Asia pressured to adopt reforms in private sector<\/p>\n
MANILA (AFP): The economic slowdown in the United States will
\nforce Asian nations to implement reforms in the private sector
\nwhich many of them had tried to evade for the last three-and-a-
\nhalf years, the World Bank says.<\/p>\n
Driven by the booming U.S. economy, much of Asia has been
\ngrowing strongly after being mired in a recession following a
\nfinancial crisis which erupted in mid-1997.<\/p>\n
But with growth slowing in the world's biggest economy, Asia's
\neconomic expansion will also be hit.<\/p>\n
Against such a scenario, the region had little alternative but
\nto speed up reforms to strengthen the economy and enhance
\ninvestment flows, World Bank Group managing director Peter Woicke
\ntold AFP at the end of a seven-nation regional tour.<\/p>\n
"The biggest issue in Asia which has to be addressed in most
\nof the countries is really the willingness to restructure
\ncompanies," said Woicke, also the executive vice-president of the
\nInternational Finance Corporation (IFC), a World Bank arm
\npromoting private sector investment in developing countries.<\/p>\n
The Asian financial crisis exposed the weaknesses of the
\nregion's companies which foundered as a result of overborrowing
\nin foreign currencies.<\/p>\n
Experts had recommended painful restructuring of these
\ncompanies so that the banks which lent them money could also
\ntackle the resultant problem of snowballing non-performing loans.<\/p>\n
But many Asian nations circumvented the restructuring process
\nand delayed corporate governance and other financial reforms
\nbecause their economies had started growing again rapidly after
\nthe financial crisis.<\/p>\n
What Asian companies needed now was not more borrowings or
\nlendings but more equity, Woicke said.<\/p>\n
"In order to get the equity, companies have to restructure so
\nthat banks can face up to the problem of NPLs (non performing
\nloans)," he said. "But everything is at a standstill because they
\ndon't want to restructure."<\/p>\n
Delayed restructuring of companies has dampened the capital
\nratios of banks, which are reeling from bad loans.<\/p>\n
This deprived banks from providing loans to genuinely healthy
\ncompanies, dampening investments and curtailing growth. "This
\nvicious circle has got to be broken," Woicke said."<\/p>\n
He said the booming economy of the United States had helped
\nabsorb much of Asia's exports and pulled the region out of
\nrecession shortly after the financial crisis.<\/p>\n
But U.S. economic growth has abruptly slowed with predictions
\nof a deepening downturn.<\/p>\n
"But sad as it is, I think it (the U.S. slowdown) is going to
\nfoster the reform process in Asia," Woicke said, citing
\nIndonesia, Thailand and South Korea in particular.<\/p>\n
"I think for a while there was the view in these countries
\nthat you can grow out of this restructuring problem by having
\nfast growth again. But this is not feasible or doable," he said.<\/p>\n
Woicke said the reform situation in Southeast Asia
\nparticularly "is not as good as I would like to see it" and
\nwarned that if the region did not buck up, it could lose to China
\nthe battle of wooing long term foreign investments.<\/p>\n
"Clearly, the (Southeast Asian) countries are not seeing
\nenough long term investments. We see interest to invest in these
\ncountries but it is still much less than it was three, four or
\nfive years ago," he said.<\/p>\n
On the other hand, Woicke said quite a lot of investments were
\ngoing into China where "the government has changed completely to
\nemphasize the importance of the private sector.<\/p>\n
"I find it fascinating as local companies are now keen to
\nadopt corporate governance, environmental knowledge. In China,
\nthings are moving relatively rapidly today and I think this is
\nalso a challenge to Southeast Asia," he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asia-pressured-to-adopt-reforms-in-private-sector-1447893297",
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