As the world continues to drag itself out of the global financial crisis, all eyes are on Southeast Asia. The region has consistently outpaced the rest of the world in terms of economic expansion in recent years. With positive demographics and improvements in education, wealth will only increase and the resulting consumption boom will drive economic growth higher in the coming decades.
This was the backdrop for the World Economic Forum Conference on East Asia (#wefeastasia), held in Manila earlier this year.
Participants from over 30 countries gathered to discuss some of the pressing issues facing the region ahead of the December 31, 2015 ASEAN (Association of South East Asian Nations) economic integration. Hosting the conference was Philippine President Benigno Aquino, whose country registered 2013 GDP growth of 7% — despite the damages caused by super-Typhoon Yolanda — and is expected to maintain a healthy GDP growth rate of 6.5% in 2014. Other countries in the region almost universally expect to record 2014 country GDP growth above 5%.
The mood at the conference was one of excitement and recognition that although challenges remain, the time has come for ASEAN to play a significant role on the global stage. After all, ASEAN — comprising 10 countries with a combined population of approximately 600 million people — has a combined GDP of about US$2 trillion, with post-2008 growth rates far exceeding those of the US and EU.
President Aquino confidently stated that in the Philippines has gone from "the sick man of Asia" to "the Comeback Kid", earning him applause from the delegates.
One of the most discussed issues was the urgent need for infrastructure within and between nations.
Asian Development Bank (ADB) officials reported that investment in infrastructure has not recovered in the nearly 20 years since the Asian financial crisis. While there has been progress in recent years in several countries, the ADB estimates that over US$1 trillion is required in regional infrastructure investment to maintain ASEAN's growth trajectory, and warned that individual countries will not be able to finance more than 50% of this need. Discussion quickly moved to potential solutions, with public-private-partnerships (PPP) being the most obvious.
However, while many business executives reported the availability of project financing from global commercial lenders, hedge funds and the like, the challenge appears to be with the public sector. Governments at all levels lack the experience to prepare comprehensive PPP investment proposals to shop to investors. Institutions such as the ADB are assisting with capacity-building programmes but it will take time and the involvement of the private sector to make any noticeable difference.
Regional security was also on the minds of the business leaders, academics and NGO officials who braved the 36-degree Celsius temperatures throughout the event. Admiral Samuel Locklear III, head of the U.S. Pacific Fleet, counselled for cool heads to prevail during a time of high tensions in the South China Sea. Rebalancing economic power is closely associated with evolving military and political relationships.
ASEAN is less than 18 months away from achieving an integrated common market through the formation of the ASEAN Economic Community. This integration, together with recently concluded trade agreements, is expected to further boost production and consumption in the region. Participants debated the impact on industries such as logistics and transportation, and how new technologies and innovation would transform the landscape.
With a military coup in Thailand having taken place hours before the conference commenced, discussion also centred on the changing social expectations of the growing middle class, their political empowerment and desire to rebalance income inequality.
The undeniable conclusion was that this integration, with its simplified rules, lowered tariffs and decreased costs for doing business, will catapult ASEAN into the big leagues, creating more employment and raising incomes — the kind of inclusive, equitable growth that is good news for everyone.