Asia's future lies in its own hands

Hardev Kaur, New Straits Times, Kuala Lumpur

It has sufficient manpower, economic and financial resources. Nations in the region need to cooperate and maximize on the strengths, taking into account the new economic realities. The scope is wide and opportunities are available. But it requires political will and a commitment to achieve it. More than two- thirds of the world's foreign reserves are in East Asia. Japan and China alone hold more than US$1.2 trillion (RM4.56 trillion) in foreign reserves. The region is also rich in mineral resources.

It is home to some 60 percent of the world's population. The dynamism of the region and its industrious people hold the key to the region's future prosperity. Even though the region has emerged from the throes of the 1997-1998 financial crisis, other challenges must be addressed. With increased interdependence as a result of globalization, the region is not immune to problems in the developed world. In fact, globalization has brought about greater interdependence and injected greater volatility into financial markets.

Many of the reforms of the international financial architecture have not taken place and the dangers of "unbridled currency speculation" remain. The need for a regional mechanism, such as the Chiangmai Initiative to improve measures for regional self-protection, must be stepped up just as other self-help regional institutions need to be strengthened.

The region, which has been dependent on trade for growth and economic development, cannot continue to depend on the major economic powers to provide the same pull. Not only are the markets of the industrialized countries increasingly difficult to penetrate, their economies are also slowing down.

As Tan Sri Azman Hashim, vice-chairman of the Pacific Basin Economic Council, pointed out: The "economic majors can no longer be depended upon". US, Japan and Europe which previously were regarded as "engines of world trade and world economic growth", are witnessing disappointing economic news.

Thus, the region must look to itself and new markets for continued growth and prosperity. "Trade among Asean members have roughly doubled in the last 10 years, but this growth has been no faster than our trade with the rest of the world," according to Deputy Prime Minister Najib Razak.

Even so, China is emerging as a major source of imports and an important market. Huh Chan Guk, Senior Fellow at the Korea Economic Research Institute, told the second Asia Economic Summit that Asian economies have become far more commercially linked, underpinned mainly by strong demand from China. For many Asian countries, China has overtaken Japan in terms of export market. These include Singapore, Malaysia and South Korea. For other regional countries, exports to China are growing at a faster rate than to any other destination.

In Malaysia's case, 10.5 percent of exports went to China against 9.5 percent to Japan last year compared with 15.3 percent to Japan and 2.1 percent to China in 1990.

The downside of overdependence on one country or region can have disastrous results and these have been well documented. To avoid overdependence, Asia needs to revive investment and job creation in each of the economies. This, Huh argues, is necessary to reduce regional systemic risks of relying on Chinese demand.

The challenges for the future growth are two-fold -- increasing domestic demand, rekindling entrepreneurship and growing effective market size by strengthening intra-regional economic ties.

The proliferation of bilateral trading arrangements in tandem with regional trading arrangements are gaining momentum and Asia, too, has not been left out. This is in addition to the ongoing multilateral trade negotiations under the auspices of the World Trade Organization. These must necessarily be carefully managed to avoid adverse consequences, especially to the less developed and poorer countries in the region.

Asia is a diverse region with varying interests of different constituencies -- rich and poor, urban and rural cannot be overlooked. Najib summed it up when he said: "We must continue to strive for growth with equity as a basis for developing Asia and not shirk from positive, measured interventions when required.

"Foremost is the task of structural adjustment, transforming an under-performing old economy into a dynamic and sustainable new economy." In making this transition, it is important that Asian countries guard against rising inequities, the digital divide, urban poverty, marginalised majorities as well as forgotten minorities.

The region might be rich in mineral and human resources but as the experience in Asia has shown even resource-poor economies can flourish while those richly endowed can stagnate. And stagnation is not an option for the region. While the prospects for the region are good, it cannot afford to be complacent. It needs to strengthen cooperation at all levels to move forward and overcome the differential economic growth between the region and the rest of the world.