Asia's Developing Future

Electric utilities around the world are expected to be greatly transformed by deregulation, climate change, the rise of renewable energy, new technologies, declining populations, and changing user needs. The transformation will eventually see the power grid’s integration with industries such as water, gas, transportation, among others, which ultimately could mean better service. A factor driving the changes is the need to reduce greenhouse gas emissions. Electricity and heat production is among the biggest sources of emissions, which is why energy producers have been adding more renewable sources such as solar, wind, geothermal, hydropower, and biomass into their power mix. Technology and changing demographics and user needs will also change utilities. Now that technologies can better track customers’ energy consumption, utilities will be able to predict when it is highest and ensure supply during those times. Utilities’ transformation will come in three waves. Read the transcript https://bit.ly/2Lg4AWG

For ambitious economies that have recently overcome historical economic obstacles and become stable and vibrant engines of growth, the question now is how to make growth sustainable and inclusive. For the People’s Republic of China and India, innovation is now the key to their economic futures. Yet the legacies of their growth present troubling issues, chiefly environmental degradation. Both economies are also striving to avoid the middle-income trap that can, in the case of China, undermine sustainability or, in the case of India, undermine inclusiveness. Although they share characteristics—a large population and territory, as well as a long history of civilization—they are different in important ways. Read the transcript https://bit.ly/2OXSwvr Read the working paper https://www.adb.org/publications/catching-economic-transition-innovation-prc-and-india About the author Peilei Fan is an associate professor of urban and regional planning at Michigan State University, Michigan, USA. Know more about AD

Asian economies and financial systems are becoming ever more integrated, but their monitoring has not kept pace and better safeguards are needed. This is especially true for cross-border issues. Peter Morgan, co-chair of research at the Asian Development Bank Institute, says that Europe can provide a valuable guide to developing the necessary institutions in Asia. Read the transcript https://bit.ly/2Mi3WII Read the book https://www.adb.org/publications/global-shocks-and-new-global-and-regional-financial-architecture-asian-perspectives Read the related blog post https://bit.ly/2Mv6cjP About the author and book editors Peter Morgan is co-chair of research at the Asian Development Bank Institute. He wrote Regional Financial Regulation in Asia, a chapter in Global Shocks and the New Global and Regional Financial Architecture, Asian Perspectives, a new ADBI book, which he edited with ADBI Dean Naoyuki Yoshino and Pradumna B. Rana of the S. Rajaratnam School of International Studies, Nanyang Technological Uni

Solar energy is growing fast as total capacity worldwide surges with the decline of solar-panel prices. It’s cheap and it works. How to further reduce the price of solar panels has become an important topic as solar electricity’s share of the overall energy supply grows globally. Several studies have focused on manufacturing and technological developments as the main reasons behind the most recent drop in global solar-panel prices. But a more recent study done for the Asian Development Bank Institute says that monetary variables, oil prices, and demand for solar panels due to environmental concerns also determine solar-panel prices. Read the transcript https://bit.ly/2waSto2 Read the working paper https://bit.ly/3s6Nhx7 About the authors Farhad Taghizadeh-Hesary is assistant professor of economics at Waseda University, Tokyo. Naoyuki Yoshino is the dean of ADBI. Yugo Inagaki is an alumnus of Keio University. Know more about ADBI’s work https://bit.ly/2MbErO1 https://bit.ly/2MlDL7P

Asian emerging market economies adopted a range of measures after the Asian financial crisis in the late 1990s to shelter themselves from economic and financial contagion. So far, those moves have succeeded. But with new challenges rising, some of the tools they turned to may need readjusting so that they don’t cause more problems than they cure. Hans Genberg, executive director of the Southeast Asian Central Banks Research and Training Centre, in Kuala Lumpur, Malaysia, suggests that, at the very least, more and better coordination is needed among various supervisory agencies. He also calls for an examination of whether central banks have taken on too much responsibility as their jobs have expanded. Writing in a new Asian Development Bank Institute publication, Global Shocks and the New Global and Regional Financial Architecture, Asian Perspectives, Genberg suggests that Asian central banks went with a palette of solutions to the problems exposed by the Asian financial crisis. Peter Morgan, co-chair of re

The People’s Republic of China’s integration into the global economy and East and West Germany’s reunification show the Democratic People's Republic of Korea — or the DPRK — how it might become a market economy within 20 to 25 years. Naoyuki Yoshino, dean of the Asian Development Bank Institute, told the Foreign Correspondents Club of Japan that the DPRK could also look to the success of other Asian countries in using domestic savings to kick-start growth. Other key ingredients for a successful transition would be infrastructure development, education and training, as well as the promotion of student and worker exchanges between the DPRK and other countries. The country could start with a postal savings network similar to those used in Japan and China, which would help start the process of building a financial system. From that, insurance and pension funds could be developed. The money that was deposited could be used for economic development. Read the transcript https://bit.ly/2vK8AZH About the speaker

A brewing trade war over steel is threatening to bring the world back to the economic “dark ages” when countries used trade curbs to retaliate politically against rival governments. The World Trade Organization and its members must find ways to ease tensions between rival countries and look for innovative ways to ensure global trade rules remain relevant and adaptive to the challenges of the present and the future. It may mean revisiting the WTO and the role it can play in trade governance. One of the reasons the WTO was formed was to make sure global trade is balanced and fair by isolating international trade from government intervention. Revisiting the WTO has become urgent in the wake of US President Donald Trump’s decision to slap tariffs on steel imports to protect the United States’ national interest, which is purportedly endangered by dependence on imported steel. The US acted before the WTO could consider its complaints of dumping, and the European Union and the People’s Republic of China are

The People’s Republic of China’s gradual shift from a currency policy pegged to the US dollar to one that tracks the movements of a range of currencies was the correct choice given the challenges, and neighbors Malaysia and Singapore were best served by reacting in a similar way. That’s the conclusion of research presented in Global Shocks and the New Global and Regional Financial Architecture, Asian Perspectives, a new book by the Asian Development Bank Institute. The vulnerability of the currency regimes used in Asia came into focus after the Asian financial crisis of 1997–1998, when the many Asian countries that had pegged their currencies to the US dollar found they had opened themselves to significant economic and financial risks. Since the crisis, countries have either chosen to let their currencies trade more freely against the dollar—Indonesia, Thailand, and the Republic of Korea, for example—or shifted to other methods that still retain significant control over the value of their currencies. One

Energy price shocks—negative and positive—can have a powerful economic knock-on effect, especially on food prices where food is scarce. Even though great strides have been made since 1945 in feeding Asia’s huge populations, more than 500 million people still face food insecurity. Of the world’s undernourished, almost 65% live in Asia. Food insecurity stems from the link between energy prices and food prices, among other causes. A survey of Bangladesh, the People’s Republic of China, Indonesia, India, Japan, Sri Lanka, Thailand, and Viet Nam from 2010 to 2016 proposed a model with eight variables affecting agricultural food prices—land prices, GDP, inflation rates, oil prices, biofuel prices, employment in agriculture, labor costs, and real interest rates. Farhad Taghizadeh-Hesary, one of the authors of ADBI’s research on this topic, sums up the survey’s findings. Read the transcript https://bit.ly/2LPmZuB Read the working paper https://www.adb.org/publications/volatility-linkages-between-energy-and-food

When India started opening its markets to international trade in the 1990s, what impact did it have on manufacturing and labor’s share of income? The answer lies in an analysis of plant-level data, which requires classifying industries as labor, human capital resource, or technology intensive. But first, what pushed India to open its doors? Read the transcript https://bit.ly/2Ofyop5 Read the working paper https://www.adb.org/publications/adjustment-trade-opening-labor-share-india-manufacturing-industry About the authors Prachi Gupta was a research associate at the Asian Development Bank Institute at the time the work was published. Matthias Helble a senior economist and co-head of research at ADBI. Know more about ADBI’s work https://bit.ly/2JUjwsC https://bit.ly/2LF86y8

Recent financial crises have highlighted the need to update the global institutions for financial and economic oversight that were founded more than 70 years ago, and their Asian counterparts that have been developing over the last 20 years. The evolution of financial markets and monetary policy makes it increasingly obvious that the coordination between organizations as well as the organizations themselves need to be better suited to modern reality. Peter Morgan, co-chair of research at the Asian Development Bank Institute, is one of the editors of a recent ADBI book, Global Shocks and the New Global and Regional Financial Architecture, Asian Perspectives, and an author of two of its chapters. The book investigates the issues and suggests possible remedies. Read the transcript https://bit.ly/2L3tLAy Read the book https://www.adb.org/publications/global-shocks-and-new-global-and-regional-financial-architecture-asian-perspectives Read the related blog post https://bit.ly/2Mv6cjP About the authors Peter M

Asia and the Pacific have deepened economic integration through trade and foreign direct investment since the early 1990s. But financial market integration within the region has not progressed as quickly. ADBI research examining cross-border portfolio assets and liabilities in Asia and the Pacific from 2001 to 2017 shows that rapid increases in portfolio foreign assets and liabilities have taken place, particularly after the global financial crisis of 2008–2009. The crisis and the subsequent unconventional monetary easing adopted by the United States, Europe, and Japan have affected the movement of cross-border portfolio capital flows in Asia and the Pacific. When the crisis started, portfolio investment flowed out of the region. Later on during the crisis, when advanced economies eased monetary policies, and after the crisis, a new wave of cross-border portfolio investment from the United States and Europe flowed into the region in search of higher yields. ADBI researcher Eric Alexander Sugandi collaborat

Strong and consistent incentives and greater policy stability and coordination between levels of government are needed to engender green energy financing in New Zealand and Australia, according to the Asian Development Bank Institute. New Zealand, on the face of it, looks impressive with a generating mix of over 80% renewables, but this is largely the legacy of state intervention in decades past and masks high per-capita greenhouse gas emission due to intensive agriculture. Much more could be done to encourage distributed generation (such as houses with rooftop solar panels) and electrification of transport. Australia, however, still has a system dominated by coal, and although it has had more policies to promote renewables, their effect has been muted: renewables’ contribution stands at just 17%. The reasons: political instability and policy fragmentation between state and federal administrations. Commitment to energy transition is lacking across all parties and regulators. Read the transcript https://b

The International Monetary Fund learned a thing or two from the 1997 Asian financial crisis, which helped it respond better to the 2008 global financial crisis. Thanks to IMF assistance, troubled countries were in a better position to weather the global crisis. The IMF provided financing to more than 30 countries that saw investors and capital flee financial markets. On average, IMF financing after the global crisis was larger than after the Asian crisis by more than 3 percentage points of gross domestic product. The IMF lent to countries beyond normal limits and increased the size of assistance in several instances when the initial amount wasn’t enough to curb capital outflow and stabilize exchange rates. The bigger financing packages and other innovations it introduced from 2008 to 2011 showed the IMF had learned its lesson from the Asian financial crisis, when inadequate financing contributed to the failure of IMF programs to stop capital outflows and currency free-falls. Read the transcript https://b

One of India’s major exports can readily be seen in computer science faculties, at information technology events, or among programmers and developers in most parts of the world—the IT professional. India is a major global supplier of IT professionals, especially to Organisation for Economic Co-operation and Development member countries, but stricter immigration policies in countries, including the US and the UK in the wake of Brexit, may dent their job prospects, forcing an increased focus on the People’s Republic of China and Japan. An Asian Development Bank Institute report by Anthony D’Costa of the University of Melbourne found the entire Indian IT industry is estimated to employ directly 2.5 million to 3 million people, with another 10 million or so indirectly in low-wage services. But with much of the domestic industry focused on the lower end of the market, going abroad is one of the few attractive options for upward mobility. Restrictive immigration policies mean this is not always feasible. Re

China’s financial system is developing rapidly, swelling the country’s bank assets to become the largest in the world, and there are worrying similarities with the global dominance of Japan’s banks in the late 1980s. Japan’s experience ended in tears with the bursting of a domestic and international financial and real asset bubble, heralding the economy’s descent into on-and-off recessions for the next 3 decades and stubborn deflation. Research done for the Asian Development Bank Institute found that, despite the rapid development of capital markets since the 1990s, China’s financial system continues to be dominated by bank lending. Read the transcript https://bit.ly/2z8u1sp Read the working paper https://www.adb.org/publications/development-and-transformation-prc-financial-system About the authors Damian Tobin is a lecturer on Chinese business and management at the School of Finance and Management, SOAS University of London. Ulrich Volz is head of the Department of Economics at the same institution.

Central banks and regulators should be on the frontline of fighting the carbon emissions driving climate change, and a more proactive approach can address the visible side effects in Asia, such as the annual choking smoke haze that envelops parts of the region. Authorities should take account of climate risks as part of their duties of oversight, and “green finance” should play a major role in ensuring the investments needed to promote development are conducted in a sustainable fashion, says Ulrich Volz of the SOAS University of London. Green finance is defined as all forms of investment or lending that consider environmental factors. This is particularly important in Asian economies, including the Peoples’ Republic of China, where pollution and carbon emissions have been a significant brake on growth due to issues ranging from water and air pollution to higher healthcare costs. Read the transcript https://bit.ly/2MoSr2A Listen to the entire presentation https://bit.ly/2tsls6y About the author Ulrich V

Developing economies often lack sophisticated equity markets, meaning that firms that are focused on innovation must rely on bank lending. But tight bank policies can undermine the culture of innovation that is essential to growth. Research conducted for the Asian Development Bank Institute concludes that deregulation creates a dynamic banking sector that, depending on the development stage, can either aid or hinder innovation. The gradual deregulation of US banks over 20 years since 1970 is particularly instructive. During this period, some US banks responded to deregulation by making credit more available to out-of-state firms. Others consolidated locally by opening new regional branches. Comparing the two patterns shows how extending credit markets aided innovation, while regional expansion generally hindered it. Read the transcript https://bit.ly/2lAx1Uw Read the report https://www.adb.org/publications/banking-and-innovation-review About the authors Chen Lin is a professor at the University of Hong

Businesses around the world need to pay closer attention to technology, design, branding, and other forms of intangible assets, if they want an edge over their competitors in keeping customers interested. About a third of the value of goods manufactured globally comes from intangible capital, highlighting the need for businesses to protect the intellectual property of these types of assets to stay competitive. This is among the findings of a new study from the World Intellectual Property Organization, titled 2017 World Intellectual Property Report—Intangible Capital in Global Value Chains. The report looks at the role of intangible capital in global value chains, the range of activities needed to manufacture a product and deliver it to consumers. Carsten Fink, chief economist of the World Intellectual Property Organization, says the study shows that the value of intangible capital amounted to $5.9 trillion in 2014, contributing twice as much as tangible capital. Read the transcript https://bit.ly/2tk

With aging becoming a pressing issue in many countries, especially in Asia, governments need better indicators that track the well-being of the elderly to craft policies to better meet the needs of the aged. Many countries do not have the data needed for sound policy making, planning, and investment targeting, which leads to piecemeal public policies with little sense of priority. The People’s Republic of China, Thailand, and Viet Nam are just some of the countries relatively unprepared to deal with their rapidly aging societies. Multilateral and nongovernment organizations have developed several global aging indexes that focus on various aspects of aging and well-being. Read the transcript https://bit.ly/2K4HQwe Read the blog post https://www.asiapathways-adbi.org/2018/03/piecemeal-policy-approaches-to-aging-societies-can-they-be-avoided-with-proper-data-on-well-being/ About the author Claude Bodart is an international advisor at the Center for Ageing at the Beijing Normal University Know more abou