New Challenges and Opportunities in Asia: Asia and Europe Growing Together: Is it Possible?
Statement by
Philippe Bénédic
Resident Director General
European Representative Office
Asian Development Bank
At the German-Asian Business Circle "Asia-Pacific 2007" New Year Reception
Frankfurt am Main, Germany
26 February 2007
Excellencies, ladies and gentlemen,
It is a privilege to share views with you today about new challenges and opportunities in Asia. On behalf of the Asian Development Bank, I would like to express our sincere thanks to Mr. Bodo Krüger, President of the German-Asian Business Circle and his colleagues, for inviting us to join this distinguished audience.
The keynote question "Asia and Europe growing together: is it possible?" is a highly debated one because Asia is often perceived as a threat to the European economies. Asia's rapid economic growth is indeed a challenge, but we believe that it is, first and foremost, a great opportunity for Europe.
Let me introduce briefly the Asian Development Bank. Based in Manila, the Philippines, ADB is a multilateral development bank exclusively focused on Asia-Pacific countries and dedicated to reducing poverty in the region. Established in 1966, it is owned by 67 countries, 48 from the region and 17 from Europe, including Germany. Under President Haruhiko Kuroda, ADB has considerably strengthened its operations and adjusted to new needs in Asia.
ADB provides long term financing and approved $8.6 billion loans, grants, equity participation and guaranties in 2006, contributing to about $15 billion total investments in the region. Through its catalytic role and strong relationship with Asia-Pacific countries, ADB also plays a major role to facilitate public and private investments in the region. Cofinancing with European partners is a major aspect of ADB operations with an average of $400-500 million cofinanced each year by European public and private partners.
I. Rapid Economic Transformation in Asia
As you know, the entire Asia continent is in the midst of unprecedented transformation. With China's GDP growth averaging 9-10%, India accelerating to 7-8% and other Asian countries catching up, economic growth in Asia is expected to remain robust around 6-7% a year if the global environment remains favorable, and internal and global risks are managed carefully.
Remarkably, Asian economic expansion is now based on three pillars: vibrant exports, rapidly increasing intra-regional trade and large domestic demand.
As highlighted in ADB's 2007 annual economic forecasts, Asian Development Outlook (ADO) to be launched end of March, Asian economies have intensified structural reforms to improve their resilience and their competitiveness. They have also taken major steps to accelerate regional economic and financial integration as emphasized during the recent East Asia Summit held in Cebu, the Philippines.
Asia's share of world trade has doubled over the last 25 years from 15% to 30%. Intra-regional trade has risen from 43% of Asia's total trade in 1990 to 55% in 2005 - only modestly lower than the 62% figure for the former 15 European Union countries.
There is enormous potential to build on this success, but the recent proliferation of bilateral and regional trade agreements (81 have been signed and 100 more are either under negotiation or proposed) leading to the so-called "noodle bowl effect" has raised concerns in the wake of the suspension of multilateral trade negotiations.
Foreign trade investments in developing and emerging countries have concentrated in Asia where they represent $230 billion a year out of a total of $380 billion, particularly in People's Republic of China ($70 billion); Hong Kong, China ($40 billion) and Singapore ($30 billion).
As a result of large current account surpluses, foreign exchange reserves in Asia including Japan represent 64% of the world total ($2.9 trillion out of $4.5 trillion) with China's reserves alone exceeding $1 trillion and growing by almost 250 billion a year.
Despite increased investment rates, savings have accumulated in the region and financial markets are under pressure. Emerging countries have themselves become donor countries and Asian companies have increasingly invested in European and North American corporations and financial markets. Without any doubt, Asia has become a key global player and will play a major role in the adjustment of global imbalances.
II. New Challenges in Asia
Despite impressive progress, Asian countries face major challenges. Two thirds of the world's poor still live in Asia, i.e. 1.9 billion people earn less than $2 a day. Increased disparities among and within countries could jeopardize social and regional balance.
Maintaining robust economic growth to generate job opportunities and further reduce poverty will imply huge infrastructure investments estimated, for example, at $300 billion a year in both India and East Asia.
Energy efficiency is notoriously low in many Asian countries and current trends cannot be sustained. Energy savings and renewable energies urgently need to be developed to reduce the global impact of Asia's rapid economic growth on energy sources and climate change. Similarly, rapid urbanization and water resources management are critical challenges.
Improved access to international financial markets will require further progress in corporate governance and risk management.
From a broad perspective, emerging Asia is fully aware of its new role and increased responsibilities as a key world player. We believe it will ensure careful balance with other countries in the region and further promote internationally established standards.
III. Europe and Asia Growing Together?
Faced with increased competition from Asia, protectionism would certainly not be the solution for Europe. However, decision makers have to address the critical question of whether jobs created in Asia are necessarily jobs lost in Europe? In other words, will job losses be balanced by new job creation and economic opportunities? Yes, we believe that Asia and Europe can grow together.
Asia's rapid economic growth is clearly a challenge to the global economy and environment in many ways, but European investors, consumers and workers can benefit from Asia's growth and exploit such new opportunities for a number of reasons:
First, low production costs in Asia translate into lower consumer prices keeping inflation and interest rates moderate and boosting domestic demand. With rising living standards and improved social protection in Asia, labor costs will however adjust upward and the gap with European countries will be progressively reduced.
Second, Asian unsaturated markets of over 4 billion consumers and growing income provide huge export opportunities, European companies are particularly competitive for high value manufactured products and infrastructure investments.
Third, European partners have comparative advantages and know how to help Asian countries address new challenges in the energy, transportation, water and environment sectors which also have a global impact.
Fourth, European companies investing in Asia improve their competitiveness, take advantage of regional markets in Asia and generate new job opportunities and revenues in Europe. To maintain their competitive edge and comparative strengths, more strategic investment in R&D are, however, urgently needed.
Fifth, developing Asia can learn from European experience how to combine economic growth with environmental protection, balance urban and rural development, promote regional economic integration and build up strong corporate, legal and welfare systems. All these are necessary conditions for sustainable economic development.
Finally, from a political and strategic perspective, Europe and Asia have a common interest in supporting multilateral dialogue and constructive engagement to ensure peace, stability and security in the region.
IV. Business Opportunities for Germay
The private sector in Germany is in a good position to contribute to this growth and benefit from it at the same time. Since Germany joined ADB in 1966, German companies and consultants have been awarded almost $3 billion in procurement contracts on ADB-financed projects. Over the past 20 years German consultants were involved in almost 5,200 contracts for ADB projects. In both procurement and consulting services, Germany ranked 8th place among the 67 member countries.
ADB website www.adb.org provides practical information on Country Strategies and Programs (CSPs), ADB operations and future business opportunities, including procurements, cofinancing and direct investments.
Excellencies, ladies and gentlemen,
We believe all these are strong reasons for Asia and Europe to unite their forces to ensure harmonious Asian integration in the world economy and shared prosperity.
As a strategic partner in Asia and the Pacific, the Asian Development Bank will be pleased to support public and private European partners. We are, therefore, looking forward to our enhanced cooperation.
Thank you.
News and Events 
Top of page
