ADB president calls for sustainable growth, better infrastructure networks

Asian Development Bank (ADB) president Haruhiko Kuroda today said the key challenge for emerging East Asia to sustain growth is to expand domestic and regional demand by improving Asia’s regional infrastructure networks and removing barriers to intra-regional trade.
"It is particularly critical for moving beyond the recent global crisis toward sustainable and balanced economic growth and rapid poverty reduction," said Kuroda in his remarks at the APEC Finance Ministers' Meeting in Kyoto.
Kuroda cited ADB’s forecasts that projected emerging East Asia's gross domestic product to expand 8.4 per cent in 2010, well above the 5.2 per cent rate last year. Growth is seen cooling somewhat in 2011, but it should remain robust at 7.3 per cent, said a press release from the Manila-based Asian agency.
"The key challenge is to transition back to sustained and more inclusive growth," said Kuroda. "In doing so, they must ensure private demand can fill in for withdrawn stimulus and remain watchful of the possibility of volatile capital flows."
The ADB President warned that capital flows in and out of developing Asia could become destabilizing, complicating macroeconomic management. Several economies have already raised policy rates, and are watching asset prices carefully, while using well-targeted capital controls to limit speculation.
Kuroda stressed the importance of regional infrastructural development and transport, and trade facilitation across Asia and the Pacific in order to achieve a stronger, more balanced, sustainable, and inclusive growth in the region.
"While physical connectivity is improving, many companies in Asia face difficulty in conducting cross-border trade mainly because of inefficient customs practices, which keep the costs of doing business high," he added.
Meanwhile the intra-regional trade between the SAARC comes to around five per cent due to difficult cross border trade arrangement.
Similarly, on Kuroda urged developing Asia's policymakers to implement macroeconomic and regulatory policies that would help sustain the region's recovery and enable their economies to become more responsive and resilient to future crises.
"As the recovery gathers momentum, we must have a clear understanding of the lessons that we have learned over the past two years and set the foundations for a more stable global financial system," Mr. Kuroda said in his address to the "Impact of the Global Crisis on Asia - Lessons Learned, Policy Insights and Outlook", a regional forum attended by central bank governors, finance ministers, and officials from 14 countries in developing Asia. It is the third and last in a series of forums organized by ADB to help find solutions to the crisis.
Mr. Kuroda said that the push given by expansionary fiscal and monetary policies had certainly helped strengthen domestic demand and compensated for the sharp decline in world trade at the height of the crisis. This had allowed developing Asia to rebound strongly from the crisis, with growth now forecast to reach 8.2 per cent in 2010.
Referring to the role of ADB during the crisis, he said that ADB had also played its part in helping revive domestic absorption, and substantially increased its lending level during the crisis period to countries hard hit by the crisis.
However, the gradual easing of stimulus, and a combination of monetary and fiscal policies will be crucial for fostering macroeconomic stability and sustaining growth in the post-crisis period.
The crisis also raises policy challenges for central banks. "There is a growing consensus that macroprudential instruments should be used to support financial stability," he said. Changes are also needed in the operational frameworks of central banks, including widening the definition of collaterals, increasing the maturity of central bank loans to banks and improving cross-border liquidity provisions, Kuroda added.