Feature Archive 2011

Sharing the Risk in the People's Republic of China

A new ADBI working paper analyzes consumption risk sharing among provinces in the People's Republic of China during 1980–2007. The interprovincial fiscal transfer system smoothed 9.4% of shocks to gross provincial product and helped to cushion a relatively large percentage of province-specific shocks in coastal areas. Migration of rural labor to urban areas and the remittance of migrants' wages play important roles in promoting risk sharing in inland provinces. By contrast, the extent of risk sharing through financial intermediation and capital markets is very limited. Read more.

Explaining the Lack of Progress in Asian Monetary Cooperation

Since the financial crisis of 1997–1998, East Asia has made advances toward greater regional integration and cooperation in finance and trade, accompanied by progress on institution-building at the regional level. However, there has been little progress in monetary cooperation. A new ADBI working paper suggests that domestic distributional politics—the processes by which gains and losses within countries are distributed—may be one reason for the low priority that has been placed on regional monetary cooperation to date. Read more.

Climate Change and its Impact on Agriculture

The significant relationship between climate change and agriculture in Asia was examined at a seminar in Seoul, Republic of Korea on 13–16 December 2011, cosponsored by ADBI. Agriculture is extremely vulnerable to climate variability and weather extremes, such as droughts, floods, and severe storms. The forces that shape the climate are also critical to farm productivity and food security. The meeting noted the importance of allowing individuals more options and resources to respond to climate change and providing an economic environment that is flexible and responsive. Read more.

Water in History

Asia's current water allocation and usage issues are rooted in the history of the region. A workshop in Tokyo on 13–14 December, cosponsored by ADBI, examined the role of water in the history of Japan, Europe, Iran, Morocco, the People's Republic of China, and Pakistan, among others. The workshop also offered an opportunity to seek solutions to related issues, such as sanitation, climate change, food production, and energy. Read more.

Reform of International Monetary System Examined at ADBI Annual Meeting

ADBI held its 14th Annual Conference on Reform of the International Monetary System on 2 December 2011. The conference brought together scholars and officials from Asia and Europe to discuss reforms of the international monetary system, including the outlook for and issues relating to internationalization of the renminbi, lessons for Asia from the sovereign debt and banking sector crisis in Europe, issues related to currency cooperation in Europe and Asia, and ways to promote regional and global cooperation in financial safety nets. ADB President Kuroda joined the final panel and gave closing remarks. Read more.

Japan and its emerging neighbors

The long-term impact on Japan of the rise of ASEAN, the People's Republic of China and India was examined at a meeting in Tokyo on 30 November, sponsored by ADBI, ADB, and the Asahi Shimbun newspaper. The symposium tracked the long-term trends of ASEAN, the People's Republic of China and India and analyzed policies and strategies that are needed to achieve a harmonious and peaceful Asia. The outcome of the symposium will feed into the major ADB and ADBI study on these key emerging economies. Read more.

Asian Perspectives on Financial Reforms

Emerging economies performed well during the global recession, especially in Asia. However, significant challenges lie ahead. These are examined in a new ADBI volume copublished with Brookings Institution Press. Editors Masahiro Kawai and Eswar Prasad and the contributors analyze the major domestic macroeconomic and financial policy issues that could limit the growth potential of Asian emerging markets, such as rising inflation and surging capital inflows, with the accompanying risks of asset and credit market bubbles and of rapid currency appreciation. Read more.

Europe Sovereign Debt Crisis: Lessons for Asia

The eurozone predicament was analyzed by three European experts at a distinguished speaker seminar at ADBI on 1 December. In a lively discussion, Professors Stefan Collignon, Eric Girardin and Charles Wyplosz surveyed the battleground of the European sovereign debt crisis and examined the advantages and disadvantages of centralization at the European level, the potential for the European Central Bank to guarantee sovereign bonds, and the adequacy of the European Financial Stability Facility, among other issues. They also set the current problems of the eurozone in the context of the enormous export gains that had followed the creation of the single currency in 1999. Read more.

Four important events at ADBI

ADBI faces a busy week. On 29 November, the ADB Office of Regional Economic Integration will launch the latest issue of Asia Bond Monitor^* by holding a seminar at ADBI. The following day, ADBI, ADB, and Asahi Shimbun newspaper sponsor a conference on Japan and the Rise of ASEAN, the People's Republic of China, and India. On 1 December, Stefan Collignon, Eric Girardin and Charles Wyplosz will offer a distinguished speaker seminar on the Europe Sovereign Debt Crisis and its lessons for Asia. On 2 December ADBI holds its annual conference on Reform of the International Monetary System. Registration and other details can be found by clicking on the links in the right-hand column.

Preparing for an older Asia

Asia is ageing rapidly and this will have enormous financial and social consequences, some of which are already being faced by countries such as Japan. ADBI addressed the significance of Asia's demographic transition in two recent meetings. New Thinking on Social Security in Asia analyzed the challenges ahead while the potential benefits from ageing Asia, for societies as a whole and for individual businesses, were covered in a second meeting: Economic Opportunities from the Ageing Society. ADBI Dean Kawai summarized these twin benefits in his opening remarks: "The rising number of the elderly with high levels of education and/or experience can be a pool of valuable knowledge and talent that is useful to society. Older people with adequate post-retirement income provide an expanding market for firms willing to produce goods and services designed for them."

Research into Asia's production networks is just beginning

Asia's extensive network of transborder production networks hit the headlines for the wrong reasons in 2011 as first the triple disaster in Japan and then extensive flooding in Thailand disrupted key supply lines. A new ADBI working paper reviews the literature on production networks in East Asia, in particular their structure and mechanics and the conditions under which they take place. The authors note that research into production networks faces a number of inherent difficulties. The theory of such networks is incomplete, and it does not scale up to industry- or macro-level in a convincing way. They also point out that production networks are not fully observed in official figures such as international trade statistics. Read more.

Registration open for new microfinance course

The eighth Microfinance Training of Trainers Course will run from December 2011 to April 2012. The course is based on the interactive microfinance distance learning course developed by the United Nations Capital Development Fund.^* About 3,000 participants have benefited from previous courses, which are based on self study, online tutoring and e-discussion. The course is sponsored by ADBI and the World Bank Tokyo Development Learning Center. Register online.^*

Graying Asia: An Opportunity?

How can countries in Asia, especially those with relatively undeveloped social security systems, prepare for the projected ageing of their societies? What lessons are available from developed countries that already have large populations of older persons? These are among the questions that will be discussed at an ADBI conference on New Thinking on Social Security in Asia on 17 November. Another ADBI conference on Economic Opportunities from the Ageing Society: Policies and Challenges on 18 November will take a close look at the opportunities offered by ageing societies and, among other issues, will examine how Japan's experience and how technology is helping address the needs of its large population of older persons.

Time to drop the "Impossible Trinity" theory

A new ADBI working paper argues that the "Impossible Trinity" theory (a country cannot enjoy monetary independence, exchange rate stability, and financial integration at the same time) has been unhelpful in addressing the policy problems caused by volatile capital flows to emerging countries. The Impossible Trinity and Capital Flows in East Asia by ADBI Fellow Stephen Grenville argues that East Asian emerging countries have been able to manage their exchange rates while maintaining monetary policy independence. International capital flows do, however, present policy challenges other than those envisaged by the Impossible Trinity. These include fickle changes in risk assessments, mindless herding, booms and busts in capital-exporting countries and the structural profitability differential between these emerging countries and the mature economies. Read more.

Fukushima offers Japan an opportunity to reform its power industry

A new ADBI working paper argues that the Fukushima nuclear disaster offers Japan a chance to end its power monopolies and put in place an energy industry that would be more efficient, innovative, environmentally friendly, and safer. Professor Masahiko Aoki and Geoffrey Rothwell recommend that the Japanese government buy TEPCO's transmission grid and place it under a new corporate entity acting as an independent system operator (ISO). A modular structure would enable renewable and other power sources to be connected to the grid, The authors argue that under their recommendations (i) retail distributors and large consumers could engage in long-term, fixed-cost contracts with suppliers; (ii) personal consumers could contract for power for a specified quantity under a fixed price, and pay a spot market price; and (iii) the ISO could introduce "cost-based dispatch," which would enable greater competition. Read more.

How will the rise of ASEAN, the People's Republic of China, and India affect the world economy?

Views from inside and outside emerging Asia were presented at a meeting on 25 and 26 October under the ADBI and Peterson Institute for International Economics joint project on the Implications of the rise of ASEAN, the People's Republic of China, and India for the world economy. ADBI Dean Kawai gave welcome remarks. Examinations of the challenges facing Asia, ASEAN, the People's Republic of China, and India were followed by sessions on "The Rest of the World Responds" and on the trade, finance, and security implications of the rise of Asia. Arising from this conference, a book will be published in 2012 by ADBI and the Peterson Institute. Among the questions it will address are: How will the rest of the world adjust to the rise of ACI? What are the major risks to ACI's relationships and interdependence with other regions? Read more.

PRC, India, and Japan links examined

In recent decades, the economies of Japan and People's Republic of China (PRC) have become deeply integrated. At the same time, the two countries have succeeded in establishing durable dialogue mechanisms, bilaterally and within the framework of ASEAN+3 (ASEAN, the People's Republic of China, Japan, and the People's Republic of Korea). In parallel, although on a much smaller scale, India has been deepening its trade integration with the PRC, to the point where the PRC is now India's largest trade partner. At an ADBI distinguished speaker seminar on 17 October, Suman Bery, a member of the Economic Advisory Council^* to the Prime Minister of India, discussed the prospects for cooperation and integration of these three Asian economies. Read more.

What impact will the outsourcing industry have on poverty?

A new ADBI working paper examines IT-enabled industries in two developing countries where such industries are at the early stages of development (the People's Republic of China and the Philippines) and one where the industry is mature (India). The PRC and the Philippines have developed this industry in cooperation with multinational enterprises, while in India there has been a greater focus on domestic firms. Since these industries do not help the more impoverished or less educated, their impact on poverty is limited, especially in rural areas. Read more.

Tax conference for Central, West, and East Asia

Senior tax policymakers and administrators from nine Central, West and East Asian countries attended the 19th Tax Conference on International Model Tax Treaties at ADBI on 4–7 October 2011. The conference examined OECD and United Nations model tax treaties; designing and drafting domestic law to implement international treaties; and country experiences, including Japanese and Thai experiences of tax treaties, Central and West Asian tax treaties, Islamic financing, and transfer pricing. Read more.

Need for strong leadership at G-20 Cannes Summit

In a wide-ranging presentation at ADBI on 7 October, former ADB chief economist and senior adviser to the President of the Republic of Korea, Jong-Wha Lee, argued that the G-20 needed to take the lead in restoring confidence and building strong, sustainable, and balanced global growth and prosperity. For developing countries, he pinpointed difficulties arising from volatile commodity prices and capital flows and weak growth in developed economies. Pointing out that the G-20 had proved effective in averting a global recession in 2008, Dr. Lee argued that the forthcoming G-20 Cannes Summit provided an ideal opportunity for the G-20 to consolidate its global leadership role. Read more.

How should Asia respond to financial reforms following the global financial crisis?

An Asian perspective on recent global regulatory developments was provided by a meeting on New Paradigms for Financial Regulation and Macro Policies: Emerging Market Perspectives at ADBI on 30 September. After surveying new developments in the global regulatory landscape, policymakers and members of multilateral development banks and academia compared the effects of the global financial crisis on various Asian economies and their financial systems. They analyzed the results of policy interventions, made recommendations for monetary policy and financial regulatory policy, and examined how to foster financial development and inclusion. The meeting further developed ideas covered in the recent ADBI and Brookings Institution book Financial Market Regulation and Reforms in Emerging Markets. Read Dean Kawai's opening remarks.

India services sector shows resilience

Despite the global economic crisis, the Indian economy has managed to maintain one of the highest growth rates in the world. The services sector accounted for around 88% of the growth rate in real gross domestic product in 2008–2009. A new ADBI working paper examines the demand- and supply-side factors that have contributed to the continuing growth of services in India. This paper is one of a number of ADBI initiatives analyzing services in Asia, including a meeting on Services Trade: New Approaches for the 21st Century earlier this year and a forthcoming book on services sector reform. Read more.

"Aging before affluence" in the PRC

The relationship between the rapidly aging population in the People's Republic of China (PRC) and its stage of economic development was analyzed at a distinguished speaker seminar at ADBI delivered by Professor Cai Fang of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. Professor Cai pointed out that the PRC had achieved the demographic transition much sooner than other countries at similar stages of development, a phenomenon he called "aging before affluence." In 2010, for example, 8.9% of the Chinese population was 65 and older, compared with 5.3% in other developing countries. As a result the PRC has already passed the point in the development of an economy when its surplus of cheap labor runs dry and labor costs increase. Read more.

Reform of the PRC banking sector

Reform of financial regulation is a priority for every major economy. As recommended by the G-20, new international standards have been issued, notably Basel III. The People's Republic of China (PRC) has been closely involved in framing these standards and its banks are likely to be able to meet the new capital and liquidity targets fairly easily. However, the key issue for the PRC—as well as other emerging markets—is to how to keep focused on the domestic policy agenda while adopting the new global standards. A new ADBI working paper examines the need to maintain a balance between better regulation and promoting financial innovation. Read more.

Message from the ADBI Dean six months after the Great East Japan Earthquake

Six months have passed since Friday 11 March 2011, when the triple disaster of the Great East Japan Earthquake, the tsunami, and the Fukushima nuclear accident struck Japan. Despite these adverse circumstances, ADBI has continued to operate almost normally. Thanks to the "collective energy conservation efforts by the Japanese people, we have been able to continue our work effectively throughout the spring and the hot and humid summer", Dean Kawai notes, outlining some highlights of ADBI's events, activities, and outputs over the past six months. Read the full message.

Financial Inclusion Discussed in Tokyo

How can we improve access to financial services and expand opportunities for poor households and micro, small-, and medium-sized enterprises in developing Asia-Pacific? This was the theme of the Asia-Pacific Financial Inclusion Forum jointly organized by the Asian Development Bank Institute and the APEC Business Advisory Council in Tokyo on 6-8 September.

As ADBI Dean Masahiro Kawai emphasized, effective institutions, and sound and well implemented regulation are crucial, especially in the areas of credit information, legal frameworks, and consumer protection. Further, improving financial inclusion requires close partnerships between government, business, and nongovernment organizations. Read Dean Kawai's opening remarks to the Forum.

Shaping Asia's Institutional Architecture for Economic and Financial Integration

Asian economic regionalism has emerged from a bottom-up process, driven by market forces in the absence of a grand plan for regional integration. Based on the results of a survey of Asia's opinion leaders conducted by the Asian Development Bank in 2010, a new ADBI working paper discusses how Asia's institutional architecture for economic and financial integration is taking shape and suggests there is a need to create new institutions in support of Asian regionalism and to adopt a broad perspective in moving towards the formation of a region-wide economic community based on strong political commitment and grassroots participation.

Asian Financial Cooperation discussed in Shanghai

Can the People's Republic of China allow foreign central banks to buy and sell renminbi sovereign bonds in the market? This is one of the three proposals to promote the renminbi as a global reserve currency and allow for greater capital account liberalization made by ADBI Dean Masahiro Kawai at the 3rd Shanghai Forum on Asian Financial Cooperation on Friday 28 August. The other proposals included: (i) accelerating the pace of appreciation of the renminbi against the US dollar; and (ii) laying out a clear blueprint for the internationalization of the renminbi and the upgrading of Shanghai as an international financial center. Read Dean Kawai's keynote speech and his opening remarks of the conference.

Study on emerging economies discussed at Delhi

India's policymakers, experts, and heads of think tanks discussed productivity growth; financial development; quality of life, resource security, and the environment; and regional cooperation in ASEAN, the PRC, and India at a workshop on 18-20 August. The head of the ADB Office of Regional Economic Integration Iwan Azis, Department of Economic Affairs Joint Secretary Venu Rajamony, and Planning Commission Member Saumitra Chaudhuri led the opening session. ADBI, ADB, and the Indian Council for Research on International Economic Relations organized the workshop. The Delhi workshop followed on the heels of a similar meeting in Beijing in May. The book that results from this flagship project will be published in 2012, in association with ADB. Read more.

The pluses of an open approach to environmental disclosure

How much environmental information should a firm provide? Many simply comply with their legal obligations, yet a new ADBI working paper argues that benefits can accrue to "green industries" that voluntarily disclose information about the environmental impact of their operations. The authors explain the advantage of voluntary information disclosure strategies using examples from the People's Republic of China, India, Indonesia, the Philippines, and the United States and Thailand. The paper ties in with ADBI's wider project on Climate Change and Green Asia.

The Yen's Fetters

Two days before Professor Koichi Hamada's Distinguished Speaker Seminar on "The Yen's Fetters: On the Comparative Performance of Japan and Asian Countries" the Japanese government and central bank intervened to weaken the yen. His timely and well-attended presentation criticized Japan's "desperate macro-economic record relative to advanced countries as well as to most Asian countries" and the strength of the yen, for which the Bank of Japan and the Ministry of Finance "are principally responsible." Read more.

Asian economic security depends on close cooperation between the PRC and Japan

The "grim prospects" for narrowing global imbalances and reforming the international financial architecture are examined in a new ADBI working paper "The Political Economy of Reducing the United States Dollar's Role as a Global Reserve Currency." It argues that greater regional financial and monetary cooperation and rebalancing of economic growth will be the best way for Asia to insulate itself from the vagaries of the global economy, but for that to succeed the PRC and Japan need to work together. Read more.

ASEAN Secretary-General sets out ASEAN Economic Community's challenges

Will the ASEAN Economic Community (AEC) be in place by 2015 as planned? Visitors to an ADBI distinguished speaker seminar on 3 August heard one of the central actors in the AEC process, ASEAN Secretary-General Surin Pitsuwan, deliver his views on the current state of play. He pointed out that ASEAN's centrality in the region is not by choice but by necessity. But ASEAN faces many challenges, including the diversity of its forms of government, culture, religion, and stage of economic development. Achieving consensus at regional and national levels is not easy and some more developed members are reluctant to further open up their economies. To monitor progress, ASEAN has developed a scorecard system to track each member's performance in fulfilling commitments. The seminar tied in closely with one of ADBI's own research projects, ASEAN 2030.

ADBI Hosts Meeting on Productivity Growth in Asia

Previous studies on Asia's extensive production networks have used international trade data or input–output tables, but such aggregate data cannot explain how the networks actually operate. Production Networks in Asia: A Case Study from the Hard Disk Drive Industry examines the procurement system of a hard disk drive assembler operating in Thailand. It found that this particular production network consists mostly of arm's-length suppliers, who are independent and on an equal footing with the assembler. Read more.

ADBI passes two milestones: 300 working papers and 1,000 Twitter followers^*

On 28 July 2011, ADBI published the 300th working paper on its website. The first was published on 1 January 2003, the 100th in March 2008, and the 200th in February 2010. This rapid expansion of the ADB working paper series has made it an invaluable resource for researchers on economic development in the Asia and Pacific region, not least because PDF files of the papers are available for free on the ADBI website. ADBI is committed to continuing to add to this large body of research. Working paper 300 by Biswa Nath Bhattacharyay, Lead Professional and Adviser to the Dean, analyses the factors that promote effective development of bond markets in Asian economies. In the same week ADBI received its 1,000th Twitter follower.

Micro-study sheds light on East Asia's production networks

Previous studies on Asia's extensive production networks have used international trade data or input–output tables, but such aggregate data cannot explain how the networks actually operate. Production Networks in Asia: A Case Study from the Hard Disk Drive Industry examines the procurement system of a hard disk drive assembler operating in Thailand. It found that this particular production network consists mostly of arm's-length suppliers, who are independent and on an equal footing with the assembler. Read more.

Asia's Free Trade Agreements book cited in WTO's World Trade Report 2011^*

The World Trade Report 2011 is devoted to preferential trade and refers in some detail to the ADBI and ADB book Asia's Free Trade Agreements: How is Business Responding?. The World Trade Organization (WTO) flagship publication notes that, while only about one-quarter of firms surveyed for Asia's Free Trade Agreements currently use free trade agreements, this doubles when plans to use them in future are taken into account. The WTO launched the World Trade Report 2011 in Geneva on 20 July. Details can be found in the WTO press release^* and executive summary^*.

Global Financial and Economic Crisis: Implications for Trade and Industrial Restructuring in South Asia

This study by Prabir De and Chiranjib Neogi investigates the impact of the global crisis on India's trade and industry. Using panel data modeling and vector autoregression techniques, the authors find that changes in trade composition are positively associated with changes in manufacturing composition, controlling for other variables. However, they find no strong indication that Indian industry has been severely harmed by the fall in demand in crisis-affected developed economies such as the United States, the European Union, and Japan. Read more.

Financing Infrastructure for Connectivity

ADBI policy briefs are designed to present the main features of complex issues in a concise way for busy policymakers. The latest addition to the series proposes various ways to tap Asia's huge financial resources to fund essential infrastructure. The key challenges include integrating financial markets to mobilize Asian savings for infrastructure, and providing proper incentives to investors, particularly those in the private sector, by developing appropriate policies, regulations, and institutions and long-term innovative financial instruments. The policy brief builds on previous work by ADBI and ADB on the role infrastructure can play in regional integration, including the flagship project Infrastructure for a Seamless Asia, launched in 2009. Read more.

Climate Change and Green Asia and ASEAN, the PRC and India

The ADBI and ADB project Climate Change and Green Asia recognizes the essential role that emerging economies of Asia have to play in global sustainable development. This study will recommend an Asian strategy for low-carbon green growth that maximizes environmental, economic, and social benefits, without hampering competitiveness. Another ADBI and ADB project, Role of Key Emerging Economies—ASEAN, the People's Republic of China (PRC), and India—for a Balanced, Sustainable, and Resilient Asia, will address major issues of regional cooperation and integration affecting these three emerging economies, which are major economic drivers not only of Asia but of the world, because of their trade, investment and capital flows; the size of their economies; and their rapid economic growth. A component of this study, ASEAN 2030, examines ASEAN development beyond 2015 and will highlight the structural changes needed so the ASEAN countries can reach the status of fully developed economies by 2030. ASEAN 2030 is carried out in close cooperation with the ASEAN Secretariat. Read more.

Top Ten ADBI Publications

ADBI tracks its most downloaded publications on a monthly basis. The top 10 publications for May 2011 reflect ADBI's consistent focus on two key issues for emerging Asia: the role of infrastructure in supporting regional integration and the management of capital flows and exchange rates. Infrastructure for a Seamless Asia was a major ADBI and ADB copublication in 2009 and it regularly features in ADBI's most downloaded books (number 3 in May). A recent working paper examining the European Union's experience with public–private partnership to boost cross-border infrastructural development also featured in the list (10), demonstrating the interest in such cross-regional comparisons. Concerns about financial issues were demonstrated by the popularity of the book Managing Capital Flows: The Search for a Framework (2), which was published at the end of 2010, and a new working paper, Exchange Rates and Global Rebalancing (5). The list also demonstrates the breadth of interest of visitors to the ADBI website, with items on corporate social responsibility (1), NGO law and governance (7), and wastewater management in Singapore (8) also featuring. Read more.

Workshop on Climate Change and Green Asia

Investments in low-carbon development can generate wealth, growth, and employment. ADBI Dean Masahiro Kawai, ADB vice-president Bindu Lohani, and Shixian Gao of the PRC Energy Research Institute opened the first technical workshop for the ADBI-ADB flagship study on Climate Change and Green Asia, in Beijing, 13-14 June. Professor Jeffrey Sachs (pictured) gave a special presentation that emphasized the importance of countries drawing up a technology road map. Among the topics discussed were technology transfer; financing low-carbon growth from public, private, and international sources; and country reports from the PRC, India, Indonesia, Japan, Singapore, Thailand and Viet Nam. The Climate Change and Green Asia project will encourage regional policy cooperation to tackle two of Asia's most pressing and interlinked issues: the consequences of global climate change and the energy needs of booming economies. Read more.

Financial Market Regulation and Reforms in Emerging Markets

The far-reaching impact of the global financial crisis has highlighted the need to strengthen financial systems in advanced economies and emerging markets. In this new ADBI and Brookings volume, Masahiro Kawai, Eswar Prasad, and their contributors offer a systematic overview of recent developments in regulatory frameworks in both developed countries and emerging markets. They address a number of key questions. What lessons does the global financial crisis of 2007—2009 offer for the establishment of efficient and flexible regulatory structures? How can policymakers develop broader financial markets while managing the associated risks? How—or should—they make the formal financial system more accessible to more people? Read more.

Need for a Regional Free Trade Agreement

"East Asia is at the forefront of world free trade agreement activity," according to ADBI's recent study Asia's Free Trade Agreements: How is Business Responding? A new working paper by Yunling Zhang and Minghui Shen develops this theory by delineating the different characteristics of various agreements. The authors point out that multi-layered free trade agreements in East Asia have created new trade barriers and raised the cost of business. They argue that East Asia needs to progress to a region-wide free trade agreement. Read more.

Coverage of ADBI Activities

ADBI meetings and publications featured prominently in the media and on other organizations' websites in April and May. The WTO published an article^* by ADBI Dean Masahiro Kawai and ADB's Ganeshan Wignaraja on free trade agreements in Asia. The article draws on the book by the same authors published earlier this year by ADBI. Centralbanking.com^* gave prominent coverage to the ADBI seminar "Working Together Towards Better Financial Regulation and Stability in Asia"^* at the ADB Annual Meeting in Hanoi. A panel discussion on managing capital flows in Hong Kong, China, was widely reported by the regional media, including Channel News Asia^*. The ADBI working paper on the iPhone and the US trade deficit continues to attract the world's attention, most recently in articles in Time magazine^* and China Watch, a New York Times supplement.

Searching for Calmer Waters^*

Bankers crave stability, which is why more than 150 people attended the ADBI seminar on "Working Together Towards Better Financial Regulation and Stability in Asia" at the ADB Annual Meeting on 4 May. ADB President Haruhiko Kuroda noted that the region, particularly the nonbanking and capital market sectors, needed to "redouble its efforts" if Asia's financial security was to be assured, while ADBI Dean Masahiro Kawai clearly outlined the strengths and weaknesses of Asia's financial systems in a speech^* delivered by Mario Lamberte, the ADBI Director of Research. In addition to Mr. Kuroda and Mr. Lamberte, other speakers were: William Shorten, Australia's Minister for Financial Services and Superannuation; Thomas Wieser, Director General for Economic Policy and Financial Markets at Austria's Ministry of Finance (pictured, with Mario Lamberte and facilitator Maura Fogarty); Naoyuki Shinohara, Deputy Managing Director of the International Monetary Fund; and Bandid Nijathaworn, Former Deputy Governor for Monetary Stability and Financial Institutions Stability, Bank of Thailand. The seminar was jointly organized with the ADB Office of Regional Economic Integration. Read more^*.

• See the video here^*

ASEAN 2030 project gathers steam

The ADBI research project "ASEAN 2030: Growing Together for Shared Prosperity", which is jointly organized with the ASEAN Secretariat and ADB headquarters, has held two path-breaking country consultations. In Brunei Darussalam, a meeting on 28 April was chaired by Dato Lim Jock Hoi, Permanent Secretary, Ministry of Foreign Affairs and Trade, while in the Lao People's Democratic Republic a meeting in Vientiane on 29 April was attended by several senior members of the government, including the Director Generals of the Planning Department and the ASEAN Department. The Vientiane meeting was distinctive for being conducted mainly in the Lao language.

The ASEAN 2030 project is gaining momentum, with further meetings planned in Hanoi, Bangkok, Yangon, and Kuala Lumpur, and with a conference in Jakarta in mid-July. The study report will be presented to ASEAN officials later in the year. The ASEAN 2030 study is a critical input in the larger study on the Role of Key Emerging Economies–ASEAN, PRC, and India—for a Balanced, Sustainable, and Resilient Asia. Read more.

Panel discusses flows of capital in Asia at launch of new ADBI title

ADBI's recent title Managing Capital Flows was launched in Hong Kong, China, on 21 April with a well-attended panel discussion. The event was opened by Peter Pang, deputy chief executive of the Hong Kong Monetary Authority. The panel discussion was moderated by Henny Sender of the Financial Times, with concluding remarks delivered by Andy Filardo of the Bank for International Settlements (BIS), pictured. The BIS co-hosted the event, which was extensively covered in the Hong Kong and regional media. Read more.

Cost distortions that underlie the PRC's current account surplus

The current account surplus of the People's Republic of China (PRC) has attracted a lot of foreign and domestic attention. This new ADBI working paper offers a new way of looking at the surplus, arguing that asymmetric market liberalization and related factor market distortion are behind the PRC's external imbalances. These cost distortions have artificially lowered PRC production costs, raised profits, and improved their products' international competitiveness. This has stimulated the economy, but has also brought about severe structural risks. In order to rebalance the economy, the authors recommend that the PRC should adopt a comprehensive reform package that removes these distortions. Read more.

Panel discussion to launch Managing Capital Flows book in Hong Kong

ADBI will launch the book Managing Capital Flows in Hong Kong on the morning of 21 April. A panel discussion will feature distinguished figures from the public sector, banking, and academic communities, including Peter Pang (Deputy Chief Executive Hong Kong Monetary Authority) Masahiro Kawai (Dean and CEO, ADBI), Andrew Filardo, (Head of Economics for Asia and the Pacific, Bank for International Settlements), Anthony Chan (Senior Vice President and Asian Sovereign Strategist, Alliance Bernstein Hong Kong Limited), R. Sean Craig (IMF), Professor Yue Ma (Lingnan University), Eric Girardin (Université de la Méditerranée Aix-Marseille, France). The discussion will be moderated by Henny Sender (Financial times). Read more.

Launch of Asian Development Outlook

Activities at ADBI are returning to normal after the disruption that followed the 11 March earthquake. On 18 April, ADB and ADBI will host a seminar on Asian Development Outlook 2011,^* which provides a comprehensive analysis of macroeconomic issues in developing Asia. The special theme of this year's publication, South–South economic links, is particularly relevant to ADBI's work. At the seminar, the ADB Chief Economist Changyong Rhee will explore the opportunities for Asia's trade and investment that will open up in emerging markets in the South. He will also explain what the rising economic power of countries such as the People's Republic of China (PRC) and India has to offer other emerging markets. Read more.

Crisis, Imbalances, and India

Since many emerging Asian economies currently have large current account surpluses, the issue of rebalancing has special significance for Asia. While India, like other Asian economies, suffered only an indirect impact from the financial crisis, its current policy challenges appear to be different from those facing the People's Republic of China (PRC) and other East Asian economies, which have relied heavily on external demand and access to the United States market for their growth momentum. The paper argues that, given its large domestic market, India could help other East Asian economies in their efforts to achieve greater export diversification and rebalancing of growth. Read more.

Seminar: Robert N. McCauley - Managing Foreign Exchange Reserves During and After the Crisis

Robert McCauley's seminar paper addressed five key questions for reserve managers. (i) Should they have bigger liquidity portfolios? (ii) Should they restore the previous weight given to bank deposits? (iii) Do US agencies have a future? (iv) What approach will managers take to corporate bonds? (v) Is the diversification of portfolios continuing? Drawing on an extensive range of data from the US Treasury Department, Federal Reserve Bank surveys, the Bank of International Settlements, and other sources, McCauley's presentation tracked portfolios from 2007 to 2010, to reveal how reserve managers' portfolios had become more concentrated and more liquid. Although he noted a continuing interest in greater diversification, he also argued that most alternative markets were too small and not liquid enough to meet the needs of large reserve managers. Read more.

ADBI Dean Expresses Sympathy to the People and Government of Japan

ADBI opened on Monday morning, 14 March, following the earthquake and tsunami in Japan on Friday 11 March. On behalf of ADBI staff, Dean Masahiro Kawai extended sympathy and support to the people and government of Japan. "We will work with the international community to contribute to the recovery and help those in need," said Dean Kawai. Read the full message.

The Tohoku-Kanto Great Disaster: Five Stages of Planning

Former ADBI Dean Peter McCawley stresses that responses to disasters need to take place in stages. Concentrating on issues that are relevant to Japan, his analysis emphasizes policy rather than immediate action. Immediate action is critical, but strong policy guidance is important as well. Peter McCawley is one of the authors of the recent ADBI book The Asian Tsunami: Aid and Reconstruction After a Disaster. Read the briefing note here.

Meeting on Flagship Study for Climate Change and Green Asia

An inception meeting for an ADB–ADBI flagship study that will examine how emerging economies of Asia can respond to demands for low–carbon development was held at ADBI on 28 February–1 March. In addition to being one of the fastest-growing regions in the world, the Asia and Pacific region is also emerging as the largest source of greenhouse gas emissions as a result of increasing energy consumption and changing land use. After examining initiatives in both emerging and developed economies, the meeting examined how some of their weaknesses can be overcome by influencing lifestyle choices and using market-based policy instruments. Professor Jeffrey Sachs delivered a keynote presentation by videolink (see photo). Read more.

What Regulatory Policies Work for Emerging Markets?

This paper discusses the banking regulatory and supervisory practices in the People's Republic of China (PRC). While the PRC has incorporated many sound practices advocated by the Basel Core Principles for Effective Banking Supervision (BCPs), significant differences can also be observed between PRC practices and those in the BCPs. Broadly speaking, the PRC adopts a rules-based approach to regulation and finds specific guidance more helpful than sole reliance on principles-based approaches. The paper argues that general principles and a principles-based approach to regulation do not seem to work well for emerging markets. Read more and post a comment.

Market Failures and Regulatory Failures: Lessons from Past and Present Financial Crises

A new ADBI working paper identifies four primary failures contributing to the financial crisis of 2007–2009 -excessive risk-taking in the financial sector due to mispriced government guarantees; regulatory focus on individual institution risk rather than systemic risk; opacity of positions in financial derivatives; and runs on the banking sector that threatened to bring down the entire financial sector—and proposes specific reforms to address them. It sets the financial crisis in its historical context by describing responses to the panic of 1907 and the Great Depression. Read more and post a comment.

Asia's Free Trade Agreements: How Is Business Responding?

The spread of Asia's free trade agreements (FTAs) has sparked an important debate on the impact of such agreements on business activity. This pioneering study uses new evidence from surveys of East Asian exporters-including Japan, the People's Republic of China, the Republic of Korea and three ASEAN economies of the Philippines, Singapore, and Thailand-to shed light on the FTA debate. Read the book online.

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How the iPhone Widens the US Trade Deficit with the PRC

At the center of global imbalances is the bilateral trade imbalance between the PRC and the US. The authors use the iPhone as a case study to show that even high-tech products invented by US companies will not increase US exports, but on the contrary exacerbate the US trade deficit. Read more.

Asia's Free Trade Agreements: How Is Business Responding?^*

"A region-wide free trade agreement would have clear economic benefits. It would, of course, increase market access to goods, services, skills and technology. It would also increase market size, permitting specialization and greater economies of scale," said ADB President Kuroda at today's launch of a new book. Read the news release.

• More about the book.^*

Managing Capital Flows: The Search for a Framework

Capital inflows can pose serious challenges for macroeconomic management and financial sector supervision in emerging market economies. This new book, edited by Masahiro Kawai and Mario Lamberte, presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Read the book online.

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