Asia Must Lift Productivity to Improve Growth and Well Being

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"Boosting productivity is making the most of human resources, which is good for greater inclusion," says a new annual review from Independent Evaluation at the Asian Development Bank (ADB).

An improvement in productivity of physical investments by just two-tenths of one percent in Asia is like adding $10 billion to those investments.

Asia and the Pacific needs to focus on increasing the overall productivity from its investments in physical, human, and natural capital, said a new annual review from Independent Evaluation at the Asian Development Bank (ADB).

“A part of boosting productivity is making the most of human resources which therefore is also good for greater inclusion,” says Vinod Thomas, director general of Independent Evaluation. “Another part is relying on more high yielding public investments which is good for environmental sustainability and climate friendliness as well.”

The Annual Evaluation Review 2015 notes that in recent years in Asia and elsewhere, growth in overall productivity has slowed, particularly since the 2008 global financial crisis. As a result there is need for both countries and ADB to be more strategic in getting the most from their investments.

“An improvement in productivity of physical investments by just two-tenths of one percent in Asia is like adding $10 billion to those investments,” says Mr. Thomas.

The report notes that expansion in one area of overall productivity—output per worker—has slowed in recent years in Asia, including in the three largest economies: the People’s Republic of China (PRC), India, and Indonesia and this could have a negative spillover effect elsewhere in the region. As the PRC rebalances its economy in favor of consumption over investment, productivity needs to become a bigger driver of growth.

“Stronger results have to be wrung from investments in physical, human, and natural resources through efficiency and sustainability gains,” said the study’s principal author Walter Kolkma. “Human development is critical for raising productivity and this means aggressive commitments to education, training and healthcare.”

The report further notes that ADB has seen improvements in development returns from its operations, with the success rate of completed ADB-supported projects during 2012–2014 rising to 72%. At the same time, continued attention to project design, sound safeguards, due diligence, and supervision, will help improve outcomes.

Multilateral development banks can help strengthen the pace and quality of growth. Infrastructure finance would get a boost from the Asian Infrastructure Investment Bank and the New Development Bank of BRICS nations. The challenge is to link infrastructure investment to inclusive growth objectives and climate change. The latter has become an urgent priority given the acute vulnerability to the rise in extreme weather events in Asia and the Pacific. This change is illustrated most recently by the devastation caused by Cyclone Pam in Vanuatu, and earlier by super typhoon Haiyan that hit the Philippines in 2013, the 2011 floods in Australia and Thailand and recurring ones in China and India.

The report notes that ADB is in an excellent position to help countries put in place infrastructure incorporating both climate change resilience and inclusion of lower income strata in the growth process. Such an agenda would dovetail with the planned combination of its concessional Asian Development Fund lending operations and ordinary capital resources balance sheet. This will allow ADB to increase its annual financing commitments to countries to up to $20 billion, and if leveraged one to one with cofinancing, up to $40 billion.

Says Thomas: “ADB is uniquely placed to scale up its program in Asia. In part, it can raise the returns to the projects it finances with continued improvements in their design and delivery. The far bigger shift would be that ADB’s infrastructure strategy, along with the region’s, targets the growing income inequality and the reality of runaway climate change.

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To read the evaluation report, visit and download the main report.

About Independent Evaluation at the Asian Development Bank
Asian Development Bank's Independent Evaluation, reporting to the Board of Directors through the Development Effectiveness Committee, contributes to development effectiveness by providing feedback on ADB's policies, strategies, operations, and special concerns in Asia and the Pacific.

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Hans van Rijn
since: 09/2011
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Independent Evaluation at Asian Development Bank
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