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ADBI News
2013 Volume 7 Number 4

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Realizing an Innovative, Inclusive, and Integrated Asia

ANNUAL CONFERENCE

ADB President Takehiko Nakao stressed that innovation and regional integration are crucial to Asias long-term growth.

16th ADBI Annual Conference on 27 November took stock of developments in the role of innovation for inclusive growth and integration in the Asia and Pacific region. ADB President Takehiko Nakao, who gave the opening remarks, emphasized innovation, integration, and inclusion as key to lasting and sustainable growth in Asia. In his closing remarks, ADBI Dean Masahiro Kawai underscored the potential for innovation to drive growth in Asia. The conference focused on the following key issues: (i) importance of innovation on sustainable growth in Asia; (ii) evolution of inclusive growth in Asia; (iii) and developments in regional integration, trade and finance, and regulation and coordination. Five years after the onset of the 2008 global financial crisis Asia continues to face the challenge of achieving sustainable and inclusive growth. The US and Europe growth rates look likely to remain subdued for some years to come, which underlines the need for greater trade integration within Asia to take advantage of the growing regional market. To sustain growth, Asia needs to enhance its innovative capacity. Greater research and development, and a better learning environment in Asia, will help improve education, healthcare,

The

In this issue
Realizing an Innovative, Inclusive, and Integrated Asia 12 The Future of the World Trading System: An Asian Perspective 2 ADBI in the News 2 Low-Carbon Green Growth in South and Central Asia 3 Transforming Industrial Clusters Into Eco-friendly Economic Zones 3 Abenomics: Controversy, Progress, and Prospects 4 International Monetary System Reform 4 Reshaping Europes Financial System 5 Enhancing Regional Cooperation in Asia 5 Central Asias Participation in Global Supply Chains Key to Growth 6 Recent Publications 6 Upcoming Events 7 Recent Working Papers 7 Sri Lankan Journalist Wins 2013 DAJA Competition 8
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clean energy, and ultimately overall productivity in the region. This conference produced a number of research papers, which will be considered for inclusion in

ADBI working papers as well as in a published book.

For more information on this event, please visit: www.adbi.org/event/5853.innovative.integrated.asia.pacic.2013/.

The Future of the World Trading System: An Asian Perspective

What are the key challenges facing the multilateral trade system? An ADBI session during the Bali Trade and Development Symposium on 4 December held on the sidelines of the Ninth WTO Ministerial Conference, reviewed policy options from an Asian perspective. In his opening presentation, ADBI Research Director Ganeshan Wignaraja highlighted Asias success in applying outward-oriented trade policies, but expressed

SYMPOSIUM

concern over both the increasing Asian noodle bowl of free trade agreements and the welfare of small economies less well-integrated into the FTA landscape. He urged further market-friendly policies to support supply chain trade among Asian economies, including a consolidation of existing FTAs. ADBI Research Fellow Matthias Helble, who moderated the session, argued that Asias outward oriented economic policies and commitment to regional and multilateral trade liberalization had greatly contributed to the regions prosperity. He stressed that in the years to come it will be crucial to limit the risks that Asias regional trade agreements carry, especially the risk that mega-regional trade deals will divide the region. Instead, he called for a more integrated and open Asia, where regional cooperation is inclusive and goes well beyond the realm of trade.
For more information on this event, please visit: www.adbi.org/event/6026.future.world.trading.system.asia/. To download a copy of The Future of the World Trading System: Asian Perspectives, please visit: www.adbi.org/book/2013/06/14/5746.future.world.trading. system/.

ADBI Research Fellow Matthias Helble (far left) and ADBI Research Director Ganeshan Wignaraja (far right) discuss the future of the world trading system on the sidelines of the Ninth WTO Ministerial Conference in Bali, Indonesia.

ADBI in the News

Dean Masahiro Kawai was cited in articles by Berita2u, China Daily, Inter Press Service, Maeil Business, Manila Bulletin, Nikkei Shimbun, Reuters, and the New York Times. His commentary on the 40th year of ASEANJapan ties was published by Business Times and he was interviewed for TV by Bloomberg News, Channel News Asia, and NHK World. Research Director Ganeshan Wignaraja was cited in articles by China Daily, Financial Times, and Jakarta Post. His commentary, WTO Ministerial Talks in Bali May Be Asian Trade Turning Point, co-authored with Research Fellow Matthias Helble, was published by Business Times and VoxEU. Research Fellow Matthias Helble was quoted in the AP articles Bali Summit May Be Last Chance for WTO Trade Deal and WTO Trade Deal Makes Progress, which were republished by more than 40 news outlets around the world. Special Adviser to the Dean Giovanni Capannellis commentaries Time to Create an ASEAN Academy and ASEAN Principles Need Efficiency Updates were published by East Asia Forum. CBT Specialist Venkatachalam Anbumozhi was cited in the Inter Press Service article Shrinking the Financial Fallout of Natural Disasters. His commentary, Asia Can Lead the World in Ending Global Warming, was published in Asia Sentinel, Daily Star, Financial Express, and South China Morning Post.

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Low-Carbon Green Growth in South and Central Asia

Asias economic success in the last five decades has been coupled with remarkable achievements in reducing poverty and improving the quality of life of the people in the region. But the regions economic growth has also resulted in a significant increase in greenhouse gas emissions. Asias share of global emissions is expected to increase 40% by 2030 if the present rate of energy consumption continues. The challenge for Asia is whether it can switch to a less polluting pattern of production and consumption while maintaining the growth and development it requires. To address this challenge, ADBI held a workshop on Strengthening Policies and Practices for Low-Carbon Green Growth in South Asia and Central Asia in Bangalore, India, 1719 October. About 30 senior officials from South Asia and Central Asia attended the workshop. Participants recognized that low-carbon green growth is an imperativenot an option for developing Asia. They agreed with the findings of the ADBI and ADB study on low-carbon green growth that actions taken by several Asian countries have been impressive and replicable.

WORKSHOP

The workshop also recognized the immediate need for regional cooperation to disseminate low-carbon technologies and finance them. They also developed a roadmap to act together on key common issues.
For more information on this event, please visit: www.adbi.org/event/5898.policies.practices.low.carbon. green.growth.asia/?sectionID=35. To download a copy of the book Low-Carbon Green Growth in Asia: Policies and Practices, please visit: www.adbi.org/book/2013/06/28/5773.low.carbon.green.growt h.asia.policies.practices.

Transforming Industrial Clusters Into Eco-friendly Economic Zones

As economic competition increases in Asia, policymakers are searching for ways to create new industrial clusters, sustain existing ones, and revive those that are losing vigor. New industrial clusters to be developed are geographic

WORKSHOP

Tatiana Gallego-Lizon, ADB Principal Urban Development Specialist, Dean Masahiro Kawai, and CBT Specialist Venkatachalam Anbumozhi discuss the socio-economic benets of eco-industrial clusters.

concentrations of small and medium-sized enterprises that draw productive advantages from their mutual proximity and connections. These industrial clusters could be transformed into eco-industrial clusters by establishing inter-firm networks to share resources in an efficient way. ADBI, with the support of CITYNET and Kawasaki city, hosted the training course Regional Workshop on Eco-Industrial Clusters on 24 December to instruct mayors and senior officials on the concepts and practicalities of transforming industrial clusters into successful eco-friendly economic zones. The program, through technical presentations, field visits and group discussions, aimed to improve the capacity of policymakers to deliver integrated environmental and economic planning in their respective jurisdictions.
For more information on this workshop, please visit: www.adbi.org/event/5978.workshop.eco.industrial.clusters/.

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Abenomics: Controversy, Progress, and Prospects

Takatoshi Ito, Dean of the Graduate School of Public Policy at the University of Tokyo, spoke at ADBI on 15 October on the progress and prospects of Japanese Prime Minister Shinzo Abes policy package, dubbed Abenomics, consisting of three arrows: aggressive monetary easing with inflation targeting; flexible fiscal policy; and growth strategy. Abenomics first and second arrows have put the Japanese economy firmly on the path to recovery. Professor Ito argued that Tokyos successful bid to host the Olympic Games in 2020 complements Abenomics by presenting an opportunity for Japan to finally solve its debt sustainability problem.

DISTINGUISHED SPEAKER

For more information on this seminar, please visit: www.adbi.org/event/5872.ito.distinguished.speaker/.

International Monetary System Reform

An alternative currency arrangement could serve Asian economies better, said Il Houng Lee, President of the Korea Institute for International Economic Policy, at an ADBI seminar on 16 October. As a group, Asian currencies under an Asian currency arrangement could become more flexible against the US dollar. In addition, this arrangement may also help boost Asian intraregional trade and reduce the burden of large reserves holdings. The Peoples Republic of China has the

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necessary economic conditions to support yuan internationalization, but needs to go a step further. The yen is convertible, but has not moved above a certain threshold. Both currencies role can be expanded as a reserve currency when supplemented by a few selective Asian currencies for current account transaction settlements in Asia.
A currency arrangement among Asian countries could reduce the burden of large reserves holdings

For more information on this seminar, please visit: www.adbi.org/event/5908.lee.distinguished.speaker/.

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Reshaping Europes Financial System

Guntram Wolff, Director of Bruegela leading European think tankassessed the European banking system in the aftermath of the 2008 global financial crisis at a seminar at ADBI on 1 November. Arguing for a broad reform agenda that

DISTINGUISHED SPEAKER

includes private recapitalization of weak banks and a single resolution mechanism, Mr. Wolff said European banks remain reluctant to lend to each other, leading to very different credit conditions across countries and inhibiting opportunities for economic growth in the region. As negotiations on measures to improve the European financial system continue, policymakers need to be aware that restructuring decisions today will undermine future financial stability if they are made without allowing for sensible cross-border mergers, and that such decisions will have to be accompanied by serious efforts to develop capital markets to ensure that the monetary union is sound in the medium term.
For more information on this seminar, please visit: www.adbi.org/event/5901.recent.dev.eu.neglected.side.bu/.

Enhancing Regional Cooperation in Asia

Asian output is expected to expand from $17 trillion (28% of global GDP) today to $174 trillion (54% of global GDP) by 2050, and regional cooperation and integration (RCI) will play a key role in making this happen, argued Rajat M. Nag, the Managing Director General of ADB, at a seminar on 29 November. While the first generation of RCI has been achieved relatively easily, the challenge is to make sure that connectivity results in a greater movement of goods and services, and ultimately people, for the ultimate objective of greater integration. As TPP and RCEP are reshaping the landscape of regional integration, Mr. Nag said that the challenge for policymakers in Asia is to break through political pressures and offer stronger commitment to reforms, which are required from all members in order to pursue harmonization and integration in the Asia and E-newsline Brings Asia to Your Inbox
For a daily wrap up of development news and events in Asia, subscribe free to ADBIs e-newsline. Concise summaries of news, opinions, and editorials

DISTINGUISHED SPEAKER

Pacific region. He concluded that the success of regional cooperation and integration in Asia will be mutually beneficial to the region and the rest of the world.
For more information on this seminar, please visit: www.adbi.org/event/6009.nag.distinguished.speaker/.

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Central Asias Participation in Global Supply Chains Key to Growth

WORKSHOP

Keio University Professor Fukunari Kimura, ADBI CBT Director Yuqing Xing, and Tongji University Professor Sidong Zhang assess the role of global supply chains and production networks in the economic development of Central Asia.

Central Asia has emerged as an important hub for global integration. Although trade among the Central Asian economies is small, diverse resources and many economic commonalities provide an opportunity for trade diversification and specialization, which can fundamentally change trade patterns in many Central Asian countries and lead to paradigm shifts in development policies. One such force is global supply chains (GSC) and production networks (GPN). To assess the basic concepts of GSC and GPN and their roles in formulating development strategies in the Central Asia Regional Economic Cooperation (CAREC) region, a workshop on Central Asias Participation in Global Supply Chains and Its Implications to Development Policies was

organized by ADBI and the CAREC Institute on 1214 November. The key outputs of the workshop included the sharing of best regulatory practices among Asian developing countries for integrating domestic industries with GSC and GPN, and policy recommendations for promoting GSC and GPN. Officials from the policy and regulatory agencies in CAREC countries attended the workshop. CAREC countries include Azerbaijan, the Peoples Republic of China, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Turkmenistan, Tajikistan, and Uzbekistan.
For more information on this workshop, please visit: www.adbi.org/event/5918.central.asia.participation.gsc.dev. policies/.

Recent Publications
Eco-Industrial Clusters: A Prototype Training Manual
Eco-industrial clusters are a geographic concentration of interconnected industries in a specialized field that cooperate with each other to efficiently share resources and information. Industrial clusters have emerged as a central idea for innovation and competiveness. As more efforts are made to foster eco-restructuring in rapidly industrializing Asia, the need to understand and train on the sustainability potential of these clusters has become urgent. This training manual is a pioneering effort to fill that need.
To download a copy of this manual, please visit: www.adbi.org/book/2013/12/31/6082.eco.industrial.clusters/.

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Upcoming Events
The 4th ADBI-OECD-ILO Roundtable on Labor Migration in Asia: Building Human Capital across Borders (Tokyo) The goal of this roundtable is to better understand how to improve national policies on cross-border migration in Asia. Public-Private Partnership in Infrastructure Development: Basics for Negotiation (Tokyo) This workshop aims to develop the capacity of civil servants in Asia in designing, implementing, and managing public-private partnership programs and projects. Role of Microfinance Programs in Promoting Financial Inclusion: Findings from Field Studies in India and Pakistan (Tokyo) This seminar will present findings on two research studies on the contribution of microfinance programs to financial inclusion goals in India and Pakistan.

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Recent Working Papers

The Trans-Pacific Partnership Agreement: Looking Ahead to the Next Steps
Author: Deborah Kay Elms
The Trans-Pacific Partnership (TPP) represents the chance to set a trade agenda across a wide range of topics for countries throughout the Asia and Pacific region. This paper argues that the agreement should not be settled in haste. Key decisions need to be reached about broader issues related to the institutional structure of the TPP. These decisions must be made now on issues such as how to create the TPP as a living agreement, the formation of a TPP Secretariat, and the clarification of entry conditions for future members.
Read Working Paper 447 at www.adbi.org/preview/working-paper/ 2013/12/20/6050.trans.pacic.partnership.looking.ahead/.

Exchange Rate Policy and Regional Trade Agreements: A Case of Conflicted Interests?
Authors: Richard Pomfret and Victor Pontines
This paper highlights the conflicting interests of countriesto stabilize exchange rates or to keep the option of exchange rate depreciation in order to maintain competitiveness of domestic tradable producers. With deepening integration in East Asia, the desire for exchange rate stability will eventually outweigh the desire to maintain a protectionist tool. How extensive the pressures will be in East Asia will depend on how many countries desire to be in the more integrated economic area.
Read Working Paper 436 at www.adbi.org/preview/working-paper/ 2013/10/08/5909.exchange.rate.policy.trade.agreements/.

Financial Crisis as a Catalyst of Legal Reforms: The Case of Asia

Authors: Masahiro Kawai and Henrik Schmiegelow
This paper discusses how financial crises in emerging Asia and Japan worked as catalysts for legal reforms. Findings show that six Asian countries pursued significant legal and judicial reforms following the 19971998 financial crisis, but indicators that measure the quality of legal institutions exhibit mixed results. Reforms of economic laws alone cannot improve the quality of entire legal and judicial systems of countries. What matters is the enforcement of substantive law by procedural law, the efficiency of the justice system, and other political and social factors.
Read Working Paper 446 at www.adbi.org/preview/working-paper/ 2013/11/22/6012.nancial.crisis.catalyst.legal.reforms.asia/.

Regional Trade Agreements and Enterprises in Southeast Asia

Author: Ganeshan Wignaraja
This paper takes a comparative and firm-level analysis of the impact of regional trade agreements (RTAs) in Indonesia, Malaysia and the Philippines. It finds that firm-heterogeneity matters in RTA use. Acquiring knowledge about RTAs, building technological capabilities, and membership of industrial clusters all affect RTA use at the firm level. Key policy implications include the need to improve business support for RTAs, to conclude RTAs with major trading partners, and to create a database on preference use in RTAs.
Read Working Paper 442 at www.adbi.org/preview/working-paper/ 2013/10/28/5920.regional.trade.agreements.enterprises/.

Supply Chains and Credit-Market Shocks: Some Implications for Emerging Markets
Author: Yothin Jinjarak
Focusing on the adjustment of working-capital financing, this paper finds two pieces of supporting evidence from international firm-level panel data covering the period 2002 to 2012. First, for industries where investment in the input supplier-customer relationship is large, firms are more exposed to credit-market shocks. Measures of global credit-market shocks are negatively associated with trade receivables, trade payables, and inventories, conditional on contract intensity in the industries where firms operate. And second, firms in emerging markets are more vulnerable to credit-market shocks than are firms in developed countries.
Read Working Paper 443 at www.adbi.org/preview/working-paper/ 2013/11/06/5979.supply.chains.credit.market.shocks/.

Monetary Policy Frameworks in Asia: Experience, Lessons, and Issues

Author: Peter Morgan
This paper reviews the history of East Asian monetary policy frameworks since 1990; describes current monetary policy frameworks, including issue of price versus financial stability for a central bank and the policies a central bank can use to manage financial stability; the monetary policy transmission mechanism based on financial linkages and financial deepening; assesses policy outcomes including inflation targeting and responses to the Impossible Trinity; and makes overall conclusions.
Read Working Paper 435 at www.adbi.org/preview/working-paper/ 2013/09/27/5902.monetary.policy.frameworks.asia/.

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Sri Lankan Journalist Wins 2013 DAJA Competition

Shamindra Kulamannage from Sri Lanka won the 2013 Development Journalist of the Year Award at the Asia Journalism Awards (DAJA). David Bryan Lozada from the Philippines won the Young Development Journalist of the Year Award. The winners were selected from more than 80 entries from across ADBs developing member countries by a distinguished panel of three independent judges comprising Presiding Judge Anthony

AWARDS

Rowley (Business Times, Singapore), Monzurul Huq (Prothorn Alo, Bangladesh), and Yoshio Murakami (International New York Times, Japan). Nineteen finalists from 11 developing countries in the Asia and Pacific region attended a two-day workshop in Tokyo organized by ADBI. The program culminated in the awards ceremony on 21 November at the Tokai University Club. The theme of DAJA 2013 was Regionalism in Asia versus Globalization. The forum provided selected journalists from ADB developing member countries with the opportunity to discuss the emergence of regional trade agreements influencing development in Asia. DAJA was established by ADBI in 2004 to build capacity among journalists working on key development issues. The annual awards honor the work and contributions of journalists engaging in the dissemination of knowledge related to poverty reduction and other areas that support the long-term growth in the Asia and Pacific region.
For more information on this event, please visit: www.adbi.org/event/5983.daja.awards.2013/.

Shamindra Kulamannage receives the 2013 Development Journalist of the Year Award from Dean Masahiro Kawai and Anthony Rowley.

Asia Pathways Posts Published

Where Should the Trans-Pacific Partnership Negotiations Go Next? Author: Deborah Elms The PRC in the Greater Mekong Subregion: Economic and Political Implications. Authors: Xiangming Chen and Curtis Stone How to Accelerate the Implementation of the Millennium Development Goals. Author: Venkatachalam Anbumozhi BRICS Countries Emerging as Major Aid Donors. Author: Cinnamon Dornsife New Challenges for ASEANJapan Relations: Celebrating the 40th Year of ASEANJapan Friendship and Cooperation. Author: Masahiro Kawai Developing Myanmars Knowledge Economy: Improving Higher Education Through International Cooperation. Author: Allan E. Goodman A Vision of Global Free Trade? The New Regionalism and the Building Blocs Debate. Author: Michael G. Plummer. Abenomics: Progress, Prospects and How the 2020 Tokyo Olympics Can Help Solve Japans Debt Problem. Author: Takatoshi Ito
View all Asia Pathways posts at www.asiapathways-adbi.org/.

Publisher: Yasuro Narita

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ADBI News reports quarterly on the activities of the Asian Development Bank Institute. The views expressed in this newsletter do not necessarily reflect the views or policies of the Asian Development Bank Institute or the Asian Development Bank. Materials may be reprinted with credit given to ADBI News. To send comments or to request a free subscription, e-mail adbinews@adbi.org; fax a message to +81-3-3593-5571; or write to ADBI News, Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. For the web version, go to www.adbi.org/newsletter/.