If you have listened to anyone with an opinion on the prospects for the Asian economy in recent months, it is likely they will have stated as a matter of fact that Asia's future is dependent on what goes on in the United States of America.
A number of banks have held recent press briefings with these sentiments at the core of their predictions for 2001 and beyond. However, a recent briefing by BNP Paribas called 'Asia beyond the recovery of the US', was refreshingly different.
BNP's colourful chief economist for the Asia Pacific region, Andrew Freris, put an entirely new slant on the commonly held view that Asian economies are at the mercy of US trends.
"Asia has an obsession with what happens in the US and to some extent this is correct, but it misses one key point, and that is how much the US matter at this stage of the cycle," Freris says. "In the current cycle of Asian economies, the role of their export trade with the US and its impact on GDP growth has been exaggerated in public discussions and comments while ignoring the importance of intra-regional trade."
In terms of individual dependence on US exports for growth, Freris argues that it varies so greatly from country to country that generalization misses important points. Even in countries such as Singapore, which we are led to believe will suffer more than most on account of US trade, the statistics do not correlate with the populist argument.
"If we look at exports to the US, Singapore has the lowest dependency in the region with only 19% of its exports sold to the US, compared to the Philippines which has a 35% dependency," Freris states bluntly. "This suggests that in Singapore, where the deceleration of exports has been pronounced, it still has relatively low export dependence on the US.
"When you quantify the effect of the US, it matters but not as much as you think it does," he adds. "Intra regional trade is more important in determining export growth. Asia depends more on Asia than the US, Japan and Europe. This is not my opinion, it is fact."
Freris also argues strongly that the success of a country is not solely dependent on exports, and there are certainly merits in his logic. "In economies such as China -- the single most important economy in Asia even when compared to Japan -- and India, they have little dependence on external trade and their cycles are driven primarily by domestic developments," Freris concludes. "In the remainder of 2001 and for 2002, the economies of Indonesia, Thailand and the Philippines will be influenced more by the pace of economic reform and financial restructuring than by the pace of their exports to the US."
Asia depending on Asia, to borrow the words of Freris, makes for a 'more sexy headline' than what we have been reading recently. To achieve growth, any country, particularly in Asia, needs to put right more pressing internal concerns such as poor business practice, bad lending and corporate governance.
Of course the US remains important, but not, as Freris says, to the ignorance of matters closer to home.
