Business and government leaders at the 17th World Economic Forum on East Asia said global financial institutions are proving to be impotent in dealing with crises such as food and fuel prices, and it is up to Asia as the emerging center of world power to take the lead in finding solutions. Speakers at the high-profile gathering in June in Kuala Lumpur, Malaysia, argued that economic clout is drifting away from the United States and Europe to Asia. They noted that the region recovered strongly from its own financial crisis more than 10 years ago.
Yashwant Sinha, India’s former finance minister and now a member of the country’s parliament, said, “The international institutions we have at the moment, including the World Trade Organization, are woefully inadequate in dealing with the global challenges. If we are providing the bulk of the incremental growth globally, we Asian nations have a vested and immediate interest in making sure that the global institutions respond to the global crisis as they should.”
He cited the current crisis in the world stock markets stemming from the subprime mortgage debacle in the United States, noting that, had the crisis occurred anywhere in Asia or Latin America, a “huge team” from the International Monetary Fund would have descended there with advice, as it did during the 1997–1998 Asian financial crisis. “There is a major regulatory failing in the U.S. What is the IMF doing about the U.S.? Nothing,” said Sinha, who also is a former foreign minister.
Rapid hikes in the price of rice and other agricultural products have also set off riots and protests from Africa to Asia and elevated fears of a global food crisis. “This is where there is an opportunity for Asia. There are a whole host of things that Asian nations can do together. We must start writing the rules of the game,” said Sinha.
Asian countries must help each other in dealing with crises because the U.S. can no longer be expected to be “the locomotive of the global economy,” said Yoshimi Watanabe, Japan’s minister of financial services and administrative reforms. “The Asian countries are in the same boat, we share the same destiny. We should not fall into the trap of protectionism, but should help each other,” he urged.
Asia, led by India and China, will define the global economy in the future, thanks to its insatiable demand for consumer goods, investment opportunities and rapidly growing economies, those attending the forum were told. “The shift in the economy around the world has been dramatic,” Lord Peter Levene, chairman of London-based Lloyd’s, the world’s biggest insurance market, told reporters before the start of the conference. “If you’re traveling in Europe and the United States, there’s a feeling of doom and gloom. Here you step off the plane and it’s the opposite.” Levene said.
Whether Asia has the institutions, the leadership and inclusiveness to lead in the long run is another matter, said Azman Mokhtar, managing director of Khazanah National, the investment holding arm of the Malaysian government. Børge Brende, managing director of the World Economic Forum, also worried whether the region can maintain its growth momentum “against strong headwinds.”
Based in Geneva, Switzerland, the 37-year-old World Economic Forum, sponsor of the East Asia and similar regional gatherings, seeks to improve the state of the world by shaping global, regional and industry agendas.
Those headwinds include the impact of climate change, looming water shortages and a widening income gap as the rich grow richer faster than the poor are getting richer.