Integration of Asian economies now more imperative

Amidst the downside risk from the debt crisis and recession in the European Union, Asian countries will have to try to boost business activities within the region in order to maintain current economic growth rates. 

The Asian strategy nonetheless should not merely focus on the market potential of populations and the accumulation of natural resources. Asian countries should also give priority to the “software side”, to improve the quality of production, goods, services and resources. At the same time, regional governments should provide new infrastructure to improve the intra-regional economy, which will help to provide a cushion against outside risk.

Asian countries have, over the past few decades, managed to strengthen their economic fundamentals. This has been made possible by private sector cooperation and the numerous regional trade agreements made by governments. This marks a desirable direction, as Asian countries have now managed to diversify their risk after relying on traditional markets such as the US and European Union.

According to the recently released Asia Economic Monitor quarterly report, the Asian Development Bank predicts that emerging East Asian economies will expand by 7.2 per cent next year, compared with the 7.5 per cent predicted in its last report, and the expected 7.5 per cent in 2011.

The risk scenarios for Asian countries next year relate to the state of economies in the EU and US. So the challenge ahead for Asian countries is to sustain current growth rates in spite of these external risks.

While the economic woes in the EU and US seem set to continue, Asian economies now have an opportunity to boost intra-regional business activities to offset declining demand in these two traditional market areas. The US economy may be on the mend, but there is a continuing risk of political gridlock, with the presidential election next year.

Asian economies are still perceived as potential areas for growth. But the growth so far owes much to sheer size of Asian populations, which create a huge market for businesses. At the same time, labour in the region is still attractive due to the low level of wages. Indeed, the economies of many Asian countries have not been driven by high-quality labour or sophisticated industrialisation. Thailand, for instance, has yet to fully improve its human resources.

Regional cooperation can play an important role in providing supportive infrastructure. For example, Asian countries could help improve their human resources by providing infrastructure to promote education, in order to enable people to stay competitive at the regional and international level. An improvement in the quality of human resources would result in the overall better well-being of people and create sustainable demand to drive growth in the long term. 

The government must also help provide supportive logistics systems to promote the exchange of knowledge, to enable workers to achieve their full potential.

The Bank of Thailand has predicted that the Thai economy next year will grow by 4.8 per cent. Thailand is set to enjoy satisfactory growth because its economy has become more dependent on our neighbours in the region.

But the region, like others, is not free from risk factors. To prevent possible disruption to this growth forecast, countries in the region should further coordinate on cooperation to ensure the stability of currencies. Unstable regional currencies and government policies that may have unpredictable results are among the risks to economic growth in the region.

While it remains unlikely that Asian countries will coordinate their fiscal and monetary policies in the same way as EU members have done, Thailand, along with other East Asian countries, should exchange views with its neighbours on how to coordinate policy platforms. After all, we face similar challenges. We will have to strike a balance between keeping inflation under control while stimulating desired economic growth.