PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | S.R. CHO

Additional Info: Policy Statements Speeches Photos Speakers & Noted Participants Featured Biographies Registration Media Information Conference Statement Regional Vitality in the 21st Century April 6-10, 2001 — Tokyo, Japan Mr. S.R. Cho Chairman Hyosung Corporation Asian economies that appeared to bounce back from the crisis of '97 have lost their momentum and there is now a fear that we might even be headed to another crisis. In our discussion on revitalizing Asian economies, I would like to begin with a quick look at the Asian political scene today. For our economies to surge ahead with vitality, we need a stable political environment that is built on the trust of people, with politicians who are public service minded. It is their duty to foster an environment that instills confidence and hope in the minds of people. But how is the political environment in Asia today? Just this year alone, the president of one of the republics was impeached and forced to resign under charges of corruption and misconduct. Another is under siege with the public demanding his resignation for alleged bribery. In Korea, investigations are under way into numerous cases of alleged bribery and corrupt practices by high-ranking officials and members of parliament. Why is our political environment in such a mess? I believe part of the reason lies at the very root of the Asian economic development early on. In those days, vital resources were in short supply, so governments set priorities and assumed the role of allocating such critical resources as capital. The pervasive role of governments in business fostered unsavory relationship, or "crony capitalism", promoted corruption and undermined transparency. Economic policies were often implemented based on political considerations. Such a tendency was particularly prominent with regimes lacking democratic legitimacy and popular mandate. With such inherent weaknesses undermining their economic foundations, these emerging economies succumbed to the forces of globalization and the power of speculative capital with devastating result in '97. The economic paradigm that allowed Asian countries to succeed in the past is clearly no longer viable in today's environment. The intricate nature of the global economy today is far too complex for any individual or bureaucracy to presage and direct the future course. Individual governments, bound by territorial borders, can no longer be the ultimate drivers of their respective economies. As these countries grew and their products became more sophisticated, they became increasingly engaged in competition on a global scale. The strength needed to prevail in this new environment can only be acquired through vigorous competition against the best of the world. The role of a government will now have to shift to that of providing an environment where the rules of the free market can operate unconstrained by non-market forces. Government will need to be a neutral enforcer of the rules rather than an active player. To that end, governments must discard the mistaken notion that development is best achieved through their direction. They must revisit their roles and boldly reduce their presence in the economic arena. The reforms and restructuring tasks now confronting the Asian countries should be accomplished through the natural process of the market. The goal of reform and restructuring is to nurture companies and industries to competitiveness, not to extend the life of ailing businesses or financial institutions. If the task is left up to the governmental decisions, we run the serious risk of succumbing to the temptation of political expediency. Market forces accomplish this task best by punishing non-performers and rewarding performers. The vibrant growth the U.S. has sustained for over a decade owes much to the innovations of American businesses. However, the underpinning for this robust growth was the steady drive for deregulation, allowing the market mechanisms to operate with ever-diminishing regulatory impediments. Simultaneously, the labor market became more flexible, allowing companies to restructure and adjust to swiftly changing market needs. The phenomenal success of the Internet is not attributable to any controlling governmental authority but the sheer absence of it. Asian countries need to regain the confidence of international investors. For that purpose, transparency at all levels will have to be enforced to global standard. Asian companies must go out of their way to make their operations clearly visible to the investors of the world. A truly market driven economy with unblemished transparency will attract investment, which will help to spark the depressed equity market, business investment, and ultimately consumer confidence. Beyond establishing true market economies, the Asian countries face yet another Herculean task. The Asian economies collectively amount to 30% of the world economy, about the same as NAFTA or the EU. The time has long past when they could count on the export surplus to the Western Hemisphere to provide the impetus for their growth. We must now cultivate our regional market through expanded intra-regional trade. Toward that end, we must work together to build a framework for the economic integration of Asia such as a Free Trade Agreement, just as North America and Europe have done. This is indeed a daunting challenge due to the wide-ranging divergence among the Asian countries in terms of economic development, culture, and religion as well as political system. Nevertheless, an FTA for Asia is a critical necessity if the Asian economy is to continue to prosper. An integrated Asian economy would improve the strength of each player through greater competition and provide an economy of scale to the successful competitor. An integrated Asia, with its unified face to the outside and continuing dialogues within, would provide greater stability and security throughout the region as negotiation and cooperation replaces confrontation. The Asian economies have enormous potential. The high savings-rates and rich human resources with industrious, well-educated people will serve as the basis for future growth. By nurturing the institution and systems of a well functioning free market, uncorrupted by political influence and with transparency worthy of investors' confidence, the Asian economies can once again surge ahead with vigor.