By Mark Smulian | 23 August 2013
Industrialisation must advance if Asian countries are to avoid being trapped in middle-income service-based economies rather than progressing to high incomes.
That message has come from the Asian Development Bank in its Key indicators for Asia and the Pacific 2013 report.
‘Historically, no economy has reached high-income status without reaching at least 18% share of manufacturing in output and employment for a sustained period,’ said Changyong Rhee, ADB’s chief economist.
He called for the development of high productivity service sectors, technological innovation, and modernisation of agriculture.
The report said Asian nations needed ‘a significant qualitative leap in structural transformation’ by transferring labour from low productivity sectors, typically agriculture, to ones with growing productive capacity.
Asian agriculture must industrialise, the ADB said, by developing agribusiness and adopting modern methods.
Looking across Asia, the bank said Hong Kong, Japan, South Korea, Singapore and Taiwan had rapidly industrialised to become high-income countries, while another group of economies, including China, Malaysia, and Thailand, were making this change more slowly.
But other developing Asian nations, including Bangladesh, India, Pakistan and the Philippines were changing yet more slowly, and had created few manufacturing jobs, though services were growing.
Rhee said: ‘Right now, as services boom in the region, it’s tempting to shun industrialisation, but it will be a serious mistake if a country wants to be prosperous.’
Services accounted for the largest share of developing Asia’s output and agriculture remained the largest employer, providing incomes for 700 million people.
The bank said good quality education would be essential for industrial diversification in middle-income economies now heavily dependent on labour-intensive sectors.
For small island economies, industrialisation may not be cost effective, and the future lay in becoming competitive in certain service sector niche markets, it said.
