As Asia has become the fastest growing and most important economic player in the world, a number of questions about its growth and its role in the global economy have come into the forefront. Questions range from the sustainability of its economic growth, its political influence, and its impact on other countries, such as India. One of the biggest challenges faced by Asian countries in the current period is their handling of the global economic downturn. There have been calls for more assertive measures, including a greater commitment by the Asian countries to use the World Trade Organization's rules for protection from dumping and subsidization.
Most countries in Asia are still developing. The recent economic slowdown was felt all over the world, with many countries suffering a deep recession. One reason for this is that Asian countries are still developing nations. Their political systems and business frameworks are still very open and a number of policies are still not in place that could bring it to a close. This gives room for Asian economic growth to continue at a rapid pace, despite the global recession. However, the recent economic slowdown may have pushed some countries to reexamine the extent of their economic liberalization and pursue policies that could protect foreign investors and ordinary citizens.
On the one hand, Asian countries have been reluctant to open up their markets. A strong economic state allows them to attract large numbers of foreign investment and capital, creating jobs and facilitating business. However, there have been some cases of expropriation and excessive manipulation of the exchange rate as a way of attracting foreign investors. There have also been instances of economic convergence, where one country enjoys the benefits of cheap goods and services while other countries have to struggle with the high cost of doing business.
Other concerns include the unequal exchange rates between Asian countries. Some blame it on differential exchange rates between the currencies of different countries, but others point out that this is caused by countries trying to gain an advantage through certain currency appreciation. Diversification of resources is another issue, as there are some areas where the export of raw materials and natural resources is very important to Asian economic development. Finally, some argue that Asian countries have not been able to fully exploit the economic potential of the mutual aid and protection network created by the EEC.
Most EEC members enjoy an economic growth of around 3% per year, well above the average of Asian countries. The reason behind this discrepancy is that structural reforms in several countries have been slow and gradual, leading to a limited impact of these policies. Additionally, some argue that the low-income trap continues to trap many poor people in poverty, preventing them from achieving economic and social goals. For this reason, Asian countries have to work more on reducing poverty. However, many economic experts argue that structural reforms will take time to bring about significant changes in income levels.
On the other hand, globalization has opened up many opportunities for Asia to pull itself out of the economic crisis. Rapid economic development can be attributed to four factors – the opening up of markets, liberalization of trade and investment, liberalization of financial services and enhanced infrastructure development. These policies have led to the opening up of countless opportunities for businesses in Asia. For example, in the past decades, some developed countries such as India, Japan and others were relatively closed off to foreign companies. However, with the rise of globalization, these countries have liberalized their policies, allowing foreign direct investment and technological advancement to boost their economy.
Another reason behind the Asian economic slowdown is the slowing down of global economic growth. Some analysts argue that globalization is coming to an end, as the rising of China and other Asian countries, particularly the Southeast Asian nations, causes a decline in the demand for labor in the U.S., UK and other European countries. In addition, a slowing down of the U.K.'s economy as a result of the Global Financial Recession (GFC) could also affect the rate of Asian economic growth. Moreover, the Asian nations' large current external debts, exacerbated by political instability, weak government policy and increasing unemployment level, pose great threats to its sustainability in the future.
However, globalization and political instability are not the only possible threats to the Asian economic horizon. While it seems unlikely that the European Union's enlargement could seriously threaten Asian economic growth, the same can't be said about the growing Asian economies of Latin America or India. Latin American countries, after all, have been successful in removing tariffs and other restrictive trade barriers with the U.S., the UK, and others. Furthermore, other emerging markets in the developing world are also gaining market access as the effects of globalization become more visible.
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