Where are Asia’s economies headed to in the short and long term? What shape are they in to withstand future financial crises? And how can they respond to the yawning rich-poor divide, now a key concern among Asian and global policymakers? These were some of the key points discussed over the first two days of business at our 47th Annual Meeting, held in Astana, Kazakhstan. A lively CNBC Debate looked at the risks the region faces from a growth slowdown in People’s Republic of China (PRC), a scale back of loose monetary policy in the US, and recent geopolitical threats. While panellists acknowledged the threat from a slowdown in PRC they also highlighted many current positives for the region including solid foreign exchange reserves, ample fiscal space, generally benign inflation, and stronger macroeconomic governance. “The region has emerged from the 2008 crisis much stronger than before with stronger macroeconomic policies and financial buffers and the risks are now easing rather than becoming more intense,” said ADB President Takehiko Nakao. Indonesian Finance Minister Muhamad Chatib Basri pointed to positive spinoffs to Asian countries, including his own from a shift to domestic demand driven growth by PRC. Paul Gruenwald, Chief Economist for Asia-Pacific at Standard and Poor’s Ratings Services, noted that an emerging wage-price spiral in Japan was a “good thing” for the economy after two decades of deflation. Moving forward the picture of course is less clear, also there was recognition that long term, sustained and inclusive growth will hinge on deeper reforms including a faster rollout of infrastructure, greater use of fiscal policy to tackle growing inequality, and stepped up regional cooperation. The need for greater cooperation both regionally and globally was a key takeaway of the Governors' Seminar, moderated by BBC presenter Zenaib Badawi. The discussion on what lessons Asia can learn from recent financial crises and how it can buffer itself from future crises provided fascinating insights both at the country and global level. Kazakhstan’s Minister of Economy and Budget Planning, Erbolat Dossaev, highlighted how his country is moving to diversify its economy and reduce its heavy reliance on oil and other mineral resources in the wake of the slump in commodity prices following the 2008 financial crisis. Indonesian Finance Minister Basri echoed that view on diversification, as well as the need to boost international reserves in tandem with increasing access to multilateral financing support. India’s Finance Secretary Arvind Mayaram took somewhat of an alternative view noting that in an increasingly interconnected world “putting our own house in order is not enough” with a need for a new approach to international financial management. "Going to the IMF right now has a stigma attached to it." In response, Marisa Lago, assistant secretary, for international markets and development in the US Treasury, noted that the IMF was the only institution capable of "financial sector firefighting" at present. She highlighted steps taken by international agencies to increase cooperation and better capitalized banks as positive steps in the wake of the 2008 crisis, but cautioned of a "race of the slowest" among countries to put financial reforms in place. Our President Takehiko Nakao underscored the point that individual country actions like prudent macroeconomic policies and strong financial regulations must be supplemented by increased global cooperation, and multilateral support arrangements. He also cautioned that financial markets cannot be left alone to regulate themselves, but will require some government oversight. The two days have given us much food for thought about issues facing the region and some of the measures needed to strengthen economies and to support the poor. Now with you all, I look forward to tomorrow morning’s formal Opening Ceremony at the Concert Hall "Kazakhstan”, which will be graced by Kazakhstan’s President Nursultan Nazarbayev. See you there!
Getting Asia in shape for the future