Page last updated at 01:52 Asia/Manila, Wednesday, 17 February 2010 PH
It is a foregone conclusion that Asia will lead the much-awaited global economic recovery in 2010. Among the emerging markets referred to as BRIC and the Next-11, eight of the fifteen economies are in Asia: China, India, Pakistan, Bangladesh, Indonesia, the Philippines, South Korea and Vietnam. With China leading them at a forecasted GDP growth rate of 9.5 percent in 2010, Asian economies will average about 7 percent growth for 2010 in contrast with less than 2.0 percent for the developed economies. Except for Japan, the driving force for the stronger recovery in Asian economies is domestic consumption. The much-awaited rebalancing of the global economy is happening: Asians, formerly the highest savers in the world, are now discovering the pleasures of splurging on consumer goods, including discretionary items, while Americans are reacquiring their old virtue of thrift.
The emerging markets of Asia passed the test of the Great Recession of 2008-2009. With the exception of South Korea, all of them avoided a recession in 2009 and are in a position to rebound strongly in 2010. Two of them, Indonesia and the Philippines will get a special boost from the establishment of the world's biggest free trade area (FTA) starting January 1, 2010 on which date Indonesia, Malaysia, the Philippines, Singapore, Thailand and China agreed to eliminate barriers to investments and tariffs on 90 percent of products. The other ASEAN members (Vietnam, Cambodia, Laos, and Burma) will follow suit in 2015. The total consumer market of AFTA+China FTA is 1.7 billion with per capita incomes averaging $2,000 to $5,000 annually. This is the range of incomes in which demand for consumer products and services tends to increase at double-digit rates, as experienced in China during the last twenty years.
Intraregional trade in the AFTA-China region has been expanding at 20 percent annually over the last ten years. China has overtaken the U.S. to become ASEAN's third largest trading partner. In the next three to five years, China will surpass Japan and Europe to be the Number One partner. In the AFTA-China FTA, average tariff rate China will be charging on ASEAN goods will be cut to 0.1 percent from 9.8 percent. Average tariffs imposed on Chinese goods by ASEAN states will fall to 0.6 percent from 12.8 percent. The sectors that will most benefit from this FTA are services, construction, infrastructure and manufacturing.
The Asian emerging markets will join the other emerging markets in the world like Brazil, Russia, Mexico, Nigeria, Egypt, Turkey, and Iran in building on their relatively strong performances in the crisis year of 2009. In 2009, the MSCI emerging markets index increased 65 percent, compared with a 25 percent jump in the Standard & Poor's 500-stock index. Merrill Lynch predicts that emerging market economies in general will grow 6.3 percent in 2010, while the global economy will expand 4.4 percent. Imports to the BRIC countries were expected to surpass imports to the U.S. for the first time ever in 2009. Even if developed countries recover completely in 2010, emerging markets will account for 70 to 75 percent of the growth in global output in the next three to five years.
It is very important that the next set of leaders who will be elected in May 2010 will seize the opportunity during the next six years for the Philippines to demonstrate to the rest of the world that it indeed deserves to be considered an emerging market. We cannot afford to lose once again the chance to help millions of Filipinos to rise from dehumanizing poverty. For comments, my email is email@example.com.