There may be disagreement over the scale and depth of the Asian financial crisis, but the business world is united about how the region’s government should react: it wants a renewed commitment to further market liberalisation, and an explicit rejection of protectionism.
Last week, European business heads met with their Asian counterparts at the third Asia Europe Business Forum (AEBF), alongside ASEM2, the Asian and European Heads of Government summit. The forum’s findings were reported directly back to the governmental summit by Sir Martin Laing, chairman of the British Overseas Trade Board.
Asia matters to Europe: the region has enormous financial and economic interests in Asia. Exports from the European Union to emerging East Asia are greater than those from the US. And the exposure of EU banks in Asia is greater than that of US and Japanese banks combined.
The business forum is a recognition of this interdependence, and was set up in Paris, October 1996 to encourage ever closer links and boost trade and investment.
The recurrent theme from last week’s AEBF was that the only way to make this happen was through opening markets. This will mean liberalising financial services and investment conditions, establishing clear rules for investment based on transparency and non-discrimination and strengthening of banking and financial regulations.
The forum took place over two days and consisted of five working groups which looked at financial services, power, telecommunications and IT, transport and water.
Each workshop was led by a specialist in the field: UK participants included Ian Thomas from Amec, Richard Slogrove from BT, Deryk King from PowerGen, and Maurice Hutson from Modern Air Systems, the UK’s delegate for small and medium-sized businesses (SMEs).
Representatives came from 15 EU states, seven members of the Association of South-East Asian Nations (Brunei, Indonesia, Malaysia, Singapore, Thailand, the Philippines and Vietnam) and China, Japan and South Korea.
The AEBF identified three major themes to be addressed over the next year: increased participation by SMEs; increased European investment in infrastructure projects; and improved financial co-operation.
The desire to encourage more small and medium-sized business enterprises between the two regions was apparent because each working group had an SME delegate from one of the participating countries.
Laing told the Heads of Government summit: ‘This is a major task and needs a wide range of policy instruments. These include much improved dissemination of information about business opportunities, better access to trade finance and venture capital, and help with identifying potential business partners. Small business centres have been established in many capitals to support SMEs and help them to work out strategies. We would like to see this network enlarged.’
As well as a great deal of talk, the conference included some action. It was the launch of ASEMConnect, a Singaporean initiative to develop an Internet site with information about business opportunities for SMEs in the region.
The working groups’ second priority theme was the promotion and encouragement of European investment in Asia’s huge infrastructure requirements. Over the past year, members of the AEBF have done extensive work on project preparation, on developing standard legal frameworks for major infrastructure projects, and on project financing.
The result of this work, through the recently established Joint Asia-Europe Committee on Infrastructure, was presented in a paper to the heads of government. It contained detailed recommendations on mitigating risk therefore enhancing private sector participation in infrastructure projects.
The third priority was to encourage cooperation in financial services to make it easier to raise funds for investment. Following discussions, specific recommendations were made to the summit. High on the list were: a need for improved public-private partnerships, in which the private sector is able to make an acceptable return on its investment; clear and transparent regulation, as well as legal certainty; a concern to protect the environment; further relaxation of visa requirements to enable business travellers to move more freely, and more efficient customs procedures to avoid costly delays.
The business forum developed from a realisation that it would take more than just regular meetings of politicians to allow Asia and Europe to develop closer working relationships, according to Margaret Beckett, trade and industry secretary.
Beckett used her opening speech at the forum to make a plea for European industry to ride out the crisis. She said: ‘In the eye of this storm it is perhaps easy to forget Asia’s formidable and continuing strengths Although adjustment in Asia following the crisis may take some time and may be painful, I am confident that with hindsight this period will be seen as no more than a pause during Asia’s impressive economic development a period in which institutional arrangements were strengthened to the benefit of later growth.
‘Companies should not abandon market positions they have worked hard to build up Asia’s problems are Europe’s problems and Europe is eager to see stability and confidence return to Asian markets.’
Responding on behalf of the forum, and urging governments to listen to its recommendations, Laing said: ‘We are from business and we are here to help you’.