“Crisis Opportunities and ADB’s Role”
Your Excellencies, esteemed guests, ladies and gentlemen:
It is an honor to be here this morning. I will focus on three issues: the impact of the global financial crisis on developing Asia, what ADB is doing to help Asia’s response, and finally, how East Asia can play a constructive role in reshaping the global financial architecture.
II. Impact of the global crisis on Developing Asia
Individually and collectively, developing Asian countries have handled this crisis well. The region is now showing signs of a V-shaped recovery, with growth slowing this year but regaining its pace next year. In fact, developing Asia is leading the global recovery. Monetary and fiscal stimulus appears to have worked.
In keeping with this, ADB’s forecasts have been revised upward. We expect developing Asia will grow 3.9% this year, up a half percentage point from our 3.4% prediction in March. Next year, we see growth at 6.4%, higher than the 6.0% March forecast and also slightly above the 2008 figure—hence the V-shaped recovery.
China is expected to grow by 8.2% in 2009, India by 6%, and Indonesia by 4.3%. The recovery, including ASEAN as a whole and Korea, should continue apace next year, with Japan back to positive growth. New Zealand is already in positive territory, while the improved growth prospects in Australia have already led to a tightening of monetary policy.
III. What ADB is doing
ADB has stepped up its lending in response to the crisis, committing an additional $10 billion over 2009 and 2010. Of this, $3 billion is designated to provide quick-disbursing funds to countries with limited fiscal space for stimulus measures. And another $1 billion is for trade financing, which will bring up to $15 billion over the next five years.
Our swift, sizable crisis response was enabled by the agreement on ADB’s general capital increase in this April, thanks to our shareholders’ support, including yours. We also look forward to your governments’ early subscription to the capital increase.
We are working closely with our developing member countries to mobilize resources for national and regional infrastructure projects. Our Asian infrastructure financing initiative is critical for the region’s long-term growth. Asia’s infrastructure demand is huge—estimated at more than $3 trillion over the coming decade. And increased connectivity is essential for enhancing regional integration, sustaining robust growth and reducing poverty.
Exacerbating the adverse effects of the global crisis, Asia has been hit hard this year by several natural disasters—floods, earthquakes, and tsunamis. ADB has been mobilizing emergency assistance from the $40 million Asia Pacific Disaster Response Fund to help meet the urgent need for resources, particularly for restoring life-saving services. ADB is also assisting governments, in cooperation with development partners, in preparing needs assessments, and stands ready to provide further assistance in rebuilding to higher standards.
IV. East Asia and the Global Financial Architecture
In the aftermath of the global crisis, the G20 has emerged as the leading global forum for reforming the international financial architecture. In Pittsburgh, the G20 vowed to reduce trade imbalances and agreed to keep stimulus in place for now to avoid derailing the fragile recovery.
Six of the 16 countries represented here are members of the G20. This provides a large window of opportunity for the East Asia Summit group to take its rightful role in restructuring the global financial architecture. It is critical that Asia contributes to an orderly transition to a new economic order—not only to restore global financial stability, but also to bring Asia back to its path of strong, sustainable, and inclusive economic growth.
As East Asia continues its “open regionalism”, its regulatory systems must be linked to the reformed global financial architecture. And exit strategies on stimulus must be carefully timed—if left too long, they will be unsustainable; but if withdrawn too soon, the region’s recovery could be derailed.
Most importantly, Asia should rebalance the sources of growth more toward domestic and regional demand, without undermining commitments to the global economic community.
Regional cooperation continues to bear fruit. The multilateralization of the Chiang Mai Initiative offers a viable institutional framework for future East Asian regional financial architecture. The credit guarantee and investment mechanism (CGIM), which is part of the roadmap of the Asian Bond Markets Initiative (ABMI), will help develop local-currency bond markets in the region. It is also crucial to move forward on regional policy coordination, especially on exchange rates. Along with national and global efforts, regional initiatives could form the building blocks for the 21st century global financial architecture.
The global recession provides the opportunity to rebalance the sources of Asia’s growth. Indeed, it could add an impetus to build a regionally well-integrated and globally connected Asian economy. The global financial landscape will change dramatically in the years to come, and East Asia must play a constructive role in shaping its future. We must look beyond the crisis to maintain a higher growth trajectory and build a more vibrant and prosperous Asia.