World Bank exec reflects on five eventful years in Asean

World Bank exec reflects on five eventful years in Asean

Photo: Thanarak Khunton
Photo: Thanarak Khunton

What strikes Ulrich Zachau the most after finishing his five-year term as the World Bank director for Southeast Asia is how social and economic development have set Thailand and the region apart from the rest of the world.

But despite improving conditions, he believes Southeast Asia still faces many challenges, notably inequality, which require tailored solutions.

"It is an extraordinary and rapidly evolving and developing region and sub-region, faster than other parts of the world," the German who holds a PhD in economics from Oxford University, told Asia Focus.

"You'll see that in the numbers where the economic growth rate and per capita income growth rate are higher in this region than elsewhere and this is true across South Asia and the sub-region of Southeast Asia.

"It is also striking how much this economic growth has begun to translate into an effective reduction in poverty and improvements in the wellbeing of many people across the region."

The World Bank now projects growth in developing East Asia and the Pacific (EAP), including China, to remain "strong" at 6.3% in 2018. That's down slightly from 6.6% last year, reflecting Beijing's strategy to ease into more sustainable growth longer-term. China's growth is expected to slip from 6.9% in 2017 to 6.5% this year.

The region's gross domestic product last year reached US$24 trillion in 2017, almost double the $12.2 trillion seen a decade earlier, representing annual growth of around 4.5% during a period that included the global economic slowdown of 2008-09.

"These achievements in terms of economic growth have brought benefits for many, many people. Not only for the rich," said Mr Zachau.

The World Bank estimates the number of people living in extreme poverty in the region fell by 920 million between 1990 and 2013. Rapid growth in labour income among the poor, along with low unemployment, public transfers, structural transformations and public investment all contributed to the decline, it added.

"But inequality remains significant and high in many countries. In a couple of countries, it is rising because the economic benefits from growth accrue more to the rich than to the poor," said Mr Zachau.

"In a couple of other countries, including Thailand, (inequality) has been declining. It is still high but the poor have been gaining more than the rich and this the most striking feature of economic and social development in Thailand and in the sub-region."

Two other trends Southeast Asia has in common with the rest of the world, he notes, are the "dramatic rise" of digital and technological development, and the rapid growth of the ageing population.

Before joining the World Bank, Mr Zachau worked for McKinsey & Co and taught economics at the University of Bonn. Prior to moving to Asia, he held senior positions with the World Bank in Washington DC, responsible for East Asia and Pacific affairs in 2012-13.

He moved to Asia in October 2013 as the Bangkok-based country director for Southeast Asia. Last month he took up a challenging new post as country director for Colombia and Venezuela based in Bogota.

Reflecting on the highlights of his time in Asean, Mr Zachau pointed to the dramatic changes in Myanmar. While the country has been democratised and reformed "in a very major way", big challenges remain including issues that potentially affect the peace of the region.

"There are dramatic changes there including the openings of the economy, of trade, initial reforms in the budget and transparency, but the peace challenges are ongoing in Myanmar; they are not resolved," he pointed out.

The World Bank, he said, has been actively supporting community-based programmes in Myanmar that directly improve people's lives by building schools, funding healthcare services for women, and improving access to electricity which means that children can now study at night.

In Cambodia, the bank has seen "tremendous economic growth and improvements" and has resumed financing, advisory services and technical assistance there.

Health and education remain important challenges and development priorities for Cambodia as 32% (or roughly 500,000) of children under five are stunted. Net enrolment in primary education has increased from 82% in 1997 to 97% in 2016 but the lower secondary completion rate, at 48% in 2015, is significantly below the average for lower middle-income countries.

In Malaysia, the bank opened a new knowledge and research centre in Kuala Lumpur in 2015, the first of its kind to combine the services it delivers locally with services and knowledge Malaysia can share with the rest of the world.

"So the World Bank is facilitating the role that Malaysia has as an advanced middle-income country ... that has a positive development experience to share," Mr Zachau said. "It also facilitates breakthrough economic research by Malaysians."

The challenges in Thailand are human development in terms of education, health, social protection or the "development of social capital", he said.

The key is to focus on quality education and good teachers who are well-trained in as many as parts of the country as possible, "especially outside Bangkok", he said.

Both Malaysia and Thailand, he observed, have done "relatively poorly" in the past in terms of their Pisa (Programme for International Student Assessment) scores before but Malaysia is improving.

Mr Zachau, meanwhile, praised Vietnam as a good example of what can be done to improve education. It is now ahead of Germany and Switzerland in science, and ahead of the US in science and mathematics.

"Vietnam, which has a lower per capita income, has fared extremely well and has untaken incredible reforms and now Malaysia is beginning to do that," said Mr Zachau. "My wish and my hope for Thailand is that as Thailand begins these reforms, Thailand will be also, in the next round of these standardised tests, begin showing some improvement."

The most recent 2015 Pisa results showed Thai students underperforming their peers in several Asian countries with scores below the international average in all three (maths, sciences and reading) subjects tested. Compared with the eighth-place ranking of Vietnam, Thailand placed 54th, the second lowest in Asean after Indonesia in 62nd place.

"It will take time because (reforms) will start in primary school, going on into secondary school until young people aged 15 are able to demonstrate these skills that will show up in the test scores," he said.

"It will take a significant effort and resources over a long period of time and it is not so much a question of money for Thailand, because the country has already spent a lot of money on education, but it is the question of how money is spent."

The Nordic example of a focus on creativity and innovation instead of rote learning could be replicated, he said, but curricula are specific to each nation and Thailand will have to determine how best to advance.

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