Contacts:
In Washington: Mohamad Al-Arief (202)-458-5964
malarief@worldbank.org
In Da Nang:Nguyen Hong Ngan - 0912225429
nnguyen5@worldbank.org;
Da Nang, Vietnam, April 4, 2008 - East Asian economies face major economic and political challenges in the months ahead as they deal simultaneously with slower growth, higher prices and the need to continue critical policy reforms, World Bank Managing Director Mr. Juan Jose Daboub said today.
Despite challenges, Mr. Daboub remained encouraged by the commitment of East Asian countries to find responsible solutions to the challenges. He emphasized that the World Bank is prepared to contribute to the efforts of ASEAN countries to move forward. He encouraged countries to work together within ASEAN to find solutions to the current challenges, and to look for opportunities for long-term, sustainable solutions. Speaking on the sidelines of the ASEAN Finance Ministers Meetings in Danang, Vietnam, Mr. Daboub said the region was positioned well to weather the downturn, thanks to sound economic management, strong growth and accumulated reserves over the past decade. He said the Bank anticipated growth for the developing countries of East Asia would be cut one or two percentage points in 2008, reaching about 8.5 per cent. “No one can say with certainty what effect this downturn in the US will have on other countries, on the real economy, even on the jobs and lives of ordinary citizens,” Mr. Daboub said. “The housing and construction boom in the US fueled growth, created jobs and provided abundant liquidity to the American market and to the world. The slowdown is working in reverse, and the unwinding of that boom will have serious effects not just on house prices, credit, jobs, consumer confidence, and retail sales in the United States, but will have repercussions that are already extending across the globe.” Mr. Daboub said that “East Asia’s strong long run growth has not been driven by year to year fluctuations in world demand, but, rather, by improvements in productivity, innovation, quality control, education and skills. These underlying strengths of East Asian economies will neither be undone by the financial turmoil nor by a slowing global market. Indeed, it is already becoming clear that East Asia, and especially China, is emerging as a growth pole in the world economy, providing a useful counterweight to the slowing industrial economies.” But high and rising food prices – especially rice prices – posed a special challenge. Governments needed to take short-term steps to protect the poor, but also ensure that long-term solutions were found to relieve shortages. “In virtually every East Asian country, high food prices are raising headline inflation and contributing to a significant decline in the real incomes of the poor, most of who devote between one- to two-thirds of their income on food”. “There is some evidence that higher food prices are bringing increased acreage under cultivation in various parts of the world, including East Asia. But this is not enough. More and better irrigation, greater private participation in food procurement, increased investment in transparent and technical agricultural support services, and increased research and development are essential components of a long-term solution. More secure land tenure and property rights for farmers will encourage more agricultural production, and give farmers better access to credit for machinery, seeds and fertilizers that can help to raise yields.” “Crucially, however, a fairer and more open global trading system will be critical to encourage increases in global food production in the longer-term” said Mr. Daboub. “While governments are appropriately looking to respond to mitigate the effects of rising food prices on the poor, it is important that this support be provided in a way that is targeted, transparent, and fiscally sustainable – and does not exacerbate market distortions that discourage production. This is a time to remove obstacles that can encourage increased agricultural trade and productivity.” At the same time, countries of the region are dealing with their own specific reform agendas, driven in part by increased external competitive pressure and in part by the process of creating an ASEAN economic community by 2015. Mr. Daboub said that these reforms had been receiving attention for some time, but the current circumstances only underscored the importance of making real progress in such areas as labor policy, civil service reform, governance, and improving trade logistics. “It is well to remember that a decade ago many of these same countries were in crisis and today, thanks to hard work and tough policy choices, they are in a position of considerable strength and security. The agenda they face today is certainly complex, but given their track record, I have every expectation that the ASEAN countries and people will be able to continue on the path to prosperity.” | 
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