Asia should invest in agriculture, says UN
(dpa) - Asian governments should maintain macroeconomic stability and invest in agriculture this year to weather the economic shocks generated by the US economic crisis, a United Nations economic report advised Thursday.
Developing countries in the dynamic Asia-Pacific region are expected to grow a healthy 7.7 per cent this year, compared with 8.2 in 2007, but the region is facing growing uncertainly as the US sub-prime crisis continues to unfold, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) predicted in its 2008 economic survey.
"The region is entering a phase of uncertainly in 2008, as the accrued impact of the sub-prime loan crisis in the US is still to be seen," said Shigeru Mochida, deputy executive secretary for UNESCAP.
South-East Asia, which remains very dependent on exports to the US, is expected to witness a lower growth of 5.8 per cent this year, compared with 6.2 per cent last year, said the ESCAP survey.
China and India, however, can expect 10.7 per cent growth and 9.0 per cent, respectively, fueled by their domestic demand that accounts for more than 90 per cent of the two countries' gross domestic product (GDP).
A real worry for the region in 2008 will be inflation, expected to reach 4.6 per cent, especially food inflation.
"Higher oil prices and many food prices is a real concern, especially for the poor," said Mochida.
This year's ESCAP economic survey had a special focus on the region's failure to tackle it persistent problem with poverty and widening income gaps between the rich and the poor, a trend which it blames on governments' neglect of their agricultural sectors over the past two decades.
"In the last decade the growth of Asia-Pacific economies was over 7 per cent in average, or a doubling in size, and yet still the region has 641 million poor people, living on less that one dollar a day, or two-thirds of the poor worldwide," noted Mochida, citing the report's findings.
"Something must be very wrong with the current approach to development," he added.
The ESCAP survey blamed the region's poor performance in eradicating poverty on governments' neglect of their agricultural sectors, which still account for 60 per cent of the overall employment.
It reveals that governments' development policies over the past two decades have been "systematically anti-agriculture," with a neglect of research and development and infrastructural investments in the sector.
A redirection of public investment in agriculture could easily drag millions of people out of poverty, while boosting purchasing power and curbing food prices at the same time.
"Raising the region's average agricultural labour productivity to the level of Thailand's, which is the benchmark for the study, would take 280 million people out of poverty," said Mochida.
Higher food production will also help beat food inflation.
"If production goes up then the prices will come down," said Shamika Sirimanne, an economist from ESCAP's poverty and development division. "Go back to agriculture. Invest in it," she admonished the region's governments.
Meanwhile, a good dose of macro-economic stability will also help governments weather the current economic malaise generating from the US.
"Lower budget deficits, low debt, low interest rates, low inflation, realistic exchange rates and low current account deficits will help investor confidence in these economics and provide the policy flexibility to manoeuvre in a delicate situation," advised Mochida.