Environmental Challenges of Development in the East...

5Environmental Challenges of Development in the East Asia and Pacific Region

In the East Asia and Pacific region, as in manyother parts of the world, economic growth hasoften been achieved at the cost of large-scaleenvironmental degradation. This “grow now,clean up later” approach to development hasproved costly and unsustainable.

Environmental Conditions,Health, and the Quality ofLife

Environmental conditions—such as dirty wa-ter, polluted air, and chemical contamination—are serious threats to people’s health, theirquality of life, and productivity. Compared toindustrialized countries, environmental factorscontribute disproportionately more to the bur-den of disease in developing countries (World

Bank 2001c). As is shown in figure 1.1, peopleare increasingly concerned about environmen-tal impacts on their health and well-being, andthis is especially true in Asia.

Exposure to water-borne diseases,

due to in-adequate

access to safe water, hygiene, and sanitation,is estimated to cause more than 500,000 in-fant deaths per year, as well as a huge burdenof illness and disability in the EAP region. Al-

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Figure 1.1 R R R R Results of Pesults of Pesults of Pesults of Pesults of Public Opinion Surveys: Concernublic Opinion Surveys: Concernublic Opinion Surveys: Concernublic Opinion Surveys: Concernublic Opinion Surveys: Concernabout Envirabout Envirabout Envirabout Envirabout Environmental Pronmental Pronmental Pronmental Pronmental Problems Affecting Health, by Roblems Affecting Health, by Roblems Affecting Health, by Roblems Affecting Health, by Roblems Affecting Health, by Regionegionegionegionegion

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1Environmental Challenges

of Development in the EastAsia and Pacific Region

6 Environment Strategy for the World Bank in the East Asia and Pacific Region

though some countries in the region havemade significant progress in improving accessto safe water and sanitation, sewage collection,and waste management, there are large chal-lenges ahead due to the compounding effectsof increased urbanization, population growth,and per capita resource consumption. For ex-ample, sanitation coverage remains very lowin several countries (see figure 1.2).

Asia is experiencing an increasing exposure to“modern” forms of environmental health risks:pollution from urban and industrial activitiesand the use of agrochemicals. Water quality hasdeteriorated, particularly in the vicinity of ur-ban areas, due to increasing and uncontrolleddischarges from municipal and industrialsources. Median fecal coliform levels in Asianrivers, a key indicator of health risk, are threetimes the world average and 50 times higherthan the level recommended by the WorldHealth Organization (WHO). Levels of sus-pended solids have quadrupled since the1970s. According to the Asian Development

Bank (ADB 2001), biological oxygen demand(BOD), an important indicator of overall wa-ter quality, is about 40 percent higher than rec-ommended by the Organisation for EconomicCo-operation and Development (OECD).

While water-related impacts dominate envi-ronmental health damage in much of South-east Asia, air pollution impacts are alsosignificant and growing (box 1.1). They aremost severe in China, where air pollution fromfuel combustion has been estimated to con-tribute to the equivalent of 3 to 6 million life-years lost annually. Pollution from coal burningalone is estimated to cause more than 50,000premature deaths and 400,000 new cases ofchronic bronchitis every year (World Bank1997b; 2004a). In addition, indoor air pollu-tion, resulting from the use of dirty fuels suchas coal and some forms of biomass for heatingand cooking, is a serious contributor to respi-ratory diseases, lung cancer, heart disease, andpremature death, especially among young chil-dren and women. The impact of dirty fuels isoften exacerbated by the use of inefficientstoves without proper ventilation.

Throughout the region, the generation of solidwaste has increased dramatically, and has out-paced the ability to properly manage wastedisposal. The current average daily waste gen-eration of about 760,000 tons is projected toincrease to about 18 million tons per day by2025 (Hornweg and Laura, 1999). Indonesiaand the Philippines, as well as parts of China,are the East Asian countries facing the great-est solid waste management challenges. The

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Figure 1.2 Sanitation Coverage in Selected Countries, Sanitation Coverage in Selected Countries, Sanitation Coverage in Selected Countries, Sanitation Coverage in Selected Countries, Sanitation Coverage in Selected Countries,20002000200020002000

Source:Source:Source:Source:Source: W W W W World Bank, 2004a.orld Bank, 2004a.orld Bank, 2004a.orld Bank, 2004a.orld Bank, 2004a.


magnitude of the problem is often beyond the

management capacity of municipal govern-ments. In addition, hazardous waste manage-

ment, closely linked with rapid indus-trialization, puts growing pressure on regula-

tory agencies to set and enforce regulations forproper disposal and treatment.

Pollution and an unhealthy environment causesevere human health impacts, negatively af-

fecting economic productivity, and may con-stitute a significant burden on social services

and public finances. As a result, environmen-tal deterioration can undermine the prospects

for economic growth and the competitiveness

of the region. Therefore, the economic ben-efits of addressing environmental problemsoften far outweigh the costs. In Thailand, forexample, the total annual cost of implement-ing air pollution controls was estimated to beabout $400 million in 2000, $660 million in2005, and $1.5 billion in 2020, while the ben-efits of investing in pollution control were es-timated at about $2 billion, $4.7 billion, and$25 billion for those years (World Bank 1999b).Piped water is a direct benefit to households,so those without access to safe water are will-ing to pay up to 10 percent of their annual in-come for water, yet this is often more than thecost of providing piped water.

Box 1.1 Assessing the P Assessing the P Assessing the P Assessing the P Assessing the Public Health Impacts of Air Public Health Impacts of Air Public Health Impacts of Air Public Health Impacts of Air Public Health Impacts of Air Pollution in Asiaollution in Asiaollution in Asiaollution in Asiaollution in Asia

In 2003, the Health Effect Institute (HEI)—under the umbrella of the Bank-supported Clean AirInitiative for Asia (CAI-Asia)—launched an ambitious four-year project on Public Health and AirPollution in Asia (PAPA). The PAPA project aims to build long-term capability to study and assessthe health consequences of air pollution, including asthma, respiratory and other illnesses, andpremature deaths. The project will produce a synthesis of peer-reviewed Asian health studiesand conduct additional epidemiological studies in four representative Asian mega-cities (Bangkok,Hong Kong, Shanghai, and Wuhan). Other Asian cities may be added in later years. The objectiveof the project is to inform policymaking on the social costs of air pollution in Asia.

An initial analysis of the 28 studies of dailychanges in air pollution and associatedhealth impacts indicate that a 20 microgram-per-cubic-meter increase in the concen-tration of airborne particulate matter smallerthan 10 microns in diameter (PM10) isassociated with a 1 percent increase in dailymortality in Asian cities. These initial findingsindicate similar dose-response relationshipsas those found in Western studies usingcomparable methods.

Source: www.healtheffects.org/international.htm or www.cleanairnet.org.

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Natural ResourceManagement, EconomicGrowth, and Livelihoods

Most EAP countries are critically dependenton natural resources. For example, forestry ac-counts for as much as 7 to 10 percent of GNPin Lao PDR, and contributes more than 3 per-cent of export earnings in at least three EAPcountries. In the case of Indonesia, exports ofwood-based products have undeniably beenimportant for growth. In the mid-1990s, thegross value of wood-based exports was $6 bil-lion, with timber contributing up to 4 percentof GDP. Though less significant than 10 yearsago, wood-based exports accounted for 9.5percent of non-oil export revenue in 2001,which was only exceeded in importance by theelectronics and textile manufacturing sectors(World Bank, 2003). Fishery products accountfor a significant proportion of exports from anumber of countries; for example 37 percentin Kiribati and 12 percent in Vietnam (see FAOstatistics at http://www.fao.org/fi/statist/statist.asp). Together, China, Indonesia, thePhilippines, Thailand, and Vietnam have morethan a billion people living in rural areas; mostare directly dependent on the quality andquantity of natural resources such as soil, wa-ter and natural ecosystems such as forests, riv-ers, wetlands, coastal zones, and marineecosystems.

One of the most challenging and demandingproblems faced by countries in the region is

the effective management of natural resources.The decisions made regarding the scale andpace of natural resource utilization and devel-opment may have long-term and often irre-versible environmental implications. Despitethe general recognition that good natural re-source management is the foundation of live-lihoods and economic growth, in virtually allcountries of the region, the natural resourcebase is declining, often at alarming rates. Poorgovernance, the collusion between powerfulelites and commercial interests, poorly man-aged commercial and illegal logging and hunt-ing, and the lack of clearly established,enforceable, and tradable property rights (e.g.lack of secure land tenure) are important un-derlying factors that determine the decline ofboth the size and the quality of the region’snatural resource base. The problem is furtherexacerbated by population growth, unplannedagricultural expansion, urban growth, and in-frastructure development.

Often, the poorer the people, the more closelytheir welfare is linked to the condition of thenatural resources on which they rely. As popu-lation densities in many countries in the re-gion are among the highest in the world, morepeople are exposed to resource scarcities, pol-lution accidents, and natural disasters. WorldBank research and other studies have demon-strated a close correlation between certainmeasures of environmental quality and pov-erty indicators. In China, for example, researchby the Chinese Academy of Social Sciences hasshown a very high level of overlap between


highly degradable land and the location of therural poor (World Bank 1999b). The WorldBank’s Poverty-Environment Nexus study hasbeen exploring similar linkages in Cambodia,Lao PDR, and Vietnam (box 1.2). These link-ages suggest that the sustainability of povertyalleviation programs could depend signifi-cantly on the way in which natural resourcemanagement (NRM) dimensions are ad-dressed.

The issues related to NRM are wide-rangingand diverse. The following discussion high-lights key priorities for the region (World Bank

2001d). By focusing on these issues, govern-ments and development agencies will facili-tate efforts to deal with the legacy ofmismanagement and will enhance the long-term capacity of the environment to supportpoverty alleviation.

Water resources. In the past decade, demandfor water by industry, agriculture, power gen-eration, and final consumption has almostdoubled in the EAP region. Competition forwater is increasing due to the lack of effectivedemand management and proper pricing re-gimes. To meet growing water demand, most

Box 1.2 P P P P Poveroveroveroverovertytytytyty-Envir-Envir-Envir-Envir-Environment Linkages in Lonment Linkages in Lonment Linkages in Lonment Linkages in Lonment Linkages in Lao PDRao PDRao PDRao PDRao PDR

A Bank study on poverty-environment linkages in Lao PDR used newly available spatial and surveydata and provincial data on the distribution of poor households to investigate the spatial dimensionof the poverty-environment nexus. Environmental issues examined included deforestation, fragilelands, indoor air pollution, and access to clean water and sanitation. Upon merging the geographicinformation on poverty and the environment, linkages were identified using geo-referencedindicator maps and statistical analysis.

In Lao PDR, the most significant spatial nexus between poverty and environmental problems isrelated to contaminated water and indoor air pollution. A spatial connection also exists betweenpoverty and other environmental problems—deforestation and fragile lands—but these appearto be weaker (see figure below).These results suggest that thewelfare of the poor may beenhanced by a close integration ofenvironmental considerations intopoverty reduction strategies. Casestudies are under way to furtherexplore options for policyinterventions.

Note: The study is part of the multi-yearPoverty-Environment Nexus study fundedby the multi-donor Trust Fund for Envi-ronmentally and Socially SustainableDevelopment (TFESSD).Source: Dasgupta and others (2002).

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countries in the region have resorted to hap-hazard development of surface water sourcesand unsustainable extraction of groundwater.As a result, water scarcity problems are increas-ing, and heavy demand in cities has led to sa-line intrusion and other problems in manyareas (World Bank 2000c, 2000d; 2001e, 2003b).The FAO describes countries with less than2,000 m3 per capita as facing serious water scar-city. As indicated in figure 1.3, average fresh-water availability in China is close to thisthreshold (2,210 m3), including extensive ar-eas where the situation is especially serious,particularly in the north. Many other areas inthe region, including urban centers, are alsothreatened with water shortages.

Another area of concern is the deteriorationof aquatic ecosystems in coastal areas. Thesesystems provide goods and services to morethan 250 million people who live within 60miles of the coastline in Southeast Asia andthe Pacific. Indirect benefits from fisheries and

tourism extend well beyond the coastal mar-gins, fueling economic growth and food secu-rity at the provincial level and beyond.However, these inherently productive coastalsystems are suffering from declining waterquality, habitat loss, and overexploitation, re-sulting in decreasing productivity and resil-ience to environmental change. Fisheries andcoral reefs are being degraded at unprec-edented rates. Cumulative impacts from hu-man stress and climate change seriouslycompromise the ecological integrity of aquaticsystems and their ability to provide the goodsand services which underpin the livelihoodsand security of the rural poor, in particular(Kottelat and Whitten 1996). The recent Tsu-nami in the Indian Ocean was a sobering dem-onstration of the importance of coastal forestsand coral reefs in providing some measure ofprotection against the potentially devastatingeffects of storm surge and cyclones—less pow-erful than tidal waves but a far more commonphenomena.

Forests and land use. Some 27 percent of thetotal land area of the EAP region is covered byforests, representing the third-largest remain-ing area of forest cover, after Latin America (47percent) and Europe and Central Asia (37 per-cent). This rich forest endowment is rapidlydisappearing. Indonesia has the highest rateof deforestation in the region; the rate almostdoubled between 1985 and 1997, from 1 mil-lion to 1.7 million hectares per year (Holmes2002). But elsewhere in the region, too, defor-estation has been proceeding at alarming rates.

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Figure 1.3 Fr Fr Fr Fr Freshwater Reshwater Reshwater Reshwater Reshwater Resouresouresouresouresources per Capita in Selectedces per Capita in Selectedces per Capita in Selectedces per Capita in Selectedces per Capita in SelectedCountries, 2000Countries, 2000Countries, 2000Countries, 2000Countries, 2000

Source:Source:Source:Source:Source: W W W W World Bank (2004a).orld Bank (2004a).orld Bank (2004a).orld Bank (2004a).orld Bank (2004a).


Figure 1.4 shows changes in forest and man-grove cover between 1990 and 2000. This kindof aggregate data, however, often masks im-portant trends and structural changes. Indeed,in many areas, an increase in low-value for-ests and plantations is masking the rapid de-cline and disappearance of mangrove andlowland forests, which provide many valuableecosystem services such as soil and coastalprotection, biodiversity, and fisheries recruit-ment. The Philippines, for example, has lost70 percent of its mangrove forests, and Viet-nam has lost 50 percent. Several countries, in-cluding China and Thailand, have imposedlogging bans, and many are implementing re-forestation programs that are helping tocounter the impacts of deforestation. The suc-cesses of these reforestation programs, how-ever, often mask a continuing deterioration in

the overall quality of forests, including theirbiodiversity, with implications for their inher-ent value and resilience, as well as putting un-intended pressure on neighboring countries(World Bank 2000d).

Illegal logging, untenable resource extraction,slash-and-burn land conversion practices, andthe subsequent degradation of ecosystems andlandscapes have been so severe as to measur-ably affect macroeconomic performance. In1998, floods in central China led to significantloss of income and livelihoods for hundreds ofthousands of people and inflicted high costson the public sector. The government attrib-uted the severity of the floods to the effects ofdeforestation and environmentally unsustain-able forest management practices. Themudslides in the Philippines that claimed thelives of about 100 people at the end of 2003were also linked to deforestation.

Recurrent, widespread forest fires in Indone-sia—caused by unsustainable plantation man-agement and exacerbated by natural causessuch as drought—cause severe health dam-age and negatively affect the economies of sev-eral neighboring countries such as Malaysiaand Singapore (Holmes 2002). The currenttrend toward degradation of natural resourcescould prevent agriculture, forestry, and tour-ism from playing their potential key roles inrural development, both directly as sources oflivelihoods and income for rural people, andindirectly through the supply of inputs tovalue-added activities.

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Figure 1.4 Change in T Change in T Change in T Change in T Change in Total Forotal Forotal Forotal Forotal Forest and Mangrest and Mangrest and Mangrest and Mangrest and Mangrove Arove Arove Arove Arove Area inea inea inea inea inSelected Countries, 1990–2000Selected Countries, 1990–2000Selected Countries, 1990–2000Selected Countries, 1990–2000Selected Countries, 1990–2000

Source:Source:Source:Source:Source: W W W W World Bank (2004a) and FAO (orld Bank (2004a) and FAO (orld Bank (2004a) and FAO (orld Bank (2004a) and FAO (orld Bank (2004a) and FAO (www.fao.orwww.fao.orwww.fao.orwww.fao.orwww.fao.org/forg/forg/forg/forg/forestry/site/11609/en).estry/site/11609/en).estry/site/11609/en).estry/site/11609/en).estry/site/11609/en).


Biodiversity. The region is exceptionally rich inbiodiversity, with many areas of high ende-mism, particularly in the Indo-Pacific, includ-ing the Pacific Islands. During the past halfcentury, the region’s rich and renewable bio-logical resources have been increasingly ex-ploited at unsustainable rates, both forinternational trade and to sustain growingpopulations. While the true extent of habitatchange and species loss in the region has notyet been fully quantified because current dataare inadequate, it is estimated that two-thirdsof Asian wildlife habitats have already beendestroyed, and that 70 percent of the majorvegetation types of the Indo-Malayan realmhave been lost. Some countries in the regionhave lost 70 to 90 percent of their original wild-life habitat to agricultural and infrastructuredevelopment, deforestation, land degradation,shrimp farming and other impacts. Overallhabitat losses have been most acute in Cam-bodia, Indonesia, Thailand, and Vietnam.

The unsustainable harvesting of natural prod-ucts (particularly timber and fish); agriculturalexpansion into primary forests, wetlands, andgrasslands; and the replacement of diverse tra-ditional crop varieties with a limited numberof high-yielding ones have had severe effectson the region’s biodiversity. Most of the threat-ened species are land-based—more than halfare found in forests, but freshwater and ma-rine habitats, especially coral reefs in Indone-sia and Thailand, are also becoming veryvulnerable. Degradation is already affectingfisheries and coastal livelihoods. In the Phil-ippines, for example, fishermen expend about

10 times more effort today than they did inthe 1980s to collect the same amount of fish(Smith and Jalal 2000). In Thailand, where openaccess has accelerated in the depletion of fishstocks, biomass has been reduced to 8–12% ofpre-industrial fishing levels (World Bank2004c).

Most countries in the region have institutedsystems of protected areas, and begun imple-menting programs to raise awareness of theeconomic importance of biodiversity. The pro-portion of areas designated for protection var-ies from 10 percent in Indonesia to 18 percentin Cambodia. While the designation of pro-tected areas indicates commitment, the effec-tiveness of protection depends on associatedincentives, policies, and institutional frame-works. These conditions are frequently lack-ing in the EAP region. It is estimated, forexample, that three-quarters of marine pro-tected areas in EAP are under high threat fromcoastal development and failure to enforceexisting regulations.

Transboundary, Regional,and Global EnvironmentalChallenges

Cross-boundary externalities. Many environ-mental issues cut across national boundaries.Cross-boundary externalities result from theuse and management of shared natural re-sources such as the Mekong, cross-boundaryair pollution, and the environmental implica-


tions of regional infrastructure development(see examples in box 1.3). Addressing regionalenvironmental issues requires policy dialogueand mechanisms for collaboration among sev-eral stakeholders, often with diverse values,objectives, and interests. As economic devel-opment continues, the magnitude and sever-ity of these transboundary environmentalproblems are likely to increase, thus requiringregional and sub-regional strategies andmechanisms for collaboration.

Environmental issues of common interest. Mostcountries in the region also share similar localenvironmental challenges such as urban airand water pollution, solid waste management,

and the degradation of natural resources. Theycan benefit from regional fora that facilitatelearning about each other’s good practices inaddressing these environmental challenges.Coordination of environmental regulations, forexample fuel quality or vehicle emission stan-dards, can also facilitate intra-regional trade,and the adoption of regulatory principles suchas the polluter pays principle can establish alevel playing field for businesses.

Regulation of regional fishing efforts, for ex-ample through regionally agreed foreign li-censing agreements for tuna among PacificIsland States, is designed to managetransboundary fish stocks within sustainable

Box 1.3 Examples of T Examples of T Examples of T Examples of T Examples of Transboundary Envirransboundary Envirransboundary Envirransboundary Envirransboundary Environmental Impacts in EAPonmental Impacts in EAPonmental Impacts in EAPonmental Impacts in EAPonmental Impacts in EAP

♦ Occasional forest fires in Indonesia affect air quality in Malaysia and Singapore, extendingas far as southern China.

♦ Air pollution from China affects air quality in Korea and Japan, having measurable effects asfar away as the western seaboard of North America.

♦ Water resource management, as well as land and infrastructure development decisions inthe middle and upper watersheds of the Mekong River affect water availability and quality,productivity of fisheries, and hydrological conditions in downstream riparian countries suchas Cambodia and Vietnam.

♦ Forest management decisions in China (in particular, the government’s decision in 1998 tosubstantially shut down the domestic logging industry) had unexpected negative side effectson forestry sectors in other countries in the region.

♦ Mismanagement of the vast grasslands of Mongolia result in increased frequency and severityof dust storms that affect China and other parts of northeastern Asia.

♦ Marine ecosystems throughout the region are being adversely affected by open accessexploitation, over-fishing, inadequate fishing practices, and pollution from land-based sources.

♦ Illegal wildlife trade (for example, of live turtles and other species from the Greater MekongSubregion to southern China) has decimated the region’s rich biodiversity.


yields and increase the capture of resourcerents locally. This is particularly important asthe region is making greater efforts towardintegration and intra-regional trade. Efforts toaddress transbound-ary and other regional is-sues of common interest include environmen-tal cooperation in the Mekong subregion (seebox 1.7), the Clean Air Initiative for Asia (seebox 3.2), the East Asia Acid Deposition Moni-toring Network (EANET), and the ASEANagreement to control transboundary haze.

Global threats and challenges. In addition,countries in the region are effected by globalenvironmental threats and participate in theimplementation of global agreements. Someof these are discussed below:

♦ Climate change. Climate change is becom-ing an overriding concern for environmen-tal sustainability globally and manycountries in the EAP region will suffer con-siderably from its effects. Pacific Island na-tions are particularly vulnerable (see box1.4). China and Indonesia are significantplayers in the global climate change dia-logue. China’s global share of GHG emis-sions accounts for 14 percent, and it isprojected to further increase with the ex-pansion of the power sector. Indonesia’sGHG emissions from the energy sector areprojected to triple between 2000 and 2020,while the share of coal in the energy sup-ply is projected to increase by a factor of 10(GOI, 1999). Indonesia is also a significantprovider of carbon sequestration services

Box 1.4 The Implications of Climate Change for P The Implications of Climate Change for P The Implications of Climate Change for P The Implications of Climate Change for P The Implications of Climate Change for Pacific Island Nationsacific Island Nationsacific Island Nationsacific Island Nationsacific Island Nations

Climate models for the Western Pacific suggest that by 2025 sea levels could rise 11–21 centimetersand average temperatures could increase 0.5°–0.6°. A World Bank study investigated theimplications of these projections for Pacific Island nations. Findings suggest that climaticphenomenon, such as drought and cyclones, will have significant impacts for many aspects oflife in Pacific Island communities. The report estimated that islands such as Viti Levu, a highisland in Fiji, could suffer annual economic damages averaging at least $23 - $52 million by 2050,or 2–4 percent of Fiji’s GDP; while Taruwa, a low atoll in Kiribati was estimated to suffer annualeconomic damages of $8–16 million, of 17–34 percent of GDP.

The report concluded that Pacific Islands are already experiencing severe impacts from climatechange, citing cyclone damage of more than $1 billion during the 1990s, as well as increaseddrought frequency. Coral bleaching and reduced calcification rates for coral reefs are also linkedto climate change. Together, these cumulative effects of climate change will disproportionatelyaffect the poor and exacerbate poverty. It will cause incremental social and economic costs, withdisaster years being exceptionally damaging. The report highlighted the need for early adaptation,stressing that some opportunities will not be available in later years, and that many current trends(such as reduced multi-crop agriculture) are actually increasing the vulnerability of Pacific Islandstates.

Source: World Bank 2000f.


through its vast forest resources. All EAPcountries have demonstrated their commit-ment to curb climate change by ratifying theKyoto Protocol, and thus are eligible to par-ticipate in the Clean Development Mecha-nism (CDM), which offers opportunities fordeveloping countries to sell eligible carbonreduction credits to industrialized countrieswhere GHG emission reductions would becostlier.

♦ Ozone-depleting substances (ODS). Duringthe 1970s, concerns were raised that cer-tain manmade chemicals containing chlo-rine or bromide destroy the stratosphericozone layer and cause serious humanhealth and environmental problems. Healthimpacts include skin cancer, eye cataracts,and weakening of the immune system;other environmental impacts range fromreduced crop and fishery yields to damageto plant genetic material and marine eco-systems. In response, the 1985 Vienna Con-vention and the 1987 Montreal Protocol(MP) were adopted, requiring the phase-out of ODS, and establishing the Multilat-eral Fund to provide technical and financialassistance to developing countries forimplementation of the Protocol. By 2001,180 countries had ratified the MP. Afterindustrialized countries eliminated ODSuse by 1995, China became the world’s larg-est consumer and producer of ODS. Mostother East Asian countries are consumersof ODS, and only a few are producers. Com-mon ODS in East Asia are CFCs, halons,carbon tetrachloride, and methyl chloro-

form. Thirteen East Asian countries (China,Indonesia, the Republic of Korea, theDemocratic People’s Republic of Korea,Malaysia, Mongolia, Myanmar, the Philip-pines, Singapore, Thailand, Cambodia, LaoPDR, and Vietnam) ratified the MP and itsvarious amendments, and are implement-ing phaseout strategies and plans with sup-port from the Multilateral Fund.

♦ Persistent Organic Pollutants (POPs). POPsare highly toxic, long lived chemical sub-stances with diverse effects on the environ-ment and human health. They accumulatein the food chain, and pose a regional/glo-bal environmental threat as they can spreadthousands of miles from the point of emis-sion. Demand for these chemicals is grow-ing in many industries, as well as inagriculture through increased application ofinsecticides and fungicides. The 2001Stockholm Convention on POPs demon-strated a commitment by both industrial-ized and developing countries to addressthis problem. By 2002, more than 150 coun-tries had signed the convention, whichwould (a) eliminate the production and useof specific POPs; (b) restrict the production,use, and trade of others; and (c) identifycontaminated sites for remediation. Ad-dressing the use of POPs is also closely re-lated to the broader chemical managementagenda. OECD predicts that the EAPchemicals industry, which accounted for 7.9

percent of world chemical production in1995, will almost quadruple by 2020 and ac-

count for 16.2 percent of world production.


Environmental Governance,Policy, and InstitutionalFramework

Sustainable economic growth and improve-

ments in welfare and social stability are onlypossible if adequate attention is given to thesustainable management of environmentalresources. The East Asian financial crisis of 1997occurred simultaneously with a parallel envi-ronmental crisis manifested by raging forest

fires, highlighting fundamental weaknesses inpolicy and institutional frameworks in both thefinancial and environmental areas that ren-dered the region’s development vulnerable(World Bank 1999a). The economic downturnthat followed the crisis created an opportunityto reexamine the relationship between eco-nomic growth and the environment (see box1.5), and to lay the foundations for a moreholistic and proactive approach toward envi-ronmental management. This approach needsto focus on improved environmental gover-

Box 1.5 Measuring the Sustainability of Development Measuring the Sustainability of Development Measuring the Sustainability of Development Measuring the Sustainability of Development Measuring the Sustainability of Development

It has been long recognized that traditional indicators of economic growth do not measure thelong-term sustainability of development. The World Bank publishes adjusted or “genuine” netsaving (ANS) rates that account for changes in all assets (physical, natural, human). This is doneby measuring how much national income is not consumed (gross saving), then adding/subtractingthe accumulation and depreciation of produced, natural and human capital, i.e. the netaccumulation of wealth in a given year.

When a country draws down its totalassets through over-consumption orresource depletion, its future welfare isreduced, i.e. negative saving ratesindicate that the country is on anunsustainable development path. In theEAP region, large gaps between grossand net savings indicate that wealthaccumulation is much slower thancommonly understood, particularly incountries with significant depletion ofnatural resources and thoseexperiencing high pollution levels.Empirical evidence also indicates apositive relationship between netadjusted savings and economic growth.

Note: Figures show data for 2002.Source: World Development Indicators (2004).

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nance and to embrace partnerships betweenthe public and the private sector, and civil so-ciety in support of sustainable development.A similar opportunity now presents itself inSouth and Southeast Asia, following the tsu-nami disaster. With the shock to fisheries, tour-ism, transport and other coastal sectors,countries are facing a forced structural adjust-ment of these segments of the economy. Withunprecedented capital flows moving in for therecovery, the opportunity to put these sectorson a more sustainable footing through reduc-ing overcapacity, broadening benefit sharing,and adopting best practices in the reconstruc-tion, must be seized.

Public policies and institutions. Throughout theregion, formal environmental policies, regula-tions, and institutions have been developed,but with few exceptions, incentives, politicalcommitment, and human and financial capac-ity for implementing, monitoring, and enforc-ing environmental laws and regulations remainweak. While it has been increasingly recog-nized that the coordination of sector policies,

and the integration of environmental consid-erations into sector policies, programs andstrategies, can be very effective in influencingenvironmental outcomes and long-termsustainability, mechanisms for influencing de-cisions at these early stages and at the policylevel are still weak or non-existent in manycountries.

Public environmental expenditures are criticalfor building human and technical capacity ingovernment agencies, credible environmentalinformation systems, and public awareness ofenvironmental conditions and issues; formonitoring and enforcing regulations; and forfinancing investments in public goods. Yet,public environmental expenditures in the re-gion have been generally low, and are particu-larly vulnerable to disproportionate reductionsduring economic downturns (see box 1.6). Thedrain of experienced professional staff from thepublic sector is exacerbating these problems.

Decentralization and environmental manage-ment. The decentralization process currently

Box 1.6 Findings of P Findings of P Findings of P Findings of P Findings of Public Envirublic Envirublic Envirublic Envirublic Environmental Expendituronmental Expendituronmental Expendituronmental Expendituronmental Expenditure Re Re Re Re Reviews in EAPeviews in EAPeviews in EAPeviews in EAPeviews in EAP

While pressures on East Asia’s natural resources greatly increased during the 1990s, findingsfrom public environmental expenditure reviews suggest that public expenditures are not increasingcommensurately with the need to address these challenges. Public expenditures on environmentand natural resource management are generally low, around 0.3 percent of GDP in Indonesia,Mongolia, Thailand, Malaysia, the Philippines, and Vietnam.

Limited public environmental spending and disproportionate cuts of public environmental budgetsduring fiscal tightening—for example in Indonesia following the 1997 financial crisis—jeopardizethe progress made throughout the region toward integrating environmental management andnatural resource management principles into economic and development policies.

Source: Vincent and others (2001), World Bank (2000b and 2002a).


taking place in several countries in the regionevokes both enthusiasm and apprehension.Devolution of power from central to local gov-ernments offers the opportunity to tackle lo-cal problems in a more sustainable manner, butthe transition will be complex and uncertain.Governments that have operated with a top-down approach may find it difficult to supportlocal-level democratization—a process thatwill require strong institutions, flexible admin-istrative instruments, effective participatorymechanisms, and empowered local officialsand communities.

Whether the drive toward decentralizationleads to more sustainable resource use or in-vites serious environmental degradation willdepend to a large extent on whether decen-tralization goes forward with or without ad-equate capacity building, environmentalregulations, and willingness to enforce them.The greatest short-to-medium-term opportu-nity created by the decentralization processarises due to the increased proximity of envi-ronmental and other decisionmaking pro-cesses to affected communities, and thepotential to improve local accountability andintegrated planning. Yet, as environmental is-sues often cross not only sectors but also ju-risdictional responsibilities. Higher levelinstitutional arrangements, such as provincial/national regulators, river-basin or airshedmanagement agencies, inter-communityagreements, and user associations or munici-pal consortia are needed to adequately addressenvironmental issues that local agencies arenot willing or able to tackle.

The private sector’s role in environmental man-agement. Attention to the environmental andsocial aspects of private sector development isincreasingly seen as an integral part of sus-tainable development. An increasing numberof private sector enterprises, particularly in theindustrial sector, are adopting environmentalmanagement systems such as ISO 14000 cer-tification programs, voluntary corporate dis-closure initiatives, and industry-wide codes ofconduct. Indeed, the number of ISO 14000certifications in Asia has grown exponentially(ISO 2002; GRI 2003). Asian companies rep-resent 20 percent of all companies participat-ing in the Global Reporting Initiative (WRI etal 2003), which encourages firms to report ontheir environmental and social performance.In October 2003, the Mizhuo Corporate Bankin Japan became the first bank in the region toespouse the Equator Principles. These prin-ciples, which were proposed by the Interna-tional Finance Corporation (IFC) and firstadopted in June 2003, set forth common stan-dards employed by private banks for manag-ing the environmental and social impact ofprojects they finance. Many of these initiativesare part of a growing interest in CorporateSocial Responsibility (CSR) initiatives in theregion.

While these are welcome new trends, declin-ing environmental quality and natural resourcedegradation in the region indicate that suchefforts should be broadened and deepened.Private sector accountability and environmen-tal initiatives need to be harnessed and fur-


ther encouraged by public awareness and in-formation disclosure programs, and enhancedmonitoring and enforcement of environmen-tal laws and regulations.

Public awareness, engagement, and the role ofcivil society. In many countries in the region,civil society is demanding the opportunity toparticipate in decision making processes, in-cluding decisions about development pro-grams and projects with significantenvironmental and social implications(Anheier, et al 2001). The increasing role of avocal and active civil society in demanding andpracticing improved environmental manage-ment has been an important element in envi-ronmental change in the region. In thePhilippines, for example, the active environ-mental NGO community is one of thecountry’s greatest potential assets in the drivetoward sustainable development. In Indone-sia, the financial crisis resulted in an animatedpublic debate about many critical issues fac-ing the country, including the state of the en-vironment. In China and Vietnam, there isgrowing pressure to allow more public partici-pation and disclosure of environmental infor-mation. Overall, however, there are largedifferences among countries in access to envi-ronmental information, the role of NGOs, andprocedures for public participation indecisionmaking.

Government bureaucracies need to becomemore responsive and open to dialogue withcivil society on major policy and development

issues. Environmental education, awarenessbuilding programs, and the disclosure of en-vironmental information are important ele-ments of building informed constituencies tosupport necessary government and public ac-tion. The power of information, importance oftransparency, and engagement of civil societyhave been recognized only recently as impor-tant elements of public policy. For example,Article 290 in the new constitution in Thailandadvocates a stronger role for civil society inenvironmental management, and the govern-ment is gradually increasing its support tocommunity-based initiatives.

Future Trends andChallenges

Following the recovery from the financial cri-sis, economic growth has resumed in EAP, con-fidence has been regained, and most long-termgrowth projections are optimistic. It is expectedthat per capita GDP in the region could growsolidly at a rate of around 5.3 percent over thenext 10 years (World Bank 2005). The follow-ing discussion highlights some of the key as-pects of the region’s future economicdevelopment that pose particular environmen-tal challenges.

Rapid urbanization. As part of its rapid eco-nomic growth, urbanization carries importantenvironmental implications for the region. Therate of urbanization in the EAP region has been


higher than in any other region in the world.It is estimated that urban areas will generateat least 70 percent of all economic growth inthe region over the next 20 years. Projectedrates of urbanization are particularly high inChina and Indonesia (figure 1.5). Future ur-banization will strongly effect the peripheriesof cities, as well as small towns and rural vil-lages as a result of urban sprawl.

Urban growth of this magnitude poses bothopportunities and challenges. If the benefitsof urbanization, linked to economies of ag-glomeration (such as ease of communication,access to labor, transit and improved services),are adequately distributed, they may be effec-tive in combating poverty and improving wel-fare. But the social and environmentalchallenges of urbanization are equally formi-dable. These include the growth of social in-equality, increase in urban violence, urbanpollution, deterioration of public health con-

ditions, which can ultimately lead to a declinein the overall competitiveness or attractivenessof urban centers as locations in which to es-tablish new businesses. For coastal cities, deg-radation of aquatic ecosystems can underminethe production of goods and services whichare essential to the economy and security ofhuman communities. The demands on urbangovernments to expand the provision of envi-ronmental infrastructure services—such assanitation, waste collection, and proper dis-posal—may thus be significantly greater thanin the past decades.

Failure to adequately manage the environmen-tal aspects of urban growth and developmentcan lead to widespread social, environmental,and economic ills. Perhaps one of the mostunfortunate manifestations of this failure is theexpansion of slum dwellings. Slums are oftenlocated in marginal land that is unsafe for oc-cupation, such as garbage dumpsites, highlypolluted riverbanks, and steep hillsides. Nearly40 percent of the urban population of the EastAsia region already lives in slum conditions,and further urban growth on the scale ex-pected, without adequate public policies andinvestments, could significantly increase thisrate and the absolute number of people af-fected.

Industrialization. Rapid industrial develop-ment is the main source of growth in manyeconomies in the region. These economiesneed to cope with the implications of rapid in-

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Figure 1.5 Actual and Pr Actual and Pr Actual and Pr Actual and Pr Actual and Projected Urban Pojected Urban Pojected Urban Pojected Urban Pojected Urban PopulationopulationopulationopulationopulationGrGrGrGrGrowth in Selected Countries, 1995-2030owth in Selected Countries, 1995-2030owth in Selected Countries, 1995-2030owth in Selected Countries, 1995-2030owth in Selected Countries, 1995-2030

SourceSourceSourceSourceSource: UNDP (2003).: UNDP (2003).: UNDP (2003).: UNDP (2003).: UNDP (2003).


dustrialization for urban quality of life, as wellas demands on urban planning, provision ofinfrastructure services, and pressures on re-source use. Appropriate policies can play animportant role in avoiding or curbing pollu-tion, even at the initial stages of industrial de-velopment (Islam, 1997). For developingcountries, several positive factors support acleaner industrial development path, includ-ing the availability of less polluting production,pollution reduction technologies, and in-creased awareness of good environmentalmanagement practices. Small and medium en-terprises (SMEs), which are often difficult toregulate for pollution management, requirespecial attention.

Addressing the policy and institutional issuesrelated to urban and industrial planning willbe a critical condition for environmentalsustainability in industrializing Asian countries.Currently, industrial and urban policymakingand planning are often undertaken by differ-ent agencies with little interaction, and locallyelected or appointed officials have little author-ity or ability to guide industrial growth to beconsistent with urban plans. The growth ofsmall and medium enterprises (SMEs) willlikely be an important component of industri-alization, job creation, and therefore povertyreduction in many EAP countries. This posesspecial challenges for environmental regula-tion because SMEs are often informal and dif-ficult to reach through traditional regulatorymeasures. More generally, limited monitoring

and enforcement capacity, and weak analyti-cal base for setting priorities for regulatory in-tervention, and limited capacity to translatebroad objectives into actions are key aspectsof institutional capacity development.

Pressure on natural resources. Total populationin the region is projected to reach 3 billion in2015, up from 1.8 billion in 2000, with signifi-cant growth occurring in areas already undersevere environmental stress (WDR 2002). Wa-ter stress, desertification, and rapid forest andhabitat losses in several countries are the signsfor this. Further growth will lead to increasedpressure on scarce natural resources and willworsen the impacts of natural disasters andshocks on the vulnerability of the poor. Popu-lation densities in rural areas in the region arealready higher than the world average (668people per square kilometer in EAP, on aver-age, versus 518 worldwide) and, despite on-going rural-urban migration, population inregion’s rural areas is growing substantially.This has significant implications for the avail-ability of agricultural land, which has increasedby some 13 percent in the past 30 years, largelyat the expense of lowland forests and theirbiodiversity.

Increasing energy use. Increasing energy useis essential to economic growth in the region.Improved access to cleaner sources of energy,such as the replacement of biomass with mod-ern fuels for household heating and cooling,will contribute to improvements in environ-


mental health and livelihoods (for example, byreducing indoor air pollution). However, arapid increase in energy demand also poses anumber of environmental threats, from explo-ration and extraction to energy production anduse (see figure 1.6 for projected growth in en-ergy demand).

The local impacts of fossil-fuel based activi-ties are the most severe—resulting air pollut-ants that affect people’s health, and ecosystemimpacts due to coal, oil, and gas exploitation,transport and transmission, and processing.Regional impacts include the contribution toacid rain, which damages forests and the pro-ductivity of agricultural crops. There are alsoglobal implications related to climate change.

Regional integration and cooperation. Govern-ments in the region are taking active steps to

increase regional integration. For example, theAssociation of Southeast Asian Nations(ASEAN) Free Trade Area (AFTA) came intoforce at the beginning of 2002, bringing to-gether the five original ASEAN members (In-donesia, Malaysia, Philippines, Singapore, andThailand). The Initiative for ASEAN Integra-tion (IAI) has also been launched to help newand less developed members (Cambodia, Laos,Myanmar and Vietnam) attract foreign invest-ments, build capacity and integrate more fullyinto AFTA. Regional integration and trade re-lations can enhance economic growth in theregion, but also call for strengthened environ-mental policy and regulatory frameworks toavoid negative environmental implicationssuch as intensified illegal logging, as well astrade in illegally produced forest products,endangered species, and hazardous or bannedsubstances.

With significant shared environmental re-sources and cross-boundary impacts, environ-mental issues are increasingly part of theregional development agenda. For example,ASEAN’s Hanoi Plan of Action sets out envi-ronmental objectives and identifies (a) trans-boundary haze; (b) nature conservation andbiodiversity; (c) coastal and marine environ-ment; (d) global environmental issues; and (e)other environmental issues as the major areasof cooperation among ASEAN members, andwith international organizations. In addition,several regional environmental organizationsand initiatives are engaged in various aspects

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SourceSourceSourceSourceSource: W: W: W: W: World Bank RAINS - Asia Database, http://www.iiasa.ac.at/Rorld Bank RAINS - Asia Database, http://www.iiasa.ac.at/Rorld Bank RAINS - Asia Database, http://www.iiasa.ac.at/Rorld Bank RAINS - Asia Database, http://www.iiasa.ac.at/Rorld Bank RAINS - Asia Database, http://www.iiasa.ac.at/Researesearesearesearesearch/TAP/rains_asia/docs/ch/TAP/rains_asia/docs/ch/TAP/rains_asia/docs/ch/TAP/rains_asia/docs/ch/TAP/rains_asia/docs/


of environmental cooperation and policy dia-logue (box 1.7).

Summary

The environmental and social challenges as-sociated with rapid economic growth, urban-ization, and socioeconomic transformation areserious, and will intensify in the face of pro-jected future economic development and re-

gional integration. Key priorities in the com-ing years include: (a) enhancing urban environ-mental conditions—air quality, access to safewater, sanitation, waste collection and safe dis-posal—with focus on the welfare of poor seg-ments of the population; (b) improving thegovernance of natural resources—with focus onthe engagement of local communities indecisionmaking and resource management;and (c) responding to intensifying regional andglobal environmental challenges.

Box 1.7 Envir Envir Envir Envir Environmental Cooperation in the Mekong Ronmental Cooperation in the Mekong Ronmental Cooperation in the Mekong Ronmental Cooperation in the Mekong Ronmental Cooperation in the Mekong Regionegionegionegionegion

Countries in the Mekong region face complex cross-boundary environmental challenges. Thefollowing are environmental initiatives to address some of these challenges:

Mekong River Commission (MRC). The Mekong River Commission was established amongfour countries—Cambodia, Laos, Thailand, and Vietnam—to collaborate in implementing theAgreement on Cooperation for the Sustainable Development of the Mekong River Basin. TheUNDP played a critical catalytic role in redirecting the MRC and is now supporting capacity building.The World Bank is currently the lead multilateral donor to the MRC, and its support and influenceare important for achieving the MRC’s long-term objectives. The World Bank is engaged throughthe Water Utilization Project, which is financed by the GEF, including the establishment of adatabase and rules for collective decisionmaking on water use to underwrite the MRC’s role as ariver basin management institution.

Greater Mekong Subregion (GMS) program. The GMS was initiated by the ADB in 1992. It isbeing jointly implemented with UNEP to achieve a common vision in a number of areas, particularlytransport. To date, this vision has translated into agreed priorities for construction of road links inVietnam, Cambodia, and the Lao PDR. The strategic framework for the next 10 years, approvedat a ministerial meeting in 2001, calls for 11 flagship programs designed to address the mostpressing environmental and natural resource management issues in the Greater MekongSubregion. Currently, these flagship programs are being reviewed to refine the thinking andactivities embodied in the various programs, build consensus on an evolving agenda, and makecommitments for implementation.

Source: http://www.mrc,ekong.org; and http://www.adb.org/GMS/program.asp

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