ADB seeks more aid for aspiring middle income countries

MANILA, Philippines – As more countries in the Asia-Pacific region reach middle-income status, the Asian Development Bank (ADB) and other multilateral donors must increase financial support to help these countries sustain the growth momentum and deal with income inequality, said an ADB independent evaluation report.

The report titled “The Asian Development Bank’s Engagement with Middle-Income Countries” said 37 countries in the region have been classified as middle income, compared with 24 in 2006. The Philippines itself is classified as a lower-middle middle-income economy.

Transitioning to a middle-income status is a measure of development based on per capita income—not necessarily of living conditions—and is a reflection of an economy’s dynamism, it said.

ADB said more poor people live in middle-income countries and are finding it difficult to reduce rising income disparities.

“Becoming a middle-income country doesn’t mean that less donor support is needed; in fact, quite the opposite,” said Marvin Taylor-Dormond, director general of Independent Evaluation at ADB.

“Investments from public, multilateral, and private sources running into trillions of dollars will be needed for a new wave of structural reforms and modernization programs to enable Asia’s middle-income economies sustain strong growth,” he added.

Contributing to economic woes in middle-incom count-ries, according to the report are:  unplanned urbanization, low productivity and competitiveness, stark regional disparities, a lack of economic diversification, and achieving environmentally sustainable growth amid climate change.

Despite having these common challenges, Asia’s middle-income economies are highly diverse concerns.

East Asia’s main challenge is the result of decades of fast growth that, among other things, degraded the environment. South Asia’s is to reduce inequality and bridge the urban–rural divide. Meanwhile, Southeast Asia’s challenge is to build on progress made in strengthening regional economic cooperation.

“ADB’s member countries are telling us they need to remove a slew of constraints jeopardizing growth, and that they want to learn from best international practices and the experiences of other countries and the private sector,” said Kapil Thukral, the report’s main author.

The study noted a greater orientation toward knowledge support and sharing would enhance ADB’s influence and impact in Asia and the Pacific where the growing economic muscle of middle-income countries is leading to stronger regional integration.

The mobilization of more international resources for development brought about by the recent entry of two new multilateral lenders—Asian Infrastructure Investment Bank and the New Development Bank of BRICS—may give middle income economies in the region a boost.