IMF MD emphasises global importance of Asian financial stability

In an inaugural address delivered today for the Future of Asian Finance conference today in Jakarta, IMF’s Managing Director Christine Lagarde emphasised financial innovation, integration, infrastructure and inclusion as key komponents of the continent’s future growth.

 

In terms of innovation, Asia’s financial sector already has supported extraordinary levels of growth and itself has been transformed by the region’s rapid rise. But finance needs to follow the example of Asian manufacturing, which has continually evolved toward higher value-added products and more cost-effective processes. Lagarde’s proposed solution is financial deepening within countries - meaning a shift away from traditional banking practices focused on deposit taking and commercial lending to corporations.

In terms of integration, Asia has made great strides in creating regional trade linkages that have spurred economic vitality. The region has placed itself at the center of global value chains. Lagarde thinks that now the time has come to inject the same vitality into regional financial linkages—to overcome a legacy of fragmented markets and build more synergy among financial institutions and capital markets.

Infrastructure represents the third “i”. It is key to Asia’s future. For frontier economies, improved roads, railways, and ports, and new supplies of water and electricity will be building blocks of development. For the emerging markets, livable cities with proper public transport and advanced IT networks can help avoid the “middle income trap.”

The fourth “i”—inclusion—represents the human side of development. For all of the region’s progress, nearly 350 million Asians still live in poverty. Most have no bank accounts. Many businesses have difficulty accessing bank loans and investment capital. Many live in the emerging markets, but are not part of that prosperity. Financial inclusion is not just a matter of products or regulations. It directly improves livelihoods and reduces poverty. It is the provision of services and the creation of opportunities where there is inequality—inequality of income and gender, education and health.

Asia’s future development presents a complex set of issues in which the financial sector plays a crucial role. They are crucially connected to Asia’s stable economic progress. Only by addressing these four factors simultaneously can the stable future growth of the continent be secured.

Source: IMF