Table Of ContentEconomics, Law, and Institutions in Asia Pacific
Series Editor
Makoto Yano
Kyoto University
Japan
Editorial Board Members
Reiko Aoki (Professor of Economics, Hitotsubashi University, Japan)
Youngsub Chun (Professor of Economics, Seoul National University, Republic of
Korea)
Avinash K. Dixit (John J. F. Sherrerd '52 University Professor of Economics,
Emeritus, Princeton University, United States)
Masahisa Fujita (President and Chief Research Officer, Research Institute of
Economy, Trade and Industry (RIETI), Japan; Member, The Japan Academy, Japan)
Takashi Kamihigashi (Professor and Director, Research Institute for Economics and
Business Administration (RIEB), Kobe University, Japan)
Masahiro Kawai (Project Professor, Graduate School of Public Policy, The
University of Tokyo, Japan)
Chang-fa Lo (Honourable Justice, The Constitutional Court, Taipei,China)
Mitsuo Matsushita (Professor Emeritus, The University of Tokyo, Japan)
Kazuo Nishimura (Professor, Research Institute for Economics and Business
Administration (RIEB) and Interfaculty Initiative in the Social Sciences (IISS),
Kobe University, Japan; Member, The Japan Academy, Japan)
Akira Okada (Professor of Economics, Hitotsubashi University, Japan)
Shiro Yabushita (Professor Emeritus, Waseda University, Japan)
Naoyuki Yoshino (Dean, Asian Development Bank Institute, Japan; Professor
Emeritus, Keio University, Japan)
The Asia Pacific region is expected to steadily enhance its economic and politi-
cal presence in the world during the twenty-first century. At the same time, many
serious economic and political issues remain unresolved in the region. To further
academic enquiry and enhance readers’ understanding about this vibrant region, the
present series, Economics, Law, and Institutions in Asia Pacific, aims to present cut-
ting-edge research on the Asia Pacific region and its relationship with the rest of the
world. For countries in this region to achieve robust economic growth, it is of fore-
most importance that they improve the quality of their markets, as history shows
that healthy economic growth cannot be achieved without high-quality markets.
High-quality markets can be established and maintained only under a well-designed
set of rules and laws, without which competition will not flourish. Based on these
principles, this series places a special focus on economic, business, legal, and insti-
tutional issues geared towards the healthy development of Asia Pacific markets.
The series considers book proposals for scientific research, either theoretical or
empirical, that is related to the theme of improving market quality and has policy
implications for the Asia Pacific region. The types of books that will be considered
for publication include research monographs as well as relevant proceedings. The
series show-cases work by Asia-Pacific based researchers but also encourages the
work of social scientists not limited to the Asia Pacific region. Each proposal will be
subject to evaluation by the editorial board and experts in the field.
More information about this series at http://www.springer.com/series/13451
Masahiro Kawai • Jong-Wha Lee
Editors
Rebalancing for Sustainable
Growth
Asia’s Postcrisis Challenge
1 3
Editors
Masahiro Kawai Jong-Wha Lee
Graduate School of Public Policy Korea University
The University of Tokyo Seoul
Tokyo Republic of Korea
Japan
The views in this publication do not necessarily reflect the views and policies of the
Asian Development Bank Institute (ADBI), its Advisory Council, ADB’s Board or
Governors, or the governments of ADB members.
ADBI does not guarantee the accuracy of the data included in this publication and
accepts no responsibility for any consequence of their use.
By making any designation of or reference to a particular territory or geographic
area, or by using the term “country” or other geographical names in this publication,
ADBI does not intend to make any judgments as to the legal or other status of any
territory or area.
ISSN 2199-8620 ISSN 2199-8639 (electronic)
ISBN 978-4-431-55320-5 ISBN 978-4-431-55321-2 (eBook)
DOI 10.1007/978-4-431-55321-2
Library of Congress Control Number: 2014954755
Springer Tokyo Heidelberg New York Dordrecht London
© Asian Development Bank Institute 2015
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Preface
The purpose of this book is to describe the challenges facing Asian economies in
the post-global financial crisis environment and to identify structural issues and
policies that can help guide Asian policymakers to expand the growth potential of
domestic and regional demand in coming years, and thereby create a basis for bal-
anced, sustainable, and inclusive long-term growth. These issues and policies span
a variety of dimensions, including macroeconomic policy (monetary, fiscal, and
foreign currency management), real sector issues (trade and industrial structure),
infrastructure development, labor market and social policy, financial sector reform
and regulation, and regional cooperation and architecture. It should be emphasized
that the notion of balanced and sustainable growth includes environmental sustain-
ability. Adjustments will be required both on the demand side and supply side of
the economy.
Key recommendations to achieve these goals include measures to: deepen social
protection to support social resilience; increase infrastructure investment to create
a “seamless Asia”; enhance productivity in the services sector; establish a region-
wide free trade agreement to encourage intraregional trade in goods and services
and investment through economies of scale and dynamic efficiency of a larger mar-
ket; promote a shift to a low-carbon society and support green growth; and deepen
and integrate the financial markets to facilitate the recycling of Asia’s high savings
for investment within the region.
The study benefited from background papers presented in 17 seminars and con-
ferences organized by the Asian Development Bank Institute (ADBI) on the general
topic of the impact and implications of the global financial crisis for Asia. Two
workshops were held in Tokyo in 2009 and 2010 to review draft chapters of the
book. This ADB and ADBI joint study was led by ADBI and conducted in collabo-
ration with ADB under our overall guidance.
We acknowledge the support of so many people and institutions in finalizing
this book. Many individuals from ADBI and ADB and from outside contributed
to the book. Mario Lamberte (The Asia Foundation) and Peter Morgan (ADBI)
coordinated, managed, and finalized the study. They played a leading role in pre-
paring the final book, as well as providing valuable inputs to Chap. 1 (Introduction
and Overview) and Chap. 8 (Beyond the Crisis: Toward Balanced and Sustainable
v
vi Preface
Growth). Yung Chul Park (Korea University) produced Chap. 2 (Crisis Impact) with
contributions by Armin Bauer (ADB), Hank Lim (Singapore Institute of Interna-
tional Affairs), and Venkatachalam Anbumozhi (ERIA). Masahiro Kawai (Univer-
sity of Tokyo) and Shinji Takagi (IMF Independent Evaluation Office) produced
Chap. 3 (Improving Macroeconomic Stability). Willem Thorbecke (RIETI), Biswa
Nath Bhattacharyay (McGill University), Hank Lim, Gloria O. Pasadilla (APEC),
and Venkatachalam Anbumozhi produced Chap. 4 (Rebalancing Production) with
contributions from Ganeshan Wignaraja (ADBI). Gloria O. Pasadilla and Bart W.
Édes (ADB) produced Chap. 5 (Enhancing Social Protection) with contributions
by Armin Bauer. David G. Mayes (University of Auckland), Peter J. Morgan, and
Hank Lim contributed Chap. 6 (Deepening the Financial System). Finally, Chalong-
phob Sussangkarn (Thailand Development Research Institute) produced Chap. 7
(Forging Regional Cooperation).
We are most grateful to the reviewers of individual chapters who gave valuable
comments They are: Barry Bosworth, Brookings Institution (Chap. 2); Charles Ad-
ams, National University of Singapore (Chap. 3); Shujiro Urata, Waseda University
(Chap. 4); Gyorgy Szirazcki and Kee Beom Kim, International Labour Organiza-
tion (Chap. 5); Andrew Sheng, China Banking Regulatory Commission (Chap. 6);
and Josef Yap, Philippine Institute for Development Studies (Chap. 7). Additional
comments were also provided by the following ADB staff: Juthathip Jongwanich,
Rana Hasan, Cyn-Young Park, Donghyun Park, Hyun Son, Lea Sumulong, and
Akiko Terada-Hagiwara. Reviews of the structure of the overall book were provid-
ed by Richard Baldwin (Graduate Institute of Geneva), Stephen Grenville (Lowy
Institute), and Peter Petri (Brandeis University).
Masahiro Kawai Jong-Wha Lee
Graduate School of Public Policy Korea University
The University of Tokyo
Contents
1 Introduction and Overview ..................................................................... 1
Masahiro Kawai and Jong-Wha Lee
2 Crisis Impact ............................................................................................ 31
Yung Chul Park
3 Improving Macroeconomic Stability ...................................................... 65
Masahiro Kawai and Shinji Takagi
4 Rebalancing Production .......................................................................... 103
Willem Thorbecke, Biswa Nath Bhattacharyay, Hank Lim,
Gloria O. Pasadilla, and Venkatachalam Anbumozhi
5 Enhancing Social Protection ................................................................... 143
Gloria O. Pasadilla and Bart W. Édes
6 Deepening the Financial System ............................................................. 179
David G. Mayes, Peter J. Morgan, and Hank Lim
7 Forging Regional Cooperation ................................................................ 221
Chalongphob Sussangkarn
8 Beyond the Crisis: Toward Balanced and Sustainable Growth ........... 251
Masahiro Kawai and Jong-Wha Lee
Index ................................................................................................................ 261
vii
About the Authors
Venkatachalam Anbumozhi is a senior economist at the Economic Research
Institute for ASEAN and East Asia, and heads its Energy and Environment Intel-
ligence Unit. His previous positions include capacity building specialist at the Asian
Development Bank Institute (ADBI), assistant professor at the University of To-
kyo, manager and senior policy researcher at the Institute for Global Environmental
Strategies, Kobe, Japan, and senior engineer at Pacific Consultants International,
Tokyo. He has also advised international agencies on sustainable development proj-
ects. He has published several books and numerous articles and reports on natural
resource management, environmentally friendly infrastructure design, and public-
private partnerships for sustainable development. He obtained his PhD from the
University of Tokyo.
Biswa N. Bhattacharyay is a distinguished fellow with the Observation Research
Foundation, New Delhi; Faculty, Desautels School of Management, McGill
University, Montreal; Visiting Professor, China University of International Business
and Economics, Beijing; and Adjunct Professor, FORE School of Management,
New Delhi. Until March 2013, he was Advisor (equivalent to Director) at the Asian
Development Bank (ADB), Manila. Previously, he was the lead professional and
advisor to the dean with ADBI, and worked with ADB’s Office of the President,
Office of Regional Economic Integration, the Strategy and Policy Department,
and the Economics and Research Department. Previous positions include chief
researcher and training advisor, Kuwait Central Bank; economic advisor, Qatar
Central Bank; professor, National Institute of Bank Management of India; National
Institute of Industrial Engineering of India; and University of Missouri-Columbia.
He obtained his PhD from Iowa State University and his bachelor’s and master’s
degrees from the Indian Statistical Institute.
Bart W. Édes is director of ADB’s Poverty Reduction, Gender, and Social
Development Division providing advice, support, and quality assurance in the social
sectors and on the social dimensions of loans and technical assistance. Previously
he oversaw communications for SIGMA, the joint initiative of the European Union
and the Organisation for Economic Co-operation and Development, assisting
central and eastern European countries with public governance reform. Prior to that
ix
x About the Authors
he was an international trade specialist at the US Department of Commerce. He
has a bachelor’s degree in government from Georgetown University and a master’s
degree in public policy from the University of Michigan.
Masahiro Kawai is a project professor, Graduate School of Public Policy,
University of Tokyo. Previously, he was dean and CEO of ADBI from 2007
through 2014 after serving as special adviser to the ADB President on regional
economic integration and cooperation. He was formerly a professor of economics
at the University of Tokyo. He also served as deputy vice minister of finance for
international affairs of Japan’s Ministry of Finance and chief economist for the
World Bank’s East Asia and the Pacific region. He has published a number of books
and more than 150 academic articles on economic globalization, regional economic
integration and cooperation in Asia, and the international currency system. He
earned his BA in economics from the University of Tokyo and his PhD in economics
from Stanford University.
Jong-Wha Lee is a professor of Economics at Korea University, Seoul, Republic
of Korea. Previously he was ADB’s Chief Economist and head of the Office of
Regional Economic Integration from 2007 to 2010. He also served as a senior
adviser for international economic affairs to the President of the Republic of Korea.
He has over 20 years of professional experience in economics and academia, and has
published numerous books and journal articles in English and Korean, especially on
topics relating to human capital, growth, financial crisis, and economic integration.
He obtained his PhD and master’s degree in economics from Harvard University,
and master’s and bachelor’s degrees in economics from Korea University.
Hank Lim is a senior research fellow at the Singapore Institute of International
Affairs. Previously he was a faculty member at the Department of Economics,
National University of Singapore. His areas of specialization include the Association
of Southeast Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC),
and East Asian economies. From 1990 to 1993, he served as the first director-general
of the Pacific Economic Cooperation Council International Secretariat in Singapore.
He was appointed as an expert for the APEC Individual Action Plan Review of the
People’s Republic of China in 2004, and for the Philippines in 2009. He holds a
master’s degree and a PhD in economics from the University of Pittsburgh.
David G. Mayes is director of the Europe Institute and Bank of New Zealand
Professor of Finance at the University of Auckland; adjunct professor, University
of Canterbury; and visiting professor, University of Buckingham. Prior to this, he
held positions that include advisor to the Board, Bank of Finland (1997–2008);
professor of economics, London South Bank University (1997–2007); and chief
manager, Reserve Bank of New Zealand (1994–1997). His current focus is on the
future development of monetary and financial integration and financial regulation.
He holds an MA from the University of Oxford and a PhD from Bristol University.
He has been an editor of the Economic Journal since 1976.
