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Challenges stand in way of Asia growth story: top execs
SO MUCH has been said about Asia's economic growth story that we forget just how precarious it actually is, say top executives in the region.
Many challenges - including a fragile middle class, tendencies towards protectionism, and the severe lack of infrastructure - still stand in the way of the Asian century becoming a reality.
At the inaugural Asia Pacific CEO Congress that kicked off on Tuesday, executives from leading multinational corporations painted a realistic if not sobering picture for the region.
"Despite all the optimism in Asia, we are really at a crossroads," said Unilever president for Asean and Australasia Peter ter Kulve, speaking at the "Unfolding of the Asian century" panel session.
"Over the last two years, consumers have been falling out of the middle class in large parts of Asia, creating economic and social tension," he observed, citing the slowdown in China's economy and the recent collapse in commodities prices as possible reasons.
The fallout could be cyclical, but it probably isn't only cyclical, he said. "This makes it important from the policy point of view, as well as the business point of view to embark on structural improvements to the system, because you get stuck otherwise."
Mr ter Kulve also highlighted the inclination towards protectionism as a potential roadblock in Asia's growth path.
While the Asean Economic Community (AEC) trading bloc has brought on progress, instincts are still very protectionistic in many countries, he said. These countries don't have the skills to build up the capacity to compete in the global market as a result, he added.
In a nod to the diversity of economies in the region, chairman and founder, Brad Peters, of cloud-based business intelligence firm Birst urged for greater economic integration. "There are really positive complementaries if you think about what an Asian division of labour would look like, because there are manufacturing economies still, agricultural economies, and knowledge economies."
The more integration you strive towards, the more positive the division of labour across different economies in the region, he said.
Managing partner of geo-strategic firm Hybrid Reality, Parag Khanna, commented that even more can be done in the area of infrastructure, especially for Asia's second tier cities.
Citing the example of Jakarta, he noted the "wobbliness" of the growth model in a number of Asia's emerging markets, where countries of more than 150 million people depend on one or two cities for 30 to 50 per cent of national gross domestic product (GDP).
"Too much of the economic growth story in emerging markets in Asia depends on the economic fortunes of one or two cities . . . and that's extraordinarily lopsided and dangerous," he said.