TOKYO, July 9: Unemployment in Asia is set to rise as the modernization of agriculture displaces farmers who will have to seek work elsewhere, threatening to cloud prospects for regional economic growth, the Asian Development Bank warned on Friday.

While the Asian economies continue to post robust growth, major challenges, including rising unemployment, confront the region, ADB president Tadao Chino said in a speech here.

While 60 per cent of the workforce in the region's developing countries are now farmers, the agriculture sector accounts for only about 22 per cent of total economic output, Mr Chino said.

"A significant amount of surplus agricultural labour will be created as agricultural productivity increases, requiring new employment to be created in other sectors," said Mr Chino.

The total workforce is already expanding across developing Asia, led by India, where it is expected to increase by 2.1 per cent every year over the period 2000-2010, according to ADB estimates.

Annual rises in the same period will also exceed two per cent in Bangladesh, Indonesia, Malaysia, Pakistan and the Philippines. In China, the region's rising powerhouse and manufacturer to the world, the labour force is expected to grow by 0.8 per cent a year.

"The Chinese economy will achieve a soft-landing over the next two to three years," with credit-tightening in selective sectors, such as bank lending, expected to have a positive impact, Mr Chino said, referring to recent efforts by Beijing to slow a runaway economy.

The ADB chief noted that even rapid economic growth in China "has not been able to absorb surplus agricultural labour, new labour-market entrants and workers laid off from uncompetitive state-owned enterprises."

"High unemployment could seriously undermine Asia's dynamism," he warned. "Social stability and security in developing Asia hinge on the significant creation of employment opportunities."

Tackling joblessness, a particularly serious problem among young people, is vital to gaining public support for economic reform, he said. Referring to a regional economic integration, Mr Chino said "an Asian single currency offers a number of potential benefits", such as lower transaction costs for trade and investment.

Given different levels of income, however, Mr Chino said the initial participants in a single currency may be limited to the 10 members of Asean and its key partners - China, Japan and South Korea. -AFP