Indonesia, Australia and overcoming the Asian crisis (3)<\/p>\n
This is the third of three articles based on former Australian
\nprime minister Paul J. Keating's lecture at the University of New
\nSouth Wales in March on the impact of the Asian economic crisis
\non the region in his capacity as visiting professor of public
\npolicy.<\/p>\n
SYDNEY: The current Asian economic crisis has demonstrated how
\ncentral the trans-Pacific links are but they require careful
\ntending on both sides of the ocean.<\/p>\n
It was openness and links across the Pacific which delivered
\nAsia's enormous growth.<\/p>\n
Asian economies are looking at a lengthy and painful period of
\nadjustment. It took Australia about five years to fully exploit
\nits new competitiveness in the 1980s. We turned a huge nominal
\ndepreciation of the exchange rate in 1985\/1986 into a real
\ndepreciation. That is, we captured the competitiveness.<\/p>\n
But we did not start really seeing the longer-term results in
\nour export performance and our import replacement performance
\nuntil about four or five years later.<\/p>\n
But I believe that the adjustment time in Asia will be shorter
\nbecause the voices of so many people looking for better lives for
\nthemselves and their families will not be denied.<\/p>\n
The underlying factors underpinning Asian growth have not
\nchanged: Young demographics, high savings rates, sensible
\nmacroeconomic policies, entrepreneurial cultures and the high
\nvalue placed on education.<\/p>\n
And if regional governments can get through this immediate
\nperiod and take advantage of the reforms now being imposed on
\nthem, and the competitiveness benefits which the devaluations
\nprovide, they will have tremendous horsepower for the next stage
\nof economic growth. The International Monetary Fund (IMF) may not
\nhave all the answers, but it has provided governments with the
\nauthority to make reforms which they could not have drawn down
\nfrom their own political system.<\/p>\n
But the long-term problems for Asia have not gone away. In a
\nsense, the real Asian economic crisis is still out there,
\nwaiting.<\/p>\n
This is the crisis of funding and building the infrastructure
\nrequired to support more than two billion people, to feed and
\neducate them and deal with the profound environmental consequence
\nof that growth.<\/p>\n
Asia's energy demand is doubling every 12 years with all the
\nconsequences that has for air quality and global warming.<\/p>\n
In the early 1990s, around 500 million East Asians lived in
\ntowns. By 2020, this figure will have trebled to 1.5 billion.
\nThis demographic shift from the countryside to the cities will
\nput a huge strain on basic services like water, sanitation and
\nshelter. Only half the urban populations in developing Asian
\ncountries currently have access to safe water supplies and 42
\npercent to sanitation.<\/p>\n
Food is a looming issue, too. We are already seeing across the
\nregion the consequences of unconstrained heavy use of
\nfertilizers, irrigation and pesticides. Agricultural productivity
\nis better, but at the expense of soil erosion, salinity and the
\npollution of water resources. How will the region supply itself
\nwith food without destroying the land for future generations?<\/p>\n
These looming problems have largely been forgotten in the
\ncurrent turmoil. But they will require even greater attention
\nonce the current crisis has past.<\/p>\n
Unfortunately, as we have seen over the months since last
\nJuly, global and regional organizations are nowhere near ready to
\nrespond effectively to the new challenges of globalization, and
\nthe changes it is bringing to the international system.<\/p>\n
Throughout this past year, the principal institutions we might
\nhave looked to for help have been out of breath, or behind the
\nplay, or playing the wrong game.<\/p>\n
Many writers have commented, and all of us know intuitively
\nanyway, that the pace of global change is quickening. It is still
\nless than 10 years since the Soviet Union collapsed, and with it
\nthe whole post-war international order. Now, only a few years
\nlater, we are seeing an economic crisis in Asia which threatens
\nto hobble the region which had promised to be the world's
\neconomic growth engine as we enter the 21st century.<\/p>\n
History is made up of discontinuities. But surely one of the
\nmain lessons of the past decade is that those discontinuities are
\nbecoming more frequent and deeper.<\/p>\n
In other words, it is not the speed of change which should
\nconcern us most but the fact that change seems to be becoming
\ninherently more sudden and less predictable.<\/p>\n
The reason lies in the profound impact on the international
\nsystem of the information revolution in all its various forms,
\nincluding the way it has made economic globalization possible and
\nhas accelerated the mobility of capital, information and ideas.<\/p>\n
The Asian economic crisis has been an obvious example of this.<\/p>\n
In a recent speech, Alan Greenspan, the chairman of the U.S.
\nFederal Reserve Board, pointed to the way the new technology
\nappears to have facilitated the transmission of financial
\ndisturbances far more effectively than ever before. Vicious
\ncycles of ever-rising and reinforcing fears have become
\ncontagious and are emerging more often.<\/p>\n
It is likely, he says, that the root of the sharp exchange
\nrate changes in Asia \"is a process which is neither measured nor
\nrational, one based on a visceral, engulfing fear.\" And once such
\ncycles are triggered, damage control is difficult. Once the web
\nof confidence which supports the financial system is breached, it
\nis difficult to restore quickly.<\/p>\n
I think this argument can be extended to the political and
\nstrategic realm. In other words, \"contagion\" is not just an
\neconomic phenomenon. Change -- any change -- is being magnified
\nby the speed and variety of the transmission mechanisms which
\nmake it known. It spreads more rapidly, is less subject to
\nfiltering by governments and less easy to control.<\/p>\n
We saw this phenomenon clearly in the political\/economic
\ncrisis which led with such startling speed to the collapse of the
\nSoviet empire in Eastern Europe.<\/p>\n
If that judgment about the international system is right, the
\npractical consequence for public policy-making is that we are
\nlikely to have less warning of future crises and, therefore,
\nfewer opportunities to avert them. And when they come, the swings
\nthey generate are likely to be larger.<\/p>\n
I agree with Alan Greenspan's conclusion that we do not as yet
\nfully understand the new system's dynamic and that we need to
\nupdate and modify our institutions and practices to reduce the
\nrisks inherent in it.<\/p>\n
The IMF has had a lead role in this crisis, but it is a very
\ndifferent, much broader, role than the sort of balance of
\npayments crises it has had to contend with in the past. The
\nfinance ministries and the IMF have not been able to assimilate
\nproperly the political dimensions of the new sort of job they are
\nnow being asked to perform.<\/p>\n
The momentum for changes to the processes and policies of the
\nIMF is now probably unstoppable.<\/p>\n
The Group of Seven (G-7) industrial countries has had a go at
\nthinking about the crisis, but its problem in these circumstance
\nis that the interests of its European members demonstrably do not
\nextend to the political stability of Southeast Asia.<\/p>\n
The Asia-Pacific Economic Cooperation (APEC) forum ought to
\nhave been ideally placed to respond to the region's difficulties
\nbecause it is an economic organization which includes all the
\ncountries most affected.<\/p>\n
One problem which has clearly emerged has been the absence of
\na strong APEC secretariat with institutional backing able to
\nbring issues and current data to the attention of member
\neconomies.<\/p>\n
But more basically, APEC has been hobbled by the agreement
\nlast year to add Russia to its membership.<\/p>\n
I think this decision was an act of international vandalism. I
\nwould have opposed it to the end. It was a fundamental mistake
\nwhich was made worse because it was designed in part to atone for
\nanother fundamental mistake -- the 1997 decision to expand NATO
\nto the European borders of the old Soviet Union.<\/p>\n
I am certainly not anti-Russian and I well understand its
\nlong-term importance as a great power. But its participation in
\nAPEC has already changed the dynamics of the organization.<\/p>\n
Under no conceivable stretch of the imagination is Russia
\ncurrently part of the Asia-Pacific economy. And its strategic and
\npolitical priorities are totally different from those of APEC's
\nother members.<\/p>\n
Precisely because it is such an important power in its own
\nright, its participation will make it harder to use APEC and the
\nleader's meetings as a focused and effective forum to oversee and
\ncoordinate the various responses to the economic crisis. Russian
\nmembership makes it impossible, for example, to contemplate using
\nAPEC as the basis for a financial fund to address future balance
\nof payments problems in the region because the potential
\nadditional demands it would generate are just too great.<\/p>\n
The declaration which emerged from the leaders meeting in
\nVancouver last November described APEC as the \"region's most
\ncomprehensive economic forum\" and \"particularly well placed to
\nplay a pivotal role in fostering dialog and cooperation.\" It
\nasked APEC finance ministers and central bankers to accelerate
\ntheir work. It talked about an increasing role for APEC.<\/p>\n
Well, we haven't been swept aside in the rush.<\/p>\n
This year's APEC meeting in Kuala Lumpur has to send firm
\nmessages that Asia remains on the path to openness. This is not
\njust a matter of making declarations but of taking specific
\nactions which will restore confidence within the region and in
\nkey markets that Asia can resume its growth path.<\/p>\n
This means showing a determination to move forward on the
\nBogor free trade and investment agenda.<\/p>\n
It means giving some clear support to the development of more
\nstructured cooperation between regional central banks.<\/p>\n
But if APEC is to get anywhere, the bulk of the work to
\nachieve it has to be going on now. It will be useless for leaders
\nsimply to turn up in Kuala Lumpur in September and expect to put
\nsomething together in those couple of days.<\/p>\n
I am not prepared to write APEC off yet. But if it does not
\nshow its relevance to the Asian economies this year, it will
\nwrite itself off.<\/p>\n
What happens to any individual international organization is
\nnot in the least important.<\/p>\n
But APEC matters because it embodies a big idea -- that of an
\nopen Asia-Pacific region. And that idea lies at the core of how
\nwe can best overcome this mess.<\/p>\n
On the trade front, the message has to be sent out strongly
\nthat the world is not in the business of building barriers. We
\nneed China in the World Trade Organization, and as quickly as
\npossible, I hope this will be one of the outcomes of President
\nClinton's proposed visits to China in June.<\/p>\n
More broadly, this would be an excellent moment to press ahead
\nwith the proposed Millennium Round of trade negotiations.<\/p>\n
On the subject of Australia and Asia, I believe the changes
\nAustralia made internally in the 1980s and 1990s have prepared us
\nwell to cope with the challenges we now face. We went voluntarily
\nthrough much of the painful integration into the global economy
\nthat our neighbors are experiencing.<\/p>\n
I also believe the progress we have made in forging closer
\nbilateral and regional ties will help both Australia and the
\ncountries around us.<\/p>\n
And I think the current government has generally been pursuing
\nthe right policies towards the region. Its speedy contribution to
\nthe IMF packages was the right thing to do.<\/p>\n
But I have to note that a few worrying signs about Australia's
\nrelationship with Asia are emerging. For example, I was taken to
\ntask by the Sydney Morning Herald last week.<\/p>\n
This is not a new phenomenon, of course, or one which strikes
\nfear in the heart. But it is worth mentioning because the
\ncriticism has broader implications.<\/p>\n
I was criticized for a speech I made in Singapore in 1996,
\nfrom which the editorial quoted. I had said that Australia's
\n\"engagement with the region around us is not just commercial. And
\nit is not just the result of some crude economic determinism. It
\ngoes -- and must go -- much deeper than that. It goes to a
\ngenuine desire for partnership and real involvement ... Australia
\nneeds to seek its security in Asia rather than from Asia.\"<\/p>\n
This view was described by the newspaper as \"lightheaded\".<\/p>\n
But to assert, as those words of mine do, that Australia's
\nengagement with Asia has a political, security and cultural
\ndimension as well as an economic one, and requires a genuine
\nnational commitment on our part, seems to me so deeply true, so
\nbasic to Australian interests, so blindingly self-evident, that
\nit is perhaps only a Sydney Morning Herald editorialist who could
\ntake exception to it.<\/p>\n
But unfortunately, there are other hints of revisionism
\naround. A sort of sotto voce whisper that the Labor government
\nrather overdid the whole Asia and that we are now paying the
\nprice. Some of the old brigade obviously think Asia's recent
\neconomic problems mean that Australia can heave a sign of relief
\nand head for the safety of old friends and familiar geography.<\/p>\n
Others argue that some historically determined conflagration
\nis coming in Indonesia and that Australia should distance itself
\nfrom it by tiptoeing quietly to the side of the field in the hope
\nthat no one will notice we are there.<\/p>\n
This is dangerous nonsense.<\/p>\n
Australia must have a deep and continuous commitment to Asia
\n-- and for reasons that lie at the heart of our national
\ninterests. None of that has changed as a result of recent
\ndevelopments.<\/p>\n
The intrinsic economic complementarities between Australia and
\nAsia have not changed. Australia has not suddenly developed
\nsecurity interests in Africa rather than Asia.<\/p>\n
Australian engagement with Asia is not a temporary enthusiasm.
\nAsia is not a flavor of the month. We have not been on a 10-day
\npackage tour from which we can return with a couple of T-shirts
\nand a handful of color prints for the album. Australia cannot
\nbolt on the Evinrude and motor off to the coast of California.<\/p>\n
If we know anything about dealing with Asia it is the
\nimportance of building relationships for the long term.<\/p>\n
That is the business Australia needs to be in now.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/indonesia-australia-and-overcoming-the-asian-crisis-3-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }