Recovery in Asia: Social agenda is a necessary prerequisite for poverty reduction and growth
| Pages | 378-379 |
Page 378
After almost two years of economic disruption, the Asian economies have begun to rebound. Yet the crisis period was no ordinary cyclical trough. It was partly due to an absence of the policy reforms necessary to prosper in a global economy with increasingly open capital markets. The costs of the crisis were not small: output declined and remains below trend, and poverty rates increased, reflecting in some countries significant declines in real wages and in others a large increase in unemployment.
The IMF firmly believes that a social agenda should be part of the reform initiatives in Asia, in addition to necessary reforms in structural, regulatory, and macro-economic policy management, which are now clearly recognized as prerequisites for sustainable growth. We know that growth is necessary to reduce poverty in the long run.
Since the Asian crisis, a consensus has emerged on the priorities for institutional reform. The objective is to support vibrant, growing economies that can benefit from global investment capital seeking high returns while remaining resilient to potentially destabilizing pressures caused by contagion, capital movements, or external economic developments. High growth is consistent with openness; the task is to ensure that capital mobility and free trade do not destabilize or undermine the financial and real sectors of an economy. Avoiding steep recessions and providing an environment that facilitates rapid growth in output and employment are powerful preventive strategies for reducing poverty. Such growth, and the jobs it creates, can lift real wages and enable workers to manage the inevitable transitions associated with the evolution of the industrialized and service-based economies of the coming century.
Instituting stronger legal, regulatory, and supervisory frameworks is crucial for sustaining growth. These "second-generation" reforms would encompass new or strengthened bankruptcy and foreclosure laws; judicial procedures that allow for expeditious resolution of claims; transparent accountancy practices; tax reforms; and institutions that ensure greater transparency in fiscal and monetary operations as well as in corporate governance. More flexible labor market policies and adherence to the principles of the International Labor Organization are equally relevant. Ensuring responsive and...
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