Market integration key to recovery

To attract investors, economies have to think big. Economic sovereignty, say experts, is fast becoming a myth: we are now interdependent.

At their first meeting this year, APEC Senior Finance Officials considered ways to achieve new growth that is balanced, inclusive and sustainable. In dialogue with experts from the International Monetary Fund, the World Bank and the Asian Development Bank, delegates considered the challenges and opportunities in developed and developing economies.

If economies are to maintain the momentum of a relatively quick recovery, greater regional integration will be a major defining factor. This is particularly true for developing economies.

Explains Srinivasa Madhur, Senior Director, Office of Regional Economic Integration at the Asian Development Bank: "In general, Asian economies need to strengthen domestic consumption and increase investment."

However, he points out, middle income economies find themselves in a particular dilemma: "They experience pressure from below and above. Lower income economies offer cheaper goods and services; and higher income economies offer better goods and services." Add to that dynamic "low levels of investor confidence which can lead to a downward spiral."

According to the Asian Development Bank, economic communities are the way forward. Acting as a community both reduces economy-specific risks and increases opportunities for investors. "The investor doesn't want to see ten tiny markets. He wants one large production base. The size of the market will be much bigger, much more attractive."

"When we speak of Asian integration," says Mr. Madhur, "we mean regional-integration and global connection. APEC provides a platform for all of this to happen."

The comparatively swift recovery of the Asia-Pacific is largely attributable to unprecedented levels of cooperation among governments.

Other areas to be discussed throughout the year include aging and fiscal sustainability; green growth; and micro-finance. Outcomes will inform recommendations to be brought to APEC Leaders in November this year.

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