THE following is an interview Changyong Rhee, Chief Economist, Economics & Research Department, ADB, gave Frontline at the ADB conclave on May 5:
How come the ADB is now expatiating on inclusive growth and escalating inequality?
Last year we discussed the issue. The major reason for rising inequality is geographical. One, the western coastal region has developed faster. The second is educational qualification, that is, availability of qualified people. Infrastructure investment so far has concentrated on building highways. Connectivity of rural areas through roads is equally important. Our education [system] is focussed on primary and secondary education and on how to secure social uplift of people in Asian economies.
What about the efficiency of the delivery mechanism in public services?
That’s why we are looking at empowerment for better delivery of government social programmes. China is relatively more effective in delivery, but there is little democracy and it needs a little more empowerment. In India, on the other hand, there is more empowerment, yet, as Prof. Amartya Sen pointed out, China spends much more on social programmes like health care as a proportion of GDP [gross domestic product], while India’s social spending [is] much lower than China’s. You [India] have empowered people more than China but by less spending. So, mere empowerment is not enough. Empowerment should be backed by measures to spend more on social projects so as to deliver more to reduce inequality.
Can you elaborate on the capital constraints plaguing the ADB and how you propose to provide a higher proportion of the Asian Development Fund (ADF) to the needy?
Actually our lending for ADF countries is not small. India has recently become a middle-income country, so there is pressure from donor countries to concentrate more on lending to low-income countries. The real problem is how to get more resources for stepping up our lending. Member-countries like China and India, which are now [in the] middle-income league, should help in augmenting resources. At the moment, we do not have a solution to the issue. How to mobilise more resources from middle-income Asian economies to help low-income Asian economies is an issue.
Inequality has widened. How do you tackle this when growth is slowing down?
What is driving the rise in inequality at the moment is the need for more technically qualified workers. In the past, workforce with limited skills [went] for jobs in manufacturing. Now, after [the] 1990s, most of the progress is in capital-intensive industries like information technology. Also being capital-intensive, it needs fewer but highly skilled people. This has reduced the share of labour in productive activities. It is now mainly [a] technology-driven industry and this is resulting in reduced jobs.
G. Srinivasan
