Posted tagged ‘east asia’

2009 strategic political, economic trends in E. Asia (Part 2 of 2)

December 24, 2008

By Jusuf Wanandi

east-asiaLearning how to deal with each other as neighbors and major regional powers is critical not only for the two individual nations, but also for the broader region in general.

That is why regional cooperation institutions should assist them in finding the right modus vivendi. The role of the United States in supporting Japan is not helpful. It should be left to China and Japan to find the balance in their relationship.

In the early 1990s, following the bursting of its economic bubble, Japan entered a decade-long recession and deflation — a period that was prolonged by inadequate government policies, especially in the financial and banking sector. In the past few years, the economy has started to grow again, albeit slowly.

But now, again, Japan’s economy is in recession. Although the financial sector has been notably strengthened, dependency on exports is still high and demand has already slowed, while domestic consumption has not increased. Japan still faces several economic constraints, such as demographic problems including an aging society, inadequate productivity levels, low levels of foreign direct investment, rising poverty and worsening income inequality.

(more…)

Advertisements

Strategic trends in E. Asia (Part 1 of 2)

December 24, 2008

By Jusuf Wanandi

Strategic trends, namely how relations among the three big powers of the region (China, Japan and the United States) will unfold, will define future developments in East Asia.

China is doing well; it hosted the Olympic Games earlier this year and the world continues to talk about the nation’s excellent achievements. Despite the global financial crisis, China is forecasting economic growth of 8 percent for next year. This is a reduction from the current 11 percent, but still a very good achievement considering the circumstances.

Yet the crisis has yet to fully unfold and the extent of its damage remains something of a mystery. For China, global funds and foreign direct investment will be limited and exports will be curtailed because of the deep recessions that developed nations are facing. That is why China’s new policies, which will encourage domestic consumption and inject money into the banking system, are very wise.

(more…)

How East Asia is responding to global crisis

December 22, 2008

By Hadi Soesastro

In East Asia, South Korea was the first to be hit by the global crisis. A report by Citibank in early Oct. 2008 showed that in the region the S. Korean economy was the most vulnerable to external financial shocks, in terms of both the risk of a sudden stop and sudden reversal of financial flows.

Having experienced the 1997/1998 crisis, the region has established currency swap arrangements, known as the Chiang Mai Initiative (CMI), to help each other in the eventuality of another such crisis. Eight years have elapsed, and a crisis is looming, but it remains uncertain as to how this arrangement can be invoked and what would trigger its use.

S. Korea has not attempted to make use of the CMI to prevent a crisis from unfolding. Under the CMI, Korea can exchange a mere US$17 billion with Japan and China, and additional insignificant amounts with other ASEAN countries. In view of the magnitude of the potential problem, the size of the CMI is too small. But perhaps the main reason for not resorting to this arrangement was that the CMI is still “an initiative”.

(more…)