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

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?

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?

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?

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?

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?