A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

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ADBI News 2012 Volume 6 Number 3

On the Path Toward a New Capitalism SYMPOSIUM

Grameen Bank founder Muhammad Yunus, (second from right), joins a distinguished panel of economists and business leaders:
Dean Kawai (far right); Masaharu Okada, (far left), professor and executive director Yunus & Shiiki Social Business Research
Center, Kyushu University; Yasuchika Hasegawa, (second from left), president and CEO, Takeda Pharmaceutical Company; and
George Hara, (center), group chairman and CEO, DEFTA Partners.

The world stands at a critical juncture in the capitalism. In the Japanese context merchants from
history of capitalism, said ADBI Dean Masahiro the Lake Biwa area had traditionally taken the
Kawai, at the opening of the symposium, Toward view that it was not sufficient for a transaction to
A New Capitalism, which was co-sponsored by be good for the seller; it must also benefit the
ADBI, The Alliance Forum Foundation, Yomiuri purchaser and the community. Dr. Jimi bemoaned
Shimbun, and Japans Ministry of Foreign Affairs, the focus on short-term profits; he argued that
Ministry of Finance, Ministry of Economy, Trade capitalism needed to evolve toward a much
and Industry, and Financial Services Agency, held longer-term perspective on growth.
on 25 July. In the presentations that followed,
speakers addressed a number of fundamental
questions. What is the right system for the global In this issue
economy? If it is capitalism, how can the system
be improved? What lessons can be taken from Toward a New Capitalism 12
former and current economic systems to forge a Sub-Regional Workshop on MDGs 3
more humane and people-centered capitalist ADBI in the News 3
model? Distinguished Speaker 4
Dr. Shozaburo Jimi, former Minister of State
for Financial Services and Postal Reform of Japan, Future of the World Trading System 5
located the source of capitalism in the European Importance of International Supply Chains 5
Reformation. In Japan, it had manifested itself in ADB-ADBI-CAREC Conference 6
the mercantile city of Osaka during the Edo period Selected Events 7
(16151868). He stressed that, although the
Recent Working Papers 7
Anglo-Saxon way of thinking practiced by Wall
Street and London exerts great influence over the ADBIWB Roundtable 8
global economy, it was not the only model for

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 A s i a n D e v e l o p m e n t
Nobel laureate and Grameen Bank founder
Muhammad Yunus gave a short history of the
worlds most famous microfinance institution. He
admitted that his first foray into small-scale
lending was not well thought out; rather, it was an
instinctive response to the contrast between the
theoretical economics he was teaching in his
university classroom and the harsh reality for the
people living in the adjoining settlement. From his
first loan for $27 to 42 families in 1976, Yunus
took the audience on an entertaining journey from
the founding of Grameen Bank in 1983 to the large
financial institution it is today, lending $1.5 billion
a year to 8.4 million people, 97% of whom are
women.
Although Grameen Bank is most famous for
nurturing very small businesses, Yunus explained
that it had also educated hundreds of thousands of
young people through its education loans.
Successful initiatives in Glasgow, New York, and
San Francisco had shown that the Grameen model
had something to offer excluded communities in
developed countries as well.
As for why loans were repaid, despite the
banks dismissal of collateral, he explained that
Closeness is the trick. They know us, and we
know them.
Yunus challenged his listeners not to be
mesmerized by the system. Far too much attention
was paid to short-term fixes that led at best to 23
year breathing periods. Instead, he urged the
audience to create systems that were new and
fresh.
Panel discussion:
Dean Kawai started the panel discussion by
posing a number of provocative questions to the
panelists. Is capitalism fundamentally bad? How
can an economic system reconcile public and
2
B a n k I n s t i t u t e
private interests? What is wrong with the market
system?
George Hara, group chairman and CEO,
DEFTA Partners, and Chairman of the Board,
Alliance Forum Foundation, was critical of the
capitalist system, which emphasized the
maximization of shareholder value in the shortest
period of time. In the United States, he felt that
this had led to a migration from investment to
speculation, which was the main cause of the
current crisis. Instead, he urged a broader view,
taking in the rights of all stakeholdersworkers,
suppliers, customers, and the broader community.
In his view, a new structure was needed, one that
embraced all these players.
Yasuchika Hasegawa, president and CEO of
Takeda Pharmaceutical, sought answers to
capitalisms current problems in the past. He
argued that there was a strong tradition of ethical
entrepreneurship in Japan, in part because of the
countrys tradition as a closed economy and the
consequent need for traders and their customers to
trust each other. Like Yunus, he argued that
proximity and a notion of a shared interest were
key to establishing ethical business practices.
Masaharu Okada, professor and executive
director of Yunus & Shiiki Social Business
Research Center, Kyushu University, regarded the
ownership of corporations as a critical element.
Grameen Bank, for example, was 97% owned by
its borrowers, with the other 3% owned by the
Government of Bangladesh. In his view, such an
ownership model was an essential part of
establishing social businesses.
Yunus explained that, although the world was
facing a bundle of crisesfinancial,
environmental, food securitywhen the crisis was
deepest the opportunities were greatest. The
opportunities offered by technology meant that the
distance between the possible and the impossible
was shrinking. He urged young people in the
audience to think the impossibleonly then
could the world truly progress.
Dean Kawai said that one of the main
conclusions from the symposium was that new
capitalism in the form of social business had the
power to solve social problems and improve social
conditions. That was an important message to take
on the path toward a new capitalism.
For more information on this symposium please visit:
www.adbi.org/event/5134.yunus.jimi.distinguished.speaker/.
Video: www.youtube.com/ADBInstitute
 A s i a n D e v e l o p m e n t
Attaining Millennium Development Goals
Two-thirds of developing countries are on target,
or close to being on target, to achieve the
Millennium Development Goals (MDGs) of
inclusive and sustainable growth. Among
developing countries that are falling short, half are
close to being on track. With improved policies
and faster growth, these countries could achieve
their targets in 2015, or shortly after. Yet even
those middle-income countries on track to achieve
MDGs are home to socially excluded groups that
are very poor and increasingly vulnerable to
worsening environmental problems and the
impacts of climate change on their lives.
To apprise policymakers on progress, the
Sub-Regional Workshop on MDGs and post 2015
Sustainable Development Agenda for Central
and East Asia, was held in Almaty, Kazakhstan,
2628 September. Joined by representatives from
Central and East Asian governments, development
agencies, and community supported organizations,
the workshop participants shared their experiences
on the implementation of MDGs. Discussions also
offered perspectives on the post-2015 development
ADBI in the News
Dean Kawai was cited in the Eurasia Review
article, Japans Dilemma on the Trans-Pacific
PartnershipAnalysis.
Director of Research Ganeshan Wignaraja was
cited in the Latin American media outlets
Aguasdigital.com, El Norte De Castilla.es,
Ideal.es, Pysnnoticias, Que!, for his views on
Latin American trade ties with Asia during the
conference, ASIA y LATINOAMERICA en la
Busqueda de: Una Asociation para el
Desarrollo Conference, held in Montevideo,
Uruguay, 31 July.
CBT Director Yuqing Xing was cited in the
Bloomberg News article, Nissan Cars Head
Home as Yen Erodes Century of Made-in-Japan
(which was republished by the Detroit Free Press
and The Japan Times); the Xinhua News article,
Japan allowed to buy 10.3 bln USD worth of
Chinese government bond; and the South China
Morning Post article, Yuan internationalisation
runs into some problems.
B a n k I n s t i t u t e
WORKSHOP
agenda. Governments are urged to adapt policies,
procedures and tools to tailor support for unique
country circumstances and needs, such as people hit
hard by financial turmoil, food and fuel crises, and
natural disasters. In doing so, it was decided to
explore buffers that allow the convergence of
MDGs and sustainable development goals (SDGs).
This is the first of four sub-regional consultations
organized by ADBI in cooperation with
UNESCAPUNDP and the AsiaPacific CoP on
MfDR.
Bindu Lohani, Vice President of ADB, (right) is joined by Serik
Akhmetov, Vice Minister of Labor and Social Protection,
Kazakhstan, (second from right) in a discussion on Millennium
Development Goal achievements in Central and East Asia.
For more information on this workshop please visit:
www.adbi.org/event/5219.mdg.post.2015.dev.framework.
central.east.asia/.
The ADBI working paper, How the iPhone
Widens the United States Trade Deficit with the
Peoples Republic of China, by Yuqing Xing and
Neal Detert, was cited in the Calgary Sun
article, Langrish: On threshold of historic deal.
And it was mentioned in the Financial Post
article, Canada-EU trade holds great potential.
ADBIs book, Shaping the Future of the Asia
and the Pacific-Latin America and the
Caribbean Relationship, was reviewed by
Foreign Affairs magazine and featured on
Dangdai.com, an Argentine media website.
ADBI was cited in the Inter Press Service
article, Free Trade with China? No, Gracias.
The Muhammad Yunus symposium, Toward A
New Capitalism, was reported on by The Japan
Times in the article, Nobel laureate Yunus wants
tech prowess applied to social businesses, and
by Kyodo News in the article, Nobel laureate
Yunus urges business to fight poverty.
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 A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Non-Tariff Measures a DISTINGUISHED SPEAKER

Challenge to Trade

Patrick Low, chief economist at the World Trade the way in which its applied which is often at the
Organization, delivered a lecture on Old Issues and source of the tension and difficulty over its trade
New Frontiers: Managing Non-Tariff Measures as effects, said Low.
part of ADBIs Distinguished Speaker Seminar To address this issue, governments need to
series on 30 August. supply better information in order to create a more
Low presented his findings on non-tariff complete picture of NTMs and their impact on
measures (NTMs) in international trade, which was trade.
also the subject of the World Trade Report 2012.
NTMs pose several challenges. The first is that not
enough is known about NTMs and their impact on
trade. The second is that NTMs may serve public
policy interests. So the question is, are they going to
serve public policy interests in a manner that
frustrates trade unnecessarily, or are they going to
be designed in a way that has a minimum impact on
trade?
The third challenge is that NTMs are typically
Greater institutional integration is needed to address
measures that must be applied administratively in a non-tariff measures, said Patrick Low, the World Trade
certain way in a repeated fashion. And so one thing Organizations chief economist.
is the substance of the measure and we can have
For more information on this seminar please visit:
disagreements about whether its appropriate or not, www.adbi.org/event/5197.low.distinguished.speaker/.
and the other is the way in which its applied, and its Video: www.youtube.com/ADBInstitute

Rise of Asia and the New World Order DISTINGUISHED SPEAKER

Dale Jorgenson, a professor at Harvard University, countries such as the PRC and India, which will
gave a presentation on The Rise of Asia and the have a larger share of the global economy. The new
New World Order as part of ADBIs Distinguished world order will look very different in 2020, with
Speaker Seminar on Asia having three of the four largest economies in
25 September. the world.
The global economy The PRC overtook Japan as the worlds
is undergoing a second-largest economy in 2010. In terms of
fundamental change. purchasing price parity (PPP), the PRC will
Despite concerns over overtake the United States (US) in 2017, according
slowing growth in the to the International Monetary Fund. And India will
Peoples Republic of overtake Japan in PPP in 2012.
China (PRC), India, The G8 and G20 countries will grow in
and Japan, and the 20102020, while the BRICS countries (Brazil,
possible dissolution Russia, India, PRC) will grow even faster. Growth
of the eurozone, global will slow for Hong Kong, China; Indonesia;
economic growth is Republic of Korea; Malaysia; Singapore; and
accelerating. In addition Taipei,Chinanonetheless Asian and global
The new world economic to the acceleration there economic expansion as a whole will accelerate,
order in 2020 will be will be a new world driven by the PRC and India.
associated with more rapidly economic order, and it
growing countries such as the
PRC and India, said Dale
will be associated with For more information on this seminar please visit:
Jorgenson. more rapidly growing www.adbi.org/event/5225.jorgenson.distinguished.speaker/.

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 A s i a n D e v e l o p m e n t
Global Trade at a Crossroads
ADBI has launched a major project to comprehensively
examine the key changes occurring in the world trading
system and the policy implications for Asia. The project
will pursue several interrelated objectives, including (i)
patterns and drivers of production networks; (ii)
reforms of WTO rules and processes; (iii) patterns of
free trade agreements (FTAs), consolidation of FTAs
ADBI Deputy Dean Jae-Ha Park (far left), Director of
Research Ganeshan Wignaraja (second from left), Satoshi
Inomata of JETRO IDE (second from right), and Biswajit
Dhar (right) of Research and Information System for
Developing Countries, discuss the outlook for the global
trading system at ADBI on 31 August.
Why Are International Supply
Chains Vital to Economic Growth?
Supply chains are crucial to trade, argued Douglas
Brooks, ADB assistant chief economist, at his
seminar, Importance of International Supply
Chains to the Performance of APEC Developing
Economies, held at ADBI on 2 July. Efficient supply
chains shorten transit time, lower transportation and
inventory costs, and facilitate planning activities.
These in turn go a long way toward mitigating the
risks faced by economic agents engaged in trade.
Global supply chains support and drive global
economic activities, which spur technological innovation
and operations, thus satisfying demands while
generating further supplies and income. Supply chains
have become so central to global trade that some are
beginning to view competition as increasingly occurring
between supply chains rather than between firms.
Supply chains are only as strong as their weakest
link, so the system needs to be more resilient and
flexible across the chain. But improving supply
chain efficiency requires a broad reform approach
encompassing both hard and soft infrastructure,
which international agencies such as the Asian
B a n k I n s t i t u t e
WORKSHOP
into larger region-wide agreements and ways of making
FTAs consistent with multilateral trade-rules; and (iv)
the economic effects of new forms of commercial and
industrial policies. The inception workshop for the
project, Future of the World Trading System: Asian
Perspectives, held at ADBI on 31 August, organized
the core study team members comprised of noted
international trade researchers from Asia and other
regions, and conducted brainstorming sessions in
which the researchers preliminary ideas and the
outline of their papers were presented and discussed.
A conference will be held in Geneva,
Switzerland, in 2013, where all the draft research
papers will be presented. Participants will include the
core study team of expertsacademics, researchers
and other resource personsas well as government
officials from Asia and other regions, and staff of
multilateral agencies. The final drafts of about a
dozen research papers will be published as an edited
volume by an international commercial publisher.
For more information on this workshop please visit:
www.adbi.org/event/5210.future.world.trading.system/.
SEMINAR
Development Bank play a
role in achieving. As well
as providing hard
infrastructure for supply
chains, governments must
also provide a regulatory
environment that is
conducive to the
participation of the private
sector, which can join in
through publicprivate APEC economies can
partnerships. A system of expand trade by improving
providing accurate and their supply chains, said
Douglas Brooks.
timely information is also
necessary for efficient supply chains. This allows
logistics service providers to integrate information
to better manage supply chains, and to cut
transaction costs by facilitating communication
between manufacturers and distributors.
For more information on this seminar please visit:
www.adbi.org/event/5080.brooks.intl.supply.chains.apec.
dev.economies/.
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 A s i a n D e v e l o p m e n t
Exploring Transport Facilitation
Arrangements in Central and West Asia
The Central Asia Regional Economic Cooperation
(CAREC) program is developing six international
transport and trade corridors linking the
programs 10 participating countries (Afghanistan,
Azerbaijan, Peoples Republic of China,
Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan,
Tajikistan, Turkmenistan, and Uzbekistan) with
each other and linking the region to other Eurasian
markets. The program plans to complete
construction or improvement of about 8,400 km of
roads and 5,300 km of railway lines by 2017.
Improvements in soft infrastructure such as
transport facilitation agreements are required to
ensure this large body of investment delivers the
highest returns to the region. Transport facilitation
is particularly important for the CAREC region,
which includes eight landlocked countries and lies
at a crossroads linking large and growing markets
in East Asia, South Asia, Europe, and the Russian
Federation. While there are a number of
multilateral and bilateral transport facilitation
agreements in place in the CAREC region,
cross-border movement of goods and people
remains constrained.
Senior transport and customs officials
responsible for transport facilitation in CAREC
Samad Garalov, Head of Control of Trade Cargo Department of the State Customs Committee of Azerbaijan (left), introduces
his countrys approach to transport facilitation arrangements in Central Asia at an ADB-ADBI-CAREC conference in Beijing,
23 July. CBT staff David Kruger (third from right) joins the meeting.
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B a n k I n s t i t u t e
WORKSHOP
countries joined a knowledge sharing event, Ways
Forward for Corridor-Based Transport
Facilitation Arrangements in the CAREC
Region, in Beijing, 23 July, to take stock of and
learn from existing transport facilitation
arrangements in the region; learn from international
good practices on region- and subregion-wide
transport facilitation arrangements; and generate
feasible and practical recommendations on moving
forward on corridor-based transport facilitation in
the CAREC region.
The meeting outcomes contributed to progress
with the broader CAREC Transport and Trade
Facilitation Strategy and helped shape a new $1.5
million technical assistance program supported by
ADB. Several CAREC countries are exploring the
possibility of piloting the recommended approach
to transport facilitation arrangements. The
workshop was organized by ADBs Central and
West Asia Department, ADBI, and the CAREC
Secretariat.
For more information on this workshop please visit:
www.adbi.org/event/5026.transport.facilitation.agreements.
carec/.
Workshop materials and reports are available on the CAREC
program website:
www.carecprogram.org.
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 A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Selected Events

ADBI Annual Conference on Growth and Regional Integration in Asia and the Pacific in 2013 and
30 Beyond (Tokyo)
November This conference will discuss recent developments in Asian growth and regional integration, and explore
prospects and assess policy choices for sustainable growth.

Book launch of the Chinese edition of Asias Free Trade Agreements: How is Business Responding?
6 (Beijing)
December This event is being organized in cooperation with Chinese Academy of Social Sciences.

11 Seminar by El-hadj Bah: Constraints of Small Firms Growth in Myanmar (Tokyo)

December This seminar will examine the constraints that small firms are facing while doing business in Burma.

Recent Working Papers

Central Banking for Financial Stability in Asia
Authors: Masahiro Kawai, Peter J. Morgan
A key lesson of the 20072009 global financial crisis was the
importance of containing systemic financial risk and the need for a
macroprudential approach to surveillance and regulation that can
identify system-wide risks and take appropriate actions to maintain
financial stability. This paper reviews the recent literature on this
topic and identifies relevant lessons for central banks.
Read Working Paper 377 at www.adbi.org/working-paper/
2012/08/28/5221.central.banking.financial.stability.asia/.
Europes Debt Crisis, Coordination Failure, and
International Effects
Author: Stefan Collignon
This paper gives an overview of the causes of the European debt
crisis and the consequences for the external relations. It finds that
political mishandling has increased uncertainty, which has
contributed to a tendency for the euro to become weaker.
Read Working Paper 370 at www.adbi.org/working-paper/
2012/07/11/5141.europe.debt.crisis.effects/.

Japans Post-Triple-Disaster Growth Strategy
Authors: Masahiro Kawai, Peter J. Morgan
The repercussions of the Great East Japan Earthquake on 11
March 2011 spread far beyond the geographical areas directly
affected. The disaster also highlighted Japans many other
structural challenges, including low growth, population aging and
low fertility, government debt, declining international
competitiveness, and uncertain energy supplies. This paper
discusses the scope of these challenges and sets out a strategy for
overcoming them and putting the Japanese economy on a stable
growth path.
Read Working Paper 376 at www.adbi.org/working-paper/
2012/08/22/5218.japan.post.triple.disaster.growth.strategy/.
Green Growth and Equity in the Context of Climate
Change: Some Considerations
Authors: Jeffrey D. Sachs, Shiv Someshwar
The authors explore ways that equity has been considered in
climate change discussions. They discuss per capita emission right
approaches, and highlight key challenges in the application of
equity in global climate change negotiations. They provide a brief
overview of key approaches to carbon financing, focusing on
recent cost estimations of potential climate change impacts, as
well as of projected needs for green growth programs.
Read Working Paper 371 at www.adbi.org/working-paper/
2012/07/13/5149.green.growth.climate.change/.

Institutions for Asian Integration: Innovation and
Reform
Authors: Giovanni Capannelli, See Seng Tan
The formation of regional production networks in East Asia has
occurred mainly through market forces, without much help from
regional institutions in promoting the creation of a single Asian
market. While this approach has served the region well, the drastic
changes experienced since the 20082009 global financial crisis
and the challenges Asian countries are facing, have rendered more
urgent the need for intergovernmental cooperation at global and
regional levels.
Read Working Paper 375 at www.adbi.org/working-paper/
2012/08/20/5217.asian.integration.innovation.reform/.
Do Exporting Firms in the Peoples Republic of China
Innovate?
Author: Ganeshan Wignaraja
This paper assesses factors driving firm-level export performance
in Asias super exporterThe Peoples Republic of China (PRC).
While early studies suggested that innovation was important, there
has been little research on opening up the black box of technology
at firm-level in the PRC, the author undertakes econometric
analysis of innovation, learning, and exporting in automobiles and
electronics firms in the PRC using a large-scale dataset to identify
the most appropriate innovation proxy.
Read Working Paper 365 at www.adbi.org/working-paper/
2012/07/03/5135.exporting.firm.prc.innovate/.

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 A s i a n D e v e l o p m e n t
Outlook for Agriculture Commodity
Exchange in Asia
The recent volatility in global commodity markets
highlights the vital role of commodity exchanges
for developing countries. A well-functioning
commodity exchange can facilitate the process of
price discovery and improve the functioning of
markets for food and agriculture commodities.
Volatility in international markets and
underdeveloped domestic commodity markets pose
risks for market participants. So enhancing
capacity for institutions that serve commodity
markets will increase the welfare of market
participants. This is crucial to commodity
exporting countries that have interest in sustaining
export revenues from commodities.
Senior officials from East Asian economies,
such as the Peoples Republic of China, Indonesia,
Japan, Thailand, and Viet Nam, attended the
ADBIWorld Bank Roundtable on Regional
Commodity Exchange Market Integration in
Asia, in Tokyo, 1213 September. Attendees from
Japanese and Indonesian companies also joined the
roundtable.
The objective of the roundtable was to deepen
the understanding of views on how to strengthen
market institutions for commodity exchange
markets. At the roundtable, participants discussed
issues related to the agriculture commodity
exchange, particularly in rice and rubber.
The event, jointly organized by ADBI and the
World Bank Jakarta Office, focused on four key
questions: (i) price discovery of the agriculture
commodity exchange, (ii) relationship between the
use of derivatives at the commodity exchange and
price volatility for agriculture commodities in
ADBI News
Publisher: Yasuro Narita
ADBI News reports quarterly on the activities of the Asian
Development Bank Institute. The views expressed in this
newsletter do not necessarily reflect the views or policies
of the Asian Development Bank Institute or the Asian
Development Bank. Materials may be reprinted with credit
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go to www.adbi.org/newsletter/.
B a n k I n s t i t u t e
ROUNDTABLE
CBT Consultant Cholifihani Muhammad (left) joins a
roundtable discussion at ADBI on commodity exchange
markets in Asia.
Asia, (iii) establishment of the regional price index
for selected agriculture commodities, and (iv) the
future of the agriculture commodity exchange in
Asia.
With the emerging economies of Asia
becoming major consumers of commodities,
greater cooperation and integration in commodity
markets through commodity exchange may lead to
a pan-Asian commodity exchange, which could
become new centers of commodity price
discovery. To support a regional exchange,
countries will have to harmonize trade and
exchange rate policies, set up mutually agreed
rules for grades, standards and contract
enforcement, and promote regional
macroeconomic stability.
For more information on this roundtable please visit:
www.adbi.org/event/5198.adbi.wb.roundtable.regional.
commodity.exchange/.
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