Amid the backdrop of deepening global economic slowdown, more than 3,500 participants gathered here Saturday for the annual meeting of the Asian Development Bank (ADB).
The meeting is expected to draw a great deal of world's attention, given ADB's role as a key financing institution devoted to boosting economy and reducing poverty in the Asia and Pacific region.
Finalizing reserve pool plan
Under the current global economic circumstances, cooperation in financial areas assumes ever more significance and urgency.
Highly dependent on exports, developing Asian countries have been hard hit by foreign demand slump as the United States, the European Union and Japan have successively entered recessions.
In May 2007, the Association of Southeast Asian Nations and China, Japan and South Korea (ASEAN+3) introduced the Chiang Mai initiative, a bilateral currency swap arrangement to help countries tackle a possible foreign capital flow shortage. The initiative was later upgraded to the Chiang Mai Initiative Multilateralization (CMIM), a regional foreign reserve pool. Now The ASEAN+3 countries have agreed to inject 120 billion U.S. dollars into the reserve pool, or the CMIM, in case of a financial crisis.
The Initiative has been considered important to Asia because it gives a signal that if there happens a big crisis in the region, there is financing available.
During the ADB governors meeting, the finance ministers of ASEAN+3 will discuss follow-up actions on the Chiang Mai Initiative.
One highly-expected outcome of their meeting is the finalization of the Initiative, namely an agreement on the contribution ratio of the projected reserve pool among ASEAN+3 member countries and a mechanism in using it. The ADB president expressed his hope that there would be "a decisive progress" on the issue.
The discussion was previously planned at the ASEAN meetings in April in Thailand, which was aborted due to anti-government protests.
Enhanced capacity after capital increase
The ADB meeting will also offer glimpses of how the multilateral lender will act after its Board of Governors approved the plan to triple its capital base from 55 billion U.S. dollars to 165 billion.
The increase plan, the lender's largest one in history and also the first one since 1994, was approved on Thursday with endorsement of an overwhelming majority of the 67 members.
"This substantial increase is a resounding vote of confidence from our shareholders for what we can achieve as a premier development partner in the region," said ADB President Haruhiko Kuroda.
The 200 percent increase will help the ADB to boost its support to countries affected by the global downturn, enabling it to provide an additional 10 billion U.S. dollars from its Ordinary Capital Resources over the next few years for crisis-related assistance.
Many analysts believe the increase comes at the right time, as the global financial crisis continued to take its toll on developing Asia, where the ADB estimates more than 60 million people will be trapped in absolute poverty this year, and nearly 100 million more in 2010.
In a recent study, the ADB projected a bleak outlook for developing Asia in the coming two years, with economic growth dropping to 3.4 percent this year, down from 6.3 percent in 2008. Economic powerhouses in the past such as South Korea, Singapore, Thailand and Malaysia, among others, would inevitably slide into recessions, according to the report.
The capital increase will also give the ADB the financial capability to pursue longer term development priorities in the region. Even before the crisis, ADB's developing member countries faced an estimated resource gap of 53 billion U.S. dollars a year for meeting the Millennium Development Goals.
ADB's Vice-President Zhao Xiaoyu told Xinhua that the bank planned to substantially increase its loans in coming years -- it will approve more than 26 billion U.S. dollars of loans in each year of 2009 and 2010, more than doubled from that of 2008.
But the Vice-President also had his concerns. Whether these loans would be effectively "absorbed" by the recipient countries and whether there would be enough projects for the money to be used would be important gauges of the effectiveness of the potential loan increase, he told Xinhua.
Boosting trade facilitation
The trade volume in the Asia-Pacific region has been largely reduced since the beginning of the financial crisis, which has severely damaged the regional economy.
In certain ways, the crisis has laid bare the weaknesses of economies relying too much on export, but, trade, nevertheless, is still the strongest tool to boost economy and fight poverty for many parts of developing Asia.
Many experts believe financing difficulties have been a major obstacle to restore prosperous trade. Knowing where the rub is, the ADB has been endeavoring to ensure trade financing through its Trade Finance Facilitation Program (TFFP), a strong move in curing trade stagnancy of the region, particularly in times of crisis.
The TFFP, which began operations in 2004, had been providing finance and guarantees through international and local banks to boost trade in developing nations.
The ADB has expanded the TFFP from 150 million U.S. dollars to one billion. It has also increased the maximum maturity of loans permitted under the TFFP to three years from two years. After the fund increase, the program is predicted to generate up to 15 billion U.S. dollars in trade financing by 2013.
The ADB planned to expand those programs to six new countries from the current nine, and talks to enhance trade facilitation are expected in meetings of the next few days.
(Xinhua News Agency May 2, 2009)
