An additional 3 billion Asians could enjoy higher living standards by 2050, but only if Asia sustains its present growth momentum and addresses significant multigenerational challenges and risks, according to a new report commissioned by the Asian Development Bank (ADB). The draft report says that as the global economy’s center of gravity shifts toward Asia, the region could account for about half of global output in 2050, up from the current 27%, as well as half of global trade and investment.
The overview of the draft report, “Asia 2050: Realizing the Asian Century,” was unveiled at ADB’s 44th Annual Meeting in Ha Noi, Viet Nam and will be a topic of discussion among participants at the Governors’ Seminar, including the finance ministers of Bangladesh, France, India, and the Republic of Korea; the vice finance minister of the People’s Republic of China (PRC); the governor of the State Bank of Viet Nam; the parliamentary secretary for finance of Japan; and ADB President Haruhiko Kuroda.
The draft report compares the potential outcomes for Asia under two competing scenarios: the Asian Century and the Middle Income Trap. In the more optimistic Asian Century scenario, the region’s gross domestic product (GDP) would soar to $148 trillion and account for 51% of global output in 2050. On a purchasing power parity basis, GDP per capita in Asia would rise to $38,600, compared with the projected 2050 global average of $36,600.
The alternative scenario assumes that Asia’s fast-growing economies—the PRC, India, Indonesia, and Viet Nam—will fall into the middle income trap of slowing growth rates and stagnating income levels over the next 5 to 10 years. Furthermore, none of Asia’s slow-growing economies would manage to accelerate its growth rate under this scenario. If these events occur, Asia would account for only 32%, or $61 trillion, of global GDP in 2050. On a purchasing power parity basis, GDP per capita would rise to only $20,300, or just over half of that under the Asian Century scenario.
Under the Asian Century scenario, almost 3 billion additional Asians would become affluent at least one generation earlier than under the Middle Income Trap scenario.
The difference in outcomes under the two scenarios and thus the opportunity cost of not realizing the Asian Century scenario is huge, especially in human terms.—Haruhiko Kuroda
The draft report identifies six key drivers of transformation in the region: technical progress; capital accumulation; demographics and the labor force; the emerging middle class; climate change mitigation and the competition for resources; and the communications revolution.
In its march toward prosperity, Asia faces several key challenges and risks. Yawning inequalities must be narrowed and—as home to over half of the world’s population—Asia must confront a massive wave of urbanization and changing demographic profiles. While developing Asia has made significant strides in tackling income poverty, non-income poverty still remains pervasive. For example, half of all Asians live without basic sanitation while 900 million people in the region have no access to electricity.
Asia’s long-term competitiveness will depend heavily on how it controls the intensity of its resource use, including water and food, and manages its carbon footprint. It is in Asia’s best interest to encourage and invest in innovation and clean technology to maintain its impressive growth momentum, the draft report says.
Fast-growing economies like the People’s Republic of China (PRC), India, Indonesia, and Viet Nam cannot afford to fall into the middle income trap when seeking to move from resource-driven growth that is dependent on cheap labor and capital to growth based on high productivity and innovation, the report cautions.
Furthermore, Asia must modernize its governance systems and retool its institutions to ensure transparency, accountability, and the enforceability of rules and regulations, the draft report says. These issues are not mutually exclusive and could impact one another in ways that multiply existing tensions or even create new difficulties that could threaten Asia’s rapid growth, as well as its stability and security.
To meet these challenges, Asian leaders need to devise bold and innovative national policies while pursuing regional and global cooperation to successfully manage regional public goods, energy security, infrastructure connectivity, food supplies and water resources, and to maintain long-term peace and stability, the report concludes.
Energy consumption. Asia accounted for about 20% of the world’s energy consumption in 2000, 27% in 2007, and is expected to rise above 40% by 2050. China surpassed the US in 2010 to become the largest energy consuming country, and Asia will surpass the OECD before 2030 to become the largest energy consuming block.
The rapid growth in Asia’s energy use has created two major concerns for the region and within the international community. First, the growth in energy consumption implies an increasingly larger claim on global energy resources and higher dependence on imported energy triggering a concern about the security of energy supplies, particularly of oil and gas.
Second, the growth in energy consumption is accompanied by a rapid increase in carbon emissions; the International Energy Agency (IEA) has projected that by 2030, PRC alone will have higher carbon emissions than the OECD countries combined.—Asia 2050
The report outlines a three priorities for domestic action on the energy front:
- Energy efficiency and diversification;
- Emerging energy technologies; and
- Public-private sector partnerships. A sustainable energy sector should rely on private investors to build new supply capacities and to manage the operation of various facilities, with the government taking charge of developing the energy diversification strategy and devising an incentive system that encourages all relevant players to serve the overall objective of improving the country’s energy security, the report says.
The draft report overview was prepared specifically for ADB’s 2011 Annual Meeting. Following discussions of the report at the gathering, a comprehensive book will be published in August.