The Economic and Social Survey of Asia and the Pacific 1995 is the forty-eighth in the series of the annual Surveys prepared by the secretariat on economic and social development in the ESCAP region. Besides providing information on recent developments, the Survey analyses selected policy issues of current concern. Accordingly, this issue focuses upon the reform and liberalization of the financial sector as an important part of macroeconomic reforms, and social security as a policy tool for mitigating some of the social problems facing the region.

The term “ESCAP region” is used in the present issue of the Survey to include Afghanistan, American Samoa, Armenia, Australia, Azerbaijan, Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Cook Islands, Democratic People’s Republic of Korea, Fiji, French Polynesia, Guam, Hong Kong, India, Indonesia, Iran (Islamic Republic of), Japan, Kazakhstan, Kiribati, Kyrgyzstan, Lao People’s Democratic Republic, Macau, Malaysia, Maldives, Marshall Islands, Micronesia (Federated States of), Mongolia, Myanmar, Nauru, Nepal, New Caledonia, New Zealand, Niue, Northern Mariana Islands, Pakistan, Palau, Papua New Guinea, Philippines, Republic of Korea, Samoa, Singapore, Solomon Islands, Sri Lanka, Tajikistan, Thailand, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu and Viet Nam. The term “developing ESCAP region” excludes Australia, Japan and New Zealand.

The pattern of recent economic development in the world points to a significant change in the nature of interdependence in the world economy. While the developing countries in the past mostly reacted passively to the level of economic activity in the developed world, it would now appear thatthese countries. particularly those in the ESCAP region, are beginning to exercise their own independent influence on the world economy. The continuing strong growth in the developing ESCAP region despite protracted recession in most industrial countries has shown that the economic growth process in the region has developed an internal dynamism and resilience that can survive strong external shocks transmitted from the rest of the world economy. Nevertheless, the region’s development will continue to be affected by global developments in such important areas as trade, investment, technology and financial flows.

During the last decade considerable emphasis was put on the need for financial sector re- form in developing countries, with much discussion on the relative merits of specific reforms and on the speed and phasing of their implementation, Practically all countries in the Asian and Pacific region have been undertaking such reforms, albeit at different speeds and with varying focuses, and this process is likely to continue. The emphasis has therefore shifted from whether reforms should be undertaken towards the limits of these reforms in the light of their impact on Ihe real economy, in particular their effects on domestic savings and investment. Another concern has been to develop ways and means of effectively handling the consequences of the increased exposure of exchange rates, foreign exchange reserves and domestic price levels to instability arising from the movements of highly mobile speculate funds in and between countries within a liberalized and increasingly globalized financial system. The tools available to Governments to influence or control financial flows, domestic money supply and rates of inflation are changing as a result of developments in the financial markets. In addition, there is an increasing need for effective prudential regulation of the sector by Governments. Ail these elements place increasing demands on the capabilities of national officials responsible for policy in ihe financial area and on domestic and international supervisory and monitoring inslilulions.

Despite commendable economic progress, the ESCAP region remains beset with many social problems. One of these is persistent poverty. Sustained economic growth and various types of policy interventions have reduced the incidence of poverty quite considerably in some countries of the region. Yet, large proportions of the population of many countries, amounting to very large absolute numbers of people, remain poor. Indeed three fourths of the world’s poor people live in the region. Poverty manifests itself in many forms of deprivation which become permanent features in the life of those who are its victims. Inadequate food and nutrition, and health, education, housing and sanitation facilities are the principal forms of deprivation.