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Transcript of remarks by the Chief Executive, Mr Tung Chee Hwa, at the World Economic Forum Plenary Session 'What Conditions for a Renewed Asian Miracle' in Davos today (Saturday).
Mr Tung: Perhaps if you don't mind, I would like to highlight to everybody really how important Asia is to the rest of the world. In the past 20 to 30 years Asia has come a long way through hard work, thrift, a firm commitment to education, political stability and fiscal prudence. Most of the countries or communities, and in fact if you look at what has happened, really literally over the last 30 years, millions, hundreds of millions of people in Asia have been lifted out of poverty. And growth over the last 20 years has been at about 7.5 per cent, compared with barely about 2 per cent in both Europe and the United States. Millions were lifted out of poverty and entered into the life of the middle class. And not only places like Japan or Singapore or Hong Kong have become some of the wealthiest in terms of GDP per capita, but economies like Taiwan and Korea have also lifted themselves from post-war poverty.
The Asian economies have grown more than anything else by embracing international trade. Export growth for the region has grown between 10 to 15 per cent every year over the past two decades. And before you throw up your arms I want you to know that imports to Asia have also been growing between about 10 to 15 per cent. So the growth has been really quite respectable in either direction. And in fact this has brought Asia to the heart of the global economy. And before the turmoil started in the middle of 1997 Asia actually accounted for 26 per cent of world exports, and 24 per cent of all imports. You know these figures made Asia a significantly bigger importer than the United States, which accounted for just 14 per cent.
This process of growth has built substantial economies even by Western standards. After decades of faltering growth, Japan's economy is still twice as large as Germany's and China's economy at $900 billion is now ranked, I think, number six in the world. The prudence of governments of the region has enabled the governments to build up very large reserves by any standards. Six Asia economies account for 37 per cent of non-gold reserves held by governments around the world. So these are figures we should really think through very carefully.
You might be thinking that I am indulging in what Mr Greenspan calls irrational exuberance. I am not. I am well aware of the damage and the pain that has been inflicted on Asia over the last 18 months; of the personal wealth that has been destroyed; of the very long and painful process of recovery and the very painful process to many people who will be losing their jobs or who have already lost their jobs. The process will be long and painful. But I wanted to mention these figures just to highlight the importance of Asia. Because if Asia goes completely out, if the lights are switched out in Asia, the impact on the global economy would be really unthinkable. So what we really need to be doing is to think through, as the Senior Minister (Lee Kuan Yew, Senior Minister of Singapore) has so eloquently stated, what went wrong, how we can fix it and we really do need to fix it. Not having to wait for a long, long time to fix it because it is not only good for Asia it is also good for the rest of the world.
In so far as Hong Kong is concerned, really, we see no particular magic than really going back all the time to the basics. In Hong Kong we had problems of our own. Our property prices were really out of this world. There was a bubble economy there which had to burst and the Asian financial turmoil accelerated that process of correction. But there is no particular magical policy. We need to constantly go back to the basics. How we rebuild the confidence of our community; continued prudent fiscal management; a sound and robust banking system; a government which is accountable to the people who understands what the people worry about; sound macro-economic policies; rule of law.
I couldn't agree with the Senior Minister more, the importance of education, the importance of grooming human resources for a knowledge-based society. So these are many of the fundamentals we are tackling in Hong Kong. I know they are tackling them in all the other countries in Asia. I have every confidence that countries in Asia, with different speed, will come to grips with all these problems.
What we also need to do is to make sure the international community gets on with building a new international financial architecture, which is really important for the global financial system that really works for the benefit of all the countries around the world. And this is really important.
The last point I want to make would be this. The United States of America went through some rough times in the late '80s and early '90s. There was talk whether the Americans would ever be competitive again. There was talk of whether Americans would ever be creative again. It seemed to be a country which had lost its way. Look how America has come back. We have seen Europe with much difficulty. We are all very impressed how Europe has been able to work very hard to force the convergence so that the Euro can be successfully launched on January 1st.
I have no doubt that all of us in Asia will go through the painful process. It may take some time but we will come out of it too. Of that I have no doubt.
Transcript of remarks by the Chief Executive, Mr Tung Chee Hwa, at the World Economic Forum Plenary Session 'What Conditions for a Renewed Asian Miracle' in Davos today (Saturday).
Moderator: Question from the floor on the contrast between Asian values and US values in the age of globalisation.
Chief Executive: Could I also share a little insight on this (inaudible). We do in Asia have very deeply held beliefs, traditions and values. But there are some values which I believe that whether you are American, you are German, you are European, you are Japanese what have you, we all share. We all value education, the importance of education, respect our elderly people, try to work hard. These are really the fundamentals and bedrocks for a sound and progressive society. Very often, given different culture, different history, and different upbringing of children, or maybe societies at a different stage of development priorities are very, very different. A rich family, their demands for the children will be very different for the family who are struggling along to make a living. A country which is fighting for survival, the needs or responses of the citizens will be very different from a country which is doing very well, enjoying the best of prosperity. So I think what is important is not for the West to say to many, many of the other nations that 'hey, I've done it my way. It worked, You must do it the same way'. Because we are built differently, we are all at different stages of development and we need to be sensitive about what other people feel, about what other people's needs are and as I said it's different culture, it's different stages of development. We understand very well sometimes when America wants all of us to have what they have but we are all at different stages of development. And I think it is important that we all be very sensitive about the other side, how we are looking at these things.
Moderator: Question from the floor on whether the panel members see any trade tensions developing, in view of the deterioration of the global outlook.
Chief Executive: Well the United States and the rest of the world are at different economic cycles, so the US is sucking in a lot of imports and understandably so. Asia at the same time Asia won't have the strength to buy a lot of goods from the United States so a $300 billion trade deficit for 1999 is entirely possible. And it is very worrying. But I would hope that given the strength of the US economy, the fact that unemployment is still at a record low, it will not become an issue as such. My big worry Roger [PepsiCo Inc chairman and panel member Roger Enrico] is that if we do have a $300 billion trade deficit, and a savings rate which is now almost negative, the impact in the longer term on the strength of the US Dollar is something to worry about. Certainly America feels the need for further opening of markets and this is really a complicated questions. I think as far as Hong Kong is concerned we are open to anybody, any time, all the goods, we drink both Coca Cola and Pepsi Cola.
Moderator: But you would be very vulnerable to trade friction between the US and China, for instance?
Chief Executive: We would be very vulnerable to trade frictions between the US and China. It is a major concern to us. We obviously in Hong Kong watch very closely what happens every year, the renewal of the Most-Favoured Nation status, which I hope would be renewed as before. But it is an issue of major concern for us.
Moderator: Question from the floor as to why Asia's high savings rate and large reserves have not been used more effectively within Asia to help those countries in financial difficulties.
Chief Executive: The fact is that many of us did participate in the IMF packages and I think it is right to go through the IMF. To answer you, is that yes the funds are being used to help the countries but it is being done through IMF. I would like to raise one other issue though and this is, one of the problems in Asia is that of all the funds at their command, much of it actually goes back to the United States in US Treasuries and so on and so forth. And some of it, somehow, finds its way back to Asia again, some in short-term capital, some through hedge funds and so on and so forth. What Asia really needs is to develop a mature bond market of our own, a debt market of our own. There is a debt market in Japan, that's different, but other than that there is not an active, credible debt market. This is one area in which we in Asia really must work very hard. Because what we need is an efficient financial intermediary other than Japan in debt market development in Asia for Asian money, long-term money. This is really going to be very important in the next decade.
End/Saturday, January 30, 1999
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