Business

Saturday October 31, 2009

Tapping into the power of ‘1’

By CECILIA KOK


EVER since Prime Minister Datuk Seri Najib Tun Razak introduced his concept of 1Malaysia, there has been an increasing number of parties jumping on the “1” bandwagon.

From corporate branding strategies such as the 1Medini, which is a residential development project in Iskandar Malaysia, and 1MH, which is the tagline of national carrier Malaysia Airlines, to sports such as the 1Malaysia F1 team, and schools in the East Coast through the state government’s proposed “1Toilet” policy, the “1” bug seems to have spread quite widely within the country that it is now becoming a cliché.

But while the adoption of the “1” concept by the private sector and government agencies reflects well their support of the Prime Minister’s vision, the concept in itself actually carries a greater meaning because it is about breaking down barriers to achieve unity.

And conventional wisdom tells us that there is power in unity.

As the global economy faces one of the most challenging crises in history, unity among countries in the world is a much-needed element to weather the storm.

In this regard, it is heartening to see that there are indeed efforts by governments worldwide to act in a more collaborative manner to pull the global economy out of this recession.

Asean leaders (top to bottom) Datuk Seri Najib Tun Razak, Philippine President Gloria Arroyo and Singaporean Prime Minister Lee Hsien Loong walk following a signing ceremony, as part of the 15th Asean summit, at the elite beach resort of Hua Hin, southern Thailand on Oct 25. Dreams of creating a huge economic bloc covering half the world’s population are slowly becoming a reality in a plan that would boost Asia’s global clout, analysts and officials say. – AFP

Early this month, Najib took the advantage of an international platform at the 35th Unesco general conference to sell the concept of “1”.

He said at the conference’s opening plenary session that the 1Malaysia national philosophy could be extended to the concept of 1Region, and ultimately, 1World.

Well, the concept of “1Region” can perhaps be seen in Europe, where 16 nations, including Germany, France, Ireland and Spain, form the eurozone – an economic and monetary union established since 1999.

Member states adopt a single currency and their monetary policies are administered by the European Central Bank.

This sort of an economic bloc was recently proposed for the Asia-Pacific economies at the 15th Association of Southeast Asian Nations (Asean) Summit that was held in Thailand over the last weekend.

The summit saw the gathering of leaders from the 10 Asean countries, namely, Malaysia, Thailand, Singapore, Indonesia, Brunei, Cambodia, Laos, Myanmar, Vietnam and the Philippines, and their six dialogue partners from China, Japan, South Korea, India, Australia and New Zealand.

Leaders involved in the summit have reportedly reached a consensus to move towards greater integration and to raise the role of East Asia on the global stage in terms of economic, social, monetary and financial areas, but there was no conclusion as to how the Asia-Pacific economic bloc should look like.

It is likely going to take at least five to 10 year to realise such a dream, Affin Investment Bank economist Alan Tan shares with StarBizWeek.

“It is a complicated move, and in order to create a win-win situation, the countries involved need to work out the details, especially in terms of intra-regional trade,” he says, adding that, ultimately, Asian countries will still have to beef up their domestic consumption to provide alternative growth drivers for their economies.

This is in line with the call for a rebalancing of the global economy, whereby Asian countries are asked to consume more and save less.

This in itself is a complex reform for the region, although policymakers are already taking steps to boost their respective domestic consumption.

The Asean Plus Six countries cover more than half of the world’s population, but they represent only 20% of the world’s gross domestic product (GDP) and 50% of the foreign exchange reserves.

Since the collapse of international trade as advanced countries entered into severe recession late last year, economists have been calling for greater intra-regional trade among Asian countries to support their own economies.

The market is huge, but if domestic consumption in the region remains weak, intra-regional trade would not make much difference to the region’s economy, economists say.

“At this juncture, Asian intra-regional trade is still dependent on the final demand of industrialised Western nations, although the fundamentals of the Asian economies remain strong throughout the global economic crisis,” Tan explains.

As for the common currency proposed for the Asian region, an economist based in Singapore in an e-mail reply to StarBizWeek, says: “A common currency is a nice idea, but the execution is likely going to be more challenging for Asia than the eurozone, which took about 50 years to create the common currency.”

He says the imperative of a “1Asia” economy is likely to integrate the various Asian economies on the real sectors, such as manufacturing, production networks and trade linkages.

However, the Malaysian Institute of Economic Research executive director Prof Datuk Dr Mohamed Ariff Abdul Kareem has a different view. In an earlier interview with StarBizWeek, he said East Asia must not reject the idea as outlandish.

“The time has come for East Asia to rethink. And it takes a severe crisis like the current one for countries to think of the unthinkable... to think out of the box,” he explains, although he believes the idea is unlikely going to materialise in the near term.

“Admittedly, it will take many years of preparations before a common currency can surface. It can happen only if there is a strong political will in the first place,” Ariff adds.

He reasons that East Asia can learn from the European experience in the wake of the global financial crisis. Recent data show that the economies that had opted for the euro are better off than those EU countries that chose to stay out.

Evidently, the euro has been far more stable than other European currencies, which have exhibited considerable volatility and experienced sharp depreciation.

“Without a doubt, the euro is protecting all those under its umbrella to a considerable extent, although it cannot insulate them from the impact of the global crisis. All this speaks well for regional monetary integration,” Ariff says.

As it stands, Asia is already leading the global economic recovery, with most of the countries in the region either having avoided or are already emerging from recession.

Moody’s economists in their recent report reiterated their views that Asia’s emerging economies would remain the world’s most dynamic and fastest growing.

As the economies in the region continue to gain strength, while advanced economies remain sluggish, their collective share of the world GDP is expected to increase further. But in the meantime, the success of the Asian economies to weather the current economic storm still hinges on their governments’ fiscal and monetary policies.

In Malaysia, Bank Negara over the week kept the benchmark interest rate unchanged at 2% to support the fledgling domestic economic recovery.

The country’s GDP contracted 6.2% year-on-year (y-o-y) in the first quarter of the year and 3.9% y-o-y in the subsequent quarter.

Malaysia’s economy is expected to return to positive territory only in the fourth quarter of the year. Next year, the country’s GDP is expected to grow by a modest 2% to 3%.

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