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ECONOMY-ASIA: Gender Discrimination Can Hit Growth – UN Expert

Ron Corben

BANGKOK, Apr 19 2007 (IPS) - Asia Pacific economies are expected to face another year of strong growth, led by China’s and India’s economic expansion but United Nations economists warn of impediments that range from poor management of capital inflows to gender discrimination.

The outlook came in the latest UN Economic and Social Commission for Asia and the Pacific (ESCAP) annual survey, released this week for a region in which export demand has been the key economic driver over the past decade.

Raj Kumar, a senior ESCAP economist, says the outlook remains buoyant after the economies weathered high oil prices in 2006 and concerns over inflation. “The economic health of the region is, I would say, very, very good and Asia performed very well this year. Even though it might be slightly lower than last year, it has been a remarkable performance,” Kumar said.

ESCAP expects the developing economies of Asia Pacific to grow by 7.4 per cent in 2007 – moderating slightly from the 7.9 per cent last year with some signs of a cooling in demand in the global electronics industry.

“Asia is one of the drivers of the growth, although it’s not the only driver – there is Europe and the United States,” Kumar said in an interview with IPS.

But a key point is how the region’s economy is changing given the growth in recent years. “Asia is transforming itself to take a bigger role than it had done before, primarily due to the very high growth rates from China as well as India – including other countries like Singapore and the Republic of Korea,” he said.

The region’s economic resilience will need to withstand any potential “shocks” over the year. ESCAP economists are closely watching the U.S. economy. A downturn in U.S. consumption, causing reduced imports from Asia, is one of the “downside risks” economists see as threatening the bright outlook.

The other concerns include another oil price shock, a “disorderly unwinding of global imbalances” – especially due to the large U.S. current account and trade deficits, together with massive surpluses and foreign exchange reserve holdings especially in Asia.

But the outlook for 2007 remains sound, and has improved from earlier forecasts. Shamika Sirimanne, a senior U.N. development economist at ESCAP, where growth for the region is now forecast at 7.4 per cent from an earlier predicted 6.9 percent was optimistic. “We see a lot of resilience in our economies to withstand any trend of a slowdown in the U.S. economy and we are still predicting a very high growth from India and China,” she said.

“India is supposed to grow around 9.0 per cent in 2007, in China close to 10 per cent. These are really remarkable numbers and South East Asia will have a rebound except for a couple of countries – such as Thailand, Cambodia – that will see lesser growth than the others,” she said.

But there are issues the region still needs to face or keep a close watch on, despite the upbeat scenario.

The “global imbalances” in capital and deficits has led to the region accumulating an unprecedented 2.5 trillion US dollars in foreign exchange reserves. The massive inflows have led to regional currencies appreciating sharply against the US dollar in the past year.

Managing foreign exchange will be a focal point for governments in the year ahead, Sirimanne says. “We perceive that the biggest challenge is going to be from the exchange rate management, and there’s going to be a lot of capital inflows coming into the region including for speculative purposes, and exchange rate management will be the biggest issue going forward,” she said.

The UNESCAP report warns that several of the countries, that a decade ago were engulfed in Asia’s financial crisis, are again “vulnerable” due mostly to the economies’ heavy reliance on exports rather than domestic consumption and local investment to drive growth.

The main economies of concern are South Korea, Indonesia, Thailand, and the Philippines to varying degrees. “A decisive policy response is needed to promote private investment in these East Asian economies,” the report says.

UNESCAP called for improved systems of risk management to enable banks more latitude in lending policies together with other financial reforms.

But foreign exchange and economic vulnerabilities are not the only issues UNESCAP has concerns over. The UN regional development body is calling on the region’s governments to look to benefit now from the “demographic dividend” of benefiting from the large numbers of adult working age people.

“Whether countries capture this opportunity will depend on the social and economic policies and institutions they adopt to absorb a rapidly growing labour force,” the UN report said.

Other regional issues include effective management of urban growth as well as the promotion of “green growth to sustain development”.

But it is in ending gender discrimination that UNESCAP sees real economic potential in key economies such as India, Malaysia and Indonesia. Sirimanne says the discrimination costs the region up to 80 billion dollars annually, in employment and education alone. “We find for example, because of the gender discrimination in employment, the region sacrifices about 42 – 47 billion dollars a year. And also gender discrimination in education costs the region about 16 – 30 billion dollars a year,” she said.

Female primary school enrolment could be as much as 26 percent lower than that of males. The region is also facing an alarming trend in the deteriorating female-to-male ratios in the population, particularly in North and Central Asia, South Asia and the Pacific Islands.

The report’s guideline is based on a view that if female participation in India for example was the same as that the U.S., India’s gross domestic product would increase by over four per cent, adding 19 billion dollars to the national economy.

“The basic point that we raise is that gender discrimination – which is normally discussed as a human rights issue – is not just a human rights issue but also carries a huge economic cost.”

“To address these issues what is needed is vision and commitment at the highest level. And with that kind of vision and that kind of commitment we have seen in many countries that gender discrimination in education, health and other issues have been addressed successfully,” she said.