Session One: Rebuilding the Global Economy: Are New Models of Growth Required?
8:45AM – 9:30AM, November 13, 2009
Welcome Address by Ms Chong Siak Ching, Chair of the APEC CEO Summit 2009 and President & CEO, Ascendas Pte Ltd
Summit Opening Keynote Address by HE Prime Minister Lee Hsien Loong of Singapore
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The global economy is finally beginning to emerge from its worst downturn since the 1930s. But some economies are recovering more quickly than others, and as such, very few onlookers are expecting a return to pre-crisis norms. For at least a few years, the world economy will be in flux, as it rebalances to accomodate new global patterns of production, consumption and trade.
It was in this context that the APEC CEO Summit 2009 commenced with a session focused on the new models of growth required to rebuild the global economy. The session began with a short welcome address by Ms Chong Siak Ching, Chair of the APEC CEO Summit 2009 and President & CEO, Ascendas Pte Ltd, who thanked participants, panelists, and the APEC Leaders. Ms Chong’s address was followed by a speech by and question-and-answer session with Singapore’s Prime Minister Lee Hsien Long.
Prime Minister Lee’s address focused on the timeliness and importance of APEC 2009 and the CEO Summit, the extent of the global financial crisis especially in the region, the state of regional integration, and finally, the role of various actors in the region in creating a sustainable recovery. In particular, he urged APEC to resist protectionism and to grow the Trans-Pacific Partnership in a step by step process to create a significant free trade agreement. He then responded to audience questions on the whether the current growth model could be sustained, the state of regional institutional architecture, and the timing of stimulus removal.
Prime Minister Lee stated that APEC and the CEO Summit gather at a significant moment. It is the 20th anniversary meeting for APEC, a timely occasion for the grouping to chart a way forward and review initiatives. Further, in the wake of the crisis, PM Lee expressed his hopes that APEC would help review government action and business reaction, in order to help quicken global recovery efforts, as well as to make such efforts sustainable.
The Prime Minister grounded his hopes for APEC going forward in its proven history of success. He cited some of APEC’s achievements: member economies have concluded over 40 FTAs between each other, total exports have gone up sixfold, and average tariffs have gone down by two thirds. Perhaps most tellingly, he said, the region’s economies have prospered. The Prime Minister stated that this success points to the advantages of free trade and globalization, and therefore the importance of APEC.
Prime Minister Lee then described the difficulties that current crisis presents, and how government responses have so far been effective. Although trade volumes decreased and financing dried up, and some observers feared that the world was on the precipice of a depression, governments responded. They took unprecedented steps including recapitalizing banks and lowering interest rates to near zero. All of these initiatives, said PM Lee, have helped mitigate the crisis.
The Prime Minister then moved to describe Singapore’s own experience and the Singapore government’s success in responding to the crisis. PM Lee said that Singapore has, as an open and global economy, felt the impact of the crisis strongly. But it responded aggressively, with one of the world’s largest stimulus packages on a per capita basis. Though it resulted in one of the largest deficits in Singapore’s history, it has been widely credited as a success. PM Lee underscored that the goal of the Singapore stimulus was to help companies and keep workers in jobs; then allowing them to endure and prosper through the crisis for themselves.
But risks still remain, he said, for Singapore and others. The world is not yet on clear footing. Much growth can be attributed to the stimulus packages, which cannot be sustained. But, he expects that the worst is over. Provided we keep our markets open and maintain links within Asia and across the Pacific, the future looks bright.
PM Lee then turned to issues facing regional integration. He cited ASEAN’s accomplishments: such as endorsing a blueprint to form an ASEAN Economic Community in 2015, signed an ASEAN Charter, as well as creating a connectivity and integration agreement. He endorsed ASEAN as the most effective center of regional integration and the hub for production.
For the Asia-Pacific, PM Lee urged that APEC, building on the G20 stand for free trade, not just for economic prosperity but for regional peace. He identified a free trade area for the Asia Pacific (FTAAP) as a long-term goal, towards which steps should be made year by year.
One such step, he said, would be for Asia-Pacific economies to push ahead with the Trans-Pacific Partnership – an FTA between a small but significant grouping- Brunei, Chile, Singapore, and New Zealand. He called it a “seed”, but one which he hopes to blossom and grow into a larger and more robust organization. The high-quality agreement, he said is designed so that other economies can join in the TPP. The US, Australia, Peru and Vietnam have already expressed interest in joining.
There is a role for international institutions, especially the World Bank and IMF. They must play their part, and must be built up to fulfill several functions: helping emerging economies, building up the global financial architecture, and encouraging governments to reform their economies to help avoid an unsustainable growth model. He also stressed the role of businesses as providing the vital economic “spark” for growth. Although bureaucracy and regulation can create pre-conditions for wealth, businesses are the engine that drives growth.
In question and answer with the CEO Summit attendees, Prime Minister Lee emphasized that rebalancing must occur between Asia and the USA. Americans are saving more than they have before and the demand must grow elsewhere to drive the economy. Many look to China and Asia to increase demand, but this will take time. Unless confidence and disposable incomes grow, there is a prospect that growth in the next two years could be relatively slow worldwide.
Another question was on Asian regionalism. Prime Minister Lee clarified that the TPP which he had promoted in his speech was not in opposition to other groups among Asians, like the ASEAN+3 which includes China, Japan and South Korea, or the East Asian Summit, which adds India, Australia and New Zealand to these ASEAN+3 economies. PM Lee believes that maintaining the link across the Pacific will be important.
The proposal by the new Japanese Premier will take time and should not be rushed. Moreover, PM Lee’s view is that while the regionalism has been messy, the wiser thing to resist the urge to tidy everything up prematurely. Rather, he urged that Asia and the Pacific leave things in place and to build on existing institutions, which can then adjust.
A third issue raised in discussion was the timing of unwinding the stimulus packages that governments had used in response to the crisis. PM Lee supported the G20 consensus that the time has not arrived at present, and that actions will have to be coordinated.
Fiscal spending measures can be eased off. But PM Lee emphasized the withdrawal of monetary stimulus and low credit rates will need to be carefully coordinated. If withdrawal is too late, said the Prime Minister, there is a risk that the liquidity will create a bubble in stock and property markets. Similarly, the guarantees that governments had given for bank deposits would have to have a coordinated withdrawal.
