 |
Interview: Prospect for Asian Economy "Very Optimistic:" ESCAP Chief
Although the Asian economy "hiccuped" recently as it continues to recover from the crisis which slashed the region three years ago, its long-term prospect in the new century will certainly be very optimistic, a senior United Nations official said in Bangkok Saturday, December 9.
"With high saving rates, sound education system, open market, business-orientated policies and other fundamental advantages, the region is set to achieve sustainable growth in the future and eventually become the main engine of the world economy," Kim Hak-Su, executive-secretary of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP), told Xinhua during an interview.
"However, recently the region-wide stock market plunge and currency depreciation have abated Asian optimism for the economic recovery, which has been moving forward smoothly and quickly until the beginning of the second half this year," said Kim, who is in charge of the main economic and social development center within the UN system in the Asia-Pacific region.
"As a result, some economists began to doubt if the recovery is a real one, or are we going to face another recession?" he said.
Brushing away such worries, he said the recent stumble can be explained as a so-called "third-year syndrome" which usually happens in the third year after a major economic recession.
"When we look back at the Latin America crisis in 1980s, we will find that there were also some kind of mental hazards in the third year of recovery after the crisis as people began to take it easy after some tension. The slow-down of the recovery usually happens at this time," Kim noted.
"And that maybe the same case for Asia after it has recovered smoothly through 1998, 1999 and the first half of this year," he said.
Citing a four-staged "Crisis Theory," the U.N. official and economic expert said when an economic crisis breaks out, the first stage is "shock," as people did not expect this kind of sudden turmoil. For Asia, that is the scene of 1997.
"Then it is followed by the 'pain' stage. In case of Asian crisis, it was a period of massive bankruptcies, high unemployment rate, huge losses of foreign reserve, as what we saw in 1998," he said.
"After that comes the 'shake-up' stage, when all crisis-hit countries in Asia began to rearrange and restructure their economy. Finally in 2000 and beyond, the economy will enter the 'readjustment' stage, when it is recovering more solidly and ready to embrace a splendid future," he said.
However, the U.N. official said, in the preliminary period of the "adjustment" stage, which is from the second half this year to first half next year, the recovery pace may slow down a little bit due to some external factors, notably the US economic soft-landing and the world oil price surge.
"The U.S. economy grew very fast in the first half this year, but since it entered the third quarter, its hi-tech sector and stock market plunged and its economy growth began to decline. This caused negative effects to Asian economy, which depends heavily on exports to the U.S.," he stated.
"Secondly, the hiking oil price has hurt the balance of payments of Asian countries as well as their economic growth, since most of them are oil-importers," he said.
Despite these difficulties, Kim said the Asian recovery has showed more positive signs this year as various reforms in financial, corporate, public sector and employment and other sectors in most countries of the region are smoothly under way.
The U.N. official stressed that among all the reforms,the restructure of Asia's ailing banking sector is the most crucial factor for fueling a sustainable economic development in the long run.
"The Asian crisis started from financial sector in 1997 when the shortage of capital liquidity could not support the economic expansion. But if the banking sector had injected enough money into the economy, the 'Asian miracle' could continue," he said.
"Up to now, many Asian banks are still weak because they had made excessive loans to property, industry and other sectors during the fast-growing period from 1980s to mid-1990s. Excessive investments then generated huge amounts of non-performing loans which eventually choked the whole banking sector," Kim said.
"So it created a huge and long-term task for Asian governments and concerned authorities to clean the financial sectors which are loaded with heavy bad loans," he pointed out. ....he pointed out.
The U.N. regional chief noted that some Asian economies have made certain progress in their financial sector reforms by setting up asset management companies and deposit insurance institutions as well as injecting public funds to reactivate ailing banks.
"There is a strengthening banking sector in Asia in general, however, the efforts are not enough, and the efforts should be doubled," he stressed.
Likening the importance of banking system to the whole economy to that of the blood vessels to a human body, he said: "We all in Asia must study carefully and think deeply how to revive our banking system, this can be the solution to our long-term future."
Furthermore, if Asia's banking sector is sound, functioning and able to provide loans to the economy, especially to the high-tech sectors, then the economy as whole can be revived, Kim added.
In other important areas for Asia's economic growth, he said export is one of the most powerful engines for the Asian economy. "If the export machine goes wrong, all other engines can be in trouble," he warned.
Praising China for having a "good engine" to boost economy growth through its strong export, the U.N. official said the country's export performance is "much better" than other countries in the region.
"China would be a major economic power in next 10 or 20 years if the present trend can be maintained," he noted.
As for Japan, the Asia-biggest and world-second economy, Kim said its current economic stagnancy is largely due to the fact that instead of investing domestically or within Asia, its citizens use most of their savings to invest in American and European financial and stock markets where the interest rates are much higher.
"When the majority of Japanese savings is not spent in Japan, their economy is just stagnated and the whole region is affected as well," he said, pointing out it was the huge amounts of Japanese savings that boosted the American stock market.
With a "wealth effect," the Americans now mainly don't create much production and tend to largely earn from the stock markets backed by Japanese savings, he said. "In 1980s, only 17 percent American bought stocks, but by 2000, 71 percent get involved in bourse," Kim noted.
Instead of sending out Asian capital outside, the economist suggested the Asian economic powers, namely, China, Japan and South Korea, as well as all other Asian nations to recirculate their capitals within Asia through a regional monetary fund or some capital swap system.
"If Asian countries can cooperate well in the field, then when we face another short liquidity problem as in 1997, the market can be refinanced and recirculated within Asian countries, and the crisis can be eased or avoided, " the U.N. regional chief said.
In retrospect, he said, the recession is not all negative because it exposed that there are some "bubbles," or fundamental weakness in the region's economic structure that needs to be adjusted in time.
"So the current readjustment is good and timely for Asia economy, and it will benefit the more sustainable growth in the new century," he said.
Meanwhile, he pointed out that economic growth cannot be achieved without progress in the social well-being of the Asian people in the coming years.
Now Asians not only need "freedom from want," which represents the economic gains, but also require "freedom from fear," which is the social improvement, Kim said.
"Poverty is a major challenge the region faces in both economic and social dimensions. Nine hundred million or nearly 70 percent of the world's poorest population live in Asia, and the number is still increasing," he noted.
He cited globalization, e-divide, the disprivileged women, population aging, illegal labor migration, human trafficking, illicit drugs and AIDS as some of the other social tasks for Asian countries to deal with in the future.
"I believe in the new century, with economic adjustment and social progress, the overall picture in the region will be more and more bright," the U.N. official concluded.
In This Section
|