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World needs new quality-oriented economic indicators

(Xinhua)

16:55, September 16, 2011

DALIAN, Sept. 16 (Xinhua) -- Key participants at the ongoing Summer Davos Forum said the world needs to invent a new set of indicators to allow countries to better gauge the quality of their economic expansion in order to bring more benefits to their people and strike a balance between humans and nature.

Ernst Ligteringen, chief executive of the Global Reporting Initiative, said that changing the existing growth mode is a must for the world to turn around the negative effects created by the current growth-oriented index, which has led to such problems as excessive resources and energy consumption, global warming and carbon emissions, and an increasing number of serious clashes between humans and the environment.

Ligteringen said at the forum, formally known as the World Economic Forum Annual Meeting of the New Champions, that the existing index system with gross domestic product (GDP) at its core has failed to factor in environmental issues and sustainability, which are crucial to the health of the economy.

It's in all nations' interests to accelerate the study of a new index system because the continued pursuit of faster growth will likely bring more pain, he said.

A number of countries and international organizations have already started to explore in this regard. The World Trade Organization (WTO), for instance, has begun to adopt "trade in value-added" instead of absolute trading volume as the measurement for imports and exports as well as surplus and deficits in some countries and regions.

Alejandro Jara, deputy director-general of the WTO, said that different measurements could cause huge disparities in the foreign trade of a country.

If trade in value-added were applied, China's surplus with the United States would be narrowed because the components and parts of a significant proportion of China's exports came from America, and that in turn puts the value-added into their pockets, Jara said.

Likewise, different gauges would create discrepancies in the judgment of a country's economic quality, he added.

In the Republic of Korea, a new index system that emphasizes endogenous economic growth, sustainable development, and accounts for natural resources and government reliability is being tested, said Kwak Seung-Jun, chairman of the Presidential Council for Future and Vision of the Republic of Korea.

He said a new quality-oriented index system must be able to quantify the previous qualitative analysis on the quality of GDP growth.

In its 12th Five-year Plan (2011-2015), the Chinese government plans to raise the proportion of non-fossil fuels in primary energy consumption to 11.4 percent, reduce its energy consumption for per unit of GDP by 16 percent, and reduce the discharge of major pollutants by eight to ten percent.

Zhang Xiaoqiang, deputy minister of the National Development and Reform Commission (NDRC), said these binding targets testify to China's resolution in elevating the quality of economic expansion.

Although participants are fully aware of the significance and urgency of establishing such a new index system, they failed to reach a consensus on what is best.

"While countries are making separate explorations in this regard, there is no single index system that's been widely recognized, and there's a long way to go before the world chooses one," said Yang Yu, a researcher with NDRC's China Center for Urban Development.

Participants said many obstacles remain for the world to jettison the old index system for something better.

Jara said that such exploration is no easy job even for the WTO. As many countries and enterprises have refused to provide more detailed information, it's hard to calculate trade in value-added, he said.

Looking ahead, Ligteringen suggests that economists and decision-makers keep in mind the fundamental needs of the general public to live a better life.

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