Economic Development

The Asian Exception

October 18, 2012

Africa

October 18, 2012

Africa
Marco Annunziata

Chief economist

Marco Annunziata is the Chief Economist and executive director of global market insight at General Electric Co., responsible for global economic, financial and market analysis to support GE's business strategy. He joined GE in January 2011 after a long experience in the financial sector, where he was most recently Chief Economist at Unicredit, and previously Chief Economist for the Eastern Europe, Middle East and Africa region at Deutsche Bank in London. Prior to Deutsche Bank, he spent six years at the International Monetary Fund in Washington, where he split his time between emerging markets and advanced economies, and was involved in both regular country consultations and program loan negotiations..

Even as fears about the European debt crisis and the United States’ feeble recovery persist, large parts of the global economy are still extremely dynamic, argues Marco Annunziata, Chief Economist of General Electric.

 

The rise of Asian economies is the defining development of our times. What drives the continent’s success? What are its comparative advantages? Asia’s excellence in math and science, and its strong investment in education, rank near the top. A highly educated workforce alongside large potential domestic markets make the region very attractive for foreign direct investment. But there is no room for complacency. Investment in infrastructure, from power generation and distribution to transport and healthcare, must be stepped up. Unless investments in education and training accelerate, the supply of skilled workers could become a bottleneck for the development of advanced manufacturing—as high and rising wages for skilled workers suggest.

The emergence of Asia’s middle class is another defining factor.. By 2030 Asia will account for two-thirds of the global middle class population and two-thirds of its consumption. The Asian consumer is poised to replace the American consumer as a global driving force. Understanding the needs and preferences of Asian consumers will be key to establishing successful global brands. This has profound implications for research and development, and marketing. For global companies, establishing centers of scientific research and technological innovation in Asia is essential to develop products that are right for that market—and that can then be leveraged on a global scale.

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Additionally, Asia’s economies have become closely intertwined through a web of supply chain relationships, all leveraging complementary strengths to make the region an economic powerhouse. Trade, both regional and global, is a crucial driver of Asia’s growth. Commitment to free trade, with reliable and clear rules on market access and competition, is essential. So are sound macroeconomic policies and good governance. Asian economies have benefited from prudent fiscal policies, low debt ratios and high levels of foreign-exchange reserves. In an uncertain global economy, where ample financial liquidity and swings in risk aversion combine to fuel large and volatile capital flows, strong policies are crucial to ensure resilience. Strong governance and institutions, and an improving business environment, will be key to keep foreign investment flowing.

Asia faces important challenges: China must rebalance growth toward consumption and away from investment; India must reboot its reform effort; and the scale of the region’s economies is both a challenge and strength. Yet there is little doubt that when we think of growth and opportunity, we should think of Asia first.

Marco Annunziata, Chief Economist and Executive Director, Global Market Insight, GE spoke at Economist Conferences’ High-Growth Markets Summit.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.

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