East Asian Members Use Lender to Foster Financial Integration By RICK CAREW May 8, 2006
HYDERBAD, India -- The Asian Development Bank's annual meeting ended Saturday with its Western and East Asian member countries divided on the role the bank should play in pushing financial integration within Asia.
Western countries say they would prefer the ADB stick with its original mandate of poverty relief and also shift its focus to partnering with the private sector in infrastructure development in Asia. But Asian members of the bank are using the ADB to encourage greater financial integration in the region, including the creation of local bond markets in Asia and discussion of a possible Asian currency.
"I worry about mission creep in this institution," U.S. Treasury Undersecretary Timothy Adams said Friday on the sidelines of the meetings.
The 13 East Asian finance ministers agreed last week to study the development of an Asian currency unit, a plan long advocated by ADB President Haruhiko Kuroda.
The measures exposed the rift between the U.S and Europeans on one side and Asian members such as China, South Korea and Japan on the other over the future strategy of the multilateral aid lender.
"ADB must remain firmly anchored to its vision of an Asia and Pacific region free from poverty. ... All other strategic objectives must be pursued in ways that contribute to this goal," said Italy's board representative, Giorgio Gomel.
In addition to the regional-currency plans, the finance ministers of the Association of South East Asian Nations plus China, Japan and South Korea agreed in a joint statement to collectively manage currency swaps and to boost the development of a regional bond market. Mr. Kuroda, of Japan, has strongly advocated increased financial cooperation in Asia and an eventual monetary union.
"Imagine an Asiawide economic community," Mr. Kuroda said in his address to the bank's board. "If we can envision all this, I know we can achieve it."
The plans for a regional-currency unit that could eventually lead to monetary union among East Asian countries remains a far-off goal for now, as East Asia's economies are far less integrated than their European counterparts.
Mr. Kuroda has previously played down the Asian currency unit's similarities to the European currency unit that foreshadowed the creation of Europe's common currency, the euro. Initial plans for a regional currency are more focused on building a regional bond market, he said.
The study on developing the currency, expected to be completed in 2007, will be led by a Japanese research institute. Some economists question the viability of such a unit given the wide economic disparity in the region.
Many member countries also criticized the ADB at the meeting for failing to draft a compelling strategy for its future development. Mr. Kuroda responded to that criticism by agreeing to convene a panel of "eminent persons" to guide the ADB in a review of its long-term strategy. The panel will report to the ADB's 2007 annual meeting in Kyoto, Japan.
