State of the Region Report 2011

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Message from the Coordinator


By the time this report is released, the increasingly dark clouds over the world economy may have passed, to great relief, or they may have unleashed an unwanted torrent of economic disengagement that threatens to reverse the modest recovery from global recession barely two years ago. Our panel of Asia-Pacific opinion-leaders has expressed a degree of pessimism about the economic outlook not seen since 2008 and developments in the US and in the Euro zone even in the few short months since the survey was conducted have served to validate the gloomy outlook.

A recession, however, is not inevitable, and even if the major developed economies experience another period of contraction, there is hope that emerging markets can provided a modicum of ballast for the world economy, as they have in the 2008-2009 recession. To be sure, emerging markets have not “decoupled” from the industrialized world, and the extraordinary fiscal stimulus that these rising powers were able to implement in the past three years cannot be sustained indefinitely. Nevertheless, the “two-speed” recovery that has characterized global economic performance in recent years is likely to continue for the foreseeable future.

More than any other region, the Asia-Pacific epitomizes the two-speed world, with the United States and Japan on the one hand still struggling to emerge out of recession (albeit for different reasons), and China, most other Asian economies, and parts of South America on the other hand experiencing relatively robust economic growth. The presence of strong performers in the region (China in particular) has been a critical factor in sustaining the overall economic health of the Asia-Pacific.

Ideally, the contrasting growth experience of the two sides of the Pacific would be accompanied by structural changes that result in more balanced growth for the region as a whole, including adjustments in external and internal balances in the US and in China. While some of this rebalancing is taking place, it has been limited to date, and may even have run its course. As PECC has stressed in previous reports, the prospects for sustained growth will require deeper structural changes in surplus and deficit economies, accompanied by more inclusive and lower-carbon intensive development strategies.

This year’s report looks at the pattern of trade in major product categories and finds that much of the trade in these categories is conducted within sub-regions rather than broadly across the Asia-Pacific. This is especially true in the case of oil and gas, for which there is virtually no transpacific exchange. As a result, there is no single Asia-Pacific market for natural gas, which is reflected in the wide discrepancy in gas prices between East Asia and North America. A separate PECC paper commissioned for the State of the Region report discusses in more detail the prospects for emergence of a transpacific energy market.

I would like to thank the State of the Region report editorial committee for valuable feedback and advice, to Tilak K. Doshi and Nahim Bin Zahur from the Energy Studies Institute of the National University of Singapore for an excellent background paper on transpacific energy relations, and especially to Eduardo Pedrosa, PECC’s Secretary General, for his considerable assistance in the design and preparation of this report. Thanks also to Jessica Yom at the PECC Secretariat who provided editorial help and led the production and communications effort. The survey of opinion-leaders would not have been possible without the support of PECC member committees, and they once again ensured that we were able to access a high quality respondent pool across the region.


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Yuen Pau Woo

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Project Team 2011

Editorial Committee

Yuen Pau Woo CANCPEC/ President & CEO, Asia Pacific Foundation of Canada

Ian Buchanan AUSPECC/ Senior Advisor, Booz Allen Hamilton

David Hong CTPECC/ President, Taiwan Institute of Economic Research

Sangkyom Kim KOPEC/ Senior Research Fellow, KIEP

Charles E. Morrison PECC Co-Chair/ USAPC/ President, East-West Center

Yoshiji Nogami JANCPEC/ President, Japan Institute of International Affairs

Tan Khee Giap SINCPEC/ Associate Professor, National University of Singapore

Jusuf Wanandi PECC Co-Chair/ INCPEC/ Member, Board of Trustees, Centre for Strategic and International Studies, Indonesia

Manfred Wilhelmy CHILPEC/ Director, Chile Pacific Foundation

Wu Zhenglong CNCPEC / Vice-Chair, CNCPEC

Eduardo Pedrosa Secretary General, PECC International Secretariat