State of the Region

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Message from
the Co-Chairs of PECC


 

We are pleased to present the Pacific Economic Cooperation Council’s fifth State of the Region report. The release of this report just prior to the G20 and APEC Leaders’ meetings could not be more timely. In the context of heightened uncertainty about the health of the world economy and strained international economic relations, our report provides an analysis of the macroeconomic challenges facing the region, and the results of a survey of over 400 opinion leaders from twenty-two Asia-Pacific economies. In addition, as APEC takes stock of its Bogor 2010 target for free and open trade and investment, we provide a measure of progress towards this goal in the form of our updated index of Asia-Pacific economic integration.

Although growth in the region has resumed since the recession of 2008-09, much of the recovery is a result of the unprecedented stimulus measures taken by major economies. There remains a great deal of uncertainty as to whether those stimulus measures should be extended, or withdrawn. What is certain is that expansionary fiscal and monetary policies will need to be withdrawn at some point and that measures will be needed to restore business confidence and private demand. In this report, we outline the structural reforms that are needed in the region to transition to what APEC leaders in Singapore last year described as more “balanced, inclusive, sustainable, and innovative” growth.

In November 2010, the Asia-Pacific region which has been the growth engine of the world economy in recent years will have an opportunity to demonstrate its leadership through the G20 summit in Seoul and the APEC leaders’ meeting in Tokyo. APEC can provide essential support for global consensus by once again affirming the need for structural reforms, helping economies shape their own domestic plans of action for reform and bringing a wider group of key like-minded economies into a globally concerted effort.

One of the biggest challenges will be to “rebalance” demand among surplus and deficit countries, the largest of which are in the Asia-Pacific region. Opinion leaders in our survey strongly endorse the need for greater emphasis on domestic demand-led growth in East Asian economies, as well as for a reduction in US deficits and the strengthening of financial regulations globally. Likewise, there was broad agreement that the implementation of structural reforms was the most important action to rebalance growth in the region and that the biggest challenge to structural reforms is entrenched interests who oppose change. This points towards a need for greater efforts to build awareness on the importance of structural reforms and for adjustment policies to help those who will be adversely affected by economic reforms.

There are many people who made this report possible, in particular the coordinator of the project, Yuen Pau Woo, and our other colleagues in the editorial committee Ian Buchanan, Manfred Wilhelmy, Wu Zhenglong, David Hong, Yoshiji Nogami, Soogil Young, and Tan Khee Giap. We also owe a special debt of gratitude to Dr. Wendy Dobson who contributed the opening chapter of this report. We also thank our member committees without whose support this report would not be possible and for their efforts in taking the time to identify and solicit responses from opinion leaders to our annual survey.

 

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Charles E. Morrison
Co-Chair

Jusuf Wanandi
Co-Chair

 

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