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ADBI News 2012 Volume 6 Number 3

On the Path Toward a New Capitalism SYMPOSIUM

Grameen Bank founder Muhammad Yunus, (second from right), joins a distinguished panel of economists and business leaders:
Dean Kawai (far right); Masaharu Okada, (far left), professor and executive director Yunus & Shiiki Social Business Research
Center, Kyushu University; Yasuchika Hasegawa, (second from left), president and CEO, Takeda Pharmaceutical Company; and
George Hara, (center), group chairman and CEO, DEFTA Partners.

The world stands at a critical juncture in the capitalism. In the Japanese context merchants from
history of capitalism, said ADBI Dean Masahiro the Lake Biwa area had traditionally taken the
Kawai, at the opening of the symposium, Toward view that it was not sufficient for a transaction to
A New Capitalism, which was co-sponsored by be good for the seller; it must also benefit the
ADBI, The Alliance Forum Foundation, Yomiuri purchaser and the community. Dr. Jimi bemoaned
Shimbun, and Japans Ministry of Foreign Affairs, the focus on short-term profits; he argued that
Ministry of Finance, Ministry of Economy, Trade capitalism needed to evolve toward a much
and Industry, and Financial Services Agency, held longer-term perspective on growth.
on 25 July. In the presentations that followed,
speakers addressed a number of fundamental
questions. What is the right system for the global In this issue
economy? If it is capitalism, how can the system
be improved? What lessons can be taken from Toward a New Capitalism 12
former and current economic systems to forge a Sub-Regional Workshop on MDGs 3
more humane and people-centered capitalist ADBI in the News 3
model? Distinguished Speaker 4
Dr. Shozaburo Jimi, former Minister of State
for Financial Services and Postal Reform of Japan, Future of the World Trading System 5
located the source of capitalism in the European Importance of International Supply Chains 5
Reformation. In Japan, it had manifested itself in ADB-ADBI-CAREC Conference 6
the mercantile city of Osaka during the Edo period Selected Events 7
(16151868). He stressed that, although the
Recent Working Papers 7
Anglo-Saxon way of thinking practiced by Wall
Street and London exerts great influence over the ADBIWB Roundtable 8
global economy, it was not the only model for

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

private interests? What is wrong with the market

George Hara, group chairman and CEO,
DEFTA Partners, and Chairman of the Board,
Alliance Forum Foundation, was critical of the
capitalist system, which emphasized the
maximization of shareholder value in the shortest
period of time. In the United States, he felt that
this had led to a migration from investment to
speculation, which was the main cause of the
current crisis. Instead, he urged a broader view,
taking in the rights of all stakeholdersworkers,
suppliers, customers, and the broader community.
Nobel laureate and Grameen Bank founder In his view, a new structure was needed, one that
Muhammad Yunus gave a short history of the embraced all these players.
worlds most famous microfinance institution. He Yasuchika Hasegawa, president and CEO of
admitted that his first foray into small-scale Takeda Pharmaceutical, sought answers to
lending was not well thought out; rather, it was an capitalisms current problems in the past. He
instinctive response to the contrast between the argued that there was a strong tradition of ethical
theoretical economics he was teaching in his entrepreneurship in Japan, in part because of the
university classroom and the harsh reality for the countrys tradition as a closed economy and the
people living in the adjoining settlement. From his consequent need for traders and their customers to
first loan for $27 to 42 families in 1976, Yunus trust each other. Like Yunus, he argued that
took the audience on an entertaining journey from proximity and a notion of a shared interest were
the founding of Grameen Bank in 1983 to the large key to establishing ethical business practices.
financial institution it is today, lending $1.5 billion Masaharu Okada, professor and executive
a year to 8.4 million people, 97% of whom are director of Yunus & Shiiki Social Business
women. Research Center, Kyushu University, regarded the
Although Grameen Bank is most famous for ownership of corporations as a critical element.
nurturing very small businesses, Yunus explained Grameen Bank, for example, was 97% owned by
that it had also educated hundreds of thousands of its borrowers, with the other 3% owned by the
young people through its education loans. Government of Bangladesh. In his view, such an
Successful initiatives in Glasgow, New York, and ownership model was an essential part of
San Francisco had shown that the Grameen model establishing social businesses.
had something to offer excluded communities in Yunus explained that, although the world was
developed countries as well. facing a bundle of crisesfinancial,
As for why loans were repaid, despite the environmental, food securitywhen the crisis was
banks dismissal of collateral, he explained that deepest the opportunities were greatest. The
Closeness is the trick. They know us, and we opportunities offered by technology meant that the
know them. distance between the possible and the impossible
Yunus challenged his listeners not to be was shrinking. He urged young people in the
mesmerized by the system. Far too much attention audience to think the impossibleonly then
was paid to short-term fixes that led at best to 23 could the world truly progress.
year breathing periods. Instead, he urged the Dean Kawai said that one of the main
audience to create systems that were new and conclusions from the symposium was that new
fresh. capitalism in the form of social business had the
power to solve social problems and improve social
Panel discussion: conditions. That was an important message to take
Dean Kawai started the panel discussion by on the path toward a new capitalism.
posing a number of provocative questions to the
For more information on this symposium please visit:
panelists. Is capitalism fundamentally bad? How
can an economic system reconcile public and Video:

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Attaining Millennium Development Goals WORKSHOP

Two-thirds of developing countries are on target, agenda. Governments are urged to adapt policies,
or close to being on target, to achieve the procedures and tools to tailor support for unique
Millennium Development Goals (MDGs) of country circumstances and needs, such as people hit
inclusive and sustainable growth. Among hard by financial turmoil, food and fuel crises, and
developing countries that are falling short, half are natural disasters. In doing so, it was decided to
close to being on track. With improved policies explore buffers that allow the convergence of
and faster growth, these countries could achieve MDGs and sustainable development goals (SDGs).
their targets in 2015, or shortly after. Yet even This is the first of four sub-regional consultations
those middle-income countries on track to achieve organized by ADBI in cooperation with
MDGs are home to socially excluded groups that UNESCAPUNDP and the AsiaPacific CoP on
are very poor and increasingly vulnerable to MfDR.
worsening environmental problems and the
impacts of climate change on their lives.
To apprise policymakers on progress, the
Sub-Regional Workshop on MDGs and post 2015
Sustainable Development Agenda for Central
and East Asia, was held in Almaty, Kazakhstan,
2628 September. Joined by representatives from Bindu Lohani, Vice President of ADB, (right) is joined by Serik
Akhmetov, Vice Minister of Labor and Social Protection,
Central and East Asian governments, development Kazakhstan, (second from right) in a discussion on Millennium
agencies, and community supported organizations, Development Goal achievements in Central and East Asia.
the workshop participants shared their experiences
For more information on this workshop please visit:
on the implementation of MDGs. Discussions also
offered perspectives on the post-2015 development

ADBI in the News

Dean Kawai was cited in the Eurasia Review The ADBI working paper, How the iPhone
article, Japans Dilemma on the Trans-Pacific Widens the United States Trade Deficit with the
PartnershipAnalysis. Peoples Republic of China, by Yuqing Xing and
Neal Detert, was cited in the Calgary Sun
Director of Research Ganeshan Wignaraja was article, Langrish: On threshold of historic deal.
cited in the Latin American media outlets And it was mentioned in the Financial Post, El Norte De, article, Canada-EU trade holds great potential., Pysnnoticias, Que!, for his views on
Latin American trade ties with Asia during the ADBIs book, Shaping the Future of the Asia
conference, ASIA y LATINOAMERICA en la and the Pacific-Latin America and the
Busqueda de: Una Asociation para el Caribbean Relationship, was reviewed by
Desarrollo Conference, held in Montevideo, Foreign Affairs magazine and featured on
Uruguay, 31 July., an Argentine media website.

CBT Director Yuqing Xing was cited in the ADBI was cited in the Inter Press Service
Bloomberg News article, Nissan Cars Head article, Free Trade with China? No, Gracias.
Home as Yen Erodes Century of Made-in-Japan
(which was republished by the Detroit Free Press The Muhammad Yunus symposium, Toward A
and The Japan Times); the Xinhua News article, New Capitalism, was reported on by The Japan
Japan allowed to buy 10.3 bln USD worth of Times in the article, Nobel laureate Yunus wants
Chinese government bond; and the South China tech prowess applied to social businesses, and
Morning Post article, Yuan internationalisation by Kyodo News in the article, Nobel laureate
runs into some problems. Yunus urges business to fight poverty.

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e


Challenge to Trade

Patrick Low, chief economist at the World Trade the way in which its applied which is often at the
Organization, delivered a lecture on Old Issues and source of the tension and difficulty over its trade
New Frontiers: Managing Non-Tariff Measures as effects, said Low.
part of ADBIs Distinguished Speaker Seminar To address this issue, governments need to
series on 30 August. supply better information in order to create a more
Low presented his findings on non-tariff complete picture of NTMs and their impact on
measures (NTMs) in international trade, which was trade.
also the subject of the World Trade Report 2012.
NTMs pose several challenges. The first is that not
enough is known about NTMs and their impact on
trade. The second is that NTMs may serve public
policy interests. So the question is, are they going to
serve public policy interests in a manner that
frustrates trade unnecessarily, or are they going to
be designed in a way that has a minimum impact on
The third challenge is that NTMs are typically
Greater institutional integration is needed to address
measures that must be applied administratively in a non-tariff measures, said Patrick Low, the World Trade
certain way in a repeated fashion. And so one thing Organizations chief economist.
is the substance of the measure and we can have
For more information on this seminar please visit:
disagreements about whether its appropriate or not,
and the other is the way in which its applied, and its Video:

Rise of Asia and the New World Order DISTINGUISHED SPEAKER

Dale Jorgenson, a professor at Harvard University, countries such as the PRC and India, which will
gave a presentation on The Rise of Asia and the have a larger share of the global economy. The new
New World Order as part of ADBIs Distinguished world order will look very different in 2020, with
Speaker Seminar on Asia having three of the four largest economies in
25 September. the world.
The global economy The PRC overtook Japan as the worlds
is undergoing a second-largest economy in 2010. In terms of
fundamental change. purchasing price parity (PPP), the PRC will
Despite concerns over overtake the United States (US) in 2017, according
slowing growth in the to the International Monetary Fund. And India will
Peoples Republic of overtake Japan in PPP in 2012.
China (PRC), India, The G8 and G20 countries will grow in
and Japan, and the 20102020, while the BRICS countries (Brazil,
possible dissolution Russia, India, PRC) will grow even faster. Growth
of the eurozone, global will slow for Hong Kong, China; Indonesia;
economic growth is Republic of Korea; Malaysia; Singapore; and
accelerating. In addition Taipei,Chinanonetheless Asian and global
The new world economic to the acceleration there economic expansion as a whole will accelerate,
order in 2020 will be will be a new world driven by the PRC and India.
associated with more rapidly economic order, and it
growing countries such as the
PRC and India, said Dale
will be associated with For more information on this seminar please visit:
Jorgenson. more rapidly growing

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Global Trade at a Crossroads WORKSHOP

ADBI has launched a major project to comprehensively into larger region-wide agreements and ways of making
examine the key changes occurring in the world trading FTAs consistent with multilateral trade-rules; and (iv)
system and the policy implications for Asia. The project the economic effects of new forms of commercial and
will pursue several interrelated objectives, including (i) industrial policies. The inception workshop for the
patterns and drivers of production networks; (ii) project, Future of the World Trading System: Asian
reforms of WTO rules and processes; (iii) patterns of Perspectives, held at ADBI on 31 August, organized
free trade agreements (FTAs), consolidation of FTAs the core study team members comprised of noted
international trade researchers from Asia and other
regions, and conducted brainstorming sessions in
which the researchers preliminary ideas and the
outline of their papers were presented and discussed.
A conference will be held in Geneva,
Switzerland, in 2013, where all the draft research
papers will be presented. Participants will include the
core study team of expertsacademics, researchers
and other resource personsas well as government
officials from Asia and other regions, and staff of
ADBI Deputy Dean Jae-Ha Park (far left), Director of multilateral agencies. The final drafts of about a
Research Ganeshan Wignaraja (second from left), Satoshi dozen research papers will be published as an edited
Inomata of JETRO IDE (second from right), and Biswajit volume by an international commercial publisher.
Dhar (right) of Research and Information System for
Developing Countries, discuss the outlook for the global For more information on this workshop please visit:
trading system at ADBI on 31 August.

Why Are International Supply SEMINAR

Chains Vital to Economic Growth?

Supply chains are crucial to trade, argued Douglas Development Bank play a
Brooks, ADB assistant chief economist, at his role in achieving. As well
seminar, Importance of International Supply as providing hard
Chains to the Performance of APEC Developing infrastructure for supply
Economies, held at ADBI on 2 July. Efficient supply chains, governments must
chains shorten transit time, lower transportation and also provide a regulatory
inventory costs, and facilitate planning activities. environment that is
These in turn go a long way toward mitigating the conducive to the
risks faced by economic agents engaged in trade. participation of the private
Global supply chains support and drive global sector, which can join in
economic activities, which spur technological innovation through publicprivate APEC economies can
and operations, thus satisfying demands while partnerships. A system of expand trade by improving
generating further supplies and income. Supply chains providing accurate and their supply chains, said
Douglas Brooks.
have become so central to global trade that some are timely information is also
beginning to view competition as increasingly occurring necessary for efficient supply chains. This allows
between supply chains rather than between firms. logistics service providers to integrate information
Supply chains are only as strong as their weakest to better manage supply chains, and to cut
link, so the system needs to be more resilient and transaction costs by facilitating communication
flexible across the chain. But improving supply between manufacturers and distributors.
chain efficiency requires a broad reform approach
For more information on this seminar please visit:
encompassing both hard and soft infrastructure,
which international agencies such as the Asian dev.economies/.

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Exploring Transport Facilitation WORKSHOP

Arrangements in Central and West Asia

The Central Asia Regional Economic Cooperation countries joined a knowledge sharing event, Ways
(CAREC) program is developing six international Forward for Corridor-Based Transport
transport and trade corridors linking the Facilitation Arrangements in the CAREC
programs 10 participating countries (Afghanistan, Region, in Beijing, 23 July, to take stock of and
Azerbaijan, Peoples Republic of China, learn from existing transport facilitation
Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, arrangements in the region; learn from international
Tajikistan, Turkmenistan, and Uzbekistan) with good practices on region- and subregion-wide
each other and linking the region to other Eurasian transport facilitation arrangements; and generate
markets. The program plans to complete feasible and practical recommendations on moving
construction or improvement of about 8,400 km of forward on corridor-based transport facilitation in
roads and 5,300 km of railway lines by 2017. the CAREC region.
Improvements in soft infrastructure such as The meeting outcomes contributed to progress
transport facilitation agreements are required to with the broader CAREC Transport and Trade
ensure this large body of investment delivers the Facilitation Strategy and helped shape a new $1.5
highest returns to the region. Transport facilitation million technical assistance program supported by
is particularly important for the CAREC region, ADB. Several CAREC countries are exploring the
which includes eight landlocked countries and lies possibility of piloting the recommended approach
at a crossroads linking large and growing markets to transport facilitation arrangements. The
in East Asia, South Asia, Europe, and the Russian workshop was organized by ADBs Central and
Federation. While there are a number of West Asia Department, ADBI, and the CAREC
multilateral and bilateral transport facilitation Secretariat.
agreements in place in the CAREC region, For more information on this workshop please visit:
cross-border movement of goods and people
remains constrained. carec/.
Workshop materials and reports are available on the CAREC
Senior transport and customs officials program website:
responsible for transport facilitation in CAREC

Samad Garalov, Head of Control of Trade Cargo Department of the State Customs Committee of Azerbaijan (left), introduces
his countrys approach to transport facilitation arrangements in Central Asia at an ADB-ADBI-CAREC conference in Beijing,
23 July. CBT staff David Kruger (third from right) joins the meeting.

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A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Selected Events

ADBI Annual Conference on Growth and Regional Integration in Asia and the Pacific in 2013 and
30 Beyond (Tokyo)
November This conference will discuss recent developments in Asian growth and regional integration, and explore
prospects and assess policy choices for sustainable growth.

Book launch of the Chinese edition of Asias Free Trade Agreements: How is Business Responding?
6 (Beijing)
December This event is being organized in cooperation with Chinese Academy of Social Sciences.

11 Seminar by El-hadj Bah: Constraints of Small Firms Growth in Myanmar (Tokyo)

December This seminar will examine the constraints that small firms are facing while doing business in Burma.

Recent Working Papers

Central Banking for Financial Stability in Asia Europes Debt Crisis, Coordination Failure, and
Authors: Masahiro Kawai, Peter J. Morgan International Effects
Author: Stefan Collignon
A key lesson of the 20072009 global financial crisis was the
importance of containing systemic financial risk and the need for a This paper gives an overview of the causes of the European debt
macroprudential approach to surveillance and regulation that can crisis and the consequences for the external relations. It finds that
identify system-wide risks and take appropriate actions to maintain political mishandling has increased uncertainty, which has
financial stability. This paper reviews the recent literature on this contributed to a tendency for the euro to become weaker.
topic and identifies relevant lessons for central banks. Read Working Paper 370 at
Read Working Paper 377 at 2012/07/11/5141.europe.debt.crisis.effects/.

Japans Post-Triple-Disaster Growth Strategy Green Growth and Equity in the Context of Climate
Authors: Masahiro Kawai, Peter J. Morgan Change: Some Considerations
Authors: Jeffrey D. Sachs, Shiv Someshwar
The repercussions of the Great East Japan Earthquake on 11
March 2011 spread far beyond the geographical areas directly The authors explore ways that equity has been considered in
affected. The disaster also highlighted Japans many other climate change discussions. They discuss per capita emission right
structural challenges, including low growth, population aging and approaches, and highlight key challenges in the application of
low fertility, government debt, declining international equity in global climate change negotiations. They provide a brief
competitiveness, and uncertain energy supplies. This paper overview of key approaches to carbon financing, focusing on
discusses the scope of these challenges and sets out a strategy for recent cost estimations of potential climate change impacts, as
overcoming them and putting the Japanese economy on a stable well as of projected needs for green growth programs.
growth path. Read Working Paper 371 at
Read Working Paper 376 at 2012/07/13/

Institutions for Asian Integration: Innovation and Do Exporting Firms in the Peoples Republic of China
Reform Innovate?
Authors: Giovanni Capannelli, See Seng Tan Author: Ganeshan Wignaraja
The formation of regional production networks in East Asia has This paper assesses factors driving firm-level export performance
occurred mainly through market forces, without much help from in Asias super exporterThe Peoples Republic of China (PRC).
regional institutions in promoting the creation of a single Asian While early studies suggested that innovation was important, there
market. While this approach has served the region well, the drastic has been little research on opening up the black box of technology
changes experienced since the 20082009 global financial crisis at firm-level in the PRC, the author undertakes econometric
and the challenges Asian countries are facing, have rendered more analysis of innovation, learning, and exporting in automobiles and
urgent the need for intergovernmental cooperation at global and electronics firms in the PRC using a large-scale dataset to identify
regional levels. the most appropriate innovation proxy.
Read Working Paper 375 at Read Working Paper 365 at
2012/08/20/5217.asian.integration.innovation.reform/. 2012/07/03/5135.exporting.firm.prc.innovate/.

A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Outlook for Agriculture Commodity ROUNDTABLE

Exchange in Asia

The recent volatility in global commodity markets

highlights the vital role of commodity exchanges
for developing countries. A well-functioning
commodity exchange can facilitate the process of
price discovery and improve the functioning of
markets for food and agriculture commodities.
Volatility in international markets and
underdeveloped domestic commodity markets pose
risks for market participants. So enhancing
capacity for institutions that serve commodity
markets will increase the welfare of market
participants. This is crucial to commodity
exporting countries that have interest in sustaining CBT Consultant Cholifihani Muhammad (left) joins a
roundtable discussion at ADBI on commodity exchange
export revenues from commodities.
markets in Asia.
Senior officials from East Asian economies,
such as the Peoples Republic of China, Indonesia, Asia, (iii) establishment of the regional price index
Japan, Thailand, and Viet Nam, attended the for selected agriculture commodities, and (iv) the
ADBIWorld Bank Roundtable on Regional future of the agriculture commodity exchange in
Commodity Exchange Market Integration in Asia.
Asia, in Tokyo, 1213 September. Attendees from With the emerging economies of Asia
Japanese and Indonesian companies also joined the becoming major consumers of commodities,
roundtable. greater cooperation and integration in commodity
The objective of the roundtable was to deepen markets through commodity exchange may lead to
the understanding of views on how to strengthen a pan-Asian commodity exchange, which could
market institutions for commodity exchange become new centers of commodity price
markets. At the roundtable, participants discussed discovery. To support a regional exchange,
issues related to the agriculture commodity countries will have to harmonize trade and
exchange, particularly in rice and rubber. exchange rate policies, set up mutually agreed
The event, jointly organized by ADBI and the rules for grades, standards and contract
World Bank Jakarta Office, focused on four key enforcement, and promote regional
questions: (i) price discovery of the agriculture macroeconomic stability.
commodity exchange, (ii) relationship between the
For more information on this roundtable please visit:
use of derivatives at the commodity exchange and
price volatility for agriculture commodities in

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