Manila: Asian nations must create more jobs for the young, who make up one-fifth of the region’s working-age population, to sustain long-term growth, the Asian Development Bank said on Wednesday.
In its annual outlook report, the Manila-based ADB said workers under the age of 24 presented a unique opportunity for enhanced growth in the region.
“It is vital that economies create productive sustainable jobs for the youth,” said the report on economies of the region excluding Japan.
Failure to do so “will not only crimp growth, it will also undermine an economy’s ability” to support a larger population in future, it said.
“At the individual level, long-term unemployment can lead to chronic poverty and result in inter-generational transmission of the scourge.”
The bank said that at present, only about 60% of Asia’s young men and 40% of young women are employed. A large proportion also face poor working conditions, it said.
The report said Asian governments must act fast to take advantage of the so-called “youth bulge,” which is expected to shrink from 20% of total population in 2005 to around 14% by 2040.
The opportunity can only be redeemed in a “short time span of a single generation,” it said, warning that otherwise, “The demographic dividend can turn out to be a demographic curse.”
‘Asia growth to cool in 2008’
Asian growth is expected to cool this year, as the region grapples with a global downturn and soaring inflation expected to hit decade-high levels, the bank said.
Fast-rising rice and oil prices as well as a worldwide slowdown will have a strong impact, the Manila-based ADB said in its annual outlook report for the economies of the region excluding Japan.
But while it said it expected 7.6% growth this year and 7.8% in 2009 -- down from last year’s 19-year high of 8.7% -- those figures were still “solid.”
It said the region was likely to be “largely insulated” from the market turmoil that began in the United States, sparked by the subprime lending crisis, it said.
Ifzal Ali, ADB’s chief economist and the author of the report, said Asia’s domestic market meant it had some buffer against slowdown in the United States, Japan and Europe.
“While Asia is not immune to a global slowdown, neither is it a hostage to what is happening in the G3,” he told a news conference in Hong Kong to coincide with the report’s release.
China and India, Asia’s key growth engines, are both expected to cool. China will grow at 10.0% this year and 9.8% in 2009, while India will expand by 8.0% and 8.5% in the same periods, the ADB said.
It cautioned that the biggest risk for the region was soaring inflation, which it forecast to rise to 5.1% this year and 4.6% in 2009, up from 4.3% in 2007.
“The projected headline rate is expected to be the highest in a decade,” the report said.
“Net fuel and food importers are likely to be squeezed by adverse movements in their terms of trade.”
Rice prices have roughly doubled in five years while oil prices have risen $95 a barrel in nominal terms in roughly the same period, with continuing upward pressure seen over the next two years, it said.
But the ADB warned governments against price-control measures.
“The fiscal implications of subsidies on food, fuel, and in some countries in developing Asia, on closely related inputs into food production ... are worrisome,” it said, adding that governments should let currencies rise.
“Resisting appreciation by tracking global interest rates down would only aggravate inflation pressures,” it said.
The bank also warned of further risks to Asian exporters if the global slowdown took a bite out of key manufactured goods such as electronics, textiles, garments and toys.
‘Skills shortage could hit growth’
Asia is facing a serious skills shortage that could hamper the region’s economic growth and push for modernisation, the bank said.
It further said the shortage was widespread and had been partly driven by skilled workers leaving to take opportunities in industrialised countries around the world.
“Although this brain drain is hardly new to the region, the skills shortage confronting it has added a new, more urgent dimension to this trend,” the bank said, calling the shortfall a “symptom” of Asia’s economic success.
“Such imbalances are particularly evident among professional groups, including accountants, airline pilots, business managers, engineers, lawyers, medical doctors, scientists and software specialists.”
As one example, it cited what it called an “acute shortage” of airline pilots in China, where a booming economy has meant rising incomes and an explosion in air travel.
“Other factors are at play, too, including a steady convergence towards international norms and practices for environmental standards, corporate governance and financial regulation,” the bank said.
“This upgrading raises the demand for professional managers and specialists.”
The report said the overall dearth of skills had resulted in “productivity losses and idle capital; rising wage costs; increased turnover of sought-after workers; and higher placement and training costs for new workers.”
“Business efficiency suffers as a result, and if problems are sufficiently widespread, whole industries and even entire economies suffer,” it said, warning that most nations had not geared their education systems to cope.
“The region’s universities have to do more than produce high numbers of graduates -- they have to turn out graduates who can perform the functions and tasks required by rapidly modernising economies.”
Set up in 1966, the ADB provides development aid to dozens of Asian and Pacific countries, where it says nearly 1.9 billion people still live on two dollars a day or less.