Every year, the Pacific Economic Cooperation Council (PECC) publishes its “State of the Region” report, one of the few such omnibus perspectives I actually look forward to seeing in my clogged e-mail inbox. This year’s report (the ninth produced by PECC), which arrived this week, is no exception.
The reason why I find the PECC’s perspective valuable is that the organization, unlike many others, balances optimism with realism; not being tied to any particular government or other economic ulterior motives (the group is based in Singapore, but draws members from all across the Pacific region, including the Philippines) allows PECC to be frank, and that, in turn, produces insights that are for the most part very practical.
This year’s State of the Region report, while generally upbeat about the prospects for the region, contains a couple of stern warnings. The report points out that growth across the region is slowing; the forecast for the next two years is for expansion at a pace of about 3.8 percent, easing to about 3.5 percent by 2018. The challenge, PECC says, is to see if the region “can do better” than the projected “steady but unremarkable” growth path, and the implication is that if it does not do better, it will miss some big opportunities the present economic state of the world has created.
The biggest opportunity is the slowdown in consumption in advanced economies, which PECC sees as being “a new normal;” consumption may recover a bit, but is unlikely to return to pre-Financial Crisis levels.
The Asia-Pacific region, with a growing consumer market and steadily (if unremarkably) increasing middle-class incomes, is ideally positioned to take up the slack in consumption; as much of the supply for the consumer demands of advanced economies comes from the Asia-Pacific region anyway, “taking up the slack” would really be a matter of boosting domestic markets. And that, of course, would only help the region become even more resilient and able to brush off global economic shocks.
That’s the good news. The bad news is the region’s policymakers and political leaders are so far – although the PECC puts it in courteously diplomatic terms – completely missing the point. The report identifies three key risks to regional growth. The first, naturally, is the risk of a significant economic slowdown in China; how likely that is to happen is probably debatable, but because China is such a large part of the regional and global economy, even a small change in its performance can have a big impact.
The second key risk to growth is the lack of political leadership. The report assesses it in dour terms: “It stands as a stark observation if not a rebuke to politicians at a time when leadership is badly needed.” The third risk, which is related, is the possible failure to implement structural reforms, which “also suggests considerable anxiety about the political ability of leaders to address an important domestic and regional agenda.”
What makes these risk observations valid is that they are not coming from the PECC itself, but from a large survey of “opinion leaders from the policy community” across the region, and so in other words are a matter of informed public perception. Apparently, things like President B.S. Aquino 3rd’s dog-and-pony show in the Philippines, the now-waning prospects that Myanmar’s military-dominated government is sincere in wanting to join the 21st century, and the populist idealism of Indonesia’s Joko Widodo are not making much of an impression, and the report gives as an example the persistent lag in infrastructure development (an absolute necessity for tapping the region’s consumer market power) as a tangible reason why not.
Those who are already lining themselves up to attempt to succeed President Aquino when he reaches the long-awaited end of his term would do well to take note: While judgments based on how many cakes one gives away to old people, how many times one is photographed carrying sacks of things, how clever one is at uttering boorish one-liners any time a microphone appears, or which dead actor is (or maybe isn’t) one’s parent might be good enough for the unwashed masses, those who actually move the world are not going to accept it, and have more than a few alternative places to take their business. This country should not be following the cynical lead of its political class, and already looking forward to being unremarkable; that path will lead exactly where it deserves to go – to the margins, from where the Philippines can continue to watch the rapidly-receding heels of a vibrant, healthy region.