An Asian Century? Plausible, not Pre-ordained

Speech | 2 August 2011

Remarks by Haruhiko Kuroda, ADB President, at the Emerging Markets Forum, Hotel Grand Palace, Tokyo

I. Introduction

Secretary Odachi, Excellencies, distinguished guests, ladies and gentlemen. I am honored to be here this morning. I would first like to thank Mr. Watanabe and the Japan Bank for International Cooperation for hosting this meeting, an important forum for government and corporate leaders to discuss a range of significant issues.

It is thus appropriate that we launch here our book —Asia 2050: Realizing the Asian Century, a comprehensive exploration of the region's potential.

There has been keen interest in Asia 2050—not just regionally, but globally. Since we began this project in July last year, the world has gone through significant change. The recovery from the recent financial crisis and recession has underscored the divergence in economic growth between emerging and advanced economies. To many, it has solidified their view that there has been a seismic economic shift toward Asia. The Asian Century is upon us, they say.

Asia has indeed done very well over the past four decades. Millions have left poverty behind. The middle class has grown and become a force. China (PRC) and India have become economic powerhouses, while countries such as Indonesia, Thailand and Viet Nam are also finding success, climbing out of poverty towards middle income status.

But as we look forward to the next four decades, the future needs to be measured not in terms of Asia's recent past, but in the context of the problems it faces and the collective responsibility needed to address critical issues. Asia faces massive challenges that must be met to sustain our region's leadership in economic growth and poverty reduction. Given Asia's extremely diverse and complex social and economic landscape, our rapid—yet uneven—rise is predicated on vast opportunities and extraordinary hard work Simply put, while an Asian Century is plausible, it is far from pre-ordained.

II. The Challenges

The keen interest in this book partly emanates from vibrant debates, constructive criticisms, and other inputs from seven Asia 2050 conferences held throughout the region and elsewhere. Over 1,500 participants—representing governments, think tanks and universities, the private sector, multilateral organizations and other interested parties— took part in lively exchanges on Asia's future. Even with the book in hand, the process continues.

As we continue our march toward increased prosperity and a region free of poverty, we must resolve short-, medium-, and long-term challenges—“mega-challenges”. How do we simultaneously sustain rapid growth and narrow widening inequality? And how do these happen while mitigating environmental damage in the race for limited resources?

The next 40 years in Asia will be shaped by a number of macro picture risks that have the potential to undermine the region's prosperity. The risks are associated with the middle income trap, competition for finite natural resources, climate change, and rising urbanization. We must also meet the challenge of providing good governance, as well as developing strong institutions, which provide the foundations on which a healthy society is built. To confront these mega-challenges—and I assure you they are mega—bold and innovative national policies are needed.

The work done in preparing Asia 2050 actually provides a tool kit for identifying opportunities and avoiding pitfalls, which are constantly evolving. The book serves as a guide as to what may happen—whether positive or negative. Let me now discuss some of the ideas raised by the Asia 2050 book.

III. The Path Forward

Clearly, no single approach works for all. Asia's diversity means actions must be country-specific. Generally, however, we can say each country's national agenda should give high priority to inclusion and elimination of inequalities.

There are challenges of effectively managing rapidly expanding urban areas, promoting policies that support energy efficiency and diversification, and cultivating an environment that stimulates innovation and entrepreneurship.

How best to use, recycle, and regenerate resources will be critical to Asia's long-term competitiveness. How we handle vital resources such as water and food will determine whether we stay on the path of economic growth and development, or stumble into conflicts of scarcity. And we must manage the region's carbon footprint. Asia must take radical steps now toward investing in innovation and clean technology. This will ensure our quest for prosperity for all does not end in environmental gridlock.

Then there are the great challenges of governance and institution-building—the Achilles' heel for development. National leaders must govern by example. Transparency, predictability, accountability and enforceability should be the key elements of decision making and in turn, will strengthen the foundations of Asia's growth. These will raise productivity while promoting political stability, and with that, private sector confidence and investment.

Competent and honest government is the best way to efficiently deliver basic services—including education, health care, and social safety nets—especially for women and the poor.

Indeed, the pressure to improve governance and institutional quality must come from within. Changing demographics, urbanization, increasing demands of an expanding middle class, and the ongoing communications revolution will accelerate demand for stronger governance, as it has in other regions of the world.

IV. Regional Cooperation and Global Responsibility

I would now like to turn to a driver of Asia's transformation—that is, regional cooperation. National achievements across the region have been amplified by coming together in recent decades through dialogue, trade, and cross-border investment.

Regional cooperation and integration are central to Asian prosperity. Greater cooperation helps protect hard-won economic gains from external shocks. It also strengthens its voice in an ever-evolving global economic system.

Asia's rapid economic growth owes much to the development of webs of supply chains and production networks known as “Factory Asia.” These will only deepen as higher incomes go toward purchasing final products produced in Asia. Regional cooperation and integration should continuously target the free flow of trade and investment—one that is market-based and collaborative.

And the more Asians are business-friendly with each other, the more Asians will learn to trust each other. Without trust, little can be achieved in regional—or global—cooperation. Things may not always be “smooth as silk” so they say. But I believe regional cooperation is the bridge that will eventually link individual economies with the rest of the world.

This brings me to Asia's increasing global responsibility to help manage the global commons—whether in tackling climate change or maintaining international peace and prosperity. Global public goods—free trade, financial system stability, climate change, and security, to name some—are responsibilities we must embrace. As an emerging leader, Asia must lead by example, by being a responsible global citizen.

V. Conclusion

ADB commissioned the “Asia 2050” study to shed some light on critical longer term issues. The study presents two alternative scenarios of Asia's economic trajectory toward 2050—“the Asian Century Scenario” and “the Middle Income Trap Scenario”. They roughly sketch what is in store, given the policy choices and trade-offs that are to be made as we seek more inclusive and environmentally sustainable growth and development.

Let me stress that the Asian century is not only about Asia. It can be a century of shared global prosperity. Asians can take their place among the ranks of the affluent—on par with those in Europe and North America.

The challenges are formidable and there are many miles to go, before the horizon comes into view. We know the policies and strategies we must pursue have gestation periods spanning many decades. So we must get a head start. Asia 2050 is not a prescription. It was designed to be thought-provoking, stimulate debate, and keep us thinking even as we act with required urgency in preparing new plans.

National leaders must work together to ensure the best common denominator can support the regional and ultimately global commons. Prosperity is earned. Asia has indeed done well the past 40 years. Let us work together to ensure we stay on the path over the next 40 years.

It is now my privilege to present the first official copy of Asia 2050 to Secretary Motoyuki Odachi.

Thank you.