The fourth NEAT Working Group on East Asian Investment Cooperation East Asia Investment Cooperation

1
The fourth NEAT Working Group on East Asian
Investment Cooperation East Asia Investment
Cooperation in Global Financial Turmoil
Opportunities and Challenges

• Nguyen Tien Phong
• Diplomatic Academy of Vietnam

2
Global turmoil

• U.S subprime mortgage market melt-down
• U.S houssing markets bubble busted.
• Results from money expanding in the U.S since
  2001.
• Risks in market for asset-backed commercial paper
  and the credit crunch.
• Increase investors prudence.

3
Global turmoil

• Costs of borrowing increases, negatively
  affecting investmen effectiveness.
• Exchange rate volatility, nations currencies
  appreciate against USD, affeting export,
  weakening trade.

4
Impacts

• U.S growth speed decrease.
• Lower projection on world economy growth.
• Decoupling seems not to be rational, at least for
  the time being.
• Reduce demand for export.
• Slower growth in countries remarkably depend on
  export to U.S.

5
Impacts

• Pressure of rasing price (oil, commodity, rice)
  in countries including east asia ones, that make
  the investment difficult to be as scheduled
  implemented.
• Need to have sound fiscal and monetary policies,
  prudent FDI attracting and implementation.

6
Opportunities

• Robust growth rates in East Asia give room for
  fiscal and monetary policy in confronting tghe
  crisis, easing inflation heat.
• Deeper integration and cooperation in investment
  (coincide with financial cooperation).
• Stop the mechanism-U.S expenditure is being
  financed by East Asia trade surplus- that
  attributes to the global financial imbalance
  (financial institutions in East Asia are being
  affected by the subprime crisis).

7
Opportunities

• Exchange of technology, management skills through
  the fdi-trade-technology linkages mechanism in
  East Asia.
• Full use of financial cooperation that being set
  up and implemented.
• Chance for further cooperation in infrastructure
  investment, provide real foundation for econmic
  sound performace, icluding private sector.

8
Challenges

• Erode the investors confidence, prudent to
  invest.
• Risk asset under downward pressure results in
  negative and adverse effect in real production
  sector.
• Stock markets get more vulnerable, reflects in
  projects and the implementation.
• Public investment in infrastructures might bring
  about high inflation.

9
What East Asia should focus on?

• Rely on it self in forcasting, preventing and
  solving crisis (economies grow at fairly high
  rate).
• Create cooperation mechanism (financial, trade
  and investment aspects) toward an economic
  community.
• Roles of leading economies in ASEAN ans plus 3
  (China, Japan and Korea) in technology transfer,
  in capital and bond market of region, in
  investing in other ones in region