East Asia Growth Hardly a Time for Celebration — World Bank

Dealing with high food and fuel prices probably constitutes a greater challenge to governments in East Asia than the financial turmoil in the United States and a slowing global economy. In the medium term, the answer clearly lies in greater fuel efficiency, stronger and more productive global agriculture and an open international trading system. But in the short term, the bigger concern is to alleviate the harsh burden this imposes on the poor. True, some economies in the region are net exporters of these commodities and so are enjoying gains in overall national income. And true, higher food prices do help farmers – although small farmers are usually net consumers of food and are thus hurt. But the non-farm poor living in rural and urban areas (and small farmers) — who devote between a third to two-thirds of their expenditures to food — are seeing their real incomes decline substantially as a result of the increase in food prices. Similarly, while higher fuel prices affect everyone, the poor are hurt disproportionately. Although this difficult problem has neither easy answers nor a one-size-fits-all solution, East Asia has faced these challenges before and adopted a variety of solutions in the past to fit different circumstances, ranging from targeted subsidies to conditional cash transfers to school lunch programs. These programs now need to be considered again and reintroduced before the problem becomes too acute.

1 Developing East Asia comprises all low and middle income economies in East Asia, including China, Indonesia, Malaysia, Philippines, Thailand, Vietnam and a number of smaller economies including Pacific Island economies. Emerging East Asia refers to Developing East Asia plus four Newly Industrialized Economies or NIEs (Hong Kong, Korea, Singapore and Taiwan, China).