Rebalancing for Sustainable Growth- Asia’s Post Crisis Challenge

1. A Joint Conference of ADBI and RIS on Sustainable Growth and Enhancing Integration in Asia Rebalancing for Sustainable Growth- Asia’s Post Crisis Challenge Comments on presentation by Dr. M . Kawai By Ramgopal Agarwala, RIS 15 September, 2010 IHC, New Delhi

2. Congratulations • A timely report. The theme is of interest to developed and developing countries alike. • Music to our ears because in RIS we have been arguing along these lines for some time, even before the break-out of the crisis. • The comprehensiveness of the recommendations is commendable. • With clarifications and refinements the document worthy for G20 Agenda. • My comments mainly asking for clarification and/or elaborations.

3. Role of Exports in the Past and the Future • The report argues “the export-led growth model, which was so spectacularly successful in Asia in earlier decades has hit significant limits.” • Two questions: • How do we measure the role of exports in Asia’s growth? In Table 1, for NIEs domestic demand accounted for more than 100% of growth during 1990-1999 and 2000-2009. The traditional approach of looking at net exports as role of external factors may be technically flawed as I have argued in RIS discussion paper no. 158. • Alternative methodology is needed. • The slowdown of exports to Euromerica does not necessarily mean end of export-led growth. Asian consumers may well compensate for slow down in demand from Euromerican consumers. Increased potential for trade in services may help. The “regional” demand highlighted in the report is about trade, though within Asia.

4. Role of Physical and Social Infrastructure Investment in Rebalancing Growth • In view of the enormous amount of work done by ADB and ABDI, the report could have given more emphasis to the role of infrastructure investment in Asia in achieving the rebalancing and given some quantitative flavor of how it can compensate for the loss of demand from Euromerica. • It would have been helpful to elaborate on how the implementation of this strategy could now become more feasible than before. Truly win-win for both developed and developing countries.

5. On Financial Co-operation • The reader is left wondering what is the mechanism that the authors have in mind for desirable objectives such as: • Allowing Asian currencies to appreciate against the USD; • Greater use of ACU; • Capital controls as a viable macro prudential measure; • Transformation of CMIM into AMF.

6. On Definition of Asia • The report seems to vacillate on how Asia is to be defined. Is its ASEAN+3 or ASEAN+6 or something even wider. • Perhaps complementarities of Asia most evident when we use a wider definition of Asia, at least including all members of ADB.

7. Need for Changing the Tonality of Asian Discourse in the Context of Changed World Economic Power • Many, including eminent commentators such as Martin Wolf are talking of post-western world. Others such as Fareed Zakaria is talking of post-American world. • In future, ‘reverse coupling’ in terms of effective demand as well as economic ideas and paradigms. • The old Asian approach of shyness, vagueness and timidity in talking of regional and global economic issues needs to be replaced by franker, bolder and clearer articulation of economic analysis and recommendations. • Asian scholars and officials need to play a role similar to that played by the American officials and scholars in creating post-war global financial architecture. Time for an Asian Bretton Woods Conference? • ADBI jointly with other Asian think-tanks such as RIS can produce a more definitive report on the subject and mobilize support for its consideration in G20 meeting.

8. Thank you