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'Deleveraging, China make life harder for poor countries'
Writer : Sender
Jul 13, 2010
Experts raised fresh concerns that economic development is probably becoming much harder to achieve for poor countries than before, due to tight credit conditions caused by the financial crisis and China's emergence as a dominant industrial power.
Contrary to common perception, China's growth may bring not only prosperity to Asia but also an increasing income gap between countries in the region, said Min Euoo-sung, chairman and CEO of the Korea Development Bank (KDB).
Speaking at the Asia 21 conference held by the International Monetary Fund, Min said that China's industrial policies will determine the fate of the fledging economies of its neighboring countries.
"China will also be a threat to many low-income countries in terms of labor-intensive products and price competitiveness. What role China is going to have will decide whether Asia will continue to have the momentum to go forward," Min said Monday during a panel discussion.
Other experts, such as Geoffrey Lamb of the Bill & Melinda Gates Foundation, agreed to some degree that China and other large emerging, export-led economies may crowd out less developed nations on the global stage, reducing them to domestic players.
"This could be the end of the export-led golden era (for Asian nations)," Lamb said. "The underdeveloped countries coming along behind the emerging nations will have a much tougher time finding the way through the competition over the next five to 10 years."
The International Monetary Fund estimates that about a quarter of Asians are still living in extreme poverty, struggling to secure food for daily consumption. A further problem is that this poverty is not evenly distributed over the region only 0.1 percent of Japanese are thought to be in this category, while in some other countries the proportion is as high as 40 percent.
A further problem that hinders the development of poor countries is that it has become more difficult to borrow the necessary capital since the global crisis, said Atiur Rahman, the governor of Bangladesh Bank.
"After the financial crisis, the international environment is very different from how it was before. Global financial firms are deleveraging and funding costs are increasing. This financial difficulty is inflicting even bigger damage on low-income countries," Bangladesh's central bank governor said.
The experts recommended various solutions such as increasing intra-regional trade and establishing strong political leadership. Min, the KDB chief, suggested that Korea and its financial institutions can share tips and know-how in economic development with less developed nations. The KDB is a state-owned policy bank specialized in industrial funding.
"Obviously Korea made a success. It was not always a one-way success. It was a combination of success and failure. We definitely would like to share our experience with our neighboring countries so they can see less trial and error," he said, adding that his bank is already participating in a government-led program to help other countries such as Algeria, Egypt and Nigeria.
(Source: The Korea Times)
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