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ECONOMIC DEVELOPMENT
VICHAYA PITSUWAN
SINGAPORE : The Asian Development Bank (ADB) sees the current global economic meltdown as opening an opportunity for Asia to play a stronger role in the world economy.
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| ag: ‘‘Asia much more resilient’’ |
Rajat M. Nag, the managing director-general of the ADB, said the global economic slowdown would have an impact on Asia's economic growth.
The crisis, which started in the US financial sector and credit markets, will spread to the real sector and lead to job losses, he said at the 2008 Leadership Summit Asia earlier this month.
But the impact is expected to be limited to 2009, Mr Nag said. "We should see three or four quarters of growth declines before starting to move up as I am sure that Asia is much more resilient than before."
He reasoned that the region now appeared to be better equipped to weather the storm than 10 years ago, as the 1997 crisis pushed Asian countries to improve their financial fundamentals.
Asia's growth relies essentially on investment, domestic consumption and innovation. But the global economic slowdown will worsen Asia's investment climate, he acknowledged. "So we must build and upgrade infrastructure, improve productivity and provide education, especially in rural areas.
"The current crisis shows that we must balance growth amid a deteriorating external environment. There should be a conscious effort to readjust the mix between consumption, investment and exports."
Further reforms are needed to drive domestic demand by creating a more conducive investment climate and thus increasing economic efficiency and the ability to adapt rapidly. This will lead to higher economic growth and generate the higher employment needed to reduce poverty.
The crisis could provide the impetus for major reform and bold initiatives, Mr Nag said. He forecasts that Asian economies will grow at an average rate of 6-7% next year. From 2002 to 2007, the economies expanded at an average annual rate of 7.2%.
Business leaders at the event agreed that Asia needed to reposition itself.
Guatam Banerjee, executive chairman of PricewaterhouseCoopers (PwC) Singapore, said it had been clear that over the past few years, growth in China and India would be significant. Meanwhile, the financial meltdown was the tipping point at which global citizens started to lose trust in the US model and turned to look at Asia.
"I expect China to reposition itself from being a global workshop into improving workers' skills, though smaller economies in Southeast Asia that rely heavily on exports and have small domestic markets will feel the challenge from this crisis," Mr Banerjee said.
In the view of western companies, Asia was now at the leading edge, said Franz B. Humer, chairman of the Swiss pharmaceutical company Roche Holding Ltd, and Simon Machell, chief executive of Aviva Asia Pacific, the world's third-largest insurance company.
They said Asia was where the customers and money were, so there are business opportunities for western firms.
Asia's large pool of population, with access to basic education and improving infrastructure, would continue to be a cost-competitive destination for international investment, they said.
Mr Humer said his main concern about investing in Asia was the other difficulties in business environment such as business conduct, corruption on a large scale and the absence of valid system to protect intellectual property rights.
"Counterfeit is the issue for us - 25% of the pharmaceuticals sold in India are fake and many governments do not take enough action to counter this issue," he said.
"The message is that we are living in tough times and changes are needed to improve this."
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