Tag Archives: ADB

ADB forecasts slowing growth in Asian economies

Asia’s developing economies is expected to grow at 7.6 percent this year, faster than earlier projected, as a pick-up in spending by consumers and companies cushions the impact of weaker exports, the Asian Development Bank said. The Manila-based lender said that growth in Asia excluding Japan and Australia in 2007 will surpass a September estimate of 7.1 percent. At the same time the bank cautioned that Asia’s developing economies will slow over the next two years. Despite of this fact, the more moderate pace is seen stabilizing the region and putting it on better footing for solid growth in the future. ADB chief economist Ifzal Ali has recently said in Tokyo that the growth in developing Asia will ease gently. However, this will ensure that growth will obtain a more sustainable level in the years ahead. In addition to it, the bank has assured that a re-emergence of the sort of financial crisis that erupted in 1997 was unlikely. These rosy outlooks argue against uncertainties that the region’s economies, predominantly those in China and India, are overheating, which could spur higher inflation or a debt crisis if imprudent loans go bad. Moreover, there are some risks as well involved that could slowdown the economies. According to the bank, looming risks include another possible increase in oil prices, which would smidgen a region that imports most of its energy. A slowdown in the U.S. economy, a key destination for Asian exports, could also damage the region’s growth, which has been largely fueled by exports.

Huge foreign reserve posing a potential threat to Asian economies

Asia’s developing economies has accumulated a threateningly huge foreign reserve of $2,280 billion, which unless being put on better use, could have serious impact on over all Asian economy, says Asian Development Bank. The Manila based bank has said that Asia’s developing economies are fuelling asset bubbles with their huge foreign currency reserves and could put them to better use by retiring debt or buying higher-yielding investments. The bank has warned that these reserves, unless sterilised, would lead to increases in money supply, which in turn, lead to bubbles in assets. It has further noted that across the region, there are asset bubbles both in housing and equity markets. However, it has ruled out the notion that the economy of two major Asian developing economies, India and China, is overheating. Ifzal Ali, ADB chief economist, has suggested that Asian developing countries use their reserves for retiring debt, investing in infrastructure or providing funds for social needs. In addition to it, he said that profits from foreign reserve could be boosted by investing in equities or other instruments, rather than focusing heavily on US Treasuries and eurozone bonds. According to the bank there are risks as well poising threat to the Asian economy such as slowing demand for electronic goods and a resurgence of inflation coupled with steep oil price rise and a possible slowing demand from the US, in case if it moves into recession or slowdown. China has already started preparing itself for making arrangements to use their foreign reserve in a profit making instrument rather allowing it to pump money into its internal economy to trigger inflation or asset bubble. China has recently formed a company that would invest a part of the foreign reserve for greater profit and it has also taken steps to boost domestic demand and curb a reliance on exports and investment for growth. In the mean while South Korea is also contemplating similar move to manage its reserve. However, this move is also not risk free and Sates are needed to be aware of risks involved in more aggressive reserve management.

China investigates into US claims of tainted gluten

China has said that it has started investigating U.S. claims that a Chinese company exported contaminated wheat gluten implicated in pet deaths in the U.S. A Chinese official has said that sampling and examination of wheat gluten are in progress nationwide and will focus on melamine. The chemical is used to make plastic and as fertilizer in Asia was recognized by the U.S. Food and Drug Administration as the contaminant in wheat gluten imported by a U.S. company and used in pet food that was recalled last month. It is the first recent high-profile incident of a tainted product being exported. The Chinese agency that monitors food exports had earlier said that China has never exported wheat or wheat gluten to the U.S. In the meanwhile, the accused firm, Xuzhou Anying Biologic Technology Development, had earlier maintained that the U.S. was its main overseas customer for wheat gluten and said that it had never shipped gluten directly to the U.S. The government in Beijing launched an inquiry into pet food safety, in particular a claim that contaminated wheat gluten exported to the US was responsible, after the US agency accused that the poison may have originated in China. Government officials in China said they had not found evidence of domestic poisonings so far, but would look into US government claims that the supplier of the tainted product was the company in Xuzhou, eastern China. The firm in question, Anying produces and exports more than 10,000 tons of wheat gluten a year, according to its Web site. However, only 873 tons were linked to tainted U.S. pet food, but it substantially raised the possibility that more of the contaminated product could still be on the market in China, or out of the country. The Asian Development Bank had earlier in January this year warned that China’s agricultural exports could be adversely affected by such cases. Analysts at ADB are of the view that China needs to address the underlying problems that lead to food contamination. They further confirm that the Chinese government is making efforts to address its food safety problems.

ADB shows concern over rising rich-poor divide in Asia

Many are speculating┬áthat after west, it is time for Asia to lead the world. 21st century is allying with Asia and expecting it to be the next power region. Development in major Asian regions has proved it correct. Countries like China, India, Japan and Southeast are perfect examples of it, where prosperity, overall development and increasing living standard authenticate the facts. Despite crossing major initial impediments, the Asian Development Bank’s report deterred its entire claim as it pictured the murky side of the development. Report asserted that wealth gap is widening in the region and lives of poor are becoming deplorable, meanwhile rich are successfully accumulating more money. China and India are holding the reign of Asia’s development; both are listed on the top ten in the ADB’s annual report. China is holding 2nd position after civil war wrecked Nepal, while India is holding 7th position. Asian region experienced major boom recently and China and India, both got bigger pie out of it, but ironically, failed to distribute the profit fairly among all. China and India’s economy is expanding with the healthy pace of 11.9% and 8 to 9 % respectively, but instead of sharing growth among all, influential people were able to pocket in 20% out of it. In the report, bank also featured minor countries like Cambodia, Sri Lanka and Bangladesh, where disparity of wealth is growing rapidly. However, poorer countries like Pakistan and Philippines have done better then the big Asian players in terms of inequality. Thailand has the most impressive record in Asia. It has reduced inequality by over 5%, while Indonesia and Malaysia have also managed to reduce inequality to some extent. The report seems shocking, but the situation isn’t as worse as it appears. The growing wealth gap is a byproduct of globalization, which has brought higher incomes to urban, skilled, English-speaking workers in all countries and gap can be stretch forward if the government doesn’t intervene here effectively as poorer have less access to quality education, health care, bank loans and other things needed to benefit from economic growth. The government needs to come up with new policies to provide the decisive shares to poor people. Implementation of hardcore economic reform along with social protection mechanisms and skills and training programs could be enough steps to narrow the gap. Apart from this, Asian governments need to increase the partnership between the public and private sectors to develop new economic activities and industries that generate new employment opportunities for the poor. Image Source