| |
The Asian Century is
only delayed
By Dr Scott B MacDonald
Asia is enjoying a period of solid economic
growth: current-account balances are generally in
surplus, and foreign-exchange reserves are at record
high levels. In China, the region's new economic
locomotive, efforts to achieve a soft landing appear to
be succeeding, albeit in a gradual fashion. Elsewhere,
India has achieved a change in government and many of
the key elements of the country's economic reforms are
intact.
Generally speaking, good news also
dominates in Southeast Asia. Even in Japan, economic
reforms have helped set the stage for what appears to be
a sustainable recovery. The task ahead for many Asian
governments and businesses is to manage success and not
fall back into the pitfalls that led to the Asian
financial crisis of 1997-98.
Clearly a very
strong desire on the part of most Asian governments not
to relive the socio-economic disequilibrium of the late
1990s has resulted in a substantial stockpiling of
foreign exchange reserves (China has US$483 billion),
measures to improve corporate governance, and the
restructuring of financial sectors. In some cases, there
has been an improvement on labor market flexibility and
less red tape for foreign investment.
Asia is
also benefiting from relatively benign international
economic conditions. In particular, the region's major
trade partner, the United States, is enjoying moderate
economic growth. In addition, European economic growth
is set to accelerate moderately in 2005, which should
help maintain export expansion in Asia.
Although
there is a strong likelihood that Asia will continue to
enjoy strong economic growth through 2004 and 2005,
there are some clouds on the horizon. Asia's strong
pattern of economic expansion cannot happen without
access to vast amounts of natural resources. In
particular, China's spurt of industrial expansion over
the past three years has fueled heavy demand for natural
resources. The recent round of oil price hikes were, in
part, caused by strong growth in China, which combined
with renewed demand in the US and geopolitical
uncertainties in key oil-producer nations, led to a
sustained rise in international hydrocarbon prices. Some
30% of China's energy needs are imported. And behind
China is India, with a population of around one billion
and an increasing consumer appetite that will raise
energy needs.
Asia's need to maintain strong
levels of growth is renewing the old debate over
securing access to key resources. While it is doubtful
that any Asian country will come to blows over coal or
copper, oil is another matter altogether. For
energy-deficient countries such as China, South Korea
and Japan the economic lifeline extends from their home
ports in the Pacific to the Middle Eastern and Central
Asian oilfields. This raises issues of the security of
supply lines as well as potential areas for exploration.
Closer home, it means greater attention to overlapping
national claims in such areas as the Kuril Islands and
the South China Sea around the Spratly Islands. In the
latter, tensions have run high in the past, as reflected
by a 1988 naval battle between Vietnamese and Chinese
forces.
For much of Asia, economic growth was
and remains export-driven. While there is a degree of
complementary exports, China's long growth spurt
(beginning in 1978) has elevated it into a competitor
for many of the same goods produced by other Asian
countries. Thailand, Malaysia, South Korea and Japan
have all felt the impact of competitive Chinese exports,
based on lower labor costs. Japan and China have already
locked horns on a number of trade issues and more are
likely. As China climbs the industrial ladder, its
competitive nature will only increase and trade
frictions are likely to rise.
Other obstacles
include the weakness of the Asian financial sector,
where reforms have been made but more must occur, and
poor corporate transparency and disclosure that hurts
investors. Last but hardly least is the threat of
terrorism. There are elements throughout the region that
feel marginalized by the formal political system and
have opted for terrorism as a means to achieving their
goals.
Yet for all the potential points of
economic derailment, Asia is more likely to stay on
track. For all the tensions emerging in the region,
there are critical reasons for governments to find
peaceful solutions. Common economic gains are likely to
outweigh the potential for conflict. Consequently, the
major task confronting Asia is how to manage the
challenges and avoid the pitfalls, something that it can
do considering the political will and vision its
leadership has demonstrated in the past.
Prior
to the Asian financial crisis there was considerable
discussion about the Asian Century; that talk was
premature, but the years ahead could be just that.
Posted with permission from KWR
International, Inc, a consulting firm
specializing in the delivery of research, communications
and advisory services.
|
| |
|
|
 |
|
