Developing countries in the East Asia and Pacific region – the first to recover from the global economic crisis – can grow rapidly in the next decade even in a weakened world, but only if they implement structural reforms with renewed vigour and cooperate further on regional economic integration and climate change.

That is the message of the latest East Asia and Pacific Economic Update Report– the World Bank (WB)’s twice-yearly assessment of the economies of the region.

Recovery in demand abroad, sustained fiscal and monetary stimulus within developing East Asia, and a rapid rebound in consumer spending prompted the WB to raise its projection for the region’s real GDP growth in 2010 to 8.7 percent, almost a percentage point above its November 2009 forecast.

The region has emerged from the crisis with manageable deficits and relatively low public and external debt, and social protection mechanisms have protected the poor from the worst effects of the slowdown.

While upbeat about the pace of East Asia’s recovery, strongly influenced by China, the report said that the region is facing a very different global economy over the medium term.

According to Vikram Nehru, World Bank chief economist for the East Asia Pacific region, countries should consider the reduction of trade barriers, transport costs and focus on areas with low production costs to raise their competitiveness.

However, to promote growth in the long-term, developing countries in the region will need to carefully manage the withdrawal of fiscal stimulus measures in the short term while returning to their structural reform agendas, the economist said.

The focus on structural reform means different things to different countries, according to the report. For China, it means rebalancing the economy, including enabling a larger role for the service sector and private consumption and moving away from investment-heavy export-led growth as well as encouraging environmental sustainability.

For the region’s middle income countries – Vietnam, the Philippines, Indonesia, Malaysia, Thailand – the priority is investment in physical and human capital to encourage a move up the value chain in production and exports.

To further integrate into the regional economy and sharpen its competitiveness in the global market, in addition to investment in infrastructure and human resources, Vietnam should reform trade policies as well as implement reforms in other sectors, said the report.

Low-income countries like Cambodia and Lao PDR, need to focus on breaking into manufacturing and becoming part of global and regional production networks.

“The regional market for goods and services will increasingly provide opportunities for expansion,” said lead economist and principal author of the report, Ivailo Izvorski.

“Deeper integration will boost intra-industry trade within global and regional production networks, encourage agglomeration economies, reduce costs and increase international competitiveness”, Izvorski added./.