Asia on a rebound: The view from Tokyo

Tokyo is busy fostering mixed-land use, which combines culture with accommodation, shopping with gardens, and retail outlets with sports complexes. No doubt the Japanese have excessively believed in a form of Keynesian economics where large public outlays have promoted almost a construction mania all over Japan in a bid to reverse their prolonged stagflation.

The conference itself was about the strength of Asia and what was described as an Asian rebound from the lost decade of the nineties, which commenced with a bursting of the Japanese bubble economy, the Korean stagnation, India8217;s balance-payments crisis in 1991 and subsequently the Asian crisis of 1997. On every reckoning, there was now an Asian resurgence marked by increased structural savings and higher investment, a deeper export commitment seeking global opportunities and a stronger movement for improved governance.

The bad news for Asia, of course, was that nothing was cheap any more and costs were rising faster than productivity while increased global integration enhanced risks of volatility.

Heizo Takenaka, a former minister of the Koizumi Government, considered by many as an architect of the recent Japanese reforms, recounted the recent reform initiatives. The key components included a sharp reduction in non-performing assets of banks from 8.4 per cent to 1.9 per cent, a reduction in fiscal deficit and a massive privatisation programme. This had resulted in reversing the stagnation in GDP growth, which from 4.5 per cent in the eighties had come down to barely one per cent in the nineties, but was now growing at a sustained 2-3 per cent.

Contrary to popular perception, the view from China presented by Yongtu Long, now secretary general, Boao Forum for Asia and former WTO chief negotiator, was that there would be no slow-down in Chinese growth prompted by a break in the pace of investment. Investment was commonly perceived as a bad boy, but would continue to grow outside metros in local towns propelled by a vibrant private sector every Chinese wants to be his own boss and millions of migrants now starting new businesses. This new-found private-sector dynamism of small and medium enterprises would continue to push Chinese growth. Domestic consumption would certainly increase but not at the expense of investment.

Soogil Young, president, National Institute of Security, Korea, believed in continued economic buoyancy but the critical assumption was continued peace and stability in the region. Koreans seem obsessed with the thought that they are being sandwiched between the two giants of China and Japan.

But the real miracle spoken of was the emergence of India. The sustained GDP growth over eight per cent in the last three years, tangible efforts to improve infrastructure, mainstreaming agricultural reforms and investment in human resource development to harness the demographic dividend is being widely acknowledged. The limitation of coalition politics was bothersome but it is recognised as the cost of democracy.

Regrettably in India inadequate credit is being given for the enormous difference this has made to India8217;s standing in Asia. It will, however, be naiuml;ve to believe that unless we stay the course and irrespective of the changing hues of coalition politics squarely address many subsisting and unfinished reform related issues, the miracle could be short-lived. We abhor the thought of the miracle becoming a myth. Asia is on a new rebound in which everyone expects India to build a leadership role.