"[There was a] very favorable external growth picture, a very big technology gap, the ability to free up resources within the economy like people moving from the countryside into urban areas and a lot of direct foreign investment. It's difficult to see all of those factors coming back," he said.
Productivity-foreign investment nexus
Only productivity growth can compensate for the diminishing impact from the other two factors of the growth equations, said Kenneth Courtis, Goldman Sach's vice chairman in Tokyo.
"The bottom line is pretty simple. We know what the demographics are and you can't really change them. It's really on the productivity side where the difference are going to be made," he said.
The optimists among economists subscribe to the view that an essential component of growth in East Asia had been the acquisition and mastery of foreign technology that has contributed to efficiency gains and productivity growth.
But foreign investment flows to East Asia are facing a serious challenge due to increased risk aversion, bursting of the high-tech bubble and a shift in the region's economic center of gravity after China's entry into the World Trade Organization.
Demographically, too, China is in the perfect sweet spot for the next 20 years, with 75 percent of its billion-plus population still in the countryside, providing a deep, low-cost labor pool.
In a recent research note Cliff Tan, Salomon Smith Barney's regional economist in Singapore, showed that since early the 1990s when China started to receive larger foreign investment, Singapore has seen the sharpest absolute rise in structural unemployment, followed by Taiwan and Hong Kong.
Korea appears to have escaped a sharp rise but probably due to an already high average unemployment rate.
"These disparities imply a rising role for structural factors in driving future growth. It shows that in Asia a rising tide no longer lifts all boats," Tan said.
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