'ASEAN' won't default on debt': Studies<\/p>\n
SINGAPORE (AFP): Indonesia, Malaysia, the Philippines and
\nThailand are unlikely to default on their largely yen-denominated
\ndebt despite the Japanese currency's steep appreciation against
\nthe U.S dollar, studies say.<\/p>\n
\"Our estimates show that the impact of the yen's rise on the
\ndebt burden of the ASEAN-4 is unlikely to significantly raise the
\nprospects of a debt default,\" a just-published study by
\nSingapore's United Overseas Bank (UOB) Group said.<\/p>\n
Apart from the four countries, the other member states of the
\nAssociation of Southeast Asian Nations (ASEAN) are Brunei and
\nSingapore.<\/p>\n
Another study, Crosby's Quarterly Economic Review of Asia,
\nsaid the regional economies were fundamentally different from
\nMexico, whose currency crisis in December sparked concerns
\nwhether Asia's developing countries would face a similar
\npredicament.<\/p>\n
The Japanese currency's estimated 20 percent rise against the
\nUS dollar this year had particularly caused persistent concerns
\nthat Indonesia, Malaysia, the Philippines and Thailand will face
\nproblems servicing their debt.<\/p>\n
This was because yen-denominated loans make up a substantial
\nportion of their total debt.<\/p>\n
Thailand has 52 percent of its total debt denominated in yen,
\nthe highest proportion among the four, while Indonesia has the
\nhighest external debt-service ratio, estimated at 32 percent,
\ncurrency analysts said.<\/p>\n
The UOB study estimated that as of March 15, the debt burden
\nof the four countries had risen by between six and 8.4 percent as
\na result of the yen's appreciation against the US dollar since
\n1994.<\/p>\n
The study said the prospects of a debt default was unlikely
\nbecause the export growth of the ASEAN-4 was well above the
\nincrease in their debt burden.<\/p>\n
Furthermore, concessional debt constitutes between 12 and 30
\npercent of the four countries' total debt.<\/p>\n
Concessional debts are those given to developing economies by
\nrich countries at discounts, usually at two-three percent, with
\nan additional grace period of about five years.<\/p>\n
The UOB study, exclusively based on economic factors, also
\nshowed that the risks of devaluation among the ASEAN-4
\ncurrencies, with the exception of the Philippine peso, were
\ngenerally lower than Mexico's.<\/p>\n
But it pointed out that the current state of the Philippine
\neconomy was comparatively better than the Mexican economy before
\nits currency plunged.<\/p>\n
Crosby said that Thailand, Malaysia, the Philippines and
\nIndonesia suffered current account deficits but the source of
\ntheir deficits generally reflected \"economic strength and not
\neconomic imbalance.\"<\/p>\n
Such strength, it said, was based on very high levels of
\nforeign investment financed largely by long-term foreign direct
\ninvestments.<\/p>\n
In another study, Salomon Brothers said that Indonesia's
\ncurrent account deficit as a percentage of its Gross Domestic
\nProduct fell from 3.2 percent in 1990 to an estimated three
\npercent in 1994 -- \"well within the lower range of the region's
\nlevels.\"<\/p>\n
Thailand's equivalent percentage was higher, at 7.7 percent in
\n1990 but down to 5.2 percent in 1994, it said, adding that these
\npercentages were likely to remain stable during 1995.<\/p>\n
Combined with foreign exchange reserves enough for five months
\nof imports at the end of 1994 for Indonesia, and 6.8 months for
\nThailand, these deficits on their own will not present specific
\nthreats to exchange-rate stability, even in the context of the
\nrising yen, Salomon Brothers said.<\/p>",
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