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 4

Outlook for Growth and CONFERENCE

Regional Cooperation in Asia

Dean Kawai (center) joins a panel of experts to assess policy choices for sustainable growth in the Asia and Pacific region.

The aftermath of the 2008 global financial crisis and Bruce Miller, Australia Ambassador to Japan.
continues to present challenges for achieving Discussions focused on the regional impact of the
sustainable and inclusive growth in Asia. Growth growth slowdown in the Peoples Republic of
in the major export markets in Europe and the China (PRC) and India, the eurozone crisis, and
United States (US) is likely to remain subdued for shifts in regional trade and financial integration.
several years, prompting the need for more robust
trade integration within Asia to take advantage of In this issue
the growing regional market. Greater financial
integration in the region is needed to facilitate the ADBI Annual Conference 12
deployment of regional savings to support
Connectivity between
investment, including infrastructure, while
ensuring that such integration has safeguards to South and Southeast Asia 2
control destabilizing volatile capital flows. As the ADBI Reaches Two Key Milestones 2
European Union is considered the most advanced 2012 DAJA Competition 3
example of regional economic and financial Eurozone Crisis 4
integration, the eurozone crisis presents lessons for
Breaking the Diabolical Loop 4
further integration in Asia.
To take stock of these developments in growth Recent Books 5
and regional integration, as well as to explore Top downloads in 2012 5
prospects and assess policy choices for sustainable Growth Constraints on
growth, the ADBI Annual Conference on Small Companies in Myanmar 6
Growth and Regional Cooperation and
Promote Financial Inclusion 6
Integration in Asia and the Pacific 2012 and
Beyond was held in Tokyo on 30 November 2012. ADBI in the News 6
The event attracted more than 100 participants, Selected Events 7
including: Haruhiko Kuroda, President, ADB; Recent Working Papers 7
Masahiro Kawai, Dean, ADBI; Zhang Yunling,
Effective Policies and Experiences 8
Professor, Director of International Studies, CASS;

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 A s i a n D e v e l o p m e n t
Papers presented will be published as ADBI
working papers and in a book.
The conference covered several key issues.
First, the slowdown in the PRC and India is being
driven by endogenous factors. Because of their
increasing importance as sources of export
demand, an output drop in the PRC or India will
lower output in the G-3 economies (Japan, EU,
US) and other Asian economies. However,
extra-regional shocks are more important in
explaining output fluctuations in ASEAN. Second,
trade and financial integration will continue to be
an important agenda for Asian economies. Asia has
a multi-track trade liberalization approach with a
focus on FTA-led liberalization to support
deepening production networks, but challenges
remain. A region-wide Asian FTA can reduce the
Connectivity between South and
Southeast Asia
Over the past decade, Southeast Asia and South
Asia were two of the fastest growing regions in the
world with annual average growth rates of 5.5%
and 7.6% respectively. In 2011, the two regions
accounted for 6% of total world output.
Nevertheless, economic integration between the
two regions is low.
To address this issue, an inception workshop
for the ADB/ADBI flagship study, Connectivity
between South and Southeast Asia, was held in
Manila on 17 December 2012.
The objective of this project is to facilitate
more effective economic integration and
cooperation between developing member countries
ADBI Reaches Two Key Milestones
ADBI passed two milestones in December 2012
with the publication of post number 50 on Asia
Pathways and working paper number 400.
Urbanization can be good for the environment, by
Guanghua Wan, was the 50th post to be published
on Asia Pathways, the blog launched by ADBI at
the beginning of 2012. Asia Pathways has grown
in influence and its authors have included
Ambassador Tommy Koh, former President of the
United Nations Conference on the Law of the Sea
and chair of the Earth Summit; Nobel laureate
2
B a n k I n s t i t u t e
risk of the noodle bowl, or overlapping regional
trade agreements, and facilitate a WTO Doha deal.
Third, optimism is growing that the eurozone crisis
will be managed and that the US will avert the
so-called fiscal cliff. Fourth, Asia would need to
be prepared in the event of a worst-case scenario.
Macroeconomic policy space may be available for
some Asian countries, but not all. Therefore,
macroprudential policies, including regional
liquidity support systems like the Chiang Mai
Initiative, are vital and need to be strengthened.
Asian economies have to deepen trade and
investment integration, strengthen the financial
system, and integrate the financial markets.
For more information on this event please visit:
www.adbi.org/event/5307.regional.integration.asia.
pacific.2013/.
WORKSHOP
in Southeast and South Asia. The expected
outcome of the project is that public and private
stakeholders will have a greater understanding and
appreciation of policy steps required for effective
economic integration and cooperation between the
two regions. This project would also help
developing member countries and ADB devise
strategies for effective regional economic
integration and cooperation, and support ADBs
role as a catalyst of regional cooperation and
integration. It is critical that the identified projects
and strategies be driven by realistic estimates of
prospective demand, rather than being
supply-driven.
Mohammad Yunus, founder of Grameen Bank;
and Tarisa Watanagase, former Governor of the
Bank of Thailand. The South China Morning Post,
The Japan Times, and China Daily are among the
newspapers to have republished Asia Pathways
posts. December also saw the publication of the
400th paper in the well-regarded ADBI working
paper series, The Persistence of Current Account
Balances and its Determinants: The Implications
for Global Rebalancing, by Erica Clower and Hiro
Ito.
 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

Bangladesh Journalist Wins 2012 AWARDS

Developing Asia Journalism Awards

Twenty-five journalists from the Asian and Pacific region participated in the DAJA Forum held at ADBI on 27 November. The annual
awards honor the work of journalists engaged in dissemination of knowledge on poverty reduction and growth in the region.

Syed Zain Al-Mahmood, a journalist with the The shrimp industry is the second-biggest
Dhaka Courier in Bangladesh, was named winner export earner in Bangladesh behind garments,
of the 2012 Developing Asia Journalism Awards with shrimp farms covering around 243,000
(DAJA) for his article Pink Gold Rush, which hectares of farmland, according to the article. But
explores the impact of large-scale shrimp farming the industry has taken a heavy toll on the
on the environment and livelihoods in local environment as salinity and pollution have
communities of the Sundarbans area. The award damaged the soil fertility of more than 405,000
was present to Al-Mahmood at ADBI in Tokyo on hectares of coastal agricultural land.
27 November as part of the 2012 DAJA Forum. Pramod Kumar Tandan, a journalist based in
The DAJA competition is a unique Nepal, won the award for Young Development
opportunity to highlight the significant Journalist of the Year (under age 30) for his article,
contribution of journalism and individual Himalayas Can Change into Blackstone Very
journalists to the development process in Asia, Soon.
said Dean Kawai. Zains article is an excellent Twenty-five journalists from across Asia and
example of this contribution. It sheds light on the the Pacific were selected as finalists by an
challenge of balancing the growth of an important international panel of judges and participated in
job-creating industry and the need to protect the the DAJA Forum.
environment. The Developing Asia Journalism Awards
were established by ADBI in
2004 to build capacity
among journalists working
on key development issues.
The annual awards honor the
work and contributions of
journalists actively engaged in
the responsible dissemination
of knowledge related to
poverty reduction, and other
areas that support long-term
growth in the Asia and Pacific
region.
For more information on this event
please visit:
DAJA participants visited Japans Tohoku Region to survey recovery efforts following the www.adbi.org/event/5091.daja.
11 March 2011 earthquake and tsunami. awards.2012/.

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 A s i a n D e v e l o p m e n t
Eurozone Crisis: a Test for
International Financial Cooperation
ADBI and the Reinventing Bretton Woods
Committee organized a joint seminar on
Adjusting the World to the New Realities of the
International Financial System at ADBI on 12
October in conjunction with the IMFWorld Bank
Annual Meetings. The background is that the
eurozone sovereign debt and banking sector crisis
poses a major threat to global economic growth
and financial stability, while at the same time the
process of economic and financial integration in
the European Union (EU) provides an important
benchmark for similar processes in Asia, although
the latter are still at a much earlier stage.
Therefore, it is important to understand the
lessons, both positive and negative, from the EU
integration process and the eurozone crisis.
ADB President Haruhiko Kuroda delivered
welcoming remarks. The first panel focused on the
eurozone crisis as a test for regional and
international financial cooperation. The second
panel, chaired by President Kuroda, addressed
Breaking the Diabolical Loop
ADBI organized a seminar titled, The Eurozone
Crisis and Its Implications for Asian
Economies, on 12 October in conjunction with the
International Monetary FundWorld Bank Annual
Meetings. The objective of the seminar was to
provide further insight on the factors underlying
the eurozone crisis, policy suggestions for ending
the crisis, and the implications of the crisis for
economic and financial stability in Asia. Erik
Berglof, chief economist, European Bank for
Reconstruction and Development, analyzed
solutions to the eurozone crisis, arguing that it was
necessary to separate legacy problems and steady
state solutions. Some burden sharing would be
Dean Kawai (center) said structural reforms and regional
cooperation are needed to boost economic and financial
resilience in Asia.
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B a n k I n s t i t u t e
SEMINAR
issues implied by creating the four unions in
Europe and their international implications.
Speakers from Northern Europe, including Klaus
Regling, CEO of the European Financial Stability
Fund, and Peter Praet, member of the European
Central Banks policy board, took a positive view
of the prospects for resolving the eurozone crisis.
ADB President Haruhiko Kuroda (left) joins a panel of
distinguished economists to discuss how economic and
financial integration in the European Union provides a
benchmark for similar processes in Asia at the seminar,
Adjusting the World to the New Realities of the International
Financial System, held at ADBI on 12 October.
For more information about this event please visit:
www.adbi.org/event/5228.eurozone.crisis.testing.regional.
intl.cooperation/.
SEMINAR
needed for legacy debt from the crisis, while a
banking union was an important step to break the
diabolical loop and regain democratic
legitimacy.
Masahiko Takeda, deputy director of the Asia
and Pacific Department of the IMF, took a
relatively optimistic view about the implications of
the eurozone crisis for global and Asian economic
and financial stability. He argued that, although
short-term prospects have deteriorated, so far
spillovers in Asia from the eurozone crisis have
been limited, and there remains ample policy
space to react to a larger external shock.
Nonetheless, structural reforms are needed over
the medium-term to increase resilience and
prevent slowdowns. During the panel discussion,
Masahiro Kawai, Dean of ADBI, also emphasized
the need for structural reforms and regional
cooperation to increase economic and financial
resilience in Asia.
For more information on this event please visit:
www.adbi.org/event/5247.eurozone.crisis.implications.asian.
economies/.
 A s i a n D e v e l o p m e n t
Recent Books
The Global Financial Crisis and Asia: Implications and Challenges
A new book, edited by Dean Masahiro Kawai,
Mario Lamberte, Yung Chul Park, aims to identify
and analyze the impact of the 20072009 global
financial crisis on Asian economies and to assess
the short-term and longer-term policy responses to
the crisis in terms of their effectiveness and
sustainability. This book is the first to be
copublished with Oxford University Press. The
volume highlights that Asian economies have
recovered strongly from the crisis, reflecting their
aggressive moves to ease monetary and fiscal
policy. However, the biggest challenge lies ahead. It
asserts that, given that it is unlikely that the US and
Europe will be engines of global growth, Asian
economies should contribute to global economic
adjustment by creating their own growth engines.
This book features a unique collection written
by international experts from developed economies
in the West and emerging economies in Asia. It
offers comprehensive coverage of macroeconomic
Infrastructure for Asian Connectivity
This book, edited by Biswa Nath Bhattacharyay,
Dean Masahiro Kawai, and Rajat M. Nag,
addresses the prospects and challenges concerning
soft and hard infrastructure development in Asia
and provides a framework for achieving Asian
connectivity through regional infrastructure
cooperation towards a seamless Asia.
This book builds upon the findings and
recommendations of Infrastructure for a Seamless
Asia, the most downloaded
book on the ADBI website. It
looks at regional infrastructure
in Asia until 2020, provides
examples of national and
regional and global best
practices, and also presents
policy recommendations.
The study offers several
measures, including creating
Top downloads in 2012
Infrastructure for a Seamless Asia was the most
downloaded publication from the ADBI website
in 2012, a position it has held since its publication
in 2009. A total of 72,000 copies were
B a n k I n s t i t u t e
policy, real sector issues, infrastructure, labor
market and social policy, financial sector reform
and regulation, and regional cooperation and
financial architecture. And it gives detailed
information of how countries were affected by the
global financial crisis and their policy responses.
The Global Financial Crisis and Asia draws
lessons on how best to avoid or mitigate future
crises and to identify structural
policy recommendations that
can help guide Asian
policymakers to expand the
growth potential of domestic
and regional demand in
coming years, and thereby
create a basis for sustainable
and inclusive long-term
growth.
To order a copy please visit:
http://ukcatalogue.oup.com/product/9780199660957.do.
effective new projects and regional and national
institutions, strengthening financing, and
improving coordination in infrastructure in Asia.
To address the great infrastructure financing gap,
the study advocates the promotion of
public-private partnerships in regional
infrastructure development in Asia.
This insightful book will serve as a definitive
knowledge product for policymakers, academics,
private sector experts and infrastructure
practitioners interested in the regional and national
infrastructure demand, investment and benefits in
the region. Concerned officials from private and
public sectors, and other experts involved in
environmental and natural resources studies will
also find this compendium invaluable.
This book was copublished with Edward Elgar. To order a copy
please visit:
www.e-elgar.com/bookentry_main.lasso?id=14819.
downloaded during the year.
Asias Wicked Environmental Problems, by
Stephen Howes and Paul Wyrwoll, was, at 19,000,
the most downloaded working paper of 2012.
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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

Growth Barriers on SEMINAR

Small Companies in Myanmar

Myanmar has been experiencing a great political
and economic transformation. The business climate
is improving, but while
entrepreneurship in
Myanmar is high, most
companies are small and
make very little profit.
What are the
constraints that keep
companies from growing
in the Southeast Asian
A lack of credit in country? This question was
Myanmar is the biggest
constraint for companies
addressed at the seminar,
to expand in the country, Growth Constraints on
said Dr. El-hadj Bah. Small Companies in
Myanmar, held at ADBI on 11 December 2012, by
Dr. El-hadj Bah, a lecturer of economics at the
University of Auckland, New Zealand.
Bah conducted a survey of small firms in
Northwest Myanmar to shed light on the economys
stagnant growth and constraints to business growth.
He found that a lack of credit is the biggest
constraint for companies to expand in the country.
Myanmar needs credible financial services,
including facilities and service programs, but the
design and administration of such programs must
avoid a one-size-fits all development agenda.
For more information on this event please visit:
www.adbi.org/event/5334.growth.constraints.companies.
myanmar/.

Developing APEC and CONFERENCE

Other Regional Economies

The conference, Regulatory Environments to The conference consisted of formal presentations,

Promote Financial Inclusion in Developing
APEC and Other Regional Economies, was held
in Melbourne, Australia, 1719 October, to discuss
effective financial inclusion regulations for the
developing countries of the Asia-Pacific region.
This event served as a knowledge sharing
platform for regional policymakers to develop and
adopt relevant policies in their countries. The
conference brought together government officials
from APEC economies and non-APEC developing
member countries, and experts on financial
inclusion. The event was sponsored by ADBI,
Australian APEC Study Center at RMIT
University, AusAid, and Association of
Development Financing Institutions in Asia and
the Pacific.
structured discussions, and country case studies
presented by experts from policy and regulatory
agencies from the region, international organizations,
banks, and non-bank financial institutions. Topics
discussed included stronger and sustainable linkages
between policymakers, regulators, and financial
institution, enhanced capacities of regional
supervisors and regulators, and concrete policy
recommendations for financial inclusion. In addition,
the forum highlighted the best regulatory standards
and practices, especially those that support
technology and IT systems in delivering financial
services to the regions developing economies.
For more information on this event please visit:
www.adbi.org/event/5249.financial.inclusion.dev.apec.
economies/.

ADBI in the News

Dean Kawai was cited in the Thai News Service article,
Establishment of Asian free trade zone positive on
trade. The Business Times cited the Dean in the article,
BOJs yen for cheap loans. And The Phnom Penh Post
interviewed the Dean in the article, ADB Institute: too
much focus on 2015.
The ADBI book, Capital Market Reform in Asia, was
reviewed by The Hindu website.
Deputy Dean Jae-ha Park was cited in the Thai News
Service articles: Yuan alternative backed; Yuan
unlikely to rule in short term; ASEM Finance Ministers
to consider regional currencies; and Asia-Europe
Editors Roundtable begins.
Senior Consultant for Research
Peter Morgan appeared on
NHK World to discuss the
outlook for the global economy.

6
 A s i a n D e v e l o p m e n t
Selected Upcoming Events
ADBI-FSA Conference (Tokyo)
The objective of the conference is to engage high-level academics, think tank scholars, policymakers and
8 March practitioners in thinking about the effective design of regulatory and policy frameworks that will promote financial
system development and stability.
Recent Working Papers
Regional Financial Arrangements and the
International Monetary Fund
Author: Barry Eichengreen
The rise of regional monetary arrangements poses a challenge for
the International Monetary Funds (IMF) global surveillance
efforts. This paper reviews how the IMF has responded to earlier
regional initiatives, from the European Payments Union of the
1950s and the Gold Pool of the 1960s to the CFA franc zone and
the European Monetary System. The penultimate section draws
out the implications for monetary regionalism in East Asia.
Read Working Paper 394 at www.adbi.org/working-paper/2012/
11/06/5328.regional.financial.arrangements.imf/.
The World Bank and the Asian Development Bank:
Should Asia Have Both?
Author: Vikram Nehru
This paper examines the complementary and competitive roles of
the World Bank and the Asian Development Bank in Asia given the
backdrop of a changing world in which development priorities and
challenges are changing rapidly and the rapid expansion of financial
flows to developing countries is challenging the influence of these
organizations. The paper highlights changes to the international aid
architecture, its increasing fragmentation, the rise of non-traditional
donors, and recent efforts at improving aid coordination.
Read Working Paper 385 at www.adbi.org/working-paper/2012/
10/02/5243.world.bank.adb.should.asia.have.both/.
The Peoples Republic of China and Global
Imbalances from a View of Sectorial Reforms
Authors: Hiro Ito and Ulrich Volz
This paper examines the impact of sectorial reforms on current
account imbalances, with a special focus on the Peoples Republic
of China (PRC). In particular, we investigate to what extent
reforms pertaining to the financial sector, social protection, and
healthcare may contribute to a rebalancing of the PRCs persistent
current account imbalances.
Read Working Paper 393 at www.adbi.org/working-paper/2012/
11/02/5308.prc.global.imbalances.sectorial.reforms/.
The Emerging Post-Doha Agenda and the New
Regionalism in the Asia-Pacific
Author: Michael Plummer
This paper considers emerging commercial policy challenges
facing the Asia-Pacific region in light of the impasse reached at
the Eighth World Trade Organization (WTO) Ministerial Meeting
in December 2011. It underscores that, while marginal
liberalization of trade barriers under the Doha Development
Agenda may not be forthcoming in the short- or even
medium-term, the WTO has been successful in erecting a
rules-based system of global governance and continues to be
important to the future health of the international trading system.
Read Working Paper 384 at www.adbi.org/working-paper/2012/
10/02/5242.post.doha.new.regionalism.asia.pacific/.
B a n k I n s t i t u t e
Impact of Changes in the Global Financial Regulatory
Landscape on Asian Emerging Markets
Author: Tarisa Watanagase
This paper discusses the relevance of Basel III to Asian emerging
markets. It reviews some of the proposed regulations of Basel III
in order to evaluate their likely implications for, and their ability to
enhance, the stability of the banking and financial system. This is
followed by a discussion on the challenges faced by the regulators
of Asian emerging markets in effectively managing their financial
regulations, given their capacity and institutional constraints.
Read Working Paper 391 at www.adbi.org/working-paper/2012/
10/26/5290.impact.global.financial.regulatory.landscape/.
Establishing Monetary Union in the Gulf Cooperation
Council: What Lessons for Regional Cooperation?
Author: Shinji Takagi
The paper reviews the experience of regional economic
cooperation in the Gulf Cooperation Council (GCC). Conceived
as a regional security alliance, the GCC has evolved to become a
common market in the making. All six GCC countries participate
in the common market project, and additional countries may join.
But the timing of introducing a common currency, initially
targeted for 2010, remains uncertain, especially in the light of the
ongoing euro area crisis.
Read Working Paper 390 at www.adbi.org/working-paper/2012/
10/19/5268.monetary.union.gulf.cooperation.council/.
The Persistence of Current Account Balances and its
Determinants: The Implications for Global Rebalancing
Authors: Erica Clower and Hiro Ito
This paper examines the statistical nature of the persistency of
current account balances and its determinants. With the assumption
that stationary current account series ensures the long-run budget
constraint while countries may experience local non-stationarity
in current account balances, the authors examine the dynamics of
current account balances across a panel of 70 countries.
Read Working Paper 400 at www.adbi.org/working-paper/2012/
12/13/5386.persistence.current.acct.bal.determinants/.
Historical Sources of Institutional Trajectories in Economic
Development: China, Japan, and Korea Compared
Author: Masahiko Aoki
This essay provides a game-theoretic, endogenous view of
institutions, and then applies the idea to identify the sources of
institutional trajectories of economic development in China,
Japan, and Korea. It stylizes the Malthusian-phase of East Asian
economies as peasant-based economies in which small families
allocated their working time between farming on small plots
leased or ownedand handcrafting for personal consumption and
markets. It then compares institutional arrangements across these
economies that sustained otherwise similar economies.
Read Working Paper 397 at www.adbi.org/working-paper/2012/
11/30/5341.historical.sources.intl.trajectories.economic.dev/.
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 A s i a n D e v e l o p m e n t
Innovative Poverty Reduction Strategies
ADBs recent poverty data found that Asia and the
Pacific region experienced a significant reduction
in poverty from 2005 to 2008. About 150 million
people exited extreme poverty during this period,
bringing the percentage of people living under the
extreme poverty line of $1.25 per day to 22% from
27%. Despite the big drop in the number of
extreme poor, the reduction for the moderately
poor, those living on $2 per day, was marginal at
only about 18 million in the region.
In light of the new poverty data, ADB and
ADBI organized a joint workshop, Effective
Policies and Experiences for Poverty Reduction
in Asia, in Kunming, Peoples Republic of China,
2325 October. The event was sponsored by ADB,
ADBI, and Research Institute for Indian Ocean
Attendees from 12 developing member countries gathered at the conference, Effective Policies and Experiences for Poverty Reduction
in Asia, in Kunming, Peoples Republic of China, 2325 October, to exchange ideas and strategies on lifting people out of poverty.
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Concise summaries of news, opinions, and editorials
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
WORKSHOP
Economies, Yunnan University. In addition to
presentations by experts in the field, 41 senior
government officials from 12 developing member
countries exchanged their countrys poverty
reduction experiences and explored the impact of
government policies and programs on poverty
reduction. Two sessions were also dedicated to
understanding how poverty data governance
differs between countries and identified
opportunities and challenges in poverty data
governance methodologies. A follow-up training
program will be held in mid-2013.
For more information on this workshop please visit:
www.adbi.org/event/5248.effective.policies.poverty.
reduction.asia/.
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