OECD Plans Invitation For Asia's 'Big Three'

RICH NATIONS CLUB

May 24, 1995

HE club of the world's richest nations aims to develop new ties to Asia's ''Big Three'' -- China, India, and Indonesia.

The reason: They're getting too big to ignore.

If these three maintain an ''apparently feasible'' growth rate of 6 percent per year, by 2010 their gross domestic product (GDP -- output of goods and services) would almost double to 60 percent of the total GDP of all the nations of the Organization for Economic Cooperation and Development, according to a report released by the OECD on May 23. The 25-member organization opened its annual ministerial meeting in Paris the same day.

This rapid expansion could provide new markets for OECD nations, as the middle class in the Big Three grows from 100 million people today to some 700 million by 2010, the report says. Other observations from the report:

* China's economy grew at more than 9 percent per year over the past decade. By some measures, its economy is already almost two-thirds the size of the economy of the United States.

* Thirty years from now, China and India could each have populations of 1.5 billion.

* From 1988 to 1992, OECD exports to Asia and Latin America grew almost twice as fast as exports between OECD countries.

''While the world economy is still dominated by OECD members, the new policies of these emerging economies represent a turnaround with profound implications,'' says OECD Deputy Secretary-General Makoto Taniguchi, who directed the study.

''The OECD has opened a dialogue with China, India, and Indonesia, who will be invited to participate in some future deliberations,'' he adds. An official OECD mission will visit Beijing in July and India later this year.

Japan's OECD delegation welcomed the shift in emphasis. ''The OECD should be of a global nature and not limit its focus on European nations, but [focus also] on Asian economies that have major potential for growth,'' says spokesman Takashi Nakane.

The new report plays down threats to jobs or wages in OECD nations from these high-growth, young economies, but sounds an alarm on the impact to the global environment.

''Both China and India are heavily dependent on coal as an energy source, which could increase the burden of pollution, unless there are not heavy investments in clean technologies,'' says Mr. Taniguchi. ''China became a net oil importer in 1993. Indonesia will likely be a net oil importer in 10 years. India already imports much of its oil.''

Thus far, the impact on employment in OECD nations has been small and limited to clothing and footwear, the report notes. Job loss in traditional manufacturing sectors is likely to be offset by job creation in new export sectors. OECD member states face much stiffer competition from each other than they do from new Asian competitors.

But OECD analysts warn that this situation could change quickly. Major developing economies ''have enormous capacity to expand their exports,'' the study adds. ''OECD countries, therefore, face the challenge of adapting production systems and enhancing the flexibility of labor markets to ever-more sophisticated and high-skill products in order to avoid unemployment as well as the pressure for protectionism.''

Founded in 1961 to help member countries ''promote economic growth, employment, and improved standards of living through the coordination of policy,'' the OECD provides a regular review of the economic policies and trends in member states.

In a preview of a June report, the OECD cut in half its projections for Japanese growth. Previous estimates put Japanese growth at 2.5 percent after inflation this year; the new projection is 1.3 percent. OECD nations as a whole will see 2.7 percent real growth rates this year; the US will see 3.2 percent, the report says.