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Seeking Stability in an Unstable World

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"In this connected world, we are all in the same boat. If part of the boat has a hole in it you cannot say afloat." The words of the chief executive of Hong Kong SAR, Donald Tsang, spoken at the APEC CEO Summit, could be said to embody the preoccupations of APEC as a whole. However well the Asia-Pacific nations are faring, they are aware that no one is safe from the chilly winds of crisis in today's economic world.

As Tsang observed, no one can do everything but everyone can do something. For Hong Kong this has meant shoring up its vulnerable areas and developing a regulatory framework that has enabled Hong Kong to place second in the World Bank's ease of doing business index.

Yet overall Tsang was not upbeat. After a lifetime working in the financial industry he described himself as a pessimist. And because Europe's sovereign debt crisis and America's problems are far from being resolved he foresees further difficulties to come. "There's a strong likelihood that things will go worse for the first quarter of the next year, even a mild recession," he said. "I fear there will be slower growth and even negative growth among major economies in the world."

Luis Alberto Moreno, the president of the Inter-American Development Bank, said the Latin American countries could offer Europe some lessons. Over 25 years Latin America experienced 31 financial crises. The "lost decade" was coined to refer to the fact that during the 1980s they saw almost no growth.

"I think everybody understands that the problems of Europe will take time to resolve," he said. "We learnt how important it is to bite the bullet and make some of the tough decisions." The reforms that followed the crises were critical in bringing about the continent's current prosperity.

Dr. Fan Gang of the National Economic Research Institute of China agreed that regulation is important. He gave the example of China's overheated real-estate market. Just in time, the authorities came up with policies and regulation and although some cities will have problems, a major crisis was averted.

"One of the reasons the US economy and some European economies got into trouble was because there were bubbles," Fan said. "With a fast growing economy it's very easy to get into an overeating situation. That will only result in a hard landing or a crisis. China is experiencing a soft landing."

Because this crisis is global, the suffering may end up being equally shared. But there is light at the end of the tunnel. Moreno suggested that this is a special time for Asia and Latin America, when they can connect the dots, grow even faster than before and make the world a better place.

Fan too thought that optimism was the best approach. If the emerging markets continue to grow then the world will be okay, he said. "Let's shift our focus to more positive things."