Asia Needs a Collective Approach to Secure Balanced and Sustainable Growth – Report

TOKYO (27 October 2010) - Asian economies have begun to recover from the global financial crisis of 2007-2009, but many risks remain, including the possibility of a double-dip recession in the advanced economies, the inappropriate timing and pace of withdrawals of macroeconomic stimulus programs around the world, surges in short-term capital inflows to emerging economies, and "currency wars."

Therefore, Asian policymakers need to take a collective approach to secure balanced and sustainable growth, concludes a new policy recommendation report released by the Asian Development Bank Institute (ADBI) for the Asian Policy Forum.

The report, "Policy Recommendations to Secure Balanced and Sustainable Growth in Asia," lays out a series of suggested policies to: strengthen the role of Asian regional bodies in global macroeconomic and financial management; reduce the global imbalance; promote inclusive and green growth; advance trade and investment integration in Asia; pursue financial regulatory reform in G20 countries; reinforce regional economic and financial cooperation in Asia; and reform the operations and governance of the International Monetary Fund and the World Bank.

The report recommends that Asian leaders attending regional and global summit meetings over the next several weeks adopt a coordinated approach to key issues on the agenda. Regarding current account imbalances, the report urges that Asian leaders pursue structural economic reforms that can expand regional trade and final demand, while allowing real exchange rates to play a facilitating role in the adjustment process. Asia needs stronger regional and global financial safety nets to reduce the need to accumulate foreign exchange reserves.

To promote trade and investment liberalization, Asian leaders should continue to support the Doha Round, while also accelerating trade integration via the consolidation of bilateral and plurilateral agreements into a region-wide agreement, and ensuring that these agreements be as open and non-discriminatory as possible as well as WTO-consistent. The report welcomes recent enhancements of the Chiang Mai Initiative Multilateralization (CMIM), and calls for it to develop into a full-fledged Asian monetary fund and thereby reduce the need for self-insurance via reserve accumulation. Finally, the report calls for reforms of operations and governance of the IMF and the World Bank, including selecting an Asian as the head of the IMF in the near future.

"Asian leaders need to meet and enunciate an Asian program to achieve balanced and sustainable growth. The articulation of such a program will boost confidence and position the region as a leading center of the global recovery," says Masahiro Kawai, Dean of ADBI.

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Tokyo-based ADBI, which is a subsidiary of the Asian Development Bank, was established in 1997 to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in the Asia-Pacific region.

The Asian Policy Forum, established in 1999, brings together leading researchers to analyze key development issues affecting the region, and to make policy recommendations on them. ADBI is the secretariat.