittsburgh Summit, September 2009; available from
www.unep.org/pdf/G20_policy_brief_Final.pdf.
66


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
Unwinding expansionary policies. While ag-
ing off recovery. On the other hand, coordina-
gressive fiscal stimulus was possible because
tion in tightening monetary policy is complicated
of the accumulated budget surpluses, the scale
by varied growth performance across the
of spending has inevitably put pressure on
subregion. Resilient economies would face
budgets going forward (figure 37). During the
greater demand-side pressure for monetary
recovery phase, Governments have begun to
tightening, whereas economies that have just
consider the timing and prioritization of their exit
begun to see growth recovery might need to
strategies to ensure fiscal probity without endan-
maintain supportive monetary policies.
gering renewed growth momentum. Other than
the impact on Governmental budgets, delay in
removing stimulus creates the risk of asset
price bubbles across many economies in the
Tightening monetary policies across
subregion. Property markets in China, the Re-
the subregion to reduce the build-up in
public of Korea and Hong Kong, China have
asset prices would need coordination,
seen rapid price rises over 2009.
since any mismatch between
Tightening monetary policies across the
economies is likely to lead to significant
subregion to reduce the build-up in asset prices
fluctuations in exchange rates
would need coordination, since any mismatch
between economies is likely to lead to signifi-
cant fluctuations in exchange rates. If Govern-
ments raise interest rates ahead of their trading
Policy coordination accelerates. East and
partners, particularly the United States, they
North-East Asian countries were notable among
would see their currencies continue to
other parts of the ESCAP region for taking the
strengthen, possibly retarding exports and chok-
lead in policy cooperation to combat impacts of
FIGURE 37. Budget balance as a percentage of GDP of major East and
North-East Asian economies, 2007 to 2009
10
8
6
4
2
0
age of GDP
– 2
– 4
Percent
– 6
– 8
– 10
China
Hong Kong, Japan
Mongolia
Republic
Russian
Taiwan
China
of Korea Federation Province
of China
2007
2008
2009
Note: Budget balance for Mongolia and Russian Federation includes grants.
Sources: ADB, Key Indicators for Asia and the Pacific 2009, available from www.adb.org/Documents/Books/Key_Indicators/
2009/default.asp (accessed 3 Nov. 2009); and ESCAP estimates.
67

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
the crisis. Cooperation moved to new heights
of other Asia-Pacific subregions. Stimulus
among the major economies of Japan, China,
spending by China has increased domestic in-
the Republic of Korea and the Russian Federa-
vestment and consumption and therefore in-
tion. The three first-named played a leading role
creased the demand for imports from the
in 2009 in the financial response of Asia and
subregion. For example, China in 2009 became
the Pacific to the crisis through the
the most important Japanese trading partner,
multilateralization of the ASEAN+3 Chiang Mai
overtaking the United States. Similarly, the in-
Initiative, as well as the expansion of bilateral
crease in exports of the Republic of Korea to
currency swap arrangements between the Re-
China in 2009 served to replace much of the
public of Korea and the other two East Asian
loss in exports to developed countries.70 Such
economies in late 2008.68 The Russian Federa-
developments point to a possible trend in the
tion and China have deepened their cooperation
medium term among neighbouring economies –
through the Shanghai Cooperation Organisation
that of supplying goods destined for final de-
framework as well as on a bilateral basis. In
mand in China rather than for processing and
October 2009, the two economies moved to-
export by China to supply final demand in de-
wards deeper integration in trade and invest-
veloped countries.
ment related to the supply of energy from the
Russian Federation to China, an area of enor-
China is expected to continue to lead growth,
mous future potential in subregional coopera-
expanding by 9.5% in 2010, with investment in
tion. The two economies have also been at the
infrastructure helping to remove supply-side
forefront of proposals to expand the system of
constraints and spur even faster growth beyond
world reserve currencies and increase the use
2010. A brighter economic outlook should also
of IMF special drawing rights (SDRs).69
encourage further investment by the private sec-
tor. China is likely to emerge in 2010 as the
Outlook and policy challenges
world’s second-largest economy.
Much depends on what happens in Japan. Even
By mid-2009 all economies were showing signs
though Japan should benefit from a revival in
of a rebound. Growth is forecast to rise from the
external demand and achieve positive growth of
setback of -1.1% in 2009 to 4.0% in 2010 (table
1.3% in 2010, domestic demand remains weak
8). Yet risks remain – the recent rebound could
and business investment has yet to sustain
quickly turn into a second dip if global financial
recovery. Consequently, Japan and other devel-
weakness returns, or if Governments exit prema-
oped countries appear to be converging in an
turely from expansionary macroeconomic poli-
equilibrium of slower growth. That would hinder
cies, and the private sector does not fill the
the return of East and North-East Asian econo-
investment gap. The key question is how to turn
mies to high growth unless they can consume
the recent rebound into a sustained recovery.
more, save less and integrate more quickly
among themselves and with other rapidly grow-
From rebound to sustainable recovery.
ing Asian and Pacific economies, notably that of
Developments in the East and North-East
India. Much remains to be done in liberalizing
subregion remain strongly influenced by China.
trade and investment and removing regulatory
If China is taken out of the equation, the growth
bottlenecks while improving employment condi-
rate for the rest of the subregion is below that
tions in order to help boost private consumption.
68
Sim, William and Nipa Piboontanasawat, “South Korea, China, Japan agree on currency swaps for stability”,
Bloomberg, 12 December 2009; available from www.bloomberg.com/apps/news?pid=20601089&sid=aMtclSyeEF8E.
69
Xinhua, “Russia, China hold similar positions on financial reform”, China Daily, 31 March 2009; available from
www.chinadaily.com.cn/china/g20/2009-03/31/content_7633245.htm.
70
Chang-mock, Shin, “Korea focus: retrospect on Korean economy in 2009”, CEO Information No. 736 (Seoul:
Samsung Economic Research Institute, 23 December 2009); available from www.koreafocus.or.kr/design2/layout/
content_print.asp?group_id=102863.
68


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
BOX 2. Potential for economic cooperation: the Democratic People’s
Republic of Korea
After two years of recession, the Democratic People’s Republic of Koreaa showed positive economic growth in 2008; yet growth
remains constrained. The global financial crisis appears to have had limited, if any, impact on the economy, given the limited
integration of the economy with the external world. The country has suffered its own financial difficulties: the complications arising
from a revaluation of its currency in November 2009. Inflation has followed, causing severe difficulties for poorer sections of the
population in purchasing necessary goods.
Trade flows remain small. It is estimated that imports continue to outpace exports resulting in a trade deficit of around $1.5 billion
in 2008. Investment is hampered by foreign exchange constraints that limit the import of capital goods needed for technological
upgrading. Other constraints such as outdated trade laws and the lack of comprehensive and coherent foreign investments policy
remain to be addressed.
Insufficient availability of energy has been a major constraint for sustainable economic growth and social welfare. Considerable
unexploited resources remain; only 30% of hydropower resources have been developed, representing nearly half of the electricity
used by industry. No oil or natural gas is produced, requiring that they or their refined products be imported.
Difficulties in the agricultural sector and their impact on food security for the population have been of great concern. Food
production fell sharply over the past decade. In addition to geographical and climatic constraints, production during both the
agricultural seasons has been severely limited by input shortages of mechanized equipment; quality seeds, fertilizer, pesticides,
fuel and plastic sheeting, as well as labour. In recent years food imports have been reduced in a disturbing trend to offset the
cereal shortfall, presenting further challenges for vulnerable groups within the country. Safety-net programmes that improve access
to basic food and other essentials are critical for households unable to meet their essential needs through their own production,
purchase or traditional coping mechanisms.
On a more positive note, the major trading partners of Democratic People’s Republic of Korea are its neighbouring economies,
namely those of the Republic of Korea, China and the Russian Federation. Being located between the well-established transport
systems of those trading partners, the potential for transit of goods by rail and road is big, as is broader economic cooperation
between Democratic People’s Republic of Korea and North-East Asia. It was also reported recently that the country has upgraded
the status of a free trade zone near its border with China and Russian Federation, that potentially will boost foreign investment.
a
Despite the paucity of reliable information for some economies, the current survey endeavours to cover all members of ESCAP, including the
Democratic People’s Republic of Korea. However, in the absence of comprehensive economic and social data, it is very difficult to present a
complete and accurate macroeconomic picture. The information here was obtained from secondary sources.
Benefiting from strong growth in China, the
NORTH AND CENTRAL ASIA
Republic of Korea is expected to resume posi-
tive growth in 2010, at a rate of around 5.2%.
Taiwan Province of China should also be able
North and Central Asia is the subregion worst
to take advantage of economic growth in the
affected by the global economic crisis. In 2008
region and grow by around 4.5% in 2010,
its economy had grown by 5.8%; in 2009, follow-
though this will depend on the performance of
ing the crisis, its economy shrank by 5.8% (table
the all-important export sector. Hong Kong,
9). Millions of people who had recently moved
China, given its closer integration with the Chi-
out of poverty saw themselves slide quickly back
nese economy, should benefit from a strong
while unemployment rose, real wages declined
performance in China and be able to grow by
and prices of basic necessities shot up. Coun-
4.5% in 2010. Mongolia should benefit from the
tries that depended on foreign-exchange remit-
Oyu Tolgoi investment. Its economy should ex-
tances also came under pressure as a result of
pand by 6.5% in 2010.
the shrinking economy in the two main migrant
69


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 9. Rate of economic growth and inflation in North and Central Asian
economies, 2008 to 2010
(Percentages)
Real GDP growth
Inflationa
2008
2009b
2010c
2008
2009b 2010c
North and Central Asiad
5.8
– 5.8
3.7
14.4
10.7
7.9
Armenia
6.8
– 14.4
1.5
9.0
3.4
4.0
Azerbaijan
10.8
9.3
7.0
20.8
1.5
6.0
Georgia
2.1
– 4.0
2.0
10.0
1.7
5.5
Kazakhstan
3.3
 1.0
2.0
17.0
7.3
7.0
Kyrgyzstan
7.6
2.3
3.0
24.5
6.8
8.6
Russian Federation
5.6
– 7.9
3.5
14.1
11.7
8.1
Tajikistan
7.9
3.4
3.5
20.4
6.4
8.0
Turkmenistan
9.8
6.1
7.0
13.0
10.0
12.0
Uzbekistan
9.0
8.1
8.0
12.7
8.0
 8.5
Notes:  a Refer to percentage changes in the consumer price index. b Estimates. c Forecasts (as of 15 April 2010).
d Calculations are based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices) used as weights
to calculate the subregional growth rates.
Sources: ESCAP calculations, based on data from the Interstate Statistical Committee of the Commonwealth of Independent
States, www.cisstat.com (accessed 22 Mar. 2010); and IMF, World Economic and Financial Surveys: World Economic
Outlook Database,
 Oct. 2009 ed., available from www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx (accessed 3
Nov. 2009); and ESCAP estimates.
destination countries of the Russian Federation
In 2009 Governments faced two main tasks. The
and Kazakhstan. Decline in remittances in most
most immediate was to contain the worst of the
Central Asian countries, became a channel of
socioeconomic fallout. As was the case in other
instability and declined economic growth, unlike
subregions, North and Central Asian countries
for the rest of Asia and the Pacific where
adopted expansionary fiscal and monetary poli-
workers’ remittances showed more resilience
cies, combined with measures to stabilize their
and support for domestic demand.
banking sectors. Governments had little choice
but to meet their pledges to increase social
The five net fuel exporters suffered a steep
spending and finance ongoing infrastructure
decline in export revenue as a result of lower
projects, leading to widened fiscal deficits.
oil prices. All have since seen inflation fall, often
because of lower prices for food and oil; never-
The second task was to maintain their resolve
theless inflation rates remain stubbornly high in
in market reforms – just when some of the
a number of countries and can be expected to
basic market-economy fundamentals were being
continue to face upward pressures as demand
questioned all over the world. Despite the temp-
picks up.
tation to turn their backs on previous policies,
Governments on the whole did not waver and
Overall, the crisis brought vulnerabilities to the
continued their market reforms. In fact, reforms
fore that should be carefully tracked and for
in the financial and banking sectors, combined
which remedial policy responses are essential.
with cautious macroeconomic management poli-
For workers and families, the recovery process
cies over the past decade, improved their over-
will be long and slow.
all resilience to financial crisis. Many economies
70

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
from the subregion showed they were better
Georgia also featured among those countries of
prepared for a financial crisis than during the
the subregion that experienced negative eco-
last one of 1997.
nomic growth, due to its relatively high exposure
to the crisis-hit developed countries and the
Impact of the crisis
collapse in demand for its foodstuffs and manu-
factured exports. Domestic instability further ex-
Economic growth has been mixed. The crisis
acerbated lacklustre economic performance.
impacted the Russian Federation severely,
where lack of access to international financing
On a more positive note, Azerbaijan, Turkmen-
during the early part of the crisis was further
istan and Uzbekistan emerged as the fastest-
exacerbated by the sharp declines in commodity
growing economies in the subregion. They are
prices. Furthermore, its deep economic and
relatively less open and thus rather more reliant
socio-political ties with the rest of the subregion
on domestic demand for economic growth. They
left no country unaffected. Armenia, suffering a
also have had the fiscal space to implement
14.4% decline in growth, was the worst affected
countercyclical measures. Uzbekistan is one of
economy, not only in the subregion but the
the fastest-growing economy of all, buoyed by
entire Asia-Pacific region. The orientation of the
increases in the price of gold and a good grain
Russian Federation to Europe and other devel-
harvest. Industrial output has led the recent
oped markets had increased over time and left
developments, growing by 9% in 2009, with
it vulnerable, as trade, investment and financial
gross fixed investment particularly in the con-
flows from developed countries plummeted. A
struction sector growing by about 30%. House-
sharp fall in remittances from Armenians work-
hold consumption has remained strong, with a
ing abroad caused much hardship, given that in
growth in retail trade of 16.6%. In fact, growth
2008 remittances accounted for a 8.9% share
in private consumption could have been higher
of its GDP. Consequently, the remittance-fuelled
except for the decline in remittance inflows from
construction boom halted sharply, with the sec-
workers in the Russian Federation and
tor contracting by more than 50% during the
Kazakhstan. In Azerbaijan, expansion in the in-
first three quarters of 2009.
dustrial sector has made a major contribution to
economic growth.
Increased grain harvests over the year provided
Reforms in the financial and banking
relief, particularly for those countries that experi-
sectors, combined with cautious
enced high unemployment, helping to ensure
macroeconomic management policies
supplies for their own people and exporting to
countries outside the subregion such as Af-
over the past decade, improved their
ghanistan. For both the Russian Federation and
overall resilience to financial crisis
Kazakhstan, exports of wheat and fuel contin-
ued to play a key role in subregional trade.
Inflation decelerated. After having experienced
Kazakhstan is one of five net exporters of fuel
the highest inflation rates seen in recent years
in the subregion with an economy highly de-
in 2008, inflation decelerated in 2009 across all
pendent on oil revenues. It was impacted heav-
ily by the crisis as well as reduced oil and other
countries owing to weakened domestic demand
commodity prices. GDP was expected to grow
and reduced commodity prices, particularly for
by 1% in 2009. From mid-2009, however,
energy and food. Notwithstanding that trend,
Kazakhstan experienced a deceleration in the
inflation is expected to remain stubbornly high,
pace of decline in industrial production, being
at or close to double digit-levels, particularly in
the first sign that the Government’s stimulus
the Russian Federation and Turkmenistan (table
package for industrial and infrastructure projects
9). In Kyrgyzstan, consumer price inflation
including small- and medium-scale enterprises
decelerated from 24.5% in 2008 to 6.8.% in
was yielding a positive effect.
2009. However, continuing power shortages
71


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
and a doubling in the cost of gas imports are
Economic crisis resulted in a sharp decline in
expected to create significant upward pressure
current account and foreign trade surpluses
on inflation in 2010. The Government of
across the region (figure 38). The impacts var-
Turkmenistan has tried to control inflation by
ied among the more closed economies that
reducing the amount of cash in circulation
were less affected. Stagnant real wage growth
through a currency reform process, given its
and limited access to credit brought a sharp
underdeveloped capital and money markets and
drop in imports. However, continued import de-
the lack of alternative monetary policy tools at
pendence on essential food products, as well as
its disposal.
machinery and equipment to complete hydrocar-
bon projects and improve infrastructure, resulted
In contrast, inflation in Armenia, Azerbaijan and
in declines in imports that were less than those
Georgia remained at modest levels (table 9).
in exports. Trade deficits therefore widened
For Armenia and Georgia, it was symptomatic
across the entire subregion (table 10). Sur-
of the steep decline in economic activity. In
pluses on the current transfers and income
contrast, Azerbaijan experienced high growth.
accounts also fell, as lower inflows of remit-
Inflation there in 2008 peaked at 20.8%, its
tances and other private transfers further exac-
highest of the past decade. The 2009 rate of
erbated balance of payment pressures.
1.5% was the result of weak growth in domestic
demand and reduced international oil prices.
The current-account surplus of Turkmenistan re-
Recent rises in fuel and basic utility prices and
mained positive in 2009 (figure 38) despite dis-
increased cost of imported goods could soon
ruptions in natural gas exports to the Russian
drive the inflation rate up again.
Federation. Nevertheless, that surplus was
FIGURE 38. Current account balance as a percentage of GDP in North and
Central Asian economies, 2007 to 2009
40
30
20
10
age of GDP
0
– 10
Percent
– 20
– 30
an
an
an
an
an
Armenia
Georgia
Russian
Tajikist
Azerbaijan
Kazakhst
Kyrgyzst
Federation
urkmenist
Uzbekist
T
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: IMF, International Financial Statistics (IFS) Online Service, available from www.imfstatistics.org/imf/, (accessed 3
Nov. 2009); and World Economic and Financial Surveys: World Economic Outlook Database, Oct. 2009 ed., available from
www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx  (accessed 3 Nov. 2009); and ESCAP estimates.
72


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 10. Trade performance of North and Central Asian economies, in
percentages, 2007 to 2009
Growth rates
Exports
Imports
2007
2008
2009
2007
2008
2009
Armenia
17.0
– 8.3
– 34.0
49.1
35.4
– 25.3
Azerbaijan
63.4
43.8
– 69.2
14.7
25.3
– 14.6
Georgiaa
31.6
21.4
– 35.3
41.8
20.9
– 37.7
Kazakhstan
24.8
49.1
– 39.3
38.3
15.7
– 25.0
Kyrgyzstan
45.8
24.3
– 22.4
55.6
46.1
– 25.3
Russian Federation
16.8
32.9
– 35.5
45.0
33.7
– 37.3
Tajikistan
4.9
– 4.2
– 28.3
42.5
33.2
– 21.5
Turkmenistanb,c
12.9
52.7
– 46.6
41.5
54.8
– 28.8
Uzbekistanb,c
42.9
29.2
– 3.8
 49.2
23.4
19.5
Notes: a 2009 data refer to first 2 quarters.
b Import value in f.o.b.
c Figures for 2008 and 2009 are EIU estimates for whole year.
Sources: Interstate Statistical Committee of the Commonwealth of Independent States, www.cisstat.com (accessed 29 Mar.
2010); and Economist Intelligence Unit, Country Analysis and Forecasts, Country Analysis Services, Country Reports,
accessible at http://countryanalysis.eiu.com/, various issues, 2010.
expected to account for 20.4% of GDP as gas
$39.6 billion received in the first six months of
exports resumed and tensions eased by year-
2008. Similarly in Georgia, FDI declined from
end. Exports to China and the Islamic Republic
$1.5 billion in the first four months of 2008 to
of Iran increased.  Similarly, in Uzbekistan, ris-
$972 million in the corresponding period of 2009.
ing global prices on its principal exports of gold,
gas, and cotton were expected to sustain the
Remittances made a major socio-economic
export revenues in 2009. Hydrocarbons also
contribution in low-income countries accounting
became a more important source of income
for one third and one quarter of GDP in
than in the past. Uzbekistan benefited from a
Tajikistan and Kyrgyzstan, respectively in 2008
renegotiated agreement with the Russian
(table 11).
Federation regarding natural gas exports, with
the result that it was the only country that
Up to one third of Tajikistan migrants are esti-
experienced slower declines in exports in 2009.
mated to have returned home in 2009 and
remittance inflows could have fallen by 60%. A
FDI inflows remained a key priority and contin-
30% fall in remittance inflows was expected in
ued to play a key role in developing and mod-
Kyrgyzstan in 2009.
ernizing the economies of North and Central
Asia in 2009. However, a more difficult interna-
Policy responses
tional economic environment limited new FDI into
the subregion. Tight credit conditions and the
Governments reacted quickly to the crisis by
economic downturn adversely impacted FDI
implementing expansionary monetary and fiscal
flows into the Russian Federation. FDI in non-
policies, in line with expansionary policies imple-
financial sectors fell by more than 50% to $17.3
mented at the global level. As the crisis evolved
billion in the first half of 2009, compared with
and Governments assumed more active man-
73


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 11. Receipts of workers’ remittancesa in major North and Central
Asian economies, 2006 to 2008
Amount (million $)
Percentage of GDP
2006
2007
2008
2006
2007
2008
Armenia
658.1
845.9 1  062.1
10.3
9.2
8.9
Azerbaijan
812.5 1 287.3 1 554.3
3.9
4.1
3.4
Georgia
485.3
695.7
732.1
6.3
6.8
5.7
Kazakhstan
187.5
223
191.5
0.2
0.2
0.1
Kyrgyzstan
481.2
714.8 1  232.4
17.0
19.1
24.4
Tajikistan
1 018.8 1 690.8 1 750.0
36.2
45.5
34.1
Turkmenistan
..
..
..
..
..
..
Uzbekistan
..
..
..
..
..
..
Note:  a Including compensation of employees.
Source: ADB, Key Indicators for Asia and the Pacific 2009, available from www.adb.org/Documents/Books/Key_Indicators/
2009/default.asp.
agement of the economy, policy debate intensi-
Most countries had to augment their funding of
fied on what that might mean for the role of the
social assistance, social insurance and nutrition
State in a market economy. How should Gov-
programmes while implementing additional
ernments direct and regulate the economy in
measures to protect the delivery of essential
order to temper the excesses and instabilities to
social services.
which unbridled capitalism was prone? – while
also enhancing openness and transparency in
The crisis exacerbated longstanding imbalances
governance and consultative processes among
in public pension systems. Sharp declines in
all stakeholders. The challenges were a re-
economic growth and high unemployment re-
minder of the complex issues that will remain
duced revenue contributions at the same time
after the crisis subsides.
that expenditures were increasing and values on
the asset side of balance sheets were dropping
rapidly. A concomitant challenge arose from the
decline in commodity prices. In countries that
Remittances made a major
are resource dependent, the flow of public rev-
enues is closely associated with commodity
socio-economic contribution
prices. Even though oil-producing and exporting
in low-income countries
countries entered the crisis with significant fiscal
space, fiscal deficits rose sharply in those coun-
tries. The Russian Federation, having accumu-
lated relatively large reserves in stabilization
In 2009, as in other subregions, substantial
funds during the period of high commodity
increases in State spending were directed at
prices that preceded the global crisis, imple-
countering the adverse impact of the crisis on
mented one of the largest countercyclical pack-
the economic security and social wellbeing of
ages in the world (at 7.2% of 2008 GDP) and
the peoples of the subregion. Public invest-
consequently saw fiscal deficits rise sharply for
ments in large infrastructure projects acceler-
the first time since 2000.
ated. However, the substantial declines in remit-
tance inflows created serious difficulties for poor
Other countries entered the crisis with con-
households that for years had come to depend
strained fiscal space. In Armenia, the budget
on remittances as a way of coping with poverty.
deficit rose from 1.2% of GDP in 2008 to 6.6%
74


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
in 2009. The Government had to raise the legal
providing exchange-rate stability. Central banks
maximum permitted budget deficit so that it
had to reduce interest rates to alleviate the
could accommodate the spending increases for
burdens of domestic businesses that ranged
social and other support programmes (figure
from wide interest-rate spreads from high crisis-
39). The deficit in Georgia rose to 8.9% in
related business risks, to low capitalization of
2009, compared with an already high deficit of
businesses, to overall weak institutional capacity.
6.3% of GDP recorded in 2008. Despite higher
At the same time, declining commodity prices,
revenues received from corporate profit tax
combined with weak demand, dampened infla-
linked to rising oil prices, Azerbaijan is expected
tionary pressures and allowed for monetary
to record one of the highest fiscal deficit of
policy to focus on maintaining financial stability
the subregion in 2009, because of continued
and supporting domestic economic activity.
expenditure increases on social spending and
large infrastructure projects. Any shortfall in
As capital flows reversed, strong downward
donor financial support, arising from the impact
pressures on exchange rates emerged in most
of the crisis and the deepening debt problems
countries of the subregion (figure 40). In the
in some countries of the European Union, is of
Russian Federation, monetary policy in 2009
major concern to all of them.
was aimed at avoiding a large, uncontrolled
devaluation of the rouble and maintaining a
Accommodative monetary policy. Govern-
nominally stable rate of exchange for the rouble
ments in the subregion aimed at two key tar-
against a dual-currency basket of a 55:45, dol-
gets in monetary policy: curbing inflation and
lar-to-euro proportion. As the rouble stabilized,
FIGURE 39. Budget balance as a percentage of GDP in North and Central
Asian economies, 2007 to 2009
8
6
4
2
0
age of GDP
– 2
– 4
Percent
– 6
– 8
– 10
an
an
an
an
an
Armenia
Georgia
Tajikist
Azerbaijan
Kazakhst
Kyrgyzst
urkmenist
Uzbekist
T
Russian Federation
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: ADB, Key Indicators for Asia and the Pacific 2009, available from www.adb.org/Documents/Books/Key_Indicators/
2009/default.asp (accessed 3 Nov. 2009); and ESCAP estimates.
75


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 40. Index of exchange rates movements in selected North and
Central Asian economies, 2007 to 2009
130
120
110
100
90
80
Index (January 2007 = 100)
70
Jan-07
Aug-07
Mar-08
Oct-08
May-09
Dec-09
Armenia
Azerbaijan
Georgia
Kazakhstan
Kyrgyzstan
Russian Federation
Tajikistan
Note:  A positive trend represents appreciation and vice versa.
Source: ESCAP calculations based on data from IMF, International Financial Statistics  (IFS) Online Service, available from
www.imfstatistics.org/imf/ (accessed 26 Feb. 2010).
and more recently appreciated, the Russian
The Government intervened quickly to stabilize
central bank cut its refinancing rate by 425
the slowdown in credit growth.
basis points to 8.75% and reduced cash re-
serve requirements to improve liquidity in the
Reform agenda and integration. Much of the
domestic economy.
rapid economic development in the subregion
prior to the global crisis has resulted from in-
Similarly in Kazakhstan, falling inflation and
creased integration with other developing as
weak domestic demand provided space to
well as developed countries – mainly through
loosen monetary policy in 2009. The Govern-
trade and investment, particularly in natural re-
ment intervened quickly to stabilize liquidity
sources, as well as remittances. Foreign ex-
shortages in the banking sector. Another con-
change earnings rose substantially, enabling the
cern was the possibility that tight credit markets
countries of the subregion to boost imports and
could dampen growth in the non-oil economy,
achieve high GDP growth. During the crisis,
thereby jeopardizing diversification targets in the
despite rising protectionist pressures and the
“Kazakhstan 2030” development strategy. Con-
sequently, the National Bank of Kazakhstan cut
temptation to reverse externally oriented growth
the refinancing rate to 7% and reduced cash
policies, countries generally maintained their
reserve requirements for commercial banks. Its
commitment to keeping trade, investment, fi-
decision to allow the trading band of the tenge
nance and labour markets open. Reforms to
to widen to a range of 127.5 to 165.0 beginning
improve the business climate and to encourage
from 5 February 2010 is likely to lead to an
FDI continued. Kyrgyzstan moved up the global
appreciation of the domestic currency that will
ranking from 80 to 41 in ease of doing busi-
help offset local demand for foreign currency.
ness, by having implemented reforms in 7 out
76


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
of the 10 areas measured in the report “Doing
Outlook and policy challenges
Business 2010”.71  Furthermore, countries in the
process of accession to WTO continued their
The growth prospects of the economies in
efforts, despite the complexities. The Russian
North and Central Asia in 2010 depend on
Federation, notwithstanding an accession proc-
trends in global commodity prices and the per-
ess almost 20 years long, remains committed to
formance of the Russian Federation and
join, at the same time pursuing other trade
Kazakhstan, which are the largest trading part-
agreements – for example, the Customs Union
ners, important investors and major sources of
with Kazakhstan and Belarus (box 3). Attention
remittances for other economies in the
has already focused on economies in Asia
subregion. A return to positive growth is ex-
and the Pacific because of growing comple-
pected in all countries and, for the subregion as
mentarities. In December 2009, the Russian
a whole, the growth rate for 2010 is forecast at
Federation opened its Siberian oil export route
3.7%.
which is expected to carry annually 80 million
tons of oil eastwards. The Russian Federation
Strong domestic demand and increased oil and
has also emerged as an important supplier of
gas production should enable the economy of
liquefied natural gas to Asia.
the Russian Federation to continue its expan-
BOX 3. Creating a “Eurasian Union”: the Russian Federation, Kazakhstan, and Belarus
Subregional economic cooperation and trade in North and Central Asia broadened in 2009 when the Russian Federation and
Kazakhstan together with Belarus, another member of the Eurasian Economic Community (EurAsEC; but not an ESCAP member
country), agreed to create a Customs Union to facilitate trade among the three of them, improve the competitiveness of their
products in world and Asian markets, and open new joint investment opportunities.a The Customs Union started functioning on 1
January 2010 with common external tariffs, common principles in macroeconomic management and competition policies, and
common approaches in subsidizing industrial and agricultural products. The Union is ready to admit other EurAsEC countries.
Kyrgyzstan and Tajikistan are expected to join. The Union aims to become part of the agreed Single Economic Space (SES)b by
2012, that in turn aims to merge within a “Eurasian Union” of the three economies thereafter.
The Customs Union aims to exploit mutual complementarities that could help create economies of scale and increase the region’s
attractiveness as an investment area. Consequently the Union’s GDP is expected to rise 15% by 2015. The Russian Federation
plays a leading role in bilateral trade with other members of the Union. It accounts for about one tenth of Kazakh exports and
more than one third of Belarusian exports. It provides more than 35% of Kazakh imports and more than 60% of Belarusian
imports. Kazakhstan and the Russian Federation have substantial hydrocarbon deposits that form their principal export prospects.
The three Customs Union members possess rich deposits of ferrous, non-ferrous and precious metals, and hydropower resources.
They share comparative advantages in the production of grains, meat and dairy products and could be self-sufficient in food. Their
wheat exports account for 17% of global wheat exports. Their combined human-resource base includes high levels of education
and scientific and technical potential. The Customs Union has a combined market of 170 million people.
Notes: a Eurasian Economic Community, “About EurAsEC”, available from www.evrazes.com/en/about/ (accessed 1 Apr. 2010).
b Resolution No. 374 of the EurAsEC Interstate Council, Concept of Establishment of the Common Transport Space of the Eurasian
Economic Community, 25 February 2008, available from www.evrazes.com/docs/view/156 (accessed 1 Apr. 2010).
71
World Bank, Doing Business 2010: Reforming through Difficult Times (Washington, D.C.: World Bank, 2009);
available from www.doingbusiness.org/documents/fullreport/2010/DB10-full-report.pdf.
77

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
sion at 3.5% in 2010. However, inflationary
OCEANIA
pressures could persist, however, because of
marked deterioration in fiscal deficits, rising
capital inflows and stronger domestic demand.
Many of the characteristics of Pacific island
In Kazakhstan, positive economic growth of 2%
economies have always impeded their develop-
is forecast in 2010 owing to continued strong
ment: their geography, narrow resource bases,
investment in oil-sector projects and rising
frequent natural disasters and fragile ecosys-
prices for hydrocarbons and metals. The fastest
tems that are vulnerable to rising sea levels.
growing economies are expected to be those
Those characteristics cannot be changed. Yet,
signs are emerging that some of the givens are
of Turkmenistan and Azerbaijan at 7%, and
being reshaped to enable the subregion to sus-
Uzbekistan at 8%. Kyrgyzstan and Tajikistan are
tain and diversify its pattern of growth.
expected to develop their energy resources
and infrastructure and to increase energy self-
sufficiency with technical and financial assist-
ance from the Russian Federation. They will
The crisis was transmitted to Oceania
need additional international assistance to
through declining demand for
sustain economic development and solve
problems of poverty, infrastructure repair and
exports, falls in tourism and
capacity-building. GDP growth of both econo-
remittance earnings, etc
mies is expected to accelerate to about 3.0% or
more in 2010.
Pacific countries have benefited increasingly
from development of tourism and related trans-
The growth prospects of the economies
port services as well as remittances that provide
in North and Central Asia in 2010
resource for business investment and support to
poor households. Some have benefited from
depend on trends in global commodity
windfall gains in high, albeit sharply fluctuating,
prices and the performance of the
commodity prices. But as they grow more de-
Russian Federation and Kazakhstan
pendent on those income sources, they become
more vulnerable to global economic shocks.
In this crisis, the major economic and trade
Looking beyond 2010, the subregion is ex-
partners were the hardest hit.  From within the
pected to expand trade and investment coop-
subregion Australia and New Zealand which are
eration with the rest of Asia and the Pacific.
key economic partners of Pacific economies,
Complementarities between countries rich in
also experienced marked slowdowns. Not sur-
natural resources and energy, and those experi-
prisingly, the crisis was transmitted to Oceania
encing a rapid demand for such resources, will
through declining demand for exports, falls in
drive the process. Cooperative agreements are
tourism and remittance earnings, and the
expected to increase and could include science
changes in oil prices, since they have high
and technology aspects, with a particular focus
transportation costs. For some Pacific island
on drawing from experience and expertise avail-
countries, incomes from off-shore trust funds
able in East Asia regarding adapting to and
were reduced as well. The challenge ahead is
mitigating climate-change challenges. Improving
to find ways to continue diversifying their econo-
environmental management in water, agriculture
mies while managing any resulting instabilities.
and energy resources, and building up a low-
carbon infrastructure that is less resource-inten-
Impact of the crisis
sive are promising new growth areas of the
future that should deepen relations with the rest
GDP growth in the subregion was 2.0% in
of Asia and the Pacific.
2008, but slowed to 1.0% in 2009 (table 12).
78


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 12. Rate of economic growth and inflation in countries in Oceania,
2008 to 2010
(Percentages)
Real GDP growth
Inflationa
2008
2009b
2010c
2008
2009b
2010c
Oceaniad,e
2.0
1.0
2.3
4.4
1.9
2.5
Australia
2.3
1.2
2.4
4.4
1.8
2.5
Cook Islands
– 1.2
– 0.1
0.8
7.8
6.5
6.3
Fiji
– 0.1
– 2.5
1.9
7.7
3.7
3.4
Kiribati
3.4
1.5
0.8
18.6
6.6
5.9
Marshall Islands (the)
– 2.0
0.5
0.5
17.5
9.6
5.9
Micronesia (Federated States of)
– 1.0
0.5
0.5
6.8
2.9
7.4
Nauru
1.0
1.0
2.0
4.5
1.8
2.3
New Zealand
– 0.5
– 0.5
1.8
4.0
2.1
2.0
Palau
– 1.0
– 3.0
– 1.0
12.0
5.2
6.7
Papua New Guinea
6.7
4.5
8.5
10.6
6.9
7.1
Samoa
– 4.9
– 0.8
0.5
11.5
6.1
6.9
Solomon Islands
6.9
0.4
2.4
17.2
8.0
7.0
Tonga
1.2
0.4
0.4
10.4
1.6
1.9
Tuvalu
1.5
1.0
1.6
5.3
3.8
3.5
Vanuatu
6.6
3.0
4.6
4.8
4.5
5.0
Notes:  a Refer to percentage changes in the consumer price index. b Estimates. c Forecasts (as of 15 April 2010).
d Calculations are based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices) used as weights
to calculate the subregional growth rates. e 2009 estimates and 2010 forecasts are available for selected economies.
Sources: ESCAP calculations based on data from IMF, 2009 Article IV Consultations, available from www.imf.org/external/
siteindex.htm (accessed 26 Feb. 2010); ADB, Asian Development Outlook 2009 Update: Broadening Openness for a
Resilient Asia
 (Manila: ADB, 2009), available from www.adb.org/Documents/Books/ADO/2009/Update/ado2009-update.pdf
(accessed 30 Nov. 2009); and Pacific Economic Monitor, Issue 4, Feb. 2010, available from www.adb.org/Documents/
Reports/PacMonitor/pem-issue04.asp (accessed 2 Mar. 2010); national sources (for Fiji and Samoa); IMF, International
Financial Statistics (IFS) Online Service,
 available from www.imfstatistics.org/imf/ (accessed 26 Feb. 2010); Republic of Fiji,
Economic and Fiscal update: Supplement to the 2010 Budget Address (Ministry of Finance, Nov. 2009), available from
www.mfnp.gov.fj/Documents/2010_Budget_Supplement.pdf (accessed 2 Mar. 2010); CEIC Data Company Ltd., available from
http://ceicdata.com/ (for Australia and New Zealand); and ESCAP estimates.
Excluding Australia and New Zealand, growth in
Australia managed to weather the global eco-
2009 was actually 1.9%. In line with experience
nomic crisis relatively well, maintaining positive
in other subregions, inflation peaked in 2008,
although very low growth in its 19th year of
following a surge in commodity prices; but fell
economic expansion. The Australian perform-
again in 2009 as international prices and aggre-
ance in turn supported Pacific island economies
gate demand dropped.
through an early recovery of tourism. Australia’s
positive performance is attributable to the signifi-
Developed countries’ performances varied
cant easing of monetary policy and fiscal expan-
sion as well as the the healthy state of the
The extent and the magnitude of the impacts
financial sector. Export demand for resources
on the economies in Oceania varied (table 12).
from its major trading partners in Asia remained
In comparison with other developed countries,
relatively strong with the result that Australian
79

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
exports remained unchanged in volume terms
ea’s economy was supported by Government
despite the sharp contraction of global trade.72
spending on infrastructure as well as lending to
Domestic demand was buoyed by growth in
the private sector, which rose by 41% in 2008
public consumption and moderate growth in pri-
and 21.3% in 2009. The resulting increase in
vate consumption, offsetting the decline of fixed
budget deficit was financed by trust funds the
investment in the first half of 2009. Household
Government had accumulated during the com-
consumption regained strength, helped by Gov-
modity boom. Further support came from gold,
ernment transfer payments as part of the stimu-
which has remained at a record high in reaction
lus package, and lower interest rates that re-
to economic uncertainty. Another positive out-
duced the burden of mortgages. As housing and
come of the commodity boom has been the
equity prices strengthened, the increase in
gains in formal employment in recent years:
household wealth further encouraged private
8.4% growth from March 2007 to March 2008
consumption.
and 3.8% to June 2009.
The New Zealand performance was more dis-
mal. The country experienced five consecutive
quarters of contraction with marked deterioration
While the crisis affected all the Pacific
in business investment and subdued wage
island economies, Papua New Guinea
growth, combined with marked reduction in
suffered less than others
working hours, resulting in a sharp decline in
household earnings growth. The sharp fall in
imports since the beginning of 2009 exceeded
export declines, resulting in trade surplus for the
After enjoying strong growth over the past three
first two quarters in 2009. Nevertheless, by the
years and reaching a peak of 10.7% in 2007,
second quarter of 2009, the acute phase of the
economic growth in the Solomon Islands is
crisis appeared over as business and consumer
likely to decelerate to 0.4%73 in 2009. Log
sentiments started to improve. Other contribut-
exports accounting for 60% of exports, the main
ing factors were positive disposable income
contributor to recent economic growth, plunged
growth following a tax cut in April 2009, mod-
by about 40% in the first half of 2009 as
eration of oil prices, a housing-market recovery
demand from China collapsed. More worrisome
supported by lower interest rates, and a long-
is the estimate that logging at pre-2009 rates
term demand for housing in response to migra-
was five times the sustainable rate, with the
tion inflows.
result that exports could continue to decline
from 2010 onwards and would virtually cease by
Varied growth among commodity exporters
2014. The economy is also suffering from a
visible slowdown in tourism, its second impor-
While the crisis affected all the Pacific island
tant contributor to strong economic growth in
economies, Papua New Guinea suffered less
recent years.
than others, mainly owing to its healthy foreign
exchange reserves and domestic bank liquidity
In Nauru, strong growth in phosphate exports in
resulting from the commodity boom years. Par-
both volume and prices was offset by the clo-
allels can be drawn with other oil-exporting
sure of an Australian refugee-processing centre
countries of Central Asia and South-East Asia.
in February 2008 which had been an important
Even though growth decelerated to a more
source of employment. GDP growth of 1% was
modest rate of 4.5% in 2009, Papua New Guin-
achieved in 2008. In 2009, a sharp decline in
72
Reserve Bank of Australia, Statement of Monetary Policy (Sydney: RBA, 6 November 2009), available from
www.rba.gov.au/publications/smp/2009/nov/html/index.html.
73
IMF,  World Economic and Financial Surveys: World Economic Outlook Database, October 2009 ed. (Washington,
D.C.); available from http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx.
80

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
prices for phosphate and physical damage to its
recently its telecommunications sector, which in-
port halted sales of phosphate from Nauru to
creased both fly-in tourists and visits by cruise
Australia.  In 2010 the economy is expected to
liners. It is also believed that visitors to Vanuatu
expand by 2%.
increased owing to security worries emanating
from political conflict in other Pacific island
Hit hard: tourism- and remittance-dependent
countries.
economies
In 2009, a combination of severe flooding at the
beginning of the year, declining tourism arrivals
Vanuatu weathered the global
and reduced earnings from sugar exports re-
economic downturn thanks to
sulted in a contraction in economic growth of
2.5% in Fiji. The decline in the European Union
strong growth in tourism
(EU) preferential price for sugar and the con-
tinuing poor performance of the sugar mills,
despite extensive refurbishment exacerbated the
situation further. Under the terms of the new EU
Samoa and Tonga, the countries that rely most
sugar policy agreed with the WTO, the EU
heavily on remittances among Pacific island
sugar price declined by 36% over the past 3
countries (table 15), were struck by a devastat-
years to October 2009. While it is true that the
ing tsunami in September 2009 that decimated
EU sugar price is still higher than the world
their income-earning capabilities.
market price, which is already at historical
highs, those price changes contributed to the
While the real GDP of Samoa improved to
sizeable reduction of export earnings. The 20%
-0.8% in 2009 after a 4.9% contraction in
devaluation of the Fijian dollar in April 2009
2008,75  recovery of production will take much
partly offset the decline in the EU sugar price,
longer. Losses by the tsunami are estimated at
while the adoption of the new Cane Quality
around 20% of 2008 GDP. Reconstruction costs
Payment system to replace payment on tonnage
may rise to $154 million. Substantial aid will be
is expected to result in quality improvements.
needed for rehabilitation of the economic sec-
tors and villages. Samoa was also affected by
The economy of Palau contracted by 1%, due
job losses due to the ongoing restructuring of
to a 10.1% fall in tourist arrivals in 2008. The
the operation of a firm which assembles wire
closure of a charter-flight operator from Taiwan
harnesses for automobile plants in Australia.
Province of China, and the declining number of
About one third of workers of the firm were
visitors from crisis-struck countries, notably Ja-
reported to have been laid off.
pan and the Republic of Korea, saw tourist
arrivals contract by 11.3% in 2009, while GDP
In Tonga, the economy grew at 0.4% in 2009,
is expected to have contracted by 3%.
still struggling to recover from the sharp fall in
commerce and tourism in 2006 as well as the
In contrast, Vanuatu grew at 3% in 2009 and
tsunami which caused extensive damage and
has become one of the few countries that re-
wiped out two remote villages. The difficulty in
sisted the global economic downturn with strong
reaching those villages will make their rehabilita-
growth in tourism. The services sector contrib-
tion very difficult, even though the reconstruction
uted approximately 77% of total GDP in 200774
of Nuku’alofa is expected to stimulate the
and is estimated to have grown by 6.6% in
economy, with loans from China, Australia and
2008. This is partly attributable to the reform of
New Zealand amounting to about 120 million
its international air transport sector and more
pa’anga.
74
ADB,  Key Indicators for Asia and the Pacific 2009 (Manila, 2009), available from www.adb.org/Documents/Books/
Key_Indicators/2009/default.asp (accessed 29 Sept. 2009).
75
IMF,  World Economic Outlook Database, October 2009 ed.
81

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Dependence on public sector in small atoll
more, the sharp decline in wage inflation
countries
reduced labour costs of production in New
Zealand.
In Kiribati, the economy is expected to grow at
1.5% in 2009, reflecting a slight expansion in
fisheries and public administration. The public
sector has been a dominant contributor to the
The impact of volatility in commodity
economy of Kiribati, providing almost two thirds
prices was more pronounced among
of all paid employment and contributing half of
the various Pacific island countries
GDP. Almost half of the national income comes
from external sources including fishing license
fees, sea farers’ remittances, official develop-
ment assistance and revenue from offshore in-
In contrast, the impact of volatility in commodity
vestment, or the Revenue Equalization Reserve
prices was more pronounced among the various
Fund (RERF). Fishing license revenue fees
Pacific island countries because of their de-
alone financed about 40% of Government rev-
pendence on imported commodities and the im-
enue in 2008 (excluding RERF).
pact of fuel prices on the substantial costs of
transport in island economies. Inflation rates in
The economy of Tuvalu grew by 1% in 2009,
Kiribati and the Marshall Islands, for example,
with continued support from Government ex-
soared in 2008 by 18.6% and 17.5%, respec-
penditure, a major player for an economy with a
tively, the highest levels in the Pacific islands.
narrow economic base. The global crisis nega-
The increases reflected the vulnerabilities posed
tively affected the country’s fiscal position
by remoteness and import dependency; none-
through the sharp fall of the Tuvalu Trust Fund,
theless, by the following year inflation in those
which is mostly invested in offshore markets,
countries had moderated to 6.6% and 9.6%,
although the impact was somewhat mitigated by
respectively. In the Federated States of Micro-
the provision of financial assistance from Aus-
nesia, utilities-driven inflation pressures eased
tralia and New Zealand.
significantly as oil prices dropped, but food infla-
tion remained persistently high.
Both the Marshall Islands and the Federated
States of Micronesia barely managed to achieve
Similarly, the Fijian inflation rate rose to 7.7% in
any economic growth in 2009 (0.5%). Both
2008 – its highest since 1990. Food prices rose
countries continued to depend heavily on finan-
by 11.5% from their 2007 level, while non-food
cial assistance from the United States under the
prices recorded an increase of 6.9%. Although
Compact of Free Association Grants, amounting
the inflation rate moderated to 3.7% in 2009,
to about one quarter of the GDP of the Feder-
inflationary pressures remain, reflected in the
ated States of Micronesia and about 64% of
20% devaluation of the Fiji dollar in April 2009,
projected revenue and grants of the Govern-
rising petroleum prices and the increase in the
ment budget in the Marshall Islands. In the
minimum wage.
latter, the opening of a new fish filleting factory
was partly offset by reduced employment in the
The inflation rate in Papua New Guinea surged
U.S. military base in Kwajelein.
from less than 1% in 2007 to 10.8% in 2008,
with an increase of 16.6% for food prices; while
Inflation lower, wide variation
non-food prices rose by 7.5%. Fast growth in
the money supply and credit, strong private-
As in other subregions, inflation rates deceler-
sector growth and Government expenditures
ated in 2009 along with the fall in commodity
added to inflationary pressures. Inflation slowed
prices and weak demand (table 12). In Australia
to 6.9% in 2009. Nonetheless inflation is fore-
and New Zealand, inflation moderated to around
cast to rise to 7.1% in 2010 in view of medium-
2% (year on year) in 2009; producer (input)
term risks of inflation imported from the coun-
prices plunged from peaks of 2008. Further-
try’s main trading partners and depreciation of
82


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
the kina against major trading partners’ curren-
External sector affected by volatilities in
cies (for example, the Australian dollar). Simi-
commodity prices, tourism and remittances
larly, inflationary pressures remain in the Solo-
mon Islands and Samoa, where the respective
While a handful of countries enjoy sizeable
Governments have incurred large expenditure
earnings from commodity exports, many island
and currencies have depreciated.
countries in Oceania are characterized by bal-
ance-of-payment deficits with disproportionately
In Nauru, the Australian inflation rate has been
large imports compared to merchandise exports.
used as a proxy since the country uses the
Tourism earnings, remittances and income
Australian dollar as its currency and Australia
from trust funds are not enough to offset
supplies about 60% of its imports. Recently the
the structural trade imbalance fully. For
Nauru Bureau of Statistics started to compile its
instance, Samoan exports account for only a
own consumer price index, which indicates
small share (4% to 5%) of imports; the huge
much higher inflation than that in Australia. Par-
deficit in merchandise trade is partly offset
ticularly high levels were recorded for clothing
by tourism, and largely offset by remittances.
(62.5%) and food (12.5%) from January to Au-
Still, the current account remains in deficit
gust 2009.
(figure 41).
FIGURE 41. Current account balances as a percentage of GDP of the countries
in Oceania, 2007 to 2009
5
0
5
age of GDP
– 10
Percent
– 15
– 20
Fiji
Kiribati
Samoa
Tonga
anuatu
Australia
V
New Zealand
Solomon Islands
Papua New Guinea
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: ESCAP calculations based on data from IMF, World Economic and Financial Surveys: World Economic Outlook
Database,
 Oct. 2009 ed., available from www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx (accessed 9 Nov. 2009
for Australia, Fiji, Kiribati, New Zealand, Papua New Guinea, Solomon Islands and Vanuatu); and ADB, Key Indicators for
Asia and the Pacific 2009
 (Manila, 2009), available from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp
(accessed 9 Nov. 2009 for Tonga).
83


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Fuel and food account for a large share of the
The recent growth in visitor numbers and
imports for many countries in Oceania. The
revenue earnings from tourism has supported
recent volatility in commodity prices has signifi-
economic growth in the Cook Islands, the
cantly affected their imports and thus their trade
Federated States of Micronesia, Fiji, Palau,
balances. For example, Fijian merchandise im-
Samoa, Solomon Islands, Tonga and Vanuatu,
ports increased by almost 25% due to higher
turning tourism into one of their most important
costs for petroleum products in 2008, followed
income-generating sectors (table 14). The extent
by a fall by 30% over the first 9 months of
of the tourism sectoral contribution hinged on a
2009, owing to lower prices of international
combination of factors including: (a) the eco-
commodities and fuels. Similar situations pre-
nomic health and pattern of consumer spending
vailed in many of the other island countries.
of mostly developed economies which account
Growth of Vanuatu imports in 2008 also re-
for the lion’s share of tourist arrivals in the
flected the increase of commodity prices as well
Pacific; (b) price competitiveness including ex-
as increase in imports of capital equipment in
change rates against the visitors’ home curren-
connection with major infrastructure projects.
cies; (c) transportation links; (d) recent natural
disasters; and (e) political stability of the host
On the other hand, some commodity exporters
country.
(Australia, New Zealand, Papua New Guinea,
Solomon Islands and Vanuatu) benefited from
The global crisis and the consequent reduction
high commodity prices during 2008. Declines in
in consumer spending led to falling tourist arriv-
primary commodity prices towards the end of
als in the Pacific. For instance, reduction of
2008 (table 13) slashed export revenues, albeit
tourism income in the Federated States of
with variations. For instance, high prices for
Micronesia and Palau is largely due to the
gold, Arabica coffee and cocoa benefited Papua
downturn in United States and Japanese con-
New Guinea, offsetting declines in revenue from
sumer spending. Yet visitors from Australia and
other primary exports such as petroleum and
New Zealand, who account for one third of
copper. Palm oil and copra exporters such as
arrivals in major Pacific destinations,76 started to
Solomon Islands and Vanuatu also benefited
pick up in the latter half of 2009, supporting
because of increases in prices for bio-fuels.
countries such as Fiji, Samoa and Vanuatu.
TABLE 13. Recent international primary commodity prices, 2007 to 2009
2007
2008
2009
Crude oil ($ per barrel, average spot price)
71.12
96.99
61.76
Copper ($ per metric tonne)
7 118
6 956
5 150
Gold ($ per troy ounce)
697
872
973
Sawnwood Malaysian ($ per cubic metre)
806.3
889.1
805.5
Sugar; EC import price (US cents per kg)
68.09
69.69
52.44
Cocoa (US cents/kg)
195.2
257.7
288.9
Coffee, Arabica (US cents/kg)
272.4
308.2
317.1
Palm oil ($ per metric tonne)
780
949
683
Source: Based on data from World Bank Commodity Price Data (Pink Sheet), March 2010, available from http://go.
worldbank.org/MD63QUPAF1 (accessed 9 Mar. 2010).
76
ADB,  Pacific Economic Monitor, No. 4, February 2010; available from www.adb.org/Documents/Reports/Pac
Monitor/pem-issue04.asp.
84


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 14. Total visitor arrivals in selected Pacific island economies, in
thousands of people, 2004 to 2009
2004
2005
2006
2007
2008
2009
Fiji
504.1
545.2
548.6
539.9
585.0
140.1a
Papua New Guinea
58.0
68.0
77.7
104.1
120.1
Samoa
98.2
101.8
115.9
122.3
121.5
71.1b
Solomon Islands
5.6
9.4
11.5
15.2
22.0
4.4c
Tonga
51.9
53.3
52.8
67.1
61.5
30.6d,e
Vanuatu
98.5
125.6
154.1
167.1
196.7
65.6c
Notes: Includes day visitors.
a January-April
b January-July
c January-March
d Estimate
e January-June
Sources: Based on data from Samoa Ministry of Finance, Quarterly Economic Review, Issue No 45: Apr-Jun 2009, October
2009, available from www.mof.gov.ws/uploads/quarterly_economic_review_iss_45.pdf; Fiji Island Bureau of Statistics, accessi-
ble from www.statsfiji.gov.fj/, and visitors arrivals, accessible from www.statsfiji.gov.fj/Tourism/Visitor_Arrivals.htm; Papua New
Guinea National Statistics Office, available from www.nso.gov.pg/, and visitors arrival (up to 2005) www.nso.gov.pg/Tourism/
tourism.htm; Solomon Island Statistic office, accessible from www.spc.int/prism/Country/SB/Stats/; migration and tourism,
available from www.spc.int/prism/Country/SB/Stats/Migration%20and%20Tourism/Tour-Index.htm; Tonga Department of Statis-
tics, available from www.spc.int/prism/Country/TO/stats/; and Vanuatu National Statistics Office, tourism statistics, available
from www.spc.int/prism/country/vu/stats/TOURISM/tourism-index.htm.
Australia is also the main source of visitors for
China to Palau led, however, to a significant
Papua New Guinea, Kiribati and Solomon is-
reduction in visitors from the second largest
lands although the extent of the contribution of
source of visitors to Palau.
tourism to the economy is still limited.
Similar to tourism, in recent years remittances
Exchange rate movements have also had a
have become a major source of income in
differentiated impact on the tourism in the Pa-
Pacific island countries (table 15) with Australia,
cific subregion. For instance, the 25% decline in
New Zealand and the United States absorbing
tourist arrivals in Fiji at the start of 2009 was
the largest share of workers. For Tuvalu and
mainly due to a sharp appreciation of the Fijian
Kiribati, remittances depend heavily on seafar-
dollar against the Australian dollar (14%) be-
ers’ employment in merchant shipping; the
tween June 2008 and the first quarter of 2009.
sharp downturn in global trade flows in the first
A 20% devaluation of the Fijian dollar in April
quarter of 2009 have adversely affected them.
2009 led to a rebound in tourist arrivals.  The
Although the Australian economy was less badly
higher tourist arrivals in Samoa during the first
affected, higher unemployment may have de-
seven months of 2009 likely reflect the depre-
pressed prospects for new migrant workers.
ciation of the Samoan Tala relative to the Aus-
tralian and New Zealand dollars in the first half
Samoa and Tonga, with GDP ratios of remit-
of 2009.
tance inflows of 25.8 and 37.7% in 2008, re-
spectively, are particularly exposed. The National
Restructuring of the Pacific airline industry and
Reserve Bank of Tonga estimates that remit-
increased connections to major tourist source
tances fell by 14% and tourist receipts by 5.9%
countries, accompanied by competitive airfares,
in the year to June 2009. Tuvalu, Kiribati and Fiji
have encouraged tourism in Samoa and
are relatively less reliant on remittances. Sa-
Vanuatu in recent years. Papua New Guinea
moan remittances continued to grow in the first
also followed suit by partly opening up its inter-
half of 2009 and expected to continue further,
national airline services. The closure of a char-
with a considerable increase in funds sent home
ter-flight operator from Taiwan Province of
to families in the aftermath of the tsunami.
85


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 15. Remittances inflows as a percentage of GDP in selected Pacific
island economies, 2000 to 2008
2000
2001
2002
2003
2004
2005
2006
2007
2008
Fiji
1.4
1.4
1.3
5.3
6.3
6.2
5.2
4.9
5.0
Kiribati
15.0
15.5
14.5
12.0
7.0
6.6
6.5
5.1
6.9
Papua New Guinea
0.2
0.2
0.4
0.4
0.4
0.3
0.2
0.2
0.2
Samoa
19.4
18.8
17.0
14.0
22.8
25.2
24.0
22.0
25.8
Solomon Islands
0.5
0.5
0.6
1.2
2.3
1.7
4.5
3.8
3.2
Tonga
30.1
39.0
44.3
32.6
34.0
30.6
30.5
39.4
37.7
Vanuatu
14.3
22.6
3.5
3.2
1.5
1.4
1.2
1.1
1.2
Sources: Based on data from World Bank Migration and Remittances Data accessible from http://econ.worldbank.org/
WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21122856~menuPK:5963309~pagePK:64165401~piPK:
64165026~theSitePK:476883,00.html (accessed 9 Mar. 2010); and World Development Indicators online, available from
http://ddp-ext.worldbank.org/ext/DDPQQ/member.do?method=getMembers&userid=1&queryId=6 (accessed 9 Mar. 2010).
In 2007 New Zealand launched its Recognized
losses combined with increased need for fiscal
Seasonal Employer scheme for temporary em-
expenditure added to a weakening of the fiscal
ployment of up to 5,000 migrant workers in
states in those countries.
seasonal activities, particularly fruit picking. All
Pacific countries (except Fiji) were to be eligible,
Imports in Australia and New Zealand decline
with initial focus on five countries: Kiribati, Sa-
sharply
moa, Tonga, Tuvalu and Vanuatu. While the scale
was limited, the scheme benefited Pacific islands
Australia and New Zealand are the major desti-
in terms of household and village-level savings
nations of export products for many Pacific is-
and the acquisition of skills and a work ethic.
land countries. Around 45% of Papua New
Australia also announced the similar Pacific Sea-
Guinean and Samoan exports were destined for
sonal Worker Pilot in 2008, involving temporary
Australia in 2007 even though their shares in its
migrants from Kiribati, Papua New Guinea, Sa-
imports were negligible. A sharp fall of imports
moa, Tonga and Vanuatu, with an annual visa
in 2009 in Australia and New Zealand had a
quota of 2,500. Again numbers were small,
significant, albeit varied, impact on many of the
particularly for a larger country such as Papua
Pacific island countries. Australian imports from
New Guinea, but the positive impacts from the
Samoa halved between 2008 and 2009, while
returning workers could be important with respect
those from Kiribati contracted by 10%.
to business start-ups, work ethic and expectations
about public services. The pilot programme was
to be evaluated at the end of 2009 to determine
Policy responses
whether the scheme would be renewed and/or
expanded beyond the five countries.
Policy options and responses to the crisis varied
significantly across Oceania. In struggling with
Trust funds lose value
rising food and fuel import costs, many Pacific
island Governments had implemented measures
Small atoll countries (Kiribati, the Marshall Is-
aimed at providing relief to low-income house-
lands, the Federated States of Micronesia,
holds, such as reducing customs duties and
Palau and Tuvalu) with trust funds that serve as
value-added tax (VAT) on selected consumer
a main source of Government revenue were
goods, and reducing taxes on fuel for transport
affected by the crisis. For instance, the value of
that in turn reduced public revenues and in-
the Marshall Islands Compact Trust Fund and
creased budget deficits. Most of the Govern-
the Kiribati Revenue Equalization Reserve Fund
ments therefore entered the crisis in weakened
declined by an estimated 20% during 2008. The
positions.
86

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
In contrast, the developed economies of Aus-
most vulnerable population groups; and (d)
tralia and New Zealand had room for large
competitive devaluations in countries that had
fiscal stimulus packages. Having enjoyed fiscal
their own currencies (Fiji, Papua New Guinea,
surpluses in the recent past, their fiscal posi-
Samoa, Solomon Islands, Tonga and Vanuatu).
tions were much better than those of many
Pacific island economies were in unique situa-
OECD countries. That in turn brought benefits
tions, especially as regards the policy space to
to Pacific island economies as deep recession
adopt any of the above options, either alone or
was pre-empted in their key trading and eco-
in combination as crisis-mitigating packages.
nomic partners. Australia launched a large fiscal
Complexities arose that consequently are unique
stimulus package that included a $21 billion
as well.
cash handout to households and public invest-
ments in school buildings and public housing.
Some countries employed fiscal stimulus to
Similarly, in New Zealand a large fiscal stimulus
boost aggregate demand. For example, Samoa
package brought a decade-long record of fiscal
prepared for sharp increases in fiscal deficits in
surplus to an end in 2009: tax revenues fell
FY2008/09 and FY2009/10 with increases in
because of falling corporate profits as well as
personal income tax cuts, while expenditures
capital expenditure, a stimulus package focused
jumped because of fiscal stimulus and in-
on infrastructure, relying on Asian Development
creases in payment of unemployment benefits.
Bank concessional lending and donor grants.
However, as the need for financial resources for
post-tsunami rehabilitation increased, priorities
changed rapidly.
Australia and New Zealand had room
The ability to finance a fiscal stimulus depends
for large fiscal stimulus packages
on a country’s capacity to borrow, which in turn
depends on the size of the existing public debt
and its creditworthiness. Pacific island Govern-
Australia and New Zealand also responded to
ments, apart from Papua New Guinea and
the economic downturn by easing monetary
Vanuatu, are not in a very good position to
policy. The Reserve Bank of New Zealand dras-
borrow; hence their need to rely heavily on
tically cut the official cash rate from the peak of
concessional lending from international develop-
8.25% in June 2008 to 2.5% by April 2009.
ment agencies and donor grants. Vanuatu had
Similarly, the Reserve Bank of Australia (RBA)
paid down its public debt through the period of
cut the cash rate from 7.25% in March 2008 to
strong economic growth and managed to be in
3% by April 2009.  However, as economic con-
budget balance in 2009. Fiji, by contrast, in-
traction started to recede, the RBA turned to
creased its budget deficit from a target level of
monetary tightening in October to pre-empt ex-
2% to 3%. Fiji had been trying to create room
cessive inflation, in the first example of mon-
for more infrastructural spending by reducing
etary tightening among developed economies.
the size of its public service. However, the
reduction of revenue in the first half of 2009
Unique developments and constraints
had led to a cutback in expenditure. The
Government’s ability to finance a stimulus
Following policy responses in the rest of the
package was limited because of the constraints
world, Pacific island Governments had four op-
on its ability to borrow and to access donor
tions for tackling the effects of the global crisis
grant monies. Tonga was also in a poor position
and its myriad ramifications, although not all of
to fund a stimulus package, although to some
them were available for some countries: (a)
extent its rehabilitation of the commercial
fiscal stimulus to boost domestic demand; (b)
area of Niku’alofa, which is funded by
monetary expansion to boost aggregate domes-
concessional loans from China and donor
tic demand as a substitute for the reduction in
funding, has functioned as an infrastructural
external demand; (c) targeted assistance to the
stimulus package.
87

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
As for the second policy option, several deve-
Oceania – particularly the exchange rate of the
loping States in Oceania effectively do not have
Australian and New Zealand currencies against
an independent monetary or exchange-rate
the United States dollar. Their depreciation in
policy, since they use the United States dollar
the latter half of 2008 led to a loss in price
(Palau, the Marshall Islands and the Federated
competitiveness for some Pacific countries,
States of Micronesia) or Australian dollar
even though it alleviated pressure on import
(Kiribati, Nauru and Tuvalu) as legal tender. In
bills.
countries with their own currencies, some form
of monetary policy action was taken to boost
Devaluation of Fiji in April 2009 increased com-
aggregate demand (except Papua New Guinea).
petitiveness and helped to offset the decline in
Money markets are underdeveloped, however,
the EU price paid for its sugar exports, while it
so demand for credit is not very responsive to
increased the value of remittances in domestic
changes in interest rates. Consequently, central
currency and foreign reserves as well. Devalua-
banks in the Pacific do not emphasize interest
tion, however, increases the cost of imports in
rates as a monetary policy instrument. Expan-
local currency terms and it stimulates inflation,
sion of the money supply is used instead as the
as well as the local currency size of the exter-
major instrument in, for example, Fiji, Samoa,
nal debt, and debt servicing costs. Consequently
the Solomon Islands and Vanuatu. Commercial
any increase in budget expenditure is eventually
banks are also encouraged to lend, as was the
squeezed out.
case with Fiji and Solomon Islands. Effective-
ness of the latter instrument is limited, inas-
Outlook and policy challenges
much as few profitable investment opportunities
are on offer. Tonga in particular has not been
In 2010 economic growth of 2.4% and 1.8% is
able to engage in credit expansion, as it has
anticipated in Australia and New Zealand, re-
been trying to bring under control a credit “bub-
spectively, that will in turn improve the growth
ble” that developed over recent years through
prospects of many Pacific island economies
rapid expansion of the money supply.
through greater tourism receipts and remittance
earnings. Strong growth is also expected in
Papua New Guinea from rising commodity
prices and growth in domestic demand. Alto-
Pacific island Governments had
gether the economies of the Oceania region are
limited options for tackling the
expected to grow by 2.3% in 2010, up from
effects of the global crisis
1.0% in 2009.
Risks nonetheless hover in the near term: rising
commodity prices put upward pressure on infla-
As far as targeted assistance for the vulnerable
tion, while rising import bills run down foreign
is concerned, Fiji provided relief through re-
exchange reserves. Any slippage in the global
moval of customs duties and VAT on key con-
economy would hit the region hard. Hence,
sumer goods while the income tax threshold
considering the risks in tandem with the
was increased. Subsidies were provided to bus
vulnerabilities unique to this subregion, not the
operators while bus fares for school children
least of which are the increasingly frequent,
were paid by the Government. Tonga removed
severe natural disasters, forecasting remains a
import duties on some food items and on fuel
highly inexact enterprise.
for domestic shipping and air transport. Papua
New Guinea also reduced the tax on petroleum
Looking beyond 2010, developments in informa-
to provide relief from higher fuel prices.
tion and communication technology are generat-
ing new sources of economic growth that will
Movements in exchange rates have played an
help bridge the geographical isolation that has
important, though not well-recognized role in the
for so long kept Oceania apart from the rest of
performance of the developing States in
Asia and the Pacific (Box 4).
88


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
BOX 4. Connectivity in the Pacific
Pacific island economies have had basic international telecommunication connectivity since the 1970s. However, the Pacific has
recorded the slowest growth in mobile telephone expansion in the Asian and Pacific region, with 4 users per 100 persons,
compared to 39 per 100 for the Asian-Pacific region. Information and communication technology (ICT) penetration is concentrated
mainly around major population centres, limited by the high costs of international and domestic bandwidth.
For small economies, cable was considered unaffordable. Only a few countries, namely Fiji, Guam, New Caledonia, Papua New
Guinea, and recently American Samoa and Samoa, have access to the global backbone through submarine fibre cables.
However, as investments are being undertaken to redeploy underused cable networks, more Pacific island developing economies
will get connections. Papua New Guinea, for example, has been using retired cables to redeploy part of the Pacific Rim West
cable to Port Moresby. Similar initiatives include the Pacific Rim East cable which runs from New Zealand to Hawaii and is used
to connect American Samoa and Samoa to the global telecommunications infrastructure networks. Another project is the South
Pacific Island Network, an eastbound submarine cable running from New Caledonia to French Polynesia and New Zealand, with
landing points in Vanuatu, Wallis, Samoa and American Samoa. With the completion of all the intra-regional ICT infrastructure
initiatives, Pacific countries will in future be able to capitalize on more available bandwidth.
For small islands where the cost of cable connectivity remains unjustifiable economically, satellite and wireless with their scalability
and flexible rollout are providing additional choice. The University of the South Pacific, for example, has a satellite-based distance
learning network which connects its main campus in Suva, Fiji to extension centres in 12 Pacific island countries. In many
business and community centres, satellite services with low-cost, very-small-aperture terminals are being complemented by
wireless mobile and internet services. T. Digicel South Pacific claims to be the fastest-growing mobile operator in the Pacific,
expanding services in Samoa, Papua New Guinea, Tonga, Fiji and Vanuatu. Other islands connectivity is under way.
The Pacific can continue to expand connectivity in future by blending cable, satellite and wireless technologies. For this purpose it
will be important to foster cooperation among Pacific island developing economies to bring about synergies between cable and
satellite linkages. By harmonizing the mix of national policies, the subregional market can grow and enable telecommunication
service providers to reach larger numbers of users through their investments. For that purpose the Pacific Plan includes a digital
strategy for exploiting ICT for sustainable socio-economic development.
SOUTH AND SOUTH-WEST ASIA
decelerated in 2009, food prices remained high
and upward pressures are re-emerging.
The global crisis affected South and South-West
Controlling inflation is and will remain the key
Asia less than other subregions. GDP growth
macroeconomic challenge for the subregion. An-
remained generally positive although exports
other key challenge is the adverse impact of
declined substantially and capital inflows were
security problems ranging from internal conflicts
reduced (table 16). The national economies de-
to terrorist attacks linked with geopolitical ten-
pend much more on domestic than on external
sions, all of which impinge on macroeconomic
demand. They rely for employment mostly on
performance and poverty reduction.
agriculture which has held up well overall and
thus dampened the worst of the crisis fallout.
Impact of the crisis
Of greater concern is the sharp increase in food
Both the global crisis and deteriorating security
and fuel prices in 2008 which created numerous
situation in some countries saw economic growth
hardships for the peoples of the subregion. As
come under pressure in 2009, decelerating to
inflation impacts the poor disproportionately, it is
2.9% as compared to 4.7% in 2008 (table 16).
a serious problem for countries with a high
Barring Afghanistan, a country highly dependent
incidence of poverty. Even though inflation rates
on foreign aid, India achieved the highest growth
89


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 16. Rate of economic growth and inflation in South and South-West
Asian economies, 2008 to 2010
(Percentages)
Real GDP growth
Inflationa
2008
2009b
2010c
2008
2009b
2010c
South and South-West Asiad,e
4.7
2.9
6.1
11.5
11.2
8.4
Afghanistan
3.4
15.1
7.6
26.8
– 10.0
8.4
Bangladesh
6.2
5.9
6.0
9.9
6.7
6.0
Bhutan
5.0
5.7
6.6
6.3
7.2
8.4
India
6.7
7.2
8.3
9.1
11.9
7.5
Iran (Islamic Republic of)
3.3
2.0
5.0
25.5
16.0
15.0
Maldives
5.8
– 2.6
2.1
12.3
8.5
6.0
Nepal
5.3
4.7
3.5
7.7
13.2
7.5
Pakistan
4.1
2.0
3.2
12.0
20.8
12.0
Sri Lanka
6.0
3.5
6.0
22.6
3.4
8.6
Turkey
0.9
– 6.0
3.0
10.4
6.3
7.2
Notes:  a Changes in the consumer price index.
b Estimates.
c Forecasts (as of 15 April 2010).
d Calculations are based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices) used as
weights to calculate the subregional growth rates.
e The estimates and forecasts for countries relate to fiscal years defined as follows: fiscal year 1 April 2008 to 31
March 2009 for India; 21 March 2008 to 20 March 2009 for the Islamic Republic of Iran; 1 July 2007 to 30 June
2008 for Bangladesh and Pakistan; 16 July 2007 to 15 July 2008 for Nepal are 2008.
Sources: ESCAP calculations based on national sources; ESCAP estimates; and IMF, Afghanistan National Development
Strategy: First Annual Report
 (2008-09), IMF Country Report No. 09/319, November 2009.
rate at 7.2% in 2009. Growth contracted in only
programme coordination, ownership and ac-
two countries: Maldives and Turkey.
countability could be enhanced. For that pur-
pose governance and the capacity of Govern-
Economic growth slows but less than in other
ment institutions would need to be improved to
subregions
administer aid-funded projects.
In Afghanistan, economic activity is dominated
In Bangladesh, GDP growth was 6.2% in 2008
by security considerations. The economy rests
and decelerated only slightly to 5.9% in 2009.
primarily on agriculture and is vulnerable to
Growth was underpinned by good performance
weather conditions. GDP growth in 2008 was
in agriculture, which accounts directly for some
3.4% but is expected to have been 15.1% in
20% of GDP and employs more than half the
2009, owing to improved weather and a good
labour force. The slowdown in industrial growth
harvest. The large fluctuations in GDP growth
mainly resulted from export decline for most of
underline the inherent vulnerability of the
economy to weather conditions. Growth will also
the items other than apparels and textiles. The
benefit from investment in construction, much of
exports of apparels continued to grow despite
it linked to donor-led development projects. The
the crisis because of the focus of Bangladesh
economy depends heavily on foreign aid, much
on the lower ends of the market that were
of it outside the Government budget. If over-
relatively less affected from the downturn.
seas development assistance could be delivered
Growth in overseas workers’ remittances helped
through the Government in greater amounts,
in sustaining domestic demand.
90

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
GDP growth in Bhutan peaked at nearly 21.4%
oil prices and declining output, GDP growth
in 2007 with the completion of the Tala
plummeted from 3.3% in 2008 to 2.0% in 2009.
hydropower project in 2007, but returned to a
That will impede the Government’s plans for an
more normal level of 5.0% in 2008 and 5.7% in
expansionary fiscal policy, which in turn will
2009. In the coming years growth in the
affect the rate of private consumption and in-
economy will be underpinned by three more
vestment. The hydrocarbons industry will con-
hydropower projects.
tinue to suffer from a lack of foreign investment,
and as refining capacity remains underdevel-
oped, despite petrol rationing, the country will
rely increasingly on fuel imports. A drought in
India achieved one of the
early 2009 was expected to lead to a rise in
world’s highest growth rates
imports of wheat and other agricultural produce.
The new five-year development plan (2010 to
2015) sets an ambitious 8% target for annual
GDP growth that will not be easy to achieve.
India felt the crisis after a period of high growth
momentum that had reached an annual average
Having grown by 7.2% in 2007 and 5.8% in
of 8.8% over the previous five years. In 2008,
2008, the economy of Maldives is expected to
growth was 7.7% during the first half of the
have contracted by 2.6% in 2009, largely be-
fiscal year, but fell to 5.8% in the second half
cause of a significant decline in tourist arrivals.
(October 2008 to March 2009). Even so, at
In addition, problems with external financing
6.7% India achieved one of the world’s highest
have held up capital projects for resort develop-
growth rates in 2008. While the economy
ment and other major projects, causing a sharp
largely sustained the momentum of the previous
decline in construction.
five years, both external and domestic demand
were affected by the crisis. There was a
Despite the recent political fragility in Nepal on
slowdown in the services sector, in domestic
top of the global economic crisis, the macroeco-
private consumption, in investment demand and
nomic situation remains broadly stable. GDP
in manufacturing output.
growth was 5.3% in 2008 and fell only slightly
in 2009 to 4.7%. Some of the fall reflects
By the beginning of the third quarter of 2009,
adverse weather, since agricultural output, which
despite the uncertain global macroeconomic
accounts for around one third of GDP and
scenario, domestic and external financing condi-
which had grown by 4.7% in 2008, grew by only
tions showed signs of improving and the busi-
2.2% in 2009. The non-agricultural sector was
ness outlook turned positive, signalling a revival
constrained by severe electricity shortages and
of industrial activity. From August to November
difficult industrial relations and strikes that de-
2009 industrial output grew in double digits,
layed the movement of goods and prevented
while GDP growth during the second quarter of
people from getting to work. In recent years the
the fiscal year 2009 (July to September 2009)
services sector has, however, grown steadily
was 7.9%. According to the preliminary esti-
and accounts for around half of GDP.
mates, GDP grew by 7.2% for the full fiscal year
2009. This recovery is remarkable given the fact
In Pakistan, GDP growth fell from 4.1% in 2008
that the agriculture output declined by 0.2% due
to 2.0% in 2009. The economy has been af-
to poor weather conditions as a result of
fected not just by the global economic crisis but
delayed and sub-normal monsoon. Both the
also by the declining security situation and in-
industrial and services sectors grew by over 8%.
tensification of conflict linked to terrorism. Indus-
try, especially large-scale manufacturing, suf-
The Islamic Republic of Iran is the net oil
fered the worst of all sectors from the drop in
exporter and the country remains highly de-
international demand, while also having to cope
pendent on oil revenues that provide over 80%
with acute shortages of electricity. Improved per-
of Government revenue. As a result of reduced
formance of the service sector offset it to some
91

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
extent, growing 3.6% in 2009, as well as a
In India, consumer prices, particularly of food,
rebound in agriculture which benefited from a
remain stubbornly high and the consumer price
bumper wheat crop. While consumer spending
index (for industrial workers) rose to about 9.0%
remained strong, gross fixed capital formation,
in 2008 (table 16). Inflationary pressures contin-
which had expanded by 3.8% in 2008, con-
ued into 2009, largely resulting from the poor
tracted by 6.9% in 2009.
monsoon with adverse impact on food supplies,
firming up of global commodity prices and the
Government expansionary fiscal stance. Inflation
as measured by the consumer price index was
The end of the internal conflict in
around 12.0% in 2009. A faster increase in food
prices has become a cause of concern.
Sri Lanka should raise confidence
among consumers and businesses
In Pakistan, inflation rose sharply from 12% in
2008 to 20.8% in 2009 mainly because of food
price increases. The Government increased the
wheat support price by more than 50%, which
GDP growth in Sri Lanka fell from 6.0% in 2008
pushed up retail prices of wheat and wheat
to 3.5% in 2009, corresponding to slower
flour across the country. It also phased out
growth in the industrial and services sectors
subsidies on petroleum products. To contain in-
and falling exports. The end of the internal
flation, the Government has been cutting spend-
conflict in May 2009 should raise confidence
ing and attempting to improve the supply and
among consumers and businesses. Much of the
distribution of essential commodities. Inflation is
economic impetus will come from developing
projected to decline in 2010 although it will
areas affected by conflict and resettling inter-
remain in double digits. Upward pressures will
nally displaced persons. A boost in agricultural
remain high, particularly if higher oil prices,
output in the north and east of the country,
electricity tariff increases, higher wages, and
higher rural incomes and increased private con-
fiscal expansion come to bear. A more active
sumption can be expected.
monetary policy might be needed to manage
inflationary pressures.
Turkey is strongly linked with the crisis-hit
economies of the developed world and thus felt
the full force of the crisis as it contracted by
6.0% in 2009. GDP growth started to contract in
A more active monetary policy might
the last quarter of 2008, which dampened
be needed to manage inflationary
growth at barely 0.9% in 2008. That reflected a
pressures
sharp decline in exports which affected domes-
tic production, as well as much greater difficul-
ties in foreign financing. However, imports fell
even more, owing to low energy prices and the
Faster reduction in inflation occurred in Bangla-
slowdown in economic activity. As a result, the
desh and Sri Lanka. In Bangladesh, lower world
current account deficit shrank from around 6.0%
food and fuel prices drove inflation down to
of GDP in 2007 and 2008 to 2.1% in 2009 –
6.7% in 2009 from 9.9% in 2008. Food inflation
which will help ease external financing pressure.
decelerated even more sharply from 12.3% in
2008 to 7.2% in 2009 supported by higher rice
Inflation is key policy concern
and wheat harvests. Non-food inflation has been
comparatively lower and remained relatively sta-
High inflation continues to be a serious problem
ble. Inflation in Sri Lanka, after reaching a high
in several countries of the subregion, rising
of 28% on a year-on-year basis in June 2008,
rapidly to double digits or close to that in 2008
decelerated sharply to less than 1.0% in Sep-
(table 16). Despite the deceleration in 2009,
tember 2009, owing to restrictive monetary
rates remained high compared with other
policy efforts, favourable domestic supply condi-
subregions.
tions and significantly lower global commodity
92

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
prices. On average inflation in 2009 was esti-
concerns that large-scale layoffs could happen if
mated at 3.4%.
the recent financial problems experienced in
Dubai spread, past experience shows that re-
Inflation in Bhutan and Nepal is linked to infla-
mittances from those countries are resilient,
tion in India due to the fixed rates of exchange
even during volatile oil price periods. Many of
of their currencies with the Indian rupee. Infla-
those countries have heavily invested in devel-
tion in Nepal reached 13.2% in 2009. It was
oping their infrastructure as a long-term devel-
driven by a 16.5% spike in the cost of food and
opment strategy, for which funding is available
beverages, which account for a 53.2% weight in
from large reserves accumulated over the
the consumer price index.
years. Therefore, large-scale lay off of migrant
workers seems unlikely even though rate of
In the Islamic Republic of Iran, annual inflation
growth of remittances has declined.
declined from 25.5% in 2008 to 16.0% in 2009,
owing to a sharp drop in international oil and
In India, the balance of payments came under
non-oil commodity prices. With fiscal policy
pressure in 2008, when the current account
likely to remain expansionary, albeit not to the
deficit widened to 2.4% of GDP in 2008. Fur-
extent it was in previous years, concerns over
thermore, net capital inflows fell to $9.1 billion
inflation will persist in the coming years. The
in 2008 as compared with net capital inflows of
adoption of a tighter financial policies stance,
$108 billion in 2007, reflecting the unstable na-
which has been expansionary and procyclical,
ture of those flows. Both exports and imports
will be needed. Even though expansionary fiscal
fell in 2009 but workers remittances remained
and monetary policies have brought about some
strong. The current account deficit further wid-
short-term gains in production and employment,
ened to 3.3% of GDP for the first nine months
the high and persistent inflation that they gener-
of fiscal year 2009.
ate can undermine long-term growth and ad-
versely affect the poor.
Similarly, Pakistan endured a decline in exports
of 6.0% in 2009, while imports contracted at a
Given the sharp economic slowdown in Turkey
much faster rate of 11%. Combined with a
and much lower international commodity prices,
strong growth momentum in workers’ remit-
consumer price inflation decreased to 6.3% in
tances of 20%, reaching a total of $7.8 billion,
2009 from 10.4% in 2008. The decreasing infla-
the current account deficit in 2008 of 8.4% of
tionary pressure enabled the central bank to
GDP was reduced to 5.3% of GDP in 2009.
implement growth-supporting monetary policy
The global economic slowdown and political and
without deviating from the main objective of
security uncertainties resulted, however, in
price stability.
slackening of capital inflows with reduced FDI
inflows, higher portfolio outflows, lower disburse-
Trade declines sharply but workers’ remittances
ments of loan and higher amortization pay-
stay strong
ments.
Before the onset of global economic crisis, high
In Bangladesh, the balance of payments
oil prices had created severe problems for the
strengthened considerably in 2009 with a cur-
balance of payments position of some countries.
rent account surplus of 1.0% of GDP. Imports
However, during the global crisis, both exports
growth decelerated markedly from 26.1% in
and imports slowed down and helped contain
2008 to 4.1% in 2009 after the onset of the
trade and current account deficits. Furthermore,
global financial crisis and lower demand for
workers’ remittances have been rising sharply.
capital and intermediate goods. Lower food and
They account for a substantial share of GDP,
fuel import prices and a good harvest also
particularly in least developed countries, and
played a role. The apparel and textile industries
provide current account support. A major part of
continued to expand because Bangladesh
remittances inflows originates from oil-rich Gulf
largely produces for the lower end of the mar-
Cooperation Countries. While there were some
ket which was less affected by the downturn.
93


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Total exports grew at 15.8% in 2008 and 10.3%
eign exchange reserves also went up by 15.8%
in 2009 which, when compared with the double-
to $3.6 billion in mid-July 2009 as compared
digit declines experienced by major exporting
with reserves one year earlier.
countries of the region, clearly shows that Bang-
ladesh has become more competitive than other
In Sri Lanka, relatively lower oil prices, a sharp
Asian and Pacific economies in the exports of
decline in imports, a steady flow of remittances,
those products. At the same time overseas
and continued flexibility in the exchange rate
workers’ remittances increased 22% in 2009, to
allowed the current account deficit to recover
$9.7 billion, being almost 11% of GDP and
from 9.0% of GDP in 2008 to around 0.3% of
lending further support to the current account
GDP in 2009. Exports are estimated to have
balance. The Bangladeshi taka remained rela-
fallen by 12.2% and imports by 29.5%, while
tively stable.
workers’ remittances increased by 14.1% in
2009. In contrast, in the Maldives, the current
In Nepal, due to the continued growth of remit-
account deficit has become unsustainably high
tances, the current account and balance of pay-
through a fall in tourism inflows and exports. A
ments remain in surplus despite large merchan-
decrease in the current account deficit is esti-
dise trade deficit. Workers’ remittances in-
mated from 51.4% of GDP in 2008 to 25.1% of
creased by 24.2% to $2.7 billion in 2009. For-
GDP in 2009 as the global outlook improves.
FIGURE 42. Current account balance as a percentage of GDP in South and
South-West Asian economies, 2007 to 2009
20
10
0
– 10
– 20
age of GDP
– 30
– 40
Percent
– 50
– 60
l
an
a
an
India
Nep
urkey
Bhut
T
Maldives
Pakist
Sri Lanka
Bangladesh
Iran (Islamic Republic of)
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: ESCAP, based on national sources and ESCAP estimates.
94

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
The Islamic Republic of Iran, being a net ex-
porter of oil, suffered sharp contraction in its
A clear roadmap of fiscal
exports in 2009 owing to lower oil prices and
consolidation needed
demand. Imports also fell but at a slower rate
as economic activity moderated in the country.
As a result, the trade surplus fell in 2009 and
the current account registered a small deficit,
Central banks showed much more willingness to
after a large surplus in the previous year.
implement a range of monetary-easing and li-
quidity-enhancing measures including reduction
In Turkey, imports declined more rapidly than
in the cash reserve ratio, the statutory liquidity
exports. The contraction in imports stemmed
ratio and key policy rates in support of expan-
partly from decline in energy prices and partly
sionary fiscal policies. Looking ahead, and as
from the slowdown in economic activity. The
inflationary pressures increase, there are signs
current account deficit is expected to shrink to
that monetary policy has started to tighten. The
Reserve Bank of India in January 2010 raised
2.1% of GDP in 2009 from just under 6.0% of
the cash reserve ratio by 0.75% to 5.75% and
GDP in 2007 and 2008. The smaller deficit will
in March 2010 policy interest rates were raised
help to ease external financing pressure as the
by 25 basis points, pushing the repo rate up to
global credit squeeze has made international
5%. It was part of a fine balancing act between
financing more difficult and more costly than in
containing inflationary pressures and supporting
the recent past.
the domestic economy as the global recovery
process remains weak.
With regard to the exchange rate against
the United States dollar in 2009, the Indian
Acceleration in expansionary fiscal policy
rupee depreciated in the beginning of the
year but in subsequent months appreciated.
The Government of India introduced a large
The Sri Lankan rupee followed a similar course
fiscal stimulus package to boost domestic de-
but could not regain lost ground and ended
mand and contain the adverse impact of the
the year slightly lower. The Pakistani rupee
global economic crisis. Fiscal stimulus was in
consistently depreciated over the year. The
the form of tax relief to boost demand, and
Bangladeshi taka showed the greatest stability
increased expenditure on public projects to cre-
ate employment and public assets. The Govern-
over the year.
ment renewed its efforts to increase infrastruc-
ture investments in telecommunications, power
Policy responses
generation, airports, ports, roads and railways,
besides expansion of the National Rural Em-
As for all other subregions of Asia and the
ployment Guarantee Scheme (box 5) as a part
Pacific, Governments in this subregion used
of fiscal stimulus in 2009 budget. The fiscal
expansionary fiscal and monetary policies to
stimulus also included write-off of agricultural
counter the negative fallout of the global
loans, revision of salaries of Government staff
slowdown and moderate the decline in growth.
(undertaken in 2008 and 2009).  Fiscal stimulus
On the fiscal side, although budget deficits were
spending over 2008 and 2009 is estimated at
the equivalent of 7.1% of GDP. As a result, the
already high prior to the global crisis, Govern-
budget deficit increased from 2.6% GDP in
ments had little choice but to run up higher
2007 to 5.9% of GDP in 2008 and is estimated
deficits as a means of countercyclical
to rise to 6.5% of GDP in 2009 (figure 43). The
stabilization. Moving forward, it is important that
budget for the fiscal year 2010 attempted to
governments in the subregion prepare a clear
address the challenge of fiscal consolidation in
roadmap of fiscal consolidation to be imple-
the face of growing public debt by raising rev-
mented at the earliest. This is important to
enues and containing unproductive expenditure.
anchor long run expectations about interest
As a result, budget deficit is expected to come
rates and private sector investments.
down to 5.5% of GDP in 2010.
95


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
BOX 5. Indian National Rural Employment Guarantee Scheme
In 2005, through the National Rural Employment Act, the Government of India launched a bold, innovative scheme to provide
employment to the rural poor: the National Rural Employment Guarantee Scheme. It provides guaranteed employment at minimum
wage for 100 days each year to every rural household whose adult members volunteer to do unskilled manual work.a At least one
third of the beneficiaries must be women.
In any poverty reduction programme the most difficult task is to identify the poor. In this case the programme is self targeting
since the non-poor are not usually attracted by hard manual work at minimum wages. People interested in the scheme are issued
registration cards and can apply for a minimum of 14 days’ continuous work either to the local Government or the programme
officer. They will be offered work, if possible within a 5-kilometre radius or, if farther away, are entitled to a transport allowance
and some extra living expenses. If applicants are not offered work within 15 days they are paid an unemployment allowance.
The scheme operates on a huge scale. During fiscal year 2008/2009 it provided more than 1 billion person-days of employment
for 45 million people.b For fiscal year 2009/2010 the Government has allocated 391 billion rupees, being more than $8 billion.
Most of the financial resources are provided by central Government, but implementation and management are largely through
State and local Governments that identify public works projects. The Government has been providing training to all the
functionaries involved. This decentralized participatory management system helps improve delivery and public accountability. It can
also be monitored centrally since details on the progress and outcomes of the scheme are available on the Internet, allowing
higher-level Government officials, if necessary, to take remedial action.
The scheme has many advantages. Besides providing employment to the rural poor, it also helps address the causes of chronic
poverty like drought, deforestation and soil erosion, through public works projects in water conservation and harvesting,
afforestation, rural connectivity, and construction and repair of embankments for flood control. It promotes an inclusive form of
financial development since, in order to protect poor workers from being cheated, payments are made through bank or post office
accounts. Long distance to available banks and post offices in some rural areas can be a serious problem; in such cases mobile
counters of banks/post offices can be provided.c
Initial evidence suggests that the programme is achieving its objectives in providing income security for the poor, achieving high
participation of women and marginalized groups, stemming distress migration, increasing access to markets and services and
regenerating national resources. Such a scheme could be replicated in many developing countries.
Notes:
a Government of India, National Rural Employment Guarantee Act, available from http://india.gov.in/sectors/rural/national_rural.php (accessed 11
Jan. 2010).
b Government of India, The Mahatma Gandhi National Rural Employment Guarantee Act, “Employment generated during the year 2008-2009”,
available from http://164.100.12.7/netnrega/writereaddata/citizen_out/DemRegister_0809.html (accessed 11 Jan. 2010).
c Mehrotra, Santosh, “NREG two years on: where do we go from here?”, Economic and Political Weekly, Vol. 43, No. 31, Mumbai, India, 2 Aug. 2008.
Yet another challenge for the economy is to
In Pakistan, fiscal deficit has been rising in
manage portfolio capital inflows, mainly foreign
recent years, standing at 7.6% of GDP in 2008.
institutional investments that contribute to bub-
In November 2008, the Government of Pakistan
bles in capital markets and put upward pressure
signed a $7.6 billion, 23-month Stand-By Ar-
on exchange rates. The Bombay Stock Ex-
rangement with the IMF to support the country’s
change Sensitive Index (SENSEX) appreciated
stabilization programme and help the country
by more than 100% between early in March
remedy balance of payments difficulties. Fiscal
2009 and the end of 2009 as foreign institu-
performance improved substantially in 2009 due
tional investment flows returned to the capital
to more stringent fiscal policy. The budget deficit
markets. The Indian rupee appreciated by
came down to 5.2% of GDP. While performance
around 6% in 2009.
on the revenue side was not very encouraging,
96


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
FIGURE 43. Budget balance as a percentage of GDP in selected South and
South-West Asian economies, 2007 to 2009
5
0
– 5
– 10
age of GDP
– 15
– 20
Percent
– 25
– 30
l
an
a
an
India
Nep
urkey
Bhut
T
Maldives
Pakist
Sri Lanka
Bangladesh
Iran (Islamic Republic of)
2007
2008
2009
Notes: Data for 2009 are estimates. Budget balance excludes grants for Bangladesh, Islamic Republic of Iran, Pakistan and
Sri Lanka.
Sources: ESCAP, based on national sources; ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009), available
from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 9 Nov. 2009); and ESCAP estimates.
the fiscal improvement in 2009 was largely
implementation of its development budget. In Sri
based on reduction in oil subsidies and develop-
Lanka, with the return of peace to the country,
ment spending which is likely to impinge on the
the budget deficit is expected to continue to
medium-term growth rate. The Government
come down; in 2009, to 7% of GDP, from 7.8%
needs to improve the tax base and raise the
of GDP in 2008. The Government signed a 20-
very low tax-to-GDP ratio in order to reduce the
month Stand-By Arrangement with IMF of about
fiscal deficit to sustainable levels.77 The tax
$2.6 billion to support the country’s economic
burden can be made more equitable by spread-
reform programme and rebuild international re-
ing it across different sectors of the economy,
serves. To contain its budget deficit, the Gov-
particularly services and agriculture.
ernment introduced several measures to en-
hance revenues and rationalize current expendi-
In Bangladesh, the budget deficit was contained
tures. As revenue measures usually take time to
at 4.0% of GDP in 2009, partly due to under-
yield results, the Government’s adjustment pro-
77
State Bank of Pakistan, Annual Report 2008-2009 (Vol. I), available from www.sbp.org.pk/reports/annual/arFY09/
qtr-index-eng-09.htm.
97

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
gramme in 2009 relied more on expenditure
expenditures, equivalent to 0.8% of GDP in
restraint, while ensuring protection of vulnerable
2008 and 1.6% in 2009. It also relaxed mon-
groups. The highest priority is being given to
etary policy to make credit cheaper and more
the reconstruction and development of the previ-
available. As a consequence and with the loss
ously war-torn areas and resettlement of inter-
of revenue from economic contraction, the
nally displaced persons. Economic stimulus
budget deficit widened from 1.8% of GDP in
measures could lead to sustained long-term
2008 to 5.4% of GDP in 2009. The financial
growth through appropriate economic reforms,
sector remained relatively stable, having bene-
including restructuring of public-sector enter-
fited from major restructuring and improved
prises.78
regulation and supervision following the 2001
financial crisis. Consumer price inflation fell in
The budget deficit in Maldives has remained
2009, which enabled the central bank to imple-
high in recent years, rising to 26.l% of GDP in
ment a growth-supporting monetary policy while
2009 from 16.9% of GDP in 2008. In December
maintaining price stability. As aggregate demand
2009, IMF approved blended financing arrange-
recovers, however, inflation could rise.
ments amounting to about $92.5 million spread
over 3 years. The financing is designed to
Outlook and policy challenges
support the Government’s policy programme
aimed at addressing the adverse impact of the
As the global outlook improves, the subregion
global economic crisis and restoring macroeco-
should resume rapid economic growth. It is
nomic stability and fiscal sustainability.
forecast to grow at 6.1% in 2010 with stronger
linkages with other fast-growing Asian and Pa-
In Nepal, the budget deficit fell to 3.8% of GDP
cific developing economies supporting its
in 2009 from 4.1% in 2008 owing to strong
growth. Some countries are already developing
revenue growth and below-target spending. The
new partnerships for trade and investment rela-
ratio of revenue mobilization to GDP grew to
tions that will combine into an Asian community
14.8% in 2009 in comparison with the ratio of
of trading nations and a node of economic
13.2% in 2008 because of encouraging growth
growth.
in revenue collection.
Growth improves but downside risks persist
Due to large oil revenues, the Government of
the Islamic Republic of Iran has been following
Most countries are projecting stronger growth in
an expansionary fiscal policy. For sharing the
2010: for example, 8.3% in India and 6.0% in
benefits of oil revenues with the people, the
Sri Lanka and Bangladesh. In India, the struc-
fiscal system incorporates huge explicit and im-
tural growth impulses of the economy remain
plicit subsidies. Energy prices including prices of
strong, given the high domestic savings rate,
petroleum products and electricity remain highly
sound financial system and a macroeconomic
subsidized. The agricultural sector and food im-
policy environment supportive of growth. With a
ports are also subsidized. Government is in the
revival in investment and private consumption,
process of reforming and overhauling the sub-
growth in exports and strong expansion in in-
sidy system by gradually phasing it out in favour
dustrial production in recent months, growth in
of a new targeted welfare system. Poor families
GDP is projected to accelerate in 2010. The
are to receive cash grants and basic services
improved security situation in Sri Lanka should
such as healthcare.
benefit all major sectors of the economy, par-
ticularly tourism and agriculture, while invest-
In response to the crisis, the Government in
ment is likely to expand strongly in 2010 as
Turkey cut some taxes and boosted certain
companies prepare for a period of accelerated
78
Institute of Policy Studies of Sri Lanka, Sri Lanka State of the Economy 2009, Colombo, 2009.
98

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
growth in domestic demand. Renewed foreign
harvests; the subregion will always be prone to
investor interest in the tourism sector holds
floods, earthquakes and other natural disasters.
promise.
There are also security risks: internal conflicts
and terrorist attacks can undermine consumer
Higher growth in Pakistan is also projected, on
and investor confidence. Across the subregion,
the assumption of improved security situation,
in the face of rising international food and fuel
relaxation of fiscal policy and some respite from
prices and the return of capital flows, Govern-
electricity shortages. The anticipated recovery is
ments may struggle to manage price and ex-
expected to be supported by the restocking of
change rate stability without compromising eco-
inventories and a small recovery in exports as
nomic growth.
the incipient recovery in major economies
gather pace. Large-scale manufacturing sector
which contracted in 2009 is projected to register
positive growth in 2010.
Accelerating economic growth is
crucial to bring down poverty levels
In Bangladesh, as external demand picks up,
growth in crisis-hit sectors of manufacturing may
follow, while remittances will continue to support
the economy and domestic demand.
Looking beyond 2010, accelerating economic
growth is crucial to bring down poverty levels.
In Nepal, the Government target of 5.5% GDP
The challenge will be how to make growth more
growth in 2010 will be supported by strong
inclusive by spreading its benefits to larger seg-
private consumption and an expansionary fiscal
ments of the population. More resources should
budget, but may be constrained due to delayed
be devoted to provision of basic services such
monsoon and poor weather conditions. GDP
as education, health, sanitation and housing
growth in 2010 is expected to be around 3.5%.
particularly for those belonging to lower income
groups. Targeted programmes for the benefit of
For Maldives, a positive GDP growth is forecast
the poor in the broader framework of social
in 2010 along with some recovery in the world
economy.
protection should also be a priority.
With projected increase in oil prices, the
Finally, the inadequacies of physical infrastruc-
economy of Islamic Republic of Iran should also
ture remain a key constraint holding back the
experience higher growth.
potential of economic growth. Of particular
concern is electricity shortage in Pakistan and
For Turkey, moderate growth of 3.0% is pro-
Nepal, where disruptions in the supply of elec-
jected in 2010, driven by improved domestic
tricity are compromising growth. Huge invest-
demand as the main European export markets
ments are needed to enhance capacity of elec-
are expected to remain weak and no major
tricity generation. At the same time, renovation
boost from external demand is expected.
of transmission and distribution lines is neces-
sary to minimize electricity losses. Potentials of
This growth outlook is subject to downside risks
trade in electricity among countries of the
linked to uncertainties that the global economy
subregion should be explored and subregional
faces. Rising oil prices could also push up
cooperation in electricity generation and distribu-
inflation and lead to higher budget and current-
tion should be promoted to overcome electricity
account deficits. Bad weather could damage
shortages.79
79
Research and Information System for Developing Countries (RIS), South Asia Development and Cooperation
Report 2008
 (Oxford University Press, New Delhi, 2008).
99

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Generally, the year 2010 presents complex is-
subregion was largely spared the institutional
sues for policymakers as they seek to manage
failures that saddled the United States and
price and exchange rate stability without com-
European financial systems. Clearly, the lessons
promising growth momentum, in the face of
from the Asian crisis were not lost on
rising international food and fuel prices and
policymakers as bank lending practices, regula-
return of capital flows.
tions and supervision have been tightened over
the years. Rather, the shock this time around
SOUTH-EAST ASIA
was transmitted via the trade channel. South-
East Asian economic growth thus slowed down
significantly from 4% in 2008 to 0.6% in 2009,
In South-East Asia the global crisis overturned
although there were differences among coun-
prevailing economic logic. Previously, the large
tries.
export-driven industrial base had been seen al-
most entirely as a source of strength. But as
Economic contraction
the financial crisis cut export demand from ma-
jor markets, the dependence on trade was re-
The national economies of Malaysia, Singapore
vealed also as a source of vulnerability. Export
and Thailand all contracted in 2009. The Philip-
dependence (defined as the ratio of exports to
pines managed to keep growth positive, but
GDP) rose from less than 50% in the mid-
experienced a dramatic deceleration. The
1990s to over 70% by 2007. Openness (defined
economies of Indonesia and Viet Nam, on the
as the ratio of imports and exports to GDP) is
other hand, though also undergoing a
also high with ratios for Singapore, Thailand,
slowdown, did not contract to the same extent.
Malaysia, and Viet Nam reaching 362%, 161%,
Two least developed countries, Timor-Leste and
130% and 160%, respectively. Those ratios are
Lao People’s Democratic Republic, grew the
significantly higher than those for the two larg-
fastest in the subregion (table 17).
est Asian developing economies: China at 60%
and India at 40%.
The variations are due to many factors, includ-
ing domestic problems of varying intensity.
Moreover, that trade is still highly concentrated.
Nevertheless, overall, some patterns across
While the subregion has to some extent diversi-
countries emerge. The worst-affected countries
fied its export destinations, its biggest markets
all had shares of exports to GDP that exceeded
are still the developed economies. And even
60%, with the European Union and United
when there has been a rise in intraregional
States accounting for relatively large shares of
trade, it is largely based on interlocking produc-
exports. The country most exposed to trade
tion networks whose output, channelled through
shock is Cambodia, with close to 80% of
China as a production hub, is ultimately des-
total exports bound for the United States or
tined for the developed countries.
Europe. Singapore and Malaysia, with exports
accounting for more than 100% of GDP,
The fall in external demand notwithstanding, the
are quite exposed to trade shock as well
economies in the subregion have enough policy
(figure 44).
levers to weather the crisis. As the following
section will point out, many economies in the
Another factor that played a role was the com-
region are poised for a faster recovery, than
position of exports. Countries with a high share
of export products based on regional production
what was initially expected.
networking and outsourcing arrangements, such
as apparel, machinery, electronics and motor
Impact of the crisis
vehicles, were more exposed to perturbations in
global trade. The extent of exposure is illus-
In contrast to the 1997 Asian financial crisis, the
trated in figure 45. The highest concentration for
genesis of the current global economic crisis
those sectors is in the Philippines at around
occurred outside of South-East Asia. The
70%; the proportions are also high in Singa-
100



CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 17. Rate of economic growth and inflation in South-East Asian
economies, 2008 to 2010
(Percentages)
Real GDP growth
Inflationa
2008
2009b
2010c
2008
2009b
2010c
South-East Asiad
4.0
0.6
5.1
8.6
2.1
4.1
Brunei Darussalam
– 1.9
– 0.5
0.6
 2.7
1.2
1.2
Cambodia
6.7
0.0
4.0
  25.0
– 0.8
5.0
Indonesia
6.1
4.5
5.5
10.1
4.6
5.3
Lao People’s Democratic Republic (the)
7.9
5.4
6.0
 7.6
0.2
5.0
Malaysia
4.6
– 1.7
5.0
 5.4
0.6
2.0
Myanmar
2.0
2.0
3.1
 26.8
6.6
10.4
Philippines (the)
3.8
0.9
3.5
 9.3
3.3
4.7
Singapore
1.1
– 2.0
7.0
 6.5
0.6
2.3
Thailand
2.5
– 2.3
4.0
 5.5
– 0.8
3.5
Timor-Lestee
12.8
7.4
7.5
 7.6
1.3
4.0
Viet Nam
6.2
5.3
5.8
 23.1
7.0
10.3
Notes:  a Changes in the consumer price index.
b
Estimates.
c
Forecasts (as of 15 April 2010).
d
Subregional calculations based on GDP figures at market prices in United States dollars in 2007 (at 2000 prices)
used as weights to calculate the subregional growth rates.
e
Refer to real non-oil GDP growth (excluding locally paid compensation of United Nations peacekeeping mission staff).
Sources: ESCAP calculations based on national sources; IMF, International Financial Statistics (IFS) Online Service,
available from www.imfstatistics.org/imf/; ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009); CEIC Data
Company Ltd., available from http://ceicdata.com/; and ESCAP estimates.
FIGURE 44. Combined share of United States and European Union purchases of
merchandise exports of selected South-East Asian economies, 2006 to 2007 and 2008
90
80
70
60
ages
50
40
Percent
30
20
10
0
s
Brunei
Republic
Malaysia
Thailand
iet Nam
Cambodia
Indonesia
Myanmar
V
Darussalam
Democratic
Philippines
Singapore
Lao People’
Average 2006-2007
2008
Note: Average 2006-2007 = average of (exports to US + EU15)/total exports for 2006 and (exports to US + EU15)/total
exports for 2007. EU15 denotes the 15 original members of the European Union.
Source: IMF, Direction of Trade Statistics database, available from www2.imfstatistics.org/DOT/ (accessed 5 Feb. 2010).
101


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
pore, Malaysia and Thailand. The main Indone-
financial markets in the United States and Eu-
sian exports, on the other hand, are oil and
rope, in the wake of the subprime crisis in 2007
other primary goods. As figure 45 shows, in all
that triggered the banking crisis and the col-
those economies the proportion has been de-
lapse of Lehman Brothers, a major investment
clining as a result of a drop in demand for such
bank in the United States, policymakers could
goods, particularly electronics.
anticipate a massive incoming trade shock. That
gave them enough time to counteract the ex-
Rebound gathers momentum. Tracking eco-
pected deflationary forces with appropriate ex-
nomic performance on a quarterly basis tells the
pansionary macroeconomic policies. Unlike the
most about the extent of the crisis, its evolution
1997 Asian financial crisis, this crisis did not
and adjustment processes that Governments
take the region by surprise.
put in place. After all, recessionary forces struck
South-East Asia only in the middle of 2008.
Annual averages thus mask the depth of the
crisis. Table 18 indicates a general improvement
Unlike the 1997 Asian financial
towards the middle of 2009, with the prospects
of a V-shaped recovery gaining ground.
crisis, this crisis did not take the
region by surprise
To some extent such rebound appears quick
because some economies were starting from a
low base. In addition, events in some senses
were working in the favour of the subregion.
Second, the subregion had, by and large, sound
First, perhaps largely unappreciated, was the
macroeconomic fundamentals. Until the second
benefit of a credible and timely early warning.
quarter of 2008 exports were still increasing
By being able to observe the implosion of the
and inflation, although high in the first half of
FIGURE 45. Export share of electronics, machinery, motor vehicles and apparel
in total exports, selected South-East Asian economies, 2006 to 2008
80
70
60
50
ages
40
30
Percent
20
10
0
Indonesia
Malaysia
Thailand
Philippines
Singapore
2006
2007
2008
Notes: Consists of: HS 61, articles of apparel, accessories, knit or crochet; HS 84 nuclear reactors, boilers, machinery, etc;
HS 85, electrical, electronic equipment; HS 87, vehicles other than railway, tramway.
Source: UN COMTRADE database, available from http://comtrade.un.org/db/dqQuickQuery.aspx (accessed 5 Feb. 2010).
102


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
TABLE 18. Percentage changes of real GDP of major South-East Asian
economies, year-on-year, 2007 to 2009
Indonesia
Malaysia
Philippines Singapore
Thailand
Viet Nam
2007
Q1
6.1
5.4
6.9
7.7
4.6
7.7
Q2
6.7
5.6
8.3
9.0
4.5
8.0
Q3
6.7
6.5
6.8
10.0
5.3
8.7
Q4
5.8
7.2
6.3
6.2
5.3
9.1
2008
Q1
6.2
7.4
3.9
7.3
6.4
7.5
Q2
6.3
6.6
4.2
2.8
5.2
5.8
Q3
6.2
4.8
4.6
0.1
2.9
6.5
Q4
5.3
0.1
2.9
– 4.2
– 4.2
5.4
2009
Q1
4.5
– 6.2
0.6
– 9.4
– 7.1
3.1
Q2
4.1
– 3.9
0.8
– 3.1
– 4.9
4.4
Q3
4.2
– 1.2
0.4
0.6
– 2.7
5.2
Q4
5.4
4.5
1.8
4.0
5.8
7.7
Source: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed 9
Mar. 2010).
the year, subsequently fell. Again in contrast to
erate they also had room for expansionary mon-
the period prior to the Asian financial crisis of
etary policies.
2007, Governments had, in varying degree,
maintained prudent public finances. They had
When the crisis came, the stage was set for
kept external debt at manageable levels and
Governments to design, prepare and execute
built up sufficient reserves to cover contingent
the necessary policies. As they did so, and the
capital outflows. Hence, the economies in the
crisis unfolded, the economic outlook in the
subregion could stand up to the scrutiny of
subregion changed.
international speculators.
Performances vary widely
Third, as a result of reforms in the aftermath of
Indonesia has weathered the global slump better
the Asian crisis, many countries had stable fi-
than its South-East Asian neighbours. With a
nancial systems. Banks were still reasonably
population of 226 million, Indonesia has a large
profitable and most economies had relatively
domestic market base. Exports account for only
few non-performing loans. In 2008, non-perform-
27% of GDP, compared with 185% of GDP in
ing loan ratios were under 6% in Indonesia,
Singapore at the other extreme. Also, the share
Malaysia, the Philippines and Thailand, com-
of electronics, machineries and other manufac-
pared with 1998 figures of 49% for Indonesia
tured exports, whose demand collapsed as the
and 45% for Thailand. Bank capital adequacy
crisis unfolded in 2008, is rather small, while only
ratios also exceeded the prudent threshold: in
one fifth of its exports go to the United States
2008; they were in double digits in Indonesia,
and European market. Furthermore the share in
Malaysia, the Philippines, Singapore and Thai-
its exports of the combined markets of India and
land. So when Governments started to prime
China, two of the fastest-growing economies in
the fiscal pumps, the financial infrastructure was
the region, in its exports is increasing.
in place to support that.
The subregion is home to two small oil-produc-
Fourth, Governments that had not been running
ing States: Brunei Darussalam and Timor-Leste.
high deficits had the resources to support their
Because 70% of its GDP comes from oil, the
responses. They could adopt vigorous
economy of Brunei Darussalam proved to be
countercyclical policies. Since inflation was mod-
less exposed to the crisis via the non-oil trade
103

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
and investment channels. Nevertheless, export
than 20%. The Government responded with an
income fell with the global oil price late in 2008.
aggressive fiscal and monetary policy, and
Investment income from overseas assets is also
growth in 2009 reached 5.3% year-on-year. The
likely to have declined. As a result the GDP
State Bank of Viet Nam devalued the dong by
contracted in 2008.
around 5% in late November 2009, and a fur-
ther 3% in February 2010, given the strains in
the balance of payment deficits.
When Governments started to prime
Growth in 2009 in Lao People’s Democratic
Republic proved brisk. This is partly as a result
the fiscal pumps, the financial
of higher metal prices, especially gold, which
infrastructure was in place
has attracted investment from China, Thailand
to support that
and Viet Nam. The economy also received a
boost as a result of pay increases for public
servants as well as increased public investment
on infrastructure for the 2009 South-East Asian
Similarly, most of the Timorese GDP is related to
Games. Lao People’s Democratic Republic
oil: its oil GDP is five times greater than its non-
should also expect a rise in exports to China,
oil GDP, so much will depend on the oil price
but the prospects for other major markets are
outlook for 2010. In 2008, the non-oil GDP grew
less sanguine: demand from Thailand, for ex-
by 13%, partly because it started from a low base.
ample, may fall, especially since some of this is
for goods re-exported to third countries.
The Philippines, despite a trade profile that is
heavily vulnerable to shocks, has just barely
At the onset of the global crisis, Malaysia suffered
been able to withstand the global downturn, partly
a deep contraction in its export-oriented manufac-
as a result of services exports, such as business
turing sector combined with a significant outflow
process outsourcing, and more importantly the
in portfolio capital. Confidence was undermined
large flows of foreign exchange through remit-
and weakened investment spending leading to a
tances, which in 2008 were $16.4 billion or 13%
negative growth rate in 2009. To counteract the
of GDP. Remittances grew by 5% in 2009,
fall in external demand, the authorities mounted
contrary to expectations. They account for around
two fiscal stimulus packages, while monetary
10% of GDP and have reached a record level of
authorities supported pump-priming activities by
$17 billion. Among the mitigating factors is the
easing the cash reserve requirement and lower-
wide geographical dispersion of overseas Filipino
ing policy interest rates. As a result, consumption
workers, and the mix of skills and positions held
increased and stabilized a decelerating economy
in overseas jobs market, many of which are in
towards the second half of 2009.
health care, a crisis-neutral sector.
Thai exports have a large share of crisis-sensi-
The large stimulus package introduced in Singa-
tive manufactures like electronics and
pore, which includes a sizeable construction
machineries. Its service sector depends signifi-
component, should contribute to future growth.
cantly on tourism which is very income elastic
Trade is also likely to resume faster than initially
and was hit hard by the global recession and
anticipated, given the recovery in the electronics
continuing political tensions. In the first half of
trade, and estimates of growth have therefore
2009, the Thai GDP fell by 6%, the largest drop
been revised sharply upwards.
in the subregion. To boost the anaemic de-
mand, the Government delivered two stimulus
In Viet Nam, growth has exhibited a sharp V-
packages supported by expansionary monetary
shape. In 2008, it grew at a brisk 6.2%, with
policy. However, they were insufficient to offset
inflation hitting 23%; combined with a current
the severe contraction in the first half of 2009,
account deficit running at 11.9% of GDP, fears
as GDP fell by 2.3% for the whole of 2009
of overheating were raised. In January of 2009,
although a turnaround in the fourth quarter of
as a result of the crisis, exports fell by more
2009 was observed.
104

CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
Cambodia is the only least-developed country in
trade shock. Thailand introduced a package
the region whose economy is not expected to
worth 17% of GDP. Malaysia offered one worth
experience any economic growth in 2009. Trade
9% of GDP. Both cases involved two tranches.
accounts for around half of GDP and is heavily
The Singaporean package was also large: 8%
oriented to crisis-affected developed countries.
of GDP. Indonesia and the Philippines, on the
In the first half of 2008, exports of garments
other hand, being less affected, had pro-
dropped by as much as 25% and tourism re-
grammes worth less than 5% of GDP.
ceipts also fell. The authorities responded with
fiscal loosening. The country could be faced
with a fiscal deficit along with an upsurge in
inflation. On the other hand, Cambodia tends to
The more aggressive responses
export garments to niche markets so if demand
came from the countries hardest
in these revives quicker than anticipated there
hit by the trade shock
could be a rapid turnaround in growth.
The GDP growth of Myanmar weakened in
2008 owing to feeble external demand and to
Second, a number of Governments based their
the destruction caused by cyclone Nargis. The
stimulus package on pragmatic considerations
agricultural sector still felt the lingering effects of
such as speed of disbursement. They often
the cyclone in 2009, dampening domestic de-
frontloaded budget items in the first half of the
mand. The largest export item is natural gas
fiscal year while also producing supplemental
whose price has fallen and, given the drop in
budgets in order to disburse funds quickly. The
both internal and external demand, growth in
Philippines, for instance, prioritized such easily
2009 was likely to be flat. Myanmar was also
implemented projects as road repairs, irrigation
affected by the downturn in its biggest export
facilities and hospitals, while also planning more
market, Thailand, although that was partially off-
complex infrastructure programmes that would
set by the robust growth of its second biggest
require longer lead times. Thailand, similarly,
market, India.
first embarked on a short-term stimulus pack-
age to support consumption spending with
Policy responses
transfer payments and cash handouts, particu-
larly to the poor and senior citizens, before
With sufficient warning, the Governments of the
unveiling a second package which involved ma-
subregion were able to proceed with timely and
jor public investment.
aggressive fiscal policies to boost domestic
spending. The packages varied considerably –
Third, nearly every stimulus package involved
in terms of size, elements, targeted sectors and
some expenditure on infrastructure. Malaysia,
criteria – depending on national priorities, fiscal
for example, under its first, $2-billion package,
space and institutional structures of decision-
combined small-scale infrastructure projects,
making and disbursement. Indonesia, for exam-
such as upgrading roads, hospitals and schools
ple, utilized income tax cuts in its fiscal pack-
with investment in strategic industries including
age. Singapore offered some support for con-
broadband. The “Stronger Thailand for 2012”
sumption, but opted for spending more on in-
package, which spans 2010 to 2012, aims to
vestment and on training as well as offering
bolster competitiveness and encourage private
guarantees on loans for working capital. Viet
investment by investing in mass transit, energy,
Nam also offered support for credit but did so
water resources, healthcare and housing. In the
through a temporary interest rate subsidy of
Lao People’s Democratic Republic, the Govern-
around 4% on certain bank loans.
ment spent on infrastructure in preparation of
the South-East Asian Games, which helped
Some patterns can be discerned across coun-
stoke demand. Viet Nam and Indonesia also
tries. First, the more aggressive responses
announced programmes that combined spend-
came from the countries hardest hit by the
ing on infrastructure with programmes for pov-
105


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
erty reduction. Directing the fiscal stimulus
ance to the private sector. The second Thai
packages at infrastructure has a number of
package is spread over three years. The in-
advantages – not only stimulating demand for
creased spending, coupled with lower tax rev-
many supplying industries, but also generating
enues, will put pressure on fiscal balances. The
employment. And since some economies are
projected 2009 budget positions across the
constrained by poor infrastructure this should in
subregion are shown in figure 46.
the longer term enhance competitiveness.
Across the subregion, most central banks, unen-
Fourth, unlike the United States, the countries in
cumbered by concerns about inflation, have pur-
this subregion did not need to bail out many
sued expansionary policies. For example, the
specific companies or financial institutions. The
Bank of Viet Nam, which had already made five
financial systems in South-East Asia have been
policy rate cuts in the second half of 2008, cut
relatively sound, and no systemically significant
the base rate again by 150 basis points in 2009
corporations needed rescuing.
which, on a year-to-date basis, represented a cut
of 700 basis points, from 14% in October 2008
More than half of the fiscal stimulus packages
to a low of 7%. Other countries in the subregion
were implemented in the first half of 2009, but
also cut their rates, though more slowly.
a number of economies embarked on a second
round shortly thereafter. For example, Malaysia
In some economies, despite the fall in central
announced a package worth around 9% of GDP
bank policy rates, there are concerns that bank
over two years. It includes increasing guarantee
lending rates may be “sticky” downwards. With
funds, tax incentives and other forms of assist-
inflation low, real interest rates thus become
FIGURE 46. Budget balance as a percentage of GDP in selected South-East
Asian economies, 2007 to 2009
4
2
0
– 2
age of GDP
– 4
– 6
Percent
– 8
– 10
s
Republic
Malaysia
Thailand
iet Nam
Cambodia
Indonesia
V
Democratic
Philippines
Singapore
Lao People’
2007
2008
2009
Notes: Data for 2009 are estimates. Budget balance excludes grants for Cambodia, Indonesia, Malaysia, Singapore and
Thailand.
Sources: ESCAP, based on national sources; ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009), available
from www.adb.org/Documents/Books/Key_Indicators/2009/default.asp (accessed 9 Nov. 2009); and CEIC Data Company Ltd.,
available from http://ceicdata.com/ (accessed 25 Feb. 2010).
106


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
high. A further concern is that creating credit
as one of the first economies to reign in
too rapidly will stoke inflation and create asset
an expansive monetary policy in 2010. The
bubbles. In response, and in a departure from
tightening was regarded as fairly mild, however,
the overall monetary trend of the subregion, the
and not expected to threaten economic
State Bank of Viet Nam in late November 2009
recovery.
increased its policy base rate from 7% to 8%
and devalued the reference rate for its currency
External sector
to the United States dollar by 5%. Viet Nam, as
of January 2010, has an inflation rate of over
For the economies of the subregion, the drop in
7%, which is high relative to the past six
exports could have put a strain on the current
months. With the possible exception of Viet
account balance had it not been accompanied
Nam, the inflation outlook for most of the
by a sharp fall in imports. The decline in im-
subregion appears benign. A few economies
ports was due partly to a reduction in domestic
such as Thailand and Cambodia, for instance,
consumption and investment but also reflected
had a deflationary environment for most of
a drop in the demand for intermediate inputs for
2009. Early in 2010, however, inflation started to
exported items – especially in parts and compo-
pick up in Malaysia, Thailand and Viet Nam.
nents for electronic goods that tend to respond
Timor-Leste, on the other hand, has a firm
more rapidly to perturbations in demand. As a
inflation anchor due to its “dollarization”.
consequence, current accounts generally re-
mained positive and in some cases actually
Early in March 2010, the Malaysian monetary
improved (figure 47). The exceptions were
authorities raised interest rates by 25 basis
Cambodia and Viet Nam which are expected to
points, from 2.00% to 2.25%, marking Malaysia
have negative balances.
FIGURE 47. Current account balance as a percentage of GDP in selected
South-East Asian economies, 2007 to 2009
25
20
15
10
5
age of GDP
0
– 5
Percent
– 10
– 15
s
Republic
Malaysia
Thailand
iet Nam
Cambodia
Indonesia
V
Democratic
Philippines
Singapore
Lao People’
2007
2008
2009
Note: Data for 2009 are estimates.
Sources: ESCAP calculations based on national sources; IMF, International Financial Statistics (CD-ROM) (Washington,
D.C.: Oct. 2009); and ESCAP estimates.
107



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
A substantial proportion of imports comes from
A V-shaped pattern has followed in capital
within the subregion – during the first three
flows. In the latter part of 2008 there was some
quarters of 2009, intraregional imports actually
capital flight, mostly flows of portfolio invest-
increased at the expense of those from the
ment. However, as Governments took measures
United States and Japan (tables 19 and 20).
to stabilize their economies, international inves-
China, likewise, has become a more important
tors became more confident in regional equity
source.
markets and the capital promptly returned.
Periods of economic contraction often provoke
Towards the second half of 2009, trade and
protectionism. In South-East Asia some Govern-
capital flows combined to put upward pressure
ments have become involved in trade remedy
on exchange rates. Economies had performed
cases and other forms of contingency protec-
better than expected, which bolstered investor
tion, but generally they have shown restraint
confidence in the financial and equity markets –
and did not systematically increase tariffs. On
and in turn created additional expectations of
the contrary, they have locked in further liberali-
currency appreciation (figure 48). Indeed, com-
zation commitments by negotiating preferential
paring average exchange rates between De-
trade agreements – seven agreements involving
cember 2009 and December 2008, the Indone-
South-East Asian economies came into force in
sian rupiah appreciated against the dollar by
2008 and 2009.
close to 16%, while the Malaysian ringgit,
TABLE 19. Import growth by ASEAN economies, by source, 2008 and 2009,
in percentages
2008
2008 Q1-3
2009 Q1-3
ASEAN
22.7
35.1
– 20.4
China
18.2
27.7
– 17.7
EU
13.1
20.9
– 22.5
Japan
14.3
21.7
– 23.6
US
16.0
22.4
– 28.9
Others
37.8
53.7
– 30.1
World
24.1
35.4
– 24.7
Source: IMF, Direction of Trade Statistics database, available from www2.imfstatistics.org/DOT/ (accessed 5 Feb. 2010).
TABLE 20. Percentage shares of imports by ASEAN economies, by source,
2004 to 2008, in percentages
2004
2007
2008
2008 Q1-3
2009 Q1-3
ASEAN
23.9
24.7
24.4
24.8
26.2
China
9.5
12.5
11.9
11.8
12.9
EU
11.2
10.8
9.8
9.8
10.1
Japan
15.1
11.7
10.8
10.5
10.7
US
11.2
9.6
9.0
8.8
8.3
Others
29.1
30.6
34.0
34.3
31.8
World
100.0
100.0
100.0
100.0
100.0
Source: IMF, Direction of Trade Statistics database, available from www2.imfstatistics.org/DOT/ (accessed 5 Feb. 2010).
108


CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
FIGURE 48. Index of exchange rate movements in selected South-East Asian
economies, 2009
130
125
120
115
110
105
100
95
90
Index (January 2009 = 100)
85
80
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Brunei Darussalam
Cambodia
Indonesia
Lao  People’s Democratic Republic
Malaysia
Myanmar
Philippines
Singapore
Thailand
Viet Nam
Note:  A positive trend represents appreciation and vice versa.
Sources: ESCAP calculations based on data from CEIC Data Company Ltd., available from http://ceicdata.com/ (accessed
25 Feb. 2010); and IMF, International Financial Statistics  (IFS)  Online Service, available from www.imfstatistics.org/imf/
(accessed 9 Mar. 2010 for Brunei Darussalam, Cambodia, Lao People’s Democratic Republic, Myanmar and Viet Nam).
Singaporean dollar and Thailand baht appreci-
Vietnamese dong on the competitiveness of
ated by around 5%.
other ASEAN exporters is not likely be very
significant because headline inflation (a cost
Exports could become less competitive as a
factor) in Viet Nam as of January 2010 at
result, especially when the Chinese yuan has
7.62% is higher than the other economies in the
effectively been depreciating in tandem with the
subregion. In addition, most economies in the
falling United States dollar. In these circum-
subregion have positive current account bal-
stances Governments could either let their cur-
ances, which ameliorates pressures on currency
rencies continue to rise, or allow international
devaluation. For those reasons, the devaluation
reserves to accumulate. Most have chosen the
of the dong is not expected to spark a round
latter course and added to a growing pool of
of massive competitive devaluation in the
foreign reserves (table 21). An exception is the
subregion.
State Bank of Viet Nam which, in November
2009, in response to the strains on the balance
Prospects
of payments, devalued the dong by around 5%.
In February 2010, the Vietnamese dong was
Despite facing the full force of the global finan-
further devalued by 3% in an effort to reduce a
cial crisis, the economies of South-East Asia
widening trade deficit and stabilize the foreign
were thus fairly resilient and policymakers were
exchange market. The move puts additional
generally able to respond effectively. Neverthe-
competitive strain on the exports of other
less, the subregion remains structurally depend-
ASEAN economies and could increase pres-
ent on trade with the developed countries. The
sures for competitive devaluation. However, the
IMF, for example, projects a 5.8% growth in the
impact of the two rounds of devaluation of the
volume of world trade in goods and services for
109


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 21. Foreign exchange reserves minus gold, selected South-East Asian
economies, 2009, in billions of United States dollars
Indonesia
Malaysia
Philippines
Singapore
Thailand
Dec-07
55.0
101.0
30.2
163.0
85.2
Dec-08
49.6
91.1
33.2
174.2
108.7
Jan-09
48.8
90.9
34.7
167.1
108.2
Mar-09
52.7
87.4
34.5
166.3
113.7
Jun-09
55.4
91.2
34.8
173.2
118.3
Sep-09
60.0
94.8
37.5
182.0
 129.1
Dec-09
63.1a
95.4
38.5a
188.9a
135.5
Note:  a Data refer to November 2009.
Source: ESCAP, based on data from IMF, International Financial Statistics (IFS) Online Service, available from www.
imfstatistics.org/imf/ (accessed 17 Feb. 2010).
2010.80 Moreover, global capital is again flowing
resurgence of the private sector. Nevertheless,
to the subregion and equity markets are excep-
infrastructure projects can be expected to con-
tionally buoyant. Malaysia and Thailand should
tinue beyond 2010, with their largest impact in
also see benefits from succeeding tranches of
developing countries where they will not only
their stimulus packages. The subregion is thus
provide employment but help address infrastruc-
forecast to grow by 5.1% in 2010.
ture weaknesses that impede growth.
South-East Asia should therefore see a rebound
towards the end of 2009. During 2010 some
countries that depend heavily on trade should
South-East Asian economies will
see positive growth: Malaysia, 5.0%; Singapore,
7.0%; and Thailand, 4.0%. Growth should be
want to look elsewhere for fresh
even stronger in Indonesia, at 5.5%, and Viet
sources of economic growth
Nam, at 5.8%. With large domestic markets,
those commodity-rich countries were able to
weather the 2009 recessional forces and should
lead the recovery in 2010.
The increase in spending is inevitably putting a
strain on public finances, so policymakers will
Cambodia is expected to resume economic
want to induce more private spending on con-
growth by 4.0% on the back of an improving
sumption and investment. They could use the
market for its main exports, while the Lao Peo-
opportunity to review the investment climate and
ple’s Democratic Republic should continue to
grow quite rapidly, by 6%. The Philippines ex-
introduce further reforms, particularly those linked
pects a boost in consumption demand during
to improving governance. With the recovery still
2010 from election spending and continued re-
tentative, careful judgement about the pace and
mittance flows. Timorese non-oil GDP, on the
timing of the exit strategy will be required.
other hand, is expected to expand by 7.5% in
2010. Brunei is expected to grow by 0.6%.
Since traditional markets in the developed coun-
tries have softened, South-East Asian econo-
As spending from the stimulus programmes
mies will want to look elsewhere for fresh
winds down, economic prospects will rely on
sources of economic growth – especially to
80
IMF,  World Economic Outlook Update: A Policy-driven Multispeed Recovery (Washington, D.C.: 26 January 2010);
available from www.imf.org/external/pubs/ft/weo/2010/update/01/index.htm (accessed 16 Mar. 2010).
110




CRISIS AND REBOUND AT THE SUBREGIONAL LEVEL     CHAPTER 2
exploit the potential for trade with the wider
policies. Within their economies, they will also
Asian and Pacific region. They need not
want to make growth more inclusive. That will
decouple from traditional markets but rather ac-
lead to more equitable development as well as
celerate regional integration and pursue more
develop stronger markets for high-value-added
aggressive trade and investment liberalization
products.
BOX 6. The changing direction of ASEAN trade
Exports of the member countries of the Association of South East Asian Nations (ASEAN) contracted severely in the first three
quarters of 2009. Intra-ASEAN trade was hit particularly hard, declining by 26.4%. ASEAN exports to China also fell, by 17%.
Chinese import demand for ASEAN products fell by less than that of the rest of the world. (table 22). Will the crisis encourage  a
shift in the direction of trade? Table 23 shows that the shares of intra-ASEAN trade and ASEAN trade to China have risen at the
expense of the traditional markets. The ASEAN-China Free Trade Agreement, which entered into effect on January 1, 2010, is
expected to intensify trading relations further. The trade share analysis does not differentiate between effects of exchange rate
movements and those of cost competitiveness. Although the trade situation is very fluid and the profile could easily change, the
analysis highlights the emerging Chinese role as a trade partner in the subregion.
TABLE 22. ASEAN export growth, 2008 and 2009, in percentages
2008
2008 Q1-3
2009 Q1-3
ASEAN
16.0
28.7
– 26.4
China
12.2
24.9
– 17.1
EU
6.9
12.7
– 27.3
Japan
20.5
25.9
– 31.8
US
-1.9
1.8
– 23.0
Others
21.8
32.3
– 20.5
World
14.5
23.7
– 24.0
Source: IMF, Direction of Trade Statistics database, available from www2.imfstatistics.org/DOT/ (accessed 5 Feb. 2010).
TABLE 23. Percentage shares of ASEAN exporters in destination markets,
in selected years
2004
2007
2008
2008Q1-3
2009Q1-3
ASEAN
24.9
25.2
25.6
25.9
25.1
China
7.3
9.2
9.0
9.2
10.1
EU
13.8
12.6
11.7
11.7
11.2
Japan
11.8
10.3
10.8
10.5
9.4
US
15.0
12.4
10.6
10.4
10.6
Others
27.3
30.3
32.2
32.2
33.7
World
100.0
100.0
100.0
100.0
100.0
Source: IMF, Direction of Trade Statistics database, available from www2.imfstatistics.org/DOT/ (accessed 5 Feb. 2010).
111







“The challenge ahead of us is, how to 
replace these crisis response policies with 
structural policies that will correct global 
imbalances and promote sustainable, 
inclusive growth not just in the recovery 
phase, but beyond”

Susilo Bambang Yudhoyono
President of Indonesia



MULTIPLE IMBALANCES
AND DEVELOPMENT GAPS
AS NEW ENGINES OF GROWTH 3
The analysis in previous chapters has shown how national Governments 
have responded with timely, unprecedented fiscal stimulus packages and 
expansionary monetary policy that have helped in reviving growth in most 
Asian and Pacific economies. However, those packages must be seen 
essentially as short-term responses to an external shock. They cannot 
continue forever to sustain the growth momentum because of constraints 
of fiscal space and their potential to stoke inflationary tendencies. Consen-
sus is growing on the need for a new growth paradigm. As argued by the 
APEC leaders at their November 2009 Summit in Singapore, the advanced 
economies are unlikely to go back to “growth as usual” and “trade as 
usual” scenarios.81  As seen in chapter 1, even with a recovery, the import 
demand in the advanced countries is unlikely to revive to pre-crisis levels 
because of the compulsions to restrain debt-fuelled consumption and 
reduce levels of public debt in order to unwind global imbalances. Asian 
and Pacific countries need to find new sources of demand to sustain their 
dynamism beyond the stimulus packages to make up for the considerable 
loss of demand in the advanced countries. They will need to “rebalance” 
their economies in favour of greater domestic and regional consumption. In 
the search for new impulses for growth, this chapter investigates the differ-
ent imbalances and development gaps, for the effort to close them could 
help in generating additional aggregate demand.
Asia and the Pacific, home to 4.1 billion people who comprise more than 
60% of the world’s population, has distinguished itself as the 
fastest-growing region in the world, especially since 1990. In particular, the 
region’s developing economies82  grew at an average annual rate of 5.3% 
between 1970 and 2008, which largely exceeds the growth rates of other 
developing and developed regions (figure 49). As a result of its dynamism, 
the region has made remarkable progress on a number of fronts, including 
poverty reduction and technological advances that will see people living 
longer, healthier and more interconnected lives than ever before.
81  See the 2009 Leaders’ Declaration of the 17th APEC Economic Leaders’ Meeting, 
“Sustaining growth, connecting the region”, Singapore, 14-15 November 2009. 
Available from www.apec.org/apec/leaders__declarations/2009.html (accessed 14 
Apr. 2010).
82  The developing economies of Asia and the Pacific are all the economies in the 
region with the exceptions of Australia, Japan and New Zealand. 


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 49. Trends in the real GDP of selected regions and countries
300
Developing Asian and Pacific economies
250
Africa
200
Latin America and Caribbean
United States
150
EU15
100
Developed Asian and Pacific economies
Index (1990=100)
50
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
Notes: Based on real GDP (at prices of 1990) in US dollars; 2009 estimates; 2010 forecasts (as of 27 Jan. 2010); GDP of
North and Central Asian countries (included in ESCAP developing countries) before 1990 estimated according to their
shares in the former USSR’s GDP in 1990.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates Database; IMF,
World Economic Outlook, January 2010 update; and ESCAP estimates.
The region’s achievements have been punctu-
Western developed countries. The imbalances
ated by two major global crises that brought
were not entirely detrimental to the region.
steadily worsening insecurity: the food and fuel
Firstly, the United States and other Western
price crisis of 2008 and the global financial
countries increased their importance as motors
crisis of 2008 and 2009. The crises have ex-
for the region’s economic growth by providing
posed global and regional structural imbalances
expanding markets for Asian and Pacific ex-
that threaten the sustainability of the region’s
ports. Secondly, the region’s large current ac-
economic growth and dynamism. The threats to
count surpluses resulted in a sizeable accumu-
economic growth posed by persistent increases
lation of foreign exchange reserves, which
in fuel and food prices were examined in the
reached $4.9 trillion as of June 2009. Those
previous edition of this Survey.83 This chapter
reserves protected the region from the risk of
extends the analysis by focusing on three major
collapsing exchange rates – as during the Asian
imbalances that have characterized the process
financial crisis of 1997 – that could have made
of economic growth in Asia and the Pacific:
the region substantially more vulnerable to con-
tagion from the current global financial crisis.

Macroeconomic imbalances

Social imbalances and development gaps
The perpetuation and deepening of the global

Ecological imbalances.
macroeconomic imbalances into the medium
term is very unlikely, however. With the external
The macroeconomic imbalances are global in
debt of the United States more than doubling,
nature, being reflected in the large trade and
from $6.7 trillion as of September 2003 to $13.7
current account surpluses of Asian and Pacific
trillion as of September 2009,84 and its budget
countries vis-à-vis the United States and other
deficit reaching close to 10% of GDP in 2009, a
83
ESCAP,  Economic and Social Survey 2009.
84
United States Department of the Treasury, U.S. Gross External Debt Statistics, www.treas.gov/tic/external-
debt.shtml (accessed 20 Feb. 2010).
116


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
macroeconomic adjustment of its economy is
living that are still relatively low in the region. As
expected.85 As a result, import demand from the
figure 50 shows, the PPP-adjusted real GDP per
United States is not expected to play the buoyant
capita86 of Asian and Pacific developing countries
role it did in the past decade. Asia and the
(excluding North and Central Asia) was approxi-
Pacific will need to reduce its trade and current-
mately $5,000 in 2008 or about half the world
account surpluses and ignite new motors of
average. The figure also shows that those coun-
growth to compensate for the anticipated reduc-
tries made remarkable progress after the 1970s,
tion in dynamism of its traditional export markets.
when their real per capita GDP was only $1,000
or half that of Africa. Although the number of
Despite the region’s accelerating growth, social
poor dropped very significantly – by around 600
imbalances are pervasive, with close to 1 billion
million between 1990 and the mid-2000s – most
people living under $1.25 per day poverty line.
of the drop was concentrated in a few countries,
The large number of poor reflects standards of
while the number of poor increased in others.
FIGURE 50. Real GDP per capita adjusted by purchasing power parity
70
60
50
46
40
33
34 34
30
dollars
28 26
22
20
15 16
12
10
10
10 10
8 8
5 6 6
5
Thousands of 2005 international
1 2
2 2
3
0
1970
1991
2008
Developing ESCAP economiesa
Africa
North and Central Asia
Latin America and the Caribbean
World
Developed ESCAP economies
EU15
United States
Notes: (a) Purchasing power parity (PPP) is a tool that accounts for differences in the cost of living across countries.
It is the amount of a certain basket of basic goods which can be bought in a given country with the money it
produces. The best-known and most-used PPP exchange rate is the Geary-Khamis dollar (the “international dollar”).
(b) Based on real GDP at 1990 prices expressed in international dollars of 2005; GDP of North and Central
Asian countries in 1970 estimated according to their shares in GDP of the former USSR in 1990.
a Excluding North and Central Asia.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates
Database;
 United Nations Population Division, World Population Prospects; and World Bank, World Development
Indicators Database,
 15 September 2009 update.
85
The United States Congressional Budget Office projects deficits to decrease in coming years, from 9.2% of the
GDP in 2010 to 6.5% in 2011, 4.1% in 2011, and 3.2% in 2012. See Congressional Budget Office, Budget
Projections, www.cbo.gov/budget/budproj.shtml (accessed 20 Feb. 2010).
86
See notes to figure 50 for an explanation of purchasing power parity (PPP).
117

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Reducing poverty and making the fruits of eco-
nesses and employment in promising “new
nomic prosperity available for the population at
economy” industries. The preservation of natural
large is not only a moral imperative but is the
resources could lead to the generation of “green
ultimate purpose of economic development. In
jobs”. Moreover, because the poor are more
the case of the Asia-Pacific region, the sheer
likely to live in ecologically vulnerable areas and
number of poor represents a potential market
depend on the availability of natural resources
larger than the European Union and the United
to make a living, addressing the ecological im-
States combined. If social and infrastructural
balances of growth in Asia and the Pacific
investments in the region contribute to providing
would make a substantial contribution to the
employment and business opportunities for the
objective of reducing poverty.
poor, their additional demand has the potential
for not only preserving the dynamism of the
region’s growth but also providing a growth
engine for the global economy.
Asia-Pacific’s poor constitute a potential
market larger than the European Union
and the United States. If social and
infrastructural investments in the region
Import demand from the United States
create employment and business
is not expected to play the buoyant
opportunities for them, their demand
role it did in the past decade
for goods and services can not
only preserve the region’s dynamism
but also provide a growth
The ecological imbalances are reflected in the
engine to the world
degradation of key natural resources such as
forests and freshwater, in unsustainable uses of
energy and in fast growth of carbon emissions.
Although the impacts of those imbalances are
In sum, sustaining economic growth in the Asia-
not immediately apparent, they pose formidable
Pacific region beyond the current recovery calls
challenges to the sustainability of economic
for addressing fundamental macroeconomic, so-
growth into the long run. Forests, for instance,
cial and ecological imbalances. As anticipated
offer a natural protection from landslides, floods
above and explained in greater detail in the rest
and soil depletion which lead to desertification
of the chapter, there are important synergies
and lower agricultural yields. Agricultural yields
across policies that address each of the imbal-
are also suffering as a result of the increased
ances. The best option for the region would be
frequency of droughts and other extreme
an integrated approach that takes into account
weather events associated with climate change.
the impacts of policy measures on the three
Thus, as the demand for food grows in tandem
imbalances and gives the highest priority to
with the population, measures need to be taken
those policies that simultaneously address more
to protect the natural capital. Investing in R&D
than one imbalance.
and rural infrastructure is also necessary in
order to increase agricultural yields.
MACROECONOMIC IMBALANCES
Besides its critical role in supporting the long-
run sustainability of economic growth of the
Prior to the global financial crisis that began in
region, addressing the ecological imbalances
2008, the world economy was characterized by
could also provide an additional motor for
record large trade and current account imbal-
growth and help alleviate poverty. For instance,
ances among major trading partners. The
promoting investments in renewable energy and
United States current account deficit increased
in technologies to improve energy efficiency
moderately from 1991 to 1997, reaching 1.7%
could create opportunities for innovations, busi-
of the GDP in 1997; after that year it soared to
118


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
4.3% of GDP in 2000 and 6% of the GDP in
South-East Asian countries. An increasingly
2005. In contrast, five Asian and Pacific econo-
buoyant United States market opened further
mies (China, Japan, Malaysia, the Russian Fed-
possibilities for exporters and contributed to the
eration and Singapore) have experienced soar-
recovery of the economies hardest hit by the
ing current account surpluses, especially since
Asian financial crisis of 1997. Figure 52 shows
2001 (figure 51). As a percentage of their joint
that net exports of goods and services
GDP, their current account surpluses increased
increased substantially their share in long-term
from 2.7% in 2001 to 5.7% in 2005 and 7.7%
real GDP growth in East and South-East Asia
in 2007. Both phenomena are related, as the
after that year.87  In the case of East Asia, the
United States is an important destination for
share of net exports in GDP growth reached a
Asian and Pacific exports. Furthermore, in the
peak of 25% for the 15-year period between
absence of a well-developed regional financial
1993 and 2008. As East Asia grew at an annual
architecture, Asian and Pacific countries have
average rate of 7.7% during that period, as
been investing the bulk of their foreign ex-
much as 2 full percentage points of annual
change reserves in the United States Treasury
growth were accounted for by the increase in
bills, thereby assisting the United States to con-
net exports of goods and services.
tinue increasing its current account deficits.
Net exports also supported growth in South-
The growing global imbalances have helped the
East Asia after the Asian financial crisis had
Asia-Pacific region especially the East and
caused the  GDP in the subregion to drop 8.6%
FIGURE 51. Trade and current account balances
800
Current account balance
600
Five Asia-Pacific
400
economies with
Trade balance
200
largest surplusesa
0
– 200
United States
– 400
Billions of U.S. dollars
– 600
– 800
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Notes: Data for Russian Federation since 1990; current account data since 1980; 2009 estimate.
a China, Russian Federation, Japan, Singapore and Malaysia.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates Database, U.S.
Census Bureau, Foreign Trade Statistics, Historical Series, and Economist Intelligence Unit, Country Database (accessed 5
Feb. 2010).
87
From the macroeconomics identity GDP = C + G + I + NE, where C is private consumption, G is public
consumption, I is gross fixed capital formation, and NE is net exports, we can write
ΔGDP/GDP    (ΔC/C)*(C/GDP) + (ΔG/G)*(G/GDP) + (ΔI/I)*(I/GDP) + (ΔNE/NE)*(NE/GDP). We define the share of
net exports in long-term GDP growth as 100[(ΔNE/NE)*(NE/GDP)]/(ΔGDP/GDP), where Δx  ≡  x  - x  is the
t
t-15
change in the value of variable x between year t – 15 and year t.
119


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
in 1998 from the previous year. During that
the onset of the subprime mortgage crisis in
dramatic adjustment process, imports contracted
2007, the negative share started to shrink and
by 13%, resulting in a jump of net exports to
is estimated to have reached -9% in 2009.
8.2% of the GDP, compared to -1.3% the year
before. As a result, the share of net exports in
For the heavily export-oriented economies of
long-term GDP growth jumped from 1% in 1997
Asia and the Pacific, the downside risk of relying
to 18% in 1998, staying roughly at that level
so heavily on net exports – their vulnerability to
until 2009.
adverse shocks affecting export markets – be-
came evident with the onset of the global finan-
Not all the subregions of Asia and the Pacific
cial crisis of 2008. As shown in figure 51, the
experienced boosts in growth through increases
adjustment of the United States current account
in net exports. In the case of South Asia, also
deficit was well underway by 2009 – as was the
shown in figure 52, the share of net exports in
adjustment of the current account surpluses of
GDP growth was negative throughout the period
the leading Asian and Pacific surplus economies.
considered in that figure. Between 1998 and
As a result of the adjustment process, net
2002, it increased from -8% to -1%, but after
exports started to decrease its share in long-
that year it decreased substantially as a result
term economic growth in East Asia (figure 52).
of a deterioration of the trade balance. There-
fore, the macroeconomic imbalances have not
Besides boosting growth, another important con-
only been growing at the global level but also
sequence of the growing trade surpluses of the
between subregions of Asia and the Pacific.
Asia-Pacific region has been the accumulation
of substantial amounts of foreign exchange re-
The figure also shows that the share of net
serves. By July 2008, shortly before the onset
exports in long-term annual real GDP growth in
of the global financial crisis, the region held a
the United States – a major market for Asian
total of $4.8 trillion, 43% higher than only 18
and Pacific exporters – dropped from -4% in
months earlier. When the crisis hit, many coun-
1997 to a low of -19% in 2005 and 2006. Since
tries used part of their reserves to stabilize their
FIGURE 52. Share of net exports of goods and services in long-term
real GDP growth
30
East Asia
20
South-East Asia
10
ages
0
Percent
South Asia
– 10
United States
– 20
1995
1997
1999
2001
2003
2005
2007
2009 2010
Notes: 2009 estimates; 2010 forecasts; East Asia: China; Hong Kong, China; Republic of Korea; and Taiwan Province of
China. South-East Asia: Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam. South Asia:
Bangladesh, India, Pakistan, and Sri Lanka.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates Database and
Economist Intelligence Unit, Country Data (accessed 5 Feb. 2010).
120


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
exchange rates. Between July 2008 and Febru-
Sources of imbalances
ary 2009 countries in the region, including India,
Malaysia, the Republic of Korea, the Russian
Trade imbalances reflect underlying changes in
Federation and Sri Lanka, lost 19% or more of
the levels of production and aggregate demand.
their reserves for that reason. However, in Feb-
From the macroeconomic identity GDP  ≡
ruary 2009 the financial crisis started to ease
C+G+I+NE, and the definition of gross domestic
and reserves increased again in Asia and the
saving,  S  ≡  GDP – (C + G), it follows that NE
Pacific, reaching $4.9 trillion by June 2009.
≡  S – I . Thus trade surpluses can be driven by
increases in savings (or increases in consump-
Overall, the huge accumulation of foreign ex-
tion), decreases in investment or a combination
change reserves has allowed Asian and Pacific
of the two. Figures 53 and 54 show the shares
countries to weather the global financial storm
in long-term economic growth of gross fixed
without suffering major disruptions to their ex-
investment and total consumption to assess the
change rates, in contrast with the experience of
relative importance of those factors in explaining
the Asian financial crisis of 1997. That experi-
the growing trade surpluses of selected
ence and the procyclical conditionalities of IMF
subregions.88 Data for the United States are
emergency loans at that time are often extolled
included for comparison.
as a major motivation for countries in the region
to accumulate reserves and self-insure against
As shown in figure 53, a decrease in invest-
future crises. While self-insurance has paid off,
ment played a major role in South-East Asia.
it is clearly not the best solution. Alternatives for
The share of gross fixed investment in long-
protecting exchange-rate stability in the region
term GDP growth dropped from 41% in 1995 to
are discussed below.
17% in 1998, revealing that the adjustment
FIGURE 53. Share of gross fixed investment in long-term real GDP growth
50
South Asia
45
40
East Asia
35
30
ages
United States
25
20
Percent
15
South-East Asia
10
5
0
1995
1997
1999
2001
2003
2005
2007
2009 2010
Notes: 2009 estimates; 2010 forecasts; East Asia: China; Hong Kong, China; Republic of Korea; and Taiwan Province of
China. South-East Asia: Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam. South Asia:
Bangladesh, India, Pakistan, and Sri Lanka.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates Database and
Economist Intelligence Unit, Country Data (accessed 5 Feb. 2010).
88
These shares are defined, respectively, as 100[(ΔI/I)*(I/GDP)]/(ΔGDP/GDP) and 100[(Δ(C+G)/(C+G))*((C+G)/GDP)]/
(ΔGDP/GDP), where Δx  ≡  x  - x  is the change in the value of variable x between year t – 15 and year t.
t
t-15
121


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
process during the Asian financial crisis fell
2006, increasing slightly thereafter. In South-East
overwhelmingly on investment.89 Similar evi-
Asia the share of consumption in long-term GDP
dence for Malaysia, Thailand and Singapore
growth increased from 60% in 1996 to 68% in
after 1997 reported by the Asian Development
2004 and has remained relatively stable since
Bank can be interpreted as a correction of
then. In East Asia higher gross domestic saving
overinvestment before the crisis.90  A similar
is estimated to have accounted for 58% of the
correction is currently underway in the United
increase in the share of net exports in GDP
States, where the share of investment in GDP
growth between 1996 and 2007.
growth increased from 23% in 1995 to 31% in
1997 and a peak of 33% in 2005 and 2006,
In summary, the analysis suggests that the
before dropping sharply to 9% in 2009. Figure
large trade deficits of the United States were
53 also shows the share of investment in long-
driven both by increases in investment and de-
term GDP growth to have been large and stable
creases in saving, and that the brunt of the
in East Asia, at around 38%, and fast-increasing
adjustment of the surpluses during the crisis so
in South Asia, where it rose from 29% in 2003
far has fallen on investment. In South-East Asia
to 47% in 2008.
a large drop in investment after the Asian crisis
of 1997 played a key role in the growth of trade
Figure 54 shows that the share of consumption
surpluses. The opposite is true for East Asia.
in long-term GDP growth in the United States
Although that subregion did experience a small
increased from 74% in 1998 to 86% in 2007. In
drop in the share of investment in GDP growth
East Asia, by contrast, it decreased steadily from
in the immediate aftermath of the 1997 Asian
61% in 1996 to 46% in 2008. In South Asia it
financial crisis, that share stabilized afterwards,
also decreased, from 71% in 1998 to 60% in
in contrast with the steady decline in the share
FIGURE 54. Share of consumption in long-term real GDP growth
100
90
United States
80
ages
70
South-East Asia
Percent
60
South Asia
50
East Asia
0 1995 1996 19971998 1999 2000 2001 2002 2003 20042005 2006 2007 2008 2009 2010
Notes: 2009 estimates; 2010 forecasts; East Asia: China; Hong Kong, China; Republic of Korea; and Taiwan Province of
China. South-East Asia: Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam. South Asia:
Bangladesh, India, Pakistan, and Sri Lanka.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates Database and
Economist Intelligence Unit, Country Data (accessed 5 Feb. 2010).
89
Gross investment dropped from an average of 36% of the GDP between 1994 and 1997 to 23% between 1998
and 2001, and remained at about 22% afterwards.
90
ADB,  Asian Development Outlook 2009: Rebalancing Asia’s Growth (Manila: 2009).
122


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
of consumption. Thus, the “savings glut” expla-
components to GDP growth dropped across
nation for the increasing trade surpluses seems
subregions, although with some differences. East
to apply only for East Asia.
Asia was characterized mostly by a decreased
contribution of consumption (or increase in sav-
ing), while South-East Asia by a decrease in the
contribution of investment. Box 7 also shows that
The “savings glut” explanation for the
the contribution of consumption to GDP growth
increasing trade surpluses seems
decreased considerably in South Asia, while the
contribution of investment increased.
to apply only for East Asia
Perhaps the most unsettling aspect of the global
imbalances discussed in this section is the
The analysis above is based on shares of
anomaly of capital flowing from Asian and Pacific
aggregate demand components in GDP growth,
developing countries to finance consumption and
which are not accurate measures of contributions
investment in rich countries such as the United
to GDP growth. However, box 7 assesses its
States. Such a flow is the opposite of what
sensitivity to alternative computation methods and
conventional economic theory would dictate on
finds that its conclusions remain the same: Ex-
the grounds of the higher rates of return to
ports increased their contribution to GDP growth
capital in developing countries.91 The absence of
significantly between two periods, 1982 to 1997
a well-developed regional financial architecture
and 1992 to 2007, especially in East and South-
has impeded the productive deployment of those
East Asia. The contribution of domestic demand
resources within the region, or in subregions
BOX 7. Sensitivity of the results to alternative methods to compute the
contribution of aggregate demand components to GDP growth
Shares of aggregate demand components, such as gross domestic investment, in GDP growth are not accurate measures of
contributions to GDP growth because they do not take into account the imports needed to satisfy such demand. Shares of
aggregate demand in GDP growth are also difficult to compare across countries, for smaller and more open economies tend to
satisfy a larger share of their consumption, investment and exports through imports.
An alternative to using shares in GDP growth, the “traditional” method is to subtract from each demand component the imports
required for its production. Technical details of the “import-adjusted” method are provided in annex I. The implementation of the
import-adjusted method requires estimates of the import intensity of each component of consumption, investment and exports. For
lack of empirical data on import intensities for developing countries, two alternative assumptions are used for the intensities: that
(a) they are equal across expenditure components; and (b) they are similar to empirical data for the European Union. As explained
in annex I, that assumption that each of those components has identical import intensities leads to underestimates of the
contribution of consumption to GDP growth and overestimates of the contribution of exports to GDP growth. Using European Union
import intensities is not entirely satisfactory either, but the main purpose of the exercise is to compare the robustness of the
results across various estimation methods.
(Continued on next page)
91
During the period, the region received net private capital inflows in the form of foreign direct investment and portfolio
investment. Those funds were, however, transferred out of the region as central banks chose to invest their foreign
exchange reserves outside the region, rather than inside it.
123



ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
BOX 7.  (continued)
Table 24 compares estimates of the contributions to GDP growth of consumption, investment and exports using the traditional
method and two variants of the import-adjusted method. The traditional method computes net exports, X – M, rather than exports
X alone; in this case, table 24 includes a computation of the share of exports in GDP growth for comparison with the import-
adjusted method. Notice that the shares of consumption, investment and exports to GDP growth in the traditional method cannot
be compared across countries or regions because they add up to more than 100%, but they nevertheless can be compared
across time for the same region. The latter is also true for the import-adjusted method, allowing us to check to what extent
changes over time in contributions to growth of different expenditure components are similar within regions even when different
computation methods are used.
Regardless of differences in the estimates according to the method employed, the results are consistent. In the three subregions
included in the table, the contribution of exports to GDP growth increased quite significantly between the period 1982 to 1997 and
1992 to 2007. The increase was highest in East Asia, where exports increased its contribution to GDP growth between 18 and
20% points (using the two variants of the import-adjusted method). The contribution of exports to GDP growth increased between
13 and 17% points in South-East Asia, and between 7 and 10% points in South Asia. The contribution of consumption to GDP
growth decreased some 16 to 20% points in South Asia and 14 to 15% points in East Asia, while it increased 2 to 5% points in
South-East Asia. Finally, the contribution of gross fixed investment to GDP growth increased 7 to 10% points in South Asia, but it
decreased between 4 and 5% points in East Asia and 17% points in South-East Asia.
Overall, the import-adjusted method seems to provide more accurate estimates of the contribution of expenditure components to
GDP growth. Therefore, furthering cooperation across national statistical offices to improve the collection of data on import
intensities in Asia and the Pacific is a worthwhile undertaking that could help improve the accuracy of estimates of the contribution
of demand components to GDP growth in the region.
TABLE 24. Contributions of consumption, investment and exports to
GDP growth
Import-adjusted
Import-adjusted
method (equal
method (EU
Traditional method
import intensities)
import intensities)
1982-1997 1992-2007 1982-1997 1992-2007 1982-1997 1992-2007
East Asia
C
59
44
42
27
49
35
I
40
35
29
24
28
24
X
50
80
29
49
23
41
South-East Asia
C
61
68
36
38
46
51
I
38
13
22
5
22
5
X
78
129
41
58
31
44
South Asia
C
78
65
64
44
67
51
I
29
49
24
35
23
32
X
15
29
12
22
10
17
Notes: East Asia: China; Hong Kong, China; Republic of Korea; and Taiwan Province of China. South-East Asia:
Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam. South Asia: Bangladesh, India,
Pakistan, and Sri Lanka.
Sources: ESCAP based on data from United Nations Statistics Division, National Accounts Main Aggregates
Database;
 and Kranendonk and Verbruggen (2008).
124


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
running growing current account deficits. In fact,
countries in Asia and the Pacific made signifi-
the Asian-Pacific accumulated foreign exchange
cant progress in reducing poverty. Fifteen coun-
reserves represent roughly one third of the re-
tries representing 93% of the population had
gional GDP. If productively deployed, they could
their headcount poverty rates92 reduced from
boost regional development and contribute to-
52.1% around 1990 to 25.2% in the mid-2000s
ward eliminating poverty and hunger.
(table 25). Cuts in poverty rates were sharpest
in China, Indonesia, Viet Nam and Thailand,
SOCIO-ECONOMIC IMBALANCES
and in only one of the countries shown in the
AND DEVELOPMENT GAPS
table, Turkey, did the poverty rate increase over
the period.
Poverty reduction: remarkable but uneven
The total number of poor in the 15 countries
shown in table 25 was also reduced significantly
As a consequence of the fast economic growth
to 596 million, from 1,493 million circa 1990
and increase in standards of living, developing
and 897 in the mid-2000s. Almost all of the
TABLE 25. Poverty reduction between 1990 and the mid-2000s
Headcount
poverty rates
Number of Poor
(per cent)
(millions)
Percentage
of total
Poverty
poverty
Country
Period
Initial
Final
Initial
Final
reduction reduction
Bangladesh
1992-2005
66.8
49.6
80.4
76.0
4.4
0.7
Cambodia
1994-2004
48.6
40.2
5.4
5.5
– 0.1
0.0
China (rural)
1990-2005
74.1
26.1
614.2
204.2
409.9
68.8
China (urban)
1990-2005
23.4
1.7
73.2
9.1
64.1
10.8
India (rural)
1988-2005
55.6
43.8
344.5
353.3
– 8.9
– 1.5
India (urban)
1988-2005
47.5
36.2
98.1
117.3
– 19.2
– 3.2
Indonesia (rural)
1987-2005
70.5
24.0
85.7
27.3
58.3
9.8
Indonesia (urban)
1987-2005
62.0
18.7
29.0
19.7
9.3
1.6
Iran (Islamic Republic of)
1990-2005
3.9
1.5
2.2
1.0
1.2
0.2
Kazakhstan
1996-2003
5.0
3.1
0.8
0.5
0.3
0.1
Lao People’s Democratic
Republic
1992-2002
55.7
44.0
2.5
2.5
0.0
0.0
Pakistan
1991-2005
64.7
22.6
76.7
37.5
39.2
6.6
Philippines
1988-2006
30.5
22.6
18.1
19.7
– 1.6
– 0.3
Russian Federation
1993-2005
2.8
0.2
4.2
0.2
4.0
0.7
Sri Lanka
1985-2002
20.0
14.0
3.2
2.7
0.6
0.1
Thailand
1988-2004
17.2
0.4
9.5
0.3
9.2
1.5
Turkey
1987-2005
1.3
2.7
0.7
1.9
– 1.2
– 0.2
Viet Nam
1993-2006
63.7
21.5
44.7
18.2
26.5
4.4
Median
48.0
22.0
Weighted average
52.1
25.2
Total (15 countries)
1 492.9
896.9
596.0
100.0
Notes: Population weights used to compute weighted averages; the 15 countries included in the table represent 93% of the population
of Asian and Pacific developing economies; poor defined as individuals consuming less than $1.25 (adjusted by PPP) per day.
Sources: ESCAP based on data from World Bank, PovcalNet Database; and United Nations Population Division, World
Population Prospects.

92
The headcount poverty rate is defined as the percentage of a country’s population living in households with
consumption or income per person below the $1.25 dollar per day poverty line (expressed in international dollars
of 2005). See notes to figure 50.
125


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
reduction took place in just a few countries, of
two survey years. This occurred between 1997
which China represented 79.5% and Indonesia
and 2000, which encompasses a dramatic 13%
11.4%. In other countries, such as Cambodia,
decline in this country’s GDP in 1998 as a
India, the Lao People’s Democratic Republic
result of the Asian financial crisis. In any event,
and the Philippines, the cuts in poverty rates
the figure suggests that economic growth is an
were insufficient to reduce the total number of
important factor in reducing poverty, but not the
poor; India had 28 million more poor in 2005
only factor.93
than in 1988.
Poverty-inequality-household
Figure 55 shows paths of poverty rates and
GDPs per capita in selected countries. All those
consumption nexus
paths are downward-sloping, showing that the
poverty rate decreases as the GDP per capita
Rising inequality can adversely affect the speed
increases. However, the rate of poverty reduc-
of poverty reduction with growth. Table 26
tion per unit of increase in the per capita GDP
shows that the Gini coefficient increased be-
varies across countries. In some cases, such
tween 1990 and the mid-2000s in 9 of 15
as Bangladesh, Viet Nam, and Indonesia, the
countries examined; the increase was higher in
slope has been rather steep, but in others, such
urban than in rural areas. In addition, the pov-
as the Philippines and Sri Lanka, the slope has
erty rates considered in table 25 are defined on
been flatter. Notice that Indonesia is the only
the basis of monthly per-capita household con-
country in the chart in which the per capita
sumption data obtained from household surveys,
GDP declined and poverty increased between
whose evolution over time differs from that of
FIGURE 55. Paths of poverty rates and GDPs per capita in selected countries
80
Rural China 1987-2005
70 Bangladesh 1992-2005
60
Indonesia 1987-2005
50
40
India 1988-2005
Viet Nam 1993-2006
30
20
Philippines 1988-2006
10
Urban China 1987-2005
Sri Lanka 1985-2002
Headcount poverty rate (per cent)
0
0
500
1000
1500
2000
2500
3000
3500
4000
GDP per capita (international dollars of 2005)
Note: Poverty rates for India and Indonesia computed as weighted averages of rural and urban poverty rates using
urbanization rates as weights.
Sources: ESCAP based on data from World Bank, PovcalNet Database; United Nations Statistics Division, National
Accounts Main Aggregates Database;
 United Nations Population Division, World Population Prospects; and World Bank,
World Development Indicators Database, 15 September 2009 update.
93
As is clear from figure 55, decrease in poverty is faster at low levels of GDP per capita. That is to be expected given
the usual shape of income distribution functions. See Suryanarayana, M. H., “Pro-poor growth: Illusions of marriage
and divorce?”, Working Paper No. WP-2008-006, Indira Gandhi Institute of Development Research (Mumbai: 2008).
126


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
each country’s per-capita GDP.94 Table 26
the Philippines, where both grew at the same
shows that in all but three countries the rate of
rate, urban Indonesia and Pakistan, where aver-
GDP growth exceeded the rate of growth of
age household consumption grew faster than
per-capita household consumption during the
per capita GDP. On the other hand, the rate of
period considered. The three exceptions were
growth of household consumption was zero or
TABLE 26. Inequality and household consumption growth between
1990 and the mid-2000s
Gini
Average Annual
Counterfactual additional
Coefficient
Growth Rate
poverty reduction
(per cent)
(per cent)
(in millions)
Household
No
consumption
Household
GDP
change
grew at an
consumption
per
in
additional 1%
Country
Initial
Final
per capita
capita
inequality
 per yeara
Bangladesh
26.2
31.0
2.2
3.2
6.5
9.5
Cambodia
38.3
41.9
1.9
5.2
0.4
0.7
China (rural)
30.6
35.9
5.1
9.1
36.3
54.5
China (urban)
25.6
34.8
7.0 }
9.1b
9.1b
India (rural)
30.1
30.5
0.9
4.0
2.3
66.3
India (urban)
35.6
37.6
1.2 }
5.8
26.6
Indonesia (rural)
27.7
29.5
3.3
3.4
1.8
0.0
Indonesia (urban)
32.8
39.9
4.6 }
6.6
0.0
Iran (Islamic Republic of)
43.6
38.3
– 0.2
2.9
– 3.3
1.0b
Kazakhstan
35.3
33.9
– 0.3
6.9
– 0.2
0.5b
Lao People’s Democratic
Republic
30.4
32.6
1.7
3.9
0.1
0.3
Pakistan
33.2
31.2
3.9
1.7
– 3.0
0.0
Philippines
40.6
44.0
1.6
1.6
2.6
0.0
Russian Federation
48.3
37.5
0.0
2.0
– 13.6
0.2b
Sri Lanka
32.5
41.1
1.9
3.2
1.4
1.6
Thailand
43.8
42.5
3.7
4.4
– 0.8
0.0
Turkey
43.6
43.2
0.5
2.2
– 0.2
1.9b
Viet Nam
35.7
37.8
5.7
6.0
1.6
0.0
Median
34.3
37.6
1.9
3.2
Weighted average
32.2
34.8
3.3
6.0
Total (15 countries)
53.4
172.0
Notes: Population weights used to compute weighted averages; the periods considered for each country are the same as
those of table 25; see footnote 98 in the text for details on the computation of the counterfactuals shown in the last two
columns of the table.
a Applied only to countries where the annual average rate of GDP growth exceeded the rate of growth of household
consumption by 1% or more.
b Enough poverty reduction to drive the poverty rate to zero.
Sources: ESCAP based on data from World Bank, PovcalNet Database; United Nations Statistics Division, National
Accounts
  Main Aggregates Database; and United Nations Population Division, World Population Prospects.
94
See the World Bank PovcalNet database for details on the data; available from http://iresearch.worldbank.org/
PovcalNet/povcalSvy.html.
127


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
negative in three countries: the Islamic Republic
The divergence between per capita GDP and
of Iran, Kazakhstan and the Russian Federation.
per-capita household consumption is further il-
lustrated in figure 56, which shows weighted
Differences between rates of growth of the per
averages of the two variables for the 15 coun-
capita GDP based on national accounts, and
tries in tables 25 and 26. The figure shows that
rates of growth of household consumption based
per capita GDP doubled between 1990 and the
on household surveys have been observed in a
mid-2000s, while per-capita household con-
wide cross-section of countries and can be ex-
sumption increased by only 50%. To be sure,
plained in several ways.95 They are of great
those weighted averages are influenced by the
significance because household consumption is
weight of the two largest countries in the region,
a more informative measure of economic well-
China and India. However, an alternative calcu-
being than GDP. According to the recent report
lation shows that the median per-capita house-
of the Commission on the Measurement of Eco-
hold consumption for the 15 countries increased
nomic Performance and Social Progress, “While
it is informative to track the performance of
20 percentage points less than the median GDP
economies as whole, trends in citizens’ material
(58% against 78%), which is still a significant
living standards are better followed through
difference. The discrepancy in the evolution of
measures of household income and consump-
both variables was recently noted by the ADB,
tion. Indeed, the available national accounts data
which considers it a major reason for the grow-
shows that in a number of OECD countries real
ing current account surpluses of the developing
household income has grown quite differently
Asian and Pacific economies over the last 10
from real GDP, and typically at a lower rate”.96
years.97
FIGURE 56. Per capita household consumption and per capita GDP in 15
Asian and Pacific developing countries
4 000
3 000
GDP
per capita
2 000
3 700
Annual per
capita
household
1 000
consumption
1 880
International dollars of 2005
1 160
770
0
Circa 1990
Early 2000s
Note: Weighted averages, using population weights, of the first and last year observations of the 15 countries included in
tables 25 and 26; average annual household consumption in China, India and Indonesia computed as weighted averages of
rural and urban average annual household consumption using urbanization rates as weights.
Sources: ESCAP based on data from World Bank, PovcalNet Database; United Nations Statistics Division, National
Accounts Main Aggregates Database;
 United Nations Population Division, World Population Prospects; and World Bank,
World Development Indicators Database, 15 September 2009 update.
95
Ravallion, Martin, “Measuring aggregate welfare in developing countries: How well do national accounts and
surveys agree?”, The Review of Economics and Statistics, vol. 85, No. 3.
96
Stiglitz, Joseph E., Amartya Sen and Jean-Paul Fitoussi, Report by the Commission on the Measurement of Economic
Performance and Social Progress;
 available from www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf.
97
ADB,  Asian Development Outlook 2009: Rebalancing Asia’s Growth.
128

MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
To assess the relative importance of rising in-
and the Pacific, consistently with the region’s
equality and slow growth in per-capita house-
high rates of GDP growth. However, the reduc-
hold consumption on the speed of poverty re-
tion in the number of poor was uneven, with
duction, the additional reduction in the number
few countries especially China accounting for
of poor under two “counterfactual” scenarios
bulk of it. The two main factors that slowed
was estimated: (a) no change in inequality and
down the rate of poverty reduction have been
(b) an additional 1% growth in per-capita house-
rising inequality and a significantly slower rate of
hold consumption in districts where the differ-
growth of per-capita household consumption
ence between the rate of growth of per capita
compared to that of per capita GDP. The latter
GDP and per-capita household consumption has
factor is related to the declining share of con-
been 1% or more.98 The results are shown in
sumption in GDP growth identified in the section
the last two columns of table 26. If the Gini
on macroeconomic imbalances.
coefficient had not changed from its values of
around 1990, poverty would have been reduced
Poverty and multiple deprivations
by an additional 53.5 million people, 9% more
than the poverty reduction of 611 million that
The above analysis employs headcount poverty
actually took place. Notice that under that coun-
rates because they provide a simple summary
terfactual scenario, China’s urban poverty rate
measure of the extent of poverty in a given
would have been driven to zero by 2005, com-
country at a particular point in time. The state
pared to its actual value of 1.7%.
of poverty is characterized by multiple depriva-
tions, however, that are not adequately captured
in a simple summary measure. In order to
complement the analysis, the rest of this section
Although the total number of poor
explores the relationship between poverty rates
dropped by almost 600 million
and selected characteristics of poverty in the
between 1990 and the mid-2000s,
areas of employment security, nutrition, educa-
tion and access to sanitary infrastructure, meas-
almost all of this drop was
ured by selected indicators taken from the Mil-
accounted for by a few countries
lennium Development Goals database.
Figure 57 shows a positive relationship between
headcount poverty rates and the share in total
The additional reduction in poverty is more than
level of employment of own-account and con-
three times larger under the second counterfac-
tributing family workers, a common measure of
tual scenario of an extra 1% increase in per-
capita household consumption. In that case,
informal employment. Work in the informal sec-
poverty in the Asia and the Pacific would have
tor is not subject to labour safety and regula-
dropped by an additional 172 million, 93 million
tions on hours of work, dismissal rules, mater-
of which would be attributable to India alone.
nity benefits, minimum wages, employers’ liabil-
Under this alternative scenario, the poverty
ity in case of employment-related injury caused
rates of urban China, the Islamic Republic of
to workers, and employers’ contributions to so-
Iran, Kazakhstan, the Russian Federation and
cial insurance schemes such as pension plans
Turkey would have been driven to zero by the
or unemployment insurance. Informal workers
mid-2000s.
are highly vulnerable to various sorts of
economy-wide and idiosyncratic risks. In the
All in all, headcount poverty rates were reduced
figure, the countries with the highest headcount
remarkably in the developing economies of Asia
poverty rates (Bangladesh, Cambodia, the Lao
98
For the computation of these counterfactuals we estimated the following regression based on data for the
districts included in tables 25 and 26:  = 213.6 – 49.02*log() + 0.88* , N = 83,  R2 = 0.88.
it
it
it
  (-5.76)           (3.09)
129


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 57. Headcount poverty and employment in the informal sector
in the Asia-Pacific region
100
al
LAO
BGD
80
KHM
VNM
NPL
IDN
60
GEO
PAK
AZE
THA
BTN
KGZ
40
IRN
LKA
PHL
(per cent)
TUR
y = 35.7 + 0.97x
KAZ
R2 = 0.62
20
MYS
employment, both sexes
Proportion of own-account and
RUS
contributing family workers in tot
0
0
10
20
30
40
50
60
Headcount poverty rate (per cent)
Note: Observations are for the latest years available as of September 2009.
Sources: ESCAP based on data from World Bank, PovcalNet Database and United Nations Statistics Division, Millennium
Development Goals Database.

People’s Democratic Republic and Nepal) have
characterized by consistently low rates of under-
between 72% and 90% of their workers em-
weight children.
ployed in the informal sector. In countries with
intermediate poverty rates, such as Sri Lanka
Figure 59 shows a negative relationship be-
and Viet Nam, the participation of workers in
tween headcount poverty rates and the primary
the informal sector ranges between 43% and
education survival rate, defined as the percent-
74%. Finally, in countries with low poverty rates,
age of a cohort of students who enter the first
participation in the informal sector ranges more
grade of primary school that complete the last
widely, from 6% in the Russian Federation to
grade of primary school, regardless of repeti-
53% in Azerbaijan and Thailand.
tion. Successful completion of primary school is
of critical importance for the acquisition of basic
Figure 58 shows that there is a positive rela-
literary and numerical skills. The figure shows
tionship between headcount poverty rates and
that in the case of the high-poverty countries,
the share of underweight children, a key indica-
this indicator ranges between 55% for Cambo-
tor of child malnutrition. As expected, countries
dia and 66% for India. Uzbekistan, as well as
with high headcount poverty rates have also
other countries formerly part of the Union of
high rates of underweight children, ranging from
Soviet Socialist Republics, is again the excep-
36% in Cambodia to 49% in Timor-Leste. The
tion to the rule. Similar conclusions are obtained
main exception in this group is Uzbekistan,
from figure 60, which shows a negative relation-
which despite its high poverty rate (46%) has
ship between poverty rates and access to im-
only 5% of its children underweight. Other tran-
proved sanitation.
sition economies such as Armenia, Georgia,
Kyrgyzstan, Kazakhstan and the Russian Fed-
In sum, while the headcount poverty rate does
eration are also characterized by low rates of
not capture the multiple deprivations of poverty, it
underweight children. Notice that in contrast
is nevertheless associated with indicators of
with the participation of workers in the informal
some of those deprivations. Countries with high
sector, countries with low poverty rates are also
poverty rates tend to have high rates of under-
130



MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
FIGURE 58. Headcount poverty and underweight children in the Asia-Pacific region
60
50
y = 4.8 + 0.69x
IND
TLS
BGD
R2 = 0.58
NPL
40
PAK
LAO
KHM
30
IDN
LKA
PHL
VNM
20
BTN
TJK
AZE IRN
10
TKM
THA
MYS KAZ
CHN
Children under 5 moderately of
ARM
severely underweight (per cent)
KGZ
UZB
0 RUS TUR
GEO
0
10
20
30
40
50
60
Headcount poverty rate (per cent)
Note: Observations are for the latest years available as of September 2009.
Sources: ESCAP based on data from World Bank, PovcalNet Database and United Nations Statistics Division, Millennium
Development Goals Database.

FIGURE 59. Headcount poverty and primary education survival rate in the
Asia-Pacific region
100 AZE
TJK
KAZ
ARM
RUS
GEO
UZB
KGZ
TUR
IDN
MYS
LKA
VNM
IRN
arting
BTN
80
s st
PHL
PAK
IND
60
LAO
NPL
KHM
BGD
, both sexes
40
age of student
y = 99 – 0.65x
primary
20
R2 = 0.50
Percent
grade 1 who reach last grade of
0
0
10
20
30
40
50
60
Headcount poverty rate (per cent)
Note: Observations are for the latest years available as of September 2009.
Sources: ESCAP based on data from World Bank, PovcalNet Database; and United Nations Statistics Division, Millennium
Development Goals Database.

131


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 60. Headcount poverty and access to improved sanitation in the Asia-Pacific region
100 THA KAZ
KGZ
UZB
MYS
GEO
TUR
ARM
RUS
TJK
LKA
80
IRN
AZE
PHL
CHN
VNM
60
PAK
ation facilities
IDN
BTN
LAO
PNG
40
TLS
(per cent)
y = 92.6 – 1.04x
KHM
BGD
R2 = 0.58
NPL
IND
20
improved sanit
Proportion of the population using
0
0
10
20
30
40
50
60
Headcount poverty rate (per cent)
Note: Observations are for the latest years available as of September 2009.
Sources: ESCAP based on data from World Bank, PovcalNet Database and United Nations Statistics Division, Millennium
Development Goals Database.

weight children, low primary school survival rates,
spending levels have been lower in low-income
high rates of employment in the informal sector
economies and least developed countries (2.5%)
and low access to improved sanitation facilities.
– those that need it the most – compared with
However, an important message of figures 57 to
high-income economies (3.9%). In some
60 is that while the correlation between poverty
subregions, such as South and South-West Asia
rates and the various indicators examined is
and North and Central Asia, spending has
high, it is not by any means absolute. For many
dropped during the first half of the 2000s. Re-
countries social indicators are better than would
garding health services, a large share of health
be expected according to their headcount poverty
expenditures in the region is funded out-of-
rates. Thus the data suggest that it is possible,
pocket, limiting access of poor individuals to
through the implementation of appropriate poli-
basic services.100 A related concern is the low
cies, to improve the social conditions of the
coverage rates of social protection programmes,
population regardless of a country’s poverty rate.
particularly in health-care assistance, labour mar-
ket programmes, assistance to persons living with
To be sure, improving the provision of basic
disabilities and access to microcredit by the
social services and developing effective social
poor.101 But on a positive note, existing levels of
protection systems are costly and require strong
poverty and other deprivations provide substantial
political commitment. The data indicate that much
headroom for increasing aggregate demand in
remains to be done in this regard in Asia and the
the Asia-Pacific region. Therefore, poverty reduc-
Pacific. The average public spending in education
tion must occupy a central place in the economic
in the region during 2005 was 3.4% of GDP,
development strategy designed to sustain Asian
below the world average of 4.7%.99  Moreover,
dynamism in the coming years.
99
ESCAP,  Economic and Social Survey 2008.
100
ESCAP,  Development of Health Systems in the Context of Enhancing Economic Growth towards Achieving the
Millennium Development Goals in Asia and the Pacific,
 Sales No. E.07.II.F.12 (Bangkok: 2007).
101
ESCAP, Economic and Social Survey 2009; and ESCAP, ADB and UNDP, Achieving the Millennium Development Goals.
132

MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
Infrastructure and other
The Asia-Pacific region includes the world’s two
development gaps
most populous countries – China and India –
so the region’s overall achievement on poverty
and other indicators is swayed by their perform-
While the Asia-Pacific region has made impres-
ance. Table 27 shows that the performance of
sive progress in reducing the number of poor,
Asia and the Pacific excluding China and India
this progress has been uneven across coun-
on some indicators has been worse than for the
tries. And the observed relationship between
region as a whole: it has progressed only slowly
headcount poverty rates and selected Millen-
nium Development Goals indicators suggests
in ensuring primary enrolment, and regressed
that progress in reaching those goals must have
on HIV prevalence. On the other hand, this
been uneven as well. The following section
group of smaller countries has done better on
summarizes gaps across Asian and Pacific
gender parity in secondary educational attain-
subregions in the achievement of the Millennium
ment on which it is an early achiever. Starting
Development Goals, together with a preliminary
from a low base on many Millennium Develop-
examination of gaps in infrastructural develop-
ment Goal indicators, South Asia has made
ment across countries in the region.
good progress on eight indicators, but is pro-
gressing only slowly on many others. Given the
The availability and quality of infrastructure hold
weight of India in subregional aggregates, it
great significance for economic development.
may be useful to consider “South Asia without
As public goods, the availability of quality
India”. That grouping is on track for poverty, but
infrastructural facilities assists in “crowding in”
progressing slowly on primary enrolment and
private investments by reducing the magnitude
the provision of clean water supplies and re-
of required investments. In other words, physical
gressing in HIV prevalence and forest cover.
infrastructure contributes to economic growth
through “multipliers” of investment, employment,
The Pacific Island countries have been less
output, income and ancillary development. The
successful – regressing or making no progress
role of physical infrastructure in fostering eco-
in 11 indicators and advancing only slowly in
nomic development and integration has been
another two, those for infant and under-five
supported by extensive empirical literature.102
mortality. Excluding Papua New Guinea, the Pa-
Thus, closing the infrastructural development
cific island countries are early achievers in gen-
gaps across the region appears to be a neces-
der equality. The 14 least developed countries
sary condition for inclusive and balanced re-
in Asia and the Pacific have made slow or no
gional development.
progress on most indicators – performing well
only on gender equality in primary and second-
As far as the Millennium Development Goals
ary education and on reducing the prevalence
are concerned there is considerable variation
of HIV and TB.
across subregions and country groupings.103
Table 27 shows that among the subregions, the
The existence of infrastructure gaps in the re-
greatest progress has been in South-East Asia,
which has already achieved 11 out of the 21
gion has received less attention in recent times
assessed indicators and is on track for another
than gaps in the achievement of the Millennium
four. Next come the North and Central-Asian
Development Goals, partly because of the large
countries which, as a group, have already
number of existing indicators of different as-
achieved nine of the indicators.
pects of infrastructure that make comparisons
102
See the following references for discussion: Aschauer, David Alan, “Is public expenditure productive?”, Journal of
Monetary Economics,
 vol. 23, No. 2 (March 1989), pp. 177-200; Easterly, William, and Sergio Rebelo, “Fiscal
policy and economic growth: An empirical investigation”, Journal of Monetary Economics, vol. 32, No. 3
(December 1993), pp. 417-458; Gramlich, Edward M., “Infrastructure investment: A review essay”, Journal of
Economic Literature,
 vol. 32, No. 3 (1994), pp. 1176-1196; World Bank, World Development Report 1994:
Infrastructure for Development
 (New York: Oxford University Press, 1994).
103
ESCAP,  Supportive Financial System and Green Growth for Achieving the Millennium Development Goals in the
Asia-Pacific Region: 
Theme Study 2010.
133


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
TABLE 27.  Country groups on and off track for the Millenium Development Goals
Goal
1
2
3
4
5
6
7
ality
al
ality
ance consumption
al
al care, at least once
, tot
 emissions
 subst
ation, tot
2
ater
$1.25/day poverty
Underweight children
Primary enrolment
Reaching last grade
Primary completion
Gender primary
Gender secondary
Gender tertiary
Under-5 mort
Infant mort
Antenat
Births by Skilled Professional
HIV prevalence
TB incidence
TB prevalence
Forest cover
Protected area
CO
ODP
W
Sanit
Asia-Pacific
Excluding China and India
South-East Asia
South Asia
Excluding India
Pacific islands
Excluding Papua New Guinea
North and Central Asia
Excluding Russian Federation
LDCs Asia-Pacific
Early achiever
On track
Slow
Regressing/No progress
Source: ESCAP/ADB/UNDP (2010), p. 10.
across countries difficult.104 For instance, a
transport density), ICT infrastructure (telephone
country may be well developed in road infra-
and internet density), energy availability (inten-
structure but may have poor telecommunication
sity of energy use) and banking infrastructure
or information infrastructure. Hence, neither a
(bank branches density) is proposed here. The
measure of road transport infrastructure or of
composite measure represents an average of all
telecommunication infrastructure would ad-
the eight unit-free indicators following the meth-
equately capture the overall quality or availability
odology of the UNDP human development in-
of infrastructure. A single comprehensive indica-
dex. (See annex II for methodological details.)
tor of infrastructural development would be de-
sirable.  To get a sense of the infrastructural
The patterns that emerge from the composite
development gaps in Asia and the Pacific, one
indicator as summarized in figure 61 suggest
such composite measure capturing aspects of
that high-income and upper-middle-income
transport infrastructure (roads, railways and air
countries such as. Singapore; Japan; New
104
The many indicators include some related to transportation facilities such as road networks, ports and airports;
and some about communication infrastructure covering telecommunication networks, information infrastructure and
energy availability, among others.
134


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
FIGURE 61. Infrastructure composite scores in Asia and the Pacific, 2007
Papua New Guinea
Nepal
Lao People’s Democratic Republic
Solomon Islands
Cambodia
Bhutan
Vanuatu
Mongolia
Samoa
Tajikistan
Tonga
Pakistan
Bangladesh
Uzbekistan
Philippines
Indonesia
Maldives
Kyrgyzstan
Fiji
India
Viet Nam
Sri Lanka
Armenia
Georgia
Kazakhstan
Azerbaijan
Iran (Islamic Republic of)
Turkey
Thailand
China
Russian Federation
Malaysia
Brunei Darussalam
Macao, China
Hong Kong, China
Australia
Korea (Republic of)
New Zealand
Japan
Singapore
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Index score
Source: ESCAP calculations as indicated in Annex II.
Zealand; the Republic of Korea; Australia; Bru-
nei Darussalam; Hong Kong, China; and Macao,
Closing the infrastructural development
China have reached a very high level of
gaps across the region appears to be a
infrastructural development, holding the top eight
positions. On the other end of the spectrum, the
necessary condition for inclusive and
least developed countries, small island econo-
balanced regional development
mies and landlocked developing countries such
as Papua New Guinea, Nepal, the Lao People’s
Democratic Republic, Solomon Islands, Cambo-
dia, Bhutan, Vanuatu and Mongolia, among oth-
The resource requirements for bridging or even
ers have very wide gaps in the levels of
narrowing those gaps are substantial. A recent
infrastructural development remaining to be
study estimated that the Asia-Pacific regional
closed. Other developing countries occupy the
infrastructure needs for the decade beginning in
middle positions with significant gaps remaining
2010 to be of the order of nearly $8 trillion
to be closed.105
($5.4 trillion for new capacity and $2.6 trillion for
105
Such a composite index of infrastructure also can be used to see if the gaps are widening over time or closing.
135


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
replacement of old infrastructure).106 The invest-
natural resources such as freshwater and for-
ment needs are on the order of $800 billion per
ests. Market failures are largely to blame, re-
year of which much remains unfunded under
flected in imperfect information on the value of
current arrangements.
goods and services provided by the natural
environment, a misalignment between the social
Narrowing the development gaps in Asia and
and private costs involved, and shortcomings in
the Pacific including poverty reduction and
the governance of natural resources.
achievement of other Millennium Development
Goals and infrastructural gaps provides valuable
The decline in the natural resource base is
opportunities for augmenting aggregate demand
particularly worrisome in Asia and the Pacific
while making the pattern of development more
because of the region’s high population density
balanced and inclusive.
and low per-capita access to critical resources
such as water and energy. Furthermore, the
economic impacts of the declining natural capi-
GROWING ECOLOGICAL
tal base are likely to fall disproportionately on
IMBALANCES
the poor, many of whom live on ecologically
vulnerable areas and depend on the availability
of natural resources to make a living.
Rapid economic growth and modernization has
put huge pressure on the natural capital of
Figure 62 shows the net increase or loss in forest
many countries in the region, depleting key
area between 1990 and 2005 for 28 Asian and
FIGURE 62. Net loss or increase in forest area between 1990 and 2005
Viet Nam
China
Uzbekistan
New Zealand
Net increase in forest area
India
Bhutan
Turkey
Kyrgyzstan
Fiji
Japan
Bangladesh
Republic of Korea
Australia
Malaysia
Papua New Guinea
Lao People’s Democratic Republic
Kazakhstan
Thailand
Mongolia
Net decrease in forest area
Timor-Leste
Sri Lanka
Armenia
Cambodia
Solomon Islands
Indonesia
Loss (-) or increase (+) in the area
Pakistan
covered by forest, as percentage of the
Nepal
1990 forest area
Philippines
– 40
– 30
– 20
– 10
0
10
20
30
40
50
Notes: Forest is determined both by the presence of trees and the absence of other predominant land uses. The trees
should reach a minimum height of 5 metres (m) in situ. Areas under reforestation that have not yet reached but are
expected to reach a canopy cover of 10% and a tree height of 5 m are included, as are temporarily unstocked areas,
resulting from human intervention or natural causes, which are expected to regenerate.
Source: ESCAP, based on data from United Nations Statistical Division, Millennium Development Goals Database.
106
ADB and Asian Development Bank Institute, Infrastructure for a Seamless Asia (Tokyo: 2009), p. 167; available from
www.adbi.org/intal/intalcdi/PE/2009/03979.pdf.
136

MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
Pacific countries for which data are available. In
nesia, Georgia and Viet Nam to close to 100%
19 of them the forest area was reduced during
or higher in Turkmenistan and Uzbekistan. Other
that period at an average rate of loss of 1% per
countries with elevated water-use rates include
annum.107 The annual average rate of decrease
Tajikistan and Pakistan (75%), Islamic Republic
in forest area was highest for the Philippines
of Iran (68%) and Kyrgyzstan (49%). In the
(2.6%), Nepal (1.9%), Pakistan and Indonesia
cases of the Islamic Republic of Iran and Paki-
(1.8%), and the Solomon Islands (1.6%). On
stan, the percentage of water resources with-
other hand, 9 countries experienced an increase
drawn has been increasing over time. While still
in their forest area between 1990 and 2005 at an
at relatively moderate levels, percentages in-
average rate of 0.7% per annum. The annual
creased significantly between 1990 and 2000 in
average rate of increase in forest area was
China, India and Sri Lanka, raising the risk of
highest in China (1.6%) and Viet Nam (2.2%).
water stress in those countries.
The loss of forest area has several adverse
While the increasing demand for water is the
effects on the environment. When trees are cut,
main reason for those trends, an additional
burned or left to decay to convert forest areas to
cause for concern is the uncertain impact on
agricultural and other uses, their stored carbon is
freshwater resources of the loss of mass being
released into the atmosphere, adding to carbon
experienced by most world glaciers.109 In the
emissions from burning fossil fuels. Tropical for-
short- to medium-run, such a loss could cause
est clearing accounts for roughly 20% of the
an increased frequency of floods; over the long-
annual anthropogenic carbon emissions.108
run, it could lead to water shortages in impor-
tant river systems of the world that bring water
Forests also provide critical ecosystem services
to billions of people.
for economies and societies. For instance, the
loss of forest area increases the likelihood of
Forest and hydrological systems are vulnerable to
landslides, floods and soil depletion of vital min-
climate change, and the loss of forests in turn
eral nutrients, making it less able to sustain
increases vulnerability to drought and a host of
agricultural production and leading to
natural disasters that are occurring with increased
desertification. Deforestation also causes severe
frequency and intensity. Therefore, the sustain-
damage to natural ecosystems that provide life-
able management of both forests and water
supporting services such as water purification
systems is important not only for the preservation
and waste decomposition.
of critical sources of natural capital but also for
adapting to extreme events and disasters. How-
The supply of freshwater resources provided by
ever, while adaptation to climate change consti-
nature is another essential ecosystem service
tutes a major focus of the scientific community
that faces multiple threats related to climate
and policymakers in the region, the need to take
change, land-use change and expanding de-
steps towards the mitigation of climate change
mand for water. Figure 63 shows that the rate of
has been moving up the policy agenda.
use of freshwater resources varies substantially
across countries in the region. According to the
Because of their very fast economic growth,
latest data available, it ranges from less than
Asian and Pacific developing economies have
10% in Malaysia, the Russian Federation, Indo-
been increasing their emissions of carbon diox-
107
That figure for the annual rate of loss was derived from the forest area lost between 1990 and 2005 divided by
the forest area in 1990 and expressed as an annual rate.
108
Intergovernmental Panel on Climate Change, Climate Change 2007: the Physical Science Basis – Summary
for Policymakers
 (Geneva: 2007); available from www.aaas.org/news/press_room/climate_change/media/4th_spm2
feb07.pdf.
109
Dyurgerov, Mark B., and Mark F. Meier, “Glaciers and the changing earth system: A 2004 snapshot”, Occasional
Paper No. 58, Institute of Arctic and Alpine Research (University of Colorado, 2005).
137


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
FIGURE 63. Proportion of total renewable freshwater resources withdrawn
Malaysia
Russian Federation
Indonesia
Georgia
Viet Nam
Turkey
China
Sri Lanka
Japan
India
Kazakhstan
Azerbaijan
Armenia
Kyrgyzstan
Iran (Islamic Republic of)
Pakistan
Tajikistan
Turkmenistan
Uzbekistan
Percentages
0
20
40
60
80
100
120
140
1990a
2000b
Notes: Total volume of groundwater and surface water withdrawn from their sources for human use in the agricultural,
domestic and industrial sectors expressed as a percentage of the total volume of water available annually through the
hydrological cycle.
a 1995 for Islamic Republic of Iran.
b 2005 for Armenia, Azerbaijan, Georgia, Islamic Republic of Iran and Turkey.
Source: ESCAP based on data from United Nations Statistical Division, Millennium Development Goals Database.
ide rapidly. In 2006 China became the country
international negotiations on how to share the
with the highest level of emissions (table 28).
costs of addressing climate change issues have
However, on a per-capita basis, the carbon
been extraordinarily complex and contentious;
emissions of China, India and other developing
as evidenced at the United Nations Climate
countries in the region are still substantially
Change Conference in Copenhagen in Decem-
lower than those of the developed countries.
ber 2009.110
Because the developing countries are still indus-
trializing and developing their infrastructure, their
And yet, many countries of the region are
shares in the global cumulative emissions are
adopting a forward-looking perspective and tak-
also considerably lower than those of the devel-
ing actions that seek to redress the imbalance
oped countries. The developing countries are
between the supply and demand for ecosystem
concerned about potential trade-offs between
services. A consensus is starting to emerge in
stringent emission-reduction commitments and
the region that an inclusive approach to devel-
their aspirations to industrialize, reduce poverty
opment also needs to address the substantial
and raise standards of living to levels similar to
challenges involved in maintaining the integrity
those of the developed countries. As a result,
of resources on which especially the poor de-
110
For a more detailed discussion refer to UN-DESA, World Economic and Social Survey 2009: Promoting
Development, Saving the Planet.

138


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
TABLE 28. Carbon dioxide emissions from selected major economies
Share of
Annual
Per capita
Share of
global CO
average
CO
global
2
2
emissions
growth rate of
emissions
cumulative CO2
in 2006
CO  emissions
in 2006
 emissions
2
1992-2006
1840-2006
Per cent
Rank
Per cent
Mta
Rank
Per cent
1) Asia-Pacific economies
Australia
1.4
(13)
1.6
19.3
(8)
1.1
China
21.8
(1)
6.2
4.7
(65)
8.1
India
4.7
(4)
4.8
1.2
(120)
2.4
Indonesia
1.3
(15)
3.6
1.6
(109)
0.6
Iran (Islamic Republic of)
1.7
(10)
4.6
6.7
(47)
0.8
Japan
4.4
(5)
0.5
9.8
(27)
3.6
Republic of Korea
1.8
(9)
3.7
10.8
(23)
0.8
Russian Federation
5.7
(3)
– 2.0
11.3
(19)
8.0
2) Other economies
Canada
1.9
(7)
1.1
16.8
(9)
2.0
Germany
3.0
(6)
– 1.0
10.2
(27)
6.7
United Kingdom
1.9
(8)
– 0.2
9.0
(32)
5.9
United States
20.3
(2)
1.2
19.3
(7)
27.8
Note:  a Metric tons of CO .
2
Sources: ESCAP, based on United Nations (2009, table 1.3, p. 9) and data from United Nations Statistics Division,
Millennium Development Goals Database; Marland, Boden and Andres (2008); and World Resources Institute, Climate
Analysis Indicators Tool 
(CAIT) Version 7.0, http://cait.wri.org/.
pend, for example by keeping freshwater use
ground, bridge differences and strengthen coop-
within sustainable levels, restoring water quality
eration to crack the hard issues facing human
in rivers, protecting the ecological services of
existence and development, and benefit the
forests and adapting to climate change. Conse-
generations to come.”112
quently, in response to the global financial cri-
sis, some ESCAP member countries have allo-
A key to addressing the region’s ecological im-
cated a high proportion of green investments in
balances will be the implementation of broadly
their fiscal stimulus packages.111 In addition,
understood technological innovations that will re-
countries such as China, the Republic of Korea,
duce the adverse impacts of production and
and India have made high-level commitments to
consumption activities on the environment, as
building environmental sustainability into eco-
well as unsustainable pressures on natural re-
nomic growth and to promote international coop-
sources. The promotion and adoption of such
eration mechanisms to fight climate change.
innovations is possible, but requires a societal
The Chinese Premier, Wen Jiabao, has stated:
consensus about their benefits, as well as
“All nations should continue to find common
strong Government support and international co-
111
Bernard, Steve, and others, “The greenest bail-out?”, Financial Times, 2 Mar. 2009; available from www.ft.com/
cms/s/0/cc207678-0738-11de-9294-000077b07658.html?nclick_check=1.
112
Xinhua News Agency, “Chinese premier, UN chief discuss climate change”, China View, Window on China sec.,
30 Dec. 2009; available from http://news.xinhuanet.com/english/2009-12/30/content_12730059.htm.
139

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
operation. Past experience suggests that eco-
nological innovations, the prospects for South-
nomic incentives have encouraged the emer-
South technical and financial cooperation in that
gence of such societal consensus and Govern-
area appear promising.
ment support.
It should be pointed out that least developed
LINKAGES BETWEEN THE THREE
countries, landlocked developing countries and
IMBALANCES
small island developing States – which are dis-
proportionately vulnerable to the consequences
of climate change – do not have the financial
Figure 64 presents a schematic view of the
resources and expertise to develop new tech-
production process. It shows three uses of GDP
nologies. A number of international agreements,
-investments, net exports and consumption, and
notably the United Nations Framework Conven-
four production inputs: capital, including that de-
tion on Climate Change (UNFCCC), recognize
rived from natural resources, technology, and
those constraints by stressing that developed
labour. The figure also shows an externality
countries need to support developing countries
related to environmental degradation. Finally, the
according to the principle of common but differ-
figure makes clear that production alone is in-
entiated responsibilities. Developed countries
sufficient to achieve the objective of poverty
are thereby committed to supporting developing
reduction, which is shown as linked to employ-
countries financially and through transfer of
ment and availability of consumption goods and
technology so that they can diversify their pro-
services. This figure illustrates the macroeco-
duction into higher value-added and less pollu-
nomic imbalances of the growth process in Asia
tion-intensive manufacturing and service indus-
and the Pacific discussed in this chapter.
tries, through the use of environmentally sound
technologies and know-how. To date, much re-
mains to be done, not only in terms of providing
financing to developing countries on preferable
terms, but also in enhancing “green” market
To sustain economic growth over the
access opportunities for developing countries.
long run, the Asia-Pacific region
needs to address its macroeconomic,
social and ecological imbalances
A consensus is starting to emerge in
in an integrated manner: policies
the region about the need to keep
that address simultaneously
freshwater use within sustainable levels,
more than one imbalance should
restore water quality in rivers, protect
be given the highest priority
the ecological services of forests, and
adapt to climate change
The links between elements in the figure are
depicted as colour-coded arrows to highlight the
In their search for new sources of growth in the
three imbalances, as well as elements of the
aftermath of the crisis, Asian and Pacific coun-
current growth strategy that have delivered, on
tries might pay attention to opportunities that
average, positive development results. The blue
may exist in environmentally sound processes
arrows highlight key elements of Asian and Pa-
and technologies through appropriate public in-
cific growth strategy that have contributed to the
terventions, international support and regional
region’s high rates of economic growth over the
cooperation. Concurrently, as key developing
past 40 years. They include high investment
countries move ahead in their development as-
rates leading to a fast accumulation of capital
pirations and in their capacity to generate tech-
which, combined with an abundant supply of
140


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
FIGURE 64. A schematic view of the three imbalances
Capital
Investment
Technology
Net exports
Natural
Production
Environmental
capital
degradation
Labour
Consumption
Poverty
reduction
Source: ESCAP.
labour, have facilitated dramatic expansion of
tion are depicted with dotted arrows, indicating
production. The expansion of employment, also
that they are weaker than desirable.
a key contributor to the fast rate of GDP
growth, has provided earning opportunities that
The ecological imbalances are highlighted with
have helped to lift millions out of poverty.
green arrows. Production activities involve both
(a) the overuse of natural resources, reflected
Addressing the imbalances means a weakening
in losses of forest area and increasing risks of
of some links shown and strengthening of oth-
water stress in some countries; and (b) the
ers. Dotted arrows, linking production with con-
emission of carbon dioxide from burning fossil
sumption, denote that the link is weak and that
fuels as well as from high carbon-emitting con-
it should be strengthened. The social imbal-
sumption activities. To address those imbal-
ances are highlighted with yellow arrows. They
ances, policies should be devised to weaken
are associated with the significantly slower
the links depicted by the green arrows. In addi-
growth rates of per-capita household consump-
tion, a strong investment programme in techno-
tion compared to per capita GDP and with
logical innovations to improve energy efficiency
insufficient levels of investment in the provision
and develop alternative sources of energy will
of basic social services and the development of
be required, combined with a clear commitment
social protection systems. The links between
by developed countries to support the reduction
consumption and investment in poverty reduc-
of financial and technological gaps in the region.
141

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Annex I
Import-adjusted method to compute the contri-
An alternative approach is to take into account
bution of aggregate demand components to
empirical data on import intensities. Although
GDP growth
such data are not easily available in Asia and
Pacific countries, it is possible to explore up to
Assume that the production of consumption,
what extent the results sensitive to the assump-
investment and exports requires an identical
tion of equal import intensities by using on import
proportion of imported goods and services, or
intensities observed in other areas of the world.
import intensity, m. Under this assumption we
The accompanying table presents data on import
can express the GDP identity GDP   C + G + I
intensity from a selection of European countries.
+ X – M as
The European data show consistently that the
GDP   C + G + I + X – mGDP, or
import intensities of both private and Govern-
ment consumption are clearly below the average,
while those of exports are clearly above the
GDP  ≡        1          (C + G + I + X),  or
                  1  +  m
average. Although there is some variation across
countries, the data suggest the presumption that
using identical import intensities will bias down-
æ
ö
GDP  ≡                 
1 -
(C + G + I + X).
ç
÷
ward the contribution of consumption to GDP
è
1 + ø
growth and bias upward the contribution of ex-
Thus, to implement the decomposition it is nec-
ports to GDP growth. In the table in the text we
apply the import-adjusted method using both
æ ö
essary to subtract     from private
identical import intensities and the median import
ç
C
÷
1
intensities of the countries shown in the accom-
è + ø
panying table.
æ ö
consumption,          from government con-
ç
G
÷
To implement this alternative method, decom-
è1+ ø
pose imports as
æ ö
sumption, ç
÷from investment and
0.7αC + 0.3αG + 1.1αI + 1.5αX = M
è1+ ø
æ ö
      m
where  α is obtained as                         
α  =
      .a   It is thus
ç
   from exports and proceed with the
÷X
          1  +  m
è1+ ø
æ ö
usual growth decomposition.
necessary to subtract 0.7            from private
ç
C
÷
è1+ ø
While the assumption of identical import
æ ö
intensities is useful as a first approximation, it
consumption, 0.3      from government
ç
G
÷
underestimate the contribution of consumption
è1+ ø
to GDP growth because private and government
æ ö
consumption, 1.1          
ç
÷  from investment and
consumption typically have smaller import con-
è1+ ø
tent than investments and exports. By the same
æ ö
token, this assumption will overestimates the
1.5         from exports before proceeding
ç
÷X
contributions of investment and exports to GDP
è1+ ø
growth.
with the usual growth decomposition.
a
The coefficients 0.7, 0.3, 1.1, and 1.5 are the medians in the bottom line of the table below. Notice that
α 
          M         
    m
(C + G + I + X) = M. Thus α (GDP + M) = M and                            .
α  =

     GDP + M    1 + m
142


MULTIPLE IMBALANCES AND DEVELOPMENT GAPS AS NEW ENGINES OF GROWTH     CHAPTER 3
Import intensities of selected European countries, 2005
C
G
I
X
Total
1) In per cent
Belgium
32
10
48
62
45
France
18
8
26
45
23
Germany
22
9
33
42
28
Italy
19
8
31
26
20
Netherlands
27
12
41
60
42
Spain
16
8
23
65
27
2) Ratio to total
Belgium
0.7
0.2
1.1
1.4
1.0
France
0.8
0.3
1.1
2.0
1.0
Germany
0.8
0.3
1.2
1.5
1.0
Italy
1.0
0.4
1.6
1.3
1.0
Netherlands
0.6
0.3
1.0
1.4
1.0
Spain
0.6
0.3
0.9
2.4
1.0
Medians
0.7
0.3
1.1
1.5
1.0
Source: ESCAP based on data from Kranendonk and Verbruggen (2008).
Annex II
The composite measure of infrastructure develop-
Energy availability: Energy availability is cap-
ment is based on 8 physical infrastructure indica-
tured by intensity of electric power consumption
tors covering 40 ESCAP member countries in the
(kWh) per inhabitant.
region for 2007. It is a summary measure and it
measures the average achievement of a country.
Banking infrastructure: Captured by number of
The aspects of infrastructure covered in the
banks per 100,000 population.
construction of the composite index and their
measurements are as follows:
Data sources include World Development Indica-
tors
 (World Bank), Statistical Yearbook for Asia
Transport infrastructure: There could be sev-
and the Pacific (ESCAP), and Key Indicators for
eral aspects of transport infrastructure such as
Asia and the Pacific (Asian Development Bank).
availability of roads, railways, air transport and
ports. In view of the availability of comparable
We follow the United Nations Development Pro-
indicators, we have employed following five indi-
gram’s (UNDP) Human Development Index
cators for capturing the availability of transport
(HDI) methodology while indexing the physical
infrastructure: (i) Air transport is captured by
infrastructure development.a In general, to trans-
passengers carried per 10,000 population and
form a raw variable, say x, into a unit-free index
air freight million ton-km, (ii) Road infrastructure
of a development dimension x between 0 and 1
by the length of roads network per 1000 sq.
(which allows different indices to be added to-
km. of geographical area, (iii) Railway infrastruc-
gether), we use following formula:
ture by length of railway lines per 1000 sq. km.
of geographical area.
    x – min(x)
Dimension   =
x
max(x) – min(x)
ICT infrastructure: The availability of ICT
infrastructure is captured with the help of
where min and max(x) are the lowest and highest
“teledensity” and availability of Internet captured
values the variable x can attain, respectively.
by total number of telephones (mobiles and
fixed line) per 100 population and Internet users
The composite index was calculated as a sim-
per 100 inhabitants respectively.
ple average of all the unit free indicators.
a
For concept and methodology, see the example in Sudhir Anand and Amartya Sen, Sustainable Human
Development: Concepts and Priorities,
 (UNDP, 1994).
143




Photo: Keren Su/Corbis






















 “We...need to remain vigilant and active 
to ensure that our policies and economic 
reforms strongly support the enabling 
environment for economic growth. In 
addition, we have to pay special attention 
to our social protection policies to ensure 
that our poor, our children and our 
women, who are the most vulnerable, are 
not left behind”

Edward Natapei
Prime Minister of Vanuatu 



A REGIONAL 
POLICY AGENDA
FOR REGAINING
THE DYNAMISM 4
Trillions of dollars accumulated in foreign exchange reserves during the 
decade that preceded the global crisis, as net exports, became a key 
element supporting GDP growth in Asia and the Pacific.113  As this Survey 
describes in the previous chapter, those reserves were mostly invested in 
treasury bonds issued by developed countries outside the region, which in 
turn fed debt-driven consumption abroad. With the advent of the first 
worldwide recession since the 1930s and the enormous debt burden 
accumulated by developed-country Governments, a return to business as 
usual seems unlikely. There is little likelihood that even a recovery in 
major developed economies could rekindle the pre-crisis, export-led growth 
trend for the region.114 
Asian and Pacific countries therefore need to find new sources of domestic 
and regional demand to make up for weakened Western demand for their 
exports, to help sustain their dynamism and allow for a gradual unwinding 
of global imbalances. Part of the solution could be to develop a more 
consumer-centric economy in the region — one in which rising 
consumption is increasingly fed by production from within the region. By 
allocating financial capital more efficiently within the region, more jobs 
could be generated and the benefits of economic growth could be spread 
more equitably, in turn stimulating increases in private consumption.
113  While not all subregions of Asia and the Pacific experienced a disproportionately 
large contribution of net exports to economic growth over the past decade, private 
consumption has generally diminished, at least up to the onset of the global 
financial crisis of 2008.
114  The President of the United States Mr. Barack Obama stated on 9 May 2009: “The 
long-term deficit and debt that we have accumulated is unsustainable. We can't 
keep on just borrowing from China or borrowing from other countries… [A]t some 
point they're just going to get tired of buying our debt. And when that happens, we 
will really have to raise interest rates to be able to borrow…” [Reuters, “Obama 
says U.S. can’t keep borrowing from China”, 14 May 2009, available from 
www.reuters.com/article/politicsNews/idUSTRE54D58Q20090514.

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Corrections in the large socio-economic and
REDRESSING SOCIO-ECONOMIC
ecological imbalances in the region could pro-
vide much headroom for generating new aggre-
AND ENVIRONMENTAL
gate demand, as this Survey discusses in the
IMBALANCES FOR EXPANDING
preceding chapter. With nearly 1 billion people
in poverty and wide gaps in infrastructure and
DOMESTIC CONSUMPTION
lifestyles, opportunities could be developed to
augment aggregate demand through private
With over 950 million poor as of 2005, the
consumption and investment. Critical for regain-
challenge of reducing poverty in Asian and Pa-
ing the region’s dynamism are policy measures
cific countries remains formidable and should be
taken at national and regional levels that can
assigned the highest policy priority. Poverty re-
reduce poverty and facilitate more inclusive eco-
duction also has the potential to enhance do-
nomic growth. Similarly, greener “new-economy”
mestic consumption by adding hundreds of mil-
industries and businesses based on energy-
lions of new consumers to the mainstream. The
and material-saving innovations could also be
skyrocketing food and fuel prices of 2008 and
sources of growth, providing more affordable
subsequent global financial crisis were stark
products for consumption by the poor while
reminders that poverty can suddenly increase
promoting environmental sustainability. There-
during turbulent times, wiping out hard-won
fore, inclusive and sustainable growth is not
gains. In the context of poverty reduction,
only desirable but also a necessary condition for
measures such as strengthening social protec-
regaining the dynamism of the Asia-Pacific re-
tion, focusing on agriculture and rural develop-
ment and enhancing financial inclusiveness
gion in the aftermath of the global economic
could help in expanding the domestic base of
crisis.
demand while addressing socio-economic imbal-
ances.
Strengthening social protection
Asia-Pacific needs to find new
sources of domestic and regional
Addressing the social imbalances of the region
demand to help sustain its
calls for two different, but equally important,
dynamism and contribute to
policy goals: (a) to redouble efforts to reduce
the gradual unwinding of
entrenched poverty and deprivation; and (b) to
protect the population at large from the risk of
global imbalances
falling into poverty as a result of various haz-
ards, including adverse economic shocks, natu-
ral disasters, illness, disability and other circum-
stances. Both goals can be addressed through
The present chapter outlines a policy agenda
broadly understood policies that provide social
for the region at the national and regional levels
protection in times of adversity and reduce un-
that could help unleash latent domestic
acceptable levels of deprivation.115 Such social
and regional demand and address the macr-
protection policies should be concerned with
oeconomic, social and ecological imbala-
developing short-term safety nets, preventing
nces described in chapter 3 in an integrated
increases in deprivation, and promoting better
manner.
chances of individual development.116
115
Kannan, K. P., “Social security in a globalizing world”, International Social Security Review, Vol. 60, Nos. 2-3,
2007, pp. 19-37.
116
Guhan, S., “Social security options for developing countries”, International Labour Review, Vol. 133, No. 1, 1994,
pp. 35-54.
148

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Social protection systems are key to attaining a
Despite their usefulness in attaining an inclusive
more inclusive development process. They can
development process and in minimizing adverse
serve as automatic stabilizers during periods of
impacts of economic crises, the coverage of
crisis by providing additional income to the poor
social protection programmes in the Asian and
and helping maintain their food intake and ac-
Pacific region is among the lowest in the world.
cess to education and health services. In non-
Most of the poorer developing countries lack
crisis times they can help support domestic
institutionalized welfare systems. They may have
demand by reducing the need for precautionary
a variety of social protection measures but their
saving against catastrophic out-of-pocket ex-
programmes may not be sufficiently funded, co-
penses in coping with medical or other emergen-
herent or extensive to protect vulnerable
cies. Some types of social protection measures
populations. The fragmented social safety nets
are particularly relevant for tackling crisis situa-
that do exist are generally biased towards the
tions as they can provide quick relief to the poor
formal sector, leaving many people without ba-
in the short-term.117 Among them are (a) employ-
sic services and rights. For instance, social
ment generation measures; (b) cash transfers
insurance tends to reach only a small proportion
programmes – conditional or unconditional; (c)
of the workforce – generally government work-
targeted social services, such as feeding pro-
ers and some of those employed in the formal
grammes and health and education programmes
sector – which in India, for example, represents
that focus on benefits for women and girls;
less than one tenth of the total workforce.
and (d) expansion of microcredit schemes to
impoverished groups and localities.
Many of those programmes have the nature of
The coverage of social protection
social assistance and social services. The stimu-
programmes in the Asian and
lus packages in the region contain many such
Pacific region is among the
measures for crisis relief. For example, the
lowest in the world
stimulus package in India includes an expansion
of the National Rural Employment Guarantee
Scheme. The Indonesian package emphasizes
labour-intensive infrastructure projects. Stimulus
Across the region, people working in the infor-
packages in the Philippines and Thailand include
mal economy do not generally benefit from
social security benefits and cash transfers to the
social safety nets. ESCAP has estimated that
poor, while subsidies for health, education and
across Asia and the Pacific only 20% of the
social services in general find a major place in
unemployed and underemployed have access to
the stimulus packages of China, Singapore,
labour market programmes for unemployment
Thailand and Hong Kong, China. Easing the
benefits, training or public welfare, including
availability of financing for affected groups such
work-for-food programmes.118 Only 30% of the
as women and small entrepreneurs has been a
elderly receive pensions and only 20% of the
feature of the Indian and Thai packages. To be
regional population has access to health-care
effective in relieving crises, social protection
assistance – making out-of-pocket medical
measures should be able to target the affected
expenses in Asia and the Pacific among the
people and provide enough benefits to overcome
highest in the world.119 Even in China social
crisis impacts.
insurance has been largely restricted to urban
117
This discussion draws on ESCAP, ADB and UNDP, Achieving the Millennium Development Goals, pp. 60-66.
118
ESCAP,  Economic and Social Survey 2009, p. 64.
119
“In some countries in the region, more than 60% of money spent on health care comes from the patient’s
pocket. By contrast, in Germany an average of just 13% of all medical expenses are borne by the patient, with
the rest covered by social health insurance or by the Government”. (WHO, Regional Office for the Western
Pacific, “Governments not spending enough on health”, press release, 3 Mar. 2010; available from
www.wpro.who.int/media_centre/press_releases/pr20100303.htm).
149

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
populations, although the Government has
household out-of-pocket medical expenditures,
made a concerted effort to extend it to migrants
thus demonstrating that universal health-care is
and the rural population. In South Asian coun-
achievable in a lower middle-income country.122
tries only 8% of the population is covered by
healthcare programmes, compared to 20% for
Another important type of social protection in
the Asia-Pacific region in general.
Asia and the Pacific consists of public works
programmes aimed at reducing poverty. The
Social protection systems can be strengthened in
National Rural Employment Guarantee Act
several ways. While systems vary across coun-
(NREGA) of India provides a legal guarantee of
tries for many reasons, a minimum floor of social
100 days of employment every year for adult
security benefits for all citizens should include (a)
members of any rural household willing to do
guaranteed universal access to essential health
unskilled manual work at the statutory minimum
services; (b) guaranteed income security for all
wage, as discussed in chapter 2. The central
children through family and/or child benefits; (c)
Government funds the cost of wages, 75% of
guaranteed access to basic means-tested or self-
the cost of materials, and part of the adminis-
targeted social assistance for the poor and the
trative expenses; the remaining costs are
unemployed; and (d) guaranteed income security
funded by State Governments. Participants in
through basic pensions for people in old age and
NREGA work in projects such as water conser-
people living with disabilities.120
vation, flood control, irrigation and land develop-
ment. The programme has many benefits, in-
Several Asian and Pacific countries provide ex-
cluding the reduction of distress migration, em-
amples of ambitious social security pro-
ployment generation in the most distressed ar-
grammes. In 2001 Thailand took the historic
eas, and improvements in the natural resource
step of legislating full population coverage in
base for poor communities. Acknowledging the
health care by introducing a universal health-
potential of gender discrimination, the Act man-
care scheme, popularly referred to as the “30-
dates equality in wage payments of men and
baht Scheme” from the amount initially stipu-
women and the availability of childcare at the
lated as a co-payment. Any Thai citizen not
work site. At least one third of NREGA benefici-
already covered by the social security health
aries must be women and women must be
insurance scheme or the Civil Servants’ Medical
represented in the management and monitoring
Benefit Scheme enjoy full access to health serv-
of the programme as well as in its social audit.
ices provided by designated district-based net-
Where work is to be performed beyond 5 km of
works of providers -health centres, district hos-
their residences, women should be given prefer-
pitals and cooperating provincial hospitals. The
ence to work nearer to their residence and
eligible population must register with the net-
members of the same household should be
works to obtain a free insurance card. The
allowed to work at the same work site. Finally,
initial 30 baht co-payment – a little less than $1
by recognizing a single person as a household,
– for each outpatient visit or hospital admission
NREGA enables widows and other single
has been abolished and medications on pre-
women to access the programme. Recent data
scription are also free of charge.121 Evaluations
shows an average female participation rate
suggest that the Scheme has succeeded in
in the programme of 49.7%, with 22 of 32
making the coverage of health-care services
states exceeding the mandated rate of one
near-universal and in significantly reducing
third.123
120
ESCAP,  Economic and Social Survey 2009, p. 65.
121
ESCAP, ADB and UNDP, Achieving the Millennium Development Goals, p. 61.
122
Damrongplasit, Kannika, “Thailand’s universal coverage system and preliminary evaluation of its success”,
presentation at Freeman Spogli Institute for International Studies, Stanford University, 15 Oct. 2009; available
from http://iis-db.stanford.edu/evnts/5747/presentation_Kannika.pdf.
123
Data were obtained for fiscal year 2008/09 from the NREGA website, http://nrega.nic.in/writereaddata/mpr_out/
nregampr_0809.html (accessed 17 Mar. 2010). (See also India, Ministry of Rural Development, 2008a).
150

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
A novel approach to social protection is the use
To be sure, guaranteeing universal access to all
of conditional cash transfers. An example is
those basic services is expensive. A key concern
given by Pantawid Pamilyang Pilipino Program
of many low-income developing countries is the
(“4Ps”) of the Philippines, which provides poor
implications for fiscal balances, especially be-
households with 500 pesos a month for their
cause of current budgetary strains. But given the
health needs and a 300-peso educational sub-
low coverage of social safety net programmes,
sidy for each child up to age 14. Poor families
public expenditures should be reprioritized so that
can get the educational subsidy for a maximum
such programmes can be adequately financed.
of three children. In return, beneficiaries are
The reallocation of spending can be an important
required to comply with the following conditions:
source of financing for an enhanced safety net
(a) pregnant women must receive prenatal care,
package. Moreover, significant efficiency gains
childbirth must be attended by a skilled or
within the existing safety net system can be
trained person, and mothers must receive post-
realized, under the right set of reforms, allowing
natal care; (b) children 0 to 5 years of age must
countries to consolidate small programmes,
have regular health check-ups and vaccinations;
which might be unable to reach satisfactory
and (c) children 6 to 14 must attend school at
economies of scale individually.
least 85% of the time. Failure to comply with
those conditions could mean losing the subsidy.
School principals and the municipal health offic-
ers are tasked to monitor compliance. The ra-
tionale for the conditions is to create incentives
Policies that generate income
for the recipients to invest in their own human
opportunities and improve access
capital. Such investments should give them, es-
pecially the children, a better chance to exit
to basic social services in rural areas
poverty permanently in the long term.
are essential in reducing poverty
and rural-urban imbalances
A promising policy framework for the implemen-
tation of broad social protection policies in the
region is given by the 2004 Social Charter of
the South Asia Association for Regional Coop-
A “green revolution” for food security
eration (SAARC). The charter emphasizes the
importance of the objective of reducing poverty
and poverty reduction
in South Asia to (a) ensure that “every member
of society is enabled to satisfy basic human
Poverty in Asia and the Pacific remains pre-
needs and to realize his or her personal dignity,
dominantly a rural phenomenon. Up to 80% of
safety and creativity” and (b) support economic
the poor in China, India and Indonesia – 585
growth. In order to achieve the goal, the Char-
million out of 731 million – lived in rural areas
ter highlights the need for enshrining rights of
in 2005 (table 25, chapter 3). Policies that
access to basic social services in national laws:
promote the generation of jobs, increase income
opportunities in rural areas, and improve access
States Parties agree that access to
to basic social services are essential in reduc-
basic education, adequate housing,
ing poverty and rural-urban imbalances. Be-
safe drinking water and sanitation,
cause the rural poor derive most of their in-
and primary health-care should be
come from agricultural activities,125 policies to
guaranteed in legislation, executive
facilitate the access of smallholder producers to
and administrative provisions…124
land, agricultural inputs, extension services, fi-
124
SAARC,  Social charter, available from http://www.saarc-sec.org/main.php?id=13.
125
Davis, Benjamin, and others, “Rural income generating activities: a cross country comparison”, ESA Working
Paper No. 07-16 (Rome: FAO, 2007); available from ftp://ftp.fao.org/docrep/fao/010/ah853e/ah853e.pdf.
151


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
nance and markets could significantly contribute
the dramatic increase in crude oil prices, record
to reducing rural poverty, decreasing distress
low levels of world cereal stocks, rapid growth
migration to the cities – and thereby urban
in the world GDP, expansion of the biofuel
poverty – and increasing the supply of food.
production, enhanced speculative activity in
Moreover, vibrant agricultural communities are
commodities, and a long-term decline in invest-
likely to attract other economic activities, con-
ment in agriculture that led to a drop in the rate
tributing to the creation of non-farm business
of growth of yields.
and employment opportunities.126
Food prices moderated significantly in 2009 with
Besides the critical roles of agriculture and rural
respect to 2008 (figure 65). The FAO food price
development in poverty reduction, two other
index dropped 36% between June 2008 and
considerations make them key priorities for in-
February 2009, not surprisingly in light of a sharp
vestment and promotion policies for the me-
world recession and the dramatic drop in the
dium-to long-term.
price of crude oil during the second half of 2008.
However, food prices started to climb back up,
Firstly, the spikes in food commodity prices of
increasing 25% between February 2009 and
2007 and 2008, while abated by the global
January 2010. More dramatically, the price of
financial crisis during 2009, are not expected to
crude oil – which had dropped 70% between
be a fluke. The episode of high food prices
July and December of 2008 – increased by as
reflected structural, long-run factors, as de-
much as 91% between December 2008 and
scribed in the Survey 2009, which were consid-
January 2010. Given the high correlation be-
erably attenuated but not eliminated as a result
tween food and crude oil prices from the 2000s,
of the sharp contraction in economic activity
those trends – which are depicted in trend lines
that took place in 2009. Those factors included
in figure 65 – are worrisome.127
FIGURE 65. FAO food price index and Brent crude oil price, January 2004 to February 2010
300
150
Crude oil
250
125
200
100
150
75
Food
100
50
US$/Barrel
Index (2002-2004=100)
50
Recent trends
25
0
0
2004
2005
2006
2007
2008
2009
2010
Sources: ESCAP based on data FAO, World Food Situation, http://www.fao.org/worldfoodsituation/FoodPricesIndex/en/ and
United States Energy Information Administration, available from http://tonto.eia.doe.gov/dnav/pet/hist/rbrteM.htm (accessed 10
Mar. 2010).
126
Anriquez, Gustavo, and Kostas Stamoulis, “Rural development and poverty reduction: is agriculture still the key?”,
ESA Working Paper No. 07-02 (Rome: FAO. 2007); available from ftp://ftp.fao.org/docrep/fao/010/ah885e/ah885e.pdf.
127
The correlation coefficient between the FAO index and the Brent crude oil price, using monthly observations
between January 2000 and January 2010 is r=0.93.
152

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Secondly, by 2050 the population of Asia and the
ronmental resilience and social inclusiveness as
Pacific is expected to increase by one and a half
it attempts to return power to the producer –
billion people and the demand for food and feed
the farmer, especially women farmers.
is expected to double from current levels. How-
ever, according to current trends in yields, it is
To foster the second green revolution, Govern-
projected that the region’s supply of grains by
ments should focus on the right factor inputs;
2050 will fall considerably short of matching that
namely,
increase in demand.128 Therefore, investing in
agriculture with the objective of increasing its
assets such as land, tools, machinery and
yields must be a top priority for the region.
renewable water and energy resources.
Achieving that objective is even more critical in
efficient credit allocation through the promo-
the face of unpredictable, but increasingly more
tion of financial inclusiveness.
common, extreme weather events such as pro-
longed dry periods or heavy rainfall spells that
knowledge generation through publicly
are known to reduce crop yields and cause
funded agricultural research and develop-
extensive crop losses.129 Moreover, by some
ment together with agricultural extension
accounts, if current warming trends continue, the
services, to rapidly transfer and diffuse
yields of major food crops in tropical countries
knowledge from the laboratory to the field.
could decrease by 20% to 30%.130
information and communication technology
applicable to farming.
In past publications ESCAP has suggested spe-
cific policy recommendations to achieve those
Furthermore, risk management and social pro-
goals.131 Here we highlight the need for the
tection systems, such as crop insurance and
“second green revolution”. While the Green
improved crop transport and storage systems,
Revolution of the last century achieved signifi-
besides efficient rural infrastructure, need to be
cant yield increases in the Asia-Pacific region, it
provided.
brought concomitant problems from its high in-
puts of irrigation, chemical fertilizers, pesticides
The institutions that could provide critical help
and insecticides, and its excessive energy use.
for farmers include those supporting extension
As Asian and Pacific economies rebalance, a
education, post-harvest processing, credit and
second green revolution is needed that can
marketing, and communication connectivity in-
move agriculture from high chemical and water
cluding mobile phones. Farmers need them for
inputs to knowledge-intensive and sustainable
help in meeting international standards, espe-
agriculture. The second green revolution should
cially in food safety. One reason why the ben-
integrate the region’s unique traditional knowl-
efits of higher food prices have not accrued to
edge with advances in science and agricultural
farmers in many Asian and Pacific developing
engineering, including plant genetics, plant pa-
countries is that institutions that allow farmers to
thology and information and communication
take advantage of the higher food prices in the
technology. The approach should emphasize
international market were not in place. Wher-
ecological sustainability with integrated pest and
ever institutions existed, farmers have reaped
soil fertility management, minimum tillage and
benefit; Viet Nam is a case in point where small
drip irrigation. A knowledge-intensive agriculture
farmers have benefited from high international
commends itself also on the grounds of envi-
prices of rice by accessing export markets.
128
International Water Management Institute and FAO, Revitalizing  Asia’s  Irrigation: To Sustainably Meet Tomorrow’s
Food Needs
 (Colombo: 2009); available from www.fao.org/nr/water/docs/Revitalizing_Asias_Irrigation.pdf.
129
Lansigan, Felino P., “Coping with climate variability and change in rice production systems in the Philippines” in
Rice is Life: Scientific Perspectives for the 21st Century, K. Toriyama, K.L. Heong and B. Hardy, eds. (Manila:
International Rice Research Institute, 2009), pp. 542-545.
130
Science Daily, “Dramatic changes in agriculture needed as the world warms and grows”, 12 Feb. 2010; available
from http://www. sciencedaily.com/releases/2010/02/100211141140.htm.
131
ESCAP,  Economic and Social Survey 2008; and ESCAP, Sustainable Agriculture and Food Security.
153

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
A key element here would be a system that
the Africa Rice Center). In 1994 NERICA devel-
could help small farms benefit from economies
oped a new rice variety combining the best
of scale in marketing and assist them in meet-
traits of African and Asian rice varieties. As a
ing international standards. That role used to be
major collaborative project, it involved institu-
played by parastatals, howsoever inefficiently,
tions in 17 African countries and the CGIAR
many of which were dismantled as a part of
with support from the Japanese Government
liberalization, privatization and deregulation poli-
and other multilateral donors. As a result of the
cies under structural adjustment programmes.
growing demand for NERICA rice, cultivated
To provide for such needs, community-based
areas are being extended to 210,000 hectares
organizations such as the self-help groups in
in West and Central Africa, exposing more than
India, the grass-roots non-governmental organi-
1.7 million African farmers to the new crop and
zations (NGOs) and farmers’ organizations in
associated technologies. African rice production
the Philippines such as the Indigenous Multi-
has increased to 744,000 tons per year with
Purpose Cooperative (IMPCI), Namitpitan Bulo
savings of $88 million in rice imports.132 South-
Farmers Associations Inc. (NBFAI), Bado
South and “triangular” cooperation are ought to
Dangwa Federation of Association and Coopera-
play an equally important role in fostering the
tives (BDFCO) and Pide Aguid Fidilisan Multi-
second green revolution in Asia and the Pacific.
Purpose Cooperative (PAFMPCI) are showing
that they can do better than the erstwhile quasi-
government agencies, if promoted and nurtured
“Green growth”: new green industries
in an enabling environment.
as engines of growth
The system of institutes of the Consultative
Group on International Agricultural Research
Today’s challenges of combining developmental
(CGIAR) have a key role in generating new
aspirations with sustainability are even starker
knowledge and technology in agriculture and
than before. Widespread environmental degra-
putting it in the public domain, where it is
dation and extreme weather events such as
available to national agricultural research sys-
more frequent and stronger tropical storms in
tems for adaptation to their geoclimatic condi-
the Pacific and Indian oceans, record droughts
tions. Those institutes include the International
and more frequent flash floods, have made the
Rice Research Institute (IRRI) in Los Baños,
Asia-Pacific region particularly crisis-prone. The
Philippines and the International Crop Research
poor bear a disproportionate burden of the ad-
Institute for Semi-Arid Tropics (ICRISAT) in
aptation costs. The new weather patterns are
Hyderabad, India, among others. They should
the result of divergent global growth and rising
be enabled by the international community to
inequality that has built up over many decades,
play a similar role along with such institutions
as the quest for development and prosperity
as the Centre for Alleviation of Poverty through
particularly of the advanced economies has pro-
Secondary Crops’ Development in Asia and the
duced the bulk of greenhouse gases. Develop-
Pacific (CAPSA) and Asian and Pacific Centre
ing countries are deeply concerned that theirs is
for Agricultural Engineering and Machinery
an environmentally constrained world, where
(APCAEM) of ESCAP.
their efforts to catch up in growth and economic
convergence may be seriously limited.
One recent success story in agricultural trans-
formation based on knowledge through interna-
ESCAP promotes the “Green Growth” approach
tional cooperation is the New Rice for Africa
that emphasizes environmentally sustainable eco-
(NERICA) programme of the West African Rice
nomic progress to foster low-carbon, socially
Development Association (WARDA; renamed
inclusive development. Among the pillars of
132
Kumar, Nagesh, “South-South and triangular cooperation in Asia-Pacific: towards a new paradigm in development
cooperation”, UNESCAP Working Paper WP/09/05 (Bangkok: ESCAP, 2009); available from www.unescap.org/
pdd/publications/workingpaper/wp_09_05.pdf.
154

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Green Growth are sustainable consumption and
the adaptation of existing technologies to local
production, greening of businesses and markets,
contexts – have a critical role to play. The
sustainable infrastructure, green tax and budget
rationale for public intervention here is that action
reforms and investment in natural capital, as
to promote innovation has great social value but
endorsed by the Fifth Ministerial Conference on
is poorly remunerated.134 Action for innovation
Environment and Development in 2005.133  Even
might not take place at all without Government
though no one size may fit all, the movement of
support. Moreover, in the case of environmentally
developing countries towards environmentally
friendly technologies, innovation is critical as local
sustainable consumption and production could be
conditions differ from one region to another and
facilitated by the following policy measures.
from one country to another. Government support
that permits experimentation and knowledge-
sharing could bring substantial sharing of benefits
and saving of resources, at the same time
nurturing new frontiers of economic growth within
Industrial policies – strategic
the region. Government support for innovation in
collaborations between the private
developing countries may be all the more critical
sector and the Government to uncover
in view of barriers to entry in relevant fields from
and remove obstacles to the adoption
competitive corporations that are themselves pro-
tected by intellectual patent regimes and other
of new technologies or the adaptation
restrictive practices.
of existing technologies to local
contexts – have a critical role to play
Government support should cover the develop-
in the promotion of investments in
ment and commercialization of environmentally
environmentally friendly technologies
friendly technologies that lead to affordable
products and improve the wellbeing of the poor
and rural populations. Rural solar electric sys-
tems for homes, popularized by Grameen
First is the case for gearing industrial policy to
Shakti in Bangladesh (box 8), is one such
promote investment in environmentally friendly
technology.135 The Governments of Japan,
technologies and products. Such investments are
China, India and the Republic of Korea, among
critical, particularly during the early phases of
others, have adopted measures to support de-
development and deployment of new technolo-
velopment of such innovations as a part of their
gies. Green technologies need to be sustained
national action plans on climate change.136
until they take root. They also need complemen-
China has become a top investor in clean en-
tary investments along the entire supply chain.
ergy, with investments soaring by more than
Industrial policies – understood as strategic col-
50% in 2009 to reach $34.6 billion; far ahead of
laboration between the private sector and the
the second largest investor, the United States,
Government, aimed at uncovering and removing
at $18.6 billion. The Chinese Government has
obstacles to the adoption of new technologies or
set some of the world’s most ambitious targets
133
See ESCAP, Greening Growth in Asia and the Pacific, Sales No. E.09.II.F.6, available from www.unescap.org/esd/
environment/publications/gg_asia_pacific/GreeningGrowth.pdf; and Navigating Out of the Crisis, ST/ESCAP/2538,
available from www.unescap.org/tid/publication/tipub2538.pdf.
134
“If the entrepreneur fails in his venture, he bears the full cost of his failure. If he is successful, he has to share
the value of his discovery with other producers who can follow his example and flock into the new activity”.
(Rodrik, Dani, “Industrial policy for the twenty-first century”, CEPR Discussion Paper DP4767, Centre for
Economic Policy Research; available from www.cepr.org/pubs/dps/DP4767.asp).
135
“Grameen Shakti to launch solar power system in Dhaka, cities”, Bangladesh Economic News, 26 June 2009;
http://bangladesheconomy.wordpress.com/2009/06/26/grameen-shakti-to-launch-solar-power-system-in-dhaka-cities/;
“Bangladesh decides to use solar power to save energy”, Bermana, 5 Nov. 2009, http://www.bernama.com/
bernama /v5/newsworld.php?id=452797.
136
ESCAP,  Economic and Social Survey 2009, p. 80.
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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
BOX 8. Pro-poor investments in renewable energy and beyond
Grameen Shakti, a not-for-profit subsidiary of the Grameen Bank established in 1996, had financed and installed about 220,000
home solar systems in rural Bangladesh by March 2009, providing electricity to more than 2 million people.a The systems include
a rooftop solar photovoltaic panel, a battery and the required electronics, and cost between $350 and $400 each. Customers
generally pay 10 to 15% as down payment and the rest in monthly instalments for three years. The system should last them 20
years. The panel provides enough electricity to power a few lights, a black-and-white TV and a cell phone.b While that level of
electricity use sounds modest, it is crucial for the close to 70% of Bangladeshi households that are not connected to the national
grid, and rely on kerosene for lighting.
Solar home systems have greatly benefited entire communities not just individual households, providing for lighting in rural clinics
and schools, and the elimination of the adverse health consequences of kerosene smoke. Solar home systems have also
extended opening hours for rural businesses and led to the creation of new job opportunities for solar and electronic technicians.
In order to support the new demand, Grameen Shakti has trained over 1,000 female technicians on renewable energy
technologies through its Grameen Technology Center Program.c Grameen Shakti has also started expanding its operations to
Dhaka and other major urban centres with packages that are more powerful to cater to the requirements of urban consumers, but
are also more expensive.
a Grameen Shakti website, “Programs at a glance,” www.gshakti.org/glance.html.
b Gunthier, Marc (2009), “Grameen Shakti brings sustainable development closer to reality”, GreenBiz.com, 21 Jan, www.greenbiz.com/blog/2009/
01/21/grameen-shakti-brings-sustainable-development-closer-reality-bangladesh.
c Grameen Shakti website, “Creating 100,000 green women entrepreneurs”, www.gshakti.org/ green-women.html.
in renewable energy use, notably wind and solar
charges while subsidizing public transport sys-
alternatives.137 Likewise, the Government of Re-
tems. Sometimes regulations and standards are
public of Korea plans to spend $84 billion over
adopted to promote environmentally friendly
five years to develop environmentally friendly
practices and products. Cases in point are
industries and use them as a growth engine for
standards of energy efficiency indicated on elec-
the wider economy. That level of investment
tric appliances, or of emissions imposed on
represents 2% of GDP per year. Through that
vehicles, or decrees requiring compliance with
plan the Republic of Korea expects to transform
itself into one of the world’s seven strongest
new norms. In New Delhi, for example, conver-
nations in terms of energy efficiency and green
sion of the entire fleet of public transport to a
technology by 2020.138
cleaner fuel, compressed natural gas (CNG),
led to significant improvement in air quality.
Secondly, strategically framed regulations and
Evidence that high energy prices encourage
incentives, and taxes, can facilitate the adoption
energy conservation has sparked discussion
of environmentally sound practices and tech-
about phase-out of fuel subsidies. The G-20
nologies. For instance, Governments worldwide
summit meeting at Pittsburgh in September
promote energy conservation through taxes on
2009 endorsed phasing out of fuel subsidies,
fuels, personal vehicles and high parking
together with provision of essential energy serv-
137
The Pew Charitable Trusts, Who’s Winning the Clean Energy Race? Growth, Competition, and Opportunity
in the World’s Largest Economies
 (Washington, D. C.: 2010); available from www.pewglobalwarning.org/cleanener
gyeconomy/index.html.
138
Agence France Press, “SKorea unveils massive plan for green growth”, France24, 6 July 2009; available from
http://mobile.france24.com/en/node/4895801.
156

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
ices for those in need through the use of
Agreement leaves the provisions for transfer of
targeted cash transfers, among other appropri-
technology quite vague. The conditions, norms
ate mechanisms.139
and practices for facilitating transfers of environ-
mentally friendly technologies need to be de-
Thirdly, an important condition for ensuring envi-
fined. A review of the Agreement could address
ronmental sustainability in developing countries
the important issue of transfer of technology
is to the availability of environmentally sound
and conditions under which technologically less
technologies. The United Nations Framework
advanced countries could seek transfer of tech-
Convention on Climate Change (UNFCCC) pro-
nology from patent owners. Developing coun-
vides for the commitment of developed countries
tries can fully use the flexibilities provided in the
to support developing countries, through transfer
TRIPs Agreement, including provisions for com-
of technology according to the principle of com-
pulsory licensing in their own patent legislation
mon but differentiated responsibilities.140 The
in order to safeguard themselves from possible
bulk of the technology in the field is protected by
abuses of monopoly power by patent owners as
intellectual property rights, such as patents that
provided by TRIPs.144 Discussions leading to
tend to be dominated by corporations based in
the recognition of public health related excep-
developed countries. For instance, four fifths of
tions showed some flexibility in interpreting what
all renewable energy patents granted from 2000
constitutes ‘exigent circumstances’ opening the
to 2004 are owned by the European Union, the
door to potential use of these exceptions in the
United States and Japan (the “Group of 3”, or
climate change context.145
G-3); moreover, their share in motor-vehicle
abatement technologies is as high as 95%.141
Alternative mechanisms to facilitate access of
Such a high concentration of patent ownership
developing countries to new technologies have
by private corporations based in a few devel-
been suggested, such as technology pools in
oped countries affects the access of developing
the public domain, dedicated multilateral funding
countries to relevant technologies.
mechanisms for supporting innovative activity in
developing countries, and formation of R&D alli-
Although transfer and dissemination of technol-
ances involving developing country enter-
ogy is an explicit objective of the Agreement on
prises.146
Trade-Related Aspects of Intellectual Property
Rights (TRIPs Agreement),142 which provides for
Fourthly, the UNFCCC also provides for finan-
measures to prevent practices that adversely
cial support from developed countries to aid
affect international transfer of technology,143 the
adaptation efforts of developing countries. Multi-
139
The leaders of the Group of 20 endorsed the objective of phasing out fuel subsidies in September 2009. They
also recognized “the importance of providing those in need with essential energy services, including through the
use of targeted cash transfers and other appropriate mechanisms”. See Juliet Eilperin, “G20 leaders agree to
phase out fossil fuel subsidies”, Washington Post, 25 Sept. 2009.
140
UNFCCC, “Draft Decision -/CP.15”, 18 Dec. 2009, available from http://unfccc.int/resource/docs/2009/cop15/eng/
l07.pdf. [old 143].
141
United Nations, DESA, World Economic and Social Survey 2009: Promoting Development, Saving the Planet,
Sales No. E.09.II.C.1, p. 128; available from www.un.org/esa/policy/wess/wess2009files/wess09/wess2009.pdf.
142
Article 7 of the TRIPs Agreement; see Annex 1C of the Marrakesh Agreement Establishing the World Trade
Organization, signed in Marrakesh, Morocco on 15 Apr. 1994; available from www.wto.org/english/tratop_e/trips_e/
t_agm0_e.htm.
143
Ibid., Article 8.
144
Ibid., Article 31.
145
United Nations, DESA, World Survey 2009, p. 131.
146
Ibid., chapter V.
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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
lateral agencies such as the World Bank group,
systems could likewise assist in poverty allevia-
the Global Environment Facility (GEF) and indi-
tion. From the perspective of the poor, an inclu-
vidual Governments have initiated action in that
sive financial system would offer options for
regard. Despite their efforts there is a stagger-
accessing financial products and services. This
ing difference between the sheer size of re-
could include obtaining savings, credit and in-
sources necessary for adaptation, which has
surance on favourable terms and conditions and
been estimated in the range of $50 billion to
accessing payments services for undertaking
$100 billion per year (and of which about half
transactions and remittances in a secure and
would be needed in developing countries), and
cost-effective manner. Robust evidence from
the amount actually mobilized and available,
several ESCAP member countries shows that
which is about $154 million.147 The United Na-
poor households with access to financial serv-
tions Climate Change Conference in Copenha-
ices can improve their economic well-being,
gen in December 2009 recognized that scaled-
while they invest in children’s education, and
up, additional and adequate funding, as well as
enjoy better nutrition and health status, than
improved access, should be provided to devel-
similar households without such access. Fur-
oping countries to support enhanced action on
thermore, women of such households have
mitigation. The collective commitment by devel-
been found to increase their role in decision-
oped countries to provide new resources ap-
making, contributing to improve the welfare of
proached $30 billion for the years from 2010 to
children.
2012. Developed countries also committed
themselves to jointly mobilizing $100 billion
a year by 2020 to address the needs of
developing countries.148
The poor are typically excluded from
Finally, valuable opportunities present them-
accessing core services offered by the
selves for sharing development experiences and
formal financial sector such as savings,
best practices among the developing countries
credit, insurance and payments
in the area of sustainable consumption and
production. Developing countries in the region
have demonstrated their capability in work on
biofuels, solar and wind power and waste man-
agement, among others, that could be valuable
Unfortunately, across most developing countries
for others and could be fruitfully shared.
of Asia and the Pacific, financial services are
ESCAP, for example, has helped cities in Bang-
used by only a small proportion of the popula-
ladesh, Pakistan, Sri Lanka and Viet Nam in
tion. Only in a handful of countries do more
managing solid waste by replicating an initiative
than half the households have access to formal
of Waste Concern, a Bangladeshi NGO, using
financial services. The vast majority of the
decentralized treatment plants.149
population in most of those countries, especially
the poor and those slightly above the poverty
line, are typically excluded from accessing the
Enhancing financial inclusiveness
core services offered by the formal financial
sector, such as savings, credit, insurance and
Patently, a well-functioning financial system is
payments. Most countries have far to go in
crucial to economic growth. Inclusive financial
order to achieve financial inclusiveness.
147
Ibid., pp. 93 onward; see also Khor, Martin, “Copenhagen: key issues facing developing countries”, South Centre
Climate Policy Brief; available from www.southcentre.org/index.php?option=com_content&task=view&id=1130&
Itemid=1.
148
Copenhagen Accord, paragraph 8: UNFCCC, “Draft Decision”.
149
ESCAP,  Economic and Social Survey 2009, p. 83.
158

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Barriers to financial access exist on both the
equip themselves to make use of banking
demand side and supply side. The demand-side
services.
factors are primarily the capacity of potential
clients to deal with banks, including their literacy
The regulatory environment should aim to en-
levels, income, occupation and the appropriate-
courage a diversity of financial service providers
ness of the services and products on offer.
who can increase the options available to the
On the supply side the factors include the
poor. Policymakers should ensure that fewer
perception of banks about the profitability and
entry barriers exist for new institutions, as in a
risks involved in dealing with poor customers
tiered system of banking, while allowing sound
and the cost of dealing with a large number
existing institutions to develop appropriate bank-
of clients carrying out very small transactions.
ing services. Flexibility in terms of ownership
Moreover, the banking system is fraught with
regulations and reduced capital requirements
several built-in biases such as the location
should be the norm for service providers that
and business hours of banks, costs, and
reach out to the poor. Tax incentives could also
cultural prejudices of banking staff that prevent
be provided to encourage more inclusive
the poor and women from accessing banking
microfinance-type lending, by commercial banks.
services.
Concurrently, the Government might also encour-
age widespread use of information and commu-
Most countries typically have a range of finan-
nications technologies to provide “branchless
cial institutions, among which commercial banks
banking” services to the poor in villages and in
are central to the financial system. Commercial
remote areas through innovative partnerships
banks have historically had only limited success
with NGOs, microfinance institutions, post of-
in reaching out to the poor. Capital markets
fices, telecommunications companies and other
(equity and bond markets) by their nature have
local entities such as village shopkeepers. A
a very limited role in achieving financial
new range of products and services to help the
inclusiveness as they cater to investment needs
poor improve their livelihood can be provided
of relatively larger enterprises. Others such
such as mobile banking services, microsavings,
as development finance institutions and
microcredit, microrepayment, microremittances
microfinance institutions have had relatively
and microinsurance.150.
more success at reaching out to the poor and
to the small and microenterprises. Furthermore,
Governments could aim to improve the banking
public and technology-enabled networks such as
architecture by establishing institutions that
post offices, telecommunications companies
facilitate financial inclusiveness such as credit
and the Internet also hold potential for bringing
bureaus and credit guarantee funds for
forth financial inclusiveness.
microfinance activities. The regulatory environ-
ment could be improved with accounting and
To promote inclusive banking, Governments
audit standards for microfinance institutions and
should foster efficient and fair banking with
other potential new entrants for financial
safety features such as a well-defined lender of
inclusiveness. Governments might also under-
last resort, a deposit insurance agency, safe
take large-scale financial literacy campaigns to
cash remittance and transit facilities, and an
equip the poor to benefit from financial inclu-
institutional mechanism to deal with distressed
siveness. Banks could be encouraged to offer
banks. An inclusive banking policy should
convenient branches along transportation routes
go hand in hand with development projects
and provide mobile banks, on vans, boats or
and provision of other services to the poor
other appropriate vehicles, to extend their reach
such as health and education, so that they can
to the poor and in remote areas.
150
ESCAP, “Theme Study” for the Sixty-sixth Commission Session (forthcoming).
159

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Enhanced access of the excluded poor through
microfinance and microinsurance, among other
Boosting regional economic integration
means, may protect them against the
has become an imperative: the region
vulnerabilities that they face and assist them in
needs to find new sources of
exploiting opportunities for self-employment.
Many successful experiments in Asia and the
economic growth from within
Pacific are enhancing financial inclusiveness.
The scope is wide for sharing the best practices
for everyone’s benefit.
Boosting regional economic integration has be-
come an imperative: the region needs to find
EXPANDING DEMAND THROUGH
new sources of economic growth from within. To
COOPERATION
date the connections with Europe and North
America have been better than with each other.
Until the global recession hit, that pattern served
Some might say that the policy recommenda-
the region well. Historical, political and topo-
tions discussed above would be more feasible
graphical reasons have played their part – the
in certain countries than in others because of
orientation of maritime transport networks, for
the heterogeneity of the Asia-Pacific region.
example, has been directed towards the major
Larger countries, especially those with high sav-
seaports which in turn provided connections on-
ings and overall prudent macroeconomic objec-
ward to Europe, North America and elsewhere.
tives, are much more likely to be able to
Furthermore, the emergence of new countries
rebalance growth strategies to enhance the do-
since the Second World War has engendered
mestic consumption of the poor than are
non-physical barriers, such as regulatory con-
smaller countries. Similarly, countries with more
trols, at new borders where previously transport
developed and technically advanced economies
networks had been relatively well connected.
The physical and non-physical barriers to trade
have a higher potential for innovating and
and transport have significantly increased the
adapting green technologies that are likely to be
costs of moving goods across borders, which in
in high demand in future. Smaller and less
turn has induced reductions in the volumes of
developed countries are less likely to be able to
intra- and inter-regional overland trade. In the
implement such policies on their own. Those
financial sphere the case is no different: mas-
countries did not exhibit the same resilience
sive savings in the region had to be invested in
during the crisis and went into recession. At the
low-interest debt of the United States and other
same time, vast opportunities remain untapped
developed countries (albeit to a lesser extent in
in those countries. Benefits could be garnered
the latter) because of the relatively less devel-
from the markets and dynamism of their larger
oped state of regional financial architecture, de-
and more advanced counterparts. In turn, their
spite the huge investment needs of the region.
comparative advantages to bring enhanced
There are serious institutional, market and policy
efficiencies to regional supply chains would ben-
obstacles to channelling those savings to more
efit the larger and more advanced countries in
profitable and socially desirable investments
a mutually supportive manner. Action needs to
within the region. Large investment opportunities
be taken to unlock those potential develop-
with higher returns are available in the region,
ments.
but first the issues of availability of finance, its
costs, overall risk perceptions and enabling con-
The case has been made for Asian and Pacific
ditions for wider public-private partnerships must
countries to embark on a new development
be addressed.
paradigm whose strategic goal is to become a
more integrated and competitive matrix which
In sum, obstacles at the regional level persist.
can generate its own rapid growth that is inclu-
The deficiencies are part of existing develop-
sive and sustainable.
ment gaps. They cover a wide spectrum of
160

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
constraints in the institutional and physical infra-
partners or among the partners themselves, re-
structure as well as existing policy obstacles.
sulting is an Asian “noodle bowl” phenomenon.
Addressing the deficiencies should be delayed
Other trade arrangements are developing, such
no longer because the benefits of economic
as the Asia-Pacific Trade Agreement (APTA)
integration need to be spread among low-in-
under ESCAP auspices, that brings together
come economies and the vast swathes of poor
Bangladesh, India, Sri Lanka, China, the Repub-
people who remain far behind – living on less
lic of Korea and the Lao People’s Democratic
than $1.25 per day. The future of the region
Republic, with Mongolia among others, showing
depends on narrowing those gaps.
interest. Functional groupings such as the Asian
Cooperation Dialogue (ACD) promote regional
The remaining pages of this Survey focus on
cooperation in specific sectors.
identifying opportunities and proposing the re-
gional actions that Governments, regional or-
Despite the complex network of political group-
ganizations such as the Association of South-
ings, Asian and Pacific leaders have articulated
east Asian Nations (ASEAN) and SAARC, and
a vision through various fora, of a unified eco-
institutions such as ESCAP and ADB could
nomic space that would evolve over time. Mov-
facilitate in reforming the policy agenda. Four
ing from vision to action requires identifying an
elements are presented here that could lever-
approach whereby all perceive that the eco-
age complementarities across the region and
nomic and social benefits override geopolitical
lay the foundations for an inclusive and sustain-
sensitivities.
able path for development.
Evolving a broader framework for
economic integration

With growth poles such as China and
India along with economic powerhouses
Asia and the Pacific have lagged behind other
like Japan, a unified Asia-Pacific market
regions in exploiting the potential of regional
has the potential to emerge as a centre
economic integration – Europe, North America,
of gravity in the world economy
South America and Africa have all established
some form of customs unions and even mon-
etary unions.
Cooperation in the Asia-Pacific region is fos-
With growth poles such as China and India
tered by such groups as ASEAN in South-East
along with economic powerhouses like Japan, a
Asia, SAARC in South Asia and the Bay of
unified Asia-Pacific market has the potential to
Bengal Initiative for Multi-Sectoral Technical and
emerge as a centre of gravity in the world
Economic Cooperation (BIMSTEC) in South and
economy. Two proposals are helping to broaden
South-East Asia that promote regional trading
the regional arrangements driven by ASEAN: (1)
and investment arrangements. Among them
an East Asia free-trade agreement (EAFTA) that
ASEAN is the most advanced in economic co-
would ally ASEAN+3 countries and is being
operation with plans of forming an ASEAN Eco-
considered in the ASEAN+3 summit framework;
nomic Community by 2015. Besides deepening
and (2) a comprehensive economic partnership
economic integration between member coun-
of East Asia (CEPEA) that would cover a free-
tries, ASEAN is bringing together six large Asian
trade agreement, trade facilitation and economic
and Pacific economies as partners (Japan,
cooperation and would combine ASEAN with its
China, the Republic of Korea, India, Australia
partners Australia, China, Japan, India, New
and New Zealand) and negotiating “ASEAN+1”
Zealand and the Republic of Korea in the East
free-trade agreements with them. The interac-
Asia Summit (EAS) framework. At their last
tion has also encouraged many other bilateral
meeting in Hua Hin, Thailand, in October 2009,
free-trade agreements among ASEAN and its
the EAS leaders examined the EAFTA and
161




ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
CEPEA proposals.151 Independent simulation
port operations. Intraregional transport networks
studies using general equilibrium models show
are being formalized, intercountry transport is
that EAFTA and CEPEA hold significant welfare
being upgraded, missing links are being con-
gains for their member countries. Higher welfare
structed, trade facilitation agreements are being
gains were reported for CEPEA compared with
formulated and implemented, and transport lo-
alternative options, probably because of
gistics are improving.
synergies brought by additional members such
as India, Australia and New Zealand and indeed
After decades in negotiation, the ESCAP Inter-
the larger market.152 In the wake of the current
governmental Agreement on the Asian Highway
crisis, steps towards formation of a unified mar-
Network and the ESCAP Intergovernmental
ket and broadening of economic cooperation
Agreement on the Trans-Asian Railway Network
should be expedited.
entered into force in 2005 and 2009, respec-
tively (figure 66). While agreements are impor-
Developing regional transportation
tant elements in increasing regional connectivity,
networks and improving trade facilitation
much remains to be done in actually building
the infrastructure. The magnitude of investment
Intercountry transport and infrastructural issues
in physical infrastructure required to realize such
are increasingly the focus of attention; in par-
transport connectivity is huge. An ESCAP study
ticular, removing regulatory barriers to trade and
found that in a list of 121 high-priority projects
transport and improving the efficiency of trans-
in 25 countries to develop sections of Asian
FIGURE 66. Asian Highway and Trans-Asian Railway Networks
Source: ESCAP.
151
Chairman’s Statement of the 4th East Asia Summit, Cha-am, Thailand, 25 October 2009; available from
www.aseansec.org/23609.htm.
152
Kawai, Masahiro, and Ganeshan Wignaraja, “ASEAN+3 or ASEAN+6: which way forward?”, ADB Institute
Discussion Paper No. 77 (Tokyo: 2007), available from www.adbi.org/files/dp77.asean.3.asean.6.pdf; and Kumar,
Nagesh, “Towards broader regional cooperation in Asia”, RIS Discussion Paper.(Colombo: Asia-Pacific Trade and
Investment Initiative, 2007), available from www.ris.org.in/tbrcia.pdf.
162

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Highway routes, member States were already
Even before the entry into force of the network
investing or had committed to invest $25 billion.
Agreements, member countries have considered
However, the study found that an additional $18
“essential that Governments take a leading role
billion was necessary in upgrading and improv-
in more effectively integrating the different forms
ing 26,000 km of the existing Highway. For the
of transport in order to develop sustainable
Trans-Asian Railway, similar levels of investment
intermodal transport systems that deliver effi-
need to be budgeted to build the missing links,
cient domestic transport services and at the
same time provide access to international mar-
upgrade existing routes and, most significantly,
kets and wider hinterlands”.153 The value of
ensure interoperability across borders.
setting a long-term vision for an international,
integrated, intermodal transport system in Asia
and the Pacific has been recognized by succes-
sive Ministerial Conferences. The development
Trade procedures involved in moving
of such an integrated system requires
goods from the factory to the closest
intermodal transfer points where goods, contain-
seaport take an average of over 60
ers or vehicles can be trans-shipped onto the
days in landlocked countries
most economical and energy-efficient mode of
transport for specific segments of their move-
ment from origin to destination. The transfer
points connecting different inland transportation
Without sound legal and regulatory bases for
modes like highways, railways or waterways are
vehicles, goods and people to cross borders
known as “dry ports”.
and transit countries, no international traffic can
move along the infrastructure. Decades of policy
Dry ports are equipped to transfer goods, con-
focus in many countries on trade with devel-
tainers and vehicles between modes. They have
oped countries that transits seaports and air-
customs clearance facilities that give them a
ports has resulted in neglect of trade issues
similar status to seaports or international airports.
with land borders. Slow and costly processes,
They may also provide facilities for product grad-
formalities and procedures hinder movement of
ing, sorting and packaging. The areas surround-
goods. That translates into a big disadvantage,
ing dry ports may develop into special economic
particularly for landlocked countries where trade
zones that provide opportunities to act as growth
procedures involved in moving goods from the
poles in the deeper hinterland. In a number of
factory to the closest seaport take an average
countries and country groups in the region, the
of over 60 days, nearly twice the average for
concept of the transport corridor is being
Asian and Pacific developing countries and 10
adopted. Examples include the domestic
times more than in Singapore. The complex
Mumbai-New Delhi corridor in India; the North-
procedures increase transactional costs and
South, East-West and other corridors of the
create opportunities for rent-seeking that dis-
Greater Mekong Subregion (GMS);154 and the six
courage cross-border trade. Ultimately, the con-
Central Asia Regional Economic Cooperation
siderable welfare loss on account of trade trans-
Corridors (CAREC).155 Economic corridors linking
action costs and time delays may wipe out the
dry ports can become valuable means of inclu-
benefits of trade liberalization in the region. In
sive growth that spread economic activity to the
addition, physical and regulatory barriers to
hinterland and bring new investment and employ-
trade are an obstacle for the development of
ment opportunities to impoverished regions, while
border areas.
reducing pressure on the coastal areas.
153
Seoul Declaration on Infrastructure Development in Asia And The Pacific, adopted at the Ministerial Conference
on Infrastructure held at Seoul from 12 to 17 November 2001, E/ESCAP/MCI(2)/Rep., 6 December 2001.
154
GMS comprises Cambodia, China (Yunnan Province and Guangxi Zhuang Autonomous Region), the Lao People’s
Democratic Republic, Myanmar, Thailand, and Viet Nam.
155
CAREC comprises Afghanistan, Azerbaijan, China, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan and Uzbekistan.
163

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Trade and transport facilitation is the other side
pore and Hong Kong, China rank among the
of the connectivity coin. Facilitation at land bor-
best performers in the world where export proce-
ders has taken second priority to issues of
dures take 6 days or less to complete and cost
trade with developed countries that transits sea-
less than $650 per container on average; in
ports and airports. The problems usually result
comparison, the same job in the G-7 countries
from complicated, lengthy and frequently chang-
might take 10 days and cost $1,124. However,
ing procedures and documentation, different re-
the region is also home to some of the worst
quirements in different countries, duplicated in-
performers whose export procedures consume
spections, and high charges. In some countries,
more than 75 days on average and cost over
traded goods have to be trans-loaded near bor-
$3,000. On average, export procedures in Asian
der crossings because trucks of some countries
and Pacific developing countries take more than
are not permitted to cross borders or only per-
3 times longer to complete than in G-7 countries.
mitted to travel a short distance in other coun-
The huge difference stems partly from the vol-
tries.
ume of documents required in completing import
and export procedures. Asian and Pacific firms
Too often has trade facilitation been narrowly
also face trading costs that are on average 17%
interpreted as the modernization of customs
higher than those in the G-7 countries.
clearance and technical controls at the border.
Actually such procedures account for less than
ASEAN leaders recognize the region’s potential
one fifth of the time needed to move goods
to flourish as a hub, at the crossroads of an
from factory to ship. The most time is taken in
economically vibrant region bounded by India to
preparation of documents required for imports
the west, China, Japan and the Republic of
and exports, because of the large number of
Korea in the northeast; and Australia and New
agencies and organizations involved156 that deal
Zealand in the south. At its Summit in October
with trade, transport, customs, immigration, se-
2009, ASEAN established the High-Level Task
curity, health, veterinary and phytosanitary is-
Force together with ADB, ESCAP and the Eco-
sues, and produce quality, as well as the private
nomic Research Institute for ASEAN and East
sector. Its very multiplicity increases the difficulty
Asia (ERIA) to study ASEAN’s internal and ex-
in identifying and addressing bottlenecks in
ternal connectivity and to develop an ASEAN
documentation processes across entire interna-
master plan on regional connectivity.157
tional trade and transport chains. A more
comprehensive approach to trade facilitation
The imperative to strengthen regional connectiv-
adopted in many countries focuses on enhanc-
ity assumes new relevance as the value of
ing coordination and collaboration between the
regional synergies and sources of demand
official agencies involved as well as between
emerges in the aftermath of the global crisis.
those agencies and the providers of transporta-
Streamlining the flow of goods and services
tion, logistics, conformity assessment and
across the region, as well as exploiting the
financial services. The Republic of Korea, for
potential of investments in developing physical
example, has implemented an electronic “single-
infrastructure, serves one of the key strategies
window” system that links users with more
for recovery: augmenting the aggregate de-
than 60 Government and private-sector organi-
mand. Governments need to identify the gaps in
zations.
the Asian Highway and TransAsian Railway net-
works, prioritize them and act to develop them,
Efficiency levels vary greatly in the mix of trade
besides strengthening the trade and transport
and transport facilitation in the region.  Singa-
facilitation at the borders.
156
Examples include health authorities, agencies and service providers involved in ensuring conformity with product
standards prevailing in the destination country, port authorities, banks and immigration services.
157
See ASEAN Leaders’ Statement on ASEAN Connectivity, Cha-am, Hua Hin, Thailand, 24 October 2009.
164

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Strengthening connectivity through
tives are under way to increase bandwidth capac-
information and communications
ity available to Asian and Pacific countries, such
as the recently concluded Asia-America Gateway
technology (ICT)
Cable System which links the United States with
several South-East Asian countries,159 and initia-
Although the world had reached unprecedented
tives to reutilize underused cables, especially
levels of ICT penetration by the end of 2008,
first-generation fibre-optic cables that connect
with over 4 billion mobile cellular subscriptions,
underserved Pacific islands developing countries
1.3 billion fixed telephone lines and close to
with global telecommunications networks.160
one quarter of the world’s population using the
Internet, major imbalances across and within
In parallel with increasing external connectivity
countries remained.158 In all economies mobile
is a push by Governments to share or expand
phone use has increased tremendously, facilitat-
backbone infrastructure, in many cases through
ing the expansion of markets, business and
regional ICT cooperation. One such example is
public services. On average, the Asia-Pacific
the Greater Mekong Subregion Information
region has over 50 mobile subscribers per 100
Superhighway project; it reached an important
persons, but access to mobile communication
milestone recently in inaugurating a fibre-optic
ranges widely in the region from as low as 0.8
network with a transmission speed of 620 Mbps
subscribers per 100 persons in Myanmar and
and construction and upgrades of stations along
Kiribati to 177 in Macao, China. The digital
the route, linking Cambodia, the Lao People’s
divide is even starker regarding access to
Democratic Republic, Myanmar, Viet Nam, Thai-
Internet services. In 2008, there were 78
land and Yunnan Province of China.161
Internet users per 100 persons in the Republic
of Korea, 69 in Japan, 67 in Singapore and 63
Besides facilitating the expansion of markets
in Malaysia, compared with only 0.5 in Cambo-
and business opportunities, ICT connectivity can
dia, 0.3 in Bangladesh and 0.1 in Myanmar and
play a role in bringing social and economic
Timor-Leste. Broadband subscribers in the re-
benefits and in poverty reduction. For instance,
gion are still few: about 4 subscribers per 100
the South Asia Subregion Economic Coopera-
persons and an average of only 0.02 for least-
tion (SASEC) Information Highway project for
developed countries.
India, Bangladesh, Nepal and Bhutan aims to
set up village networks that are expected to
The extent to which a country connects with the
expand broadband wireless connectivity to rural
region and the rest of the world can be gauged
communities and improve their access to serv-
by its available international bandwidth, which
ices such as telemedicine, distance learning,
varies enormously by country. Low bandwidth
and e-government services.162
further limits the extension of Internet use since
many developing countries rely on content and
ICT connectivity can also play a key role in
applications from overseas. A number of initia-
connecting remote communities and providing
158
International Telecommunications Union, Trends in Telecommunication Reform 2009: Hands-on or Hands-off?
Stimulating Growth through Effective ICT Regulation,
 10th ed. (Geneva: 2009); available from www.itu.int/publ/D-
REG-TTR.11-2009/en.
159
Othman, Azlan, “Tests completed on Asia-America gateway”, Brudirect.com, 11 Nov. 2009; available from www.
brudirect.com/index.php/2009111110259/Local-News/tests-completed-on-asia-america-gateway.html.
160
ESCAP,  Enhancing Pacific Connectivity: the Current Situation, Opportunities for Progress, Sales No. E.08.II.F.14
(Bangkok: 2008); available from www.unescap.org/idd/Pubs/st_escap_2472.pdf.
161
Xinhua News Agency, “Cambodia, China complete phase 1 of GMS Information Highway Project”, People’s Daily
Online,
 15 July 2009; available from http://english.people.com.cn/90001/90776/90883/6701499.html.
162
iGovernment, “Four South Asian countries to set up info-highway”, New Delhi, 16 October 2007; available from
www.igovernment.in/site/four-south-asian-countries-to-set-up-info-highway/.
165


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
them with access to educational services. For
Countries are committed to intraregional connec-
instance, the University of the South Pacific
tivity to enhance regional integration and eco-
network links 14 campuses in 12 countries
nomic growth in the near future. For instance, the
(Cook Islands, Fiji, Kiribati, the Marshall Islands,
ASEAN ICT Master Plan 2010-2015 will reinforce
Nauru, Niue, Solomon Islands, Tokelau, Tonga,
the role of ICT for ASEAN integration. Their
Tuvalu, Vanuatu and Samoa) through satellite-
initiatives will also lead into still undeveloped
based ICT, providing audio- and video-
potential for ICT: supporting early-warning sys-
conferencing, e-curricula, e-learning materials
tems for disaster-preparedness with emergency
and Internet services.163
procedures and response activities (box 9).
BOX 9. Connectivity for improved disaster preparedness, response and management
In the first half of 2009, Asia and the Pacific saw 40 disasters that killed more than 1,000 people and affected 5.9 million other
lives. The economic damages were estimated at more than $1,500 million.a In September 2009, the region experienced multiple
disasters over a brief time. Typhoon Ketsana hit the Philippines, Viet Nam, Cambodia and the Lao People’s Democratic Republic.
A tsunami struck Samoa, American Samoa and Tonga. Two massive earthquakes rocked Sumatra, followed by devastating
typhoons the next month that affected South-East Asian countries. All those disasters eroded social and economic development
efforts leading toward achieving the Millennium Development Goals.
Despite rapid expansion in telecommunication connectivity, ICT tools have not been fully used to reduce the impact of disasters.
Capacity is insufficient for analysing and interpreting data for evidence-based policymaking and decision-making. Access to
telecommunication networks is limited during disasters. The challenges underline the need for Asian and Pacific countries to
enhance regional connectivity and jointly address disaster preparedness, response and management that builds on the strengths of
each country.
The ASEAN Agreement on Disaster Management and Emergency Response (AADMER) is an exemplary mechanism. The first of
its kind in the world, AADMER is a regional agreement that legally binds ASEAN member States together to promote regional
cooperation and collaboration in reducing disaster losses and intensifying joint emergency response to disasters in the ASEAN
region. AADMER provides for disaster risk identification, monitoring and early warning, prevention and mitigation, preparedness
and response, rehabilitation, technical cooperation and research, mechanisms for coordination, and simplified customs and
immigration procedures. AADMER also supports the establishment of the ASEAN Coordinating Centre for Humanitarian Assistance
for operational coordination of disaster management activities under the ASEAN Agreement. AADMER entered into force at the
end of 2009.
Asian and Pacific countries could also leverage ICT resources and services that are available regionally and globally by joining
cooperative mechanisms and capacity-building programmes for disaster risk management being promoted by ESCAP, such as the
Regional Space Applications Programme for Sustainable Development and the Sentinel Asia project, as well as the United Nations
Platform for Space-based Information for Disaster Management and Emergency Response being executed by the United Nations
Office for Outer Space Affairs. Tsunami-prone countries can seek support from sources such as the ESCAP Trust Fund for
Tsunami, Disaster and Climate Preparedness in strengthening their multi-hazard capacities and creating a regional early warning
system for tsunami and other hazards.
a CRED, November 2009.
163
The University of the South Pacific, “USP – an introduction”; available from www.usp.ac.fj/index.php?id=usp_
introduction.
166

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
Developing financial architecture for crisis
ment, for filling in the gaps and putting in place
prevention and narrowing the gaps
building blocks for multilateral cooperation at the
global level. That was clearly recognized in the
Outcome Document of the United Nations Con-
The crisis has revealed the glaring lack of
ference on World Financial and Economic Crisis
financial tools available at regional level, beyond
and Its Impact (2009):164
those in the hands of Governments. While some
countries had built up sufficient reserves to
Given the sensitivity of regional and
protect their balance of payments, less fortunate
subregional institutions to the spe-
countries had no recourse to regional sources of
cific needs of their constituencies,
assistance given the dearth of monetary and
we note the value of regional and
financial cooperation. The Asian Clearing Union,
subregional cooperation efforts in
for example, has few members, remains fo-
meeting the challenges of the global
cused on the settlement of payments on trade
economic crisis and we encourage
transactions among members, and does not
enhanced regional and subregional
deal with exchange-rate stability. The Asian
cooperation, for example, through
Bond Fund, another regional initiative, remains
regional and subregional develop-
small in scale and cannot yet serve as a cred-
ment banks, commercial and re-
ible and cost-effective source of financing. The
serve currency arrangements, and
Chiang Mai Initiative (CMI) of ASEAN+3 (APT),
other regional initiatives, as contribu-
the clearest example of a regional financial
tions to the multilateral response to
cooperation scheme, remains insufficiently devel-
the current crisis and to improved
oped as a first source of assistance; some
resilience to potential future crises.
members found alternative sources of support
as discussed in chapter 1. The crisis also high-
Some of the elements needed for policy reform
lighted how the lack of well-developed regional
action are discussed below.
financial architecture prevented efficient interme-
diation between the region’s expanding foreign
Crisis prevention and management
exchange reserves and its substantial unmet
investment needs, thus leaving the central banks
For effective prevention of systemic crises, a
no option but to invest their reserves in United
regional crisis fund should include as many
States Treasury bills and equivalent securities in
countries of the region as possible. The quan-
the West that earn poor, if not negative, returns
tum of funds should be sufficient for the fund to
in real terms. In the aftermath of the crisis and
act as the lender of first recourse in the event
need for augmenting aggregate demand in the
of macroeconomic or balance-of-payment diffi-
region, the function of regional intermediation
culty. The fund should ideally include support for
acquires a degree of criticality. Besides crisis
domestic financial sectors in its remit, in addi-
prevention and intermediation between savings
tion to balance-of-payments support to Govern-
and investment in the region, a regional financial
ments, to enable assistance to banks as was
architecture could also be instrumental in ex-
undertaken by Governments in the United
change-rate coordination and in evolving a re-
States and Europe during the current crisis. The
gional perspective and coordinated voice for
fund would require a physical infrastructure with
reform of international financial architecture.
well-qualified staff to engage in monitoring of
emerging trends prior to and during crises, as
Enhanced regional cooperation should not be
well as design of the terms associated with the
regarded as an alternative to full participation in
support provided to Governments in the region.
global economic relations, but rather a comple-
Availability of a well-endowed regional crisis-
164
United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development, “The
world financial and economic crisis and its impact on development: Report of the Secretary-General”, A/
CONF.214/4, 24-26 June 2009.
167

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
response facility could reduce pressure on Gov-
worth of yen-denominated swap facilities sepa-
ernments to build large foreign-exchange re-
rately. The Republic of Korea will contribute
serves for protecting their economies against
$19.2 billion. Within ASEAN, Indonesia, Malay-
speculative attacks and liquidity crises.
sia, Thailand and Singapore will each contribute
$4.77 billion and the Philippines will give $3.68
The crisis has provided a window of opportunity
billion. Other details remain unclear, though the
for creating an effective regional crisis-response
same conditions as with the CMI remain (i. e.,
fund. Although the opportunity became available
20% unrestricted borrowing and 80% balance
right after the 1997 crisis, the relatively rapid
only with IMF conditionalities). Importantly, the
return of economic growth resulted in a loss of
regional economies have agreed to create a
policy urgency. The multilateralization of the APT
CMI reserves pool in its present form could
stronger regional surveillance system in con-
evolve into a truly effective first line of defence
junction with the ADB and the ASEAN Secre-
for the region, if its geographical coverage, size
tariat “to monitor and analyze regional econo-
and functions were expanded. As long ago as
mies and support CMIM decision-making”.167
the eighth APT Finance Ministers’ Meeting in
Presumably if and when this surveillance sys-
Istanbul in May 2005, there was an agreement
tem is effectively established, the 20% of re-
to re-evaluate the process, including the possi-
serve that can be tapped without IMF
bility of regionalizing the arrangements.165 There
conditionality will be increased.
was agreement on looking into developing a
collective mechanism to activate the swaps. The
need to improve on the extent of regional dia-
logue and surveillance was also recognized, and
Availability of a well-endowed regional
to link them more closely and effectively with
crisis-response facility could reduce
the CMI. Progress on those issues was slight
pressure on Governments to build
until recently. At the APT Finance Ministers’
large foreign-exchange reserves
Meeting in Bali, Indonesia in May 2009, the
APT countries reached an agreement to trans-
form the existing bilateral arrangements into a
regional foreign reserve pool of $120 billion to
“address short-term liquidity difficulties in the
Since the region holds reserves of almost $5
region and to supplement the existing interna-
trillion, the proposed reserve fund has the po-
tional financial arrangements”.166 The CMI
tential for significant expansion over time. Ex-
multilateralization (CMIM) came into effect on 24
pansion of membership to include key countries
March 2010.
such as India also needs to be resolved if the
CMIM is to evolve into a truly regional reserve
The “Plus-Three” countries of China, Japan and
pool. The pool could involve three tiers of liquid-
the Republic of Korea are committed to funding
ity. The first tier would be CMIM-owned re-
80%, to the pool while the 10 ASEAN members
serves, which offer the highest degree of liquid-
will share the remaining 20%. Of that amount,
ity and have zero conditionality; however, that
Japan will contribute $38.4 billion to the pool, as
would be costly. The second tier would consist
will China (in conjunction with Hong Kong,
of all the countries’ own reserves placed with
China). Japan has also extended $60 billion
the regional pool. The third tier would be con-
165
ASEAN, Joint Ministerial Statement of the 8th ASEAN+3 Finance Ministers’ Meeting, Istanbul, Turkey, 4 May
2005, available at http://www.aseansec.org/17448.htm.
166
ASEAN, Joint Media Statement of the 12th ASEAN+3 Finance Ministers’ Meeting, Bali, Indonesia, 3 May 2009;
available from: http://www.aseansec.org/22536.htm.
167
Ibid., paragraph 9.
168

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
ventional IMF lending via its various facilities.168
exchange reserves becomes particularly impor-
With such a structure the degree of liquidity
tant if funding from foreign sources, through
could be inversely related to the degree of
official assistance and the private sector, is
conditionality. Such a regional reserve or insur-
likely to be curtailed by resource constraints in
ance pool would help supplement the ongoing
the developed world in the aftermath of the
restructured/new IMF lending facilities to fortify
crisis. To exploit the full potential of financial
the regional economies against future financial
cooperation, financing regional integration and
crises.
development, countries need to strike a collec-
tive balance between, on the one hand, emerg-
Effective deepening of regional monetary inte-
ing investment opportunities especially in re-
gration will not happen until there is consider-
gional public goods and, on the other, rising
able strengthening of the regional surveillance
foreign-exchange reserves.
mechanism with well-worked-out surveillance
and policy conditionality. The announcement of
Until the crisis struck, the lack of depth in
strengthening of surveillance alongside the crea-
regional capital markets, and resulting percep-
tion of the CMIM is therefore an important step.
tions of risks and costs, drove regional funds to
Nonetheless, surveillance in itself is insufficient
investments in developed countries. Far greater
if it lacks enforcement capacity that would en-
emphasis must be given to integrating regional
able implementation of remedial action for
equity markets and fostering the development of
member countries that might be running unsus-
local-currency bond markets at the regional
tainable policies.
level. Intraregional investment in local currency
bonds has remained small because of exces-
There is the equally hard issue of what such a
regional liquidity arrangement implies for ex-
sive legal and institutional impediments, as well
change-rate coordination. Countries with rela-
as the lack of investment information.169 The
tively stable fixed exchange rates would require
Asian Bond Market Initiative (ABMI),170 intended
somewhat greater reserves in managing their
to foster growth of local currency bond markets,
currencies and/or pursue much more disciplined
has moved slowly as countries have remained
domestic economic policies, while countries run-
preoccupied with addressing issues of harmoni-
ning more flexible regimes could potentially
zation of rules and regulations. The ABMI has
cause or be faced with competitiveness pres-
not spurred private investment as much as
sures in the near term vis-à-vis the others, if
hoped because transparency in its investment
their currencies were to appreciate or depreciate
targets and fund performance is lacking. Never-
sharply.
theless an excessive emphasis on growing capi-
tal markets in the region may increase the risk
Regional funding of development gaps
of financial instability for economies by opening
themselves more to speculation. In sum, the
The crisis has exposed the need for regional
crisis makes a persuasive case for a return to
cooperation in funding action to close develop-
fundamentals to ensure stability through greater
ment gaps in an effort to augment aggregate
use of the banking system, combined with ef-
demand while fostering balanced and sustain-
fective regulations, to recycle regional savings
able development. The region’s stock of foreign
into regional investments.
168
Rajan, R., and R. Siregar, “Centralized reserve pooling for the ASEAN+3 (APT) countries”, in Monetary and
Financial Integration in East Asia,
 vol. 1, The Way Ahead (Manila: ADB; United Kingdom: Palgrave McMillan;
2004), pp. 33-34.
169
Arner, Douglas, Paul Lejot, and S. Ghon Rhee, Impediments to Cross-border Investments in Asian Bonds
(Singapore: Institute of Southeast Asian Studies, 2005), chap. 4, pp. 21-50.
170
For general information, see ADB presentation, available from www.adbi.org/conf-seminar-papers/2005/06/17/
1167.asean.abmi.presentation/.
169

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
One of the clearest alternative uses for some
tions of increased riskiness of domestic banks.
portion of these assets, both for domestic de-
Seizing up of trade finance in the current crisis,
velopment and for increasing regional integra-
however, was not due to shortcomings of do-
tion, lies in funding for the massive
mestic banks but to generalized global unwilling-
infrastructural needs across Asia and the Pa-
ness to lend between banks. The perceived
cific. ESCAP has been at the forefront of analy-
risks involved in financing trade during the crisis
sis regarding that issue for some years.171 Re-
could be considered a form of market failure.
cent estimates indicate that the region needs an
Hence, Governments could have a role to play
annual investment of more than $800 billion in
in mitigating the harm in a future crisis from the
transport, energy, water and telecommunica-
paucity of trade finance. For instance, they
tions, with an annual shortfall of more than
could provide export credit insurance and guar-
$200 billion.172 A regional financial architecture
antees as a way of lowering the commercial
can develop the capacity to facilitate intermedia-
risk in financing trade.173 Such countries as
tion between the region’s foreign exchange re-
India, Indonesia and Thailand have already
serves and the growing unmet investment re-
taken such actions. Since trade finance risks
quirements. The objective is to narrow the de-
are shared among partners in different coun-
velopment gaps in the region while augmenting
tries, regional collaboration has a role to play in
the aggregate demand. The architecture could
this area. Asia and the Pacific remains the only
include an infrastructure development fund man-
developing region in the world without its own
aged by a regional institution. Mobilizing just 5%
trade finance institution.
of the region’s reserves – currently at nearly $5
trillion – would provide start-up capital of nearly
$250 billion for the fund. It would be able to
mobilize additional funds, as and when required,
A new regional financial architecture
by issue of bonds to the central banks of the
could facilitate the intermediation
region to enable them to park their foreign-
between the region’s foreign
exchange reserves. By co-financing viable
exchange reserves and unmet
projects along with other sources, such an
architecture could expedite investments in
investment requirements to
infrastructural development, especially in cross-
narrow development gaps
border connectivity linking poorer parts of the
Asia-Pacific region with regional growth centres.
In sum, reserve pooling may be directed to-
Regional exchange rate stability
wards the twin goals of crisis management and
development finance, to enhance management
Another pressing policy gap at the regional level
of both roles in an integrated manner.
which has been brought into relief by the crisis
is the lack of mechanisms for exchange rate
Trade finance
cooperation. During the economic recovery
phase the pressure on countries to maintain
Another area in crisis management that lends
exchange rate competitiveness in order not to
itself to regional cooperation is trade finance. In
impair the revival of exports will increase. With-
the 1997 crisis, trade finance to the region
out cooperation the risk is that competitive de-
seized up, although that was linked to percep-
valuation may be instigated which may not yield
171
ESCAP,  Enhancing Regional Cooperation in Infrastructure Development Including That Related to Disaster
Management,
 Sales No. E.06.II.F.13, ST/ESCAP/2408 (New York: United Nations; Bangkok: 2006).
172
ADB and ADBI, Infrastructure for a Seamless Asia (Tokyo: 2009).
173
ESCAP,  Economic and Social Survey 2009, p. 35.
170


A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
net benefits in the quantity of exports and in-
weights determined on the basis of regional
stead result in lower domestic export receipts
trade shares. Each country would announce a
because of exchange-rate losses for each
central parity vis-à-vis the basket and commit to
country.
keeping it within a unilaterally chosen band.
There would be no restrictions over the choice
Diverse exchange-rate arrangements exist in the
of the exchange rate regime by individual coun-
region whose inherent incompatibility becomes
tries; that is, each country would be free to
evident especially in times of instability. At one
choose its own regime with respect to the com-
extreme are independently floating currencies
mon basket. Here too, as with the dollar peg,
such as those of Japan, the Republic of Korea
changes among reserve currencies would not
and the Philippines. At the other is Hong Kong,
affect intraregional exchange rates: in other
China which has a currency board operating an
words, if each participant stabilized its currency
explicit peg to the United States dollar. In be-
vis-à-vis a common basket of reserve curren-
tween are the tightly managed pegs of China
cies, they would also stabilize against each
and Malaysia and the relatively more flexible
other. The common basket peg would have the
regimes of Thailand, India and Singapore. Dur-
advantage of enhancing stability of effective ex-
ing large swings of the dollar, a high degree
change rates.
of instability ensues in Asian exchange rates
(table 29).
The BBC regime combines flexibility with stabil-
ity. It allows the currency to fluctuate within a
As intraregional trade is expected to grow in
relatively narrow range while the central parity is
future, it needs a currency management system
shifted in response to changes in the underlying
that facilitates trade and macroeconomic stability
fundamentals and large, durable shocks. Such
vis-à-vis intraregional and extraregional trading
an approach has the potential to produce rela-
partners. A possible approach for the region
tively stable intraregional currency values for an
might be a basket parity relative to a number of
initial subgroup of participating countries that
reserve currencies, a band and a crawl of the
possess similar trade baskets, such as the ma-
exchange rate (a “BBC” regime). A basket of
jor developing economies of East Asia. Re-
three reserve currencies could be targeted, in-
quired supporting arrangements, which would
stead of the dollar alone, with a common set of
not be serious impediments, would include
TABLE 29. Regional currency swings during the crisis
Dollar rates
Yuan rates
Boom
Bust
Recovery
Boom
Bust
Recovery
Chinese yuan
9.3
10.7
0.1



Indian rupee
19.2
– 16.6
5.4
9.0
– 26.2
5.4
Indonesian rupiah
– 2.7
– 20.0
20.2
– 11.0
– 27.7
20.0
Malaysian ringgit
10.0
– 4.5
4.5
0.6
– 13.8
4.5
Philippine peso
17.9
– 3.0
– 2.0
7.9
– 12.4
– 2.0
Singapore dollar
14.7
0.3
6.9
4.9
– 9.5
6.8
S. Korean won
28.8
– 33.5
20.9
17.8
– 40.0
20.7
Taiwan dollar
5.9
– 2.7
6.2
– 3.2
– 12.1
6.2
Thai baht
43.4
– 14.3
6.3
30.9
– 22.6
6.3
Note: Boom defined as January 2003 to July 2007, Bust as from August 2007 to February 2009, and Recovery as from
March 2009 to September 2009.
Table adapted from Akyuz, 2009, “Capital Flows and Macroeconomic Management: National and Regional Policy Options,
Presentation by Yilmaz Akyuz at ESCAP Regional Expert Group Meeting, 7-8 October 2008, Singapore”.
171

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
greater intraregional capital-account openness
change-rate vulnerability to short-term capital in-
and access to intraregional reserves by the
flows. The frequency and magnitude of financial
basket of reserve currencies.174
crises have given renewed and unprecedented
vigour to proponents of restraining cross-border
capital movements. The discussion of capital
controls is highly complex with no definitive
For regional cooperation in exchange
policy conclusion to date.
rates to be effective in supporting
Restraints on capital movement may be divided
exports, all major exporting
into controls on capital account transactions
economies of the region
per se (“capital controls”) and controls on
would need to be included
foreign currency transactions (“exchange con-
trols”). Four key features of curbs on capital
movement are whether they are (a) comprehen-
sive or selective; (b) meant to be temporary
For regional cooperation in exchange rates to
or permanent; (c) imposed on outflows or
be effective in supporting exports, all major
inflows; and (d) direct/administrative or price-
exporting economies of the region would need
based.
to be included. China’s return in the post-crisis
period to its earlier managed-float system,
In view of relatively robust recovery in Asia and
would be a great help in supporting the recov-
the Pacific, the concern is that the huge volume
ery of Asia-Pacific exporting economies. During
of liquidity in developed countries from loose
the crisis China maintained a relatively fixed
monetary policy will flow to the region in the
exchange rate to ensure stability for its
form of short-term capital seeking good returns.
economy when capital flows were excessively
Besides being highly volatile, such flows tend to
volatile. Furthermore, China’s return to the band
put pressure on exchange rates of the host
system would help in promoting intraregional
economies, as discussed in Chapter 1. Hence,
trade by further encouraging the economy’s shift
debate on the relevance of measures to moder-
to a more consumption-led economy. Such a
ate such inflows is increasing. Numerous
development would boost China as a source of
mechanisms for managing capital inflows could
final goods demand for exporting economies,
be considered, ranging from administrative
besides assisting in macroeconomic manage-
measures such as introducing deposit require-
ment. It would also help the yuan gradually
ments on capital inflows, to market-based in-
emerge as a regional and eventually global
struments such as levying financial transaction
reserve currency. Such a trend could be criti-
taxes on inflows, including taxes that vary with
cally important for the region in coming years
the maturity period of the capital inflow or which
as it looks within itself for sources of final
demand to replace the curtailed post-crisis
are countercyclical; to “throw some sand in the
spending power of developed economies.
well-greased wheels” of international markets, in
the words of economist James Tobin who first
Management of capital flows
proposed it.175 Attention is being renewed to
arrangements such as the Chilean unremuner-
The potential for exchange-rate cooperation ex-
ated reserve requirements (URR) or Encaje,
tends to the critical issue of managing ex-
which appears to have been helpful in manag-
174
Reference regarding the proposal and analysis in the preceding paragraphs is made to Akyuz, Yilmaz, “Exchange
rate management, growth and stability: national and regional policy options in Asia”, Policy Paper Series
(Colombo: UNDP Regional Centre for Asia Pacific, 2009); available from www2.undprcc.lk/resource_centre/
pub_pdfs/P1115.pdf.
175
Tobin, James, “A proposal for international monetary reform”, Eastern Economic Journal, vol. 4, Nos. 3-4, pp.
153-159.
172

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
ing capital surges when it was in place in the
sedes the G-8 and signals the systemic impor-
1990s,176 as well as Malaysian adoption of capi-
tance of major emerging countries in the Asia-
tal controls following the 1997 crisis.
Pacific region, with the accession of China,
India, Turkey, Indonesia, the Republic of Korea
Notwithstanding the merits and demerits of vari-
and Australia to membership; besides Japan
ous options, the appropriate level at which to
and the Russian Federation, already part of the
enact such controls must be considered. Since
G-8. Furthermore, the G-20 established the Fi-
the first entrant tends to be affected adversely
nancial Stability Board at the London Summit in
in a “prisoner’s dilemma” type of situation, such
April 2009 with members from the central banks
measures yield optimal results when applied
and other financial regulatory agencies of all G-
globally. Following an extensive debate on the
20 member Governments of the Asia-Pacific
relevance of such a tax to moderating the vola-
region. Notably, the membership of its pred-
tility of capital flows internationally,177 the IMF
ecessor the Financial Stability Forum included a
was asked by the G-20 to examine the pro-
single Asian country, Japan.
posal. Besides moderating the volatility of flows,
it has been argued that such taxes can gener-
The Pittsburgh G-20 meeting held in September
ate valuable revenue for funding global public
2009 made further progress in strengthening
goods such as poverty reduction and other Mil-
cooperation in macroeconomic policies and giv-
lennium Development Goals. Given the scale of
ing a more influential agenda-setting role to
daily financial transactions, it has been esti-
major developing economies of Asia and the
mated that even a very small tax can yield
Pacific. An important reform undertaken there
substantial revenue. In case a global consensus
was establishment of a peer review mechanism
fails to emerge, Asian and Pacific countries can
of the economic policy framework of G-20 coun-
consider imposing such taxes regionally or even
tries; for the first time, developing country mem-
individually to moderate the instability caused by
bers had the opportunity to review developed
short-term capital flows, as Brazil has done
countries’ policies and thus contribute to the
recently. The IMF now acknowledges that con-
transparency of regulatory policies and account-
trols on foreign capital in emerging economies
ability of systemically important countries. Lead-
can be part of the policy options available to
ers also committed to a shift in the IMF quota
Governments to counter the potentially negative
share to emerging market and developing coun-
economic and financial effects of sudden surges
tries of at least 7%, although that has not yet
in capital.178
come into force. Finally, in the short term, lead-
ers pledged that fiscal stimulus of developed
Evolving a regional perspective on reform
countries should not end prematurely as such an
of international financial architecture
action would hurt developing nations the most.
The international community has addressed the
In general, the region has acquired an increas-
reform agenda through a number of fora. Per-
ingly important voice through the representation
haps the most visible has been the emergence
of its major economies at the global
of G-20 as the premier forum on global eco-
policymaking table. The enhanced role also
nomic policy coordination, including global finan-
places increased responsibility on those major
cial and regulatory issues. The G-20 super-
economies. Regulatory regimes, financial and
176
Bird, Graham, and Ramkishen S. Rajan, “Does FDI guarantee stability of international capital flows? Evidence
from Malaysia”, Centre for International Economic Studies Discussion Paper No. 0044 (South Australia: Adelaide
University, 2000); available from www.adelaide.edu.au/cies/papers/0044.pdf.
177
Heaney, Vince, “Tobin tax talk not without merit”, Financial Times, 21 Dec. 2009, p. 24; available from
www.ft.com/cms/s/0/06a8cade-ecc6-11de-8070-00144feab49a.html.
178
Ostry, Jonathan D., and others, “Capital inflows: the role of controls”, IMF Staff Position Note SPN/10/04, 19 Feb.
2010, p. 15; available from www.imf.org/external/pubs/ft/spn/2010/spn1004.pdf.
173

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
non-financial institutions and policymaking or-
G-20 process can voice their views. The
gans will all be subjected to more stringent
majority of the world’s people who have been
performance and reporting requirements. Fur-
left out are from developing countries that are
thermore, those economies must deal with the
most dependent on globalization and yet are
expectations of other developing countries that
most at risk from its deficiencies. For that rea-
are not part of the G-20 but expect progress in
son, in providing analysis and technical support
resolving shortcomings that continue to persist.
and in building consensus through policy
dialogues, the United Nations has an important
For example, reform of IMF conditionalities and
complementary role. The United Nations Confer-
other policies have not been tackled in sufficient
ence on the World Financial and Economic
scope. Some developing countries are asking
Crisis and Its Impact on Development was held
for a new approach in removing conditionalities
in New York from 23-24 June 2009, preceded
that could have procyclical effects.179 In their
by the Commission of Experts of the President
view it would be more helpful for the IMF to
of the General Assembly on the Reform of
focus on providing sufficient funds to support
International Monetary and Financial System;
exchange rates while countries pursue expan-
nearly all United Nations members could thus
sionary policies to restart growth. Likewise, for
gather and devise a uniquely inclusive and com-
economic crises a framework for debt standstills
prehensive agenda for action.
and cancellations should be worked out, to obvi-
ate the need for simultaneously dealing with
The Conference was able to highlight the chal-
debt repayments. Progress remains sketchy on
lenges faced by developing countries, especially
other fronts, including the issue of how best to
the poorer ones. The meeting emphasized the
reduce the scale of financial trading, possibly
plight of developing countries with the sudden
through a global tax on financial transactions (a
reversal of private capital flows, large and vola-
“Tobin” tax) to moderate the volatility as
tile movements in exchange rates, falling rev-
discussed above and the design of a new
enues and reduced fiscal space for taking cor-
global reserve currency system. Overall, under
rective measures. It called for a coordinated
the G-20 process, the structure of the current
and comprehensive global response to focus on
financial system has remained fundamentally
restoration of the flow of development finance
unchanged. But at the same time the level of
without unwarranted conditionalities and on debt
risk in the global financial system has grown, as
relief to developing countries for  “fostering an
the concentration of systemically important
inclusive, green and sustainable recovery”;
banks engaged in unregulated activities in-
among many other measures.
creased along with the bailouts given to them.
The Asia-Pacific region needs to formulate a
The list of drawbacks emphasizes that no one
position on the issues emerging around reform
process can bring lasting change. Major draw-
of the international monetary and financial archi-
backs of the G-20 process include its limitation
tecture to promote stability and minimize the
on membership and lack of a legal institutional
risk of future financial crisis. Debate continues
structure, raising questions about its enforce-
on the relevance of a “Tobin tax” to moderate
ment capacity.
volatility and on curbing excessive risk-taking of
financial institutions by restricting bank bonuses
Global cooperation on the future financial archi-
and introducing bank taxes. Debate also contin-
tecture needs to proceed in parallel tracks, so
ues on diversifying currency reserves from the
that countries that have been left out of the
United States dollar to other currencies or to a
179
A recent study has found that 31 of 41 IMF loan agreements with developing countries involved procyclical
macroeconomic policies (Weisbrot, Mark, and others, IMF-supported Macroeconomic Policies and the World
Recession: a Look at Forty-One Borrowing Countries
 [Washington, D. C.: Center for Economic and Policy
Research, 2009], p. 4; available from www.cepr.net/documents/publications/imf-2009-10.pdf).
174

A REGIONAL POLICY AGENDA FOR REGAINING THE DYNAMISM     CHAPTER 4
basket of currencies along the lines of the IMF
inclusive Asian and Pacific voice that could con-
Special Drawing Rights (SDRs). China has pro-
tribute in building reform in the global financial
posed the development of a transnational re-
architecture. ESCAP has provided a forum for
serve currency system, based on a basket of
the purpose: at its high-level policy dialogue in
the world’s major currencies, similar to the cur-
Dhaka from 18 to 20 January 2010, finance
rent SDR scheme but with the basket of SDR
ministers and other senior officials of Asian and
currencies being expanded from the dollar,
Pacific least developed countries produced a
pound, euro and yen to include other Asian
regional review of the Brussels Programme of
currencies.180 The Russian Federation has also
Action on Least Developed Countries in which
supported the idea of using an expanded bas-
they raised their concerns about financing for
ket of currencies as the basis for a global
development and sought representation at the
reserve system, with a similar expansion in the
newly established Financial Stability Board es-
mix to include other currencies.181 The Russian
tablished by the G-20.
Federation and China have taken practical
measures to support the increased use of
The development of regional financial architec-
SDRs as an additional reserve currency. For
ture may help Asian and the Pacific countries in
example, in the IMF sale of $150 billion of SDR
coordinating their views for a position in the
bonds in July, China purchased $50 billion and
discussion on international monetary reform and
the Russian Federation $10 billion, in effect
financial architecture. It may also help the re-
diversifying their reserves from dollars to the
gion avoid disruptions in the flow of develop-
basket of SDR currencies.
ment finance and preserve macroeconomic sta-
bility. The aim is to resume the pre-crisis trajec-
With 53 member States and 9 associate mem-
tory of regional growth and pursue the agenda
bers, ESCAP could coordinate a common and
of inclusive and sustainable development.
180
Zhao Xiaochuan, “Reform the international monetary system” speech by the Governor of the People’s Bank of
China, 23 Mar. 2009; available from www.gov.cn/english/detail.asp?col=6500&id=178.
181
Embassy of the Russian Federation in the Kingdom of Norway, President of Russia Dmitry Medvedev’s address
to St. Petersburg International Economic Forum, plenary session, 5 Jun. 2009; available from www.norway.mid.ru/
news_fp/news_fp_124_eng.html.
175






Ange Holmgren-Sylvain
Photo: Marie 






“As a region, we must build upon our collective 
strengths if we are not only to recover from the 
present crisis, but build the foundations for a 
more inclusive and sustainable society for all 
peoples of Asia-Pacific” 

Noeleen Heyzer
Under-Secretary-General of the United Nations and
Executive Secretary of the United Nations 
Economic and Social Commission 
for Asia and the Pacific


ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
178

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194

STATISTICAL ANNEX
STATISTICAL ANNEX
List of tables
Page
1.
Real gross domestic product growth rates ...........................................................................
196
2.
Gross domestic savings rates ...............................................................................................
197
3.
Gross domestic investment rates ..........................................................................................
198
4.
Inflation rates .........................................................................................................................
199
5.
Budget balance ......................................................................................................................
200
6.
Current account balance .......................................................................................................
201
7.
Change in money supply .......................................................................................................
202
8.
Merchandise export growth rates ..........................................................................................
203
9.
Merchandise import growth rates ..........................................................................................
204
10. Inward foreign direct investment ...........................................................................................
205
11. Official development assistance and workers’  remittances ..................................................
206
12. International  migration............................................................................................................
207
13. Primary, secondary and tertiary education ............................................................................
208
14. Poverty and malnutrition ........................................................................................................
209
15. Unemployment rate by gender and age group .....................................................................
210
195

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 1. Real gross domestic product growth rates
(Percentages)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
0.1
3.2
5.3
2.7
3.5
4.1
5.3
4.7
5.2
5.8
2.1
– 1.1
China
7.8
7.6
8.4
8.3
9.1
10.0
10.1
10.4
11.6
13.0
9.0
8.7
Democratic People’s Republic of Korea – 1.1
6.2
1.3
3.7
1.2
1.8
2.2
3.8
– 1.1
– 2.3
3.7
..
Hong Kong, China
–6.0
2.6
8.0
0.5
1.8
3.0
8.5
7.1
7.0
6.4
2.4
– 1.9
Japan
–2.0
–0.1
2.9
0.2
0.3
1.4
2.7
1.9
2.0
2.4
–1.2
– 5.2
Macao, China
– 4.6
–2.4
5.7
2.9
10.1
14.2
27.3
6.9
16.5
26.0
12.9
1.3
Mongolia
3.5
3.2
1.1
0.9
4.7
7.0
10.6
7.3
8.6
10.2
8.9
0.5
Republic of Korea
–6.9
9.5
8.5
4.0
7.2
2.8
4.7
4.0
5.1
5.1
2.2
0.2
Russian Federation
–5.3
6.4
10.0
5.1
4.7
7.3
7.2
6.4
7.7
8.1
5.6
– 7.9
North and Central Asia
–3.8
6.1
9.6
5.9
5.3
7.5
7.5
7.4
8.8
8.9
5.8
– 5.8
Armenia
7.3
3.3
5.9
9.6
13.2
14.0
10.5
13.9
13.2
13.8
6.8
–14.4
Azerbaijan
10.0
7.4
11.1
9.9
10.6
11.2
10.2
26.4
34.5
25.0
10.8
9.3
Georgia
3.1
2.9
1.8
4.8
5.5
11.1
5.9
9.6
9.4
12.3
2.1
–4.0
Kazakhstan
–1.9
2.7
9.8
13.5
9.8
9.3
9.6
9.7
10.7
8.9
3.3
1.0
Kyrgyzstan
2.1
3.7
5.4
5.3
0.0
7.0
7.0
–0.2
3.1
8.5
7.6
2.3
Russian Federation
–5.3
6.4
10.0
5.1
4.7
7.3
7.2
6.4
7.7
8.1
5.6
–7.9
Tajikistan
5.3
3.7
8.3
9.6
10.8
11.0
10.3
6.7
7.0
7.8
7.9
3.4
Turkmenistan
7.1
16.5
5.5
4.3
0.3
3.3
5.0
13.0
11.4
11.6
9.8
6.1
Uzbekistan
4.3
4.3
3.8
4.2
4.0
4.4
7.7
7.0
7.3
9.5
9.0
8.1
Oceania
4.5
4.3
3.2
2.6
4.0
3.4
3.7
3.2
2.7
4.6
2.0
1.0
Australia
5.0
4.3
3.2
2.6
3.9
3.2
3.6
3.2
2.7
4.8
2.3
1.2
Cook Islands
–0.8
2.7
13.9
4.9
2.6
8.2
4.3
0.0
0.7
1.3
–1.2
–0.1
Fiji
1.3
8.8
–1.6
1.9
3.2
1.0
5.5
0.6
1.9
–0.5
–0.1
–2.5
Kiribati
15.2
–1.2
7.6
–5.1
6.1
2.3
2.2
0.0
3.2
–0.5
3.4
1.5
Marshall Islands
–3.6
–2.9
5.1
2.7
3.8
3.4
5.6
2.0
2.4
3.3
–2.0
0.5
Micronesia (Federated States of)
5.5
–2.1
4.7
0.1
0.9
2.9
–3.3
–0.6
–2.3
–3.1
–1.0
0.5
New Zealand
0.8
4.7
3.8
2.4
4.7
4.9
4.5
3.1
2.3
3.1
–0.5
–0.5
Palau
2.0
–5.4
0.3
1.3
–3.5
–1.3
6.0
5.9
4.8
2.1
–1.0
–3.0
Papua New Guinea
4.7
1.9
–2.5
–0.1
2.0
4.4
0.6
3.9
2.3
7.2
6.7
4.5
Samoa
2.4
2.2
3.3
8.2
3.2
4.8
4.8
5.4
1.0
6.4
–4.9
–0.8
Solomon Islands
3.2
–1.6
–14.2
–8.0
–2.8
6.5
4.9
5.4
6.9
10.7
6.9
0.4
Tonga
3.5
2.3
5.4
7.2
1.4
3.4
2.6
–3.0
0.8
–3.2
1.2
0.4
Tuvalu
10.5
2.4
–12.8
13.2
5.5
4.0
4.0
2.0
1.0
2.0
1.5
1.0
Vanuatu
4.3
–3.2
2.7
– 2.6
– 7.4
3.2
5.5
6.5
7.4
6.8
6.6
3.0
South and South-West Asia
4.9
3.4
5.1
2.3
4.7
7.1
7.6
8.6
8.2
7.5
4.7
2.9
Afghanistan
..
..
..
–3.5
81.1
14.3
9.4
14.5
11.2
16.2
3.4
15.1
Bangladesh
5.2
4.9
6.0
5.3
4.4
5.3
6.3
6.0
6.6
6.4
6.2
5.9
Bhutan
5.8
7.7
7.2
6.8
10.9
7.2
6.8
6.5
6.3
21.4
5.0
5.7
India
6.7
6.4
4.4
5.8
3.8
8.5
7.5
9.5
9.7
9.2
6.7
7.2
Iran (Islamic Republic of)
1.6
2.8
5.1
3.3
7.5
6.8
4.8
5.7
6.2
6.9
3.3
2.0
Maldives
9.8
7.2
4.8
3.5
6.5
8.5
9.5
– 4.6
18.0
7.2
5.8
– 2.6
Nepal
3.2
4.3
6.0
5.4
0.1
3.9
4.7
3.1
3.7
3.3
5.3
4.7
Pakistan
3.5
4.2
3.9
2.0
3.1
4.7
7.5
9.0
5.8
6.8
4.1
2.0
Sri Lanka
4.8
4.3
6.0
– 1.4
4.0
6.0
5.4
6.2
7.7
6.8
6.0
3.5
Turkey
3.1
–3.4
6.8
–5.7
6.2
5.3
9.4
8.4
6.9
4.7
0.9
– 6.0
South-East Asia
– 6.9
4.1
6.6
1.9
4.9
5.5
6.6
5.8
6.1
6.5
4.0
0.6
Brunei Darussalam
– 0.6
3.1
2.8
2.7
3.9
2.9
0.5
0.4
4.4
0.2
– 1.9
– 0.5
Cambodia
5.0
12.6
8.4
7.7
7.0
8.5
10.3
13.2
10.8
10.2
6.7
0.0
Indonesia
– 13.1
0.8
4.9
3.6
4.5
4.8
5.0
5.7
5.5
6.3
6.1
4.5
Lao People’s Democratic Republic
4.0
7.3
5.8
5.7
5.9
5.8
6.9
7.3
8.3
7.9
7.9
5.4
Malaysia
–7.4
6.1
8.9
0.5
5.4
5.8
6.8
5.3
5.8
6.2
4.6
– 1.7
Myanmar
5.8
10.9
13.7
11.3
12.0
13.8
13.6
13.6
12.7
5.5
2.0
2.0
Philippines
– 0.6
3.4
6.0
1.8
4.4
4.9
6.4
5.0
5.4
7.1
3.8
0.9
Singapore
– 1.4
7.2
10.1
– 2.4
4.1
3.8
9.3
7.3
8.4
7.8
1.1
– 2.0
Thailand
–10.5
4.4
4.8
2.2
5.3
7.1
6.3
4.6
5.2
4.9
2.5
– 2.3
Timor-Leste
–2.1
–35.5
13.7
16.5
2.4
0.1
4.2
6.2
–5.8
8.4
12.8
7.4
Viet Nam
5.8
4.8
6.8
6.9
7.1
7.3
7.8
8.4
8.2
8.5
6.2
5.3
Memorandum items:
Developing ESCAP economies
2.5
6.0
7.1
4.5
6.7
7.1
8.1
8.0
8.7
9.1
5.7
4.0
(excluding China and India)
–2.8
4.5
6.8
1.0
5.5
4.5
6.6
5.8
6.0
6.0
2.7
– 0.6
Developed ESCAP economies
–1.4
0.3
2.9
0.4
0.6
1.6
2.8
2.0
2.1
2.6
– 0.9
– 4.6
Pacific island economies
3.5
3.3
–1.9
0.6
1.8
3.7
2.5
3.0
2.4
4.6
3.8
1.9
Notes: Figures for 2009 are estimates. Data and estimates for countries relate to fiscal years defined as follows: 2008 refers to fiscal year
India: 1 April 2008-31 March 2009;
Islamic Republic of Iran: 21 March 2008-20 March 2009;
Bangladesh, Pakistan: 1 July 2007-30 June 2008;
Nepal: 16 July 2007-15 July 2008.
The term “developing ESCAP economies” refers to developing Asian and Pacific economies, excluding those of North and Central Asia.
The term “developed ESCAP economies” refers to Australia, Japan and New Zealand.
Sources: ESCAP, based on national sources; International Monetary Fund, International Financial Statistics databases (Washington, D.C.,
September 2009); ADB, Key Indicators  for Asia and the Pacific 2009 (Manila, 2009); CEIC Data Company Limited; and the website of the
Interstate Statistical Committee of the Commonwealth of Independent States (www.cisstat.com), 22 March 2010; and ESCAP estimates.
196

STATISTICAL ANNEX
Table 2. Gross domestic savings rates
(Percentage of GDP)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
38.9
38.0
38.0
39.0
40.4
43.0
45.6
46.6
47.8
49.9
50.4
50.8
Hong Kong, China
29.4
30.1
32.0
29.8
31.1
31.2
30.7
33.0
33.1
31.8
31.2
30.2
Japan
27.6
26.2
26.4
24.3
23.6
23.8
24.0
24.6
24.2
23.9
23.6
20.6
Macao, China
46.5
42.9
47.4
47.9
51.6
56.7
63.5
63.5
67.2
70.5
70.1
..
Mongolia
14.3
14.6
10.4
5.7
3.4
12.2
19.5
32.0
39.8
37.2
35.7
..
Republic of Korea
37.9
35.8
33.3
31.3
30.7
32.2
34.1
32.3
31.0
30.9
30.3
29.0
Russian Federation
21.6
31.9
38.7
34.6
30.8
32.1
33.1
33.7
34.0
34.2
34.6
30.0
North and Central Asia
Armenia
– 11.2
– 8.3
– 8.9
– 4.8
0.9
6.5
7.4
14.0
17.7
18.7
17.9
16.1
Azerbaijan
4.8
8.6
20.4
24.9
24.7
27.6
31.3
47.5
54.4
56.9
56.2
57.0
Georgia
6.5
7.4
9.9
15.9
15.3
16.7
15.3
15.7
6.7
8.4
2.6
1.7
Kazakhstan
15.9
16.0
26.0
28.7
33.8
34.3
34.9
38.9
44.1
43.8
47.5
39.4
Kyrgyzstan
– 6.1
3.2
14.3
17.7
13.8
5.3
5.8
– 2.1
– 13.1
– 4.6
– 10.8
– 1.8
Russian Federation
21.6
31.9
38.7
34.6
30.8
32.1
33.1
33.7
34.0
34.2
34.6
30.0
Tajikistan
6.3
15.9
9.3
– 0.5
3.2
3.0
3.3
– 12.0
– 20.5
– 23.8
– 21.5 – 18.1
Turkmenistan
7.3
12.3
49.3
36.2
43.2
31.1
25.2
40.2
..
..
..
..
Uzbekistan
19.9
17.3
19.4
20.0
21.8
26.9
31.9
32.7
33.9
29.5
28.9
..
Oceania
Australia
23.2
22.6
23.1
22.4
23.1
23.0
23.5
23.9
25.5
26.3
28.1
28.3
Cook Islands
14.8
20.2
21.8
26.7
24.0
21.4
18.1
25.0
21.5
..
..
..
Fiji
30.7
22.4
12.2
8.1
17.3
13.6
2.5
1.5
– 4.5
0.6
..
..
Kiribati
4.2
– 0.6
2.8
2.1
1.4
2.1
1.9
1.8
1.9
..
..
..
New Zealand
20.6
21.5
23.2
24.7
24.1
23.8
24.0
22.8
22.0
22.9
21.3
20.4
Papua New Guinea
22.6
13.2
38.8
36.0
27.9
35.7
31.0
35.9
36.1
35.9
35.4
34.2
Samoa
– 6.5
– 13.0
– 9.2
– 14.1
– 14.5
– 14.0
– 14.1
– 14.0
– 13.9
..
..
Solomon Islands
– 9.7
– 0.2
– 7.9
– 12.7
– 5.5
4.1
0.0
– 6.8
– 6.5
– 5.5
– 10.2
..
Tonga
– 17.2
– 10.2
– 9.4
– 22.6
– 25.5
– 24.3
– 18.4
– 24.9
– 26.4
– 31.4
– 38.9
..
Tuvalu
..
..
..
..
..
..
..
..
..
..
..
..
Vanuatu
22.4
19.2
19.3
17.9
9.4
12.7
16.4
20.2
23.8
24.9
..
..
South and South-West Asia
Bangladesh
17.4
17.7
17.9
18.0
18.2
18.6
19.5
20.0
20.2
20.4
20.3
20.0
Bhutan
22.9
22.5
23.3
40.9
39.7
39.1
36.0
27.7
38.6
37.2
..
..
India
22.3
24.8
23.7
23.5
26.3
29.8
31.7
34.2
35.7
37.7
33.9
34.5
Iran (Islamic Republic of)
25.5
25.4
26.8
38.4
38.5
38.6
39.6
39.3
37.7
38.1
41.3
..
Maldives
46.7
44.2
44.2
44.9
46.3
49.1
46.2
..
..
..
..
..
Nepal
12.8
12.6
14.1
11.7
9.5
8.6
11.7
11.6
9.0
9.9
11.2
8.0
Pakistan
16.7
14.0
16.0
15.9
16.5
17.3
17.6
15.2
14.1
15.4
11.5
11.2
Sri Lanka
19.6
18.0
15.2
16.1
15.5
15.6
15.9
17.2
17.0
17.6
16.2
15.6
Turkey
23.3
19.3
17.8
19.2
19.2
16.6
16.8
16.5
17.1
16.5
16.4
14.7
South-East Asia
Brunei Darussalam
29.9
36.9
49.4
44.3
47.2
48.6
51.4
59.1
62.1
59.1
..
..
Cambodia
2.3
7.6
8.1
11.6
8.5
9.1
8.5
9.9
13.8
16.1
30.3
..
Indonesia
26.5
19.5
31.8
31.5
25.1
23.7
24.9
27.5
28.7
28.1
30.6
30.5
Lao People’s Democratic Republic 14.8
16.4
15.1
15.4
17.9
17.0
18.2
17.3
18.7
22.3
27.0
..
Malaysia
48.7
47.4
46.1
41.8
42.0
42.5
43.4
42.8
43.2
42.0
42.2
36.7
Myanmar
11.8
13.0
12.3
11.5
10.2
11.0
12.3
13.3
13.8
13.6
14.5
14.9
Philippines
12.4
14.3
17.3
17.1
19.1
19.7
21.2
21.0
20.1
20.8
19.2
16.0
Singapore
53.0
49.0
47.4
44.2
40.5
43.6
47.1
48.8
50.3
52.4
50.0
45.5
Thailand
34.8
32.5
32.5
31.4
31.7
32.0
31.7
30.9
32.4
34.1
33.2
30.6
Viet Nam
21.5
24.6
27.1
28.8
28.7
27.4
28.5
30.3
30.6
29.2
26.6
27.2
Notes: Figures for 2009 are estimates. Data for Islamic Republic of Iran, the Lao People’s Democratic Republic and Nepal are based on national
sources. Data for the Islamic Republic of Iran refer to gross national savings.  Data for Cook Islands, Kiribati and Samoa are calculated on the
basis of United Nations Statistics Division databases.
Source:  ESCAP, based on ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009)  with updates and estimates from national sources.
197

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 3. Gross domestic investment rates
(Percentage of GDP)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
37.1
36.7
35.1
36.3
37.9
41.2
43.3
44.0
44.5
43.1
44.4
43.8
Hong Kong, China
28.9
24.8
27.5
25.3
22.8
21.9
21.8
20.6
21.7
20.9
20.4
18.9
Japan
26.3
24.8
25.4
24.8
23.1
22.8
23.0
23.6
23.8
24.1
23.5
20.3
Macao, China
17.7
17.7
11.6
10.3
11.0
14.6
17.0
27.5
35.4
36.8
29.2
..
Mongolia
35.2
37.0
36.2
36.1
39.6
35.5
34.5
37.0
35.1
40.2
38.6
..
Republic of Korea
25.0
29.1
30.6
29.3
29.1
30.0
29.9
29.7
29.6
29.4
31.4
25.5
Russian Federation
15.0
14.8
18.7
21.9
20.0
20.8
20.9
20.1
21.3
24.6
25.3
23.3
North and Central Asia
Armenia
19.1
18.4
18.6
19.8
21.7
24.3
24.9
30.5
35.9
37.2
39.9
39.5
Azerbaijan
33.4
26.5
20.7
20.7
34.6
53.2
58.0
41.5
29.9
21.5
20.2
19.0
Georgia
27.2
26.5
26.6
30.3
28.5
31.3
31.9
33.5
30.9
32.1
27.0
27.1
Kazakhstan
15.8
17.8
18.1
26.9
27.3
25.7
26.3
31.0
33.9
35.5
28.0
32.3
Kyrgyzstan
15.4
18.0
20.0
18.0
17.6
11.8
14.5
16.4
24.2
26.6
24.8
21.4
Russian Federation
15.0
14.8
18.7
21.9
20.0
20.8
20.9
20.1
21.3
24.6
25.3
23.3
Tajikistan
15.4
17.3
9.4
9.7
9.4
10.0
12.2
11.6
16.0
24.6
17.4
..
Turkmenistan
45.5
39.7
34.7
31.7
27.6
25.4
23.1
22.9
23.8
23.3
..
..
Uzbekistan
20.9
17.1
19.6
21.1
21.2
20.8
23.9
23.0
22.3
19.9
..
..
Pacific island economies
Australia
23.9
24.8
25.1
22.1
22.9
25.0
26.1
26.4
27.0
27.5
28.7
28.1
Cook Islands
18.4
17.2
16.8
15.8
16.4
16.9
17.6
16.7
16.9
17.7
..
..
Fiji
28.2
22.8
17.3
16.1
19.7
22.0
19.2
19.4
16.2
17.1
..
..
Kiribati
42.5
44.9
43.2
43.5
43.9
43.5
43.6
43.7
43.6
..
..
..
New Zealand
20.3
22.3
21.6
22.3
22.2
23.5
24.8
24.8
23.7
24.1
23.2
19.0
Papua New Guinea
17.9
16.1
21.9
23.0
25.0
21.4
21.4
17.5
15.7
15.1
15.9
17.6
Samoa
14.0
14.1
14.2
14.3
13.1
12.3
11.2
10.4
9.8
9.1
8.7
..
Solomon Islands
6.8
6.2
6.6
6.8
5.4
9.4
11.4
13.8
14.6
18.9
17.8
..
Tonga
19.0
20.2
19.4
18.0
19.7
18.4
19.4
19.8
17.6
16.1
17.6
..
Tuvalu
54.9
57.9
54.7
55.8
56.1
55.6
55.8
55.8
55.7
..
..
..
Vanuatu
17.7
20.3
22.2
20.0
21.1
19.4
21.2
21.5
23.9
25.8
..
..
South and South-West Asia
Bangladesh
21.6
22.2
23.0
23.1
23.2
23.4
24.0
24.5
24.7
24.5
24.2
24.2
Bhutan
35.7
39.7
47.3
59.2
59.2
56.8
62.0
51.2
46.9
38.9
..
..
India
23.3
25.9
24.3
22.8
25.2
27.6
32.1
35.5
36.9
39.1
36.5
36.5
Iran (Islamic Republic of)
24.7
26.0
27.1
32.6
33.9
35.1
35.7
35.8
35.0
34.4
36.8
37.6
Maldives
30.1
33.6
26.3
28.1
25.5
27.1
35.0
53.5
..
..
..
..
Nepal
23.1
19.0
22.6
22.3
20.2
21.4
24.5
26.5
26.9
28.1
31.8
29.7
Pakistan
17.7
15.6
17.2
17.0
16.6
16.8
16.6
19.1
22.1
22.5
22.0
19.7
Sri Lanka
25.4
25.6
25.4
22.2
22.0
21.6
24.7
26.1
27.4
27.3
27.1
25.5
Turkey
 22.1
19.1
20.8
15.1
17.6
17.6
19.4
20.0
22.1
22.2
21.8
16.1
South-East Asia
Brunei Darussalam
33.8
21.4
13.1
14.4
21.3
15.1
13.5
11.4
10.4
12.9
11.6
..
Cambodia
11.8
16.7
16.9
18.5
18.1
20.1
16.2
18.5
20.6
20.8
23.7
22.5
Indonesia
16.8
11.4
22.2
22.0
21.4
25.6
24.1
25.1
25.4
24.9
27.8
27.4
Lao People’s Democratic Republic
24.9
22.7
20.5
21.0
24.0
21.4
21.1
17.5
21.4
22.0
24.0
..
Malaysia
26.7
22.4
26.9
24.4
24.8
22.8
23.0
20.0
20.5
21.7
19.1
13.8
Myanmar
12.4
13.4
12.4
11.6
10.1
11.0
12.2
13.2
13.8
13.5
14.4
14.9
Philippines
20.3
18.8
21.2
19.0
17.7
16.8
16.8
14.6
14.5
15.4
15.2
14.8
Singapore
32.3
32.0
32.5
26.0
23.7
16.0
21.8
20.2
20.1
20.7
30.9
28.9
Thailand
20.4
20.5
22.8
24.1
23.8
25.0
26.8
31.4
28.4
26.6
28.8
21.3
Viet Nam
29.0
27.6
29.6
31.2
33.2
35.4
35.5
35.6
36.8
43.1
41.1
41.9
Notes: Figures for 2009 are estimates. Data for Cambodia, Islamic Republic of Iran and the Lao People’s Democratic Republic are based on
national sources.
Data for Cook Islands, Kiribati, Samoa, and Tuvalu are calculated based on United Nations Statistics Division databases.
Sources:  ESCAP, based on ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009) with updates and estimates from national sources.
198

STATISTICAL ANNEX
Table 4. Inflation rates
(Percentages)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
2.1
3.4
0.7
0.9
0.1
0.9
1.8
1.2
1.2
2.0
3.5
– 0.3
China
– 0.8
– 1.4
0.3
0.7
– 0.8
1.1
3.9
1.8
1.5
4.8
5.9
– 0.7
Hong Kong, China
2.8
– 4.0
– 3.8
– 1.6
– 3.0
– 2.5
– 0.4
0.9
2.1
2.0
4.3
0.5
Japan
0.7
– 0.3
– 0.7
– 0.8
– 0.9
– 0.3
0.0
– 0.3
0.2
0.1
1.4
– 1.4
Macao, China
0.2
– 3.2
– 1.6
– 2.0
– 2.6
– 1.6
1.0
4.5
5.2
5.6
8.6
1.2
Mongolia
9.4
7.5
11.6
6.2
0.9
5.2
8.3
12.8
4.8
9.6
28.0
7.0
Republic of Korea
7.5
0.8
2.3
4.1
2.8
3.5
3.6
2.8
2.2
2.5
4.7
2.8
Russian Federation
27.7
85.7
20.8
21.5
15.8
13.7
10.9
12.7
9.7
9.0
14.1
11.7
North and Central Asia
24.8
72.3
19.3
19.7
14.8
12.4
10.1
11.9
9.7
9.5
14.4
10.7
Armenia
8.7
0.7
– 0.8
3.1
1.1
4.8
7.0
0.6
2.9
4.4
9.0
3.4
Azerbaijan
– 0.8
– 8.5
1.8
1.5
2.8
2.1
6.8
10.0
8.3
16.7
20.8
1.5
Georgia
3.6
19.1
4.0
4.7
5.6
4.8
5.7
8.2
9.2
9.2
10.0
1.7
Kazakhstan
7.1
8.3
13.2
8.4
5.9
6.4
6.9
7.6
8.6
10.8
17.0
7.3
Kyrgyzstan
10.4
36.0
18.7
6.9
2.1
3.1
4.1
4.4
5.6
10.2
24.5
6.8
Russian Federation
27.7
85.7
20.8
21.5
15.8
13.7
10.9
12.7
9.7
9.0
14.1
11.7
Tajikistan
43.0
26.0
24.0
36.5
10.2
17.1
6.8
7.8
11.9
21.5
20.4
6.4
Turkmenistan
16.8
23.5
8.0
11.6
8.8
5.6
5.9
10.7
8.2
6.3
13.0
10.0
Uzbekistan
29.0
29.1
25.0
27.3
27.3
11.6
6.6
10.0
14.2
12.3
12.7
8.0
Oceania
1.0
1.4
4.3
4.2
3.0
2.8
2.3
2.7
3.5
2.3
4.4
1.9
Australia
0.9
1.5
4.5
4.4
3.0
2.8
2.3
2.7
3.5
2.3
4.4
1.8
Cook Islands
0.7
1.3
3.2
8.7
3.4
2.0
0.9
2.5
3.4
2.5
7.8
6.5
Fiji
5.9
2.0
1.1
4.3
0.8
4.2
2.8
2.4
2.5
4.8
7.7
3.7
Kiribati
4.3
0.6
0.9
7.0
1.6
2.6
– 1.9
– 0.5
– 0.2
3.7
18.6
6.6
Marshall Islands
2.2
1.7
1.6
1.7
1.3
– 2.8
2.2
4.4
4.3
3.1
17.5
9.6
Micronesia (Federated States of)
..
..
2.2
0.5
– 0.1
0.1
2.3
4.3
4.4
3.6
6.8
2.9
Nauru
..
..
..
..
..
..
2.3
2.7
3.5
2.3
4.5
1.8
New Zealand
1.3
– 0.1
2.6
2.6
2.7
1.8
2.3
3.0
3.4
2.4
4.0
2.1
Palau
..
..
..
– 1.8
– 1.3
0.9
5.0
3.9
4.5
3.2
12.0
5.2
Papua New Guinea
13.6
14.9
15.6
9.3
11.8
14.7
2.1
1.8
2.4
0.9
10.6
6.9
Samoa
5.4
0.3
0.9
4.7
8.1
0.1
16.3
1.9
3.8
5.5
11.5
6.1
Solomon Islands
12.3
8.0
7.1
7.7
9.3
10.0
7.1
7.4
11.2
7.7
17.2
8.0
Tonga
3.3
4.5
6.2
8.3
10.4
11.6
11.0
8.3
6.4
5.9
10.4
1.6
Tuvalu
0.6
4.0
1.3
1.3
8.0
3.3
2.8
3.2
3.8
2.2
5.3
3.8
Vanuatu
3.2
3.1
2.1
3.5
2.1
1.1
3.2
1.2
2.0
3.9
4.8
4.5
South and South-West Asia
30.8
21.4
17.4
17.2
15.5
10.3
6.4
6.7
8.3
8.4
11.5
11.2
Afghanistan
..
..
..
..
..
24.1
13.2
12.3
5.1
13.0
26.8
– 10.0
Bangladesh
9.0
7.0
2.8
1.9
2.8
4.4
5.8
6.5
7.2
7.2
9.9
6.7
Bhutan
10.6
6.8
4.0
3.4
2.5
2.1
4.6
5.3
5.0
5.2
6.3
7.2
India
13.2
4.7
4.0
3.8
4.3
3.8
3.8
4.4
6.7
6.2
9.1
11.9
Iran (Islamic Republic of)
18.1
20.1
12.6
11.4
15.8
15.6
15.2
12.1
13.6
18.4
25.5
16.0
Maldives
– 1.4
3.0
– 1.2
0.7
0.9
–2.9
6.4
3.3
3.5
7.4
12.3
8.5
Nepal
8.3
11.4
3.4
2.4
2.9
4.8
4.0
4.5
8.0
6.4
7.7
13.2
Pakistan
7.8
5.7
3.6
4.4
3.5
3.1
4.6
9.3
7.9
7.8
12.0
20.8
Sri Lanka
9.4
4.7
6.2
14.2
9.6
6.3
9.0
11.0
10.0
15.8
22.6
3.4
Turkey
84.7
64.9
54.9
54.4
45.1
25.3
8.6
8.2
9.6
8.8
10.4
6.3
South-East Asia
21.0
7.7
2.4
4.9
4.6
3.3
4.1
5.9
6.7
3.9
8.6
2.1
Brunei Darussalam
– 0.4
– 0.1
1.2
0.6
– 2.3
0.3
0.9
1.1
0.2
0.3
2.7
1.2
Cambodia
14.8
4.0
– 0.8
– 0.6
3.2
1.2
3.9
6.3
6.1
7.7
25.0
– 0.8
Indonesia
58.5
20.5
3.7
11.5
11.9
6.6
6.2
10.5
13.1
6.3
10.1
4.6
Lao People’s Democratic Republic
91.0
128.4
25.1
7.8
10.6
15.5
10.5
7.2
6.8
4.5
7.6
0.2
Malaysia
5.3
2.7
1.5
1.4
1.8
1.0
1.5
3.0
3.6
2.0
5.4
0.6
Myanmar
51.5
18.4
– 0.1
21.1
57.0
36.6
4.5
9.4
20.0
35.0
26.8
6.5
Philippines
9.3
5.9
4.0
6.8
3.0
3.5
6.0
7.7
6.3
2.8
9.3
3.3
Singapore
– 0.3
0.0
1.4
1.0
– 0.4
0.5
1.7
0.5
1.0
2.1
6.6
0.6
Thailand
8.1
0.3
1.6
1.6
0.6
1.8
2.8
4.5
4.6
2.2
5.5
– 0.8
Timor-Leste
..
..
63.6
3.6
4.7
7.2
3.2
1.8
4.1
8.9
7.6
1.3
Viet Nam
7.3
4.1
– 1.7
– 0.4
3.8
3.2
7.8
8.3
7.4
8.3
23.1
7.0
Memorandum items:
Developing ESCAP economies
11.3
6.1
4.9
5.6
4.4
3.7
4.2
3.7
4.0
5.0
7.3
3.1
(excluding China and India)
20.5
12.5
9.0
10.1
8.5
5.9
4.5
5.1
5.2
4.8
8.0
3.8
Developed ESCAP economies
0.7
– 0.1
– 0.3
– 0.3
– 0.5
0.0
0.2
0.0
0.6
0.3
1.7
– 1.1
Pacific island developing economies
10.1
9.6
9.8
7.5
8.1
10.3
3.5
2.3
3.1
2.7
10.1
6.3
Notes: Figures for 2009 are estimates. The data and estimates for countries relate to fiscal years defined as follows: 2008 refers to fiscal year
India: 1 April 2008-31 March 2009;
Islamic Republic of Iran: 21 March 2008-20 March 2009;
Bangladesh, Pakistan: 1 July 2007-30 June 2008;
Nepal: 16 July 2007-15 July 2008.
The term “developing ESCAP economies” refers to developing Asian and Pacific economies, excluding those of North and Central Asia.
The term “developed ESCAP economies” refers to Australia, Japan and New Zealand.
Data for the following countries (Brunei darussalam, Cook Islands, Micronesia, Nauru, Palau and Tuvalu) are based on ADB, Key Indicators for
Asia and the Pacific 2009.
Consumer price inflation for the following countries are for a given city or group of consumers: Cambodia is for Phnom Penh, India’s data refer
to the industrial workers index, Nepal is for national urban consumers, Sri Lanka is for Colombo, and Timor-Leste is for Dili.
Sources: ESCAP, based on national sources; International Monetary Fund, International Financial Statistics databases (Washington, D.C.,
September 2009), and World Economic Outlook  Databases (Washington, D.C., October 2009); ADB, Key Indicators for Asia and the Pacific 2009
(Manila, 2009); CEIC Data Company Limited; and the website of the Interstate Statistical Committee of the Commonwealth of Independent States
(www.cisstat.com), 22 March 2010 and ESCAP estimates.
199

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 5. Budget balance
(Percentage of GDP)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
– 2.4
– 3.0
– 2.8
– 2.5
– 2.6
– 2.2
– 1.3
– 1.2
– 0.8
0.6
– 0.4
– 3.8
Hong Kong, China
– 1.8
0.8
– 0.6
– 4.9
– 4.8
– 3.2
1.7
1.0
4.0
7.7
– 0.3
– 2.4
Japan
– 10.6
– 7.3
– 6.4
– 5.9
– 6.7
– 6.7
– 5.2
– 6.2
– 1.0
– 2.6
– 2.7
– 7.4
Mongolia
– 14.3
– 11.6
– 7.7
– 4.5
– 5.8
– 3.7
– 1.8
2.6
3.3
2.9
– 5.0
– 6.0
Republic of Korea
– 3.9
– 2.5
1.1
1.1
3.1
1.0
0.6
0.4
0.4
3.5
1.2
– 4.0
Russian Federation
– 4.8
– 1.2
2.4
3.1
1.7
2.4
4.8
7.5
7.5
5.4
4.1
– 5.9
North and Central Asia
Armenia
– 3.8
– 5.2
– 4.9
– 4.3
– 2.6
– 1.3
– 1.7
– 1.9
– 1.5
– 1.5
– 1.2
– 6.6
Azerbaijan
– 1.8
– 2.4
– 1.0
– 0.4
– 0.5
– 5.1
– 2.6
– 2.3
– 4.6
– 5.5
– 6.1
– 8.2
Georgia
– 6.2
– 6.7
– 3.7
– 1.8
– 3.7
– 2.9
– 3.2
– 1.1
– 3.0
– 4.7
– 6.3
– 8.9
Kazakhstan
– 3.9
– 3.5
– 0.1
– 0.4
– 0.3
– 0.9
– 0.3
0.6
0.8
– 1.7
– 2.1
– 3.1
Kyrgyzstan
– 3.0
– 2.0
– 2.2
0.4
– 1.0
– 0.8
– 0.5
0.2
– 0.2
0.1
0.8
– 1.5
Russian Federation
– 4.8
– 1.2
2.4
3.1
1.7
2.4
4.8
7.5
7.5
5.4
4.1
– 5.9
Tajikistan
– 2.7
– 2.4
– 5.7
– 3.1
– 2.4
– 1.8
– 2.4
0.2
0.8
1.6
1.0
– 0.5
Turkmenistan
– 2.6
0.0
– 0.3
0.6
0.2
– 1.4
0.5
0.9
6.0
4.5
3.2
– 2.0
Uzbekistan
– 3.4
– 1.7
– 1.0
– 1.0
– 1.5
0.6
1.2
2.9
3.8
2.7
1.5
0.1
Oceania
Australia
– 0.3
0.6
1.9
0.9
– 0.4
0.7
0.7
1.4
1.7
1.6
1.9
– 2.7
Cook Islands
– 2.5
– 2.4
– 1.8
1.3
– 4.2
– 0.8
– 1.0
2.1
2.1
3.6
3.7
..
Fiji
5.0
– 0.3
– 3.2
– 6.5
– 5.7
– 5.8
– 3.1
– 3.4
– 2.8
– 1.7
0.5
– 2.5
Kiribati
70.2
37.5
42.7
10.1
3.8
9.9
12.3
7.7
12.0
37.9
..
..
New Zealand
0.4
0.1
2.1
2.0
3.9
4.2
4.4
5.4
6.3
5.3
– 1.3
– 4.9
Papua New Guinea
– 1.8
– 2.4
– 2.0
– 3.4
– 3.8
– 0.9
1.7
0.1
3.2
2.6
– 2.2
– 0.4
Samoa
2.0
0.3
– 0.7
– 2.2
– 2.0
– 0.6
– 0.8
0.3
0.3
1.1
– 3.3
..
Solomon Islands
3.0
5.0
– 0.6
– 7.4
– 20.2
– 5.8
4.9
– 0.9
– 3.9
0.5
0.0
..
Tonga
– 2.4
– 0.2
– 0.4
– 1.5
– 1.4
– 3.1
0.9
2.4
1.5
1.4
2.0
1.3
Tuvalu
19.1
– 3.5
– 2.2 – 45.7
33.7
– 33.3
– 14.7
– 7.4
18.7
– 14.3
7.2
4.6
Vanuatu
– 9.4
– 1.5
– 7.0
– 3.7
– 2.2
– 1.8
0.9
2.0
0.4
0.3
2.3
0.7
South and South-West Asia
Bangladesh
– 3.4
– 4.6
– 6.1
– 5.2
– 4.7
– 4.2
– 4.2
– 4.4
– 3.9
– 3.7
– 6.1
– 4.0
Bhutan
0.9
– 1.7
– 3.8 – 10.6
– 4.6
– 9.8
1.8
– 6.6
– 0.8
0.6
0.7
2.2
India
– 5.1
– 5.4
– 5.7
– 6.2
– 5.9
– 4.5
– 3.9
– 4.0
– 3.3
– 2.6
– 5.9
– 6.5
Iran (Islamic Republic of)
– 2.2
– 0.2
– 0.2
– 0.4
– 4.1
– 3.4
– 3.0
– 3.7
– 7.2
– 3.4
– 3.5
– 4.8
Maldives
– 1.9
– 4.1
– 4.4
– 4.7
– 4.9
– 3.4
– 1.6 – 10.9
– 6.9
– 5.3
– 16.9
– 26.1
Nepal
– 5.5
– 4.9
– 4.3
– 5.5
– 5.0
– 3.3
– 2.9
– 3.1
– 3.8
– 4.1
– 4.1
– 3.8
Pakistan
– 7.6
– 6.1
– 5.4
– 4.3
– 4.2
– 3.6
– 2.4
– 3.3
– 4.3
– 4.4
– 7.6
– 5.2
Sri Lanka
– 8.9
– 7.3
– 9.7 – 10.6
– 8.6
– 7.7
– 7.9
– 8.4
– 8.0
– 7.7
– 7.8
– 7.0
Turkey
– 6.2
– 6.4
– 5.6 – 11.9
– 12.0
– 8.7
– 5.3
– 1.5
– 0.6
– 1.6
– 1.8
– 5.4
South-East Asia
Cambodia
– 5.4
– 3.8
– 4.8
– 6.3
– 7.0
– 6.1
– 3.5
– 2.2
– 2.8
– 2.2
– 1.5
..
Indonesia
– 1.7
– 2.5
– 1.1
– 2.4
– 1.5
– 1.8
– 1.0
– 0.6
– 0.9
– 1.3
– 0.1
– 1.5
Lao People’s Democratic Republic
– 6.6
– 2.5
– 4.6
– 4.5
– 3.4
– 5.7
– 2.6
– 4.5
– 3.1
– 2.6
– 2.2
– 7.8
Malaysia
– 1.8
– 3.2
– 5.5
– 5.2
– 5.3
– 5.0
– 4.1
– 3.6
– 3.3
– 3.2
– 4.8
– 7.7
Myanmar
0.8
– 0.3
0.7
..
..
..
..
..
..
..
..
..
Philippines
– 1.9
– 3.8
– 4.0
– 4.0
– 5.3
– 4.6
– 3.8
– 2.7
– 1.1
– 0.2
– 0.9
– 3.9
Singapore
2.5
0.5
2.0
1.6
– 1.1
– 1.6
– 1.1
– 0.3
0.5
3.3
1.5
– 1.1
Thailand
– 2.8
– 3.3
– 2.2
– 2.4
– 1.4
0.4
0.1
– 0.6
1.1
– 1.7
– 1.1
– 4.4
Timor-Leste
2.0
1.0
4.0
14.0
46.0
102.0
174.0
284.0
384.0
178.0
Viet Nam
– 2.5
– 4.4
– 5.0
– 4.9
– 4.8
– 4.9
– 4.9
– 4.9
– 5.0
– 4.9
– 4.5
– 8.2
Note: Figures for 2009 are estimates.
Sources:  ESCAP, based on national sources; ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009);  International Monetary Fund,
International Monetary Fund Article IV Consultation, various issues; and ESCAP estimates.
200

STATISTICAL ANNEX
Table 6. Current account balance
(Percentage of GDP)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
3.0
1.9
1.7
1.3
2.4
2.8
3.6
7.2
9.5
11.0
9.8
6.6
Hong Kong, China
1.5
6.3
4.1
5.9
7.6
10.4
9.5
11.4
12.1
12.3
14.2
8.7
Japan
3.1
2.6
2.6
2.1
2.9
3.2
3.7
3.6
3.9
4.8
3.2
2.8
Macao, China
..
..
..
..
54.2
59.1
63.6
41.4
30.6
49.0
..
..
Mongolia
– 6.8
– 5.8
– 5.0 – 12.0
– 8.6
– 7.1
1.3
1.3
7.0
6.7
– 13.1
– 7.0
Republic of Korea
11.7
5.5
2.3
1.6
0.9
1.9
3.9
1.8
0.6
0.6
– 0.7
4.6
Russian Federation
0.1
12.6
18.0
11.0
8.5
8.2
10.1
11.1
9.6
6.0
6.1
3.9
North and Central Asia
Armenia
– 22.1 – 16.6
– 14.6
– 9.4
– 6.2
– 6.7
– 0.5
– 1.1
– 1.8
– 6.4
– 11.6
– 12.5
Azerbaijan
– 30.7 – 13.1
– 3.2
– 0.9
– 12.3
– 27.8
– 29.8
1.3
17.7
30.7
35.5
16.0
Georgia
– 12.8 – 10.0
– 7.9
– 6.4
– 6.4
– 9.6
– 6.9
– 11.1
– 15.1
– 19.6
– 22.7
– 16.8
Kazakhstan
– 5.8
– 1.0
2.0
– 6.5
– 4.4
– 0.9
0.8
– 1.8
– 2.5
– 8.0
5.3
– 1.9
Kyrgyzstan
– 25.1 – 20.1
– 9.0
– 3.4
– 3.8
– 3.2
0.2
– 2.4
– 10.6
– 6.9
– 13.4
– 8.1
Russian Federation
0.1
12.6
18.0
11.0
8.5
8.2
10.1
11.1
9.6
6.0
6.1
3.9
Tajikistan
– 7.3
– 0.9
– 1.6
– 4.9
– 3.5
– 1.3
– 3.9
– 2.7
– 2.8
– 8.6
– 7.9
– 6.5
Turkmenistan
– 32.7 – 14.8
8.2
1.7
6.7
2.7
0.6
5.1
15.7
15.5
18.7
20.4
Uzbekistan
– 0.7
– 1.0
1.8
– 1.0
1.2
5.8
7.2
7.7
9.1
7.3
12.8
7.2
Oceania
Australia
– 4.8
– 5.3
– 3.8
– 2.0
– 3.8
– 5.4
– 6.1
– 5.8
– 5.5
– 6.3
– 4.4
– 3.8
Fiji
4.6
– 1.1
– 4.0
– 6.7
2.6
– 6.6
– 12.9
– 11.4
– 19.0
– 14.0
– 18.6
– 8.7
Kiribati
27.7
11.9
– 0.8
16.1
7.6
– 19.5
– 11.1 – 19.1
– 2.9
– 1.0
– 0.9
– 3.1
New Zealand
– 3.8
– 6.1
– 5.1
– 2.7
– 3.9
– 4.3
– 6.3
– 8.4
– 8.6
– 8.1
– 8.9
– 6.1
Papua New Guinea
0.9
3.9
10.1
8.8
– 4.2
3.8
4.4
12.4
7.3
1.8
2.8
– 6.7
Samoa
6.6
2.3
– 3.3 – 36.2
– 22.2
– 8.1
– 6.9 – 10.7
– 16.8
– 8.4
– 12.4
– 16.4
Solomon Islands
– 1.3
3.0
– 7.3
– 6.4
– 4.4
6.3
16.3
– 6.9
– 6.3
– 12.4
– 18.7
– 11.1
Tonga
– 11.9
– 1.0
– 6.7
– 9.9
4.9
– 2.9
3.8
– 2.7
– 8.0
– 8.5
– 9.0
– 6.5
Vanuatu
2.5
– 4.9
2.0
2.0
– 5.4
– 6.6
– 5.0
– 7.4
– 4.1
– 5.9
– 7.4
– 6.0
South and South-West Asia
Bangladesh
– 0.6
– 0.9
0.0
– 1.7
0.5
0.4
0.9
– 0.6
1.2
1.4
0.9
1.0
Bhutan
10.6
2.2
5.4
– 8.8
– 14.9
– 21.8
– 17.0 – 28.4
– 4.5
14.4
– 2.1
– 10.1
India
– 1.0
– 1.0
– 0.6
0.7
1.3
2.4
– 0.4
– 1.2
– 1.0
– 1.3
– 2.4
– 3.3
Iran (Islamic Republic of)
– 2.2
6.3
13.0
5.2
3.1
0.6
0.6
8.8
9.2
11.9
6.0
– 0.2
Maldives
– 4.1 – 13.4
– 8.2
– 9.8
– 5.6
– 4.5
– 15.8 – 36.4
– 33.0
– 41.5
– 51.4
– 25.1
Nepal
– 0.9
4.0
2.9
4.5
4.2
2.4
2.7
2.0
2.2
– 0.1
2.9
4.3
Pakistan
– 2.2
– 2.6
– 0.3
0.4
3.9
4.9
1.8
– 1.4
– 3.9
– 4.8
– 8.4
– 5.3
Sri Lanka
– 1.4
– 3.5
– 6.3
– 1.1
– 1.4
– 0.4
– 3.1
– 2.5
– 5.3
– 4.3
– 9.0
– 0.3
Turkey
0.7
– 0.4
– 3.7
1.9
– 0.3
– 2.5
– 3.7
– 4.6
– 6.0
– 5.8
– 5.7
– 2.1
South-East Asia
Cambodia
– 5.7
– 5.0
– 2.7
– 1.1
– 2.3
– 3.6
– 2.2
– 3.6
0.4
– 2.8
– 7.3
– 5.4
Indonesia
4.3
4.1
4.8
4.3
4.0
3.5
0.6
0.1
3.0
2.4
0.1
2.0
Lao People’s Democratic Republic
– 11.7
– 8.3
– 0.5
– 4.7
0.3
– 2.0
– 7.7
– 5.7
1.4
2.6
3.3
..
Malaysia
13.2
15.9
9.0
7.9
7.1
12.1
12.1
14.5
16.3
15.5
17.6
15.0
Myanmar
– 0.2
– 0.1
– 0.1 – 0.03
0.01
0.00
0.01
0.00
0.03
..
..
..
Philippines
2.4
– 3.8
– 2.9
– 2.4
– 0.4
0.4
1.9
2.0
4.5
4.9
2.5
3.6
Singapore
22.2
17.4
11.6
12.5
12.6
23.1
16.6
18.3
21.4
23.5
14.8
13.4
Thailand
12.7
10.1
7.6
4.4
3.7
3.3
1.7
– 4.3
1.1
6.3
0.6
7.7
Timor-Leste
– 7.1 – 12.6
– 15.9
– 15.4
20.7
78.4
165.2
296.1
405.0
191.0
Viet Nam
– 3.9
4.1
3.5
2.1
– 1.7
– 4.9
– 3.5
– 1.1
– 0.3
– 9.8
– 11.9
– 9.0
Note: Figures for 2009 are estimates.
Current account balance of Papua New Guinea for 2005-2008 is based on International Monetary Fund 2007 Article IV Consultation.
Current account balance of Samoa and Tonga for 2005-2008 is based on International Monetary Fund 2008 Article IV Consultation.
Sources:  ESCAP, based on International Monetary Fund, International Financial Statistcs databases (Washington, D.C., September 2009) and
World Economic Outlook Databases (Washington, D.C.,  October 2009) with updates and estimates from national sources.
201

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 7.  Change in money supply
(Percentages)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
14.9
14.7
12.3
15.0
13.1
19.2
14.9
16.7
22.1
16.7
17.8
29.6a
Hong Kong, China
11.1
8.3
9.3
– 0.3
0.5
6.3
7.3
3.5
16.2
18.8
4.2
8.9a
Japan
3.1
2.8
1.3
– 17.1
0.9
0.5
0.6
0.5
– 0.7
0.7
0.8
3.3a
Macao, China
8.1
12.3
8.9
12.2
24.5
9.8
2.3
14.2a
Mongolia
– 1.7
31.6
17.6
27.9
42.0
49.6
20.4
34.6
34.8
56.3
– 5.5
26.9
Republic of Korea
27.0
27.4
25.4
13.2
11.0
6.7
– 0.6
3.1
4.4
0.3
15.9
11.8b
Russian Federation
37.6
56.7
58.0
36.3
33.8
38.5
33.7
36.3
40.6
44.2
14.6
16.4
North and Central Asia
Armenia
36.7
14.0
38.6
4.3
34.0
10.4
22.3
27.8
32.9
42.3
2.4
16.4
Azerbaijan
– 15.2
20.1
73.4
– 11.3
14.5
29.7
47.5
22.1
86.8
71.7
44.0
– 0.3
Georgia
– 0.8
20.6
39.2
17.6
17.9
22.8
42.4
26.5
39.7
49.7
6.9
8.2
Kazakhstan
– 14.1
84.4
45.0
40.2
30.1
34.2
68.2
26.3
78.1
25.9
35.4
17.9
Kyrgyzstan
17.5
33.7
11.7
11.3
33.9
33.4
32.1
10.0
51.5
33.2
..
..
Russian Federation
37.6
56.7
58.0
36.3
33.8
38.5
33.7
36.3
40.6
44.2
14.6
16.4
Tajikistan
28.2
24.6
63.3
35.0
40.5
40.9
9.8
113.3
65.4
108.7
– 3.6
– 14.0c
Turkmenistan
67.7
75.7
83.3
23.8
1.5
40.9
13.4
27.2
17.7
..
..
..
Uzbekistan
27.5
32.7
37.1
54.3
29.7
27.1
47.8
54.3
36.8
46.1
32.4
..
Oceania
Australia
8.4
11.7
3.7
13.2
5.7
12.8
11.4
8.6
15.0
29.9
14.3
0.5
Cook Islands
12.1
16.7
4.8
14.4
3.2
9.9
9.6
– 5.2
22.4
– 5.8
4.0
..
Fiji
– 0.5
13.6
– 1.5
– 3.1
7.8
25.0
10.5
15.1
20.2
10.3
– 6.7
3.7a
Kiribati
..
..
..
..
..
..
..
..
..
..
..
..
Micronesia (Federated States of)
0.7
3.4
– 1.0
6.0 – 12.0
– 3.7
– 0.1
1.6
– 8.5
4.6
3.2
8.6b
New Zealand
0.3
7.1
1.5
– 1.9
11.5
9.5
3.5
9.5
11.3
11.1
10.3
– 0.6
Papua New Guinea
2.5
9.2
5.0
6.2
7.3
– 4.4
14.8
29.5
38.9
27.8
11.2
19.3
Samoa
2.5
15.7
16.3
6.1
10.2
14.0
8.3
15.6
13.7
11.0
5.8
8.4a
Solomon Islands
..
..
..
..
6.4
23.8
17.7
37.1
25.3
24.0
6.9
14.5
Tonga
14.8
12.0
18.7
14.3
8.3
14.5
13.9
22.1
5.4
13.5
0.7
2.3b
Tuvalu
..
..
..
..
..
..
..
..
..
..
..
..
Vanuatu
12.6
– 9.2
5.5
5.5
– 1.6
– 0.9
9.9
11.6
7.0
16.0
13.4
1.8a
South and South-West Asia
Bangladesh
10.4
12.8
18.6
16.6
13.1
15.6
13.8
16.7
19.3
17.1
17.6
19.4
Bhutan
13.9
32.0
17.4
7.9
26.9
1.8
19.9
11.9
13.0
13.0
32.4
24.6d
India
18.2
17.1
15.2
14.3
16.8
13.0
16.7
15.6
21.6
22.3
20.5
18.1a
Iran (Islamic Republic of)
20.4
21.5
22.4
27.6
24.9
24.5
23.0
22.8
29.1
30.6
7.9
18.7d
Maldives
23.0
3.5
4.2
9.1
19.5
14.5
32.8
11.7
20.6
23.7
23.6
12.5
Nepal
21.9
20.8
21.8
15.2
4.4
9.8
12.8
8.3
15.6
13.8
20.9
27.1b
Pakistan
7.9
4.3
12.1
11.7
16.8
17.5
20.5
16.5
14.6
19.5
15.5d
..
Sri Lanka
13.2
13.4
12.9
13.6
13.4
15.5
19.6
19.0
17.9
16.5
8.4
..
Turkey
89.3 102.0
40.7
87.4
29.8
14.4
20.8
36.0
22.2
15.2
24.8
13.7a
South-East Asia
Brunei Darussalam
..
..
38.0
– 16.7
1.9
4.1
15.8
– 4.5
2.1
6.7
9.6
17.4
Cambodia
15.7
17.3
26.9
20.4
31.1
15.4
28.3
15.8
40.5
61.8
5.4
35.6
Indonesia
62.3
11.9
15.6
13.0
4.7
8.1
8.2
16.3
14.9
19.3
14.9
13.0
Lao People’s Democratic Republic
113.3
78.4
46.0
13.7
37.6
20.1
21.6
7.9
26.7
38.7
18.3
..
Malaysia
1.5
14.2
5.3
2.3
6.0
11.1
25.2
15.6
17.1
9.5
13.4
10.4a
Myanmar
34.2
29.5
42.5
43.9
34.7
1.4
32.4
27.3
27.2
30.0
14.8
27.3e
Philippines
8.6
16.9
8.1
3.6
10.4
3.6
9.9
6.4
19.6
5.4
2.9
..
Singapore
30.2
8.5
– 2.0
5.9
– 0.3
8.1
6.2
6.2
19.4
13.4
12.0
11.3
Thailand
9.4
1.8
4.0
5.8
1.3
6.2
5.8
6.1
8.2
6.3
9.2
6.5
Timor-Leste
41.1
6.9
18.3
28.2
43.9
34.1
29.6
Viet Nam
23.5
66.5
35.4
27.3
13.3
33.1
31.0
30.9
29.7
49.1
20.7
38.6 f
Notes: a November compared with the corresponding period of the previous year.
b
October compared with the corresponding period of the previous year.
c
March compared with the corresponding period of the previous year.
d
June compared with the corresponding period of the previous year.
e
September compared with the corresponding period of the previous year.
f
August compared with the corresponding period of the previous year.
Sources:  ESCAP, based on national sources; International Monetary Fund, International Financial Statistics databases (Washington, D.C.,
February 2010); and ADB, Key Indicators for Asia and the Pacific 2009 (Manila, 2009) (for Cook Islands, Turkmenistan and Uzbekistan).
202

STATISTICAL ANNEX
Table 8.  Merchandise export growth rates
(Percentages)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
0.5
6.1
27.9
7.0
22.1
34.6
35.4
28.4
27.2
25.7
17.3
– 15.9
Hong Kong, China
– 7.5
0.0
16.1
– 5.9
5.4
11.8
15.8
11.6
9.4
8.8
5.3
– 12.2
Japan
– 7.8
8.1
14.3
– 15.9
3.4
13.1
19.9
5.2
8.7
10.4
9.5
– 25.7
Macao, China
– 0.8
2.8
16.3
– 9.4
2.4
9.5
9.0
– 11.9
3.3
– 0.6
– 21.4
– 52.2a
Mongolia
– 23.5
3.8
30.1
11.9
0.5
17.5
41.2
22.4
44.5
26.3b
10.8c
..
Republic of Korea
– 2.8
8.6
19.9
– 12.7
8.0
19.3
31.0
12.0
14.4
14.1
13.6
– 13.8
Russian Federation
..
2.2
41.4
– 3.0
6.7
25.2
35.9
32.9
24.8
16.8
32.9
– 39.2d
Taiwan Province of China
– 9.3
9.9
22.8
– 16.9
7.1
11.3
21.1
8.8
12.9
10.1
3.6
– 20.3
North and Central Asia
Armenia
– 5.2
5.1
29.7
13.8
47.8
35.7
5.4
34.7
1.1
17.0
– 8.3
– 34.0
Azerbaijan
– 16.1
51.3
81.3
11.9
10.9
13.9
42.6
104.4
70.1
63.4
43.8
– 69.2
Georgia
– 21.7
24.4
35.6
– 1.6
8.9
33.4
40.2
33.8
8.2
31.6
21.4
– 35.3e
Kazakhstan
..
– 7.5
63.2
– 5.2
12.3
33.5
55.0
38.6
37.3
24.8
49.1
– 39.3
Kyrgyzstan
– 15.2
– 13.5
10.4
– 6.1
3.8
18.5
24.2
– 6.3
31.9
45.8
24.3
– 22.4
Russian Federation
..
2.2
41.4
– 3.0
6.7
25.2
35.9
32.9
24.8
16.8
32.9
– 35.5
Tajikistan
..
..
..
– 22.3
7.0
14.5
14.7
– 0.7
54.0
4.9
– 4.2
– 28.3
Turkmenistan
– 19.1
93.3
111.1
4.7
9.1
21.1
11.2
28.3
44.7
12.9
52.7
– 46.6b
Uzbekistan
..
..
..
8.0
– 20.8
29.1
31.6
11.6
18.0
42.9
29.2
– 3.8b
Oceania
Australia
– 12.8
– 0.5
13.3
1.2
1.9
9.6
20.9
21.3
18.9
14.1
29.9
– 15.5f
Fiji
– 11.6
19.4
– 13.5
0.1
3.7
34.4
– 0.6
– 6.7
5.6
8.0
6.9
– 38.6e
New Zealand
– 15.4
3.7
6.6
3.2
4.8
14.9
23.1
6.8
3.2
18.7
14.9
– 26.5a
Papua New Guinea
– 16.1
9.1
7.3
– 13.7
– 9.5
34.4
18.5
26.8
26.7
13.0
25.2
– 35.5e
Samoag
30.5
..
..
9.7
– 8.9
5.2
– 18.4
– 9.6 – 17.0
7.7
10.5
– 22.5
Solomon Islands
– 27.6
4.4
– 47.4
– 5.0
– 21.8
33.7
28.6
22.2
7.5
41.7
21.0
– 28.0h
Tongag
– 17.8
12.6
– 9.9
8.3
50.8
– 1.1
– 21.6
15.9
– 4.0
– 13.5
– 7.4
– 55.4
Vanuatu
– 4.0
– 24.2
5.8
– 24.4
– 6.3
43.1
39.9
1.2
– 1.8
– 19.8
40.6
..
South and South-West Asia
Afghanistang
..
..
..
..
46.8
43.6
111.1
26.5
8.5
9.6
19.9
..
Bangladeshg
16.8
2.9
8.3
12.4
– 7.4
9.4
16.1
13.8
21.6
15.6
17.4
10.1i
Bhutang
12.1
– 5.9
9.2
– 12.9
4.5
8.7
39.7
34.5
47.2
83.7
– 18.2
..
Indiag
– 3.9
9.5
21.1
1.5
20.3
23.3
28.5
23.4
21.8
28.9
12.1
– 19.1f
Iran (Islamic Republic of)g
– 28.6
60.3
35.3
– 16.0
18.1
20.4
29.0
47.2
18.1
28.2
3.0
– 13.2e
Maldives
6.6
– 4.3
18.8
1.4
20.1
14.8
19.1
– 10.7
39.4
1.2
45.0
– 30.7e
Nepalg
12.7
17.4
37.6
4.6
– 18.8
4.3
8.9
13.0
2.2
1.2
8.2
– 4.1b
Pakistang
3.7
– 9.8
10.1
7.4
– 0.7
22.2
10.3
16.9
14.3
4.4
18.2
– 6.4
Sri Lanka
1.9
– 2.6
19.8
– 12.8
– 2.4
9.2
12.2
10.2
8.4
11.6
5.9
– 12.9
Turkey
2.7
– 1.4
4.5
12.8
15.1
31.0
33.7
16.3
16.4
25.4
23.1
– 22.6
South-East Asia
Brunei Darussalam
– 50.2
28.9
23.9
5.5
3.1
29.2
1.5
24.9
26.0
0.9
43.4
– 17.1a
Cambodia
49.2
11.4
7.9
15.4
15.0
18.9
23.5
37.8
18.2
14.3
4.4
– 7.2a
Indonesia
– 10.5
1.7
27.6
– 12.3
3.1
8.4
12.6
19.5
18.3
16.8
16.9
– 14.4
Lao People’s Democratic Republic
93.0
24.7
– 15.4
– 4.0
2.7
13.4
22.3
30.2
69.1
12.4
21.3
– 7.3a
Malaysia
– 6.9
15.5
16.1
– 10.4
6.9
11.3
21.0
11.8
13.5
9.7
13.3
– 21.1
Myanmar
0.6
22.4
42.1
32.6
4.8
0.5
14.1
17.4
20.9
7.0
38.3
– 21.9a
Philippines
16.9
18.8
8.7
– 15.6
9.5
2.9
9.5
4.0
14.9
6.4
– 2.8
– 21.9
Singapore
– 12.1
4.4
20.2
– 11.7
2.8
27.8
24.2
15.6
18.4
10.1
13.0
– 20.2
Thailand
– 6.8
7.4
19.3
– 6.6
4.6
17.4
20.6
15.0
16.9
18.6
15.5
– 14.2
Timor-Leste
..
..
..
230.8
48.8
21.9
6.4
10.8
12.5
– 22.2
100.0b – 28.6b
Viet Nam
1.9
23.3
25.5
3.8
11.2
19.0
30.8
24.0
22.9
22.2
29.5
– 9.7
Notes: a Refers to the first 8 months.
b
Estimate.
c
Projection.
d
Refers to the first 11 months.
e
Refers to first 6 months.
f
Refers to the first 10 months.
g
Fiscal year.
h
Refers to the first 9 months.
i
Provisional.
Sources: ESCAP, calculated from national sources; International Monetary Fund, Direction of Trade Statistics Database; and Country Reports
Series; Economist Intelligence Unit, Country Reports; CEIC Data Company Limited; and the website of the Interstate Statistical Committee of the
Commonwealth of Independent States (www.cisstat.com).
203

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 9.  Merchandise import growth rates
(Percentages)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
East and North-East Asia
China
– 1.5
18.2
35.8
8.2
21.2
39.9
35.8
17.7
19.9
20.8
18.4
– 11.3
Hong Kong, China
– 11.5
– 2.7
18.6
– 5.4
3.2
11.8
16.7
10.5
11.6
10.0
5.6
– 10.6
Japan
– 17.2
11.0
22.0
– 8.0
– 3.3
13.5
18.8
13.4
12.2
7.4
22.6
– 27.8
Macao, China
– 10.8
4.5
11.4
5.8
6.0
8.9
26.2
12.5
16.6
17.5
0.0
– 11.2a
Mongolia
7.5
1.9
19.8
3.8
8.3
16.0
27.5
16.0
23.9
43.1b
38.3c
..
Republic of Korea
– 35.5
28.4
34.0
– 12.1
7.8
17.6
25.5
16.4
18.4
15.3
22.0
– 25.8
Russian Federation
..
– 30.5
11.9
23.6
10.2
24.2
31.8
30.6
39.6
45.0
33.7
– 39.6d
Taiwan Province of China
– 8.5
5.7
26.6
– 23.3
4.9
13.0
31.8
8.2
11.0
8.2
9.7
– 27.4
North and Central Asia
Armenia
1.1
– 10.1
9.1
– 0.8
12.5
29.6
5.6
33.4
21.6
49.1
35.4
– 25.3
Azerbaijan
..
– 16.9
7.4
– 4.8
24.5
49.3
31.5
21.4
21.1
14.7
25.3
– 14.6
Georgia
– 11.3
– 21.9
2.9
6.2
5.6
43.4
61.7
34.9
47.7
41.8
20.9
– 37.7
Kazakhstan
..
– 52.4
37.0
26.0
2.0
29.3
52.3
35.8
36.4
38.3
15.7
– 25.0
Kyrgyzstan
17.0
–27.1
– 8.2
– 11.3
27.2
26.6
25.0
22.3
62.0
55.6
46.1
– 25.3
Russian Federation
..
– 30.5
11.9
23.6
10.2
24.2
31.8
30.6
39.6
45.0
33.7
– 37.3
Tajikistan
..
..
..
– 20.0
0.0
28.2
56.0
– 3.3
29.5
42.5
33.2
– 21.5
Turkmenistanf
..
..
..
..
..
40.8
22.1
– 6.4
– 13.2
41.5
54.8
– 28.8b
Uzbekistanf
..
..
..
28.5
– 30.3
10.0
27.3
8.1
16.0
49.2
23.4
19.5b
Oceania
Australia
– 1.2
6.4
5.2
– 9.6
11.3
25.4
20.7
14.5
12.0
19.3
18.9
– 19.0g
Fiji
– 19.7
25.3
– 7.9
4.8
9.2
39.1
14.6
2.6
20.3
– 0.8
9.6
– 34.4e
New Zealand
– 13.9
14.4
– 2.7
– 4.3
13.1
23.3
25.0
13.1
0.7
16.1
12.0
– 33.5a
Papua New Guinea
– 27.0
– 0.1
– 7.0
– 6.4
14.6
10.3
22.4
4.6
30.5
32.2
22.3
– 17.9e
Samoah
1.9
..
..
30.9
12.9
– 7.6
23.3
24.3
16.6
14.5
2.6
– 5.8
Solomon Islands
– 40.8
– 13.7 – 24.5
– 13.0
– 19.0
36.3
29.5
52.3
17.3
32.3
12.6
– 21.3 i
Tongaf h
18.6
– 21.2
12.8
– 2.9
0.8
21.0
11.6
27.6
15.8
– 11.4
27.4
– 5.7 f
Vanuatu
– 5.6
9.3
– 7.2
0.7
– 0.7
16.5
22.9
16.5
8.0
24.8
42.6
..
South and South-West Asia
Afghanistanh
..
..
..
..
36.9
– 8.8
1.5
14.9
11.1
10.1
5.7
..
Bangladeshh
5.1
6.5
4.6
11.5
– 8.5
13.1
12.9
20.6
12.2
16.6
25.6
4.2 j
Bhutanh
3.7
19.3
14.0
6.1
– 5.2
2.2
29.2
75.5
– 5.6
21.1
3.6
..
Indiah
– 7.1
16.5
4.6
12.3
14.5
24.1
48.6
33.8
21.8
35.4
15.9
– 22.9g
Iran (Islamic Republic of)f h
1.2
– 6.0
12.3
20.2
21.6
34.1
31.1
11.9
15.2
16.5
17.7
22.5e
Maldives
1.5
13.6
– 3.4
– 0.3
1.1
20.2
36.3
16.1
24.4
18.3
26.6
– 34.5e
Nepalh
– 11.8
– 11.0
22.1
– 0.2
– 10.6
13.6
10.6
13.8
15.8
15.0
23.6
8.4b
Pakistanh
– 14.9
– 6.8
9.3
4.1
– 3.6
18.2
27.6
32.1
31.6
8.0
31.2
– 10.3
Sri Lanka
0.4
1.5
17.4
– 14.9
2.2
9.3
19.9
10.8
15.7
10.2
24.0
– 29.5
Turkey
– 5.4
– 11.4
34.0
– 24.0
24.5
34.5
40.7
19.7
19.5
21.8
18.8
– 30.3
South-East Asia
Brunei Darussalam
– 26.0
– 43.1
7.5
– 7.9
23.9
– 17.7
22.2
1.8
17.5
98.2 – 32.6
1.8a
Cambodiaf
1.1
10.1
14.5
2.2
15.2
3.4
19.7
22.9
17.2
118.8
25.6
– 20.5a
Indonesiaf
– 31.2
– 5.6
30.8
– 13.9
2.1
10.3
29.9
26.7
14.6
15.4
37.7
– 26.6
Lao People’s Democratic Republic
57.8
25.5 – 14.7
4.3
0.4
12.0
30.5
20.3
30.1
27.6
34.2
– 10.4a
Malaysia
– 26.2
12.2
25.3
– 10.0
8.2
4.4
26.3
8.7
14.1
12.7
6.8
– 21.1
Myanmar
– 17.6
7.2
20.2
– 12.4
11.5
8.7
7.1
3.5
7.3
43.9
25.9
– 8.4a
Philippinesf
– 17.5
3.6
12.3
– 4.2
18.7
3.1
8.8
7.7
9.2
7.2
2.2
– 24.2
Singapore
– 23.3
9.3
21.1
– 13.8
0.4
17.0
27.4
15.2
19.3
10.2
21.5
– 23.1
Thailand
– 33.0
17.7
24.6
– 0.7
4.0
16.8
25.3
25.7
9.0
8.7
27.7
– 25.1
Timor-Leste
..
..
..
13.5
– 16.8
– 10.8
– 16.1
– 16.0
– 9.8
74.3
100.6b
24.6b
Viet Nam
– 0.8
2.1
33.2
3.7
21.7
26.7
26.1
17.0
20.4
37.0
32.7
– 14.7
Notes: a Refers to the first 8 months.
b
Estimate.
c
Projection.
d
Refers to the first 11 months.
e
Refers to the first 6 months.
f
f.o.b. value.
g
Refers to the first 10 months.
h
Fiscal year.
i
Refers to the first 9 months.
j
Provisional.
Sources: ESCAP, calculated from national sources; International Monetary Fund, Direction of Trade Statistics Database; and Country Reports
Series; Economist Intelligence Unit, Country Reports; CEIC Data Company Limited; and the website of Interstate Statistical Committee of the
Commonwealth of Independent States (www.cisstat.com).
204

STATISTICAL ANNEX
Table 10. Inward foreign direct investment
FDI inward stock
FDI net inflows
Millions of
Percentage of GDP
Millions of
Percentage of GDP
US dollars
US dollars
2008
90-95
96-00
01-05
2008
2008
90-95
96-00
01-05
2008
East and North-East Asia
China
378 083
9.7
16.0
13.5
8.7
108 312
3.6
4.1
3.3
2.5
Democratic People’s Republic of Korea
1 435
6.4
9.4
10.6
10.8
44
0.1
0.6
0.7
0.3
Hong Kong, China
835 764
190.2
188.5
253.8
387.7
63 003
4.4
14.7
13.8
29.2
Japan
203 372
0.4
0.8
1.9
4.1
24 426
0.0
0.1
0.2
0.5
Macao, China
9 749
54.5
44.5
44.1
44.7
1 905
0.0
0.0
6.2
8.7
Mongolia
1 946
1.4
9.3
27.5
37.0
683
0.5
2.5
6.6
13.0
Republic of Korea
90 693
1.9
4.5
11.4
9.8
7 603
0.2
1.2
0.8
0.8
Russian Federation
213 734
0.3
5.6
21.4
12.7
70 320
0.2
1.1
1.7
4.2
North and Central Asia
Armenia
3 521
2.3
18.4
30.2
29.5
1 132
0.7
5.8
5.0
9.5
Azerbaijan
6 612
1.1
62.9
102.3
14.3
11
0.6
13.9
24.4
0.0
Georgia
6 919
0.3
13.6
34.4
54.1
1 564
0.1
4.8
7.0
12.2
Kazakhstan
58 284
4.1
33.8
52.8
44.0
14 543
2.0
6.3
7.7
11.0
Kyrgyzstan
1 015
1.7
21.7
27.1
20.1
233
1.2
3.6
2.8
4.6
Russian Federation
213 734
0.3
5.6
21.4
12.7
70 320
0.2
1.1
1.7
4.2
Tajikistan
862
0.8
9.3
13.3
34.8
376
0.3
1.8
4.9
15.2
Turkmenistan
4  748
4.2
22.7
34.1
53.7
820
2.6
3.4
5.8
9.3
Uzbekistan
3 043
0.4
3.2
8.8
11.8
918
0.1
0.8
0.9
3.6
Oceania
American Samoa
Australia
272 174
25.5
27.1
33.8
26.8
46 774
2.0
1.8
1.4
4.6
Cook Islands
39
18.9
66.2
25.4
1
1.0
4.8
0.1
Fiji
1 759
25.4
26.3
21.5
48.9
274
3.3
2.9
4.1
7.6
French Polynesia
324
3.8
4.8
5.4
6.9
32
0.4
0.3
0.4
0.7
Guam
Kiribati
141
2.6
74.1
209.1
181.9
2
0.4
29.2
24.2
2.5
Marshall Islands
6
– 1.2
37.0
– 5.2
3.3
Micronesia (Federated States of)
6
0.0
– 7.0
0.0
2.4
Nauru
0
– 0.6
1.2
4.5
2.0
New Caledonia
2 239
2.8
2.7
6.2
24.1
467
0.3
– 0.2
1.2
5.0
New Zealand
53 424
33.2
52.3
49.5
42.3
1 979
4.3
3.3
2.0
1.6
Niue
7
0
Northern Mariana Islands
Palau
124
0.0
57.4
87.3
69.3
2
0.6
17.0
3.3
1.0
Papua New Guinea
2 312
36.6
43.2
57.4
28.9
– 30
5.7
6.0
1.3
– 0.4
Samoa
74
13.4
20.9
16.7
13.8
6
3.1
2.1
0.0
1.0
Solomon Islands
700
121.6
101.8
108.2
106.8
76
4.0
1.3
0.5
11.5
Tonga
84
2.6
6.0
13.0
28.0
6
0.8
0.7
2.9
1.9
Tuvalu
32
0.8
1.0
106.7
99.2
2
0.4
– 1.2
27.3
5.2
Vanuatu
1 019
135.0
167.0
182.7
182.4
34
12.7
9.3
5.7
6.0
South and South-West Asia
Afghanistan
1 365
0.4
0.5
4.5
10.8
300
0.0
0.0
2.3
2.4
Bangladesh
4 817
1.6
3.8
5.5
6.1
1 086
0.1
1.1
0.9
1.4
Bhutan
131
1.0
1.0
1.7
9.8
30
0.1
0.1
0.5
2.2
India
123 288
0.9
3.0
5.2
9.8
41 554
0.2
0.7
0.9
3.3
Iran (Islamic Republic of)
20 811
2.1
2.2
6.8
6.0
1 492
0.0
0.1
1.8
0.4
Maldives
225
14.9
17.3
22.4
17.8
15
2.4
2.1
1.8
1.2
Nepal
127
0.3
1.1
1.6
1.0
1
0.0
0.2
0.1
0.0
Pakistan
31 059
4.5
9.8
7.5
17.4
5 438
0.6
0.6
1.0
3.0
Sri Lanka
4 283
9.3
11.5
10.1
10.5
752
1.0
1.4
1.1
1.8
Turkey
69 871
6.2
6.8
11.3
9.4
18 198
0.4
0.3
1.2
2.5
South-East Asia
Brunei Darussalam
10 361
3.6
52.3
105.1
71.3
239
2.5
12.9
15.7
1.6
Cambodia
4  637
6.0
35.4
41.2
41.4
815
2.2
6.3
3.6
7.3
Indonesia
67 044
8.1
15.9
7.9
13.1
7 919
1.3
0.5
0.6
1.6
Lao People’s Democratic Republic
1 408
6.1
29.9
29.5
26.4
228
2.7
4.5
1.1
4.3
Malaysia
73 262
28.2
49.0
35.3
33.1
8 053
7.0
5.2
2.6
3.6
Myanmar
5 546
11.4
41.4
44.8
19.3
283
3.0
7.2
2.3
1.0
Philippines
21  470
12.4
19.2
14.8
12.7
1 520
1.8
2.1
1.2
0.9
Singapore
326 142
77.1
104.0
152.3
179.3
22 725
10.9
14.3
13.6
12.5
Thailand
104 850
10.7
17.3
32.4
37.2
10 091
1.6
3.4
3.8
3.6
Timor-Leste
166
19.0
25.2
46.4
29.2
0
5.2
0.0
5.4
0.1
Viet Nam
48 325
29.8
56.1
66.5
53.3
8 050
7.7
6.4
3.7
8.9
Source:  See Technical Notes at the end.
205

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 11. Official development assistance and workers’ remittances
ODA received
Workers’ remittances
Millions of
Percentage of GNI
Millions of
Percentage of GNI
US dollars
US dollars
1990
2000
2007
1990
2000
2007
1995
2000
2007
1995
2000
2007
East and North-East Asia
China
2 030 1 728 1 439
0.5
0.1
0.0
350
556 10 680
0.0
0.0
0.3
Democratic People’s Republic of Korea
8
73
98
0.0
0.7
0.7
Hong Kong, China
38
0.1
Japan
505
1 261
0.0
0.0
Macao, China
0
0.0
Mongolia
13
217
228
1.0
20.1
5.8
12
1.1
Republic of Korea
52
0.0
291
63
172
0.1
0.0
0.0
Russian Federation
852
0.1
North and Central Asia
Armenia
216
352
11.4
4.0
12
9
94
1.0
0.5
1.1
Azerbaijan
139
225
2.7
0.8
57
1 192
1.1
4.2
Georgia
169
382
5.3
3.7
95
245
3.0
2.4
Kazakhstan
189
202
1.1
0.2
64
132
0.4
0.1
Kyrgyzstan
215
274
16.7
7.3
1
2
705
0.1
0.2
18.8
Russian Federation
852
0.1
Tajikistan
124
221
11.7
7.4
1 685
56.5
Turkmenistan
31
28
0.8
0.4
Uzbekistan
186
166
1.4
0.7
Oceania
American Samoa
Australia
Cook Islands
12
4
9
20.7
5.3
4.4
Fiji
50
29
57
3.7
1.7
1.9
26
1.5
French Polynesia
260
11.2
14
0.3
Guam
Kiribati
20
18
27
50.9
20.4
20.6
Marshall Islands
57
52
42.8
27.1
Micronesia (Federated States of)
102
115
43.0
44.9
Nauru
0
4
26
0.4
14.8
77.0
New Caledonia
302
12.0
3
0.0
New Zealand
Niue
7
3
15
Northern Mariana Islands
63
Palau
39
22
31.2
13.0
Papua New Guinea
412
275
321
15.5
8.7
6.3
Samoa
48
27
37
28.9
11.8
7.1
39
20.3
Solomon Islands
46
68
246
22.3
20.2
42.6
Tonga
30
19
31
21.5
12.2
12.1
96
37.7
Tuvalu
5
4
12
53.1
32.9
39.1
Vanuatu
50
46
57
26.8
19.8
11.8
6
11
1
2.5
4.7
0.3
South and South-West Asia
Afghanistan
122
136 3 951
3.4
5.0
39.0
Bangladesh
2 093 1 172 1 502
7.3
2.5
2.0 1 202 1 958
6 553
3.1
4.2
8.9
Bhutan
46
53
89
17.6
11.9
7.3
India
1 399 1 463 1 298
0.4
0.3
0.1 6 139 12 745
1.7
2.8
Iran (Islamic Republic of)
105
130
102
0.1
0.1
0.0
Maldives
21
19
37
11.1
3.2
3.7
Nepal
423
387
598
10.4
6.2
4.8
57
111
1 647
1.2
1.8
13.2
Pakistan
1 127
700 2 212
1.9
0.9
1.3 1 712 1 075
5 992
2.1
1.4
3.4
Sri Lanka
728
276
601
9.1
1.7
1.9
790 1 142
2 502
6.0
7.0
7.8
Turkey
1 202
327
795
0.6
0.1
0.1 3 327 4 560
1 209
1.4
1.7
0.2
South-East Asia
Brunei Darussalam
4
0.1
Cambodia
41
396
672
3.3
12.6
9.1
10
100
184
0.3
3.2
2.5
Indonesia
1 716 1 654
872
1.6
1.2
0.2
651 1 190
6 004
0.3
0.9
1.4
Lao People’s Democratic Republic
149
282
396
17.2
17.8
10.6
Malaysia
468
45
200
1.1
0.1
0.1
Myanmar
161
106
197
3.1
1.5
1.1
81
77
1.0
1.1
Philippines
1 271
575
634
2.9
0.7
0.4
432 5 161 13 266
0.6
6.4
8.4
Singapore
– 3
0.0
Thailand
796
698
– 312
0.9
0.6
– 0.1
Timor-Leste
0
231
278
0.1
71.6
16.1
Viet Nam
181 1 681 2 497
3.0
5.5
3.6
Source:  See Technical Notes at the end.
206

STATISTICAL ANNEX
Table 12. International migration
Stock of foreign population
Stock of foreign population
as share of total population
Net migration rate
Thousands
Percentages
Per 1,000 population
1990
1995
2000
2005
1990
1995
2000
2005
90-95 95-00
00-05
05-10
East and North-East Asia
China
376
437
508
590
0.0
0.0
0.0
0.0
– 0.1
– 0.1
– 0.3
– 0.3
Democratic People’s Republic of Korea
34
35
36
37
0.2
0.2
0.2
0.2
Hong Kong, China
2 218
2 431 2 669
2 721 38.9
39.1
40.0
39.5
10.1
9.3
3.3
3.3
Japan
1 076
1 363 1 687
1 999
0.9
1.1
1.3
1.6
0.8
0.1
0.1
0.2
Macao, China
200
224
240
278 53.9
54.5
54.5
57.0
7.8
7.1
17.2
19.3
Mongolia
7
7
8
9
0.3
0.3
0.3
0.4
– 15.4
– 4.3
1.4
– 0.8
Republic of Korea
572
584
568
551
1.3
1.3
1.2
1.2
– 2.9
– 0.3
– 0.3
– 0.1
Russian Federation
11 525 11 707 11 892 12 080
7.8
7.9
8.1
8.4
3.0
3.0
1.3
0.4
North and Central Asia
Armenia
659
682
574
493 18.6
21.1
18.7
16.1
– 29.6
– 14.3
– 6.5
– 4.9
Azerbaijan
361
525
348
255
5.0
6.7
4.3
3.0
– 3.1
– 3.2
– 2.4
– 1.2
Georgia
338
250
219
191
6.2
4.9
4.6
4.3
– 20.7
– 15.9 – 13.4 – 11.5
Kazakhstan
3 619
3 295 2 871
2 974 21.9
20.7
19.2
19.6
– 18.6
– 17.1
– 2.7
– 1.3
Kyrgyzstan
623
482
373
288 14.2
10.5
7.5
5.5
– 12.2
– 1.1
– 2.9
– 2.8
Russian Federation
11 525 11 707 11 892 12 080
7.8
7.9
8.1
8.4
3.0
3.0
1.3
0.4
Tajikistan
426
305
330
306
8.0
5.3
5.4
4.7
– 10.7
– 11.2 – 10.9
– 5.9
Turkmenistan
307
260
241
224
8.4
6.2
5.4
4.6
2.5
– 2.3
– 1.1
– 1.0
Uzbekistan
1 653
1 474 1 367
1 268
8.1
6.4
5.5
4.8
– 3.1
– 3.4
– 3.1
– 3.0
Oceania
American Samoa
21
23
25
27 45.2
43.7
43.2
42.3
Australia
3 581
3 854 4 027
4 336 21.0
21.3
21.0
21.3
4.2
5.0
6.5
4.8
Cook Islands
3
3
3
3 14.6
14.8
15.9
14.6
Fiji
14
15
16
17
1.9
1.9
2.0
2.1
– 9.3
– 10.7 – 10.3
– 8.3
French Polynesia
26
28
30
32 13.2
13.1
12.9
12.7
– 0.5
1.4
1.5
Guam
70
72
74
76 52.1
49.4
47.8
45.4
– 4.6
– 6.4
1.0
Kiribati
2
2
2
2
3.0
2.6
2.4
2.2
Marshall Islands
2
2
2
2
3.3
3.1
3.1
2.9
Micronesia (Federated States of)
4
3
3
3
3.8
3.1
2.9
2.6
– 4.4
– 25.4 – 17.9 – 16.3
Nauru
4
4
5
5 42.9
42.5
45.4
48.7
New Caledonia
38
45
50
54 22.0
23.1
23.1
23.2
5.8
5.5
4.3
4.5
New Zealand
523
594
685
858 15.5
16.1
17.7
20.9
8.1
2.3
5.1
2.4
Niue
0
0
0
0 20.0
20.6
21.8
23.7
Northern Mariana Islands
27
36
45
51 61.6
62.8
65.0
63.4
Palau
3
5
6
6 19.2
27.3
32.7
30.0
Papua New Guinea
33
31
26
25
0.8
0.7
0.5
0.4
Samoa
3
5
6
7
2.0
2.7
3.2
4.0
– 15.8
– 16.3 – 20.8 – 18.4
Solomon Islands
5
5
6
6
1.5
1.5
1.4
1.4
Tonga
3
2
2
1
3.2
2.3
1.6
1.1
– 18.0
– 19.5 – 15.9 – 17.5
Tuvalu
0
0
0
0
3.6
2.9
2.3
1.9
Vanuatu
2
2
1
1
1.4
1.0
0.7
0.5
– 1.1
– 7.9
South and South-West Asia
Afghanistan
58
70
76
86
0.5
0.4
0.4
0.4
42.6
– 3.8
7.2
7.5
Bangladesh
882
1 006
988
1 032
0.8
0.8
0.7
0.7
– 0.8
– 0.8
– 1.0
– 0.7
Bhutan
24
28
32
37
4.3
5.4
5.7
5.7
– 38.2
0.1
11.6
2.9
India
7 493
7 022 6 411
5 887
0.9
0.7
0.6
0.5
– 0.2
– 0.3
– 0.3
– 0.2
Iran (Islamic Republic of)
4 292
3 016 2 804
2 062
7.6
4.8
4.2
2.9
– 3.9
– 0.2
– 2.9
– 1.4
Maldives
3
3
3
3
1.2
1.2
1.1
1.1
Nepal
431
625
718
819
2.3
2.9
2.9
3.0
– 1.0
– 0.9
– 0.8
– 0.7
Pakistan
6 556
4 077 4 243
3 554
5.7
3.1
2.9
2.1
– 4.2
– 0.1
– 1.6
– 1.6
Sri Lanka
459
426
395
366
2.7
2.3
2.1
1.9
– 2.9
– 4.3
– 4.6
– 3.0
Turkey
1 150
1 212 1 263
1 334
2.1
2.0
1.9
1.9
– 0.2
0.0
– 0.2
– 0.1
South-East Asia
Brunei Darussalam
73
87
104
124 28.5
29.6
31.2
33.6
2.6
2.2
2.0
1.8
Cambodia
38
116
237
304
0.4
1.0
1.9
2.2
2.8
1.3
0.2
– 0.1
Indonesia
466
219
292
136
0.3
0.1
0.1
0.1
– 0.8
– 0.9
– 0.9
– 0.6
Lao People’s Democratic Republic
23
23
22
20
0.5
0.5
0.4
0.3
– 1.3
– 3.4
– 4.1
– 2.4
Malaysia
1 014
1 193 1 554
2 029
5.6
5.8
6.7
7.9
3.0
4.5
1.2
1.0
Myanmar
134
114
98
93
0.3
0.3
0.2
0.2
– 0.6
0.0
– 4.2
– 2.0
Philippines
159
210
323
375
0.3
0.3
0.4
0.4
– 2.7
– 2.4
– 2.2
– 2.0
Singapore
727
992 1 352
1 494 24.1
28.5
33.6
35.0
15.4
19.6
6.7
22.0
Thailand
387
549
792
982
0.7
0.9
1.3
1.5
– 0.1
– 1.5
4.4
0.9
Timor-Leste
9
10
9
12
1.2
1.1
1.1
1.2
– 40.9
9.1
1.8
Viet Nam
29
39
56
55
0.0
0.1
0.1
0.1
– 2.4
– 0.5
– 0.5
– 0.5
Source:  See Technical Notes at the end.
207

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 13. Primary, secondary and tertiary education
Net enrolment ratio in
Net enrolment ratio in
Gross enrolment ratio in
primary education
secondary education
tertiary education
Percentage of primary
Percentage of secondary
Percentage of tertiary
school-aged children
school-aged children
school-aged children
1991
2000
2007
1999
2002
2004
2007
1999
2002
2004
2007
East and North-East Asia
China
98.0
6.4
12.7
17.8
22.9
Democratic People’s Republic of Korea
Hong Kong, China
92.4
74.3
76.0
78.6
31.0
33.8
Japan
99.7
100.0
99.8
99.4
99.7
99.9
98.2
45.1
50.5
54.0
58.1
Macao, China
81.1
85.5
92.9
62.1
71.7
76.1
77.6
27.7
64.6
68.0
57.0
Mongolia
90.1
89.9
88.8
55.5
71.7
81.4
81.1
25.7
34.0
39.0
47.7
Republic of Korea
99.7
96.9
94.5
87.3
90.4
96.9
72.6
86.8
89.9
94.7
Russian Federation
97.9
69.0
74.7
North and Central Asia
Armenia
85.0
83.0
83.5
85.0
23.7
26.5
26.2
34.2
Azerbaijan
88.8
89.5
95.3
75.3
77.8
80.7
83.0
15.7
15.9
14.9
15.2
Georgia
97.1
93.7
76.4
81.9
35.9
40.9
41.5
37.3
Kazakhstan
88.0
87.2
90.2
87.9
90.6
86.2
24.5
38.8
47.1
51.2
Kyrgyzstan
92.3
86.7
84.5
82.1
80.5
29.0
42.9
39.6
42.8
Russian Federation
97.9
69.0
74.7
Tajikistan
76.7
95.9
97.2
62.8
76.2
79.6
81.3
13.6
14.0
16.4
19.8
Turkmenistan
Uzbekistan
78.2
91.0
91.7
12.9
13.8
14.1
9.8
Oceania
American Samoa
Australia
99.4
94.7
97.1
87.8
85.9
87.9
65.4
76.5
72.4
75.1
Cook Islands
77.4
67.4
59.0
70.1
Fiji
97.5
78.6
77.0
81.1
15.5
French Polynesia
Guam
Kiribati
70.4
Marshall Islands
66.3
74.4
16.9
Micronesia (Federated States of)
98.2
14.1
Nauru
72.3
New Caledonia
95.4
New Zealand
98.1
98.7
99.1
91.9
64.3
69.2
85.7
79.8
Niue
93.4
Northern Mariana Islands
Palau
96.4
40.2
Papua New Guinea
66.0
2.0
Samoa
90.0
71.5
65.6
66.0
11.5
Solomon Islands
83.5
23.0
27.6
Tonga
96.5
72.2
66.4
3.4
5.4
6.0
Tuvalu
Vanuatu
70.6
93.9
86.9
29.6
36.2
38.1
4.0
5.0
4.8
South and South-West Asia
Afghanistan
24.7
25.9
1.3
Bangladesh
76.3
42.1
44.7
41.0
40.7
5.4
6.0
5.5
7.2
Bhutan
55.5
58.8
16.9
24.5
2.7
5.3
India
79.2
10.4
9.5
Iran (Islamic Republic of)
92.4
80.2
78.5
18.9
19.4
22.6
31.4
Maldives
86.7
98.2
96.3
31.5
51.1
69.0
0.2
Nepal
63.0
70.5
76.1
42.0
5.0
5.6
11.3
Pakistan
33.3
22.0
28.3
32.2
2.5
3.1
5.1
Sri Lanka
84.3
Turkey
89.2
92.3
69.5
21.5
24.4
28.9
36.3
South-East Asia
Brunei Darussalam
92.0
92.8
89.1
12.3
13.7
14.9
15.4
Cambodia
72.0
87.2
89.4
15.4
22.1
25.8
34.1
2.5
3.0
5.3
Indonesia
96.3
92.6
94.8
56.1
67.5
15.0
16.6
17.5
Lao People’s Democratic Republic
62.1
77.2
86.3
26.3
30.5
35.3
35.9
2.4
4.3
5.8
11.6
Malaysia
93.0
96.8
65.1
65.4
72.0
23.0
28.0
30.6
Myanmar
98.6
Philippines
96.4
91.3
50.7
56.3
60.8
61.3
28.7
30.4
28.8
Singapore
Thailand
87.7
93.9
76.1
33.0
41.0
43.6
49.5
Timor-Leste
63.0
9.6
Viet Nam
90.4
94.5
59.1
10.6
Source:  See Technical Notes at the end.
208

STATISTICAL ANNEX
Table 14.  Poverty and malnutrition
Population living below $1
Population
Prevalence of
(2005 PPP) a day
undernourished
underweight children
Percentage
Percentages
Percentage of
children under 5
1990
1996
2002
2005
1991
2004
Earliest
Latest
East and North-East Asia
China
60.2
36.4
28.4
15.9
15
9
19 (90)
7 (05)
Democratic People’s Republic of Korea
21
32
60 (98)
23 (04)
Hong Kong, China
Japan
5
5
Macao, China
Mongolia
18.8 (95)
15.5
22.4
30
29
12 (92)
6 (05)
Republic of Korea
2.0 (98)
5
5
Russian Federation
2.8 (93)
3.5
2.0
2.0
5
5
3 (95)
North and Central Asia
Armenia
17.5
15.0
10.6 (03)
46
21
4 (98)
4 (05)
Azerbaijan
15.6 (95)
6.3 (01)
2.0
27
12
10 (96)
10 (06)
Georgia
4.5
15.1
13.4
47
13
2 (05)
Kazakhstan
4.2 (93)
5.0
5.2
3.1 (03)
5
5
8 (95)
4 (06)
Kyrgyzstan
18.6 (93) 15.5 (99)
34.0
21.8 (04)
17
5
11 (97)
3 (06)
Russian Federation
2.8 (93)
3.5
2.0
2.0
5
5
3 (95)
Tajikistan
44.5 (99)
21.5 (04)
34
34
17 (05)
Turkmenistan
63.5 (93) 24.8 (98)
9
6
11 (05)
Uzbekistan
32.1 (98)
42.3
46.3 (03)
5
14
19 (96)
5 (06)
Oceania
American Samoa
Australia
5
5
Cook Islands
10 (97)
Fiji
8
5
8 (93)
French Polynesia
5
5
Guam
Kiribati
8
5
13 (99)
Marshall Islands
Micronesia (Federated States of)
15 (97)
Nauru
New Caledonia
8
9
New Zealand
5
5
Niue
Northern Mariana Islands
Palau
Papua New Guinea
35.8
Samoa
9
5
Solomon Islands
25
9
Tonga
Tuvalu
Vanuatu
10
7
South and South-West Asia
Afghanistan
48 (97)
39 (04)
Bangladesh
66.8 (92) 59.4
57.8 (00)
49.6
36
27
67 (92)
46 (07)
Bhutan
26.2 (03)
19 (99)
India
49.4 (94)
41.6
24
21
53 (93)
48 (05)
Iran (Islamic Republic of)
3.9
2.0 (98)
2.0
5
5
16 (95)
Maldives
9
7
39 (94)
30 (01)
Nepal
68.4
55.1 (04)
21
15
49 (95)
45 (06)
Pakistan
64.7 (91) 48.1 (97)
35.9
22.6
22
23
40 (91)
38 (02)
Sri Lanka
15.0 (91) 16.3
14.0
27
21
38 (93)
29 (00)
Turkey
2.1 (94)
2.0
2.7
5
5
10 (93)
4 (03)
South-East Asia
Brunei Darussalam
5
5
Cambodia
48.6 (94)
40.2 (04)
38
26
40 (93)
36 (05)
Indonesia
19
17
34 (95)
28 (03)
Lao People’s Democratic Republic
55.7 (92) 49.3 (97)
44.0
27
19
44 (93)
37 (06)
Malaysia
2.0 (92)
2.1 (95)
2.0 (04)
5
5
23 (93)
8 (05)
Myanmar
44
19
32 (90)
32 (03)
Philippines
30.7 (91) 28.1 (94)
22.0 (03)
22.6 (06)
21
16
34 (90)
28 (03)
Singapore
3 (00)
Thailand
5.5 (92)
2.0
2.0
2.0 (04)
29
17
19 (93)
9 (05)
Timor-Leste
52.9 (01)
18
22
49 (07)
Viet Nam
63.7 (93) 49.7 (98)
40.1
21.5 (06)
28
14
45 (94)
20 (06)
Source:  See Technical Notes at the end.
209

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 15.  Unemployment rate by gender and age group
Total
Female
Male
Youth
unemployment rate
Percentage
Percentage of
Percentage of
Percentage of labour
of labour force
female labour force
male labour force
force aged 15-24
1991 2000
2007
1991
2000
2007
1991
2000
2007
1991
2000
2007
East and North-East Asia
China
2.3
3.1
4.0
Democratic People’s Republic of Korea
Hong Kong, China
1.8
4.9
4.0
1.6
4.0
3.4
1.9
5.6
4.5
4.2
11.2
9.0
Japan
2.1
4.8
3.9
2.2
4.5
3.7
1.9
5.0
4.0
4.5
9.2
7.7
Macao, China
3.0
6.7
3.0
3.7
4.6
2.7
2.5
8.6
3.4
9.9
6.2
Mongolia
2.8
22.8
Republic of Korea
2.4
4.4
3.2
2.0
3.6
2.6
2.7
5.0
3.7
7.4
11.8
8.9
Russian Federation
6.1
5.8
6.4
14.5
North and Central Asia
Armenia
28.4
Azerbaijan
6.5
5.3
7.8
14.0
Georgia
10.8
13.3
10.5
12.6
11.1
13.9
21.1
31.5
Kazakhstan
12.8
7.3
Kyrgyzstan
8.2
Russian Federation
6.1
5.8
6.4
14.5
Tajikistan
2.5
Turkmenistan
Uzbekistan
Oceania
American Samoa
5.0
6.0
4.9
Australia
9.6
6.3
4.4
9.2
6.1
4.8
9.9
6.5
4.0
17.5
12.1
9.4
Cook Islands
7.2
9.3
6.1
14.7
Fiji
5.9
French Polynesia
Guam
3.5
11.5
11.5
11.5
Kiribati
Marshall Islands
Micronesia (Federated States of)
Nauru
New Caledonia
New Zealand
10.3
5.9
3.6
9.5
5.8
3.9
10.9
6.1
3.3
18.8
13.2
9.7
Niue
Northern Mariana Islands
Palau
Papua New Guinea
2.8
1.3
4.3
5.3
Samoa
Solomon Islands
Tonga
Tuvalu
Vanuatu
South and South-West Asia
Afghanistan
Bangladesh
3.3
3.3
3.2
10.7
Bhutan
India
4.3
4.1
4.4
10.1
Iran (Islamic Republic of)
11.1
10.5
24.4
15.7
9.5
9.3
22.3
Maldives
2.0
2.7
1.6
4.4
Nepal
Pakistan
5.9
7.2
5.1
16.3
15.8
8.6
4.2
5.5
4.2
10.1
13.3
7.5
Sri Lanka
14.7
7.7
6.0
21.2
11.3
9.0
10.0
5.9
4.3
23.6
21.2
Turkey
8.2
6.5
9.9
7.1
6.3
10.2
8.7
6.6
9.8
15.3
13.1
19.6
South-East Asia
Brunei Darussalam
4.7
6.7
3.7
Cambodia
2.5
2.8
2.1
Indonesia
9.1
10.8
8.1
19.9
25.1
Lao People’s Democratic Republic
Malaysia
3.0
3.2
3.1
3.4
2.9
3.1
8.3
10.9
Myanmar
Philippines
9.0
10.1
6.3
10.5
9.9
6.0
8.1
10.3
6.4
17.6
21.2
14.9
Singapore
1.9
6.0
4.0
1.8
6.6
4.3
2.0
5.6
3.7
8.8
8.9
Thailand
2.7
2.4
1.2
3.5
2.3
1.1
2.0
2.4
1.3
6.6
4.5
Timor-Leste
Viet Nam
2.3
2.1
2.4
4.8
Source:  See Technical Notes at the end.
210

STATISTICAL ANNEX
Technical notes
Table 1.  Real gross domestic product
based on IMF, International Financial Statistics databases
growth rates
and  World Economic Outlook databases, October 2009
while data on Brunei Darussalam, Cook Islands, Micronesia
GDP growth rate at constant prices. The real annual
(Federated States of), Nauru, Palau and Tuvalu are based
percentage changes in GDP (at constant market prices) in
on ADB, Key  Indicators for Asia and the Pacific 2009. The
national currencies are reported in this table. GDP is
figures for 2009 are generally estimates and based on
defined as the total cost of all finished goods and services
ESCAP calculations. The projections/estimates are also
produced within the country in a given year. Most countries
provided by country authorities.  For India, data refer to
use constant market price values.  The growth rates of
the industrial workers index. Consumer price inflation are
some countries are at factor cost, including Fiji, India, the
for a given city or group of consumers in respect of
Islamic Republic of Iran and Pakistan, while Nepal is at
the following countries: Cambodia is for Phnom Penh;
producers’ prices. In the case of Timor-Leste, the data
Sri Lanka is for Colombo; and Nepal is for national urban
refer to real non-oil GDP. The table contains historical
consumers.
data from 1998 to 2008.  Historical data are mainly
based on IMF, International Financial Statistics databases
Table 5.  Budget balance
and ADB, Key Indicators for Asia and the Pacific 2009
with updates from national and local sources. The data
Government surplus or deficit, as percentage of GDP.
for 2009 are generally ESCAP estimates and calcula-
The Government fiscal balance (surplus/deficit) is the differ-
tions, although some projections are in line with the
ence between central government total revenues (including
economic programmes/projections of the Governments
grants) and total expenditures as a percentage of GDP.
concerned.
This provides a picture of the changes in the Government’s
financial position each year. When the difference is posi-
Tables 2 and 3.  Gross domestic savings and
tive, the fiscal position is in surplus; otherwise, it is in
investment rates
deficit. Government revenue is the sum of current and
capital revenues. Current revenue is the revenue accruing
Gross domestic savings and investment as a percent-
from taxes, as well as all current non-tax revenues, except
age of GDP. Gross domestic savings (GDS) are calculated
for transfers received from other (foreign or domestic)
as the difference between GDP and total consumption
governments and international institutions. Major items of
expenditure in the national accounts statistics. Gross do-
non-tax revenue include receipts from government enter-
mestic investment (GDI) is the sum of gross fixed capital
prises, rents and royalties, fees and fines, forfeits, private
formation and changes in inventories. Gross fixed capital
donations and repayments of loans properly defined as
formation is measured by the total value of a producer’s
components of net lending. Capital revenue is the pro-
acquisitions minus disposals of fixed assets in a given
ceeds from the sale of non-financial capital assets. As for
accounting period. Additions to the value of non-produced
government expenditure, it is the sum of current and
assets, such as land, form part of gross fixed capital
capital expenditure. Current expenditure comprises pur-
formation. Inventories are stocks of goods held by institu-
chases of goods and services by the central Government,
tional units to meet temporary or unexpected fluctuations in
transfers to non-central government units and to house-
production and sales. The amounts computed in the table
holds, subsidies to producers and the interest on public
refer to GDS and GDI as a percentage of GDP at current
debt. Capital expenditures, on the other hand, cover out-
prices. Historical data are mostly derived from ADB, Key
lays for the acquisition or construction of capital assets
Indicators for Asia and the Pacific 2009 while data on
and for the purchase of land and intangible assets, as well
some countries/areas (Georgia, Maldives, Russian Federa-
as capital transfers to domestic and foreign recipients.
tion, Solomon Islands, Tajikistan, Turkey, Turkmenistan,
Loans and advances for capital purposes are also in-
Uzbekistan and Macao, China) are based on World Bank,
cluded. Grants are excluded in Bangladesh, Cambodia,
World Development Indicators. The 2009 data are obtained
China, Hong Kong (China), Indonesia, Iran (Islamic Repub-
from input supplied by national authorities and ESCAP
lic of), Kiribati, Malaysia, Pakistan, the Republic of Korea,
calculations and estimates.
Singapore, Sri Lanka, Thailand, Turkmenistan, and devel-
oped ESCAP countries. In the case of Timor-Leste, the
amounts are computed as a share of non-oil GDP. The
Table 4.  Inflation rates
budget surplus/deficit of Singapore was computed from
government operating revenue minus government operating
Inflation rates. Rates of inflation in this table refer to
expenditure and minus government development expendi-
changes in the consumer price index (CPI) and reflect
ture; while the budget balance of Thailand refers to a
changes in the cost of acquiring a fixed basket of goods
government cash balance comprising the budgetary bal-
and services by an average consumer. Historical data are
ance and non-budgetary balance.
211

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
Table 6.  Current account balance
Table 10.  Inward foreign direct investment
Current account balance, as a share of GDP. The current
Foreign direct investment (FDI) inward stock.  Repre-
account balance refers to the sum of the balance on goods,
sents the value of the share of capital and reserves
services and income. It also includes current transfers
(including retained profits) attributable to the parent enter-
crossing national borders. A positive balance shows that the
prise, plus the net indebtedness of affiliates to the parent
foreign currencies flow into the domestic economy; likewise,
enterprise.  Inward  stock is the value of the capital and
a negative balance shows the opposite. The figures are
reserves in the economy attributable to a parent enterprise
reported as a percentage of GDP at current prices (national
resident in a different economy. Expressed in millions of
United States dollars and as a percentage of GDP.
currency) to allow for cross-country comparisons. Historical
Source: Calculated by ESCAP using data from United
data are mainly based on IMF, International Financial Statis-
Nations Conference on Trade and Development, Foreign
tics databases and World Economic Outlook database,
Direct Investment and National Accounts Main Aggregates
October 2009, with updates and estimates from national,
database (online database accessed on 21 September
local and country sources. The 2009 data are derived from
2009 and 22 October 2009).
projections supplied by national authorities and ESCAP
estimates. In the case of Timor-Leste, current account
Foreign direct investment (FDI) inflows.  Comprise capi-
balance includes international assistance and the amount is
tal provided (either directly or through other related enter-
computed as a percentage of non-oil GDP.
prises) by a foreign direct investor to an FDI enterprise, or
capital received by a foreign direct investor from an FDI
Table 7.  Change in money supply
enterprise. FDI inflows comprise capital provided (either
directly or through other related enterprises) by a foreign
direct investor to an FDI enterprise in the reporting
Growth of money supply. The annual growth rates of
economy. Expressed in millions of United States dollars and
board money supply (at the end of a given period) as
as a percentage of GDP. Source: Calculated by ESCAP
represented by M2. M2 is defined as the sum of currency
using data from United Nations Conference on Trade and
in circulation plus demand deposits (M1) and quasi-money,
Development, Foreign Direct Investment and National
which consists of time and savings deposits, including
Accounts Main Aggregates database (online database
foreign currency deposits. Historical data for M2 are mainly
accessed on 21 September 2009 and 22 October 2009).
obtained from IMF, International Financial Statistics
databases with updates and estimates from national and
local sources. In the case of Cook Islands, Turkmenistan
Table 11.  Official development assistance
and Uzbekistan, the data are based on ADB, Key  Indica-
and workers’ remittances
tors for Asia and the Pacific 2009. The data for 2009 are
computed by ESCAP on the basis of IMF data and
Official development assistance received.  The amount
estimates based on national sources.
of official development assistance (ODA) received in grants
and loans during the reporting period, expressed in millions
of United States dollars and as a percentage of the gross
Tables 8 and 9.  Growth rates of merchandise
national income (GNI). Source: Calculated by ESCAP us-
exports and imports
ing data from Organization for Economic Co-operation and
Development, Development Database on Aid from DAC
Growth rates of exports and imports. The annual growth
Members and National Accounts Main Aggregates database
(online database accessed on 2 October 2009 and 5
rates of exports and imports, in terms of merchandise
November 2009).
goods only, are shown in these tables. Data are in millions
of United States dollars primarily obtained from the bal-
Workers’ remittances received. Current transfers from
ance-of-payments accounts of each country. Exports in
abroad by migrants who are employed or intend to remain
general are reported on a free-on-board (f.o.b.) basis. In
employed for more than a year in another economy in
this case, exports are valued at the customs frontier of the
which they are considered residents, expressed in millions
exporting country plus export duties and the costs of
of United States dollars and as a percentage of gross
loading the goods onto the carriers unless the latter is
national income (GNI). Source: Calculated by ESCAP us-
borne by the carrier. It excludes the cost of freight and
ing data from International Monetary Fund, Balance of
insurance beyond the customs frontier. As for imports, data
Payment Statistics (CD-ROM, August 2009) and National
are reported either on an f.o.b. or c.i.f. (cost, insurance,
Accounts Main Aggregates Database (online database
freight) basis. On a c.i.f. basis, the value of imports
accessed on 5 November 2009).
includes the cost of international freight and insurance up
to the customs frontier of the importing country. It excludes
Table 12.  International migration
the cost of unloading the goods from the carrier unless it
is borne by the carrier.
Stock of foreign population. Estimated number of interna-
tional immigrants, male and female, in the middle of the
Historical data on exports and imports are mainly obtained
indicated year, expressed in thousands. Generally, this
from country sources, statistical publications, and second-
represents the number of persons born in a country other
ary publications. The figures for 2009 are generally esti-
than where they live. Source:  World Migrant Stock: The
mates based on country sources and calculations by
2008 Revision population database (online database
ESCAP, and are also provided by national consultants.
accessed on 25 August 2009).
212

STATISTICAL ANNEX
Stock of foreign population as share of total popula-
population living on less than $1.25 a day, measured at
tion.  The number of international immigrants divided by
2005 international prices, adjusted for purchasing power
the total population. Expressed as a percentage in the
parity (PPP). The purchasing power parity conversion factor
middle of the indicated year. Where data on the place of
is the number of units of a country’s currency required to
birth was unavailable, the number of non-citizens was used
buy the same amounts of goods and services in the
as a proxy for the number of international immigrants. In
domestic market as the United States dollar would buy in
either case, the migrant stock includes refugees, some of
the United States. Source: United Nations Millennium De-
whom may not be foreign-born. Source:  World Migrant
velopment Goals Indicators (online database accessed on
Stock: The 2008 Revision population database (online data-
3 September 2009).
base accessed on 25 August 2009).
Population undernourished.  The prevalence of (severely)
Net migration rate.  The number of international immi-
underweight children, expressed as the percentage of chil-
grants minus the number of emigrants over a period,
dren aged 0-59 months whose weight for age is less than
divided by the average population of the receiving country
minus 3 standard deviations from the median for the
over that period. Expressed as the net number of migrants
international reference population ages 0-59 months.
per 1,000 population. Source:  World Population Prospects:
Source: United Nations Millennium Development Goals
The 2008 Revision population database (online database
Indicators (online database accessed on 3 September
accessed on 28 April 2009).
2009).
Table 13.  Primary, secondary and tertiary
Prevalence of underweight children.  The percentage of
education
children aged 0-59 months who fall below minus 2 stand-
ard deviations from the median weight for age of the
Net enrolment ratio in primary education. The number of
international reference population. The international refer-
pupils of the theoretical school-age group for primary edu-
ence population, often referred to as the NCHS/WHO
cation, expressed as a percentage of the total population
reference population, was formulated by the National
in that age group. Source: UNESCO Institute for Statistics,
Center for Health Statistics (NCHS) as a reference for the
Data Centre (online database accessed on 17 November
United States and later adopted by the World Health
2009).
Organization (WHO). Source: United Nations Millennium
Development Goals Indicators (online database accessed
Net enrolment ratio in secondary education.  The
on 4 August 2009).
number of pupils of the theoretical school-age group for
secondary education, expressed as a percentage of the
Table 15.  Unemployment rate by gender
total population in that age group. Source: UNESCO Insti-
and age group
tute for Statistics, Data Centre (online database accessed
on 28 August 2009).
Unemployment rate: total, female, male.  The number of
persons of working age who, during the reference period,
Gross enrolment ratio in tertiary education. The number
were without work, currently available for work and seeking
of pupils enrolled in the tertiary level of education, regard-
work, divided by the total labour force. National definitions
less of age, expressed as a percentage of the population
and coverage of unemployment may vary. Data are
in the theoretical age group for the same level of
disaggregated by sex. Source: Calculated by ESCAP using
education. For the tertiary level, the population used is
data from International Labour Organization, Key Indicators
the five-year age group following on from the secondary
of the Labour Market, Sixth Edition (online database
school leaving age. Source: UNESCO Institute for Statis-
accessed on 14 September 2009).
tics, Data Centre (online database accessed on 10 August
2009).
Youth unemployment rate: total.  The number of young
persons aged 15-24 who are without work, currently avail-
Table 14.  Poverty and malnutrition
able for work and seeking work, divided by the total labour
force of that age group. Source: United Nations Millennium
Population living below $1.25 (2005 PPP) a day.  The
Development Goals Indicators (online database accessed
poverty rate at $1.25 a day is the proportion of the
on 27 July 2009).
213

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2010
214

Since the 1957 issue, the Economic and Social Survey of Asia and the Pacific has, in addition to a review of the current
situation of the region, contained a study or studies of some major aspect or problem of the economies of the Asian and
Pacific region, as specified below:
1957:
Postwar problems of economic development
1958:
Review of postwar industrialization
1959:
Foreign trade of ECAFE primary exporting countries
1960:
Public finance in the postwar period
1961:
Economic growth of ECAFE countries
1962:
Asia’s trade with western Europe
1963:
Imports substitution and export diversification
1964:
Economic development and the role of the agricultural sector
1965:
Economic development and human resources
1966:
Aspects of the finance of development
1967:
Policies and planning for export
1968:
Economic problems of export-dependent countries.  Implications of economic controls and liberalization
1969:
Strategies for agricultural development.  Intraregional trade as a growth strategy
1970:
The role of foreign private investment in economic development and cooperation in the ECAFE region.  Problems
and prospects of the ECAFE region in the Second Development Decade
1971:
Economic growth and social justice.  Economic growth and employment.  Economic growth and income distribution
1972:
First biennial review of social and economic developments in ECAFE developing countries during the Second United
Nations Development Decade
1973:
Education and employment
1974:
Mid-term review and appraisal of the International Development Strategy for the Second United Nations Development
Decade in the ESCAP region, 1974
1975:
Rural development, the small farmer and institutional reform
1976:
Biennial review and appraisal of the International Development Strategy at the regional level for the Second United
Nations Development Decade in the ESCAP region, 1976
1977:
The international economic crises and developing Asia and the Pacific
1978:
Biennial review and appraisal at the regional level of the International Development Strategy for the Second United
Nations Development Decade
1979:
Regional development strategy for the 1980s
1980:
Short-term economic policy aspects of the energy situation in the ESCAP region
1981:
Recent economic developments in major subregions of the ESCAP region
1982:
Fiscal policy for development in the ESCAP region
1983:
Implementing the International Development Strategy:  major issues facing the developing ESCAP region
1984:
Financing development
1985:
Trade, trade policies and development
1986:
Human resources development in Asia and the Pacific:  problems, policies and perspectives
1987:
International trade in primary commodities
1988:
Recent economic and social developments
1989:
Patterns of economic growth and structural transformation in the least developed and Pacific island countries of the
ESCAP region:  implications for development policy and planning for the 1990s
1990:
Infrastructure development in the developing ESCAP region:  needs, issues and policy options
1991:
Challenges of macroeconomic management in the developing ESCAP region
1992:
Expansion of investment and intraregional trade as a vehicle for enhancing regional economic cooperation and
development in Asia and the Pacific
1993:
Fiscal reform.  Economic transformation and social development.  Population dynamics: implications for development
1995:
Reform and liberalization of the financial sector.  Social security
1996:
Enhancing the role of the private sector in development.  The role of public expenditure in the provision of social services
1997:
External financial and investment flows.  Transport and communications
1998:
Managing the external sector.  Growth and equity
1999:
Social impact of the economic crisis.  Information technology, globalization, economic security and development
2000:
Social security and safety nets.  Economic and financial monitoring and surveillance
2001:
Socio-economic implications of demographic dynamics.  Financing for development
2002:
The feasibility of achieving the Millennium Development Goals in Asia and the Pacific.  Regional development
cooperation in Asia and the Pacific
2003:
The role of public expenditure in the provision of education and health.  Environment-poverty nexus revisited:
linkages and policy options
2004:
Poverty reduction strategies: tackling the multidimensional nature of poverty
2005:
Dynamics of population ageing: how can Asia and the Pacific respond?
2006:
Emerging unemployment issues in Asia and the Pacific: rising to the challenges
2007:
Gender inequality continues – at great cost
2008:
Unequal benefits of growth – agriculture left behind
2009:
Triple threats to development: food, fuel and climate change policy challenges

This publication may be obtained from bookstores and distributors throughout the world.  Please
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For further information on publications in this series, please address your enquiries to:
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After the first global economic contraction in recent history, a rebound began to take shape among Asian and 
Pacific countries. The regional rebound remains fragile and uneven with a number of downside risks. Turning it 
into a sustained recovery will make 2010 a year of complex policymaking, far exceeding that of emergency crisis 
management in 2009, with rising inflationary tendencies and asset bubbles.
The global crisis has exposed underlying structural imbalances built up over decades.  Reorienting the macro-
economic structure in fairer, more balanced and inclusive channels of development will help sustain the recovery 
once fiscal stimulus policies have done their job. Redressing the multiple imbalances will enable the Asia-Pacific 
region to drive its own development and create new sources of economic growth from within.  In such a radically 
altered panorama, the long-awaited arrival of the region as a central participant in global economic relations is 
on the horizon. But fulfilling this potential requires an ambitious regional policy agenda.
The 2010 edition of the oldest and most comprehensive annual review of economic and social development 
spanning all economies in this vast and diverse region, the Economic and Social Survey of Asia and the Pacific 
2010 assesses the critical issues, policy challenges and risks that the region faces in the months ahead as it leads 
the world economy in recovery from a dire recession.  It also outlines the elements of a policy agenda for 
regaining the region’s dynamism through inclusive and sustainable growth.
“... Let us begin an economic recovery that is not only  
 

robust, but also just, inclusive, and sustainable --    
 
  lifting the entire world.  For if we do not do it  
 
 
    now, at a moment of crisis, when will we?”
     
BAN 
Ki-moon
 
     
Secretary-General of the United Nations
USD $80
ISBN 978-92-1-120592-3
United Nations publication
Printed in Bangkok
April 2010 – 2860