The third conference held by the IMF and JICA (the Japan International Cooperation Agency) has discussed the participation of frontier and developing countries in Asia in economic growth. In his opening remarks the deputy managing director of the IMF noted the robust growth of frontier and emerging economies in Asia and suggested that this is a model for frontier and low-income countries in other regions of the world.

There is however a global economic slowdown and the IMF’s growth projections for Asia have been reduced. Growth in Asia is now predicted to be 5.4% in 2015 and 5.3% in 2016. Another challenge for the emerging economies in Asia is social inequality with a relatively high proportion of populations still living in extreme poverty. Much progress has however been made and the numbers of people living in extreme have halved since the period of high growth began. Effective policy measures are therefore essential and fiscal redistribution by reducing inequality could support economic growth. Evidence from advanced economies suggests that direct income taxes and transfers, including benefits and pensions, have helped to reduce inequality by around a third.

The IMF considers that policy priorities should include spending on infrastructure, education, healthcare and social security. However this government spending needs to be financed in a sustainable way that leads to stability and economic efficiency. In frontier and developing countries of Asia the average tax revenue to GDP ratios are relatively low. Efforts can therefore be made to broaden income and consumption taxes by reducing the number of tax exemptions available and by improving the level of compliance by taxpayers. Efforts could also be made to make tax systems more progressive so that higher income taxpayers pay a higher proportion of their income in tax than lower income groups.

The conference discussed inclusive growth, fiscal sustainability and promotion of small and medium enterprise development. There was also discussion of strengthening capital and financial markets, and how capital can help the countries meet their infrastructure requirements and deal with demographic issues.

The frontier and developing countries participating in the conference were Bangladesh, Bhutan, Cambodia, Laos, Maldives, Mongolia, Myanmar, Nepal, Papua New Guinea, Sri Lanka and Vietnam.