Former New Zealand PM on Asia’s strong growth, replacing the TPP, and the economic outlook for Cambodia
Former New Zealand PM on Asia’s strong growth, replacing the TPP, and the economic outlook for Cambodia
Asia is at the centre of a changing tide of geopolitical influence as US President Donald Trump distances himself from his predecessor’s “Pivot to Asia” policy and China seeks to further expand its influence. The Post’s Kali Kotoski sat down with John Key, former prime minister of New Zealand from 2008 to 2016, to discuss the current state of affairs in the region.
Following from your experience as prime minister and before that as an investment banker, what is your overall sense of the prospects for economic growth in Asia and the Asean region?
In terms of the region, I think there is no question that Asia will continue to be the primary source of global growth. China, though some say it is growing at a slightly nominal and slower rate than it was, has opened an enormous space as the driver of growth. And it is hard to see growth anywhere like that in Europe with Brexit, or in the US because it is such a well-developed economy. So the bottom line is that there is a lot growth left in the tank for Asia. For Cambodia specifically, I think the country is going through a natural evolutionary growth cycle as it turns into a middle-income economy. This will create significant challenges for keeping up with infrastructure, but as the consumer base gets wealthier and demands and expectations grow, this will create a lot of inbound capital investment.
What do you believe are the economic prospects for Cambodia?
I think for the long term, with the economy being dependent on low-income garment production and a low-wage economy, Cambodia will eventually shift to a much more service-oriented economy, particularly based around tourism. And this will grow, primarily from more Chinese tourist arrivals. Plus the relationship between the Cambodian and Chinese governments is very strong, and I think that if I come back in five years there will be a lot of Chinese here.
How does Cambodia move away from a low-wage, garment-based economy and attract more foreign direct investment?
The two biggest things for this are always stability and predictability. So if you are a foreign investor you want to know with a high degree of confidence that you can get your money in and can get your money out. And you want to feel confident with the rule of law and how it is actually used on the ground. I think where people get concerned, and when foreign capital dries up very quickly, is when government regulations in the labour sector fall behind.
New Zealand was a big supporter of the Trans-Pacific Partnership (TPP), of which Cambodia is excluded. After the US rejection of the TPP, do you see the Regional Comprehensive Economic Partnership (RCEP) taking its place?
Despite New Zealand being one of the strongest advocates of TPP, after speaking with Prime Minister Hun Sen, it is clear that Cambodia is very focused on RCEP. And it is quite possible, and ironic, that RCEP could get completed this year before the TPP is even introduced. But regardless, what New Zealand did was develop comprehensive free trade agreements to tap into a growing consumer base. And that is the same path Cambodia will eventually take.
As the US moves away from former President Obama’s Pivot to Asia policy, do you see the space and willingness for China to fill the void?
With the US not as engaged in Asia, China will continue to try to fill that void. And that is not something that should be taken as threatening because China just wants to lift more and more people out of poverty and drive economic growth. China is not going to sit back and wait for Donald Trump to make a move on trade if he doesn’t want to. So if China wants to do something, they will do so by pushing harder on RCEP. But if the United States and China can align themselves on an issue, that is a very powerful force.
