East Asia’s development trajectory has been one of the most successful episodes of structural transformation in modern economic history. Rapid industrialization, export orientation, and integration into global value chains enabled sustained productivity growth and large-scale poverty reduction.  

Over the past half-century, the region reduced extreme poverty at an unprecedented scale: using a common global poverty line of around $3.20 a day, Asia’s poverty rate fell from roughly 74% in the mid-1960s to below 10% by 2014, driven largely by China and Indonesia. While East Asia still outpaces the global average, slower growth is exposing persistent vulnerabilities, including low creation of quality jobs and widespread vulnerability to falling back into poverty.

The End of “Easy” Growth
The conditions that underpinned this model have fundamentally changed. Growth is no longer propelled by readily available gains from factor accumulation, low-cost labor, or frictionless globalization. Instead, East Asian economies now face a more demanding environment characterized by rising inequality, intensifying geopolitical tensions, technological disruption, and climate constraints. 

First, Inequality is becoming a defining challenge. In 2025, in several East and Southeast Asian economies, the richest 10% captured more than half of national income, while the bottom 50% received only about 10%. Meanwhile, Asia accounted for 74% of new industrial-robot installations worldwide in 2024, with East Asia’s robot density reaching 182 per 10,000 manufacturing workers in 2023. As automation and artificial intelligence accelerate, without broader access to skills and opportunity, technological progress could deepen inequality, weaken social mobility, and erode the social compact underpinning East Asia’s development.

Second, geopolitical fragmentation is redefining globalization. Strategic rivalry, trade weaponization, supply-chain re-shoring and “friend-shoring,” and the securitization of technology -- especially in semiconductors, AI, and clean energy -- have ended the era of cost-efficient integration. East Asian economies must now pursue industrialization under conditions of uncertainty, contested rules, and constrained policy space.

Third, energy is now central to the region’s growth prospects. Electricity demand in East Asia is projected to rise by about 25% by 2030 and more than double by 2060, requiring trillions of dollars in clean energy and industrial decarbonization investment. Yet fossil fuels still generate about three-quarters of ASEAN electricity, even as renewable capacity has nearly tripled over the past decade. The challenge is clear: sustaining growth while ensuring that automation, inequality, and energy transition are managed in ways that deliver good-quality growth.

How Can East Asia Grow Better, not just Faster?  
East Asia’s past growth model -- export-led, labor-intensive, and powered by deep integration into global value chains -- has delivered extraordinary gains. But it is no longer sufficient. Slower global trade, rapid technological change, climate constraints, and geopolitical fragmentation demand a new definition of success. 

Good-quality growth goes beyond headline GDP numbers. It rests on productivity-led expansion driven by learning, innovation, and structural transformation; inclusive outcomes that create good jobs and reduce inequality; environmental sustainability, particularly through energy transition and decarbonization; and resilience to geopolitical shocks and technological disruption. Industrial policy should be judged against these criteria, not by export volumes or the scale of favored sectors alone.

First, technological change lies at the center of this challenge. Robots and AI offer significant potential to raise productivity, improve quality, and expand new services and manufacturing niches. However, they also compress labor demand in routine tasks and increase skill premiums. Industrial policy should therefore promote human-centered automation by linking incentives for technology adoption to workforce training, job transformation, and diffusion among small and medium-sized enterprises. Technology policy that ignores labor market adjustment risks accelerating inequality and undermining political support for growth-enhancing reforms.

Second, human capital development is the most fundamental pillar of good-quality growth. Education and skills systems must evolve in tandem with industrial upgrading. This requires stronger emphasis on digital literacy, analytical capabilities, and adaptability throughout the education system, as well as revitalized technical and vocational training closely aligned with industry needs. Lifelong learning mechanisms are essential to ensure that workers can transition across sectors as technologies and production structures change. Skill formation should be treated as core economic infrastructure, not as a peripheral social policy.

Third, innovation and research and development play a complementary role. Public R&D should be mission-oriented, focusing on areas where social returns exceed private incentives, such as clean energy, advanced manufacturing, and digital public infrastructure. Stronger university -- industry linkages, support for SME innovation, and mechanisms for technology diffusion are crucial to broadening the productivity base of the economy. Innovation policy should prioritize learning and adaptation, not only frontier breakthroughs.

Fourth, energy readiness has become a critical determinant of industrial competitiveness. Rising energy demand, exposure to fossil fuel volatility, and climate commitments require East Asian economies to integrate industrial policy with energy transition strategies. Decarbonizing industrial production through electrification, energy efficiency, and clean energy deployment is no longer optional; it is increasingly a condition for access to global markets. Strategic public investment in smart, green infrastructure-- combining digital connectivity, logistics, and low-carbon energy systems -- can crowd in private investment while strengthening long-term resilience.

Finally, governance is decisive. Industrial policy must be anchored in transparency, effective coordination, and adaptability -- especially amid heightened geopolitical uncertainty. Diversifying supply chains, avoiding excessive dependence on single markets or technologies, and embedding institutional mechanisms for policy learning are essential to sustained success. Strategic autonomy should not be misconstrued as isolation; rather, it is the capacity to engage globally from a position of strength.

We are embracing the new global economic era where we share the world with Super Intelligent AI, with structural geopolitical tensions, rising inequality, growing protectionism, and climate change. Only by investing in digital infrastructure, human capital, the green transition, and inclusion can East Asian economies secure durable prosperity while strengthening resilience and social cohesion. East Asia’s next phase of development should be defined not by the speed of growth but by its quality.

Editor's Note: This work forms part of an ongoing research project at the United Nations Sustainable Development Solutions Network (UN SDSN).

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Lili Yan Ing is Secretary General of the International Economic Association (IEA) and a Distinguished Fellow at the UN Sustainable Development Solutions Network (UN-SDSN). The views expressed in this article are solely those of the author.

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