TODAY'S economic crisis in Asia has now surpassed the Asia Crisis of a decade ago.
Australia's international attention has so far been captured by the US, China and Europe.
But the other seven countries among Australia's top 10 export targets -- all of them Asian, plus New Zealand -- bought, in the last financial year, a massive 48.3 per cent of our goods and services exports.
What is happening there?
Richard Martin, the managing director of Sydney-based regional business analyst IMA Asia, says: "It's a bit like watching a train wreck in slow motion. North Asia is suffering the biggest collapse in demand since World War II. It's bigger than the Asia Crisis."
Stephen Roach, the Hong Kong-based chairman of Morgan Stanley Asia, says: "There's not a country in the region that is not slowing sharply or in outright recession."
Westpac analyst Richard Franulovich says "the speed of the decline embedded in the latest Asian data is on par with the collapse in the US during the 1920s Depression".
The International Monetary Fund has just revised down its economic 2009 forecast for Asia to 2.7 per cent. It forecasts global growth at 0.5 per cent, the lowest rate since World War II.
IMF chief Dominique Strauss-Kahn said last week that Asian countries could not begin to recover until the rest of the global economy escaped from the current downturn, and warned that "a worse outcome cannot be ruled out".
Australian education and engineering exports to Asia are likely to stand out, however, as many other sectors collapse.
For Australia is a lower cost education provider than its competitors in Europe and North America. And Asian governments, like governments elsewhere, are preparing spending sprees on infrastructure to stimulate their economies -- and Australian firms are well placed to pick up some of the action.
The most prominent market champion for investing in Asia, American Jim Rogers, who now lives in Singapore, said recently: "The money has left America. The money is in Asia."
But although Asia largely cleaned up its financial act -- its balance sheets and its debt -- following the crisis a decade ago, it retained its old export-driven model. Asian countries continue to depend far more on manufacturing than Western countries do.
Thus, as US and European markets collapse, Asian markets have not been able to kick in instead.
ANZ chief economist Saul Eslake says: "The Chinese are giving serious thought as to whether re-creating that model of export-led growth is what they want. It would be in the interests of the world as a whole if China concentrated on consuming more and the US concentrated on producing more."
Taiwan's beleaguered President, Ma Ying-jeou, is handing out shopping vouchers worth $164 each. About 21 million people, 91 per cent of the population, have collected theirs to date. Tsann Kuen, the largest consumer electronics chain, reported record turnover on January 18, the first day the coupons were released.
A decade ago, Thailand's dynamic automotive sector emerged out of the Asian crisis because demand remained strong in other regions.
Today, demand is down everywhere.
Japan's exports fell 35 per cent and Taiwan's 42 per cent in December, and South Korea's fell 33 per cent in January.
But the globalising imperative remains strong in Asia.
There has been little political backsliding towards protectionism -- except in India, which recently slapped a six-month ban on the import of toys from China.
China is furious about the attacks on its low-currency policy from the new Obama administration, and the region more broadly is anxious about the Congress push for "Made in the USA" conditions on the latest stimulus package -- conditions that Obama also opposes.
Premier Wen Jiabao says China will maintain its currency at a "rational and balanced level".
The China Development Research Foundation's Yang Min says: "This sparring" about the yuan's exchange rate "is no longer an academic argument, but a trial of strength for China".
There is a danger, though, that it also develops into a trial of strength between China and the rest of Asia.
For China's own exports are suffering surprisingly less than its neighbours, virtually all of which have over this decade made China their own top export target. China imports massive amounts of components from Asia, which it assembles and sells elsewhere.
China's exports, for instance, fell just 2.8 per cent in December. The big damage to Australia's own resource exports to China has come not so much from the contraction in China's export sector but in the jarring halt to construction, whose drivers are domestic.
The Korea Times reported last week that "China has been emerging as the biggest threat to the Korean economy", whose "high dependence on China has made the country particularly vulnerable to emerging China risk".
Morgan Stanley research vice-president Sharon Lam said in Seoul: "I thought China would be the saviour to Korea, but this now doesn't seem likely."
In December, Korea's exports to China fell 33 per cent, even though Korea's won has, like the yuan, been kept low.
IMA Asia's Martin says: "China is gaining market share in a fantastic way. People are slashing orders but may be at the same time buying more from China -- whose exporters are benefiting from the restoration of a range of government incentives alongside the low currency, including tax rebates, besides access to low-cost or even no-cost capital and utilities."
Southeast Asian countries, though, are cushioned slightly by the extent of their agricultural sales, including palm oil, chicken and pork, to Chinese consumers. About a third of southeast Asia depends on farming, compared with 5 per cent of north Asia. And China's food market is holding up.
Many Indonesian workers who have been working in neighbouring countries, especially Malaysia and Singapore, have been laid off.
Labour exports are still helping sustain other parts of southeast Asia but, Martin says, the World Bank predicts that global remittances will shrink by 1 per cent this year.
The Philippines still expects its remittances to grow this year -- although by 6-9 per cent, compared with 15 per cent in 2008. But the underlying drag on Asia remains its export dependence.
Martin says: "Asia has relied on export manufacturing to drive its growth this decade and has paid much less attention to domestic demand, with the exception of construction" -- which remains, notoriously, the chief source of income for politicians and their parties, from Japan to India.
"The big take-away from this is that Asian consumers won't replace lost demand from the US and Europe in the next three to five years, though in the longer term they will take on more of that burden."
At the same time, Asian consumers are not over-leveraged, since they did not overspend in recent years, and household balance sheets are in reasonable shape despite the stock markets collapsing around the region. Overall, middle-class Asian stress levels are mostly below those of their peers in the US, Europe and Australia. And Asian populations are big enough to sustain large domestically focused industries.
Yet they have slashed spending, especially on big-ticket items including cars and travel. Asia-wide deflation is a distinct possibility later this year.
Martin applauds China's moves to reform its healthcare, pension system and social safety net, and stresses the need for the whole region to follow suit. "That's crucial for getting spending up. A ridiculously low proportion of China's economy comprises domestic spending.
"The Asian countries as a whole must now turn to such domestic reforms in order to improve their efficiency. That's a tough battle. Their politicians have been reluctant so far to take on vested interests, in the way that the Bob Hawke government did in Australia in the 1980s."
He says that in Japan, Junichiro Koizumi started to move in this direction but has now departed the scene. Almost no other leader in Asia has pushed his or her agenda beyond the entrenched focus on export manufacturing and infrastructure.
Japan has depended in the past 20 years on public construction, exports to China and automotive sales to the US. "All three are now dead," Martin says.
Yet Japan is largely reverting to public works packages. Since its bubble economy burst 20 years ago, it has launched successive waves of such spending, which have already helped drive public debt to 157 per cent of gross domestic product.
An Australian academic in Japan, Gregory Clark, says: "There is a serious lack of demand in Japan and somebody has to fill the consumption gap."
Peter Drysdale, a leading expert on Asian economies at the Australian National University, says: "In circumstances in which the North American and European economies are likely to recover slowly from the crisis, the articulation of measures to promote early recovery of the Asian economies will boost confidence and position the East Asian economy as a leading centre of global recovery."
He says that channelling the region's vast hoard of savings into productive domestic investment "is a top policy priority".
He urges regional finance ministers and central bank governors to meet "to enunciate a collective East Asian program for stabilising the regional and global economy". And he advocates using the East Asian Summit structure -- which includes Australia -- to organise such a meeting.
In the past, political will has proved an important ingredient in Asian economic success. But overcoming today's hurdles and driving sustained domestic reform require leadership of a rare quality.
Paul Gruenwald, ANZ's chief Asia economist, says: "There does appear to be some domestic demand in the region." But "there is little to be done in the near term except to nurture whatever domestic demand there is, including by using fiscal stimulus, and to wait for a recovery in the advanced economies".
Martin agrees. He says that 2009 is likely to resemble a "gap year" for Asian economies. "Without any strong driver for global demand, 2009 will be marked by uncertainty, with conflicting signals on underlying demand until new trends are established in 2010.
"Some firms, notably acquirers willing to gamble on future but unproven trends, thrive in this environment. But many will find it simply delays growth plans by a year."
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