World-renowned economist Sachs extols Asia's growing role on world economy

MANILA, Philippines - Amid the scorching heat of the noonday sun and tight security, foreign and local dignitaries gathered at the Philippine International Convention Center (PICC) in Manila to listen to world-renowned economist Jeffrey Sachs speak in a seminar at the 45th Annual Meeting of the Asian Development Bank (ADB) Board of Governors.

In his stern and authoritative voice, Sachs, director of the Earth Institute at Columbia University, said that amid the financial debt crisis in Europe and the US economic woes, the global economy will now depend more on Asia for growth.

“Asia would be leading global growth, given the crisis in Europe and  the US,” Sachs said in the governors’ seminar titled “How Can Asia Respond to Global Economic Crisis and Transformation? ” 

The seminar focused on Asia’s growing role on the world economy and the risks it faces including the prevalent eurozone crisis, sluggish growth in the United States, the so-called “middle income trap” and climate change.

However, Sachs was quick to point out that Asia must watch out for asset bubbles as it develops its ‘’own growth pole” on the back of the recession in the United States and Europe, which he said has affected exports.

Sachs said what Asian countries should work for is sustainable development and seriously take its growing role in the world economy.

While the region is poised to grow faster than developed nations, Finance Secretary Cesar Purisima said risks now lie ahead and regional cooperation will be needed to withstand the crisis in Europe and the US.

“I think integration is very important in a sense that individually, we cannot deal with these problems, but together it would be easier,” he said.

Purisima, chairman of the ADB Board of Governors, said the “age of transition” is happening now when the balance of power is shifting to Asia from the developed markets in Europe and the US.

“Asia needs to invest in the fundamentals that will allow us to quickly adjust to the changing times. We need to invest in infrastructure, in our people and in our institutions,” Purisima said.

The Finance chief used the ADB seminar to cite the Aquino administration’s focus on delivering good governance that will translate into good economics.

He said for instance that the government has invested significantly in conditional cash transfers to enable those living in poverty to be productive participants in the economy and in the expected rise of Asia.

Sachs, however, cautioned that development comes with risks.

Purisima agreed and pointed to large capital flows flooding the region as a result of the financial turmoil abroad.

 “The substance of banking must be kept close to the real economy…We need information to control these derivatives,” Purisima said.

Sachs said the “middle income trap” remains a concern and noted that investments in science and technology and infrastructure need to be sustained.

For his part, Chinese Vice Finance Minister Li Yong said a strengthened local macroeconomic condition and “deepened regional cooperation” will be recipes for a sustained and inclusive growth in the region.

“Asia needs to make sure that growth is based on high domestic demand consumption,” Li said.

The same is true for China, a middle-income economy, which has also embarked on innovation and education, while “sticking to the policy of opening up.” “This (opening up) is very important for China,” Li added.

Purisima said another challenge is climate change as he reiterated the call to establish a global pool of funds, contributions in which will be based on countries’ carbon footprints.

Sachs agreed,saying: ‘’Regionalism is important and that Asia must get adequate financing to get emissions in control.