Manage risks on road to progress


ALL roads—without exception—toward national prosperity are strewn with pitfalls and dangers, which must be navigated jointly by the political and economic leaderships before progress is attained.

The vital role of risk management is especially pronounced in cases of underdeveloped and developing nations, like the 10 members of the Association of Southeast Asia (Asean), including the Philippines. Some of these risks are the accumulated impacts of factors–like the currency exchange rates, overheating of the leading economies (the US, China, the European Union, Russia, etc.), protectionism, and geopolitical conflicts using trade as guns and ammunitions.

Another phenomenon that needs to be studied is the growing international terrorism of the Islamic State of Iraq and Syria (IS) which has been growing since Russia lost its Afghanistan war with the Osama bin Laden fighters. In fact, IS terrorists have moved their killing rampage into Asean. Just read how the IS-supported Maute band has destroyed Marawi City since last May 23.

The equation of dangers (and how these must be managed) and progress comes to mind because of the economic surge of China, replacing Japan as the world’s second largest, next only to the US, and its financial/technological assistance offers to the Asean, Central Asia, and African for infrastructure networks with Beijing to boost global trade.

Undoubtedly, the railways that will link China with most of the undeveloped and underdeveloped–spelled poor and poorest—sovereign nations, sources of raw materials for industries. It will facilitate the faster and cheaper way of transporting goods and people. It will increase employment in China and these countries as well.

It will also boost China’s economy more and allow it to overtake the US as the world’s top leader because the Americans have not done this much to their natural resources-rich South American neighbors. The US since the expansion of its domestic railway network westward to the Pacific coastline states, prioritized Europe as the destination of its exports. It colonized the Philippines as a stepping stone to China, the most populous country on earth since the start of the past two centuries.

International credit raters have predicted that the current trend, because of China’s initiatives, will render the 620 million-population Asean as the fastest growing region for the next two decades at an average economic growth rate of almost seven percent. China will slow down below seven percent.

It is a no brainer that the US, the European Union and upcoming group of Brazil, Russia, India and South Africa (BRIS) will not be caught sitting on their hands. They have anticipated their futures—the immediate next five years, the next decade or their intermediate future, and finally the probable developments in the next 25 to 50 years. And they will act to keep in cadence with the leaders.

Last week, the international wire services reported how international banks’ analysts—who consider the current impending US Federal Reserve reduction of its $4.5 trillion balance as a threat to Asia’s developing countries—see the immediate consequences of the China-led infrastructure build-up worldwide:

Maybank’s senior economist Chua Hak Bin said China’s One Belt One Road (OBOR) program will be “stepping up infrastructure account deficit and increase external debts.” And “depending on the form of external financing, some emerging markets could become more sensitive to volatile foreign capital flows and currency mismatch risks.”

The Asian Development Bank estimated developing economies in the Asia-Pacific region “need to invest as much as $26 trillion through 2030 to build transport networks, boost power supplies and upgrade water and sanitation facilities…but overall debt levels remain low by global standards….”

Ms Alicia Garcia-Herrero of Hong Kong-based Natixis sees the immediate future lies in what happens to the US dollar. “If it remains weak, there may be no cause for concern.” Even if “the US dollar gets stronger, the developing economies—particularly India, Indonesia and the Philippines—have room to increase interest rates to keep foreign capital investments from outflowing”.

China has Asean in its investment and economic assistance crosshairs as principal target. Nothing wrong with that. After all, Asean is rich in natural resources from its collective land and marine areas. The region is the site of the Coral Triangle which is merely three percent of the world’s geographical area, but has more than 20 percent of the world’s biodiversity—and still counting.

From history, one knows the Spanish, the Dutch, French, British, Americans and Japanese colonized almost all of the 10 Asean countries for their resources—from the16th to the 19th centuries. This is the 21st century. The US and its allies, since World War 2 ended in 1945, have transformed colonization into a different and subtle form: trade and aid.

Russia and China have copied the Western version and are propagating it now while maintaining their dictatorial grip on their governments. In short, there is the continuous competition for economic leadership. All their arsenals for competition include modern production technologies, new scientific and medical inventions, communication and information technologies, education and knowledge advancement. Nothing wrong with all that because it is a win-win game.

But the countries or economies whose standings are below the world’s top 20 must always be on the lookout for their own national interest because in this age, there are two uses of trade and aid: political or ideological control on one hand, and unadulterated sincere assistance on the other. There is a very thin line between the two.

Chinese investments overseas are now into energy, transportation, infrastructure, construction and real estate. Singapore-based economist Weiwen Ng of the Australia-New Zealand Banking Group cautioned: “While the host countries stand to benefit from increased investments from China, it further increases the concentration of risks given that Asean is already heavily exposed to China via trade and tourism flows.”

A safe suggestion to Asean 10: Be friendly to all superpowers and near-superpowers. Do not stick to only one foreign assistance source. Because we can lose all our eggs in one accident if we put them all in one basket only. And always watch out for the pitfalls! United and economically integrated we are a region to count on.

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