Counting the Cost
Lessons for Europe from Japan's 'lost decade'
As Europe struggles with its financial crisis, we ask if there are lessons it can learn from the East.
Last Modified: 17 Jun 2012 18:47

Crisis, what crisis? On this episode of Counting the Cost, we head east to take a look at some of Asia's new economic miracles and to ask what lessons they can offer to Europe as it struggles with its financial crisis.

For decades it was one of Asia's economic underachievers, but the World Bank is predicting that the economy of the Philippines will grow by four per cent this year. That may not be a huge figure, but it is significantly better than many other countries.

However, more than 10 per cent of the country's economy still relies on foreign remittances - that is the money that overseas workers send back home. And that continues to make the country vulnerable to the global economic cycle.

In addition to that, there are also issues with corruption. Transparency International, which monitors corruption, ranked the Philippines 129th out of 178 countries last year. But the impeachment of the former chief justice, Renato Corona, has sent a message to the international community that Benigno Aquino, the country's president, is serious about fighting and eradicating corruption. Corona is the most senior public official to be removed from office without mass protests or military intervention and it is a decision that the business sector has welcomed as signalling a maturing of the democratic processes in the country.

When Asia experienced its own financial crisis in 1997, Indonesia was one of the countries at the heart of it. Now, it has a growth rate of 6.3 per cent and unemployment is at 6.5 per cent. The government debt to GDP ratio is at 25 per cent - compare that with Italy, which is at 120 per cent, and the comparative strength becomes apparent.

It is also a member of the 10-country Association of Southeast Asian Nations (ASEAN), which is hoping to form a trading bloc similar to the EU by 2015.

Surin Pitsuwan, the ASEAN secretary-general, tells Counting the Cost why he believes the markets have grown tired of Europe's attempts to rein in its financial crisis.

"I think the markets are beginning to have some scepticism of the ability of Europe to really put their acts together," he says, adding: "But ASEAN is in the middle of the growth centre."

For his part, Gita Wirjawan, Indonesia's trade minister, explains to Counting the Cost why a stronger Europe is for the benefit of everybody.

Japan is famous for its lost decade of the 1990s. It is now an all too familiar story - an asset bubble, cheap credit and then the inevitable burst that led to bad debts, a banking crisis and government bailouts.

It all amounted to a decade of stagnation. But was it really as bad as it seemed then?

Economist Paul Krugman recently told the Financial Times: "What we thought was that Japan was a cautionary tale. It has turned into Japan as almost a role model. They never had as big a slump as we have had. They managed to have growing per capita income through most of what we call their 'lost decade' .... My running joke is that the group of us who were worried about Japan a dozen years ago ought to go to Tokyo and apologise to the emperor. We've done worse than they ever did. When people ask: might we become Japan? I say: I wish we could become Japan."

So, are there lessons to be learnt from Japan? Counting the Cost puts that question to Seijiro Takeshita, the managing director of Mizuho International.

Watch each week at the following times GMT: Friday: 2230; Saturday: 0930; Sunday: 0330; Monday: 1630. Click here for more Counting the Cost.

Follow Kamahl Santamaria @KamahlAJE and business editor Abid Ali @abidoliverali


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