Written by Ann Quon, Head of External Relations
It was the host country’s chance to enjoy the limelight with ‘India Day’ taking center stage as an array of eminent speakers provided insights into a country which holds some of the world’s richest tycoons, and half of Asia’s poorest citizens.
Finance Minister P. Chidambaram talked about the renewed confidence in India compared with seven years ago when ourlast Annual Meeting was held in Hyderabad. Whileinvestment and growth had dipped and the current account deficit spiking, he was confident that India would climb back rung by rung to achieve 8% growth in the long term. India’s emerging middle class consumer market and youthful population would see to that aided by the government’s ambitious plan to spend about $2.5 billion on providing manufacturing job skills to 500 million youths by 2022, targeting the poverty stricken rural areas.
He also highlighted the tremendous opportunities for the private sector with about $1 trillion in infrastructure investments needed in India over the next 5 years, of which private players are being eyed to finance about half.
The eagerly awaited Governors’ Seminar looked at what Asian economies need to go beyond the “Factory Asia” label. Some countries such as Indonesia have already “graduated” and are experiencing incredible growth, while for other developing economies it is the future and not the past.
The challenges were many - rising inequality, youth unemployment, ageing populations, increased competition,and labor laws, among others, the latter a highly relevant subject in the wake of the tragic deaths of garment workers in Bangladesh.
Some pretty clear messages emerged from the packed session. There’s no one size fits all solution on how the region can keep growing at its recent historically high rates, and it is difficult for economies to reinvent themselves. Asia can no longer rely on low cost mass production and must become more innovative and knowledge driven to compete effectively in an increasingly high tech world where the need for low skilled factory labor is increasingly obsolete.
Japan’s Minister of Finance, Taro Aso detailed the formula which transformed his country into one of the world’s economic powerhouses, while noting that the economy is facing new challenges such as inreased competition, need for more innovation and an aging population. Although as an aside, he quipped that even at 72 years, he was still workingand travelling.
Finland’s Undersecretary of State in the Ministry of Foreign Affairs, Anne Marjanna Sipilainen explained her country’s extraordinary transition from a resource driven to knowledge driven economy, with its impressive education and social protection systems, while Indonesia’ s Minister of State for National Development, Armida Alisjahbana, outlined her country’s push to boost infrastructure and domestic consumption to drive growth.
Raghuram Rajan, Chief Economic Advisor for India’s Ministry of Finance, highlighted the need to take advantage of rising domestic consumption and the middle class to build up the service sector as a growth driver in India, while Harvard Business School Professor Tarun Khanna stressed the need for Asia to be more innovative by developing stronger institutions and protecting intellectual property rights more vigorously.
Growing inequality was a recurrent theme sparking differing responses, including the unconventional view that some inequality is good as an incentive as long as you don’t level down.
Moderated by the veteran broadcaster Nik Gowing, who had the packed room tweeting and emailing their questions and comments live, Beyond Factory Asia no doubt will continue to be discussed for some time to come.