Interview

Asia needs diversity

Bambang Susantano, Vice-President at the Asian Development Bank (ADB), discusses inequality.

It is frequently said that diversity is critical to innovation and essential for development. Would you agree with that statement?
Diversity is indeed critical to the innovation that Asia – and other regions – needs in order to grow and develop further. Only by ensuring that the voice of key stakeholders is heard and the poor are empowered will we be able to find the best solutions to some of our biggest challenges whether it be climate change, big infrastructure projects, or governance.

So you can actually measure the differences between economies involving a broad range of people and other types of economies?
Yes we can. The standard indicator of a country’s level of wealth is the gross domestic product per capita. It roughly measures the differences in standards of living across economies. To capture differences within economies, our developing members conduct regular representative household surveys. They provide detailed information on income, for instance, and are used to measure inequalities.

The region your bank represents – how diverse are the economies there nowadays?
Despite the high growth our region experienced in the past years, inequality between and within economies remains a concern. The levels in gross domestic product per capita differ widely across the Asia and Pacific region. They range from as low as 1,774 dollars to 82,763 dollars.

What should be done to improve the situation?
There is much disparity in the region. The solution to reducing this disparity lies in igniting and sustaining growth in these economies. To do this, it is critical to have the right policy environment, good infrastructure, and to invest in education and health. It is crucial that economic growth be environmentally sustainable.

Does that include inequality within countries?
A recent ADB study shows that income inequalities in a number of economies in the region have worsened in the 2000s compared with the 1990s. However, knee-jerk responses should be avoided. This is because typically the factors that seem to be driving rising inequality are also those which are important for delivering economic growth, i.e. technological change, globalisation and market oriented reforms. The precise policy mix needs to be arrived at judiciously and will vary from country to country. However, some general principles are as follows: First, the pattern of economic growth should be consistent with the creation of productive and well-paying jobs. For this, it is essential that countries improve productivity in agriculture – where many of the region’s poor are working – and generate job opportunities in higher productivity sectors, including modern, labour-intensive manufacturing and services. This requires a policy regime that encourages investments, openness to trade, and good infrastructure. Second, countries must invest in the human capital of their people. More broadly, education and skills development are crucial here, as is attention to basic healthcare and sanitation. Finally, countries need to be better prepared for addressing vulnerabilities to ‘shocks’, both economic and natural. This requires developing viable and effective social protection systems and building infrastructure and cities that are resilient to climate change.

What exactly does ADB do to enhance diversity in its projects and programmes?
One of the drivers of change in ADB’s Strategy 2020 is partnerships with international development institutions, civil society organisations and NGOs, among others.  Engaging with civil society, youth, and other actors enables us to address challenges, introduce innovative approaches and enhance diversity for achieving inclusive growth. Consultation with a wide range of groups in our projects means we listen to diverse opinions and shape our projects accordingly. This is critical to ensure the success of all projects, both big and small.

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