The theme of the 19th Asia Business Conference held at the Ross School of Business was Asia: Globalization and Transformation. Keynote speaker Dr. Surin Pitsuwan, Secretary-General of ASEAN, delivered a good speech, which I shall summarize here.
Strength of Asia and ASEAN as a region
Together, the Asian countries account for 25% of world GDP. While IMF has pared down growth estimates for the US to -2%, Asia’s average growth rate remains high at 5%, making it the fastest growing region in the world.
Hong Kong and China have experienced positive FDI growth despite the financial turmoil.
As a region, ASEAN trades voluminously amongst itself. 25% of ASEAN’s trade is with the ASEAN+3 nations (Asean, China, Japan and South Korea) and 50% of ASEAN’s trade is among the ASEAN+6 (Asean+3, India, Australia and NZ).
The importance of continued economic integration and international engagement
Contrary to the tendencies of nations to implement protectionist policies during times of crisis, we must instead become aim to more economically integrated so that demand in other countries can fuel production in our own. We must create demand and trade.
An example of how ASEAN is achieving this is through its goal to create a completely integrated one ASEAN economy by 2015. Another example would be its soon-to-be concluded FTA with India, a country with 1.1 B in population size. This gives ASEAN access to the purchasing power which India’s emerging middle class will soon wield.
China is creating demand by investing heavily in infrastructure, building roads and various transport systems to facilitate movement and trade. It is especially focusing on developing transport infrastructure around the Mekong river, which runs through China, Myanmar, Laos, Cambodia, Thailand and Vietnam.
Countries must also strive to lower the cost of doing business by reducing bureaucratic red tape.
Financial regulation
Dr. Pitsuwan recommends greater transparency and governance with respect to our financial institutions. Financial sitmuli among countries must also be coordinated. For example, if Singapore guarantees bank deposits, Malaysia must follow suit because the two economies are so integrated that they are practically one.
ASEAN+3 countries have also agreed to expand an existing bilateral foreign currency swap framework that had been set up to assist to any of them that may experience liquidity problems, amid the spreading global financial crisis. This is known as the Chiang Mai initiative, nicknamed the ‘Asian Monetary Fund’ by Pitsuwan.
The Message
Nations are now looking to China to lead the world out of the financial crisis. According to Dr. Pitsuwan, “the world has changed”. China is now a global economic leader.
At the same time, the fates of nations have never been more intertwined. What is good for the US is good for East Asia, and vice versa. We must step out of this crisis together.
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My thoughts
I was struck by how relevant all my research at MTI was to whatever Dr. Pitsuwan was saying. Economic integration? That is exactly what the trade division at MTI strives for, day after day, year after year. Countries must invest in infrastructure? It was at MTI where I learnt how much inadequate infrastructure and excessive legislation affects the attractiveness of a country’s investment climate. Singapore has been ranked #1 for ease of doing business for the last 2 years. One ASEAN? That is exactly how I marketed Singapore to the Mercosur when I created the presentation to convince them to sign an FTA with us.
At the beginning of his speech, Dr. Pitsuwan told us how he decided to turn down 2 other invitations to speak at other locations in order to be here for the ABC. He said that it was due to the countless emails from Professor Lim. “Such is the persuasive power of Dr. Linda Lim.”
Sitting in the beautiful Blau Auditorium listening to Dr. Pitsuwan, Secretary-General of ASEAN, address students and faculty of UM, I must say I have never been more proud to be a member of the Ross community, and a citizen of Singapore.
