Hyderabad, May 4, 2006 AEST (ABN Newswire) - Asia's Growth Depends on Addressing Imbalances and Weaknesses, Asian Development Bank (ASX: ATB) President Tells Governors' Seminar on 'A Shared Responsibility: Fixing Global Payments Imbalances'
Investment rates in Asia seem too low to sustain growth and poverty reduction in the future, ADB President Haruhiko Kuroda told the Governors' Seminar at the ADB Annual Meeting in Hyderabad today.
East and Southeast Asia's investment rates fell sharply following the 1997 financial crisis and have yet to reach earlier levels, Mr. Kuroda told the seminar on "A Shared Responsibility: Fixing Global Payments Imbalances" on the second day of the 39th Annual Meeting of the Board of Governors.
In response, more public sector resources should be mobilized for infrastructure investment, while financing gaps should be bridged through partnerships with the private sector, and the business climate improved.
Mr. Kuroda said private investors are shying away from countries with burdensome regulations, inefficient and corrupt bureaucracies and poor quality public services. Meanwhile, the infrastructure gaps are enormous and widespread.
"Higher investment rates and better infrastructure would do much to ensure the sustainability of future growth and, more immediately, to promote a more balanced demand in countries where net exports are surging," he said.
Mr. Kuroda said imbalances in domestic saving and investment, and underdeveloped domestic and regional capital markets are the "flip side" of rising current account surpluses in much of developing Asia, as well as the fast accumulation of international reserves assets.
In the case of the People's Republic of China (PRC), he said, the underlying imbalance manifests as too much savings and insufficient consumption.
"The key to unlocking consumption, as well as ensuring better quality investments, will be reforms of the banking and broader financial system that will allow markets to guide and discipline credit allocation," he said. Investing in pensions and social protection would also reduce savings and help domestic demand play a bigger role in supporting the PRC's growth.
In the wider region, fast official reserve accumulation is symptomatic of another broad challenge - the need for deeper and more efficient domestic and regional capital markets, Mr. Kuroda said.
Asia's surplus savings are not finding their way into productive investment outlets at home or within the region.
"Cross-border investment originating in Asia is still predominantly directed to the United States and Europe," he said.
More efficient use of surpluses will require deepening of the private sector's role in domestic and regional capital markets. This in turn will require legal, regulatory, and other reforms whose success hinge on improve governance, he said.
"In tackling this difficult structural agenda and in addressing the risks posed by imbalances, regional cooperation initiatives will be critical," Mr. Kuroda said.
The Governors' Seminar featured presentations by P. Chidambaram, Chair of the Board of Governors of ADB and ADB Governor for India; Sadakazu Tanigaki, Minister of Finance and ADB Governor for Japan; Timothy Adams, Undersecretary for International Affairs, Treasury, United States; Li Yong, Vice Minister of Finance and ADB Alternate Governor for the PRC; and Wolfgang Morke, Director, International Relations Department, Deutsche Bundesbank and Alternate Director, Bank for International Settlements. The event was moderated by Martin Wolf of the Financial Times.
Source:
Asian Development Bank
Contact
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253;
+632 898 3413;
+63 915 741 4363
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