ADB Chief: Asia Must Promote Free Trade Amid Uncertainty, Use Current Crisis to Implement Structural Reforms

Asian countries must promote a free trade system at this time of uncertainty by proceeding with structural reforms such as the easing of regulations, according to Asian Development Bank President Masato Kanda.

The following is excerpted from an interview with Kanda conducted in Milan by Yomiuri Shimbun Correspondent Takashi Itoda, who is based in Bangkok.

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Asian countries can be said to have experienced economic growth thanks to the benefits of globalization under a free trade system.

These countries have solidified their positions as manufacturing hubs by implementing open economy policies and developing infrastructure. As their national incomes have grown, so too have their middle class populations with purchasing power.

Therefore, if trade shrinks or geopolitical risks increase, economic growth in the Asia-Pacific region as a whole will slow down, threatening the foundation of people’s lives, particularly among the poor and others in vulnerable situations. Some analyses point to high risks for the future of countries such as Cambodia, Vietnam and Sri Lanka.

The world is now facing unprecedented uncertainty. Investors naturally dislike uncertainty, so there are concerns that emerging Asian countries will experience turmoil in financial markets and capital outflows due to risk aversion and reduced appetite for investment. There will also be increasing debt burdens due to rising interest rates and currency depreciation.

However, it is fruitless to merely lament the situation. Each country must use the current crisis as an opportunity to proceed with structural reforms and build resilient economies that do not rely solely on exports to specific countries.

The first step is to improve the investment environment through such measures as relaxing regulations, thereby expanding domestic demand. It is important to diversify industries and supply chains and to strengthen human resource development by improving the level of education and vocational training. Diversifying trade partners and deepening economic ties within the region are also important tasks.

A free and open trade system is a reflection of humanity’s wisdom. Now is the time to further proceed with an open economy. Asian nations can establish win-win relationships by supplying high-quality products to other countries and receiving good products from them, which will enable both sides to improve and support one another.

The ADB aims to financially support structural reforms in various countries and boost the sustainability of industries. The bank is also working to reinforce economic links within the region. For instance, it plans to provide $10 billion (about ¥1.4 trillion) for an international power grid project connecting the Association of Southeast Asian Nations’ member countries to ensure a stable supply of electricity.

The bank has established a system to swiftly implement emergency loans in the event of an economic crisis such as capital outflows. Amid growing global tensions, there are increasing expectations for the ADB, which maintains a neutral stance, thereby placing a heavy responsibility on us.

During talks in the United States in April, U.S. Treasury Secretary Scott Bessent commended the ADB for its strategy to create jobs and encourage technological innovation by boosting support for the private sector. We also agreed that the ADB and the United States will work to build closer ties.

Various countries are pursuing their national interests, with diverse debates taking place within each country. While this is no easy task, it is essential to maintain the free trade system and make this crisis an opportunity to build a better economy and society.

Masato Kanda