Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey : Conference Highlights Asia’s Advancing Role in the Global Economy
March 15, 2016
- Asia has shown remarkable resilience and remains a key growth center
- Bold reforms tailored to country circumstances needed to unlock Asia’s potential
- Region welcomes expansion of IMF capacity building activities
Maintaining high growth, boosting job creation, and making further gains in reducing poverty are top policy priorities, Asian policymakers declared at a conference in New Delhi, India.
Panelists debate at a session of the Advancing Asia Conference in New Delhi from March 11 to 13 (photo: IMF)
CONFERENCE IN INDIA
“The region’s dynamism presents an historic opportunity to invest now for the future—and to advance Asia,” said IMF Managing Director Christine Lagarde in opening remarks. “Doing so will not only put Asia on the path to sustained growth, but also strengthen its role in the global economy,” she noted.
“Asia is a ray of hope for global economic recovery,” added Indian Prime Minister Narenda Modi. “The twenty-first century is, and will be, the Asian Century.”
Over the past 15 years, economies in Asia have become stronger—the region accounts for 40 percent of the global economy and contributes about two-thirds of global GDP growth—and social progress and poverty reduction have seen significant improvements.
While Asia remains the most dynamic part of the world economy, its growth momentum has cooled, reflecting among other things a more challenging global environment. Participants at the three-day conference “Advancing Asia: Investing of the Future” examined the main economic and social challenges facing the region, and looked at ways that economic policy can boost potential output and advance employment growth and social progress more widely.
The March 11-13 conference, held in New Delhi, India, and jointly sponsored by the IMF and the Ministry of Finance of India, brought together over 400 people from 30 countries spanning Asia and the Pacific, and included senior officials, policy makers, prominent academics, opinion leaders, financial sector executives, and civil society representatives to discuss the future of the region.
New push to build capacity
During the opening session of the conference, the IMF and Government of India also announced the opening of the South Asia Regional Training and Technical Assistance Center (SARTTAC) in New Delhi next year. The new center will offer a fully integrated training and technical assistance center serving Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka.
In announcing the SARTTAC, Prime Minister Modi said: “The Fund has built up an immense stock of economic expertise. All its members should take advantage of this. All of us need to pursue policies that provide a stable macroeconomy, enhance growth and further inclusion. The Fund can be of great assistance in this. Apart from advice, the IMF can help in building capacity for policy making.”
Despite the decade of strong growth in the region, millions of people in Asia continue to live in poverty, and labor force participation by women and youth remains low in many countries. Conference panelists discussed ways to share the region’s wealth more equally, and to encourage increased labor force participation by women and youth.
Harnessing the region’s potential
Some unique measures to overcome inequality in the region were discussed, including a scheme in the Maldives to concentrate populations across some 180 islands into central areas in order to ensure provision of basic services such as health and education. Azeema Adam, Governor of the Central Bank of Maldives, also noted that lack of financing for investment in basic infrastructure is a challenge for the Maldives.
Access to education, especially basic primary education, was seen as critical to achieving inclusive growth. “The solution to overcoming poverty is giving everyone the chance to finish at least a basic education,” said Milwida Guevara, CEO of Synergeia Foundation in the Philippines. Educational systems also need to be innovative and tailored to the needs of local communities.
Fazle Hasan Abed, Founder and Chairperson of BRAC Bank, Bangladesh, noted that access to financial services is an essential element of poverty reduction. “Financial services drive social and economic progress. They facilitate people’s ability to enter the job market, access health care, and pay school fees.” To encourage increased access, financial services need to be tailored to the needs of different income groups, from basic savings to providing loans for startup companies.
In her keynote remarks, Melinda Gates, co-Chair of the Bill and Melinda Gates Foundation, also underscored the importance of increased access to basic health and financial services, especially for women and girls. Harnessing the potential of women and girls—the region’s greatest natural resource—is the most effective means of securing sustainable, inclusive growth. “Empowering women and girls is not only the right thing to do, it is the smart thing to do,” she said.
Cleaning up the environment
The economic consequences of climate change are increasingly coming to bear on the region—both by raising their proclivity to experience natural disasters and in the deterioration of living standards and environmental conditions. Water resources and flooding, vulnerable coastal zones, heat waves, and increasingly volatile conditions for agriculture are just some of the problems to which countries in the region must adapt in the coming years. Panelists discussed the need to both adapt to and mitigate natural disasters.
Innovative measures to reduce carbon emissions and mitigate climate change are taking place across the region, including project to finance green garment industries, organic fertilizer production, and solar homes and plants, participants observed. President Takehiko Nakao said that the Asian Development is increasingly focusing its financing on energy efficient projects, including renewable energies and public transportation projects.
At the same time, the Attorney General and Minister of Finance of Fiji, Aiyaz Sayed-Khaiyum, stressed the importance of adaption, especially for Pacific Island economies. He noted that Fiji, and most Pacific Island countries, already have low carbon footprints, but they face challenges to adapt their infrastructure to make them more resilient to natural disasters. This will be an important consideration as Fiji rebuilds form the recent devastation from Cyclone Winston.
Helen Clark, Administrator of the United Nations Development Program, reiterated that addressing climate change requires action to both reduce carbon emissions and help vulnerable countries adapt, including through investing in disaster resilient infrastructure and climate smart agriculture.
Managing capital flows
Conference participants also discussed the challenges in the region associated with the normalization of U.S. and other advanced economy monetary conditions, in particular ongoing and possible financial volatility in the region. Panelists saw a role for both macroprudential as well as capital controls in managing capital flows. Sukudhew Singh, Deputy Governor, Bank Negara Malaysia, saw the need to use the “full spectrum of tools, including capital controls, but policymakers would achieve the best outcomes by working on their own fundamentals.”
There was also discussion of possible role for international policy coordination in ameliorating the negative impact of volatile capital flows. In a keynote address, Reserve Bank of India (RBI) Governor Raghuram Rajan noted that the larger economies needed to be more aware of the risks involving their monetary policies, which almost always focus inwards and tend to overlook the spillover effects on smaller economies. "Given the importance of spillovers from monetary policies, it is important we start building a global consensus on how to get better outcomes for the world," Rajan said.