eddie yue : developing asia ’ s infrastructure to sustain economic growth statement by mr eddie yue, deputy chief executive of the hong kong monetary authority, and head of delegation, hong kong, for the 48th asian development bank annual meeting, baku, azerbaijan, 4 - 5 may 2015. * * * i would like to thank the government of azerbaijan for hosting the 48th annual meeting of the asian development bank ( adb ), and the management and staff of adb for the excellent arrangements of the event. i would also like to express my deepest condolences to the people of nepal affected by the recent earthquake. global economic growth has been modest and uneven since the last annual meeting. while developing economies including those in asia remain an important source of global growth, there are signs that activities are slowing and potential outputs are falling. despite substantial progress, developing asia still faces significant development challenges. in particular, a number of developing economies have been held back by infrastructure bottlenecks. to sustain economic growth and fully realise their growth potential, substantial infrastructure investment is needed. developing asia ’ s infrastructure development needs dwarf existing official development assistance, government and private investments combined. to fill this huge infrastructure financing gap, we need bold, new efforts. in this regard, we welcome the combination of asian development fund ( adf ) resources with the adb ’ s ordinary capital resources. the merger will allow adb to make more efficient use of its existing resources and substantially expand its financial capacity by up to 50 % according to adb ’ s estimates. this, in turn, will mobilise more public and private sector investments through co - financing and greatly enhance the support available to developing members. we are also glad to see that governments are working together and making significant steps in promoting infrastructure development. they include, for instance, the establishment of the asian infrastructure investment bank and the g20 global infrastructure initiative and global infrastructure hub. these initiatives underscore the commitment by governments from within and outside the region to give infrastructure investment a fresh impetus. by bringing new funds and new ways for development assistance, they will serve to complement the existing efforts by adb in meeting the region ’ s vast development needs. as highlighted in the theme for this year ’ s annual meeting, fostering cooperation among development partners – existing and new, private and public, national and multilateral – is crucial for reaping synergy and maximising development impact. adb has a hailed tradition of cooperating with other partners in delivering results. by working

lengthened negative tail. consistent with a greater variability of earnings expectations, volatility of stock prices has been elevated in recent years. the increased volatility of stock prices and the associated quickening of the adjustment process would also have been expected to be accompanied by less volatility in real economic variables. and that does appear to have been the case. that is, after all, the purpose of a prompter response by businesses : to prevent severe imbalances from developing at their firms, which in the aggregate can turn into deep contractions if unchecked. as might be expected, accumulating signs of greater economic stability over the decade of the 1990s fostered an increased willingness on the part of business managers and investors to take risks with both positive and negative consequences. stock prices rose in response to the greater propensity for risk - taking and to improved prospects for earnings growth that reflected emerging evidence of an increased pace of innovation. the associated decline in the cost of equity capital spurred a pronounced rise in capital investment and productivity growth that broadened impressively in the latter years of the 1990s. stock prices rose further, responding to the growing optimism about greater stability, strengthening investment, and faster productivity growth. these are earnings - weighted projections for s & p 500 corporations as reported by securities analysts to i / b / e / s, a financial research firm. the roughly twenty - year history of this series confirms a pronounced upward bias in these long - term projections of analysts of approximately 4 to 5 percentage points in annual expected growth. there is little evidence, however, one way or the other, of bias to changes in the rate of growth. but, as we indicated in congressional testimony in july 1999, 2 "... productivity acceleration does not ensure that equity prices are not overextended. there can be little doubt that if the nation's productivity growth has stepped up, the level of profits and their future potential would be elevated. that prospect has supported higher stock prices. the danger is that in these circumstances, an unwarranted, perhaps euphoric, extension of recent developments can drive equity prices to levels that are unsupportable even if risks in the future become relatively small. such straying above fundamentals could create problems for our economy when the inevitable adjustment occurs. " looking back on those years, it is evident that increased productivity growth imparted significant upward momentum to expectations of earnings growth and, accordingly, to price - earnings ratios.