NEW
DELHI, INDIA – Developing Asia must invest in skills, technologies, and the
private sector to move beyond low-cost manufacturing and ensure economic growth
remains strong, delegates at the Governors’
Seminar at the 46th Annual
Meeting of the Board of Governors of the Asian Development Bank (ADB) heard
today.
“’Factory
Asia’ itself is clearly evolving,” ADB President Takehiko Nakao said. “Huge
investments must be made in education and skills training that are appropriate
for the needs of the future. For any of this evolution to proceed, the right
infrastructure must be in place.”
Exporting
manufactured goods has transformed many Asian economies over the past few
decades, helping lift millions out of poverty. However, that growth model needs
to evolve given changing global patterns of growth, demographics, and technology,
according to Beyond Factory Asia: Fuelling Growth in a Changing World,
which was presented at the Governors’ Seminar, the flagship seminar of the Annual
Meeting.
Slow
growth in the US, Europe, and Japan together with a growing Asian middle class
means demand is shifting away from developed markets to emerging economies.
Expanding markets in other regions of the world may also present a new
opportunity for Asia.
Meanwhile,
production in Asia is becoming more expensive as wages and commodity prices
tick up and as the labor pool shrinks, eroding Asia’s cost advantage. Complex
supply chains and volatile foreign exchange rates make management of manufacturing
across multiple countries difficult and increasingly risky.
While
low-cost manufacturing will remain a key part of Asia’s economies going
forward, its contribution will decline and governments need to be ready now to
help their economies continue to transform. The region needs to boost
domestic demand and help firms target other emerging markets in Asia and
beyond. Greater regional cooperation will open up trade across borders and keep
protectionism in check.
Support
will be needed to help the private sector move up the value chain and to
develop the financial markets needed for companies to raise funds and manage
risks. Meanwhile, countries need to help their people learn the skills that
companies need to produce more sophisticated goods and to invest in the
research that will encourage development and adoption of new technologies.
Other
panelists at the seminar included Japanese Finance Minister Taro Aso; Anne
Sipilainen, ADB Governor for Finland; Armida Alisjahbana, the Indonesian State
Minister for National Development Planning; Raghuram Rajan, the chief economic
advisor to the Government of India; and Harvard Business School Professor Tarun
Khanna.
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