Challenges facing India, China, Japan find attention at World Economic Forum

Some of the eminent speakers invited for the meeting include Stephen S. Roach, Chairman, Asia, Morgan Stanley, Hong Kong SAR; Baba N. Kalyani, Chairman and Managing Director, Bharat Forge, India; Haruhiko Kuroda, President, Asian Development Bank, Manila; Yasuo Hayashi, Chairman and Chief Executive Officer, Japan External Trade Organization, Japan.

Stephen S. Roach cast the crisis as a wake-up call that puts the lie to mindless extrapolations about Asias lofty growth prospects. In fact, the export-heavy growth model that worked brilliantly during the global trade boom of the past seven to eight years has now gone bust. He noted that even Chinese Prime Minister Wen Jiabao had been cautioning for the past two years about Chinas growth patterns becoming unbalanced and unsustainable. Roach said, Its time to focus much more on internal private consumption, not just for China, but for the region as a whole.

Roach further said, In fact, the deepening economic contraction of the past few months suggests the region is far less resilient than some had believed. It also shows decoupling never existed. With heightened international flows of capital, information and labour, the world is more intricately interlinked than ever before, and no region is more closely woven into the global trade network than export-dependent Asia.

Baba N. Kalyani was of the view that amid this overdue rebalancing between deficit and surplus nations, an inevitable rise in unemployment may give rise to protectionist sentiment. He said curbing protectionism would be crucial to prevent an already-unsavoury financial picture from deteriorating into a grave economic depression. We clearly need a negotiated settlement of trade issues. The Asian bloc can play an important role in contentious trade issues, whether its agriculture or services, he said.

The crisis could offer new intra-Asian business opportunities as regional companies apply their competitive advantages to the needs of neighbouring countries. For example, Japan, with its substantial capital and well-developed technology base, could play a part in the ongoing infrastructure development taking place in India or China. From a corporate standpoint, we look at the crisis as an opportunity to start investing and improving infrastructure, said Kalyani.

Thats not to downplay the very real disparities that exist between the Big Three, whether in culture, political systems or language, Haruhiko Kuroda pointed out. He further stated, Besides facing common economic problems, each country faces distinct challenges of its own. China needs to boost consumption and India must improve its infrastructure. Japan, which has once more slipped into recession not long after emerging from over a decade of economic stagnation, faces what is in some ways the most challenging scenario. It must figure out how to readjust its social system to care for a rapidly aging population, against the backdrop of a large public debt overhang, he said.

Yasuo Hayashi said at the meeting, There is no shortage of sceptics on the prospects of regional integration. He further pointed towards signs of clear progress, including efforts by the Big Three to conclude economic partnership agreements with the Association of Southeast Asian Nations. It may take time to realize economic integration, but weve already set in motion the first steps, he said.

There was a general consensus among all the participants at the meeting that stressed need to find ways to import oil and other natural resources to fuel the export-intensive economies of these countries. The speakers were concerned about finding ways to respond to the startling drop-off in external demand that had already caused substantial job losses in the manufacturing and service sectors in all these countries.