Asia Pacific urged to boost consumption as economic driver

AP FILE PHOTO

DENPASAR — Asia Pacific economies must boost household consumption as a driver of economic growth, in tandem with efforts to liberalize trade and investment, a study said Thursday.

The Asia Pacific Economic Cooperation (APEC) forum study said the yawning gap in consumption patterns between the region’s rich and developing nations must be narrowed if economic growth is to be sustainable.

With slackening demand from struggling major export markets like the United States and Europe, Asia needs to perk up domestic consumption to drive economic growth, analysts have said.

According to the study, consumers in APEC’s developing economies on average spend $3,111 a year, less than 10 percent of the $31,738 spent by consumers in the grouping’s industrialized members.

The study was released ahead of the annual APEC summit next week in the Indonesian resort island of Bali.

While APEC’s emerging and developing economies account for 81.7 percent of the region’s population, their household expenditure amounts to only 30.5 percent of the grouping’s total household spending, it said.

“Therefore, the promotion of household consumption is critical not only for APEC’s pursuit of sustainable growth but also to ensure that growth is equitable and inclusive,” the study said.

APEC is a loose grouping that covers 21 economies bordering the Pacific Rim from China to Chile via the United States.

Among the most effective measures to boost consumption include “improving the social safety net and other insurance mechanisms”, it said.

Tax transfer policies such as slashing income tax can also help increase household incomes.

“In the long term, it is more fiscally sustainable to spur consumer spending by ensuring a healthy labor market and strong income growth,” it said.

On improving the investment climate, the study said progress has been made but the pace was “uneven”.

For example, it takes about three days to set up a business in New Zealand, Australia, Singapore and Hong Kong — a process that takes 36 days in the Philippines, 47 days in Indonesia, 51 days in Papua New Guinea and 101 days in Brunei, it said.

“This wide divergence… suggests there is room for APEC to intensify efforts to achieve a better business climate,” it said.