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Developing Asian economies need to develop manufacturing

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Developing Asian economies need to industrialise if they wish to eventually achieve high income statues, the Asian Development Bank (ADB) has stated.

As reported by AFP, the ADB says that nations which do not develop a manufacturing sector but move from agriculture to the services sector are likely to fall into a ‘middle income trap’.

High-income economies are defined as those with per capita incomes of more than US$15,000. An ADB study of 100 nations showed that economies within this category have at least an 18 percent share of manufacturing in total output and employment for a sustained period.

ADB chief economist Changyong Rhee said at a news conference in Singapore, "A lion's share of Asian economies are moving directly from the agricultural sector to the services sector, bypassing industrialisation.

"We find that historically, virtually no country becomes a high-income country without having a significant degree of industrialisation."

Rhee added that it is actually difficult for an economy to go beyond the middle-income stage without the 18 percent threshold in employment and output share.

Countries that have moved from the agricultural sector to the services sector without the necessary levels of industrialisation include the Philippines, India, Sri Lanka and Pakistan.

Rhee says that these countries do not attract service-sector jobs such as legal and IT work. Instead, they only attract ‘low-quality’ service jobs.

According to Rhee, the problem is not a result of a lack of understanding of the need for manufacturing within governments. It comes down to local politics and government structures.

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