Despite woes. SE Asia can still deliver
Despite woes. SE Asia can still deliver
By Simon Tay
TOKYO: The news coming out of Southeast Asia today is almost always negative. Street riots, ethnic clashes, bombs and political in-fighting flash on television screens around the world.
Many commentators and investment analysts are writing off Southeast Asia because of inaction over economic policies and questionable governance.
In Indonesia, for example, some say it may take up to eight years for recovery. Others predict the breakup of the country.
In most other nations, a slow and patchy reform continues.
The downturn, in response to the slow U.S. economy, brings more bad news. Investors are now looking to other regions including China, Eastern Europe and Latin America.
However, some of the problems in Southeast Asia are relatively manageable and do not need to affect the region as a whole.
In Indonesia's case, we must remember it is an archipelago that stretches across four time zones. Troubles in Kalimantan do not need to affect financial capitals on another Indonesian island or poison the whole region.
There has also been a move toward democracy and quality governance. Democracy is not an immediate cure. The case of the Philippines shows how messy the transition can be. But such long- term action may allow for more stability in the region in the future.
There is also a debate about recovery from the crisis. There has been the use of letters from the alphabet to describe various types of recovery.
During the crisis, there was a fear of a U-shaped recovery, with the broad, long bottom representing a slow movement.
However a sharper, faster V-shaped recovery was made by exporting to the United States.
The letter W seems to represent the situation today, with a wobbly up and down of market fluctuations-often in response to the U.S. market.
In the future, the era of the letter X is coming. There is much more diversity now between various countries and companies in Southeast Asia.
The bottom half of the letter X depicts how some companies may move downward, and how most of them will likely stay there. The upper half of the X shows how some companies may progress and keep moving in that direction.
Diversity is also increasing as recovery continues. There is a much more competitive global market place.
It is unlikely there will be another Asian miracle. With globalization and increased competition, there are going to be winners. But, perhaps more than ever, there will also be losers.
Companies compete for profits and domination, but countries also need to cooperate. Efforts have also been made to bring Southeast Asians together for free trade and investment.
This is not only true among original Association of Southeast Asian Nations (ASEAN) members, but also within new members in Indo-China and Myanmar.
While the ASEAN Free Trade Area still has limits, countries like Vietnam and Cambodia have learned more about free markets and trade in the process. In time, the region will offer a single market for businesses.
Links with Japan are especially important because Japanese business understands Southeast Asia.
Since the 1970s, the Japanese government has encouraged its companies to look to Southeast Asia. Trade and investment flows within the East Asian region increased.
By the 1990s, countries like Malaysia, Thailand and Indonesia were seen as a likely second tier of newly industrialized economies. Together with others in East Asia, they formed a "flying geese pattern" of development, led by Japan.
The 1997 regional crisis has changed things.
Today, while the worst is over for most countries, others are still struggling and some seem unstable. Japan's decade-long period of slow growth is dragging on.
Although still a rich nation, the Japanese have not yet been able to offer clear leadership for reform and progress, for themselves or the region. The storm of the crisis has made the Asian geese scatter.
Many Japanese businesses, facing their own problems, are scaling back expenses and overseas investments generally.
There is a danger that Southeast Asia will no longer attract Japanese interest and investment. Yet there are enduring fundamentals in the partnership between the two.
Despite the last decade, Japan still has many strengths, including a world class manufacturing base, people with expertise, experience and considerable capital and savings.
But, Japan still needs to export its production to cheaper locations. It still needs secured access to natural resources.
Southeast Asia also still has strengths.
The decades of growth before 1997 were neither a miracle nor a mirage. The region has people who are more educated and attuned to the market. There is a growing middle class, and a cadre of professionals, managers and entrepreneurs.
This is true in Singapore, Malaysia and Thailand, and also in other countries like the Philippines and Indonesia.
In the miracle market of the 1980s and early 1990s, you did not need to be a genius or fight so hard. So many countries and companies did well. Today's market is different.
If theory X is correct, some countries and companies cannot expect an automatic recovery. They may struggle to recover and must make great efforts to change their path of development if they are to catch up.
But others in Southeast Asia are on the upper half of the X. There are countries, sectors of the economy and companies that are going to make profits. This is so even in troubled Indonesia and the Philippines.
Those who are brave, have deep pockets and insight to take a risk, will find there are rewards to be made.
The letter X is a symbol of uncertainty but in adventure stories, it also marks the spot for treasure.
Today, Southeast Asia will continue to reward those who invest and do business wisely. The present problems are not good reason to write off the whole region.
Business leaders and investors who know the region well, as do some Japanese, should be looking at things more closely than ever before.
The writer is chairman of the Singapore Institute of International Affairs.
-- The Asahi Shimbun