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 collaborated with ADBI visiting scholar Sayuri Shirai on the study. Sugandi summarizes their findings.

Read the transcript

https://bit.ly/2Lekmp5

Read the working paper

https://www.adb.org/publications/cross-border-portfolio-investment-financial-integration-asia-pacific-region

About the authors

Sayuri Shirai is a visiting scholar at the Asian Development Bank Institute and former member of the Bank of Japan’s policy board.

Economist Eric Alexander Sugandi, an ADBI consultant, formerly with Standard Chartered Bank, Citibank, and Bank Mandiri in Indonesia.

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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://bit.ly/2uiB0JC

Read the working paper

https://www.adb.org/publications/assessing-effectiveness-imf-programs-following-global-financial-crisis

About the authors

Carlos De Resende is a senior economist at the Institute for Capacity Development of the International Monetary Fund.

Shinji Takagi is professor emeritus of economics at Osaka University and visiting research professor at the Asian Growth Research Institute, Fukuoka, Japan.

Know more about ADBI’s work on the global financial crisis

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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://bit.ly/2L0ZNsB

Read the working paper

https://www.adb.org/publications/green-energy-finance-australia-and-new-zealand

About the authors

Ivan Diaz-Rainey is co-director at the Otago Energy Research Centre and associate professor of finance at the Department of Accountancy and Finance, University of Otago, New Zealand.

Greg Sise is managing director at Energy Link in Dunedin, New Zealand.

Know more about ADBI’s work on green energy

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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.

Know more about ADBI’s work on the People’s Republic of China’s financial system:

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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.

Read the transcript

https://bit.ly/2KLIz2v

Read the report

https://www.adb.org/publications/labor-migration-asia

About the author

Anthony P. D’Costa is chair and professor, Contemporary Indian Studies Director, Development Studies Program, University of Melbourne, Australia.

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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 Volz is head of the Department of Economics, SOAS University of London.

Know more about ADBI’s work on climate change

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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 Kong.

Sibo Liu is a PhD candidate at the University of Hong Kong.

Lai Wei is an assistant professor at Lingnan University, Hong Kong, China.

Know more about ADBI’s work on banking

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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/2tk9qeh

Watch the presentation

https://bit.ly/2K0hect

About the speaker

Carsten Fink is chief economist of the World Intellectual Property Organization, Geneva, Switzerland

Know more about ADBI’s work on intellectual property

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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 about ADBI’s work on aging in China

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World oil price volatility affects the economies of the Organization of Petroleum Exporting Countries as well as their non-OPEC counterparts, but little attention is paid to non-OPEC economies, which don’t have a formal bloc to lobby for them.

But non-OPEC energy exporters have taken a more significant role as oil demand has increased since the late 1990s. OPEC is no longer the main exporter, and the increased demand for oil, due in part to the rapid economic development of India and the People’s Republic of China, has led to a greater diversification of suppliers.

Research by the Asian Development Bank Institute looks at one of the largest non-OPEC oil-exporting countries, the Russian Federation.

Read the transcript

https://bit.ly/2JB3Wmn

Read the report

https://www.adb.org/publications/impact-world-oil-prices-energy-exporting-economy-including-monetary-policy

About the authors

Victoriia Alekhina is a PhD candidate of economics at Keio University, Tokyo.

Naoyuki Yoshino is dean of the Asian Development Bank Institute.

Know more about ADBI’s work on oil

https://bit.ly/2MkPn8z