REPUBLIKA.CO.ID, JAKARTA -- Enhancing labor skills as a key element for overcoming the middle-income trap in developing Asia-Pacific economies. APEC policy dialogue discussed how developing economies stuck in the middle-income trap typically achieve initial growth by successfully mobilizing inputs based on low-cost advantages, but with rising costs and eroding competitiveness, they then fail to make the leap to the next phase of development.

“Building on APEC’s successful work over the years on economic integration, trade and investment liberalization and structural reform, APEC is well-positioned to help developing economies avoid the middle income trap and graduate into high income status,” APEC Senior Official from China, Tan Jian said recently.

Policy ideas and analyses presented at the dialogue focused on innovative pathways for APEC emerging and developing economies to overcome this trap.

Professor Huang Yiping of Peking University said that successful economies such as Japan, Korea, Chinese Taipei, and Hong Kong, China, were all manufacturing-based economies that employed large numbers of workers during their early stages of development, although they went on different development paths once they reached the middle-income levels.

“Early engagement in labor-intensive manufacturing development provided an opportunity for continuous on-the-job training and human capital accumulation," Huang said on Mindat

According to Professor Huang, some economies ‘stuck’ in the middle-income trap relied heavily on a resource-based economy such as oil or agricultural exports for their initial growth spurt. This pathway did not provide the opportunity for human capital accumulation and on-the-job training. However, enhanced workforce education could help such economies overcome this barrier.

In addition to the shortage of available talent, other key barriers that prevent economies from climbing out of the middle income trap include the failure to implement structural reforms, growing income inequality, lack of adequate infrastructure and institutional gaps.

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