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Takehiko Nakao

The Asian economy is growing fast, but sizeable pockets within the continent are being left behind. The president of the Asian Development Bank, Takehiko Nakao, tells Jacopo Dettoni how his organisation is looking to tackle this problem.

Q: The main theme of this year’s Asian Development Bank [ADB] annual meeting in Manila concerns 'linking people and economies for inclusive development'. Asia has been growing at a fast pace, but also inequality is on the rise, and the Philippines is a good example of that. What are the missing links between people and economy to set the ground for inclusive development?

A: Our action in the Philippines is a good example of the kind of things we should be doing to support people. Among other things, we are supporting the reconstruction of [conflict-hit island] Mindanao, rural development, investment in education and educational reforms, and we are starting to support more enthusiastically the development of the transport system in Manila.

Asia has grown very solidly in the past few years, even after the global financial crisis, and the region's economy has grown at about 6% per year. Excluding the newly industrialised countries [Hong Kong, Taiwan, Singapore and South Korea], we see growth of 6.6% in both 2017 and 2018, which means the GDP will double in 12 years [at this pace].

People’s lives today are much better because of higher incomes, better jobs, some rural development, improved productivity in agriculture, and access to education, health and [sanitation], but still many people are left behind, and that’s why we should pay more attention to people.

Q: What are the key factors behind connecting people to growth?

A: We can do many things, from infrastructure development to investment in education and health. Another more straightforward way to support households is conditional cash transfers, which offer a sort of social protection... and more generally endorsing a more conducive, market-friendly investment climate by supporting public-private partnerships and capital market reforms.

Q: Technology is also a way to make growth more inclusive, although automation poses a threat to labour-intensive manufacturing hubs in Asia. How can policymakers reconciliate job creation and inclusiveness in the era of automation?

A: There are many concerns about the impact of technology on jobs, but we would like to strike a more positive note. Even if there is technological feasibility [for artificial intelligence and robotics to take human jobs en masse], economic feasibility is a different issue. Even if a machine can do everything, it can be costly to use. It would be better to use more reasonably waged workers. Artifical intelligence and robotics cannot replace all the jobs.

Also, because there is more efficiency in production, income is growing, and thus the demand for manufacturing products is also growing. Besides, there will be new industries [coming along] that we didn’t expect. [And tourism should also be taken into account.] It used to be a privilege, but now everyone enjoys tourism. So we don’t have to worry too much about that, although there is a cost of transition.

Today, technological changes happen rapidly. More people quickly lose jobs, and it may not be easy for them to pick up a new job. We need to invest in education and retraining them, but also give income support to those who cannot easily find new jobs. Globalisation and technology are generally positive trends, but can also cause growing inequality, and we should raise these issues.

Q: The ADB is working on a new 2030 strategy and one of the pillars of the preparation works reads: 'Adapt to remain relevant.' How will you adapt to remain relevant in a region increasingly able to meet its own financing needs?

A: We are challenged on whether we can remain relevant because many Asian countries can finance themselves by issuing bonds and our scale of operations is about $19bn, growing but still limited compared with the huge financial needs of Asia.

One element behind staying relevant is technology; how we can incorporate better technology, how we can show examples of doing things better using better technologies and ideas and knowledge. Another element behind staying relevant is to continue to develop our policy advisory by using policy-based lending or budget support.  

A third element is that we should mobilise more private sector financing. In 2017, private sector lending made up $3.2bn of our total lending of $19.1bn and we will be increasing private sector operations, as well as catalysing private resources through cofinancing. And regional integration is another element, a very important hallmark of ours.

This article is sourced from fDi Magazine
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