{
  "title": "Mutual Interdependence: Asia and the World Economy, Address By Anne O. Krueger, First Deputy Managing Director, IMF",
  "publication": "IMF News, June 30, 2005",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp063005",
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  "summary": "To the Institute for Global Economics, Seoul, Korea",
  "authors": [
    "Anne O. Krueger"
  ],
  "publishDate": "2005-06-30",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Focus: Asia's economic transformation, its role in the world economy, and the reciprocal obligations between Asia and the global economic system.\n- Central thesis: Asia's rapid growth depended on domestic policies promoting stability, growth and openness, and successful integration with the international economy; continued progress requires preservation and strengthening of the multilateral trading and international financial systems."
    },
    {
      "heading": "The Asian transformation — findings and key statistics",
      "content": "- Historical context:\n  - Several Asian economies in 1950 were still worse off than in 1913 (Angus Maddison data).\n  - In 1820, Japan marginally above world average; China slightly below; Asia excluding Japan about four fifths of world average.\n  - By 1950, Japan slightly below world average; China little more than a fifth of world average; Asia excluding Japan roughly a third of world average.\n- Rapid postwar growth:\n  - Korea: per capita GDP in 1998 (1990 PPP dollars) almost 16 times its 1950 level; share of world GDP rose from 0.3 per cent in 1950 to 1.7 per cent.\n  - China: real per capita GDP rose almost eightfold between 1975 and 2003—and fourfold from 1985.\n  - India: real per capita GDP rose 2.4 times between 1975 and 2003, with most growth after 1991 reforms.\n  - By historical standards, postwar growth rates were unprecedented: real per capita GDP in Korea, Thailand and Singapore has grown by more than 5% a year, on average, since 1960.\n  - Since 1990, Asian per capita incomes have grown nearly twice as fast as that of the United States."
    },
    {
      "heading": "Domestic policy framework — drivers of growth",
      "content": "- Core policy elements credited for Asian success:\n  - Commitment to policies fostering growth, stability and openness.\n  - Use of traded goods sectors as growth engines; openness to international trade.\n  - Macroeconomic stability, education, infrastructure, and structural reforms promoting competition and flexibility.\n- Trade as critical factor — exact figures:\n  - Korea: export to GDP ratio rose from 3 per cent in 1960 to 26 per cent in 1975 and 38 per cent in 2003.\n  - China: export to GDP ratio was 2 per cent in 1970 and rose to 34 per cent in 2003.\n- Mechanisms by which trade fosters growth:\n  - Competition increases productivity, reduces prices, eliminates domestic monopolies, creates employment—especially absorbing unskilled labor into labor-intensive exports—and facilitates skill acquisition to move up the value-added chain."
    },
    {
      "heading": "External environment — multilateral trade and regional arrangements",
      "content": "- Role of multilateral trade liberalization:\n  - Progressive elimination of tariff and non-tariff barriers under GATT and WTO linked to unprecedented global trade expansion.\n  - 1947: average tariffs on manufactured imports among industrial countries over 40 per cent; by late 1990s lowered to less than 5 per cent in the EU, the United States, and Japan.\n  - Start of 21st century: world trade worth around $8 trillion—25 per cent of global GDP—compared with $1.5 trillion in 1970, and 13 per cent of world GDP.\n  - WTO: volume of world trade in 2000 was 22 times its level in 1950.\n  - Merchandise exports have grown by 6 per cent a year on average for the past 50 years.\n  - Last year (relative to speech): global growth was 5%; global trade grew by 8.5%.\n- Regional trade arrangements:\n  - Regional groupings can bring benefits but should complement—not substitute for—multilateral liberalization.\n  - EU example: tariffs fell by 40 percentage points globally and by 45 percentage points within the Union during integration.\n- Doha Round:\n  - Critical stage; a successful WTO ministerial in December would give fresh impetus to trade expansion.\n  - Calls for mutual movement: advanced economies must fulfill promises to reduce agricultural and other protection; developing countries must commit to reducing protectionism among themselves.\n  - Emphasis on agricultural liberalization—industrial countries urged to reduce market restrictions and export subsidies; Asian countries called on to take difficult decisions on agriculture to strengthen bargaining power."
    },
    {
      "heading": "The international financial system — stability, crises, and lessons",
      "content": "- Bretton Woods and adaptability:\n  - Postwar fixed-but-adjustable exchange rate system fostered stability up to 1971; transition to floating rates in 1971–73 aided flexibility in coping with oil shocks.\n  - IMF role: providing temporary financial support during balance of payments crises critical to system stability.\n- Private capital flows and crises:\n  - Korea first emerging market to borrow on international capital markets in the 1960s; 1970s banks were major finance source; 1990s saw soaring private international capital flows.\n  - Financial crises of 1990s illustrated increased exposure of policy mistakes and rigidities as capital moved globally.\n- Asian financial crisis (1997–98) — proximate causes and data:\n  - Sudden reversal of capital flows: net inflows to the Asian crisis countries were roughly 6.3% of their GDP in 1995, and 5.8% in 1996; in 1997 net outflows were 2% of GDP, rising to 5.2% in 1998.\n  - Rapid credit expansion, rising non-performing loans (NPLs), currency mismatches, and fixed exchange rate pegs amplified financial distress.\n  - Economic consequences: decades of rapid growth halted; living standards fell and unemployment rose; Korea's GDP returned to pre-crisis levels within two years; Indonesia exited its Fund-supported program at end of 2003.\n- Policy and institutional lessons:\n  - Importance of sound macroeconomic framework and well-regulated financial sector (addressing NPLs, capital adequacy, effective supervision).\n  - Need for financial institutions to develop credit risk assessment skills and for effective bankruptcy laws balancing creditor and debtor rights.\n  - Advantages of flexible exchange rate regimes to reduce vulnerabilities from currency mismatches.\n  - Interdependence of corporate sector health and financial sector soundness—financial reform must address corporate weaknesses.\n  - Ongoing need for reforms; IMF uses Article IV consultations and other instruments to promote these lessons."
    },
    {
      "heading": "Asia and the world — influence, representation, and leadership",
      "content": "- Asia's rising economic weight has increased its real-world influence, but institutional voice in global economic institutions has lagged.\n- IMF position: Fund management supports proposals to rebalance voice and representation to reflect Asia's economic weight; changes require consensus among shareholders.\n- Asia's potential leadership roles:\n  - Model for rapid sustained growth through policy example.\n  - Leading role in advancing trade liberalization and in pushing Doha negotiations toward agreement.\n  - Encouraged to ensure regional arrangements complement multilateral approaches."
    },
    {
      "heading": "Conclusion — implications and policy recommendations",
      "content": "- Summation of benefits and obligations:\n  - Asia's postwar progress is a testament to sound policies, persistent reforms, and trade liberalization; millions have escaped poverty as a result.\n  - Continued global and Asian progress depends on:\n    - Preserving and strengthening the multilateral trading system and completing the Doha round to expand markets further.\n    - Maintaining a stable, adaptable international financial system and completing financial sector reforms domestically.\n    - Asian countries leading by example through further liberalization (including difficult agricultural reforms) and by resisting protectionism among developing countries.\n- Policy recommendations (explicit and implied):\n  - Advanced economies should fulfill commitments to reduce agricultural and other protectionist measures.\n  - Developing countries should commit to reducing protectionism against each other.\n  - Asian countries should pursue further domestic liberalization to strengthen their bargaining power in multilateral negotiations.\n  - Continue financial sector reforms: resolve NPLs, ensure capital adequacy, strengthen supervision, improve bankruptcy frameworks, and promote flexible exchange rates.\n  - Use current favorable global climate to pursue reforms that raise potential growth and reduce vulnerability to shocks.\n\nSource: Address by Anne O. Krueger, First Deputy Managing Director, International Monetary Fund, To the Institute for Global Economics, Seoul, Korea, June 30, 2005.\n\n---\n\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp063005"
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    "Authors: Anne O. Krueger",
    "Published: June 30, 2005",
    "Focus: Asia's economic transformation, its role in the world economy, and the reciprocal obligations between Asia and the global economic system.",
    "Central thesis: Asia's rapid growth depended on domestic policies promoting stability, growth and openness, and successful integration with the international economy; continued progress requires preservation and strengthening of the multilateral trading and international financial systems.",
    "Historical context:",
    "Rapid postwar growth:",
    "Core policy elements credited for Asian success:",
    "Trade as critical factor — exact figures:",
    "Mechanisms by which trade fosters growth:",
    "Role of multilateral trade liberalization:",
    "Regional trade arrangements:",
    "Doha Round:",
    "Bretton Woods and adaptability:",
    "Private capital flows and crises:",
    "Asian financial crisis (1997–98) — proximate causes and data:",
    "Policy and institutional lessons:",
    "Asia's rising economic weight has increased its real-world influence, but institutional voice in global economic institutions has lagged.",
    "IMF position: Fund management supports proposals to rebalance voice and representation to reflect Asia's economic weight; changes require consensus among shareholders.",
    "Asia's potential leadership roles:",
    "Summation of benefits and obligations:",
    "Policy recommendations (explicit and implied):",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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