Small Governments, Big Ambitions : Fiscal Policy in East Asia and Pacific - Overview

Overview & Synopsis

This publication examines how East Asian and Pacific economies have achieved rapid growth through a fiscal model characterized by low taxation, limited public spending, and strong investment in infrastructure. While this approach contributed significantly to poverty reduction and economic transformation, it also resulted in underinvestment in human capital, social protection, and climate resilience. The publication argues that as countries in the region aspire to attain high-income status, they must transition from a growth-enabling to a growth-enhancing fiscal framework. This requires strengthening public investment in education, healthcare, social safety nets, and climate adaptation while improving government effectiveness and fiscal sustainability. The report highlights the need for broader and more efficient taxation, better-targeted public spending, and institutional reforms that support inclusive and resilient development. Drawing on extensive economic analysis and regional evidence, the study provides policy recommendations for enhancing revenue mobilization, improving service delivery, rationalizing subsidies, and fostering public trust in fiscal reforms. Ultimately, it presents a roadmap for building stronger, more capable states that can support sustainable growth and meet emerging social and environmental challenges in the East Asia and Pacific region.