TCS Daily

Regaining Global Competitiveness, Asian Style

By Raphael Madarang - May 8, 2006 12:00 AM

Editor's note: What follows is the winning essay in the recent TCS Daily writing contest. For the contest we asked: "Are free trade agreements in Asia helping Asia to be globally competitive?"

My idea of a globally competitive Asia crystallizes into that of an affluent region taking a proactive role in setting economic, cultural and scientific trends focused on the overall welfare and development of humankind -- as it once did over the span of several centuries in millennia past.

A series of political upheavals in the course of modern history have partially dethroned Asia of this prestige through division and economic isolation, which has caused massive poverty to infest Asian society in both material and mental terms over a prolonged period of time. This division and isolation has caused a large part of Asia to shrink from the view of the rest of the world, debilitating it from its capacity to reach out, enshrouding its once heralded significance in obscurity, and constraining its ability to actualize its potential.

Slowly however, through the opportunities afforded by the establishment of Free Trade Agreements (FTAs) and the international momentum to focus on this strategy, a semblance of economic and cultural reintegration has begun to form. Thus, over and above the rationale for increased liberalization according to fundamental economic theory, the introduction of FTAs in Asia has provided the region with the impetus to move towards a more equal and proactive engagement of its regional and global partners -- particularly on matters of societal and technological innovation.

As the most culturally, politically and economically diverse region in the world, Asia's potential contributions to the world in these areas, and in a plenitude of other disciplines, are limitless. Historic proof of such great promise is evidenced in the great scientific advances which modern society owes to many Asian discoveries and innovations, among the greatest of which are in mathematics and medicine. Asia has the minds, resources, industries and traditions of ASEAN, the Middle East, Japan, China, Korea and India. Given the rich commingling of human ideas and potentials that have brought forth a repository of time-tested values and traditions, the question therefore of whether Asia can be globally competitive becomes less of a moot debate and more of a certainty.

Some positive indications have already surfaced, such as the recognition of Eastern/Oriental professional and medical practices, and the fusion of Eastern/Oriental ideas in the arts and technologies -- denoting a growing acceptance of Asia in the global market. As a consequential indication of competitiveness, the sustained growth of Asian economies and increased business confidence in the region may also be cited. Nevertheless, much remains to be done, judging from the most forward of observations one can make on the living conditions and strife that remains to characterize a good part of Asia.

What then is this elusive condition or catalyst that will serve to bring Asia out of the darkness and into the light of regaining its competitive status? This invites yet another question -- what then has kept Asia from developing and applying this catalyst?

To the first question regarding the much needed catalyst for heightened competitiveness, the clearest answer is that of an equitable distribution of income and resources throughout Asia. For all its rich traditions, historic significance and resource abundance, Asia remains in deep penury due to the skewed distribution of income and resources as indicated by the already wide and widening gap between the rich and the poor. For one, according to the Asian Development Bank, Asia's poor account for two-thirds of the total in the developing world with some 900 million people living in only a dollar-a-day in conditions which are considered the most polluted and environmentally degraded in the world.

For an answer the second question on what has caused a large part of Asia to remain stricken by such dire economic conditions, a more structural explanation may be provided. Much of the poverty in Asia has been caused by restrictive economic practices of state protection that favor small, exclusive and affluent sectors in society -- many of which may hold such positions based not on merit (or competitive economic performance) but on political attachments -- bereft of any consideration of market efficiencies. Such systems bask in mediocrity, lack transparency, hinder the entrance of new economic players, and is viciously sustained by the socio-economic inequality/division that it strives to perpetuate.

Thus far, apart from unilateral efforts and diplomatic relief, the most substantial and long-term economic and societal improvements in Asia were brought and are being brought about by FTA initiatives such as the AFTA and SAFTA. Albeit with limited success, these FTAs are gradually proving to be the antithesis of the opaque and inefficient economic structures -- through the encouragement of more foreign competition and promoting transparency through common standards (e.g. in tariff classification, customs valuation, rules of origin etc.). With a diversity (in cultural, political and economic terms) unparalleled among the other regions of the world, it is clear that the strategic key to Asia's overall economic rise is the establishment of common and guiding economic standards that will facilitate the flow of trade and ease the movement of capital to bolster productivity and growth amidst a plethora of values and beliefs.

Commerce is a language common to all Asians, and one that could transcend the convoluted tethers and machinations of economic dependency and oligarchic control towards a more aware, educated and independent Asian citizenry. An understanding of human progress (both intellectual and material), peace and global competitiveness can be productively discussed in the mutually recognized syntax of international trade. Making more people literate in this language has been the positive effect FTAs in Asia which, a decade into their existence, still continue to alter the economic, and political landscape of the region by tempering domestic industries to competitiveness, bolstering income and employment opportunities, and allowing consumers access to an infinitely wider range of quality products and services.

In time, as FTAs open more opportunities and markets in the region to more diverse economic players functioning within a framework of healthful competition, Asia's path towards regaining global competitiveness becomes even clearer.

The author is Assistant Manager, PricewaterhouseCoopers Worldtrade Management Services, Manila. The views expressed here are his own.


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