Asia must 'put house in order'<\/p>\n
Eileen Ng, Agence-France Presse, Kuala Lumpur<\/p>\n
There is little Asia can do to prevent a foreign investment
\nslowdown amid fears of terrorist threats but it can \"put its
\nhouse in order\" to rebuild confidence, analysts said Monday.<\/p>\n
The recent bomb blast on the Indonesian island of Bali and a
\nlooming U.S.-Iraq war are driving investors out of the region and
\nthey are likely to stay away in the short-term, analysts told a
\nconference on strengthening investor confidence in emerging
\nmarkets.<\/p>\n
\"They are shying away from the region now and I don't think
\nthere will likely be a turnaround in that situation for the next
\nsix months,\" said ING's chief economist for Asia, Tim Condon.<\/p>\n
Condon forecast a short-lived U.S.-Iraq war in early 2003 but
\nsaid a repeat of the 1997-1098 Asian financial crisis was \"very
\nunlikely.\"<\/p>\n
Even if a war was averted, he said, prospects for the region
\nwere \"considerably gloomier\" now than it six months ago amid weak
\nbusiness and consumer confidence and fragile capital markets.<\/p>\n
\"There is not much that Asia can do amid the global
\nuncertainties. Asia will be forced to rely on domestic demand to
\ngenerate economic activities. Growth will be driven by Asian
\ninvestors,\" he added.<\/p>\n
Manu Bhaskaran, economic research chief with consultancy firm
\nCentennial Holdings in Singapore, said fears of a second Gulf War
\nhave already wreaked havoc on Asian economies.<\/p>\n
\"It looks like there is a high risk of war but whether there
\nis a war or not, almost doesn't matter now because the damage is
\ndone,\" he told AFP.<\/p>\n
\"Oil prices have risen because of the fear of war,
\nuncertainties over the war and its implications have already
\ncaused businesses around the world to cut back on spending and
\nhiring and it has already slowed global growth and affected
\ntrading countries in the region.\"<\/p>\n
With dark clouds over growth prospects in the United States,
\nJapan and Europe and perceptions of Asia as a new terrorist
\nground, he forecast a \"cautious, subdued outlook\" for the region.<\/p>\n
\"Asia must focus on improving its own fundamentals. Get your
\nown house in order. People may have wrong perceptions but
\neventually they will come back to fundamentals,\" he added.<\/p>\n
Bhaskaran said Asia must search for new domestic growth
\nengines and continue its restructuring and consolidation to cope
\nwith growing foreign competition and improve resilience to
\ninstability.<\/p>\n
\"The world is a tougher place and the key is adjustment to
\nchange. Those who change will prosper but others who do not will
\nfall by the wayside. There will be a stark pattern of winners and
\nlosers,\" he added.<\/p>\n
John Snow, chairman of U.S. fund manager State Street Global
\nAlliance LLC, said Asian markets would have to lower their
\ninvestment target for the next three to five years.<\/p>\n
Emerging markets, most which lacked liquidity and breadth,
\nmake-up only two to four percent of investment portfolios in the
\nworld capital basket with Asia dominating the race, he said.<\/p>\n
They must improve corporate governance and strengthen legal
\nreforms to boost private equity flows, he added.<\/p>\n
Malaysia's Securities Commission chairman Ali Abdul Kadir said
\n78 emerging stockmarkets worldwide accounted for less than 10
\npercent of global market capitalization at the end of 2001.<\/p>\n
Liquidity has also dried up, with emerging stockmarkets
\naccounting for just over five percent of the world's market
\nturnover compared to around 18 percent at the end of 1994, he
\nsaid.<\/p>\n
\"It is crucial therefore that we take focused, definite and
\nconcerted steps to reverse this situation,\" Ali said.<\/p>\n
\"The biggest challenge that emerging markets face going
\nforward is that of retaining and building up investor confidence.
\nAs we all know, once lost, confidence is frightfully difficult to
\nregain.\"<\/p>",
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