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SOCIAL DIMENSIONS OF INCLUSIVE GROWTH IN ASIAN MIDDLE INCOME COUNTRIES Opening Remarks to the ADB-ILO-IPRCC Workshop (13 September 2011, Jakarta, Indonesia) by James Nugent, Deputy Director General for Southeast Asia, and former ADB Country Director for Indonesia, Asian Development Bank

Excellency Pak Lukita Dinarsyah Tuwo, Vice Minister BAPPENAS, Madame Yamamoto, Regional Director General, International Labor Organization Colleagues from International Poverty Reduction Center in China Colleagues from the China Leading Group on Poverty Distinguished Guests, Ladies and Gentlemen:

Introduction From the outset, on behalf of the Asian Development Bank, I wish to thank the Government of Indonesia, the ILO, and the International Poverty Reduction Center in China (IPRCC) for their warm hospitality and the excellent organization of this workshop. It is an honor for ADB to be with you today and discuss the transformation of in countries transitioning from low-income to a middle income status.

Economic growth and emerging middle income countries Since the 1980s, rapid economic growth and active macro-economic, industrial, and social policies propelled several Asian states into the ranks of the middle-income (and even high-

2 income) countries: Last year around this time, ADB published a special study on Asias middle income countries. In this context, in 2010 ADB published a special study on Asias middle income countries and more recently, the ADB-supported Asia 2050 study presented a possible scenario of a much more prosperous region than today. Most countries in the region remain lower middle income countries, and a key question that arises is what these countries need to do beyond economic growth so that they do not fall into the middle-income trap. Recent research shows that while reducing income poverty of the very poor ($1.25) is a major achievement in the region, the number of people around the $2 poverty threshold has changed little. In sum, poverty reduction programs in the region have been successful, and growth has been high, but the gains have not been sufficiently inclusive.

So Why Inclusive Growth Matter? Todays workshop will discuss key features in an economy that determine whether people find the growth process of relevance to them. For example, does growth provide decent jobs, opportunities for advancement, and protection against economic, social, and climate-related risks? As we know, economic growth matters little if it does not generate a positive impact on peoples lives. And this impact does not come automatically. Rather, economic growth needs to be made inclusive. Broadly speaking, todays workshop will focus on discussion of inclusive growth. More specifically, it will: highlight the need of the new and emerging MICs to create more and better jobs jobs with good working conditions and social security. Im sure Madame Yamamoto will speak about the importance of labor markets and social protection. I am happy to see increasingly closer cooperation between partner Governments, ILO and ADB on these issues, such as in the study on quality employment launched last month. The workshop will also see some stimulating background papers for this conference written by colleagues from Asian think tanks which also suggest that middle income status means that governments can afford to dedicate more public funding to health, education and urban services. The workshop will also make comparisons to developments in Latin Americas MICs, where one finds examples of how governments have reduced inequalities while at the same time maintaining growth. Some have done this by adopting active labor

3 market policies, such as skills development for poor people, and broadening social protection. One can also find in Latin America examples of government spending to improve the living environments of the urban poor. I am personally very interested in the discussions on how low-income countries view the development of their neighboring MICs, including its pro-poor and inclusive orientation.

Inclusive Growth and Social Cohesion Globally, in the past year we have seen around the world more examples of what can happen when people especially young people - are not provided with sufficient opportunities to learn in school, acquire labor-relevant skills, and then find gainful employment. Persistent inequality, a lack of a social safety net, underemployment, and denial of opportunity contribute to social tensions and can lead to instability and conflict. These developments are not lost on leaders in Asia who realize that adopting a more inclusive growth path can avoid conflict and promote a harmonious society. We should explore this further at this workshop. ASEAN countries have shown that they can improve living conditions for their people by focusing on more than just consumption. That makes development in the East and Southeast Asian region so fascinating, and that is one reason why eyes are turning toward this part of Asia. It is not only for its spectacular raw growth numbers, but also for its evolving models of social stability that can provide for a rising quality of life for women and men, including the poor, vulnerable, and excluded.

Conclusions Ladies and gentlemen, the Asian Development Bank adopted poverty reduction as its overarching goal in 1999 and reiterated its commitment to a region free of poverty when it adopted its long-term strategic framework in 2008. This framework recognizes inclusive growth as one of the three pillars promoting the poverty reduction in Asia and the Pacific. As a bank, ADB has good instruments to promote economic growth. At the same time, as development institution, ADB in collaboration with governments and many partners - is also well-suited to strengthen attention to the vital social dimensions of development. Todays workshop is the last in a series of three regional events that since 2009 have been supported by ADBs Poverty Network program and its partner Government and agencies. Many

4 of you have been involved in the earlier robust discussions on the environments of the poor and on the social impact of the global recession.

Through the network, I am also pleased to hear that ADB will continue working together with partner Governments, think tank institutions, academia and development partners in the region to promote knowledge and its sharing on inclusive growth. In this context, my colleagues will be pleased to discuss with you ideas for further study. In closing, let me again reiterate our sincere gratitude to the Government of Indonesia, ILO and the workshop organizers for the excellent arrangements. With this, I wish you all fruitful deliberations and a successful outcome.

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