Asia Update in Berlin
Economic potential
and political stability in Asia
On 11 October 2000, the Asia Pacific Committee of the German Economy held its third 'Asia Update' in Berlin, a one-day caucus (Tagung) on the theme 'Economic potentials and political stability in Asia'. The conference was attended by approximately 180 people from government departments, the business and academic worlds. The conference was co-organized by the European institutes for Asian studies, which form the Strategic Alliance: the Institut für Asienkunde (Hamburg), the International Institute for Asian Studies (Leiden), the Nordic Institute for Asian Studies (Kopenhagen) and the European Institute for Asian Studies (Brussels).
* By WILLEM G. WOLTERS
The Committee (Asien-Pazifik Ausschuss der Deutschen Wirtschaft) is an umbrella organization of German interest associations of business and industry, with member firms active in Asia. The Committee has been created in 1993, on the initiative of Chancellor Kohl, to arouse more interest in Asia and the Pacific in German business circles, and to create a body that could function as a discussion partner for the German government. The Committee advises the government on policies and strategies in Asia, and sends representatives to join government missions to Asian countries. The close co-operation of private business and government has been politically anathema in Germany since the early 1950s, but became politically acceptable in the early 1990s. In the Netherlands a similar scheme is lacking: Dutch business firms operating in Asia do not form an association, interacting in a transparent way with the government. And neither the government nor the private sector seems interested in academic specialists. On the other hand it should be pointed out that one rarely encounters world economists who are at the same time country specialists with command of the language in the Dutch academic. This combination in mainly found among social scientists and historians.
Asian crises
The main conference theme was the Asian crisis, with a number of economists giving presentations on Indonesia, India, China, the Korean peninsula, and Japan. The economic historian Dr Thomas Lindblad (Leiden University) presented a broad overview of the causes of the Asian crisis in retrospective. Lindblad pointed out that that the analysis and interpretation of the crisis has undergone a couple of changes in the years since it began in 1997. In retrospect the basic problem is the huge debt of the private sector, in the order of 65 billion dollars. Prior to 1997 Asian business people had too much confidence in their government's ability to keep the currency stable vis-à-vis the dollar. Surprisingly little hedging was done. When the Asian currencies started to devaluate against the dollar, the borrowers were losing money and they started a run out of the national currencies, causing the exchange rates of these currencies to drop sharply. In the discussion following his presentation, Lindblad made the interesting remark that if the Asian governments had not tried to fix the exchange rate between their currencies and the dollar, but had allowed some fluctuation instead, the borrowers would have hedged their capital against exchange risks, and would not have incurred such dramatic losses as they have now done, in 1997-1998.
Regional variation
Prof. Michael von Hauff (Kaiserslautern University) discussed economic developments in India. He argued that although the economic growth figures seem to be impressive, there are a number of serious weaknesses in the Indian economy, mainly of an institutional nature. There has been little productivity increase in the 1990s, poverty is on the increase, and there is a growing environmental crisis. Foreign direct investment in India is low (20 billion dollars) compared to China (300 billion). A positive note is that the decentralization policy seems to be successful.
Prof. Sebastian Heilmann (Trier University and Institute for Asian Affairs), an economist speaking the Chinese language, gave a very well informed presentation on recent developments in China. Although there are numerous worrying aspects about the Chinese economy, the speaker was optimistic about the future. It is true that the high growth figures are not to be trusted, that state enterprises are losing money, and that 100 150 million people are socially marginalized. But since the beginning of the Asian crisis the Chinese government seems to be determined to regulate the financial sector, to supervise the stockmarket (in Shanghai and Shenzen), and to create internationally competitive financial markets.
These measures will eventually lead to the abolition of the communist party. Remarkably, this is done by the government in co-operation with the communist party, under centralized control, and so we witness the paradoxical phenomenon that communism is being phased out with Leninist instruments. This is a new situation, which cannot be explained with the analytical concepts of the cold war. A whole range of government reforms is presently carried out, such as inflation control, government help in disaster areas, combatting smuggling, reorganizing government agencies. The quanxi economy is on the way down. This development is good for labour intensive export producing firms, but bad for state firms. Heilmann predicts that in ten to fifteen years the political system will undergo fundamental change. To prove his trust in China's economic future Heilmann announced that he had recently bought shares in the Chinese stockmarket.
Discussing the political and economic crisis in Japan, Prof. Werner Pascha came up with an interesting hypothesis. Although the 1990s in Japan is generally seen as a lost decade, it can very well be a period of modernization like the 1920s and the 1970s. Control of the financial system is sharpening. In 1997 the Central Bank was made independent, and this institution is now interfering strongly in financial affairs, even going against the government. Japan is now trying to implement the WTO liberalization measures. A problem is still the huge private sector debt, which the government can not eliminate by resorting to inflation. The speaker still remained optimistic: he observes in Japan 'productive efforts at consolidation.'
The main problem in the countries affected by the Asian crisis, are the political and economic institutions, according to Dr Rüdiger Machetzki (Institut für Asienkunde, Hamburg). Dr Patrick Köllner (Institut für Asienkunde, Hamburg). discussed recent developments on the Korean peninsula, with special focus on the opening up of North Korea. German government and business are eager to participate in these new developments and have made strong representations in Pyongyang.
The Conference ended with an interesting discussion. Dr Willem van der Geest (EIAS, Brussels) brought in a more cautious and even pessimistic note when he warned that in the next few years economic growth in some Asian countries may slow down again as the region is faced with more difficult external conditions, such as economic slowdown in the United States, less growth in the European Union and continued stagnation in Japan. He also pointed to political unrest in Indonesia as a negative factor. In a rejoinder Lindblad emphasized positive economic developments, particularly the fact that investments in Indonesia have not decreased significantly. Political separatism only exists in two regions, Aceh and Irian Jaya. It was to be regretted that the two aspects, economic prospects versus political instability, could not be discussed in sufficient depth. The organizers of the conference, Asia Pacific Committee chairman Edgar Nordmann and the director of the Hamburg institute, Dr Werner Draguhn, can be congratulated with an interesting conference, worth repeating elsewhere in the European arena. *
Professor Willem G. Wolters is professor of Economic Anthropology at Nijmegen University.
E-mail: W.Wolters@maw.kun.nl