Jomo: Shift in economic power to Asia unlikely

KUALA LUMPUR: Despite the current financial malaise that has drastically affected the economic strengths in traditional powerhouses of the US and Europe, there is unlikely to be any shift in economic leadership as Western multi-nationals still dominate in terms of technological advancement.

Secretary-general for economic development in the United Nations’ Department of Economic and Social Affairs Dr Jomo Kwame Sundaram said with the exception of Japan and increasingly South Korea, most Asian economies still lagged behind in terms of technological leadership, “judging from the number of patents that continue to be coming from European and American companies”.

“While the potential in Asia is certainly there, unless and until something that alters the dynamics of the world emerged from here, the notion that there will be a shift in economic dynamism from the West to Asia should not be overplayed,” he said in a public lecture on the global financial crisis here yesterday.

On the role of Islamic finance and the role it could play as an alternative financial system, Jomo said the rule and regulations governing the Islamic financial structure were still vague.

Jomo added that there was a need to better understand what Islamic finance was all about and there were signs that most Islamic financial institutions had large business dealings that were considered non-syariah compliant.

Jomo lauded the Malaysian government’s pre-emptive measure in the form of a RM7 billion stimulus package, as Malaysia was one of the most open economies and the crisis would affect the country.

However, Jomo cautioned that the monetary policy measures through interest rate reduction had its limit, citing Japan as an example where low interest rates alone were not enough to lift the economy out of the doldrums.

“There is a need to balance monetary measures with fiscal measures. However, with the exception of China and some oil exporting countries, most countries do not have the means or privilege to embark on this.

The SDR (special drawing rights created by the IMF in 1969), which is designed to augment international liquidity by supplementing the standard reserve currencies, should be revisited,” he said.

by Tony C H Goh- The Edge Daily