Emerging economic scenario in Southeast Asia
By Rashid Ahmed Mughal
The economic and political scene in the world has and is changing after the 9/11 incidents. The world is now being daunted by super power dictates and whosoever does not tread their path is either being termed as terrorists or is being treated as foe. This policy has both short and long term ramifications -- worldwide. This dictum has created special significance for the countries of southeast & central Asia including Russia and China both with regard to their foreign and economic policies. Changing economic and political scene is increasingly becoming cause of concern for both big powers i.e. China and Russia because of increasing American presence and oil resources of Middle East and the Central Asian states. It is causing worries to Japan and Korea who depend on the Middle East oil supply which has remained uninterrupted so far but with the increasing deep desire to control the Iraq oil in the first instance and trying to change the Middle Eastern map, is multiplying the worries of South Asian countries in particular and the world in general.

Japan's economy is solely dependent on the Middle East oil as more than 80 per cent of its import come from the Middle East. Already the tension in the area has increased the oil price and is poised for further increase in the coming months as the tension about the Iraq war increases. The case of Korea is not much different. It imports most of its oil from Saudi Arabia and other Middle Eastern countries and would not like to see the prices going higher as it would affect its export in terms of increasing the cost of inputs. The Japanese economy has been in recession since many years. The 1997 Asian crises intensified it manifold. It is undergoing a process of deflation as the prices have been declining for the last many years' along-with declining prices for its capital. Although the deflationary trend is strong, all the efforts by the government so far have only produced frustrating results. The role of the Japanese economy is very important for the Southeast Asian countries. Being the number two economy of the world and number one as far as Southeast Asian countries are concerned which depend on its working in full capacity to sustain worldwide trade and prosperity in the leading developing countries. US and other countries of the west are repeatedly urging Japan to open up and to deflate its economy. So far, Japan is largely complying with western demands but to no avail. Its financial system has been under serious strain since 1980s - the years of so-called 'bubble economy'. The latest news is that the biggest Japanese Bank has posted losses of up to 13 billion dollars. The smaller banks are vulnerable and International agencies have down graded many of them. The latest estimates are that its GDP is likely to expand by 0.9 per cent and the forecast for the 2004 is expected around 0.6 per cent. However, forecast for the year 2006 has been put at 1.5 per cent and nearly 2 per cent thereafter. The western economist out side Japan continues to urge monetary expansion at a faster rate even though Japan Central Bank interest rate presently hovers just above zero.

However, the situation in the next-door China is completely opposite. It has confirmed its status as the fastest growing economy in the world with a growth rate of 8 per cent. In this troubled and uncertain world economic scenario its growth rate is remarkable. Growing with this perception its GDP reached 10.24 trillion Yuan (US$ 1.25 trillion) officially. The government contributes this higher growth rate to large-scale government spending, which accounted for roughly half of the GDP in 2002. Fixed assets investment is an indication of government spending and infrastructure over a number of years, which rose up 16.4 per cent over the previous years.

However, the western economists have a different opinion on this issue. Many say that it will seriously weaken the government finances if maintained for too long as it might eventually create high pressure. At the same time many leading world economists paint a very rosy picture for the Chinese economy in future. As long as the world economic situation remained good with no big ups and downs and the macro economic policy adopted by the Central Bank is continued, the economic performance for 2003 is predicted over 7 per cent according to Mr. Zhu Zhixin, statistics commissioner, National Bureau of Statistics. The OECD also has forecast 7.5 per cent growth for China during the current year and almost 7 per cent for 2004.

Vietnam is another up coming economy in the region with a growth rate of nearly 7 per cent, which seems to be very impressive given the turbulent economic scenario worldwide. Its expansion matches other emerging regional countries of the region - namely China and India. South Korea, one of the countries highest hit by 1997 financial crisis is expected to expand at an average rate of 4.5 per cent in the next five years. Its forecast for the current year is 5.4 per cent. Malaysia and Singapore, who rely heavily on its exports, will continue their trend in the global trade. However, the weak US demand is likely to shadow the economies of the Southeast Asian region, being the biggest world consumer. The other countries in the region notably

Thailand grew at a rate of 5.2 per cent in the year 2002 - the biggest expansion since 1997 Asian financial crisis. According to the figures issued by National Economic and Social Development Board the Thai GDP rose 6.1 per cent corresponding to the growth in 2001. It was mainly driven by domestic demand. Private companies' expenditure increased by 4.7 per cent while investment grew by 13.3 per cent. Export rose by 5.7 per cent to a figure of US$66.9 billion in the year 2002 and imports rose by 4.6 per cent to a figure of US$ 63.4 billion. Given the above figures for Chinese, Thai, Indian, South Korean, Malaysian and Vietnam economies, the Asia Pacific Region is likely to out pace the rest of the world economy in the next five years with annual average growth rate of 5.5 per cent apart from China.

World growth, however, remained hostage to a number of reasons top one being the possible collapse of US dollar in the face of weak US economy and the steady eroding of its role by 'Euro'. In the context of Pakistan, the overall growth in the Southeast Asian region will have its positive effects on the Pakistan economy as well. It is hoped that it will grow steadily at a rate of 3 to 4 per cent if the world economic scenario does not change drastically and uncertainties in the face of Iraq invasion are not compounded. So far the exports are maintaining a positive trend, as there was a rise of about 19 per cent in the exports as compared to last year. With the good crop, there is a potential for export of wheat and rice, which will help save the country foreign exchange if it had to import otherwise from abroad. However, one worrying scenario would be the slowing American economy as it is the major importer of Pakistani exports

Most Asian countries including China are now focusing their economic policies less on exports than on expanding domestic investments, housing and consumer demand. The main beneficiary of the economic growth in Asia will be the consumer rather than exporters. If this happens then largely Asian consumers' will grow in power in the global economy, in the years ahead, just as 1990s was the decade of the American consumers. This will have momentous implications not only for the balance of economic power in the world but also for the balance between rich and poor. It is only a matter of time before China takes over Japan to become the world second largest economy. This will result in narrowing down the income imbalances particularly with relation to Japan and Europe whose economies are not doing so well as the Chinese economy is. The great swing in the pendulum of global will have a far greater impact on inequality around the world than any amount of development aid.

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