World needs UK to stay in Europe

Editorial

The Japan News, Japan

We hope the British people vote to remain in the European Union (EU). Should the United Kingdom leave the bloc, global financial markets would be rocked and economic turmoil would ensue.

The major points of contention in referendum campaigning are the economy and immigration.

The UK government forecasts that a vote to leave risks causing a recession and job losses. British Prime Minister David Cameron, who leads the pro-EU campaign, warns that leaving would be a "self-destruct option" for the British economy. A Brexit would mean the country having to renegotiate trade and investment rules with the EU, throwing Britain's economic outlook into doubt.

With fierce debate raging between the two camps, Mr Cameron recently visited a Hitachi train factory in the Midlands, where he said a "remain" vote would mean the country would be able to attract more foreign investment.

Foreign companies, including Japanese firms, invest in Britain to build bases as stepping stones to the EU market, which has a population of 500 million. But they set up businesses in Britain based on the premise that EU rules are applied, irrespective of whether they are in manufacturing or the financial sector.

In the light of such circumstances, Prime Minister Shinzo Abe told Mr Cameron when he visited Britain last month that it would be desirable for Britain to remain in the EU.

On the other hand, the pro-exit camp asserts that by leaving, the country would be able to control the flow of immigrants from other EU member countries. The pro-exit campaigners' strategy is to insist that the foreign influx threatens the country's employment and welfare status quo.

Should Britain leave the bloc, the EU would also suffer incalculable damage. In various parts of Europe that face a massive influx of refugees, political parties sceptical of the EU and voicing anti-refugee and anti-immigrant calls are gaining influence. If Britain votes to leave, it would lend support to such movements. The bloc may also see its influence decline in diplomatic and security areas.

The EU is a bastion of an international order based on such values as democracy, freedom and the market economy. A shock that would destabilise that order must be avoided.

S. Korea should expect the worst

Editorial

The Korea Herald, South Korea

If Brexit becomes a reality, South Korea is certain to face aggravated difficulties in its export performance that has already taken a big hit.

This would mean that Asia's fourth-largest economy could face a longer-than-expected economic slowdown.

The size of the blow that Brexit would deal can be seen from past reports on the impact on the South Korean economy of Greece's exit from the euro zone, which is still posing a threat to the global economy as a lingering possibility.

The Korea Economic Research Institute predicted last year that Grexit would slash South Korea's gross domestic product growth by up to 2.7 percentage points, compared to business as usual. The report also said that capital flight would come to more than 14 trillion won (S$16.1 billion) under a Grexit.

Greece is the world's 46th-largest economy and Britain is ranked fifth. A Brexit, no doubt, would deal a severe blow to the global economy, starting from the initial impact on Britain's neighbouring countries.

Britain is a large export destination of many European countries. A domino effect is inevitable for the rest of Europe.

The EU, including Britain, takes up more than 10 per cent of South Korea's exports. South Korea's exports to Britain would no longer benefit from the tariff exemptions in its free trade agreement with the EU. Britain's departure from the EU means that the trade deals done under the EU umbrella will have to be adjusted as well, together with new stand-alone deals with Britain.

A series of complex legal issues and readjustments of treaties and agreements will become inevitable.

Policymakers should closely look into the referendum and map out contingency plans to prepare for the worst.

A desirable way to be resilient to any external shock is to foster futuristic export industries by carrying out drastic restructuring of the economy and pouring active investment into uncharted fields.

The panic has already started

Peter Liang

China Daily, Hong Kong

Tumbling share prices in Hong Kong after the United States Federal Reserve announced it was keeping interest rates on hold showed that investors' primary concern has shifted to worries about global economic health that could be harmed by Britain's vote on whether or not to leave the European Union in next Thursday's referendum.

It's not what the US Fed did, but what its chairman Janet Yellen said that matters most to investors worldwide.

The possibility of Britain quitting the EU, or Brexit, was one of the factors that led the Fed to keep interest rates on hold, she said.

The British referendum, Dr Yellen said, "could have consequences for economic and financial conditions in global financial markets". Brexit, in turn, could have consequences for the US economic outlook, she added.

If Britain votes to stay in the EU on June 23, the Fed will still have to weigh the US economic indicators, especially those for employment and prices, to decide on rates at its next meeting late next month.

For now, at least, Brexit is the market's bogeyman.

Many business leaders have warned that Brexit can have dire consequences that extend beyond global financial markets.

The latest warning came from Germany's Foreign Minister Frank-Walter Steinmeier, who was quoted as saying that Brexit could lead to the EU's eventual disintegration.

It's hard for anyone to predict the outcome of the British vote.

The uncertainties it has created have prompted investors to run for cover, triggering a wave of sell-offs in major financial markets, including Hong Kong.

•The View From Asia is a weekly compilation of articles from The Straits Times' media partner Asia News Network, a grouping of 21 newspapers.