2008 Pan-Beibu Gulf Economic Cooperation Forum
Opening Statement by
C. Lawrence Greenwood, Jr.
Vice President, Operations 2
Asian Development Bank
30 July 2008
Beihai, People's Republic of China
I. Introduction
Your Excellencies, distinguished participants, ladies and gentlemen:
It is an honor for me to join in welcoming you to the 2008 Pan-Beibu Gulf Economic Cooperation Forum held in this beautiful city of Beihai. Asian Development Bank has been privileged to be one of the co-sponsors of this important forum since its inception. I sincerely thank the Government of the People's Republic of China and of Guangxi Zhuang Autonomous Region for the wonderful arrangements and the warm hospitality extended to all of us.
Taking this opportunity, on behalf of ADB, I would like to express our deep condolences for the victims of the recent earthquake in Sichuan. As a development partner for more than two decades, ADB stands with the people and the Government of the People's Republic of China at the time of this hardship. We are deeply impressed by the pace, scale, and effectiveness of the rescue and relief operation and early recovery efforts. ADB will continue to work with the PRC Government and provide support to the post-disaster reconstruction program through lending and technical assistance.
II. Asia's Economic Outlook, Risks, and Policy Challenges
This year's Pan-Beibu Gulf Forum is held against the backdrop of an uncertain global economy. Let me share with you some of ADB's views on Asia's economic outlook, risks and policy challenges.
Asia has emerged as a major force in the world economy and achieved remarkable progress in economic and social development. East Asia, in particular, is one of the most dynamic regions in the global economic landscape. For the last 3 years, Asia's emerging economies, led by the PRC, have maintained strong GDP growth, which peaked at 8.7% in 2007. For 2008, we expect somewhat slower but still strong growth of 7.6%, with the PRC still growing around 10% despite the impact of the global slowdown and natural disasters. The large ASEAN economies will expand about 5.6%. The Asian newly industrialized economies are forecast to grow slightly below 5%.
Despite this relatively robust growth outlook, we still see several downside risks.
First is a sharper than expected slowdown in the US and other industrialized economies. We estimate that a 1% reduction in US growth will translate into a 0.5% drop in aggregate growth in Asia.
Second is an escalation in the global financial instability that started with the US subprime market crisis.
Third is the continued rise in inflation, spurred by energy and food prices. This may be the biggest risk for Asia at the moment.
Rising prices present difficult choices for Asian policy makers. Rising fuel and food prices are cutting into domestic consumption, slowing growth, lowering standards of living, causing special hardship for the poor. Price hikes also place greater pressure on fiscal policy as countries try to shield citizens, especially the poor, from their full impact. At the same time, Asian countries face potentially even more serious problems as second-round domestic price hikes work their way through their economies. Allowing high headline inflation to translate into high core inflation would damage growth prospects in Asian economies for years to come.
Simultaneously managing slower domestic growth, fighting inflation and reducing poverty is, to say the least, a daunting task. While the precise policy response will differ depending on each country's circumstance, the mix will certainly include tighter monetary policy, more flexible exchange rates, and more investment in agriculture, energy efficiency, and infrastructure. Establishment of social safety nets is also critical to cushion the impact of higher prices on the poorest and most vulnerable.
It is also important not to let the current uncertainty, which arises fundamentally from the ongoing adjustments of international trade and financial imbalances, delay or derail ongoing trade, investment and financial integration of Asian economies. Integration has been indispensable to Asia's success in the past two decades and we must maintain the momentum towards even fuller integration within Asia and between Asia and the world. In fact, no country can address these kinds of challenges alone.
Collective effort is needed now more than ever. This brings me to the reason we are gathered here today as we explore how we can promote the integration of economies that stretch from southern China to the tip of Indonesia.
III. ADB's Strategy 2020 and Regional Cooperation
For ADB, promoting regional cooperation and integration is a top priority. In April of this year, our Board of Directors approved a new long-term strategic framework-Strategy 2020, under which regional cooperation is highlighted as one of five core operational areas.
In line with this new strategic agenda, we will scale up our support for regional cooperation and integration. First, we will increase both the volume of regional cooperation and integration operations and their share in total operations. Increased financial resources will be geared toward regional and subregional projects and programs that accelerate growth and economic partnerships. In particular, we will focus on developing cross-border infrastructure and related services, facilitating cross-border trade and investment, promoting regional monetary and financial cooperation, and providing regional public goods. For example, ADB secured from donors in May 2008 agreement to double the amount of highly concessional financing from our Asian Development Fund to be earmarked for regional projects.
Second, we will expand the creation and dissemination of knowledge and information on regional cooperation and integration to developing countries.
Third, we will further support developing countries and regional bodies in building their institutional capacity to better manage regional cooperation and integration.
And fourth, we will strengthen our role as a catalyst and coordinator of regional cooperation.
We believe strongly in the power of regional and subregional initiatives to enhance stability, increase prosperity, and improve the lives of the poor. By 2020, we project that such initiatives will account for at least 30% of ADB's operations.
IV. Regional Cooperation in East Asia
In this context, I would like to touch briefly on regional cooperation in East Asia.
Over the years, ADB has supported a host of subregional cooperation initiatives and programs in East Asia, including the Greater Mekong Subregion Economic Cooperation (GMS), Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and more recently cooperation in the archipelagic Southeast Asia (aSEA) and, of course, the Pan-Beibu Gulf.
Historically, progress in regional cooperation and integration has varied across Asia. East Asia has been at the forefront in terms of both pace and achievements. Today, intraregional trade makes up for 55% of Asia's total trade, up sharply from about 43% in the early 1990s. East Asia accounts for most of that increase. In addition, East Asia's intraregional investment now accounts for about 60% of its total foreign direct investment flows, which more than tripled over the past two decades. Financial integration has also advanced steadily. More visibly, cross-border roads, railways, transmission lines and fiber optical network are being built. Coupled with government agreements to reduce customs and transport barriers, this improved connectivity is rapidly bringing markets and people in the region even closer together.
Regional cooperation and integration in East Asia has been both market-led and government-nurtured. Its multi-track, multi-speed, step-by-step approach has allowed different countries to proceed in light of their own needs and state of development. It has also featured a healthy pragmatism which puts more focus on achieving results on the ground. Moreover, cooperation in East Asia has proceeded substantially at subregional levels, which we believe is a logical way to move forward given the region's size and diversity. These approaches have worked well in the past for East Asia, and should continue to guide cooperation efforts in the future.
V. Conclusion
The Forum on Pan-Beibu Gulf Economic Cooperation represents the newest opportunity for subregional cooperation in East Asia. The specific focus is on promoting subregional cooperation in the Pan-Beibu Gulf, covering Southern coastal provinces of PRC, Viet Nam and the oceanic countries of the ASEAN including Brunei, Indonesia, Malaysia, the Philippines, and Singapore. This Forum, in our perspective, will be an important complement to the ongoing regional and subregional cooperation initiatives in East Asia.
One important point of complementarity of the Pan-Beibu Economic Cooperation is its emphasis on maritime-based cooperation. Improving ocean-going trade, port development, and maritime-related private sector investment will complement the GMS efforts to promote connectivity over land. ADB supports programs in maritime connectivity, under the auspices of ASEAN, especially in the sub-regional initiative BIMP-EAGA, involving Brunei Darussalam, Indonesia, Malaysia, and the Philippines. We would be glad to try and see if the work we are doing in this part of Pan-Beibu cannot be used more widely. As China's only coastal province which remains relatively under-developed, Guangxi has enormous potential for growth and trade and investment ties with Asia and beyond.
ADB stands ready to assist as this new economic partnership evolves in the future. I wish the Forum every success.
Thank you very much for your attention.
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