Taipei: The next decade could be a "Golden Age" for Asia. Dr Tony Tan said this is based on the strong fundamentals in Asia that sees it recovering well from the Great Financial Crisis of 2008/9.
Dr Tan, the Deputy Chairman and Executive Director of the Government of Singapore Investment Corporation put forward the view in a keynote speech on Monday at the 2010 Commonwealth Economic Forum held in Taipei.
He observed that recovery should be sustained over the year,with global growth possibly hitting 3-4% in 2010, up from a contraction of close to 2% last year.
The stronger than expected global recovery he noted, could further surprise on the upside, at least for the next few quarters and settle into its long-term trend in 2011.
Dr Tan also said in his keynote address that the post-crisis environment will be different in at least three aspects: greater reliance on policy makers, the dominance of emerging markets, and the relative under performance of the developed world.
This in turn he stressed, poses four challenges for Asia.
The first is for Asia's financial development to find the right balance between the private and public sectors.
Next, Asia will have to be able to respond in a flexible manner to a volatile environment and also develop a more balanced and sustainable growth model.
Finally he said, Asian financial institutions will have to gear themselves to take advantage of an unparalleled opportunity to develop and mature.
The challenges ahead for Asia are difficult, he admitted.
At the same time, he said he's optimistic that Asia can overcome the odds because Asia’s fundamentals are generally sound, with policy makers who are flexible and a population that is hardworking and educated.
Dr Tan said that if Asia sets about learning the right lessons from history, especially those of the recent Great Financial Crisis, the region will be able to re-tool and re-orientate itself to propel into the next stage of development and make the next decade a "Golden Age" for Asia.
Dr Tan also said that Asian countries must seize emerging opportunities, particularly, in the banking and financial sectors.
"The globalised Western banking system, hampered by capital constraints and re-regulation, will likely not be able to intermediate the massive capital demand needed to finance Asian growth," Dr Tan said.
"This leaves the playing field unusually open for Asian financial institutions and markets, particularly for the next few years," he added.
While the West takes longer to recover from the financial crisis, the role of developing countries in the global economy is likely to increase.
Dr Tan said: "We must expect there will be more opportunities and investments in these markets. So following the strength, GIC will be investing more money in emerging markets, particularly in Asia in this decade.
"China's economy, for example, will reach two-third of the US in 20 years. One must expect to have many opportunities there."
Helped by the strong rebound in the emerging markets, Dr Tan said that GIC's balance of portfolio has come back from double-digit losses in the previous year.
"Equity has come back to its normal level; stock market has done well. So GIC will do well," Dr Tan said.
Although the future looks rosy, Dr Tan warned that policy makers in emerging markets will have to well handle rising inflation and likely asset price bubbles. Those who fail to manage these challenges could snuff out the growing economies.
Source: Channel News Asia, 18 Jan 2010.
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