Welcome remarks by Haruhiko Kuroda, ADB President, at the South Asia Forum on Impact of Global Economic and Financial Crisis, Manila, Philippines
Honorable, ladies, and gentlemen. Good Morning.
It is my privilege to welcome His Excellency the former President of the Philippines, Mr. Fidel Ramos, Honorable Minister of Finance of Maldives, Mr. Ali Hashim, Mr. Michel Camdessus, Mr. Makoto Utsumi and Mr. Arun Shourie.
I am honored and thankful for the presence of the delegations from Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. I heartily welcome the distinguished speakers and experts from the private sector.
The participation of distinguished gathering lends significance to this Forum meant for exchanging views on the global economic and financial crisis, and its implications for South Asian economies. This Forum, a first among a series of forums, will put us all in a better position to further identify and understand the crisis, its effects and consequences, and the policy options available to South Asia to mitigate the impacts.
Before I have the special honor of handing you to our keynote speaker, I would like to offer some thoughts on the crisis impact and the role of multilateral agencies.
As the crisis unfolds, it is becoming apparent that no country could remain immune. While some countries in South Asia had relatively less exposure to the crisis through adverse effects on capital flows, they remain vulnerable to global economic slowdown through export earnings, remittances, and external financing of infrastructure.
Growth in South Asia decelerated in 2008, falling from 8.6% in 2007 to below 7% based on our estimate as of last December1. It is projected to decline further to around 6% or below2 in 2009, before recovering to around 7%3 in 2010. Even at these reduced growth rates, South Asia stands out compared to the recession in the developed economies. Nevertheless, with 900 million people in developing Asia surviving on $1.25 a day4 - more than half of those in South Asia - any tempering of growth is a serious case of concern.
We remain deeply concerned about four inter-related impacts of the global economic downturn on Asia. First, the economic slowdown would result in reduction of exports with the attendant effects, not only in export-oriented, value-added industries themselves, but in industries across the entire value chain. This impact could manifest itself in the form of unemployment and a reduction in GDP.
Second, the impact is being felt through the financial system. By this, I mean the outflow of foreign direct investment from Asia's financial and capital markets resulting in depressed domestic equity markets and contributing to conservative lending strategies.
The third impact relates to liquidity in domestic financial markets. If credit availability remains constrained, it is likely to be even more constrained for the lower end of the market, i.e., credit for labor-intensive small and medium enterprises and microenterprises with its serious impacts.
The fourth impact, though not fully evident yet, could be on informal social safety nets by virtue of reduced remittances received from overseas migrant workers as the host country economy slows down and capital expenditures are reduced.
While the distinguished guests and speakers will discuss country specific as well as regional level responses, it is my earnest desire that the hard won gains on poverty alleviation do not get diluted or even reversed as a result of one or some combination of the aforementioned impacts. We must protect the most vulnerable sections of our societies through targeted support for the poor and public spending that creates jobs while preserving macroeconomic stability.
Multilateral development banks also have an important role to play. We must work together to ensure that developing Asia has sufficient access to financing-through a mix of loans, grants, and credit guarantees. We must continue with our development agenda, especially in the critical areas of infrastructure, education, and health. ADB stands ready to play a larger role in channeling resources to developing Asia. In 2009, ADB is stepping up our operations by several billion dollars from the originally planned $12 billion in 2009 in spite of resource constraints, and endeavors to assist its developing member countries affected by the crisis by employing a combination of measures including targeted lending, greater use of guarantees, and enhancing cofinancing. However, for us to deliver our mission of poverty reduction in Asia more effectively, ADB needs an immediate and substantial capital increase, and we are asking shareholders to reach an agreement by the upcoming Annual Meeting in Bali in May.
In closing, I would like to convey my appreciation to our distinguished speakers at this Forum. Drawing on both international and country-specific experiences will help us all to better understand the impacts of the crisis and identify what more needs to be done to mitigate its effects.
We are of the view that there are common factors - possibly even a regional dimension - to the crisis. Convening a forum to discuss the impact across countries in the South Asia region will serve not only to share experiences among policymakers but to strengthen the policy response to significantly lessen and soften the adverse impact of the global crisis.
I thank ADB staff for their hard work in organizing this event, and I wish all of you a lively and productive discussion.
Mr. Camdessus, may I now invite you to the podium to share with us some of your experience in maintaining global economic stability in your previous position as the Managing Director of the International Monetary Fund and in your present position as the Honorary Governor, Banque de France.
1 C6.8% according to ADB's Asian Economic Monitor (AEM), December 2008.
2 6.1% according to ADB's AEM, December 2008, and 5.4% according to the World Bank's Global Economic Prospects (GEP) 2009, December 2008.
3 7.2% according to WB's GEP 2009, December 2008.
4 2005 PPP.