Rapid transformation, rising inequality, environmental impacts

The East Asia and Pacific Region presents a dramatic illustration of the principal global dynamics, opportunities and risks of the 21st century. After making the fastest progress in growth and poverty reduction of any region around the world in the last 15 years, some countries in the region are poised to become middle-income, and some are preparing to join the select group of high-income countries. 

Such rapid transformation is leading to the largest shift in rural-to-urban population in human history.  At the same time, it is generating rising inequality within and across countries, and a significant number of fragile and lagging countries and sub-national regions—some of which are conflict-affected—are being left behind in the region’s dash for prosperity. By 2025, the region’s urban population is likely to increase by 500 million people, or 68 percent, placing stress on urban infrastructure and increasing the need for social safety nets. Together with China, where the urban population will rise by about two-thirds, other countries such as Vietnam (113 percent), Indonesia (75 percent), and the Philippines and Thailand (67 percent each) will also face tremendous stresses on urban infrastructure and social safety nets.

Rapid growth has come at significant cost to the region’s physical environment as well as that of the world. The developing countries of EAP contribute 23 percent to global carbon dioxide emissions, and their own agriculture, water supply and coastal areas have become vulnerable to the impact of climate change.

The region is also making its presence felt in the global economy. It contributed more to global growth in 2007 than the United States and, as the industrial countries face a downturn in 2008, it has emerged as a potentially stabilizing force in the world economy. While many middle-income countries in the region still face major economic challenges, they also have a crucial and growing role to play in securing future global prosperity. Their foreign direct investment and aid programs and their potential contribution to leadership on global policy initiatives to address challenges such as climate change make them more significant players in the future than ever before. 

Weathering the global economic slowdown and meeting the MDG targets

Growth in the low- and middle-income economies of the East Asia and Pacific region picked up from 9.8 percent in 2006 to 10.2 percent in 2007, but was expected to decline by up to 2 percentage points in 2008 because of the global slowdown. While most East Asian countries are well positioned to navigate the global slowdown because of investments made in structural reforms in the past 10 years, the food price crisis and oil prices have dealt a blow to poor people in a number of EAP countries.

Despite the global slowdown, sustained growth and pro-poor policies have produced dramatic reductions in poverty in many of the Bank’s client countries in the region. In 2007, the proportion of poor people (with consumption below $2 a day) fell to 25 percent, compared with 69 percent in 1990. For the region’s fast-growing countries, growth has been accompanied by exceptionally rapid urbanization. While many countries in the region have reached, or will soon reach, the human development targets set under the Millennium Development Goals (MDGs), stark differences between countries remain. Indonesia, the Philippines, and Vietnam still have to catch up with some of the wealthier middle-income countries, while Cambodia, the Lao People’s Democratic Republic, Timor-Leste, and some Pacific Island economies may fall short of some of the 2015 targets.

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