Williamsburg Conference Agenda

Overview Asia Crisis

• GDP in emerging Asia, excluding China and India, plummeted by no less than 15 percent on a seasonally adjusted annualized basis in the last quarter of 2008, with the IMF forecasting an average decline for this category of Asian countries of 2.9 percent for 2009.
• Much of Asia relies for its growth engine on high-and medium- technology manufacturing exports—in particular, motor vehicles, electronic goods, and capital machinery.
• The demand for advanced manufacturing has collapsed—Japanese auto exports, for example, have fallen by nearly 70 percent between September 2008 and March 2009. At the same time, Asia’s financial ties with the rest of the world have deepened over the past decade, exposing the region to the forces of global deleveraging
• Looking ahead, Asia’s growth path will continue to run parallel to the global economy. For the rest of 2009, the external shock is expected to continue to spill over into private investment and consumption, causing many countries to register negative growth rates. Then, as the global economy revives in 2010, so too will Asia. But the recovery is likely to be tepid—and not only because the global economy will remain weak. Experience shows that investment tends to recover slowly from downturns, especially those that involve financial stress, the report says.

Solution:

· Forceful countercyclical policies should be sustained to help Asia come out of the recession more quickly and vigorously, and to provide insurance against downside risks.

· On the fiscal policy side, it will be important to sustain the stimulus injected in 2009 into next year, not least as an insurance policy against risks that have yet to reveal themselves. At the same time, it will be critical to preserve fiscal credibility by signaling that such stimulus packages are extraordinary and will be unwound once the recovery is firmly established.

· On the monetary policy side, many central banks still have scope to reduce policy rates, while some may need to support credit to the private sector through unconventional measures.

· Asia may need to rebalance growth away from exports and toward domestic demand in order to return to pre-crisis growth rates. China is already trying to catalyze private consumption, which has been falling for a decade relative to GDP.

· Over the longer term, exchange rate appreciation also might help by providing price incentives to shift resources toward production for domestic use and by raising real household income, thereby spurring consumption, the report states.

Climate Change

· An obvious way forward is to support public energy efficient policies in non-OECD countries as well as to promote the use of renewable energy. Mobilization at the local level around this global issue will depend on our ability to refocus the debate on long-term energy strategies as well as local co-benefits like energy security or pollution abatement. With its capacity to support public policies over the long term, development assistance will play a key role.

· Provide payment for ecological services rendered, could be scaled up. Designing a compensation system to remunerate “avoided deforestation” would allow the countries concerned to benefit from the value of their natural capital. Only by using such mechanisms will we demonstrate that our priority is the future.

· There are a number of practical solutions we can implement to protect our climate. Development assistance, which can support essential technology transfers, facilitate financing and be an instrument of collective action, can serve as one of the important vehicles for these good “recipes.”

· There will be no improvement in the environment without growth, nor will there be any sustainable growth without radical change in the underlying environmental paradigms.