SINGAPORE -- The global financial crisis that was triggered by the US sub prime mortgage defaults has sent shock waves around the world –leading to an unprecedented spate of central bank and government interventions to stabilize markets and rebuild public confidence. These efforts to safeguard global financial stability also extended beyond major industrial economies to emerging markets, according to Rajat M. Nag, Managing Director-General of the Asian Development Bank.
Mr Rajat M. Nag (extreme left) with the rest of the panel.
Mr. Nag was addressing the Leadership Summit Asia 2008 held at Claude and Tuulikki Auditorium of the INSEAD Asia Campus in Singapore last week.
The summit promotes dialogue and a healthy debate on whether Asia is riding – or writing – the future. These interactive sessions covered the growing shift of economic power to Asia, and the challenges and sustainability of this growth. Participants also discussed leadership skills and capabilities that are most effective for global success, and the role of the CEO in managing risks and driving profits through global expansion and innovation. It was revealed that the US Federal Reserve is setting up US$30 billion in swap lines with Brazil, Korea, Mexico, and Singapore while the IMF is launching a US$ 100 billion short-term liquidity facility for economies with generally sound macro economic systems, he added.
Mr Nag told a packed audience of around 300 global leaders from business, government, media and academia that Asian countries are to face some very difficult challenges ahead as the global financial crisis spreads to the real economy and global growth outlook rapidly deteriorates. In the short term, Asia’s economic and financial systems will likely come under increased pressure as the global credit crunch spreads through domestic financial markets and funding conditions in general. He added that tighter global credit will affect the region’s financial markets and worsen Asia’s investment climate. And because Asia continues to require substantial investment and innovation, this poses a considerable threat to the region’s long-term growth and thus its ability to continue to rapidly reduce poverty.
Today’s Asia is at the crossroads. It is a booming market for almost every product or service imaginable. It is able to serve as a platform for cost reductions throughout the entire value chain.
And it is producing global competitors – such as Tata and Huawei – at a speed the world has not seen before. However the CEO of Aviva Asia Pacific Simon Machell noted that 9 % growth in Asia may prevent the global economy from sliding into deep recession, but recent financial conditions have deteriorated sharply and huge volatility has been the order of the day.