It is interesting to note that before the 1990s the predominant view was that a floating exchange rate regime was not suitable for a small open economy. Today, I believe that experience has been exceptionally good among those countries that are targeting inflation. In fact, even some emerging market countries are now building the same kind of regime. In recent years countries such as South Africa, Brazil, the Czech Republic, Poland and Thailand have been inspired to introduce a similar strategy. Consequently inflation targets are now introduced in quite a number of countries. Let me take this opportunity to commend the Governor of the Bank of Thailand and the bank’s staff for the first excellent Inflation Report that was presented in July. The report is very impressive and it has given me quite a few new ideas. The challenge during the 1990s for the inflation targeting countries has been to build a rigorous framework around the new regime. Questions like the choice of rate and index to be targeted, the usefulness of bands around the target and the degree of transparency all needed to be answered. It has also been important to formulate a monetary policy reaction function, that is, to define the balance between inflation variability and output variability. The reason why central banks do not aim for maximum short-term stability in either inflation or output is that attaining only one of the targets would be costly for the economy.
This, in turn, will mobilise more public and private sector investments through co-financing and greatly enhance the support available to developing members. We are also glad to see that governments are working together and making significant steps in promoting infrastructure development. They include, for instance, the establishment of the Asian Infrastructure Investment Bank and the G20 Global Infrastructure Initiative and Global Infrastructure Hub. These initiatives underscore the commitment by governments from within and outside the region to give infrastructure investment a fresh impetus. By bringing new funds and new ways for development assistance, they will serve to complement the existing efforts by ADB in meeting the region’s vast development needs. As highlighted in the theme for this year’s Annual Meeting, fostering cooperation among development partners – existing and new, private and public, national and multilateral – is crucial for reaping synergy and maximising development impact. ADB has a hailed tradition of cooperating with other partners in delivering results. By working together, we believe that ADB and its partners in the region will go a long way in mobilising funds and building the capacity of developing members in delivering high-quality infrastructure projects. As an international financial and business centre in the region, Hong Kong, China has an active role to play in supporting and promoting infrastructure investment in Asia. Corporates, as well as national and multilateral development agencies including ADB and IFC, have been making extensive use of Hong Kong, China’s deep financial markets in raising funds for infrastructure projects.