ADB President: Asia’s Growth Depends on Addressing Imbalances, Weaknesses

Investment rates in Asia seem too low to sustain growth and poverty reduction in the future, Asian Development Bank President Haruhiko Kuroda told the Bank Governors' Seminar at the ADB Annual Meeting in Hyderabad, India on May 4.

ADB President Haruhiko Kuroda

East and Southeast Asia's investment rates fell sharply following the 1997 financial crisis and have yet to reach earlier levels, Mr. Kuroda told the seminar on “A Shared Responsibility: Fixing Global Payments Imbalances” on the second day of the 39th Annual Meeting of the Board of Governors.

In response, more public sector resources should be mobilized for infrastructure investment, while financing gaps should be bridged through partnerships with the private sector, and the business climate improved.

Mr. Kuroda said private investors are shying away from countries with burdensome regulations, inefficient and corrupt bureaucracies and poor quality public services. Meanwhile, the infrastructure gaps are enormous and widespread.

“Higher investment rates and better infrastructure would do much to ensure the sustainability of future growth and, more immediately, to promote a more balanced demand in countries where net exports are surging,” he said.

Mr. Kuroda said imbalances in domestic saving and investment, and underdeveloped domestic and regional capital markets are the "flip side" of rising current account surpluses in much of developing Asia, as well as the fast accumulation of international reserves assets.

In the case of China, he said, the underlying imbalance manifests as too much savings and insufficient consumption.

“The key to unlocking consumption, as well as ensuring better quality investments, will be reforms of the banking and broader financial system that will allow markets to guide and discipline credit allocation,” he said. Investing in pensions and social protection would also reduce savings and help domestic demand play a bigger role in supporting China’s growth.

Poverty in Delhi, India (Photo:

In the wider region, fast official reserve accumulation is symptomatic of another broad challenge – the need for deeper and more efficient domestic and regional capital markets, Mr. Kuroda said.

Asia's surplus savings are not finding their way into productive investment outlets at home or within the region.

“Cross-border investment originating in Asia is still predominantly directed to the United States and Europe,” he said.

More efficient use of surpluses will require deepening of the private sector's role in domestic and regional capital markets. This in turn will require legal, regulatory, and other reforms whose success hinge on improve governance, he said.

“In tackling this difficult structural agenda and in addressing the risks posed by imbalances, regional cooperation initiatives will be critical,” he added.

Source: Asian Development Bank – Compiled by Tuong Thuy

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