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IDB and Asian Development Bank forge closer relationship

ADB President Haruhiko Kuroda attends IDB’s Annual Meeting to discuss ways to increase ties between the regions

The presidents of the Asian Development Bank (ADB) and the Inter-American Development Bank (IDB) have agreed to join forces to find ways to strengthen trade and investment ties and share development policy insights between two of the world’s fastest-growing regions.

ADB President Haruhiko Kuroda attended the Annual Meeting of the IDB and participated in the presentation to the Board of Governors of the summary of a jointly produced book, to be titled “Shaping the Future of the Asia-Latin America and the Caribbean Relationship.” IDB President Luis Alberto Moreno will attend the ADB’s annual meeting in Manila in May, when the book will be officially launched.

It is the first time that the top executives of the two regional development banks have participated in each other’s annual meetings.

“We are pleased to enter into a close collaborative relationship with the ADB, believing as we do that the world’s fastest-growing regions can benefit not only from boosting trade and investment, but from sharing their experiences in pursuing sustainable development,” Moreno said.

Latin America and the Caribbean (LAC), which underwent rapid urbanization over the past few decades, can provide Asian countries with valuable insights on how to deal with the resulting social, logistics and environmental pressures. Several Asian countries can share lessons on how they designed export-oriented development strategies, created world-class infrastructure, and improved the quality of their educational systems. And, both regions can benefit from cooperation as they work to expand the use of renewable energy through bio fuels, solar power and wind turbines.

Since 2000, trade between the two regions has been growing at an annual average rate of 20 percent, reaching an estimated $433 billion in 2011. Today, 21 percent of LAC’s trade is with Asia, right behind the United States, which accounts for 34 percent. In the same time period, LAC’s share of Asia’s trade has more than doubled to 4.4 per cent.

The surge in trade is being fostered by an increase in the number of free trade agreements (FTAs) between Asia and LAC. Between 2004 and 2011 an average of two FTAs took effect every year between the regions, resulting in a total of 18 such agreements today. Additional agreements currently under negotiation or approaching implementation could take that number to 30 FTAs by 2020.

Most Asian investment has been concentrated in LAC’s largest markets, Brazil and Mexico. In order to increase investment throughout the region, governments need to work on creating more favorable business environments, reducing non-tariff barriers and establishing more transparent regulations, the book’s authors say.

Asia’s demand for natural resources is likely to continue, and its comparative advantages in manufacturing will continue to pose challenges for Latin American companies for the foreseeable future, the authors say.

Moreno, the IDB’s president, said on a visit to China last year that it is important for Latin America and the Caribbean to move beyond the exportation of natural resources to processed products with more value added. He encouraged Asian firms to invest in infrastructure and logistics projects in LAC that will help the region’s companies become more productive and internationally competitive.

The jointly-authored book asserts that there is room for policymakers in both regions to reshape the relationship in such a way that will encourage continued strong growth that could benefit both regions for decades to come.

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