AEIR 2018

7th Meeting of the International Policy Advisory Group

Asia’s Growth and Development Challenges after the Global Financial Crisis

Date:

3-4 August 2015

Venue:

Auditorium A & B, ADB Headquarters, Manila, Philippines

The growth and development challenges facing Asia have evolved since the 2008/09 global financial crisis. First, global trade growth has slowed markedly, making exports a less reliable growth driver for the region. Second, potential growth in many Asian economies—including in the region’s largest economies—has fallen for a variety of reasons, including rising wages, economic imbalances, and a lack of industrial diversification, among others. Third, population aging in most of Asia’s higher-income economies is reducing the size of the labor force, further denting growth prospects. In addition, several global and domestic policy issues could further dampen Asia’s growth outlook. Together, these factors are leading policymakers toward “new growth models” to ensure their economies sustain development over the longer-term. (Read more | Download program)

The growth and development challenges facing Asia have evolved since the 2008/09 global financial crisis. First, global trade growth has slowed markedly, making exports a less reliable growth driver for the region. Second, potential growth in many Asian economies—including in the region’s largest economies—has fallen for a variety of reasons, including rising wages, economic imbalances, and a lack of industrial diversification, among others. Third, population aging in most of Asia’s higher-income economies is reducing the size of the labor force, further denting growth prospects.

Together, these factors are leading policymakers toward new growth models to ensure their economies’ sustain development over the longer-term. In addition, several global and domestic policy issues could further dampen Asia’s growth outlook. For instance, the expectation of the United States Federal Reserve’s monetary policy tightening cycle could fuel another round of capital outflows and financial volatility in the region. Fiscal policy space has also narrowed in several economies, constraining spending on key sectors such as infrastructure, education, and health—sectors that underpin long-term growth. The workshop will examine these issues identify options to address these challenges.

The workshop will focus on three themes:

Theme 1: Growth Drivers and the Quality of Growth
Session 1: Emerging Global Challenges and Implications for Asia
Session 2: Asian Economies after the Global Financial Crisis
Roundtable Session on Promoting Green Development

Theme 2: Financial Resilience and Stability
Session 3: Financial Resilience and Stability: Domestic and International Dimensions

3: Reform Policies focusing on Skills and Infrastructure
Session 4: Skills Upgrading and Human Capital Development
Session 5: Financing Infrastructure for Inclusive Growth

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The workshop will examine these issues, focusing on three themes:
(Click each session for more information)

Theme 1: Growth Drivers and the Quality of Growth
Session 1: Emerging Global Challenges and Implications for Asia
This session sets the stage for the meeting, with Earth Institute Director Jeffrey Sachs offering his views on emerging global trends and their implications for Asia. Policymakers from the region will respond, with ADB President Takehiko Nakao explaining how these challenges will likely impact Asia’s development and how ADB should respond. The panel will then react to points raised before taking questions from the floor.
Session 2: Asian Economies after the Global Financial Crisis

Asia has enjoyed remarkable growth since its recovery from the 1997/98 Asian financial crisis. A generally favorable external environment together with domestic reforms and structural transformation increased productivity and boosted the region’s attraction for foreign capital. However, the 2008/09 Global Financial Crisis (GFC) reshaped the global economic and financial landscape. While Asia’s growth proved more resilient than advanced economies, many believe the robust pre-crisis growth is no longer sustainable—growth prospects for some of the region’s largest economies are looking less favorable.

This session will discuss the issues and concerns over Asia’s growth prospects in the post-GFC environment. Given the region’s diversity, a variety of strategies were used during the period of robust pre-GFC growth. Some economies relied on manufacturing-led export growth, others on building a strong service sector, while others depended on natural resources. While these strategies clearly worked in the past, the changing internal and external environment post-GFC is forcing many economies in the region to rethink the way forward.

Other trends must be factored in. Asia’s aging population will likely drag on the region’s potential growth. In addition, low levels of physical and human capital investment and persistent infrastructure gaps will likely undermine Asia’s near-term prospects. Thus, the region needs to examine possible new growth drivers and opportunities.

In this session, panelists will consider two sets of questions:

  1. What was the major impact of the GFC on Asia’s future growth? What does the "new normal" of domestic and global conditions imply for the region’s growth potential? What are the most critical challenges or constraints Asia faces in sustaining robust growth, as well as reaching growth potential?
  2. What are the growth options and directions for Asia post-GFC? How should economies adjust their growth models given the changing circumstances? Will the post-crisis world require a different set of policy tools if the objective is to maintain robust growth rates? If yes, what are these tools?
Roundtable Session on Promoting Green Development

Fossil fuel-driven economies and disregard for preserving biodiversity leave the world and future generations facing the risk of catastrophe. For Asia, environmental damage and resource depletion from rapid growth are already hindering development. And its anticipated increased affluence will place tremendous pressure on finite natural resources. This has far-reaching consequences for Asia, home to over half the world’s population. Asia must find regional and global solutions to sustain its future development—future competitiveness will depend heavily on how efficiently it uses natural resources and moves toward a low-carbon future. The region can better compete in a global economy where resource efficiency, clean energy and low carbon are the ingredients of success and prosperity.

The economy, natural resource utilization, and climate change are interdependent. Green growth has great potential to provide a clear and focused agenda for action and policies to pursue economic growth while preventing environmental degradation, biodiversity loss, and the unsustainable use of natural resources. Asia must choose policies that are in its own best economic and environmental interest—and which generate green returns to growth. It is paramount that policymakers have both a “long-term perspective” on economic growth, and a willingness to accept global coordination on many fronts. However, complexities and technicalities require a multidisciplinary approach, which offers a range of policy options.

In this session, the panelists will discuss the following issues:

  1. Considering the development diversity across Asia and the Pacific, what types of pro-environment development paths can be pursued without sacrificing economic growth and job creation? How can they be achieved?
  2. Given that inclusive, green and resilient cities are key to meeting Sustainable Development Goals and global climate targets, how should Asia reshape its cities—where rapid urbanization has brought with it the urbanization of poverty? How can we better prepare Asian cities to mitigate and adapt to climate change?
  3. What can development institutions like ADB contribute to policymakers taking the “long-term perspective” on economic growth—to more effectively coordinate regional and global efforts geared toward sustainable development?
Theme 2: Financial Resilience and Stability
Session 3: Financial Resilience and Stability: Domestic and International Dimensions

Developing and maintaining financial resilience and stability remains a priority for many Asian economies. A sound and efficient financial sector can help financially underdeveloped economies in the region sustain growth. For example, bank deposits in the region equal just 60% of regional GDP, compared with the average 110% among OECD members. An additional 10% can add nearly 0.4 percentage points to average annual GDP growth per capita. And the evidence shows that both banks and capital markets can contribute to growth.

Furthermore, digital technology and mobile banking can improve access to finance by small- and medium-sized firms. Improved financial access, in turn, lubricate business operations of new and smaller firms, helping them expand by boosting investment, productivity and growth at the aggregate level. Equally important, financial inclusion can improve the living standards of low income households and expand their productive opportunities, contributing significantly to more inclusive growth.

The primary challenge facing Asia’s financial policymakers and regulators is to further develop their banks and capital markets, which benefits growth, while safeguarding financial resilience and stability.

In addition, global and regional spillovers affect the pattern of capital flows and make financial markets in the region more volatile. While Asia’s financial systems have become much healthier due to the reforms implemented after the 1997/98 Asian financial crisis and 2008/09 GFC, external shocks continue to unsettle local financial markets, capital flows, and trade. Better prudential regulation and macroprudential policies can shore up the region’s financial stability.

These are important national and regional issues important for financial resilience and stability.

In this session, panelists will consider two sets of questions:

  1. What must economies do to improve domestic financial resilience and stability? What further reforms are needed to help this process? How must the regulatory framework evolve to ensure further financial sector development without upsetting financial stability? And how should financial institutions and markets reduce the key impediments to broader financial access, particularly among small and medium enterprises and poor households?

    What are the primary international factors that affect financial resilience and stability? What are the opportunities and risks of divergent monetary policies—impending US tightening versus continued easing in Europe and Japan? Can policy coordination play a significant role globally and regionally to promote financial resilience and stability? Are current financial safety nets adequate? Can macroprudential policies and capital flow management measures mitigate the destabilizing impact of capital flows?
Theme 3: Reform Policies focusing on Skills and Infrastructure
Session 4: Skills Upgrading and Human Capital Development

Skills upgrading and human capital development (HCD) are important for raising labor productivity and fostering economic competitiveness. They help countries diversify production, adopt and adapt new technologies, innovate, promote growth and the quality of small and medium enterprises, and deepen participation in global value chains. By contrast, inadequate skills development and education entrap economies in a vicious cycle of low education, low productivity, and low income. This session will discuss and analyze strategies countries can use to upgrade their skills development systems to provide the quality labor force needed in a rapidly developing economy.

In this session, panelists will discuss two sets of issues:

  1. What are the global best practices and/or lessons learned on HCD that can make an economy more competitive?
    1. What skills and competencies need to be developed to foster high growth?
    2. What strategies are used by multi-national corporations, non-government organizations and national government agencies to address skill gaps?
    3. What is the appropriate role of the private and public sector in developing human capital?
    4. How effective are current HCD strategies in addressing identified skill gaps?
  2. What are the challenges countries face in implementing an effective technical and vocational education and training (TVET) system? What are some of the recommendations that can enhance TVET provision? What is the TVET drop-out rate?
    1. Is there evidence that employers recognize and value students passing through the standard TVET certification process?
    2. Given the proliferation of private providers, what monitoring and evaluation systems ensure the quality and credibility of TVET providers and student certifications?
Session 5: Financing Infrastructure for Inclusive Growth

Today, infrastructure demand continues to rise faster than supply, widening the infrastructure gap. As globalization deepens and Asian economies continue to expand, demand for greater information and communication technology (ICT), power, transport and logistics rises. The growth of Asia’s supply chains and production networks also raises demand for raw materials, intermediate and final goods, and services; thereby requiring an efficient infrastructure network that links producers to suppliers, suppliers to manufacturers, and manufacturers to markets.

As often cited, Asia’s overall national infrastructure investment needs between 2010 and 2020 are estimated at $8 trillion—an average infrastructure investment of about $730 billion per year. Asia has sufficient savings to meet this infrastructure gap. However, creating an appropriate financing mechanism to channel these resources into viable infrastructure projects remains the primary challenge. Without a proper financing mechanism, infrastructure needs will go unmet, the benefits of infrastructure investment will remain elusive, and the region’s growth potential will be undermined.

Financing infrastructure projects is challenging for many reasons. First, investments are relatively large and lumpy. Second, implementation takes a very long time. Third, they create assets that deliver financial returns over an even longer period. Fourth, these assets carry sovereign risks covering uncertainties over future costs and revenue streams. Finally, infrastructure investments generate large positive externality or economic benefits that cannot be captured as financial revenues.

Thus, most infrastructure projects are developed and financed by governments. And while an increasing proportion of projects involve public-private partnerships (PPPs), these still require some form of government guarantee—with the exception of telecommunications projects. For regional projects, additional complexities involve the development, approval, preparation, evaluation, implementation, management, operation, and maintenance that make financing even more challenging. By definition, they require the support of—and coordination between—two or more sovereign countries. Domestic politics complicates matters further. Key stakeholders may be reluctant to support “foreign” projects, and powerful interest groups may oppose them for protectionist or other reasons. Broader regional projects are particularly complex, and reaching agreement among a large number of governments often requires a neutral conciliator.

In this session, the panelists will discuss the following questions:

  1. What constrains developing infrastructure in Asia? Given several possible methods of infrastructure financing, which can induce better infrastructure performance and efficiency?
  2. How can relatively new financial instruments or modalities—such as PPPs— better mobilize local resources to effectively help finance Asia’s infrastructure development? What mechanisms can be designed to attract the private sector and private funding into infrastructure finance?
  3. While increased infrastructure finance can support the drive for stronger economic growth, projects also risk damaging the environment, climate and communities—unless accompanied by adequate safeguards. How can financial institutions, including development banks, aim for better environmental and social impact from safeguards as they expand infrastructure investment?

Program Agenda

Day 1 3 August (Monday)

08:00–08:40
Registration (Day 1)
08:45–09:05

Welcome Remarks

Takehiko NAKAO

President, Asian Development Bank (ADB)

08:45–09:05

Keynote Address

Jeffrey D. SACHS

Director, Earth Institute, Columbia University

09:05–10:30

Session 1: Emerging Global Challenges and its Implications for Asia

Moderator

Stephen GROFF

Vice-President (Operations 2), Asian Development Bank

Panelists:

Jeffrey D. SACHS

Director,
Earth Institute, Columbia University

SHIN Je Yoon

President,
Financial Action Task Force (FATF/GAFI)

► Presentation

M. Chatib BASRI

Senior fellow, Harvard Kennedy School and Senior Lecturer,
University of Indonesia

► Presentation

Takehiko NAKAO

President,
Asian Development Bank

10:30–10:40
Photo Session
10:40–11:00
Coffee Break
11:00–12:30

Session 2: Asia’s Growth after the Global Financial Crisis

Moderator

Juzhong ZHUANG

Deputy Chief Economist and Deputy Director General, ERCD,
Asian Development Bank

Lead Presentation:
Is Developing Asia's Growth Decelerating?

Jesus FELIPE

Advisor, ERCD, Asian Development Bank

► Presentation
Panelists:

Takatoshi ITO

Professor,
Columbia University, USA

► Presentation

Arsenio BALISACAN

Socioeconomic Planning Secretary, Philippines

► Presentation

Wing Thye WOO

Professor, University of California, Davis

► Presentation
12:30–14:00

Lunch Hosted by the President

Venue: Executive Dining Room, ADB
(By invitation)
Luncheon Speech

Gil S. BELTRAN

Undersecretary, Department of Finance, Philippines

14:00–15:45

Session 3: Financial Resilience and Stability: Domestic and International Dimensions

Moderator

Joseph ZVEGLICH, JR.

Director, Macroeconomics Research Division,
Asian Development Bank

Lead Presentation:
Monetary Policy Autonomy for Developing Countries

Shang-Jin WEI

Chief Economist and Director General, ERCD, Asian Development Bank

► Presentation
Panelists:

Diwa GUINIGUNDO

Deputy Governor, Bangko Sentral ng Pilipinas

► Presentation

Donald HANNA

Managing Director, Roubini Associates, Singapore

► Presentation

Chalongphob SUSSANGKARN

Distinguished Fellow, Thailand Development Research Institute

► Presentation

Liqing ZHANG

Dean, School of Finance and Director,
Center for International Finance Studies,
Central University of Finance and Economics, PRC

► Presentation
15:45–16:00

Coffee Break

16:00–17:30

Session 4: Skills Upgrading and Human Capital Development

Moderator

Wencai ZHANG

Vice-President (Operations 1), Asian Development Bank

Lead Presentation:
The Labour Market and Skill Development Systems in Asia:
What South Asia can Learn from East Asia

Santosh MEHROTRA

Professor, Jawaharlal Nehru Univeristy, India

► Paper
Panelists:

Lee Mun CHAN

Former Principal & CEO of Nanyang Polytechnic, Singapore

► Presentation

Cielito HABITO

Professor, Ateneo de Manila University

► Presentation

Rana HASAN

Director,
ERDI, Asian Development Bank

► Presentation

Shanti JAGANNATHAN

Senior Education Specialist,
SDAS, Asian Development Bank

► Presentation
17:45

Cocktail Reception to be Hosted by

Bambang SUSANTONO

Vice-President for Knowledge Management and Sustainable Development,
Asian Development Bank

Venue: Executive Dining Room, ADB


Day 2 4 August (Tuesday)

08:15–08:45
Registration (Day 2)
8:45–10:30

Session 5: Financing Infrastructure for Inclusive Growth

Moderator

Juan MIRANDA

Managing Director General, Asian Development Bank

Lead Presentations:
Economic Effect of Infrastructure:
Macroeconomic effects and Microeconomic effects

Naoyuki YOSHINO

Dean, Asian Development Bank Institute

► Presentation
Panelists:

Georg INDERST

Principal, Inderst Advisory

Glenn MAGUIRE

Principal, 4Sight One, Australia

► Presentation

Phouphet KYOPHILAVONG

Professor, National University of Laos

► Presentation

Ramesh SUBRAMANIAM

Deputy Director General,
Southeast Asia Department, Asian Development Bank

► Presentation
10:30–10:45
Coffee Break
10:45–12:00

Roundtable Session: Promoting Green Development Initiatives

Moderator

Bambang SUSANTONO

Vice-President for Knowledge Management and Sustainable Development,
Asian Development Bank

Panelists:

Jeffrey D. SACHS

Director, Earth Institute, Columbia University

► Presentation

Preety BHANDARI

Director, Climate Change and Disaster Risk Management Division,
Sustainable Development and Climate Change Department, ADB

Vu Quoc HUY

Director, Institute for Regional Sustainable Development,
Vietnamese Academy of Social Sciences

► Presentation

Kanhaiya SINGH

Senior Fellow, National Council of Applied Economic Research,
India

► Presentation

Yi WANG

Director-General, Institute of Policy and Management,
Chinese Academy of Sciences

► Presentation

Takehiko NAKAO

President, Asian Development Bank

12:00–12:15

Closing Remarks

Shang-Jin WEI

Chief Economist and Director General,
ERCD, Asian Development Bank

12:15–14:00

Lunch

(By invitation)
Venue: Executive Dining Room, ADB


Contact

For registration concerns and other inquiries, please contact the following:
  • James Villafuerte
    Economist
    Economic Research and Regional Cooperation Department
    Asian Development Bank
    Tel. No.: +63 2 632 5037
    Email: jamesvillafuerte@adb.org
  • Marthe Hinojales
    Senior Economic Analyst (Consultant)
    Economic Research and Regional Cooperation Department
    Asian Development Bank
    Tel. No.: +63 2 632 4444 local 70208
    Email: mhinojales.consultant@adb.org
  • Mary Ann Magadia
    Operations Assistant
    Economic Research and Regional Cooperation Department
    Asian Development Bank
    Tel. No.: +63 2 632 6629
    Email: mmagadia@adb.org



What is the IPAG?

The International Policy Advisory Group (IPAG)

Introduction

The International Policy Advisory Group (IPAG) is an initiative spearheaded by the Asian Development Bank (ADB) and the Earth Institute (EI) at Columbia University. In 2009, the two institutions formed the International Monetary Advisory Group (IMAG) of experts—tasked to enhance Asian policymakers’ contribution to the international dialogue on reforming the global reserve system. Recognizing the group’s potential contribution on a wider range of economic and development issues, the group was re-convened in 2010 as the International Policy Advisory Group (IPAG). Currently, it consists of macroeconomic and financial experts from within and outside Asia. They meet at least once a year to discuss issues pertinent to the region. ADB and EI together set the meeting agenda to focus on current critical issues and invite global experts on the topics discussed.

IPAG aims to enhance Asian policymakers’ contribution to global policymaking in three major areas: (i) global rebalancing and sustainable growth; (ii) regional cooperation in the global context; and (iii) green growth and sustainable development. IPAG produces (i) policy recommendations based on its regular meetings, and (ii) annual reports including analytical studies conducted by its members. Professor Jeffrey Sachs chairs the group, while Professor Wing Thye Woo is Executive Secretary.

Key Achievements

Since 2009, the group has held eight meetings in six countries. Over 60 experts have made 135 presentations at these meetings. Organized in partnership with selected academic and research institutes, IPAG meetings are generally scheduled before the G20 Summit in order to gather inputs that could feed into G20 discussions. The group has thus far produced some 35 analytical papers. The group’s first report released in June 2010 (The Future Global Reserve System—an Asian Perspective) contains IMAG recommendations and summaries of 18 individual essays and papers. Meeting papers are included in IPAG annual reports.

In June 2012, a Record of Discussion and Agreement was signed between ADB and the Export-Import Bank of Korea (KEXIM), which provided additional funding for the group’s activities, preparation of additional papers, and the Seoul IPAG meeting in December 2012.

Current Priorities

This year, IPAG holds its 7th meeting. Its first annual report—containing an executive summary of IPAG recommendations and individual IPAG papers from 2011-2012 meetings—will be published soon. The 7th meeting’s presentations will complete the collection of papers that will comprise the second annual report.

Event co-organized with