Global economy is witnessing a major downturn amid deepening financial crisis, and developing and emerging economies are confronting slowing growth and increased vulnerabilities. Duncun Campbell, Director, ILO, Geneva, correctly said: ?The crisis, originated in ?Wall Street?; has now entered the ?Main Street?,? in an international conference organised by the Research and Information System for Developing Countries (RIS), held in New Delhi last week. The unfolding global financial crisis is having major repercussions on the developmental goals of the countries across the world.

The ongoing crisis is expected to damage the developing economies, particularly Asian economies, differently from the one of 1997. Although less exposed to credit-default risk, developing countries are unlikely to see any decoupling from the problems faced in the developed countries. Few features are almost common to every country: growth rate decelerating; trade rapidly shrinking after enjoying a boom over the last two decades; and unemployment fast increasing. Causes are well known, but remedies are yet to be certain. Some leading countries are advocating protectionism in trade & investment, and according to some commentators, globalisation has come to a screeching halt. But one thing is certain that we need to restructure the global demand through higher spending in infrastructure.

In relative terms, infrastructure is omnipotent, whether the country is in meltdown or not. Infrastructure spending has appeared as an antidote to global meltdown. Infrastructure remains a top priority for addressing developmental gaps (for example, creating jobs) and economic integration (for example, raising trade competitiveness). At present, countries are creating jobs through higher infrastructure spending. In a January 26, 2009 forecast, the World Bank indicated that about $25-30 trillion is likely to be invested in infrastructure sector in next two decades or so.

Economic stimulus packages have been proposed by many countries, of which accelerating infrastructure spending (physical and social infrastructure) in response to the crisis has taken the centre stage. Some countries are concerned about the environment, and their spending on infrastructure is driven by ?Green Infrastructure? (for example in the US and Korea). The responses so far indicate that a whole lot of countries are in the process to enhance infrastructure spending on national infrastructure to sustain growth and domestic demand, enhance productivity, and create employment. Some nations that have announced the stimulus packages with funds for infrastructure include Australia ($76 billion in 2009), China ($180 billion/year), the US ($150 billion/year), Europe ($300 billion/year), Brazil ($281 billion till 2010) and Korea ($32 billion/year).

Of particular interest is China, which has announced a package of about $586 billion that is to be spent on upgrading infrastructure, particularly roads, railways, airports and power grids, on raising rural incomes via land reforms, and on social welfare projects such as affordable housing and environmental protection. India?s stimulus package includes measures to boost infrastructure spending, small & medium businesses, and labour-intensive export sectors such as textiles and handicrafts. Brazil?s stimulus packages primarily consider energy and transport systems. Compared to spending on national infrastructure, the same on regional (cross-border) infrastructure has been rather low.

India?s economic integration with Asia is the most striking development in last decade and a half. In tackling the ongoing crisis, Asian countries so far could not do anything substantial except expanding the Chiang Mai Initiative (CMI), a currency swap which was created when 1997 financial crisis erupted. Asian leaders have proposed a new financial cooperation plan to respond the ongoing crisis at the sideline of last Asia-Europe Summit, held in Beijing in the last quarter of 2008. The leaders of Asean+3 countries have decided to multilateralise the CMI. The new mechanism is proposed to extend the swapping mechanism from the present $80 billion to $350 billion, (about 10% of total foreign exchange reserves of the region) with 80% contribution by Asean+3 countries and 20% by Japan, Korea and China. This new mechanism is likely to be endorsed at the forthcoming Asean+3 Summit to be held in Thailand soon.

Policymakers argue that Asia can place a stimulus package through higher infrastructure spending in physical and social infrastructure. Some recent studies, including that of RIS, indicate that low returns on foreign exchange reserves give us an opportunity to enhance infrastructure spending. With the total reserves of Asia reaching about $4 trillion, infrastructure spending at the regional level will have string multiplier effects, thereby raising the global demand. However, further efforts are required to develop a truly regional pooling reserve arrangement to complement the current one. Asian Currency Unit (ACU) and Asian Bond Market (ABM) are some of the measures suggested by the policymakers.

Therefore, a well-coordinated and coherent financial cooperation policy will not only help protect Asian countries from ongoing global meltdown but also improve the capacity of the Asian countries for preparation and implementation of infrastructure projects, as well as for improving the regulatory environment. There is also an urgent need of regional surveillance mechanism to prevent the same in future.

Wisely chosen national infrastructure projects can create jobs, while building a foundation for productivity growth, domestic demand and poverty spending. At the same time, spending on regional infrastructure can help reduce disparities between the countries and regions, reinforce the regional and global production networks, and raise the export demand. Nevertheless, regional infrastructure is an essential and complementary element of national development strategies. This is the time when Asia needs higher spending in regional infrastructure projects. National infrastructure projects like India?s Delhi-Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridors (DFC), and regional infrastructure projects like Saarc Corridors and Gateways, GMS Economic Corridors, East Asia Industrial Corridor (EAIC) etc will certainly increase the domestic and regional demand, say by creating employment.

Economies are now deeply integrated than ever before. Thus, any policy causing the economies disentangle is vehemently unwarranted. We need strong political will to effectively tackle the financial crisis, besides restoring trust, rebuilding confidence among ourselves, and supporting the governments to do their jobs.

?The author is a fellow at the Research and Information System for Developing Countries (RIS). These are his personal views