Following are excerpts of an address given by IMF Managing Director Michel Camdessus at a conference sponsored by the Hong Kong Monetary Authority and the IMF on financial integration in Asia and the role of Hong Kong, on March 7, in Hong Kong.
Hong Kong is an ideal location to discuss globalization, since many of the East Asian economies, and Hong Kong in particular, represent the essence of globalization-open, dynamic economies that continue to amaze the world with their rapid economic growth and development. Today's discussion takes place less than 120 days before the resumption of Chinese sovereignty-a historic event that highlights the benefits of combining further world economic integration and adaptation within a sound policy framework.
It is plain that globalization has changed Asia's role in the world. Less obvious, perhaps, are the changes that globalization is bringing about within Asia. Clearly, globalization has had a major impact on Asia's role in the world economy. As recently as a decade ago, the developing countries of Asia accounted for only one-sixth of world output. But with many countries in the region having followed sound domestic economic policies, mobilized large amounts of domestic savings, and attracted substantial private capital inflows, Asia-excluding Australia, Japan, and New Zealand-now accounts for about one-fourth of world GDP on purchasing-power-parity-adjusted terms. On this trend, the region could account for one-third of world output by the year 2005.
But what of the changes that globalization is bringing about within Asia? There is an ongoing transformation in the composition of production and trade as the comparative advantage of many Asian economies continues to change. In particular, economies with relatively high wage costs are shifting toward higher value-added products, including services.
Similar trends are also evident in the financial area. The continued growth in net private capital inflows to the region-to over $100 billion in 1995, or well over half of total private capital flows to developing countries-has been accompanied by a change in the composition of these flows. Between 1990 and 1995, foreign direct investment in the region increased more than fourfold. Portfolio investment flows have also risen dramatically and, in the process, have helped deepen domestic capital markets in Asia.
At the same time...