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Asean's Links with Rest of Asia 'Crucial'
Source: asianewsnet.net
Source Date: Friday, November 04, 2011
Created: Nov 07, 2011

Even if Asean is able to get its act together and stay as an important lever with a sizable 590-million population market, its fate is inadvertently tied to the performance of Asia as a whole.

Not only previously higher annual GDP growth rates of China and India have been dwarfing Asean, but China in particular has emerged as Asia’s export hub – importing more from the rest of Asia to export to the rest of the world, said Andrew Sheng of Hong Kong-based Fung Global Institute.

In his keynote address at the CIMB Asean Conference on “Can Asia Go It Alone?” – an apt title given the crisis in the West – Sheng quickly answered ‘no’ to such decoupling in the short and medium terms but said the ‘answer is a very likely ‘yes’ in the long term provided that Asia and Asean can get their acts together.

He based his assessment on data showing that Asia's intra-regional trade now accounts for more than half of the region's total trade but the expansion is due to the global supply chain sourcing within the region. Moreoverm Sheng presented a chart showing Asian exports and OECD industrial production are highly correlated. And the global financial crisis, which started in 2008, has shatterd myths that Asia can decouple. Particularly, the Lehman Brothers debacle has saw open-trade economies in East Asia witnessing greater shock than anticipated, although the recovery was also faster.

The Malaysian-born economist said Asia's decoupling depends on a number of factors such as boosting domestic engines of consumption and growth and become less reliant on exports; creating own thought-leadership through investment in konwledge skills, innovation, global branding and global competition; upgrading of national and regional governance; ability to avoid regional conflicts and absence of catastrophic disasters; and propelling further economic and financial integration.

He added that Asia's rise is not preordained, due to four major transformations at play now. They include impacts on real sector from the re-invention of Asian global supply chains in the post March 11 Japan disaster; the coming of higher savings, wealth and pension management and internationalisation of Asian currencies; the rebalance role of the state and market; lifestyle change and sustainaibility agenda; and need to break out of the middle income trap.

Sheng was particularly bullish on the prospects of Asian finance. He suggested that by 2015, Asia will have half of global financial assets with major financial centres located in Hong Kong, Singapore, Shanghai, Mumbai, Sydney, Tokyo and Seoul. These centres for asset management and insurance will have to evolve with depth and liquidity. By then, he expects that the Japanese yen, Chinese yuan and Indian rupee will become global currencies. "Asia will (also) be partners in global price-making and rule making," he added.

Sheng said both China and India are re-caliberating growth models. The 2011-2015 Chinese 12th Five-year plan anchors GDP growth at 7 per cent target. China and India's will have more middle class consumers than US and Europe put together by 2030.

But he warned of unsustainable lifestyle as witnessed in the West amd Asians must embrace sustainability and environmental preservation.

Sheng recommended Asean businesses to work closely together to increase visibility and influence key issues.
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