Amid Signs of Recovery, Asia Debates Rebalancing Economies

HONOLULU (August 12) – As the region rebounds from the global economic crisis, Asian nations are debating whether to rebalance their economies away from an emphasis on exports as a principle driver of growth, according to analysts who spoke at a public program in early August at the East-West Center's Senior Policy Seminar.

"My own sense is that Asians 'get it,'" said Yuen Pau Woo, president and CEO of the Asia Pacific Foundation of Canada. "They understand that the world at the end of this dark tunnel is going to look very different than it did when we entered the tunnel. An assumption that exports can resume growth in the way that Asian countries were used to before the crisis simply is not viable."

An economist, Woo also directs a Pacific Economic Cooperation Council (PECC) project which annually assesses the state of the region. The debate, he noted, is "whether Asia can, should and how long it will take for Asian economies to rebalance growth" to rely less on exports and more on domestic demand. Most of the exports have been to the United States and to a lesser extent the European Union.

Woo sees the potential regionally for rebalancing growth in expanding areas like the services sector, social safety nets, green growth and intraregional trade. However, he said a concern that when a country rebalances it may lose its competitive advantage is leading a related debate about regional integration and cooperation. "There is this thinking around the region that for rebalancing growth to be successful calls for some degree of regional cooperation, to do it as a collective effort," he said.

Woo cited a PECC survey conducted in April, of 400 opinion leaders in Asia and the Pacific, in which 60 percent either agreed or strongly agreed that as a result of the global economic crisis, "we would see greater regional integration and cooperation among Asian countries."

Yoshiji Nogami, president of the Japan Institute of International Affairs and a former ambassador and vice minister for Foreign Affairs, discussed the need to improve the social safety nets in Asian nations, maintaining this is essential to achieve a new model of economic growth.

"Improvements in the social safety nets in Asia have a direct bearing on the growth of disposable household income," he said. Growth of disposable household incomes has a bearing on the amount of private consumption, he added, which "has a bearing on the future growth of Asian companies."

Sarasin Viraphol, a former ambassador and executive vice president of Pokphand Group in Thailand, suggested ways to improve the effectiveness of stimulus packages initiated by various governments. "The quickest way to increase consumption is to encourage more (government) spending in the rural sector," he said, particularly in Thailand, where he sees the government focusing on the urban sector rather than stimulating the rural economy.

Barbara Weisel, assistant U.S. Trade Representative for Southeast Asia and the Pacific, focused her comments on trade issues and the need to reduce barriers and expand opportunities for trade.

"Our goal is to have an integrated Asia Pacific region," Weisel said. "We don't want to see negotiations among Asia-only countries that would draw a line across the Pacific. I think we need to pay attention and focus on this with some urgency. We want to see the benefits of trade spread across the Pacific."