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A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

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ADBI News 2010 Volume 4 Number 1

Time to Reform the Global Currency CONFERENCE
Reserve System?

The world is headed toward a multiple reserve currency system, and the challenge is to ensure stability during the transitory
period. ADB President Kuroda (far left), ADBI Dean Kawai, Nobel Laureate Joseph Stiglitz, and renowned economist Jeffrey Sachs
discuss the future of the global reserve system.

The global financial crisis has cast a range of Columbia University; Charles Wyplosz, director of
challenges to the world, including the future shape the International Center for Money and Banking
and reform of the global reserve system. A well- Studies at The Graduate Institute in Geneva;
functioning global reserve system is vital to Haruhiko Kuroda, president of ADB; Masahiro
international trade and capital flows, regional Kawai, dean of ADBI; and Jong-Wha Lee, chief
integration and cooperation, and sustainable
economic growth.
In this issue
The evolution of this system will have profound
implications for Asian economies. The region holds
over half of the world’s total foreign exchange
reserves, and is highly dependent on international
trade and capital flows for its prosperity.
The global crisis has also provided fresh
momentum to the long-standing issue of reforming
the global reserve system. It has sparked debate
among academics and policymakers on a number
of key questions: Is the current system unstable? Is
it inefficient? And what role did the US dollar-
dominated system play in the crisis?
Internationally recognized scholars explored
these questions with Asian and US researchers at
ADBI on 17–18 March in Tokyo. The speakers
included Joseph Stiglitz, Nobel Laureate and
professor of economics at Columbia University;
Jeffrey Sachs, director of The Earth Institute at

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economist at ADB. The conference, The Future around Europe. In the longer run, the yuan’s role
Global Reserve System—An Asian Perspective, will also grow, especially in Asia.
was part of an ongoing research and technical Conference participants agreed that Asia will
assistance project initiated by ADB and Columbia play a critical role in building a stable global
University’s Earth Institute. reserve system. Global reserve pooling should be
Most participants agreed the US dollar will the first best choice for a stable global reserve
remain the main reserve currency well into the system, and regional reserve pooling is the second
future, although with a diminishing weight. But the best. However, with the difficulty in reaching a
world is headed toward a multiple reserve currency global agreement, deepening regional reserve
system, and during the transition period the global pooling in Asia could be a practical choice. ■
reserve system could be unstable. In the short run, See more details about the conference at www.adbi.org/
the euro will gain market share, especially in and event/3634.conference.global.reserve.system.asia/.

Post-crisis Issues: Views from Asia and Europe FORUM

The fifth Asia Europe Economic Forum (AEEF) Participants agreed that while developed
met on 25 March in Tokyo and was hosted by the economies have started to recover, the process
Japanese Ministry of Finance. The AEEF examined remains fragile. A key policy challenge is to sustain
post-crisis issues including economic recovery and the recovery while withdrawing policy stimulus to
exit strategies, rebalancing growth, global currency minimize adverse impacts on long-term growth.
adjustments, and governance of the Group of 20 Participants agreed this would require major
from both Asian and European perspectives. structural economic reforms to be undertaken by
economies in both Europe and Asia.
The conference brought together a broad range
of participants including active and former senior
policymakers, recognized academic experts, and
private sector specialists from Asia and Europe. It
was co-organized by forum members Bruegel,
Centre d’Etudes Prospectives et d’Informations
Internationales, Kiel Institute for the World
Economy, ADBI, Chinese Academy of Social
Sciences, Keio University, and Korea University. ■

Mr. Hiroshi Ogushi, Parliamentary Secretary for Finance, See more details about this conference series at
Japan, gave welcome remarks at the AEEF this year. www.adbi.org/event/3649.asia.europe.economic.forum/.

Sustaining the Euro Area’s Recovery DISTINGUISHED SPEAKER

Ignazio Visco, deputy director general of the Bank
of Italy, shed light on the eurozone’s pressing
challenges, with a focus on four points that will
shape the EU’s recovery and the strength of the
monetary union: recovery and monetary policy, the
fiscal outlook, imbalances and domestic demand,
and re-absorbing the unemployed and fostering
growth. Mr. Visco recognized the urgency of
fundamental structural reforms to raise potential
output in the eurozone that would create room for “There is an urgent need for fundamental structural reforms to
monetary policy actions without raising inflation. raise potential output in the eurozone.”

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Unless new structural measures are adopted that short-lived, in Mr. Visco’s opinion. ■
would shift demand from deficit to surplus Read a more detailed summary of this event at
countries, recovery in the eurozone is likely to be www.adbi.org/event/3462.visco.distinguished.speaker/.

The Great Depression and the Global DISTINGUISHED SPEAKER
Financial Crisis: Spot the Difference

To avoid protectionism, stimulate the domestic active country not the passive country, as in the
economy—that was a key message from Barry 1930s, that has an incentive to destroy trade. ■
Eichengreen, George C. Pardee and Helen N.
Pardee professor of economics and professor of
political science at University of California,
Berkeley, at an ADBI seminar on 3 March. In
discussing the similarities and differences between
the Great Depression and the current global
financial crisis, Mr. Eichengreen noted that in the
1930s, stimulus meant monetary stimulus, which
benefited the initiating country at the expense of its
trading partners. Today, countries have been
applying fiscal stimulus policies that benefit their
The active country, not the passive country as in the 1930s,
neighbors. But the initiating country, seeing has an incentive to destroy trade.
neighbors who are free-riding, has an incentive to
Read a more detailed summary of this event at www.adbi.org/
resort to protectionist measures. Now it is the event/3458.eichengreen.distinguished.speaker/.

Formulating US Trade DISTINGUISHED SPEAKER
Policy and Strategy

US President Barack Obama is confronting a range
of political and economic challenges amid a global
recession as he tries to formulate US trade policy
objectives and a strategy to achieve them, Clayton
Yeutter, former US trade representative and
secretary of agriculture, said in a seminar on 23
March. A key plank of the strategy will be the
newly launched National Export Initiative, which
aims to double US exports to US$3 trillion over
the next five years. Mr. Yeutter noted that an open,
rules-based trading system has brought major gains
to US producers and consumers, and concluded
that inaction on trade is highly costly to the US
The need for the US to have a trade policy that supports an economy. ■
open, rules-based trading system, in the past has brought
major gains to both US producers and consumers, leading to Read a more detailed summary of this event at
higher living standards. www.adbi.org/event/3635.yeutter.distinguished.speaker/.

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Adjustment to Trans-Pacific SEMINAR
Payments Imbalances

The ongoing global financial crisis is forcing the PRC, as well as a broader audience of
adjustment to trans-Pacific payments imbalances, government officials from Asia and the US,
accompanied by an excessive contraction of multilateral agencies, and academia.
economic activity and rising unemployment. This Participants agreed that global rebalancing
is clearly not a desirable way to reduce imbalances. would not occur automatically and that appropriate
A conference on Trans-Pacific Rebalancing, policy actions would be crucial. The conference
held on 3–4 March at ADBI, discussed factors that highlighted the need for international collective
would achieve balanced, sustainable growth in Asia action in this area given the importance of the
and the US, and the policy implications of these global rebalancing issue in the context of achieving
adjustments in both regions. Participants included strong and sustainable growth. ■
experts from ASEAN economies, the US, India, Read a more detailed summary of this event at
Japan, newly industrializing Asian economies, and www.adbi.org/event/3460.trans.pacific.rebalancing/.

11th OECD-ADBI Roundtable on CONFERENCE
Capital Market Reform in Asia

More than 100 representatives from government, To better monitor and manage systemic risk,
the business and financial sectors, and academia macro-prudential supervision should cover all
from Asia, the US, and Europe joined the 11th activities posing systemic risk. Financial regulation
OECD-ADBI Roundtable on Capital Market should be extended to all complex financial
Reform in Asia on 22–23 February to discuss exit products and address conflicts of interest by
strategies, financial regulatory reform, growth
rebalancing, and post-crisis capital market
development strategy.
Appropriate timing of monetary tightening and
unwinding of fiscal support is considered crucial to
sustaining economic growth and maintaining its
stability. Unwinding public support or tightening
monetary policy too soon will risk reversing the
course of economic recovery, while maintaining
monetary easing and fiscal stimulus for too long
may lead to inflation, asset price bubbles, and Unwinding public support or tightening monetary policy too
unsustainable public finance. soon could risk reversing the course of economic recovery.

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securities issues, ratings agencies, and advisors enabling role in reducing corporate savings and
in the distribution chain. Financial market promoting rebalancing of growth in Asia. ■
liberalization and reform including improved Read a more detailed summary of this event at www.adbi.org/
corporate governance can play an important event/3430.adbi.oecd.roundtable.asia.economy/.

New Policy Proposals for FORTHCOMING PUBLICATION
Post-crisis Growth

What are the implications of the global financial The book’s analysis and policy measures cover
crisis for Asia? What policy actions can help the five major areas: enhancing macroeconomic
region achieve balanced, inclusive, and stability through improved policy frameworks;
environmentally-friendly growth? These questions rebalancing production via deregulation,
lie at the core of Rebalancing for Sustainable investment incentives, and liberalizing regional
Growth: Asia’s Post-crisis Challenge, a trade; enhancing social protection via improved
forthcoming book by ADBI and ADB. Key social safety nets and investments in education and
findings will be presented at ADB’s Annual health; deepening financial system by reducing the
Meeting in Tashkent on 3 May. risk of systemic crises and expanding financial
With developed country export markets likely markets; and forging regional cooperation in areas
to slow, the book argues that Asia’s export-led such as liquidity provision, trade, and
growth strategy needs to be re-oriented toward macroeconomic policy. ■
greater reliance on domestic and regional demand.

Assessing the Outlook for WORKSHOP
Public-Private Partnerships

Public-Private Partnership (PPP) Days 2010
brought more than 250 public sector officials from
40 countries to Manila from 22–24 March to
review the impact of the global financial crisis on
PPP activities, the outlook for PPP projects in the
short and medium term, and the implications for
government policies.
The environment for PPP projects in Asia and
globally has been severely impacted by the
financial crisis. Despite the recent challenges,
governments around the region are increasingly
interested in the potential of PPP modalities to
develop public infrastructure. The event
highlighted the critical importance of developing
sound regulatory and legal frameworks for PPP
transactions as competition for investment funds
intensifies.
The event was organized by ADB and the
World Bank Institute, with support from ADBI;
Department of Finance, Philippines; Development
Academy of the Philippines; International Finance
Corporation; Inter-American Development Bank’s
Multilateral Investment Fund; and World Bank.
Materials are online at www.pppnetwork.info. ■
ADB Managing Director General Rajat Nag highlighted the
potential of public-private partnerships to help meet Asia’s Read a more detailed summary of this event at
vast infrastructure investment needs. www.adbi.org/event/3456.ppp.days.2010/.

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Library of Congress Selects ADBI WEB UPDATE
Website for Web Harvesting Project

The US Library of Congress will include ADBI’s
website in its historic collection of Internet
materials. It will gather content from ADBI’s
website at regular intervals and make it available
to researchers at Library of Congress facilities
and though the Library’s website at
www.loc.gov/webarchiving/. The collection
preserves important digital resources for
education and scholarship.
ADBI working papers are now systematically
posted on the Research Papers in Economics
(RePEc) and the Social Science Research Network
(SSRN) databases. RePEc is a collaborative effort
of volunteers to disseminate research in
economics. All RePEc material is freely available. Follow ADBI on Twitter, where we
SSRN disseminates social science research. It announce new research, events, and
consists of databases containing abstracts of speeches. Visit our page at
scholarly working papers and electronic paper www.twitter.com/ADBInstitute.
collections of downloadable documents. ■

Good Policy Requires Good Numbers WORKSHOP

The global financial crisis has progressively
become a global jobs crisis. ASEAN economies
have been relatively strong performers through the
crisis, but their jobs markets have not been spared.
Unemployment and the number of working poor
seem to have risen sharply.
Yet most ASEAN policymakers cannot
accurately gauge the extent of the jobs crisis in
their countries. They lack the necessary, reliable,
timely, and consistent labor statistics.
A workshop on Labor Market Information
and Analysis in Brunei Darussalam on 2–4 March,
organized by ADBI, the ASEAN Secretariat, and
the International Labor Organization, initiated
dialogue among policymakers on main economic
indicators, decent work, labor market analysis, and
trade, migration and labor markets. Participants
agreed to take this work forward through a specific
program in order to realize the ASEAN Socio-
Cultural Blueprint’s goal to “enhance capacity of
governments to monitor labor markets and human
resource indicators, and design social impact
policies.” ■
Reprinted with permission from The Brunei Times. Read a more detailed summary of this event at
www.adbi.org/event/3432.labor.market.info.analysis.asean/.

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Selected Upcoming Events

ADB Annual Meeting (Tashkent)
As many as 3,000 participants, including heads of state, finance ministers, central bank governors, and
1–4 May representatives from the private sector, academe, media, and civil society are expected to attend ADB’s
43rd Annual Meeting. This will be the first ADB Annual Meeting held in Central Asia.
www.adb.org/AnnualMeeting/2010/

Post-crisis Agenda for Asia (Tashkent)
This seminar will examine approaches to rebalancing growth in Asia toward domestic and regional
demand. Rebalancing will be critical given expectations that exports to developed economies will remain
3 May sluggish and global payments imbalances are not sustainable. ADBI has conducted a series of workshops
on related issues in the past year and will publish a book on this subject in the months ahead.
www.adbi.org/event/3642.postcrisis.agenda.asia/

Corporate Environmental Management: From Policy to Practice (Bangalore)
Across Asia, governments are actively engaging the private sector to integrate their organizational
strategies with environmental and social approaches to development. This program will help government
3–6 May
officials and managers in public and private sector organizations develop a strategic approach to dealing
with environmental issues in a collaborative manner.
www.adbi.org/event/3653.corporate.environmental.management/
View all upcoming events at www.adbi.org/calendarofevents.

Recent Working Papers

Regulating Systemic Risk The Costs of Achieving the Millennium Development Goals
Masahiro Kawai, Michael Pomerleano through Adopting Organic Agriculture
The failure to spot emerging systemic risk and prevent the Anil Markandya, Sununtar Setboonsarng,
current global financial crisis warrants a reexamination of Qiao Yu Hui, Rachanee Songkranok and Adam Stefan
approaches taken so far for crisis prevention. The paper argues Using four case studies (Wanzai, PRC; Wuyuan, PRC; Kandy,
that financial crises can be prevented because of their long Sri Lanka; Ubon Ratchathani, Thailand), this paper provides
build up over time caused by policy mistakes, and their estimates of the costs of organic agriculture programs, and sets
eventual “slow motion” eruption. them in the context of the costs of attaining the UNs’ MDGs.
Read WP 189 at www.adbi.org/working-paper/ Read WP 193 at www.adbi.org/working-paper/
2010/01/27/3447.regulating.systemic.risk/. 2010/02/09/3455.cost.mdg.organic.agriculture/.

Accelerating Regional Integration: Issues at the Border Investigating the Effect of Exchange Rate Changes on the
Douglas H. Brooks, Susan F. Stone People’s Republic of China’s Processed Exports
The recent crisis offers an excellent opportunity to make Willem Thorbecke
progress on facilitating intra-Asian trade and boosting the Many argue that the yuan needs to appreciate to rebalance the
region’s contribution to global economic recovery. This paper PRC’s trade. However, empirical evidence on the effects of a
examines the status of, and challenges to, trade facilitation yuan appreciation on the PRC’s exports has been mixed for the
among the Asian APEC members, and the roles of hard and largest category of exports, processed exports. This paper
soft infrastructure in improving that performance. finds that exchange rate appreciations across supply chain
Read WP 200 at www.adbi.org/working-paper/ countries would cause a much larger drop in processed exports
2010/02/25/3587.accelerating.regional.integration/. than a unilateral appreciation of the yuan.
Read WP 202 at www.adbi.org/working-paper/
The Euro After Its First Decade: Weathering the Financial 2010/03/04/3631.exchange.rate.changes.prc.exports/.
Storm and Enlarging the Euro Area
Klaus Regling, Servaas Deroose, Reinhard Felke, Paul Kutos The Eurozone in the Current Crisis
The first decade of the EMU has been a huge success, has Charles Wyplosz
significantly benefited its member countries, and has This paper contrasts the US and European situations during
accelerated the European integration process. Imbalances the recent crisis and examines how much of the crisis has been
within the EMU have, however, increased in the last 10 years imported by Europe from the US. The paper argues that
and have become even more evident in the global economic Europe never had a chance to avoid contagion from the US
crisis. Policies among EMU members should be better and also documents the relatively limited reaction of both
coordinated, structural reforms accelerated, framework for monetary and fiscal authorities. The concluding remarks
financial market supervision strengthened, and external consider the differences that the monetary union has made and
representation streamlined. their relevance.
Read WP 205 at www.adbi.org/working-paper/ Read WP 207 at www.adbi.org/working-paper/
2010/03/15/3637.euro.after.first.decade/. 2010/03/26/3643.eurozone.current.crisis/.

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Intelligent Transport for Sustainable Growth

Governments have started to introduce ITS as an important tool to solve social, economic, and environmental problems caused by
traffic congestion, air pollution, and increasing green house gas emissions.

Governments and municipalities around the world More than 120 participants from central and
have recognized Intelligent Transport Systems local governments in 10 countries around Asia
(ITS) technology as a vital tool to solve social, explored four ITS-related themes: Asian
economic, and environmental problems caused by infrastructure and the ITS concept, identifying
traffic congestion, air pollution, and increasing common road transportation issues in Asia,
greenhouse gas emissions. As they begin to enhancing dissemination and standardization of
implement ITS projects, governments are ITS technology, and capacity development.
exploring effective ways to advance the technology Participants agreed ITS technology can play a key
and tailor it to local conditions. role in supporting efficient transport integration in
The Regional Workshop on ITS was held on a “seamless Asia.”
8–10 March at ADBI and highlighted the importance The workshop was organized by ADBI in
of combining ITS solutions with other transport collaboration with ADB; ITS Japan; Cabinet
policies, and the need to formulate ITS standards Office, Government of Japan; and CITYNET. ■
and implement capacity building at all levels to Read a more detailed summary of this event at www.adbi.org/
ensure the maximum benefits from ITS systems. event/3457.workshop.intelligent.transportation.systems/.

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