Japan, China can lift Asia out of crisis

Asian nations can work together to get through the global financial crisis ahead of the United States, but Japan and China must take the lead, a leading UN economics adviser said Wednesday.

The huge dollar reserves of Asia’s two largest economies would be key to a faster recovery, said Jeffrey Sachs, a special adviser to UN Secretary-General Ban Ki-Moon.

He said the recession in the United States would be “significant and relatively prolonged,” while “Asia can continue to have robust growth even as the exports decline.”

He told a forum at the Asian Development Bank (ADB) in Manila that the region could recover much faster, but “it’s going to have to be an Asian-led effort within Asia.”

Sachs said the region still boasted $4 trillion in foreign exchange reserves, large current account surpluses and strong fiscal and banking systems that should help it emerge from the crisis.

Increased consumption and investment within Asia could make up for lower demand from Western countries while spurring economic activity, he added.

Because consumer demand had fallen in the West, “we’ll have to rely on public spending,” particularly on government services and infrastructure, all of which Asia needs “desperately,” he said.

Japan, which still had huge reserves, could “backstop” other Asian nations by expanding its monetary policy and making funds available to them, bolstering demand and expanding credit, Sachs said.

Specific suggestions

He suggested the ADB, supported by Japan’s resources, could make those funds available in such sectors as education, health, energy reforms and pollution control.

China, with its almost $2 trillion in reserves and massive current account surplus, should focus on sustaining its internal growth while buying more from the region, he advised.

“China’s main role should be to keep the Chinese economy growing and keep buying from the rest of the region,” said Sachs.

“It’s got to be the main demand center for the region,” he said, warning that there were troubling signs that China’s economic growth was slowing even before the global financial crisis broke out.

This made it an opportune time for that country to engage in massive public investment, he said.

Japan could be a major source of the technologies in infrastructure, energy reform and pollution control that China needs and “the two countries should be feeding off each other synergistically,” he said.

Japan’s fiscal policy

But Sachs said he was puzzled by Japan’s monetary policy, which was allowing the yen to appreciate while tightening controls.

“Japan should be making the yen absolutely available to South Korea and Asean countries,” he said. Asean is the Association of Southeast Asian Countries, a regional bloc of 10 countries that include the Philippines.

He stressed that this crisis was “imported from abroad rather than made in Asia.”

He added, “The region should not see this as a crisis. They should see it as an opportunity.” –AFP