Asia Cannot Bypass Manufacturing on Path to Prosperity: ADB

Asia Cannot Bypass Manufacturing on Path to Prosperity: ADB

By Jakarta Globe on 3:40 pm August 21, 2013.
Industrial manufacturing is vital to the economic development of Asian nations trying to create high income societies according to a report released Wednesday by the Manila-based Asian Development Bank (ADB).

In a special chapter included in “Key Indicators for Asia and the Pacific,” the bank’s flagship annual publication, ADB emphasized the importance of manufacturing in establishing more productive service sectors, fostering technological innovation and modernizing agriculture.“Historically, no economy has reached high income status without attaining at least an 18 percent share of manufacturing in output and employment for a sustained period,” Changyong Rhee, ADB’s Chief Economist, wrote in the report

The special chapter notes that one group of Asian economies — Hong Kong, Japan, South Korea , Singapore and Taiwan — reached high income status rapidly, while another group of economies — including the People’s Republic of China (PRC), Malaysia and Thailand — are transforming more slowly.

The Asian nations that have been slowest to develop, such as Bangladesh, India, Pakistan and the Philippines, have created few manufacturing jobs and are shifting from agriculture to service-based economies.

“Right now, as services boom in the region, it’s tempting to shun industrialization, but it will be a serious mistake if a country wants to be prosperous,” Rhee said.

Services are the largest sector in developing Asia’s economic output and agriculture remains the largest employer, providing income for around 700 million people in the region.

Furthermore, agricultural modernization is a key challenge for developing Asia, especially in low-income countries.

Middle-income economies that depend heavily on labor intensive sectors should focus on upgrading their industrial base, the report said. For these nations, high quality education is essential for industrial diversification and reducing the path-dependent nature of structural transformation.

For small island economies, the report said, industrialization may not prove cost effective, in which case becoming competitive in service sector niche markets may be the answer.

“Key Indicators for Asia and the Pacific 2013″ also charts the region’s progress in achieving its Millennium Development Goals (MDGs), noting that two years before the MDG deadline in 2015, most of the region made significant progress in reducing poverty, improving access to universal primary education and promoting gender equality.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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