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Asia’s next financial crisis: are we ready ?

Should Asia plunge into another crisis, would we be ready? The latest edition of East Asia Forum Quarterly (EAFQ), seeks to answer that question

Boris Sullivan

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Credits : ADB

‘Brighter prospects, optimistic markets, challenges ahead’: That was the title of the IMF’s World Economic Outlook update in January this year.

How quickly things have changed. Since that report was published, turbulence, volatility and crises have dominated the economic landscape.

Argentina is in crisis. Turkey is not far off. Markets have been rattled in Indonesia, Myanmar, Italy and Spain as financial conditions tighten.

The fallout from Brexit is more uncertain than ever. Populist politicians continue their rise. The trade war between the United States and China has escalated at an alarming rate.

The clock is ticking before the WTO dispute settlement appellate body shuts-down. China’s financial system remains precarious.

Geopolitical tensions remain high

The United States faces bitterly contested Congressional and Presidential elections with macroeconomic policies that are at odds with the direction of the economy.

Geopolitical tensions remain high with Iran, North Korea and Russia. With all these risks, now is a good time to think about Asia’s capacity to respond to economic crises. It’s appropriate to be exploring this issue this year.

It is the 10-year anniversary of the collapse of Lehman Brothers. Just last year, we marked the 20-year anniversary of the Asian financial crisis.

Should Asia plunge into another crisis, would we be ready?

The latest edition of East Asia Forum Quarterly (EAFQ), launched today, seeks to answer that question. The news is not good. There are major risks facing the region and its economies.

With trade wars, financial turmoil, institutional weakness, rising populism, territorial disputes and geopolitical tensions there is plenty of risk to go around. EAFQ assesses the capacity of global institutions, like the IMF, to respond in different crisis scenarios.

The resources of the IMF have been increased substantially since the global financial crisis. But with more countries calling on those resources, have they been increased by enough?

Are the IMF’s lending facilities flexible enough? Will countries go to the IMF if they get into trouble? Or does the IMF’s reputation since the Asian financial crisis haunt it still?

Since the Asian financial crisis, a plethora of regional financing mechanisms have been developed, particularly in Asia. What role should these institutions, such as the Chiang Mai Initiative Multilateralization, play in supporting stability.

Are these regional financing mechanisms competitors or complements to the IMF? How would they work together in a crisis, given they are untested? One line of defence against crisis is bilateral currency swap lines.

Swap lines with the US Federal Reserve, some of which still exist today, were integral taking the pressure off during the global financial crisis. China has since created its own swap lines worth almost half a trillion dollars. Are these swap lines part of the safety net?

Do central banks agree on whether they be available in times of crisis?

How do they relate to the IMF, regional mechanisms and development banks? Much can be done domestically to strengthen the resilience of Asia’s economies and financial systems.

Economies need to take steps to prevent themselves from having to access the safety net in the first place. What role can regional arrangements like APEC play in this process? In this week’s lead essay, Edwin Truman has a blunt warning: ‘Neither Asia nor the global financial safety net is ready for the next crisis’. Truman suggests three reasons for this.

Author: Editorial Board, ANU

Asia’s next crisis: ready or not? | East Asia Forum

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Economics

EEC Expects 300-billion-baht Investment This Year

National News Bureau of Thailand

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BANGKOK (NNT) – The Eastern Economic Corridor (EEC) has expected investment to triple to 300 billion baht this year as investment projects previously held by the coronavirus outbreak get pushed forward again.

EEC Secretary -General Kanit Sangsubhan said actual investment in the EEC could be up from 96 billion baht in 2020, or 46% of total project applications as investors did not invest last year, and they would have to do it this year.

He said there will be a bunch of projects held up from previous years.

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Commerce Ministry sets Thailand’s export growth target at 4% for 2021

National News Bureau of Thailand

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BANGKOK (NNT) – Thailand has seen export growth of 0.35 percent in the first month of the year. The Commerce Minister has ordered the Department of International Trade Promotion to advance an action plan to accelerate growth, which is set at 4 percent this year.

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Has Covid-19 prompted the Belt and Road Initiative to go green?

Oxford Business Group

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Has Covid-19 prompted the Belt and Road Initiative to go green?
– Covid-19 led to a slowdown in BRI projects
– Chinese overseas investment dropped off in 2020
– Government remains committed to the wide-ranging infrastructure programme
– Sustainability, health and digital to be the new cornerstones of the initiative 

Following a year of coronavirus-related disruptions, China appears to be placing a greater focus on sustainable, digital and health-related projects in its flagship Belt and Road Initiative (BRI).

As OBG outlined in April last year, the onset of Covid-19 prompted questions about the future direction of the BRI.

Launched in 2013, the BRI is an ambitious international initiative that aims to revive ancient Silk Road trade routes through large-scale infrastructure development.

By the start of 2020 some 2951 BRI-linked projects – valued at a total of $3.9trn – were planned or under way across the world.

However, as borders closed and lockdowns were imposed, progress stalled on a number of major BRI infrastructure developments.

In June China’s Ministry of Foreign Affairs announced that 30-40% of BRI projects had been affected by the virus, while a further 20% had been “seriously affected”. Restrictions on the flow of Chinese workers and construction supplies were cited as factors behind project suspensions or slowdowns in Pakistan, Cambodia and Indonesia, among other countries.

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