Asia’s voice is getting louder and the IMF—and, indeed, the world—is listening.
I am writing from Daejeon, Korea where the Fund and the government of Korea are hosting together a high-level international conference over the next two days.
The conference, entitled Asia 21: Leading the Way Forward, is an opportune time to reflect on exactly that: Asian leadership. Both the topics to be discussed and participants expected for the event speak volumes of the range and depth of expertise and experience in the region.
With broader recognition of the region’s economic, analytic and policy successes, Asia is now a leading voice in the global dialogue on economic and financial policies.
Asia is already an economic powerhouse and will continue to rise in global importance. In many respects the figures are staggering. Today, the region accounts for over half the world’s population and more than 25 percent of global gross domestic product (GDP). Twenty years from now, Asia’s economies will likely represent more than 40 percent of global GDP, and they will be larger than the US and EU combined.
Asia’s openness has been a large part of its recipe for success, but this also meant that it felt the ripple effects of the latest global crisis. However, extensive reforms over the past decade and sound economic policy management has helped the region stage a relatively quick recovery. Our latest outlook sees Asia growing by about 7¾ percent this year (up about ½ a percentage point from what we envisaged in April), led by 10½ percent growth in China.
Benefits of regionalism
But, Asia’s resilience during the recent global financial crisis has also reminded us of the benefits of regional cooperation and institution building. As no country or region stands alone in today’s global economy, policymakers must work together to reduce our susceptibility to crises and secure a sustainable recovery.
In this regard, two aspects of Asia’s approach resonate.
- First, intraregional economic monitoring and analysis have gained momentum in Asia, providing a deeper understanding of the interlinkages between countries and potential shocks.
- Second, the role of Asia’s regional financial mechanisms—including the strengthening of the Chiang Mai Initiative last March—together with tapping arrangements outside the region (such as the swap line facility with the US Federal Reserve) in response to the crisis demonstrate how policy coordination can help form a more effective global financial safety net.
International engagement and prominence
Together, Asia’s economic strength—and the policy lessons and regional cooperation that helped secure it—give the region the happy advantage of being able to lead by example. As a consequence, it is successfully increasing its global prominence, and often by engaging in the type of collaborative multilateral dialogue that has a long tradition in the region.
We see this with Asia’s standing in the G‑20. Six G-20 members hail from the region—Australia, China, India, Indonesia, Japan, and Korea. Top that off with Korea chairing the group this year, the first emerging market to do so since the crisis and at a time when, as Barry Eichengreen describes it, the G‑20 has “emerged as the steering committee for the world economy”. The G-20 mutual assessment process (MAP) bears the hallmarks of Asia’s style of collaborative economic analysis.
Asia is also contributing to the reform process through its representation on major standard setting bodies, such as the Financial Stability Board and the Basel Committee. And, Asia assumed an important role as a contributor of financial assistance during the global financial crisis. Several Asian countries agreed to bolster the Fund’s lending capacity in the context of pledges to expand the IMF’s New Arrangements to Borrow. Japan was the first, providing $100 billion, and was quickly joined by Korea, China, India, and Singapore.
Something old is new again
With all this talk of collaboration, the vision of the Fund’s forefathers is impressive. The purpose of the Fund, stated clearly in the Articles of Agreement, is to “promote international monetary cooperation through…..consultation and collaboration on international monetary problems”.
Sixty-five years later we at the IMF have an enormous opportunity to draw on Asia’s experiences and re-energize the collaborative nature of this institution. And, to do that, we are working to revamp the IMF’s governance structures this year to better reflect the new global economic order and increase Asia’s voice in the IMF’s governance. We also need to continue our efforts to increase the presence of Asian staff at the IMF.
But, to truly hear what Asia has to say, we must also change how we interact with our members in Asia. At the IMF, we see an enormous opportunity to benefit from Asia’s experiences, for example, in considering options to improve the financial safety net and how to form a more effective network of peer assessment by building on the G-20 MAP.
The world needs Asian leadership not only to sustain global growth, but also to develop policy mechanisms to contend with tomorrow’s realities.
As my IMF colleagues and I gather here in Daejeon with many luminaries from the region—senior policymakers, prominent business leaders, financial market experts, academics and civil society—we have an important opportunity to reinvent how the IMF and Asia collaborate in facing global economic challenges.