Apec checks out local traps for wounded tigers

By Yoke Har Lee

Did the Asian tigers create their phenomenal pre-crash performance on too narrow an economic base?

The question is testing the minds of Apec's economic committee.

The Asian economies might have had a different fate had their economies undergone liberalisation in the domestic-demand sectors on top of the export-led ones, Dr Mitsuru Taniuchi, current chairman of Apec's economic committee said.

Research into the issue would help Apec countries form long-term policies to avoid making the same mistake again, he said.

He spoke to the Business Herald while attending Apec's senior officials' meeting, held in Wellington from February 1-10.

The officials' meeting covered work done by the Committee on Trade and Investment and the economic committee and other sub groups ranging from market access, rules of origin, custom procedures, to the investment expert group.

Dr Taniuchi, from Japan's Economic Planning Agency, said: "When their [Asian] economies were moving along, deregulation of the export sectors worked. They were able to expand exports. But those export sectors are relatively narrow, limited particularly to the electronics and auto parts sectors. When the economies plunged into difficulties at the same time, that strategy worked adversely to this process.

"They were competing on the same grounds in rather limited areas. If those economies had deregulated not only the export sectors but the domestic-oriented ones, the situation might have been different. This is my hypothesis. Looking at those factors, we might be able to draw some lessons for policy planning for the future."

Another area of research to be pursued by the economic committee was to unravel why the drastic depreciation in exchange rate had failed to boost Asian economies' exports.

"Trade has been disrupted. The exports have not been responsive although, in the past year, exchange rates in the crisis economies have been substantially depreciated. We are now seeing substantial improvement in current account deficit but mainly through sharp decline of imports, not the increase in exports.

"We will look into why the exports have been unresponsive. Then we could ask ourselves what factors have contributed to this phenomenon - perhaps it was the disruption of export finances," he said.

The economic committee would also be preparing a formal economic outlook to be presented at the Apec's ministerial meeting in September. The economic outlook preparation was being done by Chile.

In its research programme, the committee would consider the role of SMEs (small and medium-sized enterprises) in last year's financial crisis, drawing on the Taiwanese experience.

"Some SMEs were hard hit. The Taiwanese, particularly, have been affected by the crisis but relatively speaking they are doing fine. One of the reasons is their robust and wide-ranging SME sector.

"Looking at the Taiwanese experience could have important lessons for us in planning for the future in economic management, in terms of liberalisation or deregulation or target-financing for smaller enterprises and so on."