Vietnam’s capital city is, in many ways, the perfect setting for this year’s Asian Development Bank annual governors’ meeting.
The Hanoi meetings may well be the busiest on record for the ADB, amid expectations of a record turnout of policymakers, academics, finance professionals and other delegates.
Although still small in global terms, Vietnam’s economy is a microcosm of many of the issues facing the broader Asian region. The country is expanding rapidly, with GDP growth pegged at 6.8% last year, domestic consumption is soaring, exports are rising, and poverty indicators are falling.
Domestic demand, however, is fuelling inflation: the ADB notes that food prices and school fees are among the leading drivers, helping to push the consumer price index 17.5% higher in April. Swollen public sector employers are struggling to stay competitive, while urbanisation is adding to already severe pollution and traffic congestion problems, and the country is struggling to promote the wider use of its domestic currency.
Policymakers face a delicate balancing act in trying to control inflation without derailing growth. At the same time, longerterm challenges are looming large – Vietnam’s elevation to middleincome status highlights its need to invest in education and infrastructure if it is to develop into a higherincome economy.
Many of those challenges are reflected across the entire Asian region. Inflation is at its most ferocious in Vietnam, but countries from China to India are wrestling with the impact of rising prices. Oil prices are back above US$100 a barrel, prompting fears that Asia’s oil importers will struggle to maintain economic growth if prices continue to rise. Global food prices threaten recent progress in poverty reduction, while policymakers are acutely aware of the dangers of social unrest from food price shocks. The ADB estimates a 10% rise in domestic food prices in developing Asia will push an additional 64m people below the US$1.25aday poverty line.
Shortterm stability will necessarily be top of the agenda at this year’s meetings. However, Asia also has the chance to put its new economic muscle to good use in promoting sustainable, longterm development. The AsiaPacific region already accounts for around a quarter of global economic output, and estimates are that figure will rise to as much as 50% come 2050.
As Asia continues to grow, so too will the pressure on its resources. Food and energy security will become key flashpoints as the region’s powers look to fuel their continued expansion and feed their growing populations, while calls are already growing for Asia to take more responsibility for climate change and environmental pollution – still very much secondary issues to economic growth.
This year’s meetings give Vietnam’s leaders a unique opportunity to boost their credibility and increase their profiles within Asia. Asian leaders, meanwhile, need to take full advantage of this chance to set a longterm agenda that will be of benefit to all.