"Will East Asia's Economic Miracle Return?"

Panel Discussion: June 9, 2000

Lee Kuan Yew
Senior Minister, Singapore
Robert A. Scalapino
Professor Emeritus, Institute of East Asian Studies, University of California, Berkeley (U.S.A.)

Moderator: May I start by asking both Senior Minister Lee and Dr. Scalapino to discuss the true nature of the East Asian financial crisis that began in July 1997? What appeared at first to be an isolated crisis in Thailand soon spread to other Southeast Asian countries, then to Korea and eventually hit Russia and Latin America.

Lee: In retrospect, the East Asian financial crisis was the first manifestation of a global financial system going wrong. What triggered it off was the unsustainable exchange rate regime that was maintained by Thailand and to a lesser extent by Indonesia and by Korea.

They had borrowed short in dollars and other hard currencies and invested long, in many cases unwisely in excess plants and properties.

So, once the markets saw that Thailand was not exporting enough to get the foreign exchange to meet the interest and capital due for repayment, they started selling the Thai baht short. The Thai central bank decided to defend the currency until it ran out of funds. And when it did on the first of July, it abandoned the peg.

Because the financial market had become globalized, the same investors, speculators and hedge funds operating in the whole region began to attack the other currencies because they categorized these currencies as emerging markets.

The branch managers in these various countries know the difference between the various economies, but the head managers in New York, London or Frankfurt did not. And, they said let's get out.

So, the stampede for the door began. The next to fall was the Indonesian rupiah and then the Philippine peso and the Malaysian ringgit. Then, lo and behold, by about November, December the Koreans were also (inaudible) because they had borrowed short and invested long. They had made the mistake of joining the OECD and freeing up their exchange controls.

Even though Singapore and Hong Kong had not borrowed short - in fact they had no debts - the stampede for the door drew out over a billion dollars worth of assets within a matter of months. I think most of the central bankers now admit that kind of volume sloshing out of a region must affect the whole region because you suddenly run out of liquidity.

Investors and hedge funds got nervous; the Russians ran into a crisis and it looked like it would spread on to Brazil. That's when America decided to put in a tremendous effort because had Brazil gone the same way the American economy would have been hurt.

So, in effect, it really was weakness in the banking systems of these countries that had been affected; misinvestments - you can call it cronyism, collusion, corruption, whatever you like.

But had they not borrowed in foreign exchange, had they just borrowed in their own currency as Malaysia did, then they wouldn't have come to grief. The disaster came upon them because they borrowed in foreign exchange, and once they freed up capital controls - their capital accounts were open - their currency was at the mercy of forex dealers. And the rest is history.

If you have the Indonesian rupiah at 2,500 to the dollar in mid-1997, and by January, February 1998 it went down to 10,000 and then to 17,000, then all your companies must go bankrupt, and the contagion spread.

The lesson, of course, is you should never open your capital account unless you're quite sure your banking systems, financial regulation and financial supervision are sound.

Even then, as Hong Kong and Singapore proved, if money is drawn out of the system precipitously, we'll all going to be hurt. We did not suffer the same devastation as Indonesia or other countries, but for a year and a half our economy shrank.

This is one of the negative effects of globalization. Yes, you get free capital movement, and capital moves into countries with the highest returns. But it is on imperfect information. When investors sense they have made an error, a misjudgment, and they all make a dash for the door, then grievous harm is done.

But the recovery also showed that the factors that made them high-growth areas remain: young population, increasingly educated workforce, high savings, high investment and a quick recovery. Because of high savings, low interest rates are possible. It's not like Latin America, where they don't have high savings and interest rates remain high so they can't recover.

The danger of the fast recovery with more funds coming in as they recover is that quite a few of these economies have not got rid of their problems, especially nonperforming loans at the banks, bankruptcy laws, financial regulations. There are latent problems which may again be put to the test by some subsequent crisis.

I think it was a mixed blessing to have had such a quick V-shaped recovery.

Scalapino: Let me start by saying that I have some reservations about the term "Asian miracle." Miracle connotes an event or happening for which there is no rational explanation.

I think the rapid development of East Asia in the several decades past was due to first of all political stability in general and the capacity of governments to make policy, and, secondly and more importantly, policies that for the time had a great deal of merit.

A kind of convoy system was initiated in many countries with the government picking and backing select sectors of the economy, particularly in the industrial realm; a rather low level of transparency which enabled a kind of expansionism in the loan sector and rapid growth; protection for the domestic scene, which in a certain sense did not require high levels of domestic competitiveness; and very extensive emphasis on exports.

It seems to me that was the broad pattern of most if not all of the rapidly developing economies of East Asia.

The one lesson that I would suggest is that no economic strategy, however successful, is good for all times. When the international environment began to change, when the factors of openness and globalization began to grow, this particular strategy needed to change. And I certainly agree with Minister Lee that the currency crisis was a part of the initial impact and was certainly due to the rapid flow outward of short-term capital.

I also think, however, that it became apparent that more extensive changes were necessary, and these were undertaken. One can argue with the IMF formula; it's debated in the U.S. as well as elsewhere. The fact is, however, that in a relatively short period, governments began to try to effect significant changes in the strategy: more openness; more transparency; an attempt to tackle of this problem of massive unredeemable loans; the fragility of the banking financial system; and related issues.

We have seen in most areas a relatively rapid economic change and growth. I am a bit concerned about several factors.

First of all the necessary reforms have only been partially consummated, in my opinion. Will this recovery slow down or even stop the reforms, which in my view have strong domestic opposition in some cases? Look at the problem of reforming the chaebol in South Korea, or the keiretsu system and its affiliates in Japan. Will this economic recovery still these efforts at reform, make governments more reluctant?

There is an external factor to watch, too, and that is the American economy and whether inflation will set in. That's a concern of some observers looking at the contemporary scene.

One thing I think is clear. It's going to be impossible to go back to the old order. We haven't yet learned precisely how to live with globalization, but it quite clearly requires more domestic competitiveness, more transparency, a preparation for the private sector making critical decisions, and later on I'm sure we'll talk also about high-tech, IT and the related new economy.

This is a truly complex and transitional period, and it is by no means a restoration of the old order.

Moderator: Dr. Scalapino says that the necessary reforms have yet to be carried out. Minister Lee, how much of the necessary reforms do you believe have been carried out? Are you satisfied with the reforms thus far implemented?

Lee: Nobody is. The IMF isn't. If you watch carefully, fund managers are not very enthusiastic about going back into certain countries.

The reasons are obvious. In some cases, political instability; in other cases, the banks have not been cleaned up, bankruptcy laws are weak and creditors cannot get at their assets. The process of cleaning up these bad debts and allowing creditors either to liquidate or settle has just been dragging on. And that keeps the economy from bouncing back.

I think it's not going to be easy to do because the general sense that the crisis is no longer acute releases pressure on the government and on the people who need to carry out these painful reforms - the companies, the directors and CEOs. Therefore, I think this will build up problems for the future.

There is also another point, which will affect the growth in the future. If you look at the impact of computers and information technology, if you study the figures of Internet penetration, telephone lines, mobile telephones throughout Asia, you'll find that some countries are way ahead of others.

Northeast Asia - Japan, Korea - Taiwan, Hong Kong and Singapore are ahead of the pack. So, in this next phase where IT, the Internet, will make a great difference to productivity and profitability, those countries with the advantage of a prepared population and infrastructure will probably do better than the rest.

The key growth area, of course, is China. Its IT penetration, Internet penetration is still low but growing very fast, exponentially. At the beginning of 1998, there were only about 2 million on the Internet; now it's about 10 million. If they keep on growing at that rate, I think they will make it.

It really depends on whether their regulators will allow free access to all databases, or whether they will try to control it. If they do allow free access, they will be a formidable growth area, especially with WTO membership.

Moderator: Minister Lee confessed at last year's Future of Asia forum that you were 70 before you first logged onto the Internet.

Lee: Yes, I'm afraid so. It's not easy to make a whole society Internet-savvy within a couple of years. You can have the infrastructure put in within three or four years. But getting older people unaccustomed to playing with a mouse and keyboard to use them like second nature is not easy.

Moderator: In Japan, the astonishing growth in cell-phone based Internet connections has led one commentator to joke that WWW stands not for "world wide web" but for "wearable, wireless, and women-driven." That technology is spreading to other Asian countries. I would like to ask the question on the chances of a new economy for Asia to Dr. Scalapino.

Scalapino: Well, I think it's the wave of the future. And, I think it will have profound repercussions in a variety of ways.

First of all, it accentuates generational differences. It was my grandson who taught me to use the computer, and I'm still moving ahead on things like the Internet.

One thing worries me a bit. And that is with all of these high-technology devices with the capacity to get information immediately about the world scene, many of us are wondering whether we have time to think, to contemplate. I think it also forces on leadership the demand to make immediate decisions. There is no leisure, time for reflection. Decisions once made are often difficult to retract. This is one of the political problems of this new economy age.

Moderator: I would like to touch upon the controversial topic of regional frameworks such as creation of an Asian Monetary Fund.

Scalapino: I've listened with great interest today to the various proposals discussed for a regional economic structure. Fundamentally, I am not in opposition to matters like an Asian Monetary Fund or "Asean plus three." I would raise several points, however.

First of all, at this stage it seems to me very important to keep the U.S. engaged economically, politically, strategically in Asia. An exclusiveness is unlikely to benefit. These all-Asian groups can go along with an be interactive with certain international groups, or all-region groups. When I say all-region, I mean Pacific-Asia, rather than just East Asia.

I think this is important because the world for the next few decades is going to have to live with three forces: internationalism, nationalism and what I call communalism. By communalism, I mean the search of individuals in this revolutionary era for a meaningful community. Some find it in religion, particularly fundamentalist religion. Some find it in a return to ethnicity. Some find it in localism.

The interaction between and the impact of internationalism, nationalism and communalism both economically and politically are terribly important. All three are going to exist. Can they find a degree of harmony?

It seems to me that we are in a time when multilateralism in economic, political and strategic terms is going to increase. By multilateralism, I don't just mean institutions. I also mean informal operations; trilateralism - Japan, the U.S., South Korea; quadrilateralism as exists now in connection with the Korea problem, with China joining that group.

These are terribly crucial. But they will not replace bilateralism on the one hand, or the interaction of broad groups.

Let me say that as strongly as I favor multilateralism, I think one has to admit it has not yet evolved to the point where it is truly effective in peace-making or peacekeeping. One can start with the United Nations. One can then go down to regional organizations like Asean or the Asean Regional Forum. These are important, crucial. But further reforms are necessary and further actions to make them effective are very important.

So, we shall live with all of these forces in the foreseeable future.

Lee: I have reservations both ways. If there had been an Asian Monetary Fund. If Mr. (Lawrence) Summers had not spoken to Mr. (Eisuke) Sakakibara (to kill the idea of creating an AMF), would it have been very different? I think the end result may well have been greater loss for one simple reason. Eventually whether the market turns or not depends on confidence, and that the yen was behind it to prop up these economies would not be enough to turn confidence around, and more money would have been lost.

I say this because if you look at the way the crisis developed. Thailand was first in July, but the U.S. stayed away from the rescue package, which was a very grave mistake because it sent the wrong signal to the market that the U.S. did not consider this a crucial matter. That aggravated it.

By the time Indonesia was in trouble in October, the Americans came in, but reluctantly. Japan and Singapore put out 5 billion dollars; the U.S. came up with less. Again, I think it sent the wrong message.

When it hit Korea in December, with 37,000 American troops in Korea, Wall Street was called up. The treasury secretary spoke to them, and they rolled over the debts, and they stopped the Korean rot. What was the decisive factor? That the U.S. threw money at it? No. The U.S. threw its prestige at it and said it will not let this happen.

So, as a realist, I'm not saying it's good or bad. It's just the way the world is structured. The U.S. Treasury has the biggest say in the IMF, and the IMF was built up by the U.S. and the British before even the world war was over in 1945.

I don't think it is possible to displace them. Therefore, I think if an Asian Monetary Fund is to play a role, it has to play a subsidiary role, subsidiary to the main fund.

Another reason why the Asians' fund would need the backing of the IMF is because when you go into a country and impose discipline, it's going to be painful, whether it is in Thailand, in Indonesia or in Korea.

(inaudible) and unions will rebel. Governments will be accused of having caved in. I do not see any Asian group of governments in the ARF strong enough to tell General Suharto or President Suharto, "You will do this or we will not support you." If you don't say that and you support him, that's money down the drain.

So, we have to face the awful fact that in order to fix something wrong, bitter medicine has to be administered. If you ask me, I think you'd better get a doctor that is accustomed to administering bitter medicine. So, I'm not against the idea of an Asian Monetary Fund. But if you're gonna have one, we have to be very careful deciding on what terms it will be extended and who is administering the conditionalities.

And it is always going to be unpopular. Any international conference you go to, you have any number of third world countries railing against the imperialism of the IMF and the U.S. I'm quite happy to listen to all that, but the lesson I draw is let us not let ourselves get into a position where we will need the IMF.

Moderator: The original plan for the AMF was a 100 billion dollar fund, with the participation of 10 economies: China, Hong Kong, Japan, South Korea, Australia, Indonesia, Malaysia, Thailand, the Philippines and Singapore. After the crisis erupted in July 1997, China contributed 1 billion dollars to Thailand in bilateral aid, but the U.S. didn't contribute a dime in bilateral aid. There is concern, as Minister Lee pointed out, that this was a mistake on the part of the U.S.

Scalapino: In general, I certainly agree with most of these remarks. On the Thai question, the U.S. government now admits it made a mistake. It did not see the situation as serious as it was or became.

On the broader issue, as I said earlier, given the economic involvement of the U.S. in this region, and given its political/strategic involvement - though there is certainly merit in all-Asian bodies - the U.S. cannot be left out of the overall picture, whether we're talking economic or strategic questions.

And I think there is one thing that ought to be recognized. It is appropriate on occasion for criticizing the U.S. for arrogance, for self-righteousness, for missionary activities. Once we were missionaries for Christianity; now we're missionaries for democracy.

But on occasion, as Japan knows, gaiatsu is useful. For the external parties to put certain pressures on, whether it be IMF or other U.S. pressures, is sometimes imperative if you're going to have genuine change. That's because the internal forces of resistance are very, very powerful.

When we're talking about Asian regionalism, as an outsider, I'm tempted to argue that the diversities within Asia far exceed the commonalities. There are many Asias.

We still have got to resolve some of the deep-rooted conflicts, lack of trust, problems that relate to cultural difference, legacy of history. All of these factors enter into the Asian scene as you know very well. So, to the extent we can increase meaningful multilateralism, I'm all in favor of that. But I don't think we should overlook the problems of working.

This is not Europe. Asia has nowhere near the cultural affinities of West Europe.

This is the case even within a country. The difference between a Shanghai youth and a Gansu peasant in the West is enormous. These are cultural differences within.

So what I'm suggesting is we've got to work with a variety of forces, multilateral, bilateral, and try to handle the communal factor.

My worry about the immediate future is not another world war. I think war between the major powers is very unlikely, although not impossible. What I am concerned about is the problems we have labeled humanitarian intervention or failing states. These issues that relate to how communities interact with each other are going to face us year after year for the immediate future.

Lee: There have been developments showing that neither Europe nor America has the same level of interest in the rapid recovery or the well-being of the Asian countries that have been hit as much as Japan or even China does. If you look at the financial contributions made by Japan - the 30 billion dollar Miyazawa package, the earlier packages by various Japanese prime ministers and finance ministers - and the not-inconsiderable sums extended by the People's Republic of China government through the IMF and bilateral soft loans, food, and so on to Indonesia, you see that we have more interest in each other's well-beings than do Europeans or even Americans.

That left a very deep impression that a political crisis will bring in the U.S., as in East Timor; but with a financial crisis that doesn't bring the world down, we may have to paddle our own canoe.

That has created a deeper sense of camaraderie and sense of trust in each other, which is a positive mood. How to build on that is another problem because there are diversities, there are ancient animosities. In the longer run, the leadership of the Asian groups will have to be sorted out between China and Japan.

For the time being, the Chinese don't have the same (inaudible), so I imagine that for the next 20 or more years, the Japanese will have the bigger economic clout and will be able therefore to move things faster and better.

But in 30 years, on present projections, I think the Chinese economy will be at least equal to the Japanese if not greater.

So, that is a problem which has to be resolved eventually. Maybe diplomacy and understanding can solve that, maybe it can't. I don't know. This is a question of national pride and a sense of history. So, there are these deep problems to take into account.

But for the time being, these are positive developments. I believe South Korea and Southeast Asia are very alive to the help the Japanese government has extended.

Scalapino: There is no question that economic interdependence in various forms is growing. I think we all agree on that. Further, we are seeing the emergence of what I call natural economic territories within Asia.

By that I mean contiguous regions where states, or parts of states, where there are complimentary economic factors of resources, manpower, technology and management, and therefore a very natural instinct toward an inter-relationship. For example, South Korea and Shandong Province. Or in Southeast Asia earlier, there was the relationship between Southern Malaysia, Singapore and the (inaudible) islands. All of this is very important, but I'm not yet prepared to call it community in the broader sense.

I see the kinds of problems that exist in trying to integrate the economic environment, such as the difficulties of Asean today, the problems of Sino-Japanese relations, not to mention the Korean issue. All of these make me feel that there is a very good distance to go before Asia has that degree of mutual trust and the capacity to interact that defines community. So I'm a little more skeptical.

Moderator: Let us discuss the role that China will play in the future development of East Asia. Its membership in WTO would mean it would be playing by common international rules.

Lee: Predicting the future of China is a hazardous business. I did a speech last year for a meeting in Shanghai for the 50th anniversary of the Chinese revolution. I was asked to look ahead 50 years. So I first looked backwards 50 years, and it was a very instructive review of how the ups and downs went.

Nobody could have said in 1949 that there would be so much turmoil: the Great Leap Forward, the Cultural Revolution, the Gang of Four, then in 1978, the return of Deng Xiaoping. And in the 21 years since then, we see a transformation into a completely different China.

Before that, they were making 3-4% growth, which was considerable, just as a result of getting order restored. But the increasing growth since then, about 8.5% per annum in the last decade, showed what potential there was. At the same time, if you look at the immediate problems, many things can go wrong.

The state-owned enterprises have over a 120 million employees who have to be some time or another discharged. The banks have enormous problems having lent to the state-owned enterprises. Some provinces are restive because they are not sharing in the development. This year they are spending two thirds of the development expenditure just for infrastructure for the West. But for that to produce results will take five or ten years.

So there are enormous pressures of disparities of income between the cities and the countryside and in the cities, between the haves and the have-nots, especially the migrants who come in to do the hard and the dirty.

Zhu Rongji put it in robust terms when we asked him in Singapore - after he had just reached agreement with the U.S. on the WTO - if China can overcome its problems. He said, "We know there are many big problems, but if I didn't feel confident that we can overcome them, I would not have joined WTO."

I think that sums it up. Of the two evils, doing it one's own way gradually, or doing it under pressure of discipline to which the country has committed, he has backed Jiang Zemin's choice of the tougher course.

Assuming they succeed and don't run into serious problems in the next few years, I'm optimistic. I'm optimistic not because of the present indicators but because of the younger people that I meet, including children.

When I say children, I mean people in their 40s, late 30s, children of the leaders, sons and daughters educated in the West. Some are doing business in the West, some have gone back, some are in Hong Kong.

They talk a different language than their fathers. They talk to me in English. There is no problem. We have common terms of reference. They've spent 3-4 years of college in America, another 5-6 years on Wall Street and so on. Some pick up Western names and change surnames for anonymity. They're running software companies in China based in Hong Kong.

If you have this generation take over, I think you are dealing with a different China. I'm hoping also that the West, particularly the U.S., does not antagonize this generation by China-bashing. You know this blanket "Chinese are bad, they are troublemakers, they are gonna upset the world."

That kind of bashing might turn them. I don't see them turn yet. Maybe they are sophisticated; they understand this is a propaganda game. I do not see them as a threat to world order, because I believe they understand that even a restored China does not mean a Tang or a Sung or even a Qing China. It's just one of several important countries in the world, and I think even after 100 years they may not have caught up in R&D with America.

To build up a country that is universally educated, including Gansu, Sichuan and other provinces will take more than 100 years.

The critical factor is, do we compete in military strength or software? Countries are admired that give their people a lifestyle and a standard of living and a kind of society that others aspire to. If you get the Chinese into that type of competition - who has more missiles or who has more anti-missile systems? - that leads to an unnecessary contest.

I believe the leaders of China cannot predict what their children will do.

Scalapino: I'm fond of saying that in the coming decades, China will be a major power with major problems. We've heard today that both the positive and negative sides of China's balance sheet are formidable.

The advances of the last twenty years in China have really been remarkable. Deng Xiaoping initiated the program, and it has been pursued, that has meant a sustained high growth rate, great quantities of foreign investment, a program that has raised the standards of living of hundreds of millions of Chinese.

Yet, all of the problems that have been discussed or mentioned today do exist: a fragile financial banking system; deep unredeemable loans; the problem of the East-West gap; the ailing state-owned enterprises and the difficulty of further reducing these without causing even more unemployment; and of course the massive problem of corruption.

One does not solve those problems quickly or easily.

There is also a political transition, in leadership, from the ideologues to the technocrats. The engineers, economists have been coming up in the leadership ranks, very different from earlier generations of leaders. There has been a transition away from ideology toward pragmatism and nationalism.

Nationalism today is probably a stronger appeal in terms of unity and loyalty than Marxism-Leninism. This of course raises questions.

I think there is no doubt that China has become more pluralistic. The regime is not worried about students but rather peasant unrest in some areas due to high taxes, corrupt local officials, low grain prices and workers who are unemployed. Unemployment is a massive factor. Many workers are not paid on time. These will continue to be pressures on the government.

Freedom of speech has greatly expanded, while freedom to publish is more restrained and you can't form a true opposition party. Even the Chinese intellectuals are a little concerned about losing stability if you move too fast toward political openness. Keeping in mind the Cultural Revolution, the interest in preserving a balance between stability and development is still a powerful force.

So local elections which don't challenge the party itself are allowed.

Concern about the rule of law is a big factor. It is hard to predict how far this change will go. One must keep in mind that this is a society of 1.3 billion, to grow to 1.6 billion over the next decade before it levels off, and a society of vary considerable diversity.

The ethnic minorities as such are only 8% of the total population, but they do occupy a vast part of the borderlands from Tibet to Shinjiang to Inner Mongolia. They have been of concern periodically, even if one sets aside Taiwan.

Every U.S. president since Richard Nixon has opted for a policy of engagement with China for a variety of reasons. But it is recognized today by the Clinton administration that a U.S.-Chinese relationship that is on balance favorable despite many differences will be beneficial to the whole of the Pacific-Asian region.

That relationship has a meaning for almost every other issue, and on some important issues, we have common interests and can cooperate. But at the same time, as the early months of 1999 showed, there are period of downswing in the relationship, alleged spies, WTO, bombing of the Chinese embassy. These issues aroused concern.

In the U.S. Congress there are negative feelings about the PRC.

So, there will be a constant struggle between a cooperative engagement policy and a more confrontational policy. And much will depend on the policies and attitudes of Beijing as well as the U.S. scene. I think therefore the next few years will be a very crucial period.

Moderator: The last question. Is a second Asian miracle, or, for Dr. Scalapino, a second round of rapid economic growth, possible?

Lee: First of all, I hope there will be a soft landing for the American economy and Dow Jones and Nasdaq will not crash. A crash would set us back very badly. Assuming no crash, I see a very different resumption of growth between those countries that can get their systems right and make use of the Internet and IT on the one hand, and those not yet capable of maximizing the use of the Internet and IT. So there will be a divergence in growth patterns.

The countries likely to do well are those in Northeast Asia: Japan, South Korea, Taiwan, Hong Kong and possibly China.

In Southeast Asia, the countries that may not do so well include Indonesia because it's in a state of disarray, low Internet penetration and IT investment. The Philippines is also not doing very well in that respect, although the Love Bug virus originated. There isn't the same widespread use of the Internet. Thailand is slightly better than the Philippines but also not the same widespread use. Malaysia has spent a lot of money to get their population Internet-savvy. So I think Malaysia and Singapore will do better than the rest.

With China in the WTO, the other countries will find it increasingly difficult to get direct foreign investment, because they can offer everything cheaper. Competition from China will be very keen. Unless Southeast Asia gets a free-trade area going, growth will in the future probably not be as robust as before the crisis due to the change of competitive balance.

The problem for Singapore will someday be that there will be nothing we can do that the Chinese won't be able to do cheaper.

Scalapino: I agree. The future of Asia will be one of great diversity.

Incidentally, in the short-term, WTO entry poses some pretty complicated challenges for China, if it really abides by the rules. Some of the state-owned enterprises are gonna be in even more trouble than they are in today. This is only short-term. In the longer term, WTO is a plus for China.

But I'm a little concerned about Japan. Here it seems to me, the recession was never so deep that it mobilized public opinion in favor of critical systemic changes. It has yet to do that.

Meanwhile, Japan faces a population problem. By the year 2020, 27% of the Japanese population will be 65 or older. Incidentally, I don't regard 65 as very old. The fact is that the whole issue of workforce. Expand retirement, bring more women in, immigration, internationalization, maybe all of these will be necessary in the near-term.

So, there are many issues which will require brave and courageous leadership. Never forget that leadership is a critical element in this whole question of economic development and growth.

We've talked a lot about U.S. influence in the region. I think not many people realize that the U.S. in certain respects is the most revolutionary society in the world in the sense of the pace and depth of change. This of course has had an impact on the citizenry.

What about values, my family, education for my children, urbanization and its problems? It's not surprising that our candidates are talking 95% domestic and at most 5% foreign policy.

So the concern about American hegemonism ought to be balanced with concern about America withdrawal-ism because there is a certain sentiment in the U.S. to bring our resources home and concentrate on domestic problems. The majority still supports an internationalist policy, but the minority could grow.

Moderator: Thank you very much.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.