Asia looks set to gain strength from crisis
Looking east
October 12, 2009
 By William Pesek
The search for winners amid the global crisis often leads to unexpected places. China, of course, with 7.9 percent growth. Australia, too. Last week it became the first Group of 20 nation to raise interest rates since the turmoil began.
That's quite a feat, considering the US Federal Reserve and Bank of Japan seem to now be Islamic bankers with zero rates.
Bankruptcy attorneys are winners, as are vulture funds, debt collectors, therapists, bartenders and construction companies feeding off massive stimulus efforts. And don't forget Goldman Sachs, which is raking in billions even as US unemployment edges toward 10 percent.
Goldman Sachs turned adversity to its advantage. It posted record second-quarter earnings of $3.44 billion (R25.6bn), its share price has more than doubled this year and it set aside a record $11.4bn to pay employees in the first half of this year.
Let's think ahead for a moment. Might Asia benefit from the crisis? If that sounds naive, consider how the 1997 crash left Asia stronger. It could happen again.
"After the Asian crisis, the region said never again," says Rajat Nag, the managing director at the Asian Development Bank in Manila. "Asia changed for the better and quickly. This time, we could see the region respond in a similar way."
The best thing Asia could do is integrate rapidly. Here, Japanese Prime Minister Yukio Hatoyama's push for an Asian version of the EU is both timely and important. This crisis has increased the urgency for Asia to come together.
The biggest industrialised nations aren't likely to thrive soon enough to deliver rapid growth. Asia needs to fill the void internally. That's much easier said than done, considering China, Japan and South Korea are barely on speaking terms.
The lack of policy infrastructure is an obvious impediment. Groups such as the Association of Southeast Asian Nations, or Asean, talk a great game. The results are less impressive in a region that competes more with neighbours than it co-operates.
Asian togetherness is an incredibly daunting vision for a region as disparate as this. Asean's 10 members say it all. Within it are wealthy Singapore (per-capita income of $37 600) and Cambodia ($651), never mind Myanmar, which the World Bank doesn't even list on income tables.
Piecing this puzzle together with even bigger nations such as China, India, Japan and South Korea makes Europe's single currency look simple.
In Europe, it took more than three decades to create the euro. It unfolded amid relative trust after two world wars. Asia lacks anything like that camaraderie.
The events of the last year may clear the road. It also offers Asia an abundance of lessons, including not relying so aggressively on one or two export markets.
Among the other lessons: don't allow your financial sector to become so big it imperils the entire economy; too many currency reserves can be a liability; the effects of global warming can't be underestimated; democracy only works if leaders govern responsibly after the elections.
The lessons of 1997 are a key reason Asia is holding its ground better than the West. After 1997, governments cleaned up the financial industry and reduced dodgy business practices.
Five to 10 years from now, Asians could again be better off for today's troubles.
For that dynamic to strike twice, Asia has its work cut out. There has never been a greater need to come together, nor has there ever been a better time.
William Pesek is a Bloomberg columnist. The opinions expressed are his own.
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