Asia gains from global downturn

The search for winners amid the global crisis often leads to unexpected places.

China, of course, with its 7.9 percent growth. Australia, too. Last week it became the first Group of 20 nation to raise interest rates since the turmoil began. That's quite a feat, considering the Federal Reserve and Bank of Japan have zero rates.

Bankruptcy attorneys are winners, as are vulture funds, debt collectors, therapists, bartenders and construction companies feeding off massive stimulus efforts. And don't forget Goldman Sachs Group Inc, which is raking in billions even as US unemployment edges toward 10 percent.

Goldman Sachs has turned adversity to its advantage. It posted record second quarter earnings of $3.44 billion. Its share price has more than doubled this year and it set aside a record $11.4 billion to pay employees in the first half of 2009.

Let's think ahead for a moment. Might history show those other billions - Asia's people - benefited from the crisis? If that sounds naive, consider how the 1997 crash, for all the pain it caused, left Asia stronger. It could just happen again.

"After the Asian crisis, the region said never again," says Rajat Nag, managing director at the Asian Development Bank in Manila.

"Asia changed for the better and quickly. This time, we could see the region respond in a similar way."

The best thing Asia could do is integrate more rapidly and coherently than it has in the past. This crisis has increased the urgency for Asia to come together, rather than just talk about it.

The biggest industrialized nations aren't likely to thrive soon enough to deliver rapid growth. Asia needs to fill the void internally.

However, the lack of policy infrastructure is an obvious impediment.

Groups such as the Association of Southeast Asian Nations (ASEAN) talk a great game. The results are less impressive in a region that competes more with neighbors than it cooperates.

Asian togetherness is an incredibly daunting vision for a region as disparate as this one. ASEAN's 10 members say it all.

Within it are wealthy Singapore (per-capita income of $37,600) and poor Cambodia ($651).

Piecing this puzzle together with even bigger nations such as China, India, Japan and South Korea - or roughly 3 billion people - makes Europe's single-currency achievement look simple.

In Europe, it took more than three decades of cajoling to create the euro.

In Asia, the events of the last year may clear the road. It's also offering Asia an abundance of lessons, including not relying so aggressively on one or two export markets.

Among the other lessons: Don't allow your financial sector to become so big it imperils the entire economy, and the effects of global warming can't be underestimated.

The lessons of 1997 are a key reason Asia is holding its ground better than the West. After 1997, governments from Seoul to Jakarta cleaned up the financial industry and reduced risky business practices.

Regulators didn't go too far to remove all of the firewalls between finance and average citizens.

In Nietzschean terms, 1997 didn't kill Asia; it made it stronger.

Five to 10 years from now, Asians could again be better off for today's troubles, just as Goldman Sachs is doing booming business a year after many thought most investment banks would go the way of Lehman Brothers Holdings Inc.

For that dynamic to strike twice, Asia has its work cut out. There has never been a greater need to come together, nor has there ever been a better time.

William Pesek is a Bloomberg News columnist. The opinions expressed are his own.

(China Daily 10/12/2009 page11)