Economists urge Asia to end its addiction to exports
INDONESIA: With the economic crisis dampening the world's appetite
for Asian exports, economists are urging the region dubbed the "factory
of the world" to rely less on foreign demand and buy more at home.
Asia's heavily export-driven economies have been hit hard by the
crisis, which has led to consumers from the United States to Europe
buying fewer Asian-made goods.
In export-dependent South Korea, exports fell a year-on-year 32.8
percent in January. In Japan, the December drop was 35 percent and in
Taiwan it was a record 41.9 percent.
In China, for years the engine of much of the region's growth,
exports fell 2.8 percent in December, its second consecutive drop and
its largest in a decade.
The slowdown means Asian economies have to rethink the old model of
"Asians make it, Americans buy it" and start promoting more domestic
consumption, Asian Development Bank (ADB) Institute head Masahiro Kawai
said.
"This pattern (of US consumption propping up Asian growth) is rapidly
changing and I believe that this change is not simply a temporary
phenomenon. It is going to be more permanent, or at least
semi-permanent," Kawai told a seminar held by the Association of
Southeast Asian Nations (ASEAN) last week.
"Asia should remain the factory of the world, but Asians have to
start consuming more. Asians have to start spending more."
Asian governments have already announced a slew of stimulus plans
worth hundreds of billions of dollars to pump-prime their economies, but
deeper reforms are needed, HSBC economist Frederic Neumann told AFP.
If the global downturn proves to be short-lived, Asian governments
may be able to get away with minimal changes but, "if by 2010 US growth
doesn't pick up, then Asia will face structural challenges," Neumann
said.
The key to these changes will mean tackling one of the region's
traditional strengths its high savings rate and to get Asians feeling
comfortable about spending their money, Neumann said.
In China, the government should introduce a proper safety net of
pensions, health care and education as well as focus on stimulating the
economy in its impoverished countryside, the ADB Institute's Kawai said.
In India and ASEAN countries, governments need to promote investment
and spend more money on creating infrastructure while governments across
the region must avoid the "beggar-thy-neighbour" policies of competitive
currency devaluations, export subsidies and import restrictions, he
said.
The benefits of being less dependent on exports and more focused on
domestic consumption can already be seen in Indonesia, Southeast Asia's
largest economy, according to William Wallace, the World Bank's
economist in the country.
For years Indonesia fell behind regional competitors such as Vietnam
and Thailand in export growth, but so far it has weathered the crisis
relatively well, with the government paring back its 2009 growth
forecast to between 4.5 and 5.5 percent from an earlier 6.2 percent,
Wallace said.
Jakarta, wednesday, AFP
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