East Asia's successful development model -- a combination of outward-oriented growth, human capital development and sound economic governance -- needs to be adjusted to effectively address emerging external and internal challenges, a new World Bank report says.
Titled "A Resurgent East Asia, Navigating a Changing World", the report argues that the tremendous progress seen in the region is not guaranteed in the future.
The development model that spurred the so-called East Asian Miracle will have to adapt to changing technologies, slowing trade growth and changing country circumstances if progress is to be sustained, the report said.
"Developing East Asia has been the most successful region over the last quarter century," said Victoria Kwakwa, vice-president for East Asia and the Pacific at the World Bank. "Since 2000, its GDP has risen more than three-fold, lifting over a billion people out of poverty. Despite this progress, countries in the region still have significant gaps in labour productivity, human capital, and living standards compared to high-income countries.
"This new study is about recognising that what has worked so well so far may not be sufficient going forward, as countries in the region seek to transition from middle-income to high-income status."
A half century ago, many countries in the region were poor agricultural economies, struggling to overcome legacies of conflict or central planning.
Today, however, the region is bustling with economic activity -- reflecting a mix of high- and middle-income economies that account collectively for nearly one-third of global GDP, the report said.
"A combination of policies that fostered outward-oriented, labour-intensive growth, while strengthening basic human capital and providing sound economic governance, has delivered rapid and sustained growth and has been instrumental in moving hundreds of millions of people in East Asia out of poverty and into economic security," said Sudhir Shetty, chief economist for East Asia and the Pacific. "But building on those gains may prove particularly challenging in the face of rapid changes in the world and in the region. Policymakers will need to adapt elements of the traditional East Asian development model to effectively meet these emerging challenges."
Besides continuing to strengthen the business and regulatory environments, emerging priorities include service sector reforms, deepening trade agreements, broader innovation policies and improved access to finance, especially for small and medium-sized enterprises, the report said.
Countries will need to increase state effectiveness through enhanced citizen voice and participation, increased transparency and greater government accountability, the World Bank said.