■ ASEAN FINANCE MINISTER'S MEETING IDENTIFIED FOUR MAJOR CHALLENGES FOR ASIA
An overwhelming majority, or 88 percent, of Association of Southeast Asian Nations (Asean) finance minister said “no” in a crowd survey on whether Asia is bound to follow the advanced economies’ new mediocre during the Official Monetary and Financial Institutions Forum in Lapu-Lapu City. During a keynote address, Bangko Sentral ng Pilipinas Gov. Amando Tetangco identified Asia’s four major challenges, which he also considers as opportunities, including the growing protectionism of some economies like the US.
Is Asia bound to become the new mediocre?
Eighty-three percent of the Association of Southeast Asian (Asean) finance ministers said “no” in a crowd survey during the Official Monetary and Financial Institutions Forum at the Shangri-La Mactan Resort and Spa Hotel in Lapu-Lapu City last Monday. Eight percent said yes while the remaining percent are still uncertain.
“Whether Asia will follow the advanced economies’ new mediocre or not, would depend on how Asia would overcome the risks and/or take advantage of the opportunities,” said Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. in his keynote address.
Tetangco identified the following as Asia’s four major challenges, which he also considers as opportunities. These include the growing protectionism of some economies such as the US with President Donald Trump; Brexit; China, which has moved away from export oriented to more service-oriented growth; financial spillovers including the disorderly reaction to possible US interest rate hikes; the middle-income trap where many Asian economies are considered to be at a stage of development at which, historically, sustained rapid growth becomes difficult and; demographics, where Asia is entering a period of being at both ends of the demographic spectrum.
The topic was debated by four speakers--former Bank of Thailand governor Tarisa Watanagase, BSP Monetary Board Member Felipe Medalla, Lee Kuan Yew School of Public Policy professor Danny Quah, and London School of Economics professor Lord Desai.
Opportunities
The most optimistic of the four speakers was Watanagase, who said the Asean region was up for long-term growth.
“Asia is very diverse. The Asean situation is different. Most Asean economies are in line with the long-term path…I’m optimistic that going forward, no we won’t take the mediocre path,” said the former central banker.
The term “new mediocre” was used by the International Monetary Fund (IMF) to refer to advanced economies’ slow growth, where six years since the global financial crisis, economic recovery was still proceeding at a slow pace.
Further, being the new medi- ocre meant the advanced economies’ “failure to undertake in a timely manner the necessary balance sheet repair and structural reforms to address the weaknesses of their economies.”
For Asean, Watanagase said it’s a different story.
Among the strengths of Asean are its $2.4 trillion economy of 620 million people and an economy that has sealed several trade agreements among each other and other economies. The rising middle class in the region also translates to higher consumer spending and expanding investments in the region.
For Asia in general, Quah said one of its advantages is its decreasing dependence from the West, with intra-Asian trade getting stronger. Singapore, for example, used to have the US as its top export market, but now, it’s China and Hong Kong.
“Today, Singapore exports four times to China and Hong Kong from what it does to the US, and that story of reorientation of trade redirection is repeated in all (Asian) economies. The idea that Asia only grows because the West buys needs to be thrown in the trash heap of history,” said Quah.
Challenges
But Asia is also confronted with many challenges.
For Medalla, the slowdown in Asia’s developed economies, as well as lower growth rates in emerging economies, may lead to Asia becoming the new mediocre.
For the BSP monetary board member, if mediocre is defined as slower growth, then chances are Asia will be following that path.
The International Monetary Fund (IMF) projects emerging and developing Asia will experience a decline of 6.3 percent in 2018.
Investment in infrastructure is also one of the key steps to continue growth in Asia. Watanagase said Asia needs infrastructure investment worth $1.7 trillion a year to sustain growth. Currently, this only hovers at $850 billion.