Attacks further damage SE Asia investor confidence<\/p>\n
Alan Yonan Jr., Dow Jones, Singapore<\/p>\n
The deadly weekend bombings in Bali have dealt a major blow
\nnot only to Indonesia's economy but to efforts across southeast
\nAsia to win back investor confidence after economic setbacks in
\nthe past five years.<\/p>\n
Businessmen and analysts worry that the massive car bomb which
\ntore apart a nightclub on the Indonesian resort island Saturday
\nnight, killing at least 188 people and injuring hundreds more,
\nindicates Indonesia has become a base for international terrorism
\nwith links to al-Qaeda.<\/p>\n
If so, that could mean further such attacks in coming months,
\nnot only in Indonesia but in the Philippines, which is fighting a
\nMuslim secessionist movement, or Malaysia and Singapore, which
\nhave had to act against terrorist groups since last year's Sept.
\n11 attacks in the U.S.<\/p>\n
\"This just puts an exclamation point on the concept that
\nsoutheast Asia is a hotbed of international terrorism,\" said Dick
\nBaker, Indonesia specialist at the East-West Center in Honolulu.<\/p>\n
Although nobody had claimed responsibility for the attacks by
\nMonday, the Bali bombings significantly expanded the violence in
\nIndonesia beyond previous attacks, which were carried out mainly
\nby separatist movements, Baker added.<\/p>\n
\"This has all the earmarks of an international terrorist
\nattack,\" he said.<\/p>\n
If the idea of southeast Asia as a terrorist danger spot
\nbecomes entrenched among U.S., European and Japanese investors,
\nanalysts said, capital flows into southeast Asia will shrink
\nfurther, some institutions may pull long-term money out, and
\ntrade and tourism could suffer serious damage.<\/p>\n
\"This comes at a very bad time for everyone,\" said Paul
\nSchymyck, regional economist at IDEAglobal in Singapore. \"With a
\npossible double-dip recession coming in the U.S., this is the
\nlast thing you need.\"<\/p>\n
HSBC economist John Edwards said the uncertainty created by
\nthe Bali bombings had probably eradicated any remaining chance of
\nAustralia's central bank raising rates at its next board meeting
\non Nov. 5. But he added that the central bank likely retained its
\ntightening bias, given economic factors such as Australia's
\nhousing boom.<\/p>\n
Fund manager William Pitman at Henderson Global Investors,
\nwhich has about US$2 billion invested in Asia, said it was too
\nsoon to think there would be an exodus of foreign money from
\nsoutheast Asia.<\/p>\n
\"It really depends whether (terrorism) is perceived to be more
\nof an endemic problem, which it has probably not proved to be
\nyet,\" he said, adding that ultimately, economics would drive the
\nstock markets.<\/p>\n
But the region's economies are vulnerable to any confidence
\nshock, analysts noted. Singapore last week reported growth in the
\nthird quarter that was well below expectations. The Philippine
\neconomy is coming under increasing pressure from its growing
\nbudget deficit, and Malaysia's export sector is threatened by a
\npossible slowdown in the event of a U.S. invasion of Iraq.<\/p>\n
Foreign companies, which are already directing a larger
\nportion of their overseas investment to China, may now have one
\nmore reason to avoid southeast Asia.<\/p>\n
\"The bomb blasts illustrate the risks involved in many
\ncountries in Asia, particularly southeast Asia,\" said Steve
\nBrice, chief economist at Standard Chartered Bank in Singapore.<\/p>\n
The Bali attacks may reinforce the perception that China and
\nnortheast Asian economies such as South Korea and Taiwan are
\nbetter placed in terms of their risk-return profile than
\nsoutheast Asia, he said.<\/p>\n
Singapore, a traditional safe haven in Southeast Asia, \"may
\nnow appear more vulnerable\", Brice added.<\/p>\n
Song Seng Wun, regional economist at securities house G.K. Goh
\nin Singapore, said the Bali attacks were unlikely to have any
\nlong-term impact on Asian economies unless they were followed by
\nmore terrorist incidents.<\/p>\n
But if there is a string of further attacks, there will be
\nnegative implications across a range of commercial activities, in
\ntourism, the services sector, the travel industry and domestic
\nconsumption, he said.<\/p>\n
As it is, the Bali tragedy may mean an expected lift in
\nregional economies in the fourth quarter of this year could be
\nless than originally expected, even though economic indicators
\nwill have support from their low bases during the post-Sept. 11
\nperiod last year.<\/p>",
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