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A quarterly magazine of the IMF
  June 2006
Volume 43, Number 2

Asia Rising

Asia's Winds of Change

David Burton, Wanda Tseng, and Kenneth Kang
After recovering from the 1997–98 crisis, Asia is now facing new challenges of globalization. The region has undergone a remarkable transformation over the past 50 years, becoming a driving force in the global economy, but must reform and adapt to harness the winds of change and achieve more sustainable growth.

Deepening Financial Ties
Agnès Belaisch and Alessandro Zanello
Asia's quest for closer regional and global financial integration is under way. At the global level, Asia's integration with the international financial system is well advanced, but is more limited at the regional level. Making a dent in the large unfinished agenda for financial integration poses a variety of challenges.

The Art of Reform
Andrew Sheng
Applying lessons from Suntze to Asia's financial markets. Nine years after the East Asian crisis, the region's financial markets have not fully addressed their problems of inefficient intermediation and poor risk management. Asia must undergo a fundamental change in mindset to adapt.

Japan's Back!
Daniel Citrin and Alexander Wolfson
After its lost decade, Japan's economy is set on a recovery path. It now has a healthier banking system and stronger companies, but must still improve labor utilization, enhance competition in product markets, liberalize the agriculture sector, and encourage foreign direct investment to achieve a major transformation.

Point of View
Creating a Globally Connected Asian Community

Raymond Lim
Singapore's Second Minister for Finance and for Foreign Affairs examines how the rise of China and India is paving the way for an integrated Asia. He argues that countries outside Asia will have to realign their growth strategies to not just cope with the rise of China and India but also to take advantage of it.

spacer Asia's Investment Puzzle
Charles Kramer
The investment decline in emerging Asia has been prolonged, sizable, and broad-based, reflecting a fall in private investment. Despite the recovery of Asia's economy from the 1997-98 crisis, lingering uncertainty appears to be holding back investment.

What Happened?
Anthony Elson
Why East Asia surged ahead of Latin America and some lessons for economic policy. In 1950, Latin America was the most developed region outside the industrialized countries, but half a century later East Asia had leapt to the front, while Latin America's position had declined. A look at the underlying reasons.

Also in This Issue

Adding Depth
Anne-Marie Gulde and Catherine Pattillo
Economic growth in sub-Saharan Africa is forecast to be above 5 percent in 2006 for the third consecutive year. But a key obstacle to further growth is the region's weak financial sectors—among the least developed in the world. More must be done to broaden the financial base and give small and medium-sized firms access to finance.

EU: From Monetary to Financial Union
Wim Fonteyne
Financial integration in Europe picked up renewed momentum when the euro was introduced in 1999, but progress since then has proved to be more difficult than expected. Some fundamental policy questions need to be addressed for the integration process to be completed.


Letter from the Editor

In Brief

Aid must be better targeted for MDGs
Mind your data
Oil prices give new chance for bioenergy

People in Economics

Economist as Crusader
Arvind Subramanian
Economics made Paul Krugman famous; punditry has made him a celebrity, famous for being famous. A profile of the hard-hitting political columnist looks at his contributions to both international trade theory and international macroeconomics.

Picture This

Asia's Role in the World Economy
Asia's vitality largely reflects its successful integration into the world economy. A chart-based look at the region that leads the world in economic growth.

Back to Basics

Demystifying Hedge Funds
Angel Ubide
Hedge funds may have an aura of exoticism and modernism, but their goals are as old as the art of investing itself and they are becoming increasingly popular as private ownership of capital expands worldwide.

Book Reviews

Economic Origins of Dictatorship and Democracy, Daron Acemoglu and James A. Robinson

Give Us Your Best and Brightest, Devesh Kapur and John McHale

Global Governance of Financial Systems, Kern Alexander, John Eatwell, and Rahul Dhumale

Rethinking Pension Reform, Franco Modigliani and Arun Muralidhar

Country Focus

The near-term growth outlook for Indonesia, Malaysia, the Philippines, and Thailand is favorable, thanks to strong exports. But sustaining medium-term growth requires reviving domestic demand, especially investment. A chart-based look at the region.

Straight Talk

Crabs in a Bucket
Raghuram Rajan
Why constituencies are as important as constitutions in battling underdevelopment. The IMF's Economic Counsellor argues that poor institutions alone do not explain the persistence of underdevelopment.