The East Asian economy is believed to sustain in facing crisis in the future. Countries in east Asia have prepared joint protocol in facing crisis.
In addition, the high growth with a strong domestic consumption base becomes the stability support in the region. East Asia region has also become a new power in the middle of global imbalance and declining economy in half of developed nations.
Challenge in Developing Financial Infrastructure
Meanwhile, the swiftly capital inflow to Asia is a blessing as well as challenge in developing financial infrastructure in the region, especially bond market. The swiftly capital inflow does not need to be responded with income control, which actually might be a boomerang. This was discussed at the World Economic Forum (WEF) on East Asia, which was inaugurated by Indonesian President Susilo Bombang Yodhogono in Jakarta. The WEF showed 15 discussion panel groups with various topics, such as effort to prevent crisis in Asia, geopolitical risk, maintenance of Indonesia's growth momentum, challenge of food and energy security, infrastructure obstacles, regional disaster relief, and impact of United States-China relation on Asia, in the first day.
Stuart T. Gulliver, CEO of HSBC Holdings, and Michale Buchanan, chief economist of Asia Pacific Goldman Sachs, said that Asia has a huge economic power shown by the high economic growth, strong domestic consumption, rapid export growth, and huge number of savings.
However, this region is also facing some problems. Among of them are the need of a huge infrastructure fund, potential of inflation increase due to increase of food and energy price, and potential of asset bubble.
Minister of Finance Agus Martowardojo, Deputy Governor of Central Bank (BI) Muliaman Hadad, and Rajat Nag, managing director general of Asian Development Bank (ADB), also reminded that the problem of asset bubble potential despite the quite strong fundamental in general.
Martowardojo and Hadad admitted that Indonesia is also monitoring the potential of asset bubble in property sector and financial market, including the stock market. However, the potential is not yet been seen. Hadad said,'But we are concern with the asset bubble problem'.
Nag and Gulliver believes Asian countries are getting stronger in facing a potential crisis in the future due to the prudent macro and micro policies despite facing various risks.
Nag said: 'Asia is getting stronger because the governments join together with the principle of being prudent in managing their macro economy. Asia has proven itself to be more than predicted'. He added that Asia is ready to cooperate to mitigate risks which may emerge in the long run.
CEO of Lippo Group James T. Riady also has an opinion that Asia is far stronger because it succeeded in going through crisis in 1997-1998 and 2008. Asian countries have succeeded in consolidation. He said: 'In general, fiscal is more healthy, capital balance is stronger, and debt ratio to GDP is better, including Indonesia.'
Cooperation of ASEAN+3
This region is also believed to be able to compete with western countries' economic hegemony in which half of the nations are in recession. Funds are flowing from developed nations to Asia. The cooperation of ASEAN+3, India, or Middle East is believed to be the new global balance of power.
According to Minister of Trade Mari Elka Pangestu, Buchanan, and Hadad, Asia is ready to face crisis because there is a cross border protocol mechanism. For example, if there is a liquidity crisis, there will be Asian countries' joint action. Asia is also actively designing global financial safety net with G20.
Pangestu added that ASEAN has made a food security concept, such as preparing rice reserves. ASEAN members or ASEAN+3 members (plus Japan, South Korea, and China) agree on increasing transparency in food and energy stock to prevent speculation on the commodities. Pangestu said: 'There are many joint initiatives, which can be a defense in anticipating crisis'.
Meanwhile, Sehat Sutardja, CEO of United States' Marvell Technology Group, predicted that Asia will grow to be the world's largest economic center in the next decade. Currently, there is a transfer of economic growth machine from the West to Asia.
Sutardja said: 'The transfer is more rapid when China develops low cost manufacturing.' However, Indonesia will play an important role in providing human resources, infrastructure, and technology. Indonesia's population with 230 million people and the better education level will improve the supply of professional human resources who could become leaders of international scale companies.
He said: 'Indonesia will play an important role. I want to watch if improvement in infrastructure with high technology in Indonesia could reduce social gap.'
Capital Inflow
Panelists also discussed about the swifly capital inflow. It is triggered with the low interest rate in United States and uncertainty in Europe.
According to Buchanan and Gulliver, the capital inflow is an opportunity for Asian countries to develop its bond market. Gulliver said: 'This is a great opportunity and, therefore, Asia must develop its financial market infrastructure, especially bond.'
Moreover, Asia has the power because of its huge savings. The funds can be directed for investment in bond market. He said: 'The Western countries do not own huge savings.'
Despite the swiftly capital inflow, it still has risk of sudden reversal. The panelists reminded Asia not to implement income control. What it should do is developing financial market infrastructure, especially bond.
Martowardojo and Hadad also ensured that Indonesia will not implement income control. According to Martowardojo, the government will be focus on strengthening macro fundamental so that funds flowing to portfolio could be directed to long-term direct investment.
Other Asia's power is the huge domestic consumption base. This is called by the panelists as the pillar of power owned by Indonesia, India, and China.
Gulliver underlined that Indonesia has a very prudent policy which makes it relatively immune to global crisis. Low debt ratio and strengthening of rupiah. Strong economy makes capital inflow to Indonesia quite high.
Deglobalization
Meanwhile, Klaus Schwab, founder and chairman of WEF, and Brian A. Gallagher, CEO of United Way Worldwide, reminded nation leaders, businessmen, and civil community leaders about the risk of deglobalization or failure of global system to resolve current complex issues. Schwab said: 'The number risk is currently deglobalization.'
Regarding the need of balancing the unequal income in the world, Schwab said: 'Globalization creates many opportunities, but we do not have the mechanism to understand the causes and the effects from inclusive growth.'
He underlined that mechanism responding the risks in nations, regions, and international communities is frequently unable to resolve complex problems faced by the world. Continuous unemployment problem is one of the examples. Therefore, business model and new policy are needed.
Kishore Mahbunani, dean of Lee Kuan Yew School of Public Policy of the National University of Singapore, added that global financial crisis has shown that old approach and political decision have no effect anymore.
For Europe, crisis can be controlled as long as nations in crisis, especially Greece, succeed in debt restructurization or reprofiling, budget efficiency, and capital injection. He believes that crisis will be over and there will be no second round effect. He said: 'It is proven by the stress test on banks in Europe.'
In addition, the high growth with a strong domestic consumption base becomes the stability support in the region. East Asia region has also become a new power in the middle of global imbalance and declining economy in half of developed nations.
Challenge in Developing Financial Infrastructure
Meanwhile, the swiftly capital inflow to Asia is a blessing as well as challenge in developing financial infrastructure in the region, especially bond market. The swiftly capital inflow does not need to be responded with income control, which actually might be a boomerang. This was discussed at the World Economic Forum (WEF) on East Asia, which was inaugurated by Indonesian President Susilo Bombang Yodhogono in Jakarta. The WEF showed 15 discussion panel groups with various topics, such as effort to prevent crisis in Asia, geopolitical risk, maintenance of Indonesia's growth momentum, challenge of food and energy security, infrastructure obstacles, regional disaster relief, and impact of United States-China relation on Asia, in the first day.
Stuart T. Gulliver, CEO of HSBC Holdings, and Michale Buchanan, chief economist of Asia Pacific Goldman Sachs, said that Asia has a huge economic power shown by the high economic growth, strong domestic consumption, rapid export growth, and huge number of savings.
However, this region is also facing some problems. Among of them are the need of a huge infrastructure fund, potential of inflation increase due to increase of food and energy price, and potential of asset bubble.
Minister of Finance Agus Martowardojo, Deputy Governor of Central Bank (BI) Muliaman Hadad, and Rajat Nag, managing director general of Asian Development Bank (ADB), also reminded that the problem of asset bubble potential despite the quite strong fundamental in general.
Martowardojo and Hadad admitted that Indonesia is also monitoring the potential of asset bubble in property sector and financial market, including the stock market. However, the potential is not yet been seen. Hadad said,'But we are concern with the asset bubble problem'.
Nag and Gulliver believes Asian countries are getting stronger in facing a potential crisis in the future due to the prudent macro and micro policies despite facing various risks.
Nag said: 'Asia is getting stronger because the governments join together with the principle of being prudent in managing their macro economy. Asia has proven itself to be more than predicted'. He added that Asia is ready to cooperate to mitigate risks which may emerge in the long run.
CEO of Lippo Group James T. Riady also has an opinion that Asia is far stronger because it succeeded in going through crisis in 1997-1998 and 2008. Asian countries have succeeded in consolidation. He said: 'In general, fiscal is more healthy, capital balance is stronger, and debt ratio to GDP is better, including Indonesia.'
Cooperation of ASEAN+3
This region is also believed to be able to compete with western countries' economic hegemony in which half of the nations are in recession. Funds are flowing from developed nations to Asia. The cooperation of ASEAN+3, India, or Middle East is believed to be the new global balance of power.
According to Minister of Trade Mari Elka Pangestu, Buchanan, and Hadad, Asia is ready to face crisis because there is a cross border protocol mechanism. For example, if there is a liquidity crisis, there will be Asian countries' joint action. Asia is also actively designing global financial safety net with G20.
Pangestu added that ASEAN has made a food security concept, such as preparing rice reserves. ASEAN members or ASEAN+3 members (plus Japan, South Korea, and China) agree on increasing transparency in food and energy stock to prevent speculation on the commodities. Pangestu said: 'There are many joint initiatives, which can be a defense in anticipating crisis'.
Meanwhile, Sehat Sutardja, CEO of United States' Marvell Technology Group, predicted that Asia will grow to be the world's largest economic center in the next decade. Currently, there is a transfer of economic growth machine from the West to Asia.
Sutardja said: 'The transfer is more rapid when China develops low cost manufacturing.' However, Indonesia will play an important role in providing human resources, infrastructure, and technology. Indonesia's population with 230 million people and the better education level will improve the supply of professional human resources who could become leaders of international scale companies.
He said: 'Indonesia will play an important role. I want to watch if improvement in infrastructure with high technology in Indonesia could reduce social gap.'
Capital Inflow
Panelists also discussed about the swifly capital inflow. It is triggered with the low interest rate in United States and uncertainty in Europe.
According to Buchanan and Gulliver, the capital inflow is an opportunity for Asian countries to develop its bond market. Gulliver said: 'This is a great opportunity and, therefore, Asia must develop its financial market infrastructure, especially bond.'
Moreover, Asia has the power because of its huge savings. The funds can be directed for investment in bond market. He said: 'The Western countries do not own huge savings.'
Despite the swiftly capital inflow, it still has risk of sudden reversal. The panelists reminded Asia not to implement income control. What it should do is developing financial market infrastructure, especially bond.
Martowardojo and Hadad also ensured that Indonesia will not implement income control. According to Martowardojo, the government will be focus on strengthening macro fundamental so that funds flowing to portfolio could be directed to long-term direct investment.
Other Asia's power is the huge domestic consumption base. This is called by the panelists as the pillar of power owned by Indonesia, India, and China.
Gulliver underlined that Indonesia has a very prudent policy which makes it relatively immune to global crisis. Low debt ratio and strengthening of rupiah. Strong economy makes capital inflow to Indonesia quite high.
Deglobalization
Meanwhile, Klaus Schwab, founder and chairman of WEF, and Brian A. Gallagher, CEO of United Way Worldwide, reminded nation leaders, businessmen, and civil community leaders about the risk of deglobalization or failure of global system to resolve current complex issues. Schwab said: 'The number risk is currently deglobalization.'
Regarding the need of balancing the unequal income in the world, Schwab said: 'Globalization creates many opportunities, but we do not have the mechanism to understand the causes and the effects from inclusive growth.'
He underlined that mechanism responding the risks in nations, regions, and international communities is frequently unable to resolve complex problems faced by the world. Continuous unemployment problem is one of the examples. Therefore, business model and new policy are needed.
Kishore Mahbunani, dean of Lee Kuan Yew School of Public Policy of the National University of Singapore, added that global financial crisis has shown that old approach and political decision have no effect anymore.
For Europe, crisis can be controlled as long as nations in crisis, especially Greece, succeed in debt restructurization or reprofiling, budget efficiency, and capital injection. He believes that crisis will be over and there will be no second round effect. He said: 'It is proven by the stress test on banks in Europe.'
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