Editorial»
In search of a new voice for Asia
OCT 29 - Among the more tantalizing is sues debated at the meeting of Asia-Pacific leaders last week was this: Asia needs a spokesman - preferably one that foreign investors could love.
In the West, central bankers like those at the Federal Reserve, the European Central Bank, or Bank of England, have played that role. When things go awry, powerful personalities, such as Alan Greenspan or Wim Duisenberg, are there to soothe markets with words and policy steps.
But Asia has no one like that, leaving a leadership vacuum that often makes investors wary. The lack of a dominant economic voice is a major vulnerability for the region. During the 1997-98 Asian financial crisis, for example, the Fed had to help save Asia with aggressive rate cuts. A calm response from the ECB also kept markets from plunging further. In the age of globalization and rapid capital flows, having credible economic officials on hand is as much about public relations as finance. When the Fed trimmed short-term rates in the late 1990s, it was less about how much money it was pumping into economies and more about saying, “We’re on top of things.” Investors calmed down, as did global markets.
In a more perfect world, the Bank of Japan would be that voice in Asia. When stock markets are plunging and bond spreads are widening, the monetary authority of Asia’s biggest economy would step up, calm nerves and make things safe again for capitalism.
Earlier this year, members of the Liberal Democratic Party in Japan urged the central bank governor, Toshihiko Fukui, to be the “Greenspan of Japan, if not Asia.” Sadly, the Bank of Japan has neither the ammunition nor the credibility. Overnight interest rates are near zero, leaving no room for dramatic flag-waving policy moves. Worse, Japan’s central bank is considered one of the world’s most dysfunctional. China’s central bank is hardly independent and South Korea’s lacks the brawn needed to lead in the region. India’s central bank is bringing increased respect to Asia’s third-biggest economy, but it is far too removed from the pulse of East Asia. The same can be said for Australia’s central bank, run by the highly capable Ian Macfarlane.
Here in Asia, the spokesman role is likely to fall to a national leader. That is probably for the best, considering Asia’s challenge is to find its own way and rely less on exporting to the United States and other market economies. Mahathir, Asia’s longest serving leader, became the region’s de facto voice because few, if any, of Asia’s central banks have strong clout internationally.
The trouble is, that voice all too often roiled markets rather than calmed them. In addition to blaming Jews for his country’s problems in the late 1990’s and calling foreign investors like George Soros “morons,” Mahathir also imposed capital controls. Investors were reminded of all this recently when Mahathir asked Islamic countries to unite so they would not be “defeated by a few million Jews.”
With Mahathir stepping down, delegates attending the Asia-Pacific Economic Cooperation forum wondered who might be Asia’s next public face. Singapore’s prime minister, Goh Chok Tong, tossed his vote at his Thai counterpart, Thaksin Shinawatra.
Yet there is a sense that Thaksin may get the leadership mantle by default, not because of charisma or vision. Japan can’t speak for Asia’s economies because of resentment over its actions in World War II and before. Communist China seems ill-suited, too. South Korea’s economy, Asia’s fourth-largest, is in recession. Malaysia faces a leadership change, and the Philippines and Indonesia may choose new leaders next year as might Singapore within two years. Asia needs a new voice that investors will respect and trust - one that can provide direction in the best of times and a sense of calm in the worst. It is not clear who that will be, but the region should designate someone and do so carefully. Posted on: 2003-10-28 09:32
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