Peter Pang: Recent financial and economic developments in Asia
Statement by Mr Peter Pang, Temporary Alternate Governor of the Hong Kong Monetary Authority, at
the 38th Asian Development Bank Annual Meeting, Istanbul, Turkey, 4-6 May 2005.
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Mr President, let me first of all congratulate you on your election as President of the Bank. I must next
thank Turkey for graciously hosting this year's Annual Meeting. I also join other Governors to thank the
Bank's management and staff for the excellent arrangements.
I would like to take this opportunity to welcome the successful conclusion of the 8th replenishment of
the Asian Development Fund. This would enable the Bank to continue with its programme in offering
much needed relief to the poorest people in Asia. However, while real GDP growth in the region has
been impressive, up 7.3% in 2004, income distribution remains highly uneven. The toll on human lives,
and the massive destruction left behind by the Tsunami attack last December, reminded us that
fighting poverty remains both a continuing - and daunting - task for the Bank.
While the Bank has done a commendable job in reducing poverty in the low-income economies, those
members who have attained a reasonable level of development have a different set of needs. With
global financial markets awash with liquidity, many of them have ready access to private capital, and
have less of a need to turn to the Bank for lending. The greatest challenge to these emerging markets
is how to achieve a more balanced and sustainable growth in the midst of globalisation. As more
economies in the region move to the middle-income category, I urge the Bank to proactively consider
ways and means to help them meet the new challenges of changing times.
Sustainability of the region's future growth seems to lie in the growing trend of intra-regional trade and
economic interdependence. Asia is highly integrated in trade. Propelled by vertical integration of the
production process, intra-regional trade grew by 14% a year between 1995 and 2003, while world
exports increased only 7.5%. Compared to trade, integration in the financial sector has been
progressing at a much slower pace. As a result, the very substantial volume of foreign reserves
accumulated in the region, of some US$500 billion last year alone, goes mainly to the developed
rather than the regional markets. When some of the capital from the developed market is recycled
back to the region, it is of a more volatile and repercussive nature, and can be difficult to cope with as
we saw it in the late 1990s.
To reduce the reliance on the recycling of domestic savings through the developed markets, Asian
governments have put in place several initiatives to strengthen financial intermediation. A notable
example is the Asian Bond Markets Initiative under the ASEAN+3 forum. The Initiative includes
studies on issues such as new securitised debt instruments, issuance of debt by international financial
institutions, regional credit guarantees and enhancement facilities, and the establishment of local and
regional credit-rating and credit-enhancement agencies.
Another initiative, known as the Asian Bond Fund project, represents collective efforts of the
Executives' Meeting of East Asia-Pacific Central Banks, or EMEAP, to broaden and deepen the bond
markets in the region. The ABF project will bring about many benefits. First, it introduces and
promotes new fixed-income products to the Asian markets. Secondly, it helps improve market
infrastructure. Thirdly, the initiative has helped accelerate tax and regulatory reforms in both the
regional and domestic markets.
The Bank, with its mission as the region's development bank, is well positioned to assist emerging
market economies in Asia to cope with the challenges of globalisation. In the past year, the Bank has
contributed to the issuance of local currency-denominated bonds in India, Hong Kong, Malaysia and
Singapore. The Bank is also providing valuable support to the Asian Bond Markets Initiative through
the former Regional Economic Monitoring Unit, which is now known as the Office of Regional
Economic Integration. Mr President, your decision to expand this Office and dedicate it to regional
cooperation matters is most timely and welcome, as a well defined agenda for the Bank on regional
cooperation will enhance financial stability by strengthening regional surveillance and cooperation.
Despite these efforts, developments, and - dare we say it - successes, there are many challenges
lying ahead of us. One-fifth of world population is still living in poverty, with the majority of them in
Asia. How to address the poverty issue and the uneven distribution of income amid globalisation has
become your biggest challenge. Mr. President, I believe more wealth could be generated if savings in
the region could be recycled to finance investments in the region, if intra-regional trade could grow
faster, and if investors could move funds easily from one economy to another in the region.
Mr. President, I am confident that under your leadership, the Bank will play an even greater role in the
integration of trade, finance and investment in the region. You have our unremitting cooperation and
support. Thank you.