Instability in other regions to trigger investments flows to Asia Pacific

MANILA, Philippines – Terrorism, coupled with instability in other regions, will trigger enormous amounts  investment inflows into the Asia Pacific, a panel of experts that included the president of Chile shared at the start of the Asia Pacific Economic Cooperation (APEC) CEO summit on Monday, November 16.

“APEC is the place you want to be in geopolitically despite the current territorial disputes around the South China sea, “ said panelist Ian Bremmer, president of Eurasia Group, a global political risk research and consulting firm.

“Outside of APEC, pretty much everything that could go wrong has,” Bremmer noted.

Instability in multiple failed states in the Middle East and Northern African region has led to massive migrant movements, and had allowed ISIS to spread terrorism pointed directly at Europe, the world’s largest common market, he explained.

“Everything we’ve seen with the Paris [attacks] in the past few days tells us that the world has seen that Syria is a very slippery slope and it's about to get steeper,” Bremmer said.

He also cited political deadlocks, instability, and slow growth in other established markets like the United States, Mexico, and Brazil.  CEOs around the world know that geopolitics in other regions are getting worse, Bremmer said. 

He agreed with the view of Chilean President Michelle Bachelet believed that stability in the Asia Pacific region would draw in more investments.

“The Asia Pacific region is more stable and that will lead to more capital flows," Bachelet said.

Stable leadership

Bremmer also cited one thing Asia has but other regions don't have: Leadership.

He cited Japanese Prime Minister Shinzo Abe, Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, and Philippine President Benigno Aquino III as examples of leaders who are popular enough to allow them to take decisions that have long term economic benefits. This bodes well for the region, he explained.

Bremmer said this is in stark contrast to the populist politics that European and US  politicians often play.

He said that while there are tensions between the Philippines and China over disputes in the West Philippine Sea (South China Sea), “both sides know that the economic relationship is far too important and they aren’t going to risk that,” he said.

China the big worry

Bremmer's real worry on stability – not just regional but global stability – is the situation in what is expected to soon to be the world’s largest economy, China.

“There’s no question that China has to fundamentally transform its economy and its trying to do so without transforming its political system in an enormous way which has never  been done before,” he said.

The problem is that social unrest is growing as the Chinese people grow wealthier, more informed, and more empowered. They are starting to make their voices heard.

“We’re going to be facing a world where the world’s largest economy is facing more volatility than ever before, and that’s a bit unsettling," Bremmer said.

For the immediate term however, China’s consolidation of power under Xi is a calming factor for the region as it brings stability, he said.

Economic integration essential

The Chilean president shared that the situation in Latin America has been peaceful in recent years. "Democracy has been a determining factor in this peace process," she added.

Speaking about Chile's experience, Bachelet said that integrating everyone into the economy is a key factor in the country's growth and stability.

“Economic growth is essential to this, and it has to be shared,” she said, adding that the region is more focused on fixing internal social conflicts than traditional ones.

“Latin America is the most unequal region in the world. If we don’t deal with inequalities, we risk sliding back,” she said. “In order to have a working democracy, you need social cohesion so that everyone feels [he or she is] a part of the process.”

Bachelet said one ways to achieve this is through education. She pointed out that "7 out of 10 tertiary students in Chile are the first in their families to attend college which shows social mobility.”

Even with Chile's slower growth due to the fall of copper prices and the slowdown of its main trade partner, China, Bachelet affirmed that the country sees trade as the path to growth.

This is evidenced by Chile’s decision to join the Trans-Pacific Partnership (TPP) despite already having bilateral free trade agreements with as she put it, “nearly every country" in the TPP. 

“It was important to us to be part of the TPP because it is a system of alliances that we believe is  heading in the right direction,” she said.

The leaders of the 12 TPP member countries, also APEC economies, are expected to meet on the agreement in Manila on Wednesday, November 18.  – Rappler.com