Conclusion

In order to achieve stable, sustainable economic growth globally, large emerging economies—particularly PRC and India—must shoulder greater responsibilities, and have their voices heard and views reflected, in global economic and financial architecture, commensurate with their rising economic weight. An important first step has been taken by including a host of emerging economies at the G20 summit process, but further changes will be required in the governance structures of key global organizations, including the IMF, World Bank, WTO and the newly created FSB.

One obvious change is to make voting shares reflect the output shares of member countries in global organizations. But broader reforms will also be necessary. We have argued that decentralizing global decisions is an important step forward. Internationally decentralized decision-making with independent, but closely linked, global and regional organizations could be more effective than centralized decision-making led by a single global organization in each of the major functional areas of global governance. This would mean some decisions would be shifted from the global to regional organizations and that some public goods would be produced not by one global organization but by several international organizations—in collaboration or possibly even competition with each other—with each accountable to its constituents. The system would be similar to that used to provide public goods within countries through multiple layers of government.

Decentralized decisions create new challenges. First, major emerging economies need to play increasingly active roles in decision-making processes and public goods provision through both global and regional organizations. Second, regional decisions need to be coherent globally in order to prevent “races to the bottom” and more generally to make such regional organizations and agreements the building blocks of an efficient global system. These are difficult issues, but a successful, decentralized system would enable the international community to respond to more problems, more quickly and more effectively. Regional organizations should address regional issues and externalities, and global organizations should in turn focus on truly global issues and global consistency.

Given Asia's rising economic weight, Asian governments and institutions will have to play increasingly critical roles in managing the global economy and finance. The ADB already plays an important role and promising seeds exist for new organizations in other functional areas of trade and finance. Asia can and should contribute more to governing today's extraordinarily complex world economy, in part by creating effective regional institutions.

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Comment(s)

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1. Sritanu Chatterjee
   (posted 12 August 2010 / 12:31:26 PM)
   
   Dear Sir,
   
   The suggestions put forward in the paper are quite pertinent in today's scenario. In a multipolar world, regional institutions will have much bigger and responsible role to play.The paper would be more interesting if the shortcomings or problems of having too many regional institutions had been mentioned. Decentralisation leads to many benefit - increasing bureaucratic efficiency, localisation of knowledge base and global institutions gaining more confidence while taking decisions. But the problem lies in the implementation of the idea. In India, decentralisation or "panchyati raj" started in 1980s. But very few states have been able to implement it properly till date. For some states, it has aggravated the problems. Therefore, I think if more intense thought is given on the idea of implementation then it would expedite the process of formation of regional institutions.
   
   Thanks & Regards,
   Sritanu