As business leaders from around the world converge World Economic Forum on East Asia 2010, VietNamNet interviewed Thierry Geiger, WEF’s Associate Director.

LookAtVietnam — As political and business leaders from around the world converge on Ho Chi Minh City for the June 6-7 World Economic Forum on East Asia 2010, VietNamNet interviewed Thierry Geiger, an economist who is the WEF’s Associate Director.

Thierry Geiger, an economist who is the WEF’s Associate Director

VietNamNet: Has the global crisis made it necessary to reconsider the old economic model? What’s the role of East Asia in the recovery from the global economic crisis?

WEF Associate Director Thierry Geiger: The model that is working now for emerging economies in Asia is essentially the same as the one that served other economies relatively well for decades, economies that were once poor and are now advanced. The model is far from perfect, but it has proven quite successful. The recent crisis has shown the limits and excesses of this system. What is needed are changes within the system, not a change of system.

The Developing Asia region is the world’s most dynamic region. According to the IMF, in 2008 and 2009, the years of the crisis, the region accounted for seventy percent of global GDP growth, while advanced economies accounted for a mere six percent. Between now and 2015, the IMF predicts, the contribution of Developing Asia to global GDP will be between 40 and 45 percent.

To put these figures into perspective, throughout the 1980s, this ratio was below 15 percent. It is an entirely new reality that is having huge impacts in both the region and the rest of the world. It affects political and business decisions. It changes, and sometimes reverses, not only trade and investment patterns, but also migration flows.

VietNamNet: China’s economy recovered more strongly than any other major economy after the crisis. How’s its impact to the region? What lessons can we learn from that?

Geiger: China managed to mitigate the effects of the crisis by very quickly implementing massive stimulus packages and other measures to stimulate internal demand. These partially made up for the sharp drop in exports. The fact that China resisted well also showed that its growth is not so dependent on trade after all.

VietNamNet: China’s emerging economy is said to replicate the Japanese model. Could China’s boom eventually turn into bust, like Japan’s so-called ‘lost decade’?

Geiger: I don’t think the current economic situation of China is comparable to Japan’s at any point in recent history. China is at a very different stage of economic development. Yet China’s booming economy could lead in the future to the formation of asset bubbles, and that could be reminiscent of Japan’s troubles at the beginning of the 1990s.

VietNamNet: China’s “hot” growth raises some worries of resource burnt-out, that is, reckless exhaustion of water and natural resources. Do you agree?

Geiger: China is weaving economic ties with an increasing number of countries around the world in order to secure the resources needed to fuel its growth. Technology is also providing partial solutions to some of the most pressing issues that China is facing, such as pollution or energy consumption. Through technological transfer and increasingly through innovation, China needs to leapfrog all intervening phases of industrialization and adopt only the most efficient technologies.

VietNamNet: You are a co-author of the World Economic Forum’s new East Asia Report on ASEAN trade. Can you reveal some important conclusions?

Geiger: The study draws on our ‘Enabling Trade Index (ETI) 2010.’ The ETI ranks 125 economies worldwide, including seven ASEAN countries, on their ability to fully benefit from trade. They were assessed in the following areas: market access, border administration, transport and communication, and business environment.

Despite many initiatives, the ASEAN region remains very fragmented partly due to the difficulty of moving goods across borders. Member countries enable trade to very different degrees. The ASEAN countries covered by the study span the entire ETI ranking. Singapore ranks first overall, followed by Malaysia (30th), Thailand (60th), Indonesia (68th), Vietnam (71st), the Philippines (92nd) and Cambodia (102nd).

The study found that inefficient border clearance administration and inadequate infrastructure represent major barriers to trade. They increase trade costs and shipping times, ultimately hurting the competitiveness of ASEAN’s exports. In particular, corruption in many ASEAN countries seriously undermines the transparency and predictability of border clearance, and the quality of the general business environment.

VietNamNet: The ASEAN-China Free Trade Agreement went into full operation from January 1. Will the World Economic Forum 2010 discuss the impact of this FTA on the region?

Geiger: Yes, that’s among many topics the World Economic Forum on East Asia will examine.

VietNamNet: People here are concerned that ASEAN goods may not be competitive with Chinese products in our own markets. Indonesia reportedly has proposed to postpone tariff cuts agreed on a number of commodities.

Geiger: In times of crisis, protectionist measures tend to be popular. That is understandable. However, trade is part of the solution, and certainly not a cause of the world’s current economic turmoil. Protectionist measures bring only temporary relief. In the longer run, the effects can be disastrous. So far, political leaders have not given way to protectionism despite the crisis.

Generally speaking, even in a more favorable context, FTAs are likely to bring about significant changes in the economic structure of participating countries. Most FTAs are brought into force progressively, typically over several years, to allow countries to adapt to the new environment.

VietNamNet: What does ASEAN need to do to improve its competitivity?

Geiger: Taken separately, none of the ASEAN nations have significant economic power on the world stage, except maybe Indonesia. Each individual market is relatively small. But as a group, ASEAN is 600-million people strong. This makes the region attractive to foreign investors.

The membership of ASEAN is extremely heterogeneous. Singapore and Cambodia are poles apart, for example. Each member has certain competitive advantages. As ASEAN becomes more integrated, these differences could be complementary and boost the region’s competitiveness. Efficient regional supply chains and economies of scale can be generated.

By strengthening economic relations with its main – and often nearby – trade partners, ASEAN will gain better access to enormous markets – let’s not forget that 60 percent of the world’s population live in the ASEAN neighborhood.

Xuan Linh