Sunday, January 22, 2012

6 Insights About Global Investment Opportunities and Sources of Sustainable Growth: Asian Financial Forum 2012, Part 1


Let me start by wishing everyone a very prosperous Year of the Dragon. With Chinese New Year just around the corner, perhaps now is the best time to talk about what experts say about the prospects of the Asian region in the months ahead, as was discussed in the recently concluded Asian Financial Forum in Hong Kong. Before we continue, I would like to thank the Philippine Consulate to Hong Kong, particularly my good friend, Consul Val Roque, for giving me an opportunity to participate in the forum.

The theme of this year's Asian Financial Forum is: "Asia, Driving Sustainable Growth." It was held on January 16 and 17 at the Hong Kong Convention and Exhibition Center. The first day and the morning session of the second day focused on two related topics: global investment opportunities and sustainable growth. Panel speakers included important policymakers, top managers, and successful entrepreneurs from Asia and around the world. In this post I will share insights that I have gathered from these discussions that would help us better understand the economic prospects of the Asian region in the year ahead.

1. China is still seen as the most important investment destination in the world, with Southeast Asia coming in at second

This despite the slower growth of the Chinese economy in 2011. According to panel speakers, the predictability of policy and the ease by which a government can make things happen are two important indicators that investors use in evaluating global business opportunities, attributes that are made possible in China by its highly centralized system of government

Forum participants also view the developing countries of Southeast Asia as important sources of growth. Some of the panelists affirm this view by pointing out the still-vast infrastructure needs in many parts of the region. The emergence of Burma as the possible "next frontier" of Southeast Asian investment in the light of the recent opening up of its economy was also brought up in the discussions.

2. The emergence of the RMB as an important global currency

Last year we've seen the introduction of various RMB-denominated financial products like "dimsum" bonds (i.e., RMB-denominated bonds) and RMB REITs. This year, we should expect more such products to be introduced in the market. Also, the increase in importance of the currency is highlighted by how some governments have started to convert a greater portion of their currency reserves from euros and US dollars to RMB.

3. Greater interconnection among Asian economies is needed to make Asian economies more resilient to threats from the West

This point has been emphasized by several speakers, including Hong Kong's Chief Executive Donald Tsang. One way for Asia to minimize the impact of crises and shocks that emanate from the European and US economies is to limit its dependence on Western markets and improve economic relationships and cooperation in the region. Hong Kong is seen to play a vital role in making this happen since it is seen by the world-at-large as the de facto gateway to the Chinese goods, services, and financial markets.

4. Asian savings should not be used to pay for extravagant lifestyles in the West

This is another point that has been reiterated by several panelists as a way to protect Asian interests from financial crises. Instead of buying low-interest US debt, for example, experts suggest that China use its savings to invest in Asian infrastructure and real assets instead. Of course, for this to work, Asian governments also need to promote domestic demand but without encouraging unsustainable consumption levels such as those seen in many parts of Europe and the US.

5. The biggest opportunities for sustainable growth are in "green" technologies

Panelists acknowledged the very real and pressing problems brought about by climate change, and how sustainable growth can only be possible with the reduction of the environmental impact of doing business. As developing economies, a big part of Asia contributes more to the problem than developed economies in the West, so Asian governments and businesses need to do their part by enacting environment-friendly policies and by investing in research and development for renewable energy sources.

6. Increased urbanization is emerging as a serious threat to sustainable growth

One panelist pointed out the emergence of several "mega-slum" cities around the world, and how more and more of the world's population are projected to live in slum conditions in the foreseeable future. To address this problem, experts suggest increased investments in transportation and the development of rural regions to control urban migration and better manage increasing urban populations.

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