(HONOLULU (Nov. 9, 2011) -- The president of the Asian Development Bank said today that the greatest challenge for Asia's developing countries to strengthen regional and global economies is to realign their "sources of growth toward more domestic and regional demand."
"This will help keep the region's economies strong while providing opportunities for other regions of the world," said Haruhiko Kuroda, speaking at an event co-sponsored by the East-West Center and held in conjunction with the APEC 2011 Leaders Week. "It will also contribute to the orderly resolution of global imbalances."
Kuroda gave the keynote luncheon address at the Asia-Pacific Business Symposium, co-sponsored by the EWC and Pacific Basin Economic Council with support from the APEC 2011 Hawaii Host Committee. Leaders of the 21 economies that belong to the Asia-Pacific Economic Cooperation (APEC) are gathering in Honolulu, Hawaii, this week.
Asia's developing countries account for less than one-third of global GDP but contribute more than half of global economic growth, Kuroda said. The region's GDP grew 9 percent last year, and the ADB forecasts a growth of 7.5 percent in both 2011 and 2012.
The biggest risk for the region's growth is potential spillovers "should Europe hit a financial tripwire or the US recovery stagnate," he said. "It is therefore critical for Asia to rebalance its sources of economic growth by generating more domestic and regional demand, without undermining the benefits of its earlier successful export strategy."
Kuroda emphasized that this did not mean reducing "Factory Asia's supply of products to advanced economies. Rather, it means reducing reliance on external demand as growth generator" and increasing imports from trading partners. "With its significant savings, Asia can drive and sustain growth through investment -- in physical, environmental and social assets and through consumption."
He said the potential for profitable infrastructure investments "is enormous." An ADB study estimates that developing Asia needs $8 trillion in infrastructure investment through 2020. "Carefully constructed multi-stakeholder public-private partnerships can help supply these enormous investment demands while creating jobs and reducing poverty," he said.
Kuroda named other challenges in developing Asia including:
-- Ensuring that infrastructure investment helps narrow the urban/rural divide. "Bringing market access closer to rural or isolated regions will ignite untapped production and latent demand," he said.
-- Emergence of a large, rapidly growing urban middle class. Kuroda said this will hinge on the "dynamism of Asian enterprises," especially small and medium-sized enterprises, or SMEs, “because most Asian workers depend on SMEs for their livelihoods." In manufacturing the share of employment in SMEs ranges from about 50 percent to 90 percent, he said, and trade finance must be available to support such enterprises.
-- Economic and social consequences of climate change. An ADB study focusing on Southeast Asia estimates that if nothing is done to tackle this problem, the total cost of climate change for Indonesia, the Philippines, Thailand and Vietnam could reach 6.7 percent of their combined GDP each year by 2100. "Sustainability cannot be achieved unless the world moves onto a low-carbon and climate-resilient 'green' development path that embraces both mitigation and adaptation," Kuroda said.
He said Hawaii was a symbolic place to hold the APEC meeting: "Hawaii sits in the geographic center of the Asia-Pacific region, connecting people, places and economic opportunities. It represents a bridge between North America and Asia, and between Asia and Latin America -- a region with huge potential for closer economic ties with Asia. And this is what APEC is all about -- strengthening and expanding the economic relationships between the 21 APEC members during this 21st century."