Sustainable Asian development - Can economic growth be as simple as the right partnership?
Finance and financial inclusion: How economic growth could be as simple as the right partnership?
One of the bigger events in the annual calendar took place last week and I was happy to be a part of it. The Asian Development Bank (ADB) held its annual conference in Yokohama, Japan. The theme was ‘Building Together the Prosperity of Asia’ or creating economic growth together.
It was all in the context of encouraging more sustainable and inclusive growth.
Sustainable Asian development
Whether or not Asia’s growth is independent of the West – read more here – the region’s integration with the rest of the world has been reshaping the global economic landscape.
In fact, Cyn-Young Park, Director for Regional Cooperation and Integration, ADB, notes how the emerging economies in East and Southeast Asia (grouped together as emerging East Asia) now account for about 25% of total global trade and 21% of global GDP, compared with about 10% and 5.8%, respectively, in 1985.
These are truly phenomenal statistics.
That’s why it’s great to connect with a diverse range of experts exploring different aspects of Asian trade, investment, infrastructure financing and the like. It’s constructive work and fundamentally, it was an ideal time to share ideas and explore different ways of reaching what is a common goal – tackling poverty by addressing the cycle of volatility and stagnation. Basically, fast tracking economic development.
There is a lot we can achieve by being more creative, more open and more efficient in encouraging the flow of long-term capital into developing countries and regions for economic growth.
Capital market reform
As far as I am concerned, we are all stewards of capital and structural reform of the world’s capital markets will support our efforts.
The importance of creating a deep, open government bond market is often not appreciated. But it can set in motion a series of events that leads, ultimately, to cheaper borrowing costs, improved insulation to outside shocks and increased headroom for development spending. And, this can all translate to faster social development.
It isn’t wishful thinking. It has been shown to work in countries as diverse as Russia, Poland, Malaysia and Mexico.
Ease of access for international investors helps develop liquidity and allow the development of a proper yield curve.
This improves a market’s chances of being included in the key bond indices, which in turn draws in more long-term investors such as central banks and sovereign wealth funds. It also strengthens the country’s claims to a superior credit rating. Lower borrowing costs are the natural corollary.
It is a virtuous circle. Lower borrowing costs mean a country’s yield-to-GDP ratio falls, allowing it to borrow and invest more in social development.
The ADB conference agenda focused on ‘development challenges and opportunities’. I would suggest that market reform is another of the big opportunities on offer.
As Global Head of Capital Markets and Funds Services at Euroclear, I care passionately about aligning the financial sector with moves to accelerate development among the world's emerging economies.
I am a firm believer that the free and efficient flow of capital brings benefits to all, from the promotion of financial reform and social development to the development of new mechanisms that aid market advancement.
In our increasingly interconnected world, local market success is predicated on thier ability to secure capital flows and investment in physical and social infrastructure.