Asia Times: Beijing and Delhi the wise choice


	August 4, 2001	atimes.com

Southeast Asia

Beijing and Delhi the wise choice
By Johanna Son

BANGKOK - Wary after the 1997 crisis and now hurting from the United States economic slowdown, Asian economies should rely more on their own strengths while learning to navigate the sometimes treacherous waters of liberalization, experts say.

Indeed, a group of experts that met in Bangkok this week - called the Asian Wise Persons Group and formed by a regional think tank - says there will be rough waters ahead. But, they argue, Asia must remember that it made huge strides in recent decades precisely due to the openness of its economic policies.

There is also potential for a more integrated Asia in the future, given the increased trade interest by Japan and the rise of giant economies such as China and India, says Supachai Panitchpakdi, director-general designate of the World Trade Organization (WTO). "These trends signify that with the awakening of all these giants, we will see a widening of the intensity [of trade] never seen before," Supachai, a member of the Asian Wise Persons' Group, said at the end of its first meeting.

"The 'economic geography' of Asia is certain to change with the evolving situations in two large economies, China and India," says Cesar Virata, a former Philippine prime minister. "Their increased participation in the regional and global networks will further add momentum in the changing economic map of Asia," explains Virata, chair of the seven-member group of former top government and other officials from Asia, which was formed by the Bangkok-based Asia Strategy Forum.

Liberalization by China and India may well create economic, trade and export potential for neighboring countries in Asia - which may find them economic engines and markets instead of the rivals they are often expected to be.

At present, Asia is finding out that the export muscle that drove its boom for decades can also be a weakness. For countries like Singapore, Malaysia and Taiwan, some of whose technology exports make up more than a third of total exports - their undercut export power in this once-booming sector has led to slashed growth figures for 2001.

About half of Asia's trade now occurs within the region. But its export powerhouses rely in a major way on US demand for goods. Direct exports to the United States accounted for a quarter of total Asian exports last year.

To take advantage of opportunities if Asia's changing economic landscape produces other, bigger consuming economies, the region has to learn how to negotiate with developed countries and survive in a much more globalized economy, experts say.

The key to surviving in a globalized economy is "prepared Openness", says Supachai. "Developing countries have had some criticism in openness as one of the causes of the Asian crisis," he adds, "but we can stay the course of openness in spite of its uncertain consequences."

"We are aware that we do this [call for openness] in the shadow of yet another global slowdown that puts development in the region at risk and leads some to question the values at risk in integration, both global and regional," adds Virata.

Virata says some of the Asian Wise Persons Group's discussions on Asia in the 21st Century were probably "even pessimistic", because of the economic pressures the region continues to face.

But a look ahead still presents positive economic potential despite today's tougher times, the Asian experts add. "What was wrong [in the 1997 crisis] was not the openness. What was wrong was the kind of gap between the openness of things like capital accounts and domestic weaknesses" such as in sectors like banking, explains Mitsuo Sato, ex-president of the Asian Development Bank and a member of the Wise Persons' Group. "That is the lesson we have learned from the Asian crisis," he says, adding that Asia now faces the challenge of how to build a strategy and negotiate for itself in fora like the WTO.

Virata says it is too early to predict what Asia's economic map will look like, but the emergence of China and India and the recovery of Japan are key elements that countries - and businesses - in the region need to look at.

Past experience shows that an emerging China can be a competitor for exports for Asian countries. For instance, its rise as a production powerhouse drew the bulk of the region's foreign investment and caused labor-intensive industries, from shoe to garments production, to relocate to it.

China's continued rise - it is the only Asian economy to escape damage caused by the current US slowdown - may see this trend continuing. Already, there are fears that its joining the WTO would mean more competition for smaller Asian nations. But Virata says this could turn out another way as well."If China produces more, it will also need many other requirements," he explains.

China would need to import more goods and consume more, thus presenting an economic opportunity for other Asian producers looking at the market in the world's most populous country. Indeed, China - which posted 7.5 percent growth for the first quarter - expects to retain robust GDP in the coming years.

Gao Shangquan, president of the China Research Society for Restructuring the Economic System, says the country expects growth to hover between 8-10 percent in the next decade. Virata also quoted him as saying the growth of China's imports from Asia has been bigger than its exports to Asia.

Supachai also sees some good signs in Japan, despite its recession. Latest figures show that industrial output fell 0.7 percent in June - the fourth decline in a row - and that unemployment hit a record 5 percent that month. But Supachai notes that Japan has been showing greater interest in trade-promoting measures. This means there is "more support for more intra-Asian trade" coming from the world's second largest economy, he pointed out.

He also sees prospects for a "widening marketplace" in China as it gets Most Favored Nation status with WTO entry and India in the coming years.

supachai suggests Asia would do well to have an institution like the proposed Asian Monetary Fund, meant to play a lender-of-last-resort role for the region to prevent a repeat of the 1997 crisis. But Western nations and the International Monetary Fund (IMF) opposed it a few years back, fearing it would not be run with fiscal discipline and that it could displace the IMF.

Yet things might be changing, Supachai says. In many ways, Asia is already developing its own responses from lessons from past crises - just as the experts here drew up the emergence of China and India as an opportunity rather than casting them as competitors.

A currency swap agreement is already being used by Asian countries in need of foreign currency. Thus, Supachai says, there may be hope for Asia's own fund - "at the moment I do not see many [opposing] comments on it".

(Inter Press Service)

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