Asian economies need to revisit spirit of 1997
They need to get drastic in resolving burdensome debt levels and growth lag
past year, as yet another chaebol-fuelled corruption scandal toppled the last president.
Inertia among policymakers has also hurt economic growth. Indonesia should be one of the world’s premier emerging economies, but thanks to excessive regulation and poor infrastructure, growth is meandering along at only 5 per cent.
China’s President Xi Jinping and India’s Prime Minister Narendra Modi have talked big about reform but generally acted small.
China, in fact, is falling into the same debt trap that foiled the old Asian Tigers, while seeming to ignore the warning signs, just as they did. Its debt relative to gross domestic product reached 257 per cent at the end of 2016, according to the Bank for International Settlements.
Indeed, debt has been rising across Asia. Although not at crisis levels, it is impeding growth in countries such as Korea and Malaysia. Perhaps, though, another wave of change afoot. Moon Jae-in, South Korea’s new is president, has signalled that he intends to rein in the chaebol and the families who control them, thereby levelling the playing field for smaller companies.
Indonesia’s president, Joko Widodo, has pushed through an ambitious tax amnesty while numerous sectors have been opened wider to foreign investment. Now hopefully he’ll tackle some knottier problems, such as an overly regulated labour market that scares off the factories Indonesia needs to diversify its economy.
Reform is always easier when a crisis leaves policymakers no other options. But without further change, Asia will continue to rely too much on debt instead of productivity gains for growth.
In poorer nations, improvements in household welfare will lag. As in the years before 1997, economic irregularities could build up to the point where the region faces another crisis.
Will the next Kim Dae-jungs be when you need them? there