26413 1989 THE TWYO RALMES .. F AS.A DEVELPMN AThIA KMOSMANOWU VM PRRDN FOR ASl RA}t l 9l 412 ))iq DoC. oK33 1989 c o4 POVERTY AND PROSPERITY THE TWO REALITIES OF ASIAN DEVELOPMENT Addresses by Attila Karaosmanoglu Vice President for Asia with an Introduction by Barber B. Conable President,The World Bank Washington, D.C. IlntQrationa, Mon.t0, ru( Joint Lbr,,y' nd J~10 lIt: Reoo " Bfor W8shington o *U20ptO 3;w CONTENTS Introduction 1 by Barber B. Conable, President, The World Bank The Two Asias 5 Two Asias 5 Rapid Growth in the First Asia 6 Debt Burdens 7 Economic Growth and Poverty 9 The Other Asia 10 Population and Poverty 11 Environmental Degradation 12 Resources to Alleviate Poverty 13 Opportunities for Development in East Asia 15 Regional Economic Performance 16 Underlying Strengths 17 The Experience of Indonesia and Thailand 19 Reform and Economic Recovery in the Philippines 22 The Regional Challenge 24 Strategies to Alleviate Poverty 26 Asia's Development Achievements and Prospects 26 Economic Growth and Poverty Alleviation 27 The Poorest of the Poor 29 Political Commitment 29 Improving Antipoverty Strategies 30 A New Policy-Based Sectoral Approach 31 Poverty Alleviation and Development Institutions 32 Environment, Poverty, and Growth: The Challenge of Sustainable Development in Asia 34 Critical Environmental Trends 35 Cost-Benefit Calculations 40 Areas for Environmental Action 41 Sustainable Development 46 Enhancing the Role of Asian Women in Development 48 An Economic Approach to Women in Development 48 The Asian Context 50 The Role of the World Bank 55 The International Economic Order and Structural Reform in Asia 58 Oil Shocks, Debt, and Development 59 Opportunities for Trade 60 The Experience of East Asia 62 The "Structural Reformers" of Asia 63 Trade in Services 65 Resource Requirements 66 Statistical Appendix 69 iv Introduction Barber B. Conable President, The World Bank This is a collection of six speeches delivered by the Bank's Vice President for Asia, Attila Karaosmanoglu. As such it would seem to be a simple anthology of documents, but it is actually a good deal more than that. Mr. Karaosmanoglu articulates a coherent view of Asian development for which each of these speeches presents a spe- cial dimension. The statements are organized around a single theme: the two very different realities of development found in Asia. These "two Asias" evoke the compelling contrasts between the new-found prosperity in East Asia and the severe poverty found elsewhere in the region; between the dynamic, industrialized high flyers and the more mod- erately performing lower-income countries; and between those na- tions whose economies are well integrated with world markets and those which have opened their economies more tentatively. The countries of Asia are often perceived to be "rapidly traveling up a powerful growth path." But more than 500 million poor people live in the other Asia, more than half the total poor in all develop- ing countries. Mr. Karaosmanoglu cautions against losing sight of this other Asia, where environmental degradation is most ad- vanced, where severe poverty is widespread, where high population growth rates consume resources and dissipate economic growth, and where women's participation in the development process is highly constrained. It is in this other Asia that development efforts must be concentrated. But Asian development pattems also reflect continuities and simi- larities. In the Manila address, Mr. Karaosmanoglu talks about the Asian growth "escalator," a metaphor for the process of "industrial- ization, export expansion, and dynamic comparative advantage" that is improving the development performance of a growing num- ber of Asian nations. This record of development success provides practical knowledge and helpful experience to other countries, many of them in the other Asia. Most Asian countries, including the poor, are moving toward liberalizing their trade policies, encour- aging industrial investment and competitiveness, and promoting the growth of the export sector, especially in manufactures. Tables 3 and 4 in the statistical appendix show the very strong Asian trade performance relative to other developing countries. These themes of development are in some ways uniquely Asian, but they are also part of the economic and social agenda in other re- gions of the world burdened by similar problems and attracted to similar opportunities. The interest in developing a globally competi- tive, export-oriented industrial sector is certainly not confined to Asian countries. Destruction of forest resources in Indonesia, the Philippines, and Thailand follows patterns much like those in Af- rica and Latin America. The problems of reaching the poor in an ef- fective manner with adequate resources are largely the same all over the world. Enhancing the role of women in the development process is vital to economic growth and the alleviation of poverty in all developing countries. And effective govemment policies to promote growth and reduce poverty are just as critical in Africa, Latin America, and the Middle East as they are in Asia. The World Bank is dedicating an increasing share of its resources to these prior- ities in response to the growing demand from our borrowing mem- ber countries. The scale of the Bank's lending can be seen in Table 5 of the statistical appendix. Although sharing many common problems with the developing world, Asia's contribution to development remains distinctive. In his New Delhi speech, Mr. Karaosmanoglu suggests the need to re- cast the meaning of "structural adjustment" as it applies to Asia. Neither the debt crisis, with its symptoms of acute macroeconomic 2 imbalances, nor the sweeping programs of structural adjustment, which have been applied under emergency conditions elsewhere, are common in Asia. This is not because Asian countries are im- mune to the extemal forces and the internal weaknesses that have caused such distress internationally. Rather the countries of Asia ad- dress structural problems as they emerge, thereby avoiding the wrenching change necessitated by a backlog of postponed adjust- ment. For this reason, the term "structural reform" instead of "struc- tural adjustment" captures the more durable, voluntary, and consistent approach to economic policy change practiced in both the poor and the more prosperous countries of Asia. In a region blessed with true paradigms of development yet bur- dened with massive poverty and environmental neglect, the chal- lenge of development is daunting, yet hopeful. The human and institutional endowments in the region are impressive. The record of growth and poverty reduction is well established in a number of Asian countries, as seen in Tables 1 and 2 of the statistical appen- dix. Those achievements are being replicated on the higher reaches of the "escalator," where countries such as Malaysia and Thailand are ascending to new levels of industrial technology and global mar- ket participation. Further down the "escalator," however, progress is slower and the obstacles more intimidating. Can the other Asia raise its growth performance closer to the levels seen in East Asia? Will the incidence of poverty in the low-income countries register sustained and substantial declines? Will the destruction of soils and forests be arrested? Will the growth of population be slowed? Even under the very difficult conditions prevailing in the other Asia, there is reason for hope that the responses to these questions can be positive for the future. 3 The Two Asias I want to share with you some of the excitement we derive from our development work in Asia: how the strength of many Asian economies continues to astound even the most skeptical observers, how the Bank has recently contributed to Asia's economic and so- cial progress, and, finally, how several long-term development prob- lems pose very serious challenges for a number of Asian countries. Tuo Asias Asia is far more complex than its reputation as the home of one economic miracle after another. There are many examples of rap- idly growing, highly competitive, technologically advanced devel- oping countries in Asia, but their dazzling performance tends to obscure equally compelling realities outside-the spotlight. Indeed, I am increasingly concerned that Asia's high repute in development circles is beginning to create a sense of complacency, that all of Asia is increasingly perceived as rapidly traveling up a powerful growth path of rapid adaptation and international.market integra- tion. This is simply and obviously not so. There are in fact two Asias. The first Asia, the one that inspires such international attention and excitement, is composed of the newly industrializing, high- growth economies, which have made dramatic progress in reducing the numbers and proportion of their people living in poverty. The other Asia-has registered less-impressive but steady gains and has had to contend with massive development problems, including An address to the Harvard Club of Rhein-Ruhr, Dusseldorf, Federal Republic of Germany, October 3,1988. 5 hundreds of millions of the world's absolute poor. The people of this Asia are not confined to poor countries, however; large groups of poor people are living in better-off countries as well, such as the Philippines and Indonesia. The 500 million people who live in the other Asia account for more than the half the world's poor, and their plight is a stark contrast to the stunning achievements of the first Asia. Rapid Growth in the First Asia The first group of Asian countries has once again during 1987 and into 1988 demonstrated remarkable dynamism, while leading the region's strong performance. The regional gross domestic product (GDP) is forecast to grow 6.8 percent in 1988, after a 7.2 percent gain in 1987. This is well ahead of the overall rate for all develop- ing countries, which was 4.5 percent in 1987 and is forecast to be the same for 1988. The leaders will of course be found in East Asia, where countries such as China grew by 9.4 percent in 1987, the Re- public of Korea by more than 11 percent, and Thailand at a surpris- ing 7.1 percent. But the regional figures also include the countries of South Asia, which managed to perform solidly in spite of significant setbacks from drought and floods. India, for example, managed real GDP growth of more than 3 percent last year, even as agricultural produc- tion plummeted by more than 8 percent because of the worst drought in a generation. The resilience of India's economy will be impressive indeed if, as expected, its agricultural sector rebounds strongly and leads a vigorous recovery in GDP growth, which should exceed 7 percent. Of considerable importance in the region's performance in 1987 was a remarkable surge in manufactured exports. Again, the leaders were in East Asia, as China, Korea, Malaysia, and Thailand all regis- tered real growth rates of manufactured exports of 25 to 30 percent. Indonesia, starting from a smaller base but with the benefit of favor- able government policies, registered a 40 percent increase. South Asia shared in this regional trend as well, with India and 6 Bangladesh expanding their manufactured exports by 13 to 14 per- cent. Often lost in discussions of East Asian trade issues is the strong growth of imports by Asian developing countries. For the first time in several years, the import volume of the newly industrializing economies in 1987 grew more than their export volume. For 1988, projections show a similar outcome, not only for the newly industri- alizing countries, but for Asian developing countries as a group. Al- though current account balances for the newly industrializing economies remain strongly positive, their growing appetite for im- ports is a welcome but not unexpected development. The underlying forces that propel and sustain the advance of Asian countries are complex and ever changing. At the foundation is a widely shared prudence and balance in macroeconomic manage- ment. One need only to examine some key macroeconomic indica- tors to grasp the relative stability, over time, of most East and South Asian economies. From low inflation rates, to modest government budget deficits, to manageable levels of external debt, the figures all show with few exceptions a sustained capacity to avoid the serious imbalances that have disrupted development performance else- where in the world. In 1987, for example, not one of nine major Asian countries experienced inflation of more than 11 percent. Overall, the regional reputation for macroeconomic prudence is de- served. There are other enduring factors in Asia's success: the long-term in- vestments in human capital, the proximity of Japan as an economic paradigm and inspiration, and the willingness to integrate their economies with international markets. In addition, these countries have proved highly adaptive and flexible in their response to chang- ing economic conditions and challenges. Debt Burdens However, not all of Asia has managed to grow rapidly and escape harmful macroeconomic imbalances. A high level of external debt 7 is burdening the growth of the Philippines, for example. The only Asian country to reschedule debt since the onset of the global debt crisis, the Philippines at the end of 1987 had a total outstanding ex- temal debt of about $28.6 billion, or 83 percent of GNP, while debt service consumed some 31 percent of exports after reschedulings. By continuing its program of economic and social reform, by stimu- lating further growth in output and exports, and with support from the commercial banks, this country could steadily reduce its debt burden. The World Bank has been working closely with the govern- ment to support its growth and reform program. Results so far are encouraging, with inflation under control and GDP growth up by more than 5 percent in 1987; the same performance is forecast for 1988. - A similar pattern of structural reform can be seen in Indonesia, which found itself under a heavy external debt burden for some- what different reasons. Sharply unfavorable extemal factors in 1986 both increased the country's extemal debt through the appreciation of the yen and reduced its export revenues through the fall in key export prices, particularly oil. Indonesia's disciplined and resolute response to these extemal shocks has eamed the govemment high marks in financial and development circles. The results have been both favorable and encouraging: steady economic growth of more than 3.5 percent since 1986 and forecast into 1988, highly success- ful efforts to promote non-oil exports, and an ability to service ex- temal debt without rescheduling. The composition of World Bank lending in Asia has changed. Among the intemational business community there is a long-stand- ing perception that the Bank's operations in Asia are dominated by large-scale investments in such sectors as transportation, energy, water supply, and industry. Certainly that has been the case, but last year the Bank's nonproject lending in Asia accounted for about 10 percent of total regional commitments, and this category of pol- icy-based operations is expected to expand in several countries, es- pecially on a sectoral basis. China, for example, comes to mind, but not as a country burdened with heavy extemal debt obligations, be- cause it is not. Like others in the region, China is faced- with 8 difficult and costly policy and institutional development problems, which the Bank cari help address through adjustment lending. It has already supported the next stages of China's agricultural reform with a sector adjustment operation. The ability of most Asian countries to adjust rapidly and effectively to changing economic conditions is significant. Not only have they demonstrated economic management skills, but more fundamen- tally they have sustained growth and reduced poverty. As countries have grown rapidly from low- to middle-income status in Asia, the proportion of people living in poverty has declined appreciably, thus demonstrating the strongly positive relation between eco- nomic growth and poverty alleviation. Economic Growth and Poverty In 1964, for example, Thailand had a per capita income of $110, was considered a poor country by the World Bank, and was eligible for concessional finance from the Bank's affiliate for low-income borrowers, the International Development Association (IDA). Dur- ing the next fifteen years, however, growth averaged between 7 and 8 percent, and by 1980 per capita income had reached $670, which pushed Thailand out of the low-income category and reduced the percentage of people below the poverty line to about 24 percent, compared with well over 70 percent in Bangladesh and about 50 percent in India at the same time. This process has been, and is being, replicated in other Asian countries enjoying rapid, sustained growth. The statistics on the incidence of absolute poverty are unreliable and not strictly comparable from country to country, but they do suggest relative magnitudes and trends. The incidence of poverty in Korea, for example, declined from 23 percent in 1970, when the country was still eligible for World Bank concessional finance, to less than 8 percent in 1982, while its GDP grew at an average annual rate of around 9 percent. Under such conditions, the needs of pov- erty groups for special programs are shrinking, and the resources 9 available to pay for such programs are expanding-a highly desir- able, if relatively infrequent, confluence of events. The Other Asia Such spectacular results in development can distract attention from the long-term development problems that rest very heavily on huge numbers of Asia's people. At the core is the problem of poverty, which in turn is closely linked to rapid population growth and envi- ronmental degradation. These three major problems torment the development potential and prospects of what we might call the other Asia, where modest economic growth rates, high population growth, and severe development constraints have left more than 500 million people trapped in poverty and exerting relentless pres- sure on fragile environments. In this other Asia, the ill-informed might expect to find stagnant economies and incompetent regimes, wracked by political instabil- ity and incoherent economic policies. Such situations can be found in the world today, but they are increasingly rare in this region. The other Asia, in fact, is distinguished by the overall competence of governments; the relatively steady, if not spectacular, growth of their economies; and in many cases the lively participation of the population in the economic and political life of the country. India, which has more than 300 million of the world's absolute poor, had average annual growth rates of 3.5 to 5 percent since the 1960s, with low inflation, a manageable external debt burden, an ex- traordinarily successful application of Green Revolution technol- ogy, a demonstrated capacity to avert famines during catastrophic droughts, and a vibrant democracy. Yet 43 percent of India's people live in poverty, down only 9 percent since 1970. In India, as in most of the other Asia, the dynamic interaction between growth and poverty reduction has not yet taken a firm enough hold, and the enormous economic potential, as both producers and consum- ers, of nearly half the country's population remains largely untapped. 10 Population and Poverty Rapid population growth joins with poverty to perpetuate human misery. In Bangladesh, a country with about 60 percent of the land area of the Federal Republic of Germany and almost twice the num- ber of people, the population has grown more than 2.5 percent a year since the 1960s. Meanwhile the economy, again like many countries in the other Asia, has registered steady but slow growth, with the result that the per capita increase in income per year has averaged less than 0.5 percent during the past twenty years. Agricul- tural growth has also leveled off, falling below the population growth rate and rendering the government's goal of food self-suffi- ciency increasingly distant. Beneath these statistics are the realities of life for the rural poor, where the fixed, or even shrinking, supply of nature's endowment, in this case cultivable land, must support a rapidly increasing population and where a government must pro- vide services and infrastructure at an equally rapid rate just to stay even. Population growth, it has been argued, is a self-correcting problem. Demographers explain how economic growth over time will ulti- mately begin to close the "demographic scissors," that is, as per ca- pita incomes increase, families will have fewer children, thus reducing the birth rate, while the death rate will stop falling as the positive effects of health and medical care begin to level off. Over time the two rates will converge, as they have in Europe, and pro- duce a lower population growth rate and ultimately a stationary population size. Such calculations, which are so relevant to Euro- pean realities, are a grim mockery in Bangladesh, where in twelve years the total population is projected to increase by some 40 mil- lion people. To anyone who has spent time in that country, the ad- dition of so many more human beings to a land that was half submerged under floodwater last month is not pleasant to contem- plate. According to theory, population growth, like poverty, can be re- duced naturally through a dynamic interaction with economic growth. In countries such as Korea, that theoretical process is working. With population growth rates expected at about 1.2 per- cent during the next twelve years, the population will grow by only about 5 million people. But in the other Asia, if this process is left to its own momentum, it can only lead to calamity, because ex- pected economic growth rates are too low to exert the desired influ- ence on fertility and population growth. Environmental Degradation Another long-term development problem is not unique to the other Asia, but its effects are potentially severe there: environmen- tal degradation. On the one hand, the relation with poverty and rapid population growth is relatively straightforward: as more and more people in poverty press upon limited natural resources in rural areas, they begin to deplete the stock of renewable resources and de- grade the natural base on which those resources renew themselves. This can be seen in the long-term deforestation of watersheds in South Asia and in the severe erosion that it has precipitated. On the the other hand, people living in poverty are also the victims of environmental harm inflicted by others, such as the pollution of air and water by relatively well-off urban and industrial areas or the sometimes reckless clearingof tropical forests by logging operations. In some locations in the other Asia, the complex and destructive interaction between environment and poverty is well advanced. What is to be done to address these long-term problems of poverty, population, and environment in the other Asia? We know that rapid economic growth over time can yield dramatic progress in some cases, and these countries are certainly striving with substan- tial assistance from the World Bank to accelerate their growth. But we must be realistic. In the face of severe development constraints, improvements will be more gradual and less dramatic than in the dynamic economies of East Asia. Are increased efficiency of existing programs and more effective project investments viable solutions? Some governments do have ef- fective antipoverty, environmental protection, and population 12 programs, and the Bank has worked, and will continue to work, on ways to help improve them. Indeed, poverty, population, and the environment are areas of long- standing World Bank advocacy and action. Development lending and analytical work are expanding rapidly in Asia in response to in- creased demand for assistance. For example, in the area of the envi- ronment, the Bank supported a large forest rehabilitation project in China in 1987 as well as a forest conservation project in Indonesia. Major environmental studies are forthcoming in 1988 for the Phil- ippines and Indonesia. But efforts by the Bank and the govemment to increase efficiency, improve policy, and better target investments and expenditures can go only so far. Resources to AUeviate Poverty Clearly, there is a need for additional resources, for, without them, the acceleration of progress we all seek will not be achieved. Unfor- tunately, the flow of resources to the poor-countries of South Asia, particularly official development assistance, has suffered a relative- and in some cases an absolute-decline. This has both bilateral and multilateral dimensions. India has seen its share of Bank concessional lending decline from an annual aver- age of $2 per capita in 1979-81 to less than $1 in fiscal 1988. This decline&occurred in response to the desperate needs of Sub-Saharan Africa and the emergence of China as a major claimant on the Bank's resources. But the pattem is shared by bilateral donors, as well. The latest report of the Organisation for Economic Co-opera- tion and Development (OECD) shows that South Asia's share of gross disbursements of official development assistance from the major bilateral donors (Development Assistance Committee coun- tries) has declined from 23.5 percent in 1976 to 14.1 percent in 1986. For all donors, multilateral and bilateral, shares of gross dis- bursements of development assistance have declined from 9.4 to 5.4 percent for India during those ten years and from 4 to 3.1 per- cent for Bangladesh. 13 The other Asia, we must remember, is not a club of fixed member- ship. In future years some countries may advance to higher develop- ment categories, but it is more likely that new members will be added in that time span. Countries in Southeast Asia that are now undersupplied with western development resources seem to be en- tering fundamental economic and political transitions. In time, they may well be prepared to undertake the necessary adjustments that will qualify them for significant increases in development assis- tance, but this will just place further strain on the region's dwin- dling share of development assistance. At the 1988 meetings of the World Bank and International Mone- tary Fund in Berlin, Barber Conable, president of the World Bank, eloquently set out the Bank's renewed commitment to addressing long-term development challenges. Here I have attempted to set out some of the dilemmas and contrasting realities of the develop- ment process in Asia. It is a region of great achievements, profound potential, and unquestioned further needs. But the wonders of de- velopment seen in the first Asia should not distract our attention from the scale and causes of human misery in the other Asia. Allowing this huge proportion of humanity to remain in the vi- cious circle of poverty, high fertility, and environmental neglect is not just a moral problem for the world community but a lost oppor- tunity to tap the productive and creative energies of hundreds of millions of human beings. Certainly, there is a will, both here and in the countries themselves, to confront this challenge directly. 14 Opportunities for Development in East Asia The economic progress seen in East Asia during the past twenty years may well.be remembered by economic historians as the igni- tion phase of a prolonged era of intense global competition. Cer- tainly the changes already wrought by this burst of economic energy are stunning and exciting. But competition is perceived differently according to how its effects are felt. In the United States today, global competition conveys a sense of challenge, if.not siege, as long-delayed adjustments are painfully put into place. For the developing countries of East Asia, the challenge of competition is perhaps perceived in less defensive and insular terms. Here, the competitive environment has ex- panded, with visible material benefits for many countries once thought to be mired hopelessly in poverty. Competition in East Asia has been welcomed, not feared, as an expanding arena of in- vestment and production opportunities. It is within this regional setting of rapid adaptation and economic change that the Philippines must adapt its growth strategy to en- sure sustained recovery and long-term equitable growth. Factors such as shifting comparative advantage, rising labor costs in neigh- boring countries, and new sources of foreign investment create tre- mendous potential in East Asia for countries that are able to seize the opportunities. Those unable or unwilling to react positively may fall behind. An address to the Philippine Society of International Law, Manila, Philippines, April 25, 1988. 15 Regional Economic Perforumnce The future prospects of the East Asia region are determined in part by the pattems and achievements of the recent past. Since the mid- 1960s East Asia's real annual growth rates have averaged more than 7 percent, better than any other region in the world. Between 1980 and 1985 the region's margin over its competitors expanded, as its average annual growth rate was more than twice the average growth rate of developing countries and three times that of the in- dustrial countries. And this occurred during a global recession. The export performance of the East Asian countries has also been the strongest among developing countries during the past twenty- five years. They have progressively increased their share in world markets and have overcome the effects of the slowdown in world trade in the 1980s better than most countries. The volume of manu- factured exports from the region grew 14 percent a year between 1980 and 1984, when world trade in manufactures grew at only about 4 percent a year. Except for the region-wide downtum in 1985, that trend has continued. The success of East Asian countries in both industrialization and manufactured exports has included an ability to overcome unfavor- able global trends. This is one key to the World Bank's near-term outlook. More specifically, although the trading environment may become more protectionist and the twin deficits in the United States may yet cause global demand to contract, we at the Bank still believe that 1988 will mark another year of strong growth in the region. And we see no reason fundamentally to alter that out- look for succeeding years. The Philippines is certainly part of that positive scenario. With im- portant reforms generating the needed incentives for industrial re- structuring and recovery and with continued openness in the trade regime, the Philippines should be able to build on last year's recov- ery and sustain this progress in the years ahead. The Republic of Korea's powerful performance last year might rhoderate somewhat in 1988, but Thailand and Malaysia seem to be positioning them- selves for much improved performances in the near term, with sig- 16 nificantly better growth rates than last year. Indonesia, although slowed by drastic changes in its terms of trade, has managed a very difficult adjustment process well and has sustained respectable growth rates, which should continue this year. China is e4xtending its already far-reaching reform process, and that should be accompa- nied by continued robust economic growth this year. Underlying Strengths Our optimism on regional growth prospects is founded therefore on a solid, well-established record of regional advance, achieved at times under adverse global conditions. Although impressive statis- tics can sometimes obscure fundamental underlying problems, in the case of East Asia we would argue that there are underlying strengths. Response to External Shocks. Briefly stated, there are three underly- ing factors that give the region its distinctive character and prom- ise. First, the governments are able to respond quickly to external shocks with the right policy packages. They have accurately as- sessed the structural weaknesses of the economy and have identi- fied niew opportunities to be explored. A revealing and demanding test of this factor occurred after the sec- ond oil shock of the late 1970s, when govemments in the region had to contend with much higher oil import costs and the resulting global recession. Korea, for example, weathered that test with a gen- erally conservative macroeconomic policy-stance, choosing an im- mediate but short-lived contraction of demand and a real depreciation of the exchange rate. After a brief slowdown, Korea re- sumed its growth momentum. Thailand's response was more mea- sured in macroeconomic terms and combined monetary contraction with fiscal expansion. Ultimately this proved to be suc- cessful, but it stretched the adjustment period out perhaps longer than needed. Malaysia, after an initial experiment with attempts to stimulate domestic demand, pursued a path of fiscal retrenchment. 17 The tempting choice of a substantial increase in govemment spend- ing and real appreciation of the exchange rate adopted by the Phil- ippines in the early 1980s produced well-known consequences for the country's external position and industrial sector. It led to the near collapse of industry and the financial crisis of 1983. But that experience remains exceptional, and even those countries, like the Philippines, burdened with high external debt are containing fiscal deficits and keeping inflation under control. Export Market Penetration. A second underlying strength of the re- gion is its uncanny ability to penetrate markets. One may worry about future access to those markets, but I believe there is still sub- stantial room, despite all the appearances and impressions, for ex- panding exports. In 1984 the share of developing countries generally in the imports of key markets was still low: 29 percent in the United States, 26 percent in Japan, and 9 percent in Europe. For East Asian developing countries as a group, including Korea and China, their shares of those import markets were of course lower, at 7.6 percent of the U.S. market, 14.5 percent in Japan, and only 1.7 percent for the European Economic Community. More significantly, the share of developing countries in the total market for manufactures in the United States, where the levels of import penetration are the highest, was less than 2.9 percent. Pro- tectionism does present a potential hazard, but the proliferation of nontariff barriers in the industrial countries has not halted the steady growth of East Asia's market share in world manufactured ex- ports. These countries have been quick to change the direction and composition of their exports to overcome those obstacles. Escalator of Development. The third pillar of our optimistic regional outlook is the ability of country after country to enter successfully into a fast-paced process of structural economic change. I would liken this process to countries on an upward-moving escalator of in- dustrialization, export expansion, and dynamic comparative advan- tage. It has been tempting in the past to see that escalator either as slow- ing down or admitting no new riders. Japan's ascension was, at one 18 time, seen as unique. But its path upward was followed by the newly industrializing countries of Asia, so that their industrial structure is now similar to that of Japan in 1965, and they are among the few countries that hold surpluses in today's unbalanced world trade. As the more recent entrants from the Association of South-East Asian Nations (ASEAN) have made their presence known on the lower steps of the escalator, skeptics have discovered yet further evidence of the replicability of the phenomenon. The march upward from re- source-intensive production, to labor-intensive, to capital-inten- sive, and finally to skill- and technology-intensive industrial production keeps the escalator moving and creates space for new entrants. At the core of this phenomenon is competition, with its hallmarks of rapid entrepreneurial response to new market opportunities, the increasing use of up-to-date technology, a relatively open trade re- gime that admits rather than excludes potential competitors, and a supportive policy framework from governments. An extensive array of government policy interventions has been used in East Asian countries. Various export promotion policies, im- port liberalization strategies, tax and financial reforms, and indus- trial restructuring and technological improvement policies have all been applied with varying degrees of commitment, skill, and suc- cess in the region. The Bank devotes considerable effort to compar- ing the experiences of reform in East Asia. Although no two countries have followed identical paths, a few cases stand out as par- ticularly well designed and implemented. The Experience of Indonesia and Thailand Indonesia and the World Bank have worked together on a program of trade policy reforms during the past three years. That experience would seem to be of particular relevance to the Philippines. In March 1985 the Indonesian government began its program with a comprehensive reform of the tariff schedule. It was followed by the complete reorganization of the customs, ports, and shipping opera- tions and a new system through which producer-exporters could 19 obtain internationally priced inputs free of import duties and restric- tions. These initial changes, while extensive, did not fundamentally alter the antiexport bias of the trade regime, because nontariff barriers in the form of a proliferation of import licenses still discouraged the development of globally competitive producers. So in 1986 and 1987 the govemment took further steps. It removed import license requirements on 31 percent of all items, so that the proportion of domestic production protected by import licenses declined from 49 to 34 percent. These measures marked a significant transition from the use of import restrictions to a trade regime based on tariffs. This example mirrors the trade reforms taking place in the Philip- pines in a number of ways, including the use of higher tariffs to pro- vide some domestic producers with breathing space in the near term. But the point to emphasize here is the importance of tariffs over nontariff barriers as the preferred instrument in trade policy. Attempts to exclude or quantitatively limit imports invite a host of administrative problems, and they encourage the development of high-cost, noncompetitive industrial producers. Indonesia also substantially revised export policies in its recent wave of reforms. Various administrative burdens on exporters were removed or simplified, and access to duty-free imported inputs was expanded to more firms. Industrial regulations were also removed and simplified, so that investors, including foreign investors, would no longer face a complex maze of discretionary regulations and re- quirements. These changes in trade and industrial policy have a pragmatic ratio- nale. The value of Indonesia's oil exports has fallen off dramatically, which has created an urgent need for non-oil exports to take up the slack. The future expansion of industrial employment opportunities is another vital consideration. Textiles, plywood, and minerals have responded well to the new in- centives, as have agricultural exports. For the future, however, Indonesia's manufactured exports are expected to set the pace. In 20 1987-88-they grew by 43 percent in real terms. Of considerable in- terest here-is the growth of other manufactured-goods, that is, those excluding textiles and plywood. This category shot ahead at 82 per- -cent in realterms. This group of manufacturers is expected to lead export growth in the coming years, and it is on this group-that the new investment and export promotion policies are having their most telling effect. In Thailand, the past two years of very rapid growth of manufac- tured exports seem to-have positioned the country for sustained rapid industrialization and export growth reminiscent of the Asian newly industrializing economies. Recent foreign investments from Japan and, increasingly, Taiwan have played an important role in these.developments. Industrial growth has been broadly based, but particularly strong expansion has occurred in textiles, integrated cir- cuits, automobiles, and canned food. The relocation to Thailand of Japanese-and-Taiwanese export indus- tries is a trend of particular relevance to the Philippines, which has the potential to attract these-sorts of investment shifts-as well. The policies pursued by the Thai government have been:a major factor in this almost textbook pattem of outward-looking growth, but ex- ternal factors such as the depreciation of the dollar since 1985, which enabled the governmment to devalue the baht by about 20 per- cent, and the fall in the oil import bill have alsodcontributed signifi- cantly to Thailand's success. From these brief accounts of the experience of competitors-in the Asia region, I would highlight two issues of importance to-the Phil- ippines; First, there has been a sustained commitment. to macroeco- nomic stability and to reform programs affecting the trade and industrial sectors. These reforms take time to work, and- mixed or in- terrupted signals will prolong the interval between implementation and positive results. Clearly, the situation in the Philippines was dis- tinctive: its stabilization and trade reform-programs of the early 1980s encountered various difficulties as the country passed from economic to political crises. The resulting hiatus in the reform pro- gram has meant that present efforts must makie up for lost ground in 21 the Philippines' effort to develop a more competitive position in the region. A second insight I would draw from the Indonesian and Thai exam- ples is the remarkable rapidity of economic change in East Asia. A few years ago, no one was discussing the emergence of Thailand as the next newly industrializing economy. The movement of surplus investment capital by Asian countries to new investment opportu- nities is another sudden change of great potential significance. If matched by the further,opening of the Japanese domestic market to the exports of the newly industrializing and ASEAN countries, the re- percussions and the opportunities would be very substantial indeed. The rapid changes in the structure of Indonesian industry.are an- other instance of accelerated change in the region. Refonn and Economic Recovery in the Philippines It must be a source of considerable pride and satisfaction that the Philippines is by all signs on the move again. The strong growth of gross national product (GNP) of 5.7 percent in 1987 was accompa- nied by a list of other accomplishments, which are well worth men- tioning. With the budget deficit under control, inflation stayed low at 3.7 percent country-wide, while industrial growth surged ahead at 8 percent in real terms. Manufactured export earnings rose by more than 27 percent from 1986, which helped compensate for lower eamings on primary product exports. The result was a healthy 18 percent increase in the value of exports. These strong signs of recovery have been backed up by steady and timely progress, on reform. Financial restructuring has progressed well, with the reorganization of the the Development Bank of the Philippines and the Philippine National Bank among other posi- tive steps. A major advance in tax reform occurred in January 1988 with the introduction, ten months ahead of schedule, of the value- added tax, which will help the tax system operate more fairly in the industrial sector. The World Bank announced the release of the sec- ond tranche of the Economic Recovery Loan to the Philippines early in 1988 as a result of the impressive reform record. 22 A more recent examp e of the growing partnership between the Philippines and the World Bank was the successful conclusion of negotiations on a $200 million loan to support the government's program of restructuring and privatization of govemment-owned corporations. This loan was approved by the Bank's Board of Direc- tors in 1988. The large nontinancial govemment-owned corporate sector has re- quired substantial govemment support through budgetary outlays. The objectives of this Bank-supported corporate reform program are to encourage efficiency and fair competition in the government corporate sector and to help the govemment withdraw from activi- ties that could be performed more efficiently by private firms. Cor- porations that remain in the public sector will receive assistance to upgrade their management systems. I cannot overemphasize the im- portance of this program to the development of a more efficient and productive economy, and the resolve of the government to press ahead with such difficult refornis is an impressive measure of commitment. - Another crucial area of reform that has benefited from-the strong partnership between the govemment and the Bank-is the trade lib- eralization program. Here, too, the firmnicommitment to the pro- gram has been amply.displayed with such measures as the lifting of import controls on some 300 items to date. Much like the Indones- ian program, the objective in the Philippines is to remove govem- ment controls on-import trade and to use a tariff system to provide industrial protection. And, again in common with the Indonesian program, the trade liberalization steps aim to increase the competi- tiveness of domestic producers, so that Philippine exports will be able to expand. I would.like to emphasize two points about the Philippine trade lib- eralization program. First, removing these import restrictions has not led to-a flood of imports. Last year total imports increased by 34 percent, only slightly higher than expected, while imports of liberal- ized goods increased by 58 percent. But the share of liberalized 23 goods in total imports has gone from 11 to only 14 percent, not a substantial increase. Second, we should keep in perspective the underlying purpose of trade liberalization. The central purpose is not export growth for its own sake, but growth in-overall manufacturing and manufacturing employment. With poverty and unemployment of such central con- cem in the Philippines, it is important that the country begin to build a more labor-intensive and productive industrial structure, which will be able to absorb significantly larger numbers from the work force. Are these trade liberalization measures starting to take effect? The answer is yes, and not all the positive effects are seen in trade vol- ume. The experiences of other countries show that liberalization can raise the quality of domestically produced goods, while in many cases lowering their cost. Studies also show that liberalizing coun- tries experience a strong growth in exports, as import substitution industries make the transition to exports and new firms are estab- lished. There are other concrete-signs of this process at work in the Philip- pines at this still early stage. The tire industry, for example, is now facing competition from imports admitted at lower tariff rates. The three leading tire manufacturers are responding with a three-year in- vestment plan of some 800 million pesos to upgrade the competi- tiveness of their products. Instead of hurting local production, a more liberalized trade regime has stimulated plans in- this case for in- dustrial expansion and modemization. The Regnal Challenge It is important to discuss the regional competitive context for Phil- ippine development because, for all its recent progress in policy re- form and economic performance, the Philippines faces regional competitors who are moving up that escalator I mentioned earlier with surprising speed. Such a pace of regional growth and adapta- tion is a formidable challenge to this country, both as an inspiration 24 of what can be done and as a reminder of how far there is to go. There is precious little space for major setbacks and disappoint- ments. To clarify that point further, the issue is not the pace of the Philip- pine reform program or its content. There are, indeed, steps still to be taken, but the government has defined this program and is-fol- - lowing it well. Whether the Philippines will accelerate its progress in concert with its East Asian neighbors now depends on the deter- mination of the country and its people to follow through with this program over the long haul. This is perhaps too stem a message for a country whose dramatic po- litical achievements in recent years have required from its people-- and leaders such enormous drive, energy, and resolve. But, as the--- government has made clear to the country and to us at the World Bank, the economic agenda of recovery and revitalization is at the very foundation of the country's hopes for peace and development. The World Bank has supported, and will continue to support, this program to the limits of its ability. 25 Strategies to Alleviate Poverty Finding ways to reduce poverty is an invitation to confront the most difficult challenge in development. There are no blueprints or panaceas to solve the problem of poverty in the developing world. Asia's Development Achievements and Prospects Poverty in Asia is a highly differentiated phenomenon, ranging from the severe problems in low-income South Asia, to the stub- born pockets of poverty in the middle-income countries in East Asia, and to the regional concentrations of poverty in China. Dur- ing the past twenty years, however, the poverty profile of this re- gion has been transformed, certainly more so than any other region in the world. In the process of rapid growth, industrialization, and export expansion in East Asia, the poverty problem and the devel- opment challenge have been redefined in several very important ways. The skepticism that once greeted the efforts of developing coun- tries to industrialize now is grudgingly giving way to a different re- sponse-surprise, and perhaps envy. Thirty years ago no one believed it was possible for new entrants to quickly put together complex industrial enterprises requiring sophisticated human capi- tal, diverse sources of supply, rapid adoption of high technology, and creative, aggressive marketing in unfamiliar terrain. Japan's ini- tial success, however, was soon followed by a succession of other countries, each demonstrating that competition with the industrial- An address to the High Level Committee on Poverty Alleviation, Dhaka, Bangladesh, March 28,1988. 26 ized West could be successfully managed under a variety of circum- stances. In Asian agriculture, the application of Green Revolution technol- ogy has had an enormous effect on the overall growth of the sector, with considerable benefit to the small, poor farmer. The specter of famine, once so threatening, has in recent years receded, as can be seen from the much-less-than-disastrous effects of India's worst drought in a generation and from Bangladesh's recent experience with the severe floods of 1984 and 1987. Food self-sufficiency has been achieved, or nearly so, in many Asian countries, and, where food imports are still necessary, as they are in Bangladesh, much progress has been made. Prudent government economic policy has played an active, highly effective role in Asian development. Asian govemments generally have avoided the large internal and external imbalances that have been at the core of the severe development problems in Africa and Latin America. Many have been adept at creating a stable environ- ment in which high rates of saving and investment have been sus- tained. The positive contribution of government policy to the growth of Asian economies cannot be understated. Can the industrial expansion, which has carried the region this far, continue its rapid growth? The constraints of growing protection- ism, industrial country imbalances, developing-country debt, and sluggish global growth would suggest that the possibilities are lim- ited. Yet, the high growth rates of the late 1970s and early 1980s were achieved despite the increasing protectionism and slow growth of the industrial economies. Today, Asian producers have still only slightly penetrated global markets for industrial exports. The dynamic growth of the region has not yet encountered a ceil- ing, and World Bank projections indicate a continuing vigorous per- formance. Economic Growth and Poverty Aleviation The effect of buoyant economic growth on the progress of poverty alleviation has been incontestable in the region, particularly in 27 East Asia, where poor countries have raised per capita incomes sub- stantially while reducing poverty to smaller pockets in rural areas. Progress has been made in South Asia as well under far more diffi- cult conditions, such as rapid population growth and higher popula- tion densities. Any effort to reassess antipoverty strategies must take into account the strong, demonstrated relation between overall economic growth and the incidence of poverty. Indeed, the World Bank's Pov- erty Task Force recently concluded, as have many studies on pov- erty before it, that economic growth is a significant factor in the reduction of mass poverty. The converse case is equally well estab- lished: the incidence of poverty has increased in economies that are stagnant or in decline. Although those propositions would seem to be widely accepted, they do not fully address the fate of the poor under conditions of strong growth. As study after study has showri, the benefits of long- term growth do not always accrue to those living below the poverty line. This nonparticipation of large groups of the population helps explain why the-number of people living in absolute poverty has in- creased in low-income countries in spite of respectable economic growth during the past three decades. In many middle-income countries around the world, sizable pockets of poverty persist side by side with relative affluence and vigorous growth. Again, these are not startling revelations. But they do provide the basic rationale for an important conclusion: growth policies must be supplemented by clearly defined poverty alleviation efforts. Those efforts, I should emphasize, need not be uneconomic; indeed, the scope for growth-oriented poverty alleviation efforts is large and exceeds those where efficiency tradeoffs are necessary. For the World Bank, this sort of thinking on poverty is crucial, be- cause it, or any development organization, could not justify antipov- erty interventions that amounted to unsustainable welfare programs. Helping the-poor enter the development process and the productive mainstream is our joint objective. It also meets the most basic aspiration of the poor. 28 The Poorest of the Poow For the pootest of the poor, reaching that objective will be espe- cially difficult. The distinctive characteristics of this group-separate it from the less poor and deprive the people in it of the assets, in- come, and basic nutrition that would enable them to respond to in- centives and participate in the development process. At the bottom rungs-of society, people struggle to obtain adequate nutri- tion, but generally they fail, which leads to a higher incidence- of mortality and morbidity and denies them the mobility they fieed to take advantage of new opportunities. A recent Bank study of eighty- seven low-income -countries found that about 16 percent-of-their total population falls into this category of extreme poverty. The plight of these people-the landless, the assetless, women, and groups long bypassed by development-assaults our conscience and challenges our resolve and ingenuity. Assisting the poorest of the poor involves many practical difficul- ties, especially for large development finance organizations such as - the World Bank. One way to make interventions more effective is to undertake them at the micro level through groups and organiza- tions that are intimately familiar with the -local dimensions of the problem. Many of these programs are difficult. to-replicate or ex- pand without heavy additional costs and-a-loss of effectiveness. De- fining, operational instruments and procedures that can channel substantial resources and expertise to very small-scale'inferventions without cormpronmising the-quality and- independence of the local intermediaries is-a perplexing issue. There-is no question, however, that the role of nongovernmental organizations (NGOs), particu- larly donestic ones, must expand in-order for the development_corn munityto reach the poorest-of the poor,'and that this must be accomplished through a partnership between NGOs, governments, and external financing-agencies. Political Commityent In talking about poverty alleviation, one inevitably overuses such words-as "difficult," "intractable," and "challenging." The respect 29 we have for the level of difficulty in poverty alleviation comes first from the technical issues of what to do and how to do it effectively. Beyond those technical issues lies a less concrete but vital second consideration-political commitment. Effective poverty alleviation involves structural shifts of great importance to the balance of polit- ical and economic forces in any poor country. Just as a structural ad- justment program usually requires politically sensitive change, so too will efforts to shift resources toward the poor arouse vested in- terests while they empower the powerless. Without serious govem- ment commitment to an antipoverty program, no amount of extemal good will or effort is likely to succeed. Improving Antipoverty Strategies Shaping-the broad outlines of an antipoverty strategy requires first that the achievements of past and present antipoverty approaches be recognized anid built on. Past efforts have emphasized invest-- ments in sectors in which the poor predominate or which provide services that benefit the poor. Accordingly, such areas as rural devel- opment and agriculture, the social sectors, urban development, and small-scale industry have been a frequent choice for investments, technical assistance, and institutional reforms. More recently, the frustrations encountered in reaching the poorest of the poor through sectoral investments have led many countries to emphasize targeted employment, food, and health programs, often with signifi- cant NGO participation. Certain changes in macro policies have been useful as antipoverty interventions as well, although their ef- fect is normally-felt over a longer period. As effective as those approaches have been over the years, espe- cially in the more economically buoyant 1960s and 1970s, the need to improve their -effectiveness has become increasingly urgent in re- cent years. In the more constrained economic environment of today, approaches are needed that will extract even more gains for the poor from existing resources. 30 A New Policy-Based Sectoral Approach Current-approaches can be modified to reach the poor more effec- tively. One of the more promising innovations concentrates on pol- icy and resource decisions at the sectoral level. Resources for poverty alleviation are not limited, however, to reallocations within govemment budgets, but should be seen as a tripartite under- taking involving the government, external financing agencies (in- cluding the World Bank), and private sources of development assistance. The emphasis on policy and resource allocation is best articulated at the sectoral level. Agriculture, health, family planning, educa- tion, and urban development are the sectors in which this policy- based approach has the potential to work well in the alleviation of poverty. In agriculture, for example, productive employment opportunities can still be extended significantly through improved technologies and better access to water, fertilizer, improved seeds, and rural infra- structure. Tested major improvements in surface irrigation tech- niques and the expansion of groundwater irrigation are now available.-The attraction of the Green Revolution technologies is that they are scale-neutral and promise improved yields for small farmers. These technologies also tend to be labor-intensive. In Bangladesh, agriculture will remain the major source of employ- ment and income for some time, but it will not be able to absorb all the new entrants to the labor force. Improving the access to social services is another instance in which a policy-based sectoral approach can directly benefit the poor. Sig- nificant strides can be made in orienting social services toward poorer households and in matching the content of these services to the objectives of poverty alleviation. Services in such areas as health, nutrition, family planning, education, and training have im- portant roles to play in poverty alleviation efforts. They serve both as consumption flows, which-improve the present welfare of the poor, and as investment in human capital, which leads to future yields in productivity. -31 A sectoral approach will also-be useful in adjustment programs, which often require cutbacks in social programs, retrenchments in public employment, and phaseouts of unsustainable consumer subsi- dies. These cost-cutting reforms may be unavoidable in macroeco- nomic terms, but often the urban poor bear a disproportionate share of the-burden. The social cost of some adjustment programs, particularly-in Latin America and Africa, is a matter of inicreasing concern in the Bank's operations. Although new programs to com- pensate the poor for-their losses in the adjustment process may be necessary, the initial design of adjustment programs at the sectoral level should seek to lower those potential costs to the poor at the outset. Another area where resources can be used more creatively and ag- gressively is in targeted programs, which have had some-success-in reaching the poorest of the -poor. Here, the way forward i-s less clearly defined, but by working with local NGO partners and by - drawing from the successful innovations already in place, such as rural credit in Bangladesh, substantial progress can be achieved. Such programs, targeted to the landless and unemployed and stress- ing sustainable activities to generate nonfarm income, may offer one approach for Bangladesh to explore. Poverty Alleviation and Development Institutions It would be fair to ask at this point what all this means for the oper- ations of development institutions such as the Bank and for its rela- tions with borrowers. These issues are still under intense discussion, but it is possible to outline in very general terms where this process should lead. The central procedural problem the World Bank faces is how to es- tablish an effective framework for Bank managers to undertake more of the high-risk-, staff- and resource-intensive, and innovative operations necessary to alleviate poverty. One example of this sort of operation is the Poverty Alleviation Credit now being discussed by the government of Bangladesh and the Bank. That is the kind of work that the Bank needs to do more of, and not only in -32 Bangladesh. To move a large organization toward more difficult and riskier projects requires a clear indication from the institution that an increased level of antipoverty work is highly valued and that a shift from other activities in favor of poverty alleviation is a priority. One possible step-in-that direction would be to define the Bank's poverty alleviation oper-ations with more rigor. This would concen- trate the attention of Bank staff, management, and the Board of Ex- ecutive Directors on poverty issues, while encouraging a renewed dialogue on those issues with country borrowers, and the donor com- munity. But such an approach also raises the questionl of how to de- fine an antipoverty operation since poverty alleviation objectives are implicit in all Bank operations. These are very -complex issues, but the absence of perfect definitions carnot be allowed to bar the way toward a more substantial commitment to poverty alleviation. These issues, while difficult, can be resolved in a workable way. Eradicating poverty, we all havediscovered, is not a global cam- paign to be waged with unvarying tactics and unchanging weapons. Poverty is a unique phenomenon, recreated from country to coun- try, province to province, and village to village, according to very complex, highly variable sets of local conditions. Poverty is not the same as an overvalued currency, which can be corrected by a gov- ernment edict or solved, for that matte-r, by -the recommendations of a task force or a commission; But poverty can and will succumb, step by step and country by country, to the-concef-trated, sustained efforts and.the stronger collaboration-of antipoverty forces. It i's with that higher level of cooperation and commitment-that prog-- ress-will be achieved, even in places-where it has come grudgingly and ata'substantial cost. 33 Environment, Poverty, and Growth The Challenge of Sustainable Development in Asia Environmental problems vary widely with the state of develop- ment. In a rich industrial country such as the United States or in a prosperous state such as Massachusetts, the thrust of environmental concem is directed mostly at improving the quality of life and re- moving the elements that threaten it, such as toxic waste or poison- ous chemicals. Here, incomes and expertise are available, if not always deployed, to monitor environmental trends closely, design corrective actions if those trends are unfavorable, and pay for pre- ventive and restorative activities. In developing countries, however, efforts to protect environmental resources must contend with poverty and intense competition for access to such natural endowments as forest, soils, and water. Those resources, under relentless pressure from large and growing popula- tions and commercial exploitation, are being degraded, depleted, and destroyed at an increasing rate. Fifteen years ago developing countries could be heard to declare that environmental protection was a luxury that only rich countries could afford, and they be- lieved that their low level of industrialization posed no threat to the environment. Not so today. The powerful interactions among poverty, environment, growth, and development are all too appar- ent, especially in Asia. A growing number of governments and pri- vate environmental organizations are coming to appreciate the An address to the Nieman Fellows at Harvard University, Cambridge, Massachusetts, U.S.A., February 9, 1989. 34 long-term value of natural resources and are concerned about their unsustainable overuse. In Asia the words "sustainable development" have acquired consid- erable meaning and portent. In some locations the natural re- sources on which many millions of people rely for their livelihood are in danger of disappearing. Tropical deforestation is massive and accelerating in Southeast Asia. In Nepal deforestation and soil ero- sion are taking much of the productive land. Soil erosion, saliniza- tion, water logging, and overgrazing have degraded large areas in India, so that some 45 percent of the land is now considered waste- land. In and around the major cities of Asia, the pollution of water and air has reached alarming proportions. In China, serious water pollution has affected most regions. These and other environmental developments are cause for grow- ing concern in Asia, in the developed countries, and at the World Bank. Determining their causes, their costs to society, and their - remedies are matters of great complexity and conrsiderable urgency. What are the critical environmental trends in Asia today, what ana- lytical approaches are being developed to better understand them, and how is the World Bank assisting Asian,countries to address en- vironmental problems? Critical Environmental Trends There are many causes of environmental.degradation-in Asia, some of which derive from the region's rapid-industrial growth. But under- lying all the adverse environmental trends is the region's large, dense, and growing population. Some 2.5 billion people live in the developing countries of Asia, about 64 percent of the total population of all developing countries squeezed onto 26 percent of the land. In Bangladesh, for example, the population density per square kilometer is more than 700, in India 240, and in the Philippines 190, compared with Africa, where there are just over 20 people per square kilometer. 35 Huge numbers of these people in Asia are poor, some 500 million people. They live mostly in rural areas, many of them on marginal land, and are engaged in low-input, low-productivity agriculture. They are depleting forests, soils, and watersheds in their desperate search for cultivable land, pasture, building materials, and fuel- wood. In a vicious circle of rapid population growth, poverty, and resource shortages all too reminiscent of Malthusian pessimism, the environment is perishing in many localities in Asia. To expand pro- duction and obtain necessities for survival, the poor are consuming their natural resource base. - Asia's population dynamics are, therefore, intimately connected to the four critical environmental trends in Asia. * Soil erosion and other forms of land degradation are transform- ing the ecology and productivity of the land in many Asian countries. * The relentless destruction of Asia's forests has accelerated so much in recenrt-years that, at current rates of depletion, most of the forests could disappear in- the next century. * The mounting pollution of water and air in and around Asia's dynamic industrialized urban areas is diminishing the habitabil- ity of many of the region's cities. * Asia's growing energy needs have contributed to a global de- bate on the environmental consequences of the main sources of power-thermal plants,- hydroelectric dams, and altemate energy sources. Soil Erosion and Land Degradation. Soil erosion is the most serious form of land degradation in Asia. No single event captures the se- verity of this problem and its daunting complexities as does the flooding that overwhelmed Bangladesh in 1988. In normal years the flood waters, which submerge about a third of the rural areas, are a mixed blessing of soil enrichment and agricultural bounty combined with widespread, but expected, damage to infrastructure, homes, and crops. In a bad year severe floods can inundate fully half the country, displace millions of people, and destroy their 36 meager assets. This is what happened in 1988, but it dici so witi such severity that it seemed tomany oberservers as if something fundamental had gone wrong. Indeed it had, but not suddenly. Environmental-deterioration in Bangladesh and in the watersheds that feed the huge Ganges- Brahmaputra River system has proceeded for a long time.-It is diffi- cult to sort out the exact relative impact of geological processes of erosion on the one hand and soil loss due -to the activities of people on the other.-But some trends are apparent. Under intense and growing-population pressure from the rural poor, forest-cover has been removed, steeply sloped hills have been -culti- vated, soil erosion has increased. Siltation of the riverbeds -from all causes has reduced the volume the waterways can evacuate-safely to the sea. I he geographical scope of this process is enormous and en- compasses watersheds in China, India, and-Nepal, as well as in Bangladesh itself.-These slow but massive changes are raising the potential cost to Bangladesh of extremes in rainfall and snowpack. As the Brundtland Commission-on Environment and Development has warned us, "a world in which poverty is endemic will always be prone to ecological and other catastrophes." The momentum of these long-term changes will not be easily al- tered nor their ravages easily prevehted. Reforestation of water- sheds may help in selected areas, but; in general, population- densities are too high to permit successful reforestation on a mas- sive scale; Improved agricultural techniques to reduce erosion will. also take time to introduce widely. Building dams and large reser- voirs is problematic as well. Unused sites are narrow, steep, remote, and -costly. The volume of water in the Ganges-Brahmaputra system is huge, enough to fill all of California's.reservoirs in three days. Steps-can be taken, however, to reduce-the-destruction of life and property. Some of these are local and s-mall- scale and-others re- gional and capital-intensive. What is needed-is a new willingness to explore these possibilities on a regional basis. Forest Depletion. Asia's forests are under-increasing pressure from a variety of sources. In India population-is the main cause of the 37 deforestation and degradation of watersheds, which is proceeding at an alarming rate; especialty in the Himalayas. Recent remote sens- ing of India's forest cover places it at 11 percent of India's land area, a perilously low proportion given the value of the forest in sustain- ing the lives of the poor. The urgency and importance of this prob- lem is recognized by the government and a growing number of Indian environmental groups. Indonesia's forests cover some 60 percent of the country, but the rate of deforestation is increasing. In the 1970s, an estimated 500,000 acres of forests were disappearing each year. In 1981 that rate had doubled. Today it may be more than 2 million acres a year. Here the pressure of poor people on the forests is also a factor, and roughly half of this deforestation is estimated to be due to small- holder agricultural conversion and shifting cultivation. Another 25 percent of the deforestation is caused by planned development pro- jects, and the other 25 percent is attributable to poor logging prac- tices and forest fires.-Indonesia, with its vast natural resource endowmenti is just emnerging from a frontier outlook and is explor- ing ways in which forests and other resources can be exploited for domestic consumption and export production while ensuring a sus- tainable equilibrum with the environment. Thailand, however, is at a different stage of resource depletion. In November 1988 that rapidly growing and industrializing country was dealt a cruel reminder of the fragility of environmental re- sources and the price-of their overuse. Villages in southem Thai- land were washed away in flash floods or buried in mud and logs, which left at least 350 people dead. This disaster focused the nation's attention on the state of the country's forests and how they are being misused. Thailand's forests now cover only about 19 per- cent of the-land, because generations of logging and agricultural conversion have removed half of the country's forests. Three per- cent of the remaining forest resources are lost each year. The blame for the destructive-floods is difficult to assign with precision, but poor logging practices, which have left slopes uncovered and scarred, are certainly part of the story. Villagers who converted steep slopes to tree crops also contributed. The govemment 38 recently announced an indefinite suspension on logging in the southern provinces. The loss of forest resources is perhaps thermost heralded environ- mental problem in Asia. Economically their potential value as pro- ductive assets has been reduced, their disappearance has increased soil erosion, and their role as habitats for a rich diversity of plants and animals is directly threatened. Another. less-visible trend, but no less significant for human welfare, is the decline in water and air quality in Asia's cities and industrial centers. Water and Air Pollution. By 2000, there will be twenty cities in de- veloping countries with populations in excess of 10 million each. Half of those cities will be in Asia, many in the region's poorest countries, where urbanization is occurring most rapidly. But Asia's urban pollution is not directly attributable to population size alone. The region's rapid industrialization is a significant factor as well. Much- of this industrial growth is concentrated in and around Asia's major population centers, where mechanisms for managing urban and industrial waste are not well developed. The environmental consequences of these trends are serious. Riv- ers, coastal waters, and urban air are badly polluted; groundwater is overdrawn, causing salinization and subsidence; human health is . threatened, particularly among the poor; and industrial costs are in- creased as water supplies are degraded.- On the densely populated island of Java, water pollution has reached alarming levels. Pollution loadings in some of the island's major rivers exceed conventional standards for-human waste con- tent by a thousandfold. In the Surabaya River, which supplies water for one of the large cities on the island,-pollution has seriously im- peded the functioning of the main water treatment plant, and the source of raw water for the capital, Jakarta,.is so polluted that water in the distribution system must be boiled before it can be consumed by people. These problems are intensified by the growing industrial pollution, especially along Java's north coast, where nearly 80 per- cent of Indonesia's medium- and large-scale industry is concentrated. Particularly dangerous to human health are the-concentrations of 39 toxic heavy metals that have been found in some of Java's rivers and bays. In Bangkok the picture is much the same: water and air pollution, city sewerage facilities for only 2 percent of the population, the pro- liferation of slum and squatter settlements (more than 1,000 today), and growing wastewater discharge from the dynamic indus- trial sector. To this list must be added a more specialized environ- mental problem-land subsidence. Bangkok's lack of a dependable public water supply has led to heavy underground water extraction and a subsidence -rate of nearly six inches each year. Extensive flooding and damage to property have resulted. The immediacy and pervasiveness of these environmental problems invade the daily lives of many millions of urban inhabitants, from Dhaka and Calcutta to Shanghai and Manila. Safe drinking water, waste disposal, industrial effluent control, and clean-up of rivers - and air pollution are intensely felt issues in Asia's developing coun- tries. They will crowd the region's environmental, and indeed devel opmental, agenda well inito the next century. Environmental Costs of Energy Development. A fourth area of envi- ronmental concern in Asia is in the field of energy, the needs for which are rising rapidlyin concert with industrialization and popu- lation growth. Additional energy is necessary to improve standards of living and increase production, but public debates have erupted on the environmental cost of the major energy sources. Large hy- droelectric dams, thermal power plants, and nuclear power all have their detractors and supporters. Improving the efficiency of energy use, rather than constructing new sources, is another option often raised in these debates. Cost-Benefit Cal eaons Like so many other environmental issues, meeting energy needs re- quires the calculation of the costs and benefits to society of going ahead with alternative interventions compared with the costs and benefits -of leaving things as they are. In the case of proposed large 40 dams, for example, decisionmakers need to know how-the dam com- pares with alte'rnative-sources-of-energy and water, and they must know what-will happen if they decide not to build-a-dam at all. Leaving a river valley in its natural state may seem menvironmentally benign, because forests will not-be-inundated, wildlife will not be disturbed, and people will-not need to be resettled. But iinaction- also involves rnegative environmental effects that. need-to be consid. ered as well. Without irrigation water from such a dam, the growing population will settle on marginal land for rainfed agriculture, cut down more-forest,7and cause more erosion. With no new sources of energy, the needs for fuelwood will continue to rise,-and forest re- sources-will continue to be used ui- to meet those needs. These and - other enVironmental costs must be added to the significant eco- nomic costs of not building a dam, _ard then a decision can be made. Including environmental costs and benefits in that procedure means attaching values to-them. This adds another dimension of- difficulty.'Estir atingihe-outcomes and assigning values to such fac- -tors as soil erosion, forest depletion, water pollution, sedimentation of rivers and streams,'destruction of wildlife habitats, and loss of - biodiversity presents economists and environmentalists.with some very tough issues-of definition and analysis. We-are just beginning to come to grips with-them. Areas for Envirorinental Action The Worid Bank has becomie increasingly involved-in the kinds of - studies and environmentally-targeted projects that help govern- ments to frame these issues:in-appropriate-terms and to choose the most socially beneficial inter-ventions. Its work- isJconcentrated in four key areas of environrnental action, which correspond to tfie' main environmental trends fn the region: new approaches to soil erosion nd watershed management, preservation of f6iosts, abate- ment of water and air pollution, and reduction of the environmen- tal costs of energy projects. Soil erosion antd-watershed degradation, -like other environmental - issues in Asia, are closely tied to population densities-and growth. 41 In regard to population, governments have been trying to reduce the fertility rates of the diverse populations living in Asia for many years. The World Bank has provided substantial funding for these efforts in several countries and will continue to do so. But-the most crucial ingredient will be the level of effort and commitment of the govemments themselves. The Bank is confident that govemments in the region, especially in low-income countries where population growth rates and densities have reached almost crisis proportions, will raise the priority of family planning as a developmental and en- vironmental objective. Soil Erosion. Soil erosion is the most important land degradation issue in Asia. As mentioned earlier, this process is a long-term as- pect of the increasing vulnerability to severe flooding of downriver populations in such countries as Bangladesh. For many years the World Bank has supported the construction of local flood control- infrastructure in Bangladesh as well as the rehabilitation efforts after severe floods. This important work must be expanded and im- proved. But better regional coordination is also needed between Bangladesh and neighboring states on new initiatives to regulate the flow of floodwaters, to prevent erosion, and to provide warnings of potential disasters. On previous occasions, the Bank has offered both to act as an intermediary for such discussions and to organize technical explorations of the issues. These offers, of course, still stand. It is hoped that more progress will be achieved in this vital area. The World Bank's work on soil erosion and watershed management in Asia is extensive-and will continue to expand. In 1989 the Bank has sixteen active projects that include watershed management components, and six more are proposed during the next three years. It is also studying new, low-cost ways to arrest soil erosion using veg- etative natural barriers. One species of grass, known as vetiver in South Asia, seems to hold particular promise because of its durabil- ity, its low cost, and its significant effect on moisture conservation and crop yields, as well as its ability to prevent erosion. 42 Forest Preservation. The second area of action is forest preservation. An example of such a problem can be seen in the Philippines, where a-resource of great value is close to extinction. Mainly be- cause of logging, the extent of old-growth Philippine-mahogany for- ests, that is, the-most commercially valuable hardwoods, has shrunk from more than 24 million acres in the 1950s to about 7 million acres in 1989. At current harvesting rates, this resource could disap- pear in about five years. If all commercially exploitable timber is in- cluded, in thirty years existing stands will be exhausted-from logging alone. The World Bank-has-studied this and other natural resource prob- lems in such countries as the Philippines and Indonesia and has identified what it considers an important aspect of the forest deple- tion problem and its solution. On publicly-owned forest land, pri- vate concessionaires typically pay low user fees to the govemment, such as a flat-charge based on the volume of timber removed. These modest forest charges allow concessionaires to earn returns-far above their costs and a normal rate of profit. This amount is an eco- nomic rent, and, with a publicly owned resource, that rent is going to concessionaires, not to society, which owns the resource. In addi- tion, those high-rents are powerful incentives for destructive log-- ging practices, which cause forest stands-to be mined, not harvested. In other words, because of the low cost of the resource- concessionaires now earn returs that far-exceed the discounted re- turns they would earn in the future through careful logging prac- tices and the regeneration or replanting of the stand. This analysis suggests several-desirable courses of action. Govern- ments should change concession systems to encourage sustainable yield management of-forest resources. An important step would be to capture -the economic rents of concessionaires for society at large. This would discourage destructive logging practices by raising the value of the resource as-well as provide a greater-incentive for its preservation- If concessionaires are required- to bid competitively for forest user rights, the rent and increased revenues would be - shifted to the government. The new resources could then be directed to public -purposes, such as reforestation of critical watersheds aind 43 other investments in forestry services. But higher forest user charges are not a solution in themselves. They should be highly specific charges according to tree species, grade, and site, and they should be combined with programs of replanting and enforcement. This would go a long way toward realizing the principles of sustainable yield management and preservation of the resource. These and other findings form the basis of World Bank lending in Asia to improve forestry and other natural resource management programs. They will be part of a regional forestry emphasis, directed not just at developing commercially exploitable timber, but at pre- venting shortages of fuelwood, reforesting eroded watersheds, curb- ing the destructive practices of shifting cultivators, and building up the institutional capacities of governments. These issues are being studied for Indonesia and the Pacific Islands. Future lending opera- tions have been proposed for China, India, Laos, and Sri Lanka. Components for conservation have been included in ongoing pro- jects in Indonesia, Malaysia, and Sri Lanka. Water ard Air Pollution. The Bank has long worked in forestry and watershed management, but urban water and air pollution, the third area of environmental action, is relatively new to the Bank's operations in Asia. To begin the long process of addressing these in- creasingly acute problems, the Bank will devote an expanding amount of its resources to environmental clean-up efforts in the large cities. This will require detailed studies to determine the sources of water and air pollution and then to select which of many possible interventions will yield the greatest social benefit. Given the strong demand from governments for operational support in this area, the program is expected to grow quickly. It is gratifying to see these new attitudes on urban and industrial pollution. Not long ago, countries in East Asia welcomed industries that were heavy polluters because their investments contributed to growth and employment. Today the awareness of the heavy envi- ronmental costs has changed that calculation to a more cautious approach. 44 Some of the Bank's recent work on-this issue-has already affected new projects. A pharmaceutical industry project in China included a significant component to-control hazardous materials and to mon- itor heavy metal contaimiination as well as air and water pollution. An urban project in Indonesia includes measures to reduce air pol- lution in Jakarta. Large Dams; The fourth area of operational emphasis is reducing the environmentEalconsequences of energy development, particu- larly-for large dams. It is a matter of considerable concern for the Bank and its borrowers that the effect of'dam construction on peo- ple and natural resources has at times been poorly thought through or that the measures to correct such-problems have been poorly im- plemented. -A major effort is under way within the Bank to-ensure - that such adverse-environmental consequences are assessed and mit- igated early in the evolution of such projects. The Bank's Environ- - ment Department is undertaking a study in cooperation with - nongovernmental organizations-(NGOs) on the environmental-costs and benefits of large dam's. Guidelines have already been prepared - to assist project staff in assessing arid m'inimizing the environmental costs in dam construction. 1The Bank is also reviewing past dam pro- jects in Asia to identify ways-in which environmental assessment could be improved. In Asia-mio6st- large dams are cohstructed in- India. The Narmada River Development is- a- multistate program, whichif fully imple- mented would comprise some-thirty major, and many other smaller, water projects during the next fifty years. The Bank is involved-in one of the projects and has been asked to support another.!Provid- ing new land and livelihoods for those who will have to relocate is an environmental issue of intense and continuing dialogue-between the Bank and India's central and state governments. Recently, con- siderable progress has been m-ade both in the statutory provisions for resettlement and in the-actual implementation of programs-,-and the Bank is pleased that NGQ involvement in this process is now substantial and-growing. 45 Resettlement will be a continuing focus of the Bank's attention in the design of hydroelectric projects. But other environmental issues associated with dam construction also receive scrutiny, including destruction of forests, increased erosion of streambeds, drying of downstream lakes, increased salinization in estuaries, and higher in- cidence of diseases, such as malaria and schistosomiasis. These and other environmental factors are considered in Bank assessments of hydroelectric project costs and benefits. Sustainable Development It is generally agreed- that the direction and pace of the major envi- ronmental trends in Asia is disturbing, and in some cases alarming. But environmental problems can be global in scope, not just local. Phenomena such as acid rain, damage to the ozone layer, and global warming from carbon dioxide emissions are compelling evidence that environmental interdependence is no abstraction. This gives rise to some fairly strong sentiments about who is to blarm-e and who should pay. Industrial countries want developing countries to preserve their tropical forests so as to slow the greenhouse effect and preserve wild- life habitats. Developing countries reply that industrial economies consume an inordinate share of the globe's natural resources and produce most of the pollutants. They say if forest preservation is so important to industrial countries, then they should help with refor- estation and other programs. These debates help clarify the impor- tant point that industrial and developing countries have a shared interest arid a joint responsibility on environmental issues, such as saving Asia's tropical rainforests. Inevitably, the industrial countries must be prepared to increase their foreign assistance to address these environmental concerns. The World Bank is assisting Asian countries with its relatively lim- ited financial resources and its advice on environmental issues. The future effect of its work in the environmental area will depend di- rectly on how committed the govemments are to addressing these issues and on how successful the Bank is in finding innovative and 46 replicable approaches to sustainable development. In this effort the Bank also must rely on many other agencies and nongovernmental organizations that are deeply involved in environmental work. The idea of sustainable development, which is central to under- standing the role of the environment in development, evokes differ- ent interpretations. It has been well defined, however, by the director of the Bank's Envirornment Department. He would have us focus on a long-term perspective so that the large future costs of-re- source depletion can be more accurately calculated and appreci- ated. He would also urge that the notion of threshold enter our thinking,-that is, a threshold beyond which the depletion of a natu- ral resource actually diminishes the capacity of society-to meet its- future needs. Where are those thresholds in Asia? Have they been breached al- ready? Some would argue that they have in some-wayszand in some places. The loss of forest in India comes to mind. Middle-income countries in East Asia are also rapidly approaching that threshold for forest depletion. Nepal-may be nearing the tolerable limits of soil loss in some places. It is difficult to-know for sure. But, if we wait for too much precision in theanswers to these questions, the result m-ay be precise measurements of resource exhaustion, when-it is too late to do anything about it. Such an outcome would have a profound errecr on mne aevetop- ment- prospects and performance of these countries. And ultimately it is development-sustainable development-that ensures the ex- pansion of welfare for all. That is why environmental preservation matters, arnd th-at is why the World Bank is determined to integrate- it in its approach to development; - 47 Enhancing -the Role of Asian Women in Development The task of raising the economic opportunities and participation of women is not finished, even in China and certainly not in other developing countries throughout Asia. The work of women is only dimly visible, poorly counted, underacknowledged, and over- confined to low-wage, low-skill activities. There are special issues and opportunities that Asian countries and Asian women must ad- dress in the difficult process of integrating women more fully into the development process. An Economic Approach to Womnen in Development The approach of development thinkers and practitioners alike now is to focus on the economic role of women and to seek ways to ex- pand their productivity and opportunities. The recently concluded U.N. Decade for Women helped increase the attention to women's issues among govemments, development agencies, and nongovem- mental organizations (NGOs) worldwide. Women produce more than half the food grown in the developing world and are heavily involved in trade, services, handicraft production, and light manu- facturing. Women- now account for one-fourth of the industrial labor force of the developing world. The number of women em- ployed in industry grew faster than any other segment of the world labor force from1960 to 1980. The available statistics, although fre- quently unreliable and underrepresentative, show rather-dramati- An address to the Beijing Women Journalists Association, Beijing, China, October 31, 1988.- 48 cally that women contribute on a substantial scale to economic pro- duction. It may be difficult to give a monetary value to the contribution of women within the household, but there is no disputing the-eco- nomic importance of the wide range of tasks women perform there. If not undertaken by a wife, mother, or daughter, vital tasks, such as collecting fuel and water and nurturing the young, the sick, and the aged, would need to be performed by someone else at a specific cost. In addition, women-often lack the means to work at their full po- tential. This is not a problem of motivation of inclination, but rather of limited access to productive assets and improvements in human capital. As one Bangladeshi woman explained her plight, "It is not work that lram afraid of, but the lack of it." This lack of work takesdifferent forms. It can mean unemploy- ment, that is, a lack of paid employment opportunities. Or it can mean confinement to tasks that require few skills, provide low pay, and are done for very long hours. This limited capacity-to contrib- ute more effectively is especially-ho-nstrained by custom and tradi- tion, sometimes codified into law or policies, that limit women's access to information and technology, to education and training,, to credit and resources, and to markets. These obstacles to advance- ment are especially harmful to the many women living in absolute poverty. When it is recognized that women are a substantial segment of the work force and that their potential productive contribution could be much higher, it follows that investing in improved opportunities *for them can bring substantial-benefits to development. In many de veloping countries, for example, women either own,-manage, or comanage assets in smallholder production. Extension programs are just beginning to recognize the importance of reaching out to women farmers so as to improve their productivity and food secu- rity. Investing in women can also make development programs more responsive to the-poor, because. women and their dependent children constitute most of the poor in developing countries. 49 This broad-approach to women in development rests on their eco- nomic role and contribution, which complements and enhances the more traditional ways of improving women's welfare and equal- ity. This economic approach rightly emphasizes efforts to ensure the access to opportunity and resources that women require to lead more prodiictive lives and raise household eamings. In practice, of course, these efforts must be shaped by the specific cultural, histori- cal, and economic characteristics of individual countries and regions. The Asian Context Asia contains an extraordinary diversity of development conditions and dilemmas, but the region possesses several distinctive common features, which affect the prospects and potential of women in de- velopment. Asian developing countries tend to share such attri- butes as rapid technological change, shortages of cultivable land, high female participation in manufacturing employment, and rela- tively low ratios of females to males. Technological Change. Agricultural and industrial change has pro- gressed more rapidly in Asia'-than in other areas of the developing world. Indeed, the application of Green Revolution technology was undertaken first in Asia, and the dramatic rise of Third World com- petitive manufacturing is an Asian phenomenon as well. The tech- nological and economic innovations in Asia have brought mixed blessings for women in terms of their opportunities for employment and their income levels. In China, women in rural areas have seen their role in agriculture change significantly since the late 1970s, when economic reforms introduced the responsibility system and contract farming, and the household unit once again-became the unit of production in the countryside. On the one hand, these changes have created opportu- nities and incentives to raise incomes and seek employment in off- farm activities, such as handicrafts and piecework, or in the rapidly expanding rural industry sector. On the other hand, rising agricul- tural productivity has created a surplus of farm laborers in China, a large share of whom are women. Providing the training and skills 50 needed for the transition to off-farm employment is a crucial issue for China's rural women. In other parts of Asia, too, the introduction of Green Revolution technologies seems to have disr-upted female employment patterns. Although many new jobs have been created in agriculture through Green Revolution advances, the increased mechanization in har- vesting and processing has displaced large numbers of female work- ers who were performing low-skill, labor-intensive agricultural tasks. The new jobs created in Green Revolution agriculture gener- ally have been filled by men. The effect of economic and technological innovations on women has been notable in industry as well as in agriculture. A growing body of evidence points to a pattern, in China and in much of East Asia, of female displacement to lower-paying, lower-skill jobs dur- ing periods of technological change in industry. This is not to say that technological change, in agriculture or indus- try, is intrinsically harmful to women or that such change should be resisted because it disrupts established labor patterns. The point is that, along with technological change, alternative employment op- portunities must be made accessible to women, especially through the necessary education and training so often reserved for men, and that legal and social barriers to the mobility of women must be re- duced or removed. The danger to be avoided comes not from new technology, but from other constraints that inhibit women's re- sponse to new technology. Economic and technological innovatiof-means higher productivity and overall economic growth. Sustained-economic growth remains the single most important precondition for alleviating poverty and therefore for expanding economic opportunities for women. There is precious little room for-economic nostalgia and. resistance to tech- nological change in the struggle to raise -incomes and reduce poverty. A central objective of the World Bank's work in Asia has been to help countries raise per capita incomes through accelerated eco- nomic growth. Some of these efforts have focused specifically on 51 women and the challenges they face in coping with rapid economic and technological change. In Southeast Asia, Bank-assisted educa- tion projects have-emphasized improving universal primary educa- tion in Malaysia and the Philippines and expanding access to- secondary education in Malaysia. In Bangladesh, Bank-supported primary education projects have included provisions for-hiring fe- male teachers so as to attract more girls to primary school and to re- duce the very high dropout rates for girls. In China, the education component of the Gansu Provincial Development Project incorpo- rates a plan to increase the enrollment of girls. An additional and vital benefit of female education is improved maternal and child health and lowered fertility rates. Access to credit is another important avenue through which women can adapt to, and profit from, changing economic and tech- nological conditions. Bangladesh is among the first countries to re- ceive special attention under the World Bank's women in development program, and several studies and projects are aimed at the difficult problem of delivering credit to rural poor women for homestead production and other enterprises. The Bank can draw on the experience of model credit programs, such as the Grameen Bank in Bangladesh, which have so effectively delivered credit to poor rural women and have experienced very high repayment rates, while charging competitive commercial rates of interest. In India, the World Bank has supported investments in projects, such as dairy farming and sericulture, which are based on small-scale female producers. A planned- multistate sericulture project in India is being designed to ensure that women benefit from it significantly. Cultivable Land. Intimately tied to rapid technological change-in Asia is a second issue that characterizes most of the region: the shortage of cultivable land. Women living and working on farrms in rural Asia confront a different situation from, say, most women farmers in Sub-Saharan Africa. When technological change and population pressures displace farm labor in Asia, the shortage of cul- tivable agricultural land means that rural families, including women, are-often compelled to seek nonfarm employment. Asia's high population densities and high rate of agricultural change have 52 in fact stimulated widespread migration to cities and have helped propel women into significant nonfarm employtment, particularly in the fast-growing urban services and industrial sectors. Industnial Employment. The third attribute that sets Asia apart is high levels of female industrial employment. There is no question that women, mostly single, mostly young, and-many of them mi- grants to cities, have provided the efficient, productive labor on which so much of East Asia's economic miracle has been con- structed. Especially in electronics and textiles, the female share of the work force is extremely high. In the Philippines and Malaysia, for example, 85 to 90 percent of the work force in the electronics industry was estimated to be women in 1979. In manufacturing generally, the female share of em- ployment was 47 percent in the Philippines, 44 percent in Thai- land, 40 percent in Malaysia, and 44 percent in Indonesia - according to statistics for 1980 compiled by the United Nations. Al- though this situation is more common in East andSoutheast Asia, women are increasingly becoming involved in light industry in South Asia as well. In Sri Lanka they are already a th-ird of the man- ufacturing work force. Quiestions have been raised on the effect of Asia's industrial trans- formation on women. These questions concern working-conditions, conflicts with traditional values and morals, access to more skilled ~and higher-paid jobs than assembly work, adequate access to train- ing and education in preparation for more productive employment, and the reform of traditional and legal restrictions, even though Asia ranks comparatively well in the developing world in terms of legal rights and protections for women. Certainly-those questions were faced during the industrial revolution that began more than a century ago in Europe and North America, and they need to be ad- dressed in Asia as well. But women have sought and found unprece- dented opportunities in the manufacturing sector, and many have eamed livelihoods more comfortable and rewarding than they en- dured in rural poverty. The task now is to ensure that the gains they 53 have achieved are consolidated and built on and that the new prob- lems they face are not ignored. Some of the issues involved in female industrial employment were addressed in a World Bank sector report on the Korean labor mar- ket. It noted that the government was already concemed that the large investments made in female education and training were not matched by the modest level of overall female participation in the labor force, compared with other countries, or in their low share of higher-productivity, higher-pay positions. This failure to utilize the full potential of women represents a considerable economic waste. At the same time, bringing more women fully into employment could alleviate some of the labor skill scarcities that will increas- ingly characterize Korea's economy. The report made several spe- cific recommendations to provide incentives and remove some of the barriers to the more effective integration of women into the labor market. Gender Ratios and Health. The fourth point in regard to distinctive women's issues in Asia concerns the pattern of low ratio of females to males in several South and East Asian countries. The reasons for this troubling departure from the biologically normal pattern of higher-than-equal female-to-male ratios are difficult to determine with precision. Technical issues involving migration and census tak- ing will account for some distortions, but it is clear that high female mortality rates may be- a factor in some cases. This suggests that the clear progress made in Asia's political and legal development in re- lation to women has not yet altered many of the cultural and social factors that underlie pervasive discrimination against women in some countries. Addressing this long-standing anomaly of low female-to-male ratios in Asia will involve profound social and economic issues. But that does not prevent us from seeking ways to improve the status of women, including their health, with available resources and tech- nologies. Maternal and child health and family planning programs have been widely supported by govemments, donor agencies, and 54 NOOS in Asia. Another approach is to target malnourished children with special nutrition programs. India has had remarkably good success with one such project sup- ported by the World Bank, the Tamil Nadu Integrated Nutrition Project. This project targeted malnourished children, both boys and girls, but implementation of the project involved women at every level-as top project directors, instructors, community nutrition workers, members of the women's working groups, and, of course, the mothers themselves. This deliberately high participation rate of women and mothers helped generate most welcome results in this project-cases of advanced malnutrition were reduced 20 to 25 per- cent, an achievement in itself, and malnutrition was reduced by about 50 percent. The Role of the World Bank When confronted with problems of such urgency and scope as in the case of women, the development community is tempted to promise more than it can deliver. I shall do my best to resist that temptation. The World Bank's role in this vast area must be seen as essentially catalytic and focused on countries whose governments wish to take the necessary steps. The Bank is, however, making progress in improving its capacity to assist in this area. Its president, Barber Conable, has clearly estab- lished women in development as a key operational priority within the institution. The newly created Women in Development Divi- sion is working on operational guidelines to help design projects di- rectly benefiting women. In 1987, the Bank joined with U.N. organizations to launch an international safe motherhood initiative aimed at reducing maternal mortality rates. Since then the Bank has helped arrange several national and regional safe motherhood conferences in Indonesia, the Philippines, and the Sudan, while ex- panding its financial support for maternal and child health programs. In its Asia operations, the Bank is working with other donors to help women overcome the special problems encountered in this 55 unique ana economically diverse region. i ne r5anK wiii neip aa- dress the special concerns of Asian women by * Supporting education and training programs, which help pro- vide women-with the skills they need to participate in the dy- namic growth of the region. * Actively pursuing new approaches to credit delivery, so that poor women can gain better access to financial resources for their enterprises within and outside of the household. * Continuing to improve our understanding of how women's role in development can be strengthened and how the development process, in various ways, changes the economic status and pros- pects of women; the Bank's analytical work will pay due atten- tion to the noneconomic barriers women face. - Lending more for health, nutrition, and family planning, with a special-focus on the health needs of women, especially those living in areas where the traditionally low status and high mor- tality rates of women suggest disproportionate health and nutri- tion problems. * Moving with all practical speed to a more systematic collection of gender-specific data both in analytical work and in project implementation and evaluation. * Encouraging and assisting the efforts of govemments to incor- porate the concerns of women in their national development policies and strategies. These six objectives for the Bank's work in Asia need to be seen in the proper context. They do, indeed, mark an important shift in the Bank's operational awareness and future activity in Asia, but they are not in any sense a solution to the economic and social is- sues that constrain the role of women in development. Those prob- lems are deeply ingrained in the history, laws, and cultures of very complex, sophisticated Asian societies. These issues touch the very core of a nation's identity, and their resolution is well beyond the capacity and mandate of any outside organization. 56 What will be required is, first, the commitment of govemments and the willingness of their people to take steps to improve the eco- nomic position of women and, second, the coordinated assistance of intemational donors and NGOs, including local NGOs, to provide the crucial financial support and expertise these countries will need to make a difference. This process will involve many participants to identify, analyze, and ultimately solve these problems. The World Bank stands ready to serve as an energetic partner in these efforts. For the future, I am optimistic. This region of the world has demon- strated that rapid economic development is not the unique preserve of the West, that poverty can be dramatically reduced, and that suc- cessful development is not an abstraction, but a concrete achieve- ment, for a growing number of Asian nations. This demonstration of what is possible inspires me to believe that Asian women will more fully share in the benefits of growth and in the opportunities to participate in the development process, not in the distant future, but within this generation and the one to come. 57 The International Economic Order and Structural Reform in Asia in some quarters it is considered uncongenial to divide the world into North and South, the haves and the have-nots, or the First and the Third Worlds. Such categories, it is said, arouse emotions and retard analysis. But such categories are not without their rele- vance to the realities in Asia. Indeed, development has come a long way in the past generation, but not far enough to erase the striking contrasts between the rich and the poor. In Asia these contrasts take rather distinctive forms. Instead of comparing Bangladesh and Japan, we are more likely to seek ker- nels of insight in the different approaches taken by the Republic of Korea and Thailand, by Indonesia and the Philippines, or by China and India. The developing countries of Asia contain such a diver- sity of development experience and approaches, each yielding com- pelling lessons in its own way, that the development examples of the North seem less interesting and relevant than they once were. This in no way questions the central importance of North-South is- sues in intemational development, but we need to focus with equal clarity on the range of development strategies that the nations of Asia have evolved with such originality and effectiveness during the past generation. I would like to explore the interaction between global economic forces and the countries of Asia and focus on how the directions of trade, aid, and finance changed as both North and South adjusted to the oil shocks of the 1970s and to the new competitive environ- An address to the Sixth International Seminar of Economic Journalists, New Delhi, India, January 19, 1989. 58 ment of the 1980s. Many Asian countries responded to these exter- nal changes in a distinctive manner, through a process that might be called structural reform. This has had important implications for the future development of the region. Oil Shocks, Debt, and Development More than fifteen years have passed since the onset of the energy crisis, when oil prices increased by fourfold between 1973 and 1975. These shocks were deeply felt by the economies of the developing countries. The rising oil bills were an immediate drain on the re- sources of the oil-importing countries, and the situation was aggra- vated by a widespread reluctance to increase domestic fuel prices. At first, oil-importing countries paid the imposed costs out of their foreign exchange reserves. But, in rapid order, other financial flows came to the rescue, including aid from the oil-exporting countries, increased remittances from migrant workers, and some increases in multilateral finance from the World Bank and the Intemational Monetary Fund. The main source of finance, however, was the spec- tacular increase in lending by the commercial banks, as they re- cycled petrodollars from the surplus oil-exporting countries to the deficit developing countries. As the banks increased their exposure, they developed a lending in- novation, which has since become commonplace in the financial world, but which in the 1970s transformed the distribution of risk. This, of course, was variable-rate syndicated lending, through which interest rates were adjusted every six months on the basis of the London interbank offered rate (LIBOR). Since real interest rates had been near zero during most of the 1970s, the introduction of variable rates did not involve immediate costs, and borrowers had little reason to exercise restraint. The total debt of the developing countries to private banks was about $30 billion in 1970, when most of the commercial bank activity was confined to suppliers' credits and finance for direct foreign investments. By 1980, how- ever, developing-country debt to the banks had soared to about $280 billion. 59 Two other developments in intemational finance, again outside the control of developing countries, aggravated their financial burdens. First, the earlier switch to a flexible exchange rate system among the major currencies added an element of global uncertainty. For ex- ample, as the dollar appreciated from 1981 to 1983, developing countries holding debt denominated in dollars saw the value of their obligations increase. Later, the dollar's sharp depreciation against the yen in the mid-1980s had an adverse effect on debtors whose export eamings were heavily denominated in dollars but whose external debt was heavily in yen. Indonesia, for example, saw its public debt payments rise from $3.6 billion in 1985 to $5.4 billion in 1987, an increase of $1.8 billion. More than 80 percent of that increase was due to exchange rate changes during that period. Second, developing countries were faced with dramatic shifts in the behavior of commercial lenders, who tended to move en masse when assessing a developing country's creditworthiness. Either as enthusiastic entrants to the developing-country market in the 1970s or as participants in the sudden exodus of the -1980s, the lead- ing commercial lenders, with their quick and widely replicated deci- sions, added ariother element of financial instability for developing-country borrowers. The global economy is still contending with the financial reverbera- tions of the historic shift in developing-country indebtedness. Re- source flows to these countries have dried up in net terms because of the near extinction of commercial lending in the mid- 1980s. Of- ficial development assistance has not increased, and some of what is available is caught up in new arrangements to meet short-term debt-servicing requirements. Opportunities for Trade Another aspect of the international economy, however, has contin- ued to offer excellent opportunities to developing countries that could take advantage of it-namely, trade. If, on the finance side, decisions in the North eventually impeded development in some countries, on the trade side, the effects were largely positive. 60 As primary commodity prices began their steep and lengthy decline in the 1980s and as economic growth in the North continued to be modest, markets for the manufactured exports of developing coun- tries also were expected to suffer. Contrary to those pessimistic as- sessments, their manufactured exports continued to grow after 1980 and picked up even more strongly in the mid-1980s. An important reason for that can again be found in the North, where the large fis- cal deficits in the United States overcame the effect of tight mone- tary policy and in 1983 helped stimulate a surge in U.S. growth, continued high interest rates, a sharply appreciated dollar, an ex- panding current account deficit, and a strong rise in imports of man- ufactures. The buoyant trade in manufactures helped propel the global recovery. Through manufactured exports, enterprising devel- oping countries were able to share in the stronger growth of world trade. With its appreciated-dollar and low trade barriers, the United States accounted for all of the growth of manufactured exports from developing countries between 1980 and 1985. Since 1985 manufac- tured exports from developing countries to Europe and Japan have also expanded following the appreciation of their currencies and a resurgence in growth. Manufactured exports from developing coun- tries grew from 13.9 percent of world trade in manufactured exports in 1980 to about 18 percent in 1987. The U.S. boom, therefore, was a mixed blessing for developing countries. Expansionary fiscal policy and rapid economic growth in the United States led directly to the jump in developing-country export volumes and increased their ability to pay their debts. But the sharp appreciation of the dollar exerted strong downward pres- sure on the prices of primary products, which reduced the ability of developing countries to pay their debts. And most dramatically, the sharp rise in interest rates raised the amounts of interest that all had to pay. 61 The Experience of East Asia Asian countries encountered obstacles and options during this cru- cial period in the early 1980s, when global events in finance and trade showed such volatility and posed such serious challenges to developing countries. On the manufacturing side, East Asian coun- tries did more than just share in the 4 percent annual growth in world trade in manufactures after 1980. The volume of manufac- tured exports from the region grew 14 percent a year between 1980 and 1984, which far surpassed the global figure. This performance is not attributable exclusively to the newly industrializing economies (Hong Kong, Korea, Singapore, and Taiwan). Excluding these econ omies, the share of East Asian developing countries in world ex- ports of manufactures now exceeds that of Latin America. In all of Asia's developing countries, the share of manufactures in their mer- chandise exports has risen substantially from about 46 percent in 1975 to 73 percent in 1987. Although the East Asian developing countries are correctly thought of as an emerging center of manufactured exports, all, ex- cept for Korea, are major exporters of primary commodities as well. The sharp declines in commodity prices in the 1980s therefore caused a reversal for this region. The drastic oil price decline in 1985 had a severe effect on all three oil exporters in the region. In- donesia, for example, lost $3.8 billion from its foreign exchange earnings. Malaysia's loss of oil export revenues amounted to 5 per- cent of its gross national product (GNP). These oil revenue losses im- posed acute constraints on the balance of payments, especially for - Indonesia, which had also incurred substantial external obligations. Indonesia's remarkable response to this drastic decline in oil reve- nues is a well-known example of courageous, persistent adaptation to extemal shocks both on the macroeconomic level and in the key productive sectors. In addition, this has been accomplished without resorting to the reschedulings so common for other large develop- ing-country debtors. With regard to non-oil commodities, the East Asian developing countries were particularly concerned about the prices of rice, 62 rubber, coconut, palm oil, and tin, all of which steadily declined. Malaysia was the most adversely hit by these trends because of its commodity mix, but China, Indonesia, the Philippines, and Thai- land also were affected. In the face of this worldwide decline in the commodity terms of trade, it is remarkable indeed that the East Asian countries were able to improve their income terms of trade during this period. This reflects their success in expanding their total earnings from these commodities through increased produc- tion and exports even as prices fell. On the financial side,.Asia, including South Asia, has for the most part managed to avoid the crippling levels of indebtedness that have so disrupted development prospects in other regions. Korea and Thailand encountered some balance of payments strains in the early 1980s, but, with World Bank support and their own deter- mined and timely adjustment efforts, they were able to avoid an overdependence on external finance and to exploit their export competitiveness to restore health to their current accounts. Al- though the Philippines carries a significant external debt burden, the situation there is not as acute as in some other heavily indebted countries. The end of the tunnel is more visible. The "Sttuctural Reformers" of Asia An avoidance of crisis and a willingness to integrate their econo- mies with international markets have been two hallmarks of East Asia's progress through the 1970s and into the more volatile 1980s. Because the world economic stage is so crowded with countries beset by financial and economic crises, all developing countries are frequently divided into two groups: those undergoing structural ad- justment and those that are not. The Asian experience shows that this distinction is somewhat of a simplification. Many Asian coun- tries have rapidly reformed the structure of their economies, not under the intense pressure of a balance of payments crisis, but driven by a general prudence in macroeconomic management and a perception of, and responsiveness to, rapid changes in the external environment. 63 Among the World Bank's main Asian borrowers, a significant trans- formation is, and has been, taking place, especially in restructuring the manufacturing sector. The newly industrializing economies and others have successfully broken down the old canons of self-suffi- ciency, import substitution, and export pessimism. The feasibility of moving from resource-based to labor-intensive and from labor-- intensive to technology-intensive production is now widely appreci- ated. Perhaps this occurs too much at times, as when countries seek simplified blueprints of the Korea-Taiwan miracle. For example, the belief still lingers that the success of the newly industrializing coun- tries was caused by government favoritism in industrial subsectors. World Bank work in this area has demonstrated the importance of flexible response with proper incentives to help markets function, especially through the reform of trade policy and the deregulation of private investment activities. It is gratifying that this message is now widely accepted. All this suggests that we should refine the rhetoric used to laud the economic "miracles" of Asia. It is perhaps miraculous that the gross domestic products (GDPs) of China and Korea have grown an aver- age of more than 8 percent during 1980-86, but we need to focus on the consistent process of structural reform and adaptation that underlies that performance. It might, therefore, be useful to speak of the Asian "structural reformers," countries whose sustained and well-timed efforts to increase the efficiency and competitiveness of their economies have kept them clear of the debt trap and free of the compulsory rigors of structural adjustment. This group of Asian structural reformers is welcoming countries in South Asia into its ranks. India's long-term per capita growth rate has been relatively steady and significantly positive, and it has ex- ceeded the average of all low-income countries by a substantial mar- gin (1.8 percent compared with 0.6 percent). But, most important, the growth of the Indian economy has accelerated in recent years to 5 to 6 percent, well above the trend rate of growth. This- is a trib- ute to India's prudent macroeconomic managetnent of the economy and to its reliance more on domestic than on foreign saving to fi- nance its development. 64 Because of industrial restructuring and reform of the trade regime, the economies of South Asia have displayed in recent years a new' competitiveness in world markets as manufactured expo'rts have'ex- panded briskly. This has occurred not only in India, but in Bangladesh and Sri Lanka as well. In 1988 real growth in manufac-' tured exports reached 30 percent in Bangladesh, 14 percent in India, and more than 17 percent in Sri Lanka. India-and- Bangladesh are just beginning to tap their potential for trade. India's share'of world trade is so sm-all,-about 0.5 percent, that even a severalfold increase would hardly be noticed. India is well launched toward making the reforms in its trade regime that will 'allow this kind of expansion to continue. India will benefit by being more resilient to extemal shocks and by having-the power to buy more imports. There has-also been significant progress in India's industrial sector. The highly bureaucratized system of licensing of private investment has been gradually dismantled, and many of the impediments to- competition in domestic markets have been removed. -The strong bias against exports caused by the heavy protection of domestic in-. dustry has been reduced to a considerable extent. Problems inhibit- ing efficiency still remain, particularly the web of regulations preventing the closure of unprofitable, capital-depleted enterprises. But the direction of structural reform has been set, and- the pressure of dornestic and international competitive forces-will-help acceler- ate change. Trade inMServices Another aspect of structural change deserves more international at- tention and perhaps bolder action-the expansion of trade in ser- vices. This does not refer to the specific issues placed on the agenda of the General Agreement on Tariffs-and Trade .(GATT), nor does it involve discussion of the technical issues from the perspective of carefully balanced national interests. But developing countries can have a comparative advantage in the export of services. India has - already made substantial progress in undertaking overseas contracts;, getting into hotel management in other countries, and exporting 65 tailor-made software. And economies such as Korea, Taiwan, and Turkey have undertaken numerous major construction activities in countries that allowed the firms to bring in their own personnel. But these examples have been largely confined to the markets of the oil-rich, labor-scarce economies of the Middle East. There is no fundamental reason why countries such as India cannot export more kinds of services and compete in the markets of the in- dustrial countries as well. After all, services are by definition labor- intensive, and even skilled workers are relatively inexpensive in developing countries. With the immense progress achieved in inter- national communications, one would expect a vast scope for trade in services. In the case of face-to-face services, which require the presence of the providers, however, immigration laws, trade union practices, and other systems of professional guilds will restrict the flow. The time has come for the international community to discuss the revision of barriers to trade in all kinds of services. These discus- sions could address not only banking and insurance, which have been on the agenda, but also areas such as construction, consul- tancy, shipping, air transport, and even professional services. Trade in services should not be portrayed as an industrial country monop- oly, but as an arena of growing opportunities for developing coun- tries, opportunities that can be seized by expanding the services subject to free trade. Resource Requirements Some unpredictable, some would say capricious, forces have erupted on the world economic stage during the past fifteen years. Some countries were devastated by external shocks, and others sur- vived them well. The process of structural reform has been an en- during theme in the way Asian countries have adapted to and exploited such changes in their external environment. As this process is taking hold in South Asia, the international donor community must increasingly direct its attention there. The reasons are clear enough. The agenda for such change is imposing in India and elsewhere in South and Southeast Asia. Meanwhile, 66 the relentless pressures of rapid population growth and severe mass poverty place an extremely high premium on achieving higher rates of growth. In addition, the cost of implementing such reforms while attending to urgent poverty needs will be substantial. In countries where the will and the capacity to proceed are so evi- dent and where the human cost of low growth and structural stagna- tion is so high, it is simply unthinkable that the international community would shrink from this challenge. As long as the lead- ers of these countries resolutely lead their countries through struc- tural reforms, the aid community must find the resources to lend its full support. That remains one of the most enduring principles guid- ing relations between North and South. And it is more true today and more valid in Asia than it has ever been before. 67 Statistical Appendix Table 1. Population and Per Capita GNP, 1987 Popularion Population (millions GNP per capita growth Country or region of persons) (nominal $) (percent) Bangladesh 106.1 163.9 2.6 China 1,068.5 293.6 1.4 India 797.5 311.1 2.1 Indonesia 171.4 443.5 2.0 Korea, Republic of 42.1 2,688.9 1.0 Malaysia 16.5 1,819.7 2.6 Nepal 17.6 161.2 2.7 Philippines 58.4 589.3 2.3 Sri Lanka 16.4 406.1 1.5 Thailand 53.6 849.6 1.7 Asia 2,491.1 - - Developing countries, excluding Asia 1,370.3 69 Table 2. Growth of Real GDP, 1973-88 (percent) Counny or region 1973-80 1980-85 1986 1987 1988 Bangladesh 5.7 3.6 4.7 3.9 1.8 China 5.4 10.4 7.9 9.4 11.2 India 4.1 5.8 4.6 4.4 9.0 Indonesia 7.2 3.5 4.0 3.4 4.7 Korea, Republic of 8.9 7.9 11.7 11.1 11.2 Malaysia 7.5 5.6 1.3 5.2 7.5 Nepal 2.4 5.3 3.9 2.4 7.1 Philippines 6.3 -0.7 1.4 4.9 6.7 Sri Lanka 5.2 5.0 4.4 1.1 2.7 Thailand 7.5 5.8 4.4 8.1 11.0 Asia 5.9 7.3 6.7 7.7 Low-income Asia 5.2 7.9 6.4 7.1 Middle-income Asia 8.0 5.5 7.5 9.3 Developing countries, excluding Asia 5.1 1.1 3.5 2.0 Table 3. Growth of Export Volume (Goods and Nonfactor Services), 1973-87 (percent) Region 1973-80 1980-85 1986 1987 Asia 8.7 6.8 18.4 16.4 Low-income Asia 5.4 4.2 11.2 14.5 Middle-income Asia 11.8 8.7 23.3 17.6 Developing countries, excluding Asia 4.9 3.4 1.1 4.0 Low-income, excluding Asia 4.3 -6.3 6.0 -2.5 Middle-income, excluding Asia 4.9 4.7 0.4 4.7 70 Table 4. Growth of Import Volume (Goods and Nonfactor Services), 1973-87 (percent) Region 1973-80 1980-85 1986 1987 Asia 11.2 6.2 4.1 10.5 Low-income Asia 11.0 8.8 -4.5 -2.2 Middle-income Asia 11.4 3.9 13.4 21.9 Developing countries, excluding Asia 5.7 -3.3 1.7 -0.8 Low-income, excluding Asia 7.6 -6.9 -9.5 -6.0 Middle-income, excluding Asia 5.6 -3.0 2.9 -0.2 Table 5. World Bank Cumulative Lending and Current Project Portfolio, as of April 30, 1989 Toal, Asia excludng Asia Cumulative lending to past and current borrowers (millions ofdollars) 82,241.5 130,397.7 Current project portfolio (value of active projects in millions of dollars) 25,382.8 33,869.9 Current project portfolio (total number of active projects) 476 1,178 Note: Data in this appendix are more recent than, and supersede, figures cited in the text, which have not been updated. Population data in Table I are based on the World Bank's list of countries in the World Development Report. 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