World

Euro zone crisis puts Asean
model into question

Asean, the European Union--regional blocks in general--are they an endangered species?

Pailin Chuchottaworn, CEO of PTT Plc, told the audience at the World Economic Forum in Davos that the crisis in the euro zone has suddenly thrown the Asean model into question.

"Asean 10, which is starting an Asean Economic Community, was modelled after the euro zone...which is facing a meltdown...Suddenly, we lost our way," he told a session on East Asia.

The PTT chief executive officer's question about Asean was later underscored by German Chancellor Angela Merkel in her opening address, in which she said that Europe was well in need of a new model. She reiterated that further integration and fiscal policy coordination were needed.

Nonetheless, Asia remains a bright spot and talking point at Davos 2012. Asia continues on a high-growth path alongside Brazil and Russia to help the world economy make up for the slump in the US and European economies.

Karim Raslan, CEO of KRA Group from Malaysia, said some smaller economies, such as the Philippines, are also doing surprisingly well.

Jason Li Yat-Sen from China's George Institute for Global Health reiterated that China's 8-per cent growth target for 2012 will be achieved and the country has a very good balance sheet to deal with any external shocks.

Chang Dae-Whan, chairman of Maekeyung Media Group from Korea, said the West could learn from Asia about shortening the implementation period of its policies. It is something the Europeans don't understand, he said.

In another session, Michael Spence, an economics and business professor from New York University, echoed this belief in the benefits of the policy pragmatism found in Asian economies.

Spence said the US now has a broad understanding of the structural changes it needs to make in the medium and long terms to get the economy back on track. But politics poses an obstacle.

Asked in the Asian session about the devastating floods at the end of last year, PTT's Pailin said the crisis is over and the economy is back on the growth path with retail, tourism and manufacturing picking up momentum, although investor confidence is still down.

His view was supported by Hiroyuki Ishige, CEO of the Japan External Trade Organisation, who said that both the Thai and Japanese economies--following their respective natural disaster--proved quite resilient through the strength of their management supply chains.

Pailin said that to Asean, as a group of satellite of economies, China and South Korea "will prove critical for our future".

Southeast Asia can leverage different networks including those in India, Raslan said.

Yat-Sen did not rule out a Chinese-Japanese economic axis if their historical differences can be overcome.

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