ADB meeting finds the 'Asian century' so close, yet so far
Infrastructure and banking reforms key to easing poverty, participants say
KENTARO IWAMOTO, Nikkei staff writer
YOKOHAMA -- Asia has changed beyond recognition. The Asian Development Bank proclaimed confidently in a promotion video that was played repeatedly at its 50th annual meeting held in Yokohama from Thursday to Sunday.
The statistics bear out this claim. When the ADB was established in 1966 Asia was the poorest region in the world, with an annual per capita income of around $100. That was less than one-fourth the figure in Latin America and below that of sub-Saharan Africa. Today, Asia is the center of the world's economic growth.
Yet the numbers can be deceptive. China, India, Indonesia, Pakistan, the Philippines and Bangladesh are now considered middle-income countries. Yet these six Asian nations account for almost half of the world's poor.
At the ADB meeting, participants agreed that Asia still faces many challenges, including new ones, such as the rise of protectionism. Adapting to these challenges will be the true test of whether the 21st century belongs to Asia -- something the ADB has dreamed of for the last 50 years.
"While the region has done remarkably well, we cannot be complacent. Three hundred thirty million people still live in absolute poverty, on less than $1.90 a day," ADB President Takehiko Nakao said in his opening speech on Saturday.
Poverty reduction was a frequent topic of discussion during the four-day event. In his closing remarks on Sunday, Nakao pledged the bank would support the poorest and most fragile nations. "Reducing poverty will remain our major focus," he said.
Representatives of the region's emerging economies spoke of the challenge of making further progress. "Not many middle-income countries can make the move up to high-income countries. It will require quite an investment in human capital," said Indonesian Finance Minister Sri Mulyani Indrawati.
Shaktikanta Das, India's secretary for economic affairs, said: "In 1990, 90% of Asian people lived in lower income regions. In 2015, 90% became middle class. The challenge is to sustain that momentum and move from middle income to high income. Initial steps are always the easiest."
Over the ADB's history, only a few economies, such as those of South Korea and Taiwan (which the ADB calls Taipei, China), have made the leap from low to high income. China could be next.
China's Justin Yifu Lin, director of new structural economics at Peking University, pointed out that when China's per capita gross domestic product reaches $13,000, something forecast to happen by 2025, it will amount to a major statistical shift. "Currently, only 15% of the global population lives in high-income countries," he said. "When China becomes a high-income nation, then 34% of the world's people will do so."
While those numbers are encouraging, China's rural farmers will have little to celebrate as inequality between them and the residents of rich coastal cities continues to expand. Aging societies, resilient cities, climate change and urban public transportation were also recurring themes of the meeting.
Top ADB officials identified infrastructure development as a key to growth and a solution to various problems. Vice President Stephen Groff, speaking at a seminar, said there is an inverse correlation between infrastructure and poverty, remarking, "Infrastructure is critical to reducing poverty and promoting development."
Another main issue discussed was the regional financial system. Since the 1997 Asian financial crisis, emerging economies in Asia have become more resilient in the face of currency shocks, having established a regional framework for foreign exchange cooperation, the Chiang Mai Initiative Multilateralization.
New risks, new tools
Participants touched on looming risks, such as protectionism and U.S. interest rate hikes that could pull capital out of emerging economies.
"The immediate challenges facing us stem from prolonged global uncertainties, including the backlash against economic integration and inward-looking policies," said Yoo Il-ho, South Korea's minister of strategy and finance. "Looking back to the past, we [have] witnessed free trade and financial integration lift hundreds of millions of people out of poverty," he pointed out.
Participants also talked about new tools that are helping change the lives of the poor. Speaking at a seminar, State Bank of India Chairman Arundhati Bhattacharya said that a digital banking scheme that makes use of personal identification numbers has empowered the poor and illiterate in rural areas.
Under the system, every Indian citizen receives a 12-digit ID number tied to biometric data -- a photo, fingerprint and iris scan. This allows people to withdraw and deposit cash or transfer funds using only a fingerprint. "You don't need a card. You don't need a PIN. You don't need to remember anything," she said.
Participants agreed the ADB cannot act or raise funds alone. The Yokohama meeting highlighted the importance of regional cooperation among governments, multilateral development banks and the private sector.
Nakao was repeatedly asked about potential rivalry between the ADB and the China-led Asian Infrastructure Investment Bank. "We don't need to regard the AIIB as a kind of rival, because there is a very large need to [provide] finance, so we can cooperate," he said. Whether this cooperation materializes will be watched around the world.
"Your domestic policy is no longer domestic, because any policy is going to have a spillover to the rest of the world," Indonesia's Indrawati said in one panel discussion. "If 50% of the world lived in high-income countries, we will be consuming too much electricity," she said.
By 2030, more than 80% of the world's middle class will live in the megacities of the South and account for 70% of global consumption, said Anthea Mulakala, director of international development cooperation at the Malaysia-based Asia Foundation. The growth and development of southern countries, particularly those from Asia, will continue to change the global balance of power.
"To make this truly the Asian century, Asia has to embrace change," the promotional video said. This will be its main challenge.
Moving the region to the next stage of growth and facing global challenges will require the ADB to enhance its functions and cooperation with others. This will go a long way toward fulfilling the multilateral lender's goal of putting Asia on a path to steady growth and prosperity.
Nikkei deputy editor Ken Moriyasu, staff writers Tsubasa Suruga and Alexander Martin contributed to this report.