The Jakarta Post
The storm that has rocked emerging markets in recent days is symptomatic of a global economy in the midst of change.
Since the onset of the global economic crisis, many, including the members of the Pacific Economic Cooperation Council (PECC), have urged policymakers to focus efforts on structural reforms that will make regional economies more resilient, flexible and ultimately more productive.
However, easy money gave many a superficial sense of security and reforms were postponed. The false dawn of the end of quantitative easing last year should have been a wake-up call. For some it was; others have not yet taken the steps needed. Is it now too late?
Financial markets are fickle. Motivations for fund reallocations are the subject of speculation by observers; we can make educated guesses but their decisions are not always based on fundamentals.
The risk is one of a herd mentality setting in. In such times of uncertainty, urgent remedial measures need to be supplemented by a set of clear and unambiguous policies that can break the herd out of its frenzy.
These policies should focus on unleashing hordes of cash sitting on the sidelines looking for an opportunity.
Policy announcements should direct investments towards new economic engines if the region is to sustain its impressive trajectory. In many cases this means infrastructure. Congestion has become a drag on growth in some areas, while others are unable to effectively participate in the region's value chains.
While there is money available for infrastructure development, the risk premiums remain high and the danger is that funds will be parked in low yield and low risk havens instead of more productive but risky investments.
This is where policy reforms are critical ' regulatory, legal and so on; they will make investment in infrastructure less risky, more predictable and more productive.
At their meeting in Bali last year, leaders of the Asia-Pacific Economic Cooperation (APEC) forum agreed to a Connectivity Framework that could help to guide a process that addresses the infrastructure deficit.
The challenge for China, as the chair of APEC this year, is to make this real. China has a head start on this with its announcement of a regional infrastructure investment bank.
But the idea needs to be fleshed out and ensure that it addresses gaps in the current financing arrangement ' and there are many.
Regional financial cooperation has been high on the agenda since 1997-1998 but it remains embryonic; much more needs to be done to ensure that regional safety nets can be counted upon in the case of emergencies, and that they complement and not supplement global ones.
The integration of financial markets promises the ability of those with insufficient financial systems to access capital at cheaper costs.
The Asia-Pacific, through a variety of regional cooperation processes including the ASEAN and APEC, has already formulated plans and frameworks that address these issues.
These include the ASEAN Economic Community, as well as the ongoing trade negotiations such as the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP). The potential additional gains from realizing a Free Trade Area of the Asia-Pacific (FTAAP) can be as much as US$1.9 trillion per year by 2025 according to works done in 2012 by Peter Petri et al.
However, these are just potential benefits. Infrastructure investment is needed to ensure that people have the wherewithal to participate in the global economy.
Investments in connectivity would not only help to solve the increasing income inequality but would also sustain aggregate demand.
Against this backdrop, the PECC will be organizing its annual Singapore conference over two days on Feb. 10-11 to gather experts from around the region to think about these challenges and appropriate responses to them.
While immediate attention is focused on current chaos in markets, there are deep changes taking place in the global economy. The world's three biggest economies are all in the Asia-Pacific ' the US, China and Japan ' and the dynamics among them are changing.
The US is becoming a more competitive exporter due its high productivity and low energy costs due to its shale boom, China is increasing domestic consumption and Japan has made an all-out effort to exit its long period of anaemic growth.
If the three get it right this year, the world can look forward to a significant recovery.
The pattern of growth will be different and others need to adjust to this. Infrastructure development and improved connectivity are critical.
Underlying this are structural reforms for greater resilience and flexibility in our economies.
Without them we risk being caught off guard and unable to respond to the new opportunities that these changes promise.
Jusuf Wanandi is cochair of the Pacific Economic Cooperation Council (PECC) and vice-chair of the board of trustees of the Centre for Strategic and International Studies (CSIS Jakarta). Ambassador Don Campbell is cochair of PECC and chair of the Canadian committee for PECC. Dr. Tan Khee Giap is chair of the Singapore committee for PECC and co-director of the Asian Competitiveness Institute at the Lee Kuan Yew School of Public Policy, the National University of Singapore.