6 Jan, 2004

Asia Seeks Stable And Equitable Growth

Imtiaz Muqbil

The events of the past few years have shown how vulnerable the economies of the Asia-Pacific countries are to so-called ‘external shocks.’ A United Nations Bulletin on Asia-Pacific Perspectives says it is time to seek “stable and equitable’ growth.”

1. ASIA SEEKS ‘STABLE AND EQUITABLE’ GROWTH:

2. WHOSE AGENDA IS THE WORLD TOURISM ORGANIZATION PUSHING?

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1. ASIA SEEKS ‘STABLE AND EQUITABLE’ GROWTH

The events of 2003, and indeed the past few years, have shown how vulnerable Asia-Pacific economies — and by extension, the travel & tourism industry — are to so-called ‘external shocks.’ The parameters of ‘external shocks’ have broadened, applying as much to SARS and terrorism as to currency attacks, exchange rate volatility and bursting of bubble sectors. While Asia-Pacific countries have moved rapidly to fend off terrorism and SARS, a remarkable new document from the regional commission of the United Nations says more needs to be done to strengthen them to ward off economic turmoil.

However, rather than come up with the same hackneyed formulas about opening markets, privatising everything and boosting infrastructure, as pushed by multinational finance companies and consultancies, the Bulletin on Asia-Pacific Perspectives proposes some refreshingly novel alternative policies, one of which is a clear warning to the developing economies not to become too dependent on trade with the US. It also urges them to push ahead with regional free-trade agreements and continue to demand lifting of agricultural subsidies and import tariffs by European countries.

Produced by the Bangkok-based UN Economic and Social Commission for Asia and the Pacific (ESCAP) and written almost entirely by Asian experts, the Bulletin on Asia-Pacific Perspectives offers exactly that — an Asia-Pacific perspective. The ‘alternative’ analysis and recommendations, such as the need to avoid over-exposure of exports to the US, are winning more credibility due to the weakening of the dollar.

Noting that Asia is emerging from years of economic turmoil and set to regain powerhouse status due to the impact of China and India, articles in the Bulletin indicate that Asia-Pacific countries need to learn from past mistakes and chart a future that relies more on intra-regional trade, economic independence and fair and equitable bargaining positions at global fora. A key theme is to ensure that they never again become a victim of currency attacks and bursting bubbles, such as in the real estate and information technology sectors.

ESCAP’s executive secretary Mr. Kim Hak-Su says that coming in the wake of several adverse developments in 2003, including the war in Iraq, the outbreak of SARS and geopolitical tensions in North-East and West Asia, the Bulletin “provides a perspective on some of the major policy challenges facing countries in managing stable and equitable economic growth and social development against the backdrop of the Millennium Development Goals à as well as unexpected, adverse external shocks.”

As travel & tourism, too, has fallen victim to these “unexpected, adverse external shocks”, the Bulletin should be closely read by travel & tourism policy-makers, planners, investors, owners and developers in the Asia-Pacific. It should be of keen interest to those who want travel & tourism to similarly learn from the past and help build strong, self-reliant economies, taking into account the serious concern being raised about travel & tourism becoming increasingly and excessively dominated by multinational companies.

It should also serve as a wake-up call to the World Tourism Organization, which has now become a part of the UN system, that its new “Liberalisation with a Human Face” agenda has to fall more into line with the clear desire among regional economic policy-makers to manage globalisation, not capitulate to it (see next article).

The reference in the ESCAP Bulletin to dependence on trade with the US is a case in point. The Bulletin says despite the rise in intraregional trade within the Asia-Pacific and the impact of domestic growth-enhancing measures, the United States still directly accounts for over 20 per cent of the exports of developing countries of the ESCAP region. “Such reliance is a matter of concern for the region in that it intimately links the region to cyclical developments in the United States economy with growing current account and fiscal deficits,” says the report.

The Bulletin warns of the long-term implications of these deficits. It says, “On the fiscal side, the (US) deficit has risen above 4.5 per cent of GDP and, until growth revives in a more robust fashion, is unlikely to come down significantly. All things considered, the fiscal deficit is unlikely to boost long-term growth.” It says that while “deficits induced by tax cuts do boost activity in the short termàthe rise in long-term rates eventually negates the boost owing to the slower capital accumulation caused by higher interest rates.” Given the increased integration of capital markets, “trends in United States interest rates could have a direct bearing on interest rates in other countries, possibly leading to higher global interest rates with negative spillovers on global growth,” the Bulletin says.

It reverts to the same issue later in the article, and offers another warning: “The emergence of large imbalances in the global economy, such as the United States current account and fiscal deficits and how the two are likely to be financed, may presage a period of heightened exchange rate instabilityà.” This forecast is already proving true.

Similar analysis based on a “stable and equitable” economic development formula for Asia-Pacific economies is offered about other major regional issues like free-trade agreements, the impact on small and medium-sized enterprises and agriculture policy.

Referring to the collapse of the World Trade Organization talks, the Bulletin says, in effect, not to worry. “The remarkable growth of intraregional trade and the rapid expansion of subregional trading agreements, such as those between ASEAN, China, Japan and the Republic of Korea and now between ASEAN and India, is testimony to the scope for enhancing trade not merely in manufactured goods but also in a wider range of agricultural commodities and services. Developing countries should not become hostage to the pace of liberalization at WTO but take initiatives themselves to lower barriers and promote trade in different areas.”

ESCAP is seeking to revitalise other Preferential Trade pacts (as against free-trade pacts) like the Bangkok Agreement, a regional deal initiated by ESCAP in 1975 but which the Commission admits has floundered for a host of reasons. The Bulletin notes that Bangkok Agreement is the only one that “links East and South Asia, as well as the two most populous countries in the world, China and India. It is also the only PTA with membership open to all developing countries in the region.” In addition to taking advantage of the lower tariffs on products imported by China, ESCAP says the Bangkok Agreement “could be used by developing countries in the region as a mechanism not only to provide mutual support in dealing with economic challenges but also to form common positions on specific negotiating issues in WTO.”

ESCAP also seeks equitable treatment in market-opening demands. “Markets in developed countries are not open. Agriculture, and textiles and garments are two obvious instances, characterized by quotas, high tariffs, tariff escalation and specific duties that convert to high ad valorem equivalents. In addition, faced with disciplines on tariffs, policy substitution takes place by resorting to non-tariff barriers through anti-dumping and anti-subsidy investigations. Not only are markets not open, they are further closed by using the bogey of the environment and sustainable development.”

Furthermore, the Bulletin stresses that regional policy-makers need to ensure a stable and equitable playing field for small and medium sized enterprises. “As rapid globalization and emerging new technologies reduce the importance of economies of scale in many activities, the potential contribution of SMEs has increased. However, many of the problems traditionally facing SMEs, lack of financing, difficulties in exploiting technology, constrained managerial capabilities, low productivity and a heavy regulatory burden, have become more acute in a globalized, technology-driven environment.”

The same “stable and equitable approach” is adopted in analysing the source of the SARS crisis. Unlike the mainstream, Western-dominated media, especially publications like the Asian Wall Street Journal, a fierce critic of the alleged “cover-up” by China, the Bulletin notes: “China’s initial delay in the disclosure of information could very well be due to its lack of experience in handling unexpected crises of the magnitude of SARS and the present stage of its transition. Considerations of political economy are also likely to have played a role, as the trade-off between transparency and economic growth might have compelled Chinese authorities to be cautious in the full disclosure of information for fear of large economic costs and social disruption.”

Though many policies require long-term thinking, and patience, the Bulletin recognises that “policy makers in Governments are often constrained by the power of vested interests, hamstrung by weak institutions and a lack of information that induces policy errors and misjudgments and leads to poor policy implementation. In fact, democratic politics itself creates a bias in favour of shorter time horizons for decision-making, as the typical life of an elected Government is no more than five years before it must renew its mandate with its electors. Long-term objectives are often pushed into the background as a result.”

The Bulletin can be downloaded from:

http://www.unescap.org/pdd/publications/bulletin03-04/index.asp

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2. WHOSE AGENDA IS THE WORLD TOURISM ORGANIZATION PUSHING?

The importance of the words, ‘stable and equitable’, cannot be stressed strongly enough within the context of the future development of both Asia-Pacific economies as well as the travel & tourism industry. If a country’s currency is destabilised by forces supposedly outside its control, then both its national sovereignty and national security are at risk. If it cannot get a fair price for its primary source of export income, agricultural commodities, the country cannot hope to come out of poverty.

The same arguments make clear the unstable and inequitable relations in travel & tourism. Industrialised countries claim they want economic progress in Asia, yet contribute to economic destabilisation by imposing travel advisories that curb tourism, cost jobs and further plunge communities and societies into the same poverty morass which they claim to be fighting.

As for inequitable relations, Europeans, Americans, Japanese and others can walk visa-free or get visa on arrival facilities in most Asia-Pacific countries while the reverse is clearly not the case. Yes, they bring in valuable foreign exchange but it effectively means Asia-Pacific countries are so badly in need of foreign exchange that even European paedophiles, Japanese Yakuza gangsters and American Ku Klux Klansmen can walk in visa-free — although many would consider them to be just as much a menace as terrorists.

The reference in the ESCAP Bulletin to the future of small and medium sized enterprises is another example. During the SARS crisis, SMEs were worst hit. Recognising this, regional governments unveiled a series of loans and other programmes to keep them solvent until the crisis blew over. As travel & tourism was arguably the worst affected industry, travel & tourism SMEs bore the brunt of it.

Which begs the question: What are regional travel & tourism policy-makers doing to prevent the next crisis, which will come as surely as day is followed by night, as well to help protect SMEs? Over the past few years, regional tourism industries have gone overboard to welcome investment by global multinational groups which are today dominating travel & tourism, especially hotels, tour operators, consultancies, insurance companies, credit cards, financial and banking institutions and many more. These institutions are strong enough to withstand the occasional hurricane, but the SMEs are most weakened. A few more hurricanes will kill off more SMEs and only leave the big to get bigger.

The ESCAP Bulletin also has implications for the World Tourism Organization (known by its French acronym OMT in order to distinguish it from the other WTO, the World Trade Organization), which has just become a full-fledged part of the United Nations system and is seeking to use that positioning to put travel & tourism “more firmly on the agenda of international trade talks.” It’s main tool is the ‘Liberalisation with a Human Face’ initiative which seeks open tourism markets and stresses “particularly access of the world’s poorest countries and emerging nations to industrialised state markets – a key condition for poverty elimination.”

According to OMT Secretary-General Francesco Frangialli, quoted in a Press release posted on the www.world-tourism-org website, at last year’s World Trade Organization (WTO) talks in Cancun, the ‘liberalisation with a human face’ initiative “drew real interest but had limited resonance due to the charged atmosphere at a meeting dominated by special interests and heightened wariness,”.

He added, “It is somewhat disconcerting to compare the amount of time and energy dedicated to agricultural negotiations, which the conference was unable to unblock, to the complete lack of attention given until now to tourism exchanges. Although tourism is covered in principle by the General Agreement on Trade in Services of 1994, it seems to have been forgotten that tourism receipts represent a larger volume of world trade than agricultural food exports.”

Instead, the OMT suggested that the WTO should give greater recognition to tourism’s potential as a services export and understand “why tourism could be one of the most decisive factors in achieving the goals of development and sustainability in the global trading system and of poverty reduction.”

Those kind of blanket assertions raise serious questions about the quality of ‘special advice’ being given to Mr. Frangialli by the OMT’s special advisor Geoffrey Lipman, who is spearheading the ‘liberalisation with a human face’ initiative. By inferring that tourism is more important economically than agriculture, it raises serious questions about whether the OMT truly comprehends the critical role of agriculture in Asia-Pacific economies and the massive socio-economic problems caused by low crop prices, such as environmental degradation, landlessness to urban migration.

If crop prices remain low while tourism grows, farmers are forced into selling their land at paltry prices to golf-course developers, resorts and other entrepreneurs supplying goods and services to travel & tourism. This has happened in Bali, seriously upsetting the balance of economic sustenance over the years. Once an exporter of rice to other parts of Indonesia, Bali now imports it. Over-exposure to tourism was a major reason why the Balinese economy was so badly hit after the October 12, 2002 bomb blast. If a similar trend takes place over the long term Asia-wide, the continent will shift from being a net food exporter to a net importer. The blind rush to become industrialised nations and generate exports of manufactured products has already converted thousands of farms into factories. If this happens in tourism, too, the long-term implications for the economic, social, cultural and environmental fundamentals of Asia are staggering and unimagineable.

Is this what the OMT wants to see happen? Is the OMT also cognizant of the problems caused globally by the declining prices of coffee, one of the major crops in Vietnam and several African and Latin American countries. While tourists can pay anything upto to US$ 3 for a cup of coffee in a deluxe hotel, the non-governmental organisation Oxfam said in a recent report that only 14 cents goes back to the farmer. http://www.oxfamamerica.org/pdfs/mugged_coffee-report.pdf

Rather than wondering about the preoccupation with agricultural issues at the WTO talks, the OMT would be better off allying itself strongly and firmly with the trade ministers in demanding that agricultural subsidies be removed by the European countries, as the ESCAP Bulletin suggests. Doing so would help create a whole new generation of middle-class Asia-Pacific farmers with enough income to become travellers in their own right. Both the OMT’s major goals would be achieved — less poverty and more travel.

Asia-Pacific agriculture and trade ministers would welcome the alliance with travel & tourism which, by the way, is also a major purchaser of agricultural products. As one favour begets another, these same ministers, who are also usually more politically well connected than tourism ministers, can later be asked to support travel & tourism on issues of concern to us, a favour they may well be happy to repay.

Either Mr. Frangialli and Mr. Lipman lack enough of an Asia-Pacific perspective to see the connection, or they don’t want to be seen crossing swords with European trade negotiators. And while we are on the subject, the OMT also needs to justify pushing for more travel & tourism liberalisation while maintaining an unusual silence on another major collapsing policy objective (eliminating barriers to travel) as the US starts imposing stringent visa policies and finger-printing and photographing visitors upon arrival.

Are these US policies not barriers to travel? A Brazilian judge described the action by the US immigration authorities as “absolutely brutal, threatening human rights, violating human dignity, xenophobic and worthy of the worst horrors committed by the Nazis.” He ordered tit-for-tat retaliation. Is this the future of global travel & tourism the OMT envisages worldwide? If not, why isn’t it protesting?

The frustrations of the Brazilian judge are shared in much of the Asia-Pacific, too. If the OMT wants to be taken truly seriously, it needs to fall in line with the tested, proven and true agenda of the United Nations, and not try to create its own Made-in-Madrid agenda. This means helping developing countries address issues of concern to them rather than flogging the agendas of the developed countries and multinational corporations disguised under fancy but meaningless slogans like ‘Liberalisation with a Human Face.’

The Asia-Pacific is once again in the midst of tremendous political, social, cultural, economic, technological change. Tourism has a clear role to play but it will only be taken seriously and gain some much-needed respect if it joins the battle to make Asia-Pacific economies more ‘stable and equitable’, as ESCAP secretary-general Kim Hak Su says.

This does not mean blindly opening markets but managing globalisation, protecting SMEs, promoting regional free-trade agreements, eliminating agricultural tariffs and subsidies in the developed countries and strengthening financial institutions. External economic shocks are as much a threat to Asia-Pacific economies as terrorism and SARS. The war against them must be fought with equal vigour and across all fronts.

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