South-East Asia’s economic prospects are bright despite the volatility in the region, several analysts said yesterday.
Chief economist of ANZ Bank Glenn B. Maguire and Mr Manu Bhaskaran, partner and head of economic research at Centennial Group, believe good times are ahead, as they observe an inflow of investments to Asean.
Trouble between Japan and China, such as over Beijing’s new Air Defence Identification Zone (ADIZ), will lead to a fundamental change in where the Japanese invest, Mr Bhaskaran said at the ST Global Outlook Forum titled, “Will 2014 be a year of living dangerously for Asia?”.
“That fundamental change actually means more Japanese investments in this part of the world, even with problems of the business environment in Indonesia and so on,” he said.
Agreeing, Mr Maguire noted that the political disputes have economic consequences.
The last time there was significant political tension between Japan and China in 2005 – when a new Japanese history book was said to have failed to address the extent of Japan’s World War II atrocities – Tokyo responded by moving its production networks from China to Thailand.
Then, when Thailand experienced flooding in 2010 and 2011, Japan moved farther into the region – to Malaysia, Indonesia and the Philippines, he noted.
Additionally, when the flow of funding from the United States into Asia begins to reverse once the Federal Reserve puts an end to its quantitative easing, Mr Maguire expects this to be replaced by “a more stable foreign direct investment, building real assets”.
Both men were speaking in a panel discussion on the economic outlook of Asia-Pacific with three Straits Times journalists: Mr Peh Shing Huei, Deputy News Editor and author of When The Party Ends, which looks at China’s rise and challenges after the 2008 Beijing Olympics; veteran Japan correspondent Kwan Weng Kin; and senior economics correspondent Fiona Chan. It was moderated by Foreign Editor Ravi Velloor.
Mr Peh noted that with the recent policy changes in Beijing – including the reversal of its one-child policy and the loosening of hukou, or household registration, restrictions to ease migration, Chinese President Xi Jinping has consolidated his power and shown himself as having more clout than his predecessors.
But Mr Kwan was sceptical over policies introduced by Japan’s Prime Minister Shinzo Abe to revive its ailing economy, dubbed Abenomics. “He has set his targets, but he hasn’t told us how he is going to do those things,” he said.
Ms Chan was more optimistic, saying that Mr Abe’s policies were working. She added, however, that the average Japanese has yet to feel their impact because his wages have not grown yet.
Tensions between Japan and China over China’s ADIZ also featured prominently at the forum, which was attended by 400 business leaders, academics and government officials.
The panel was followed by a lunchtime talk on US megatrends and their impact on Asia by Dr Parag Khanna, director of the Hybrid Reality Institute and senior fellow at the Singapore Institute of International Affairs.
Earlier, Foreign Affairs and Law Minister K. Shanmugam fielded questions from the floor. This was the highlight for several people, including participant K.J. Tan, 74, from a think-tank. “The Foreign Minister was very frank, and the questions were solid, insightful, relevant and pertinent.”
Ms Eleanor Oh, senior communications manager for publisher Wiley, said she wished there was more time with Mr Shanmugam, who spent an hour and forty-five minutes with the audience.
“He was very open in sharing his thoughts, and it showed that he was willing to engage us.”