Amid growing optimism in the region, over 30 policymakers, researchers, market analysts, and journalists from the larger economies of the Association of South East Asian Nations (ASEAN)—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—and China and Japan gathered in Singapore for an IMF-sponsored seminar—”Asia’s Economic Challenges and Opportunities”—on December 11-12,2003. The participants foresaw a dynamic future for the region provided it adopted a more entrepreneurial and innovative response to an increasingly competitive global environment.
From the early 1980s through the mid-1990s, the major ASEAN and newly industrialized economies of Asia made extraordinary strides in achieving rapid economic growth, attracting unprecedented amounts of global investment, achieving macroeconomic stability, and reducing poverty. This impressive performance was interrupted, however, by a crisis in 1997-98 that left the region suddenly associated not with a miracle but with structural weaknesses.
The interruption proved relatively short-lived. While a few economies remain fragile, Asia is again playing a crucial role in supporting world growth. This year, developing Asia—with a projected growth rate of 6½ percent or higher—looks to top regional growth rankings for the fourth year in a row. Its growth this time is driven by the performance of China and India. Asia now accounts for one-third of world output and one-fifth of world exports, and attracts one-third of all foreign direct investment in emerging markets.
Against this backdrop, seminar participants were upbeat and confident about the region’s future but equally certain that a sharply more competitive global economy would not tolerate rigidity or complacency. In today’s environment, they saw no way to return to East Asia’s “old” model, which had achieved vigorous growth through resource-driven, export-led development, boosted by state-directed capitalism and top-down corporate and bureaucratic organizations. With the greater integration of China and India into the world economy, Asia’s smaller emerging markets have seen their export edge diminish. More fluid capital flows have also made untenable the fixed exchange rate regimes that once helped these economies secure export markets and attract foreign direct investment. And, in some cases, nonperforming loans continue to burden financial systems. What Asia needs, participants agreed, is a new mind-set that will promote entrepreneurship and innovation in a more globalized world.