ASEAN corporate shakeup sought

ASEAN corporate shakeup sought

HANOI (AFP): International financial institutions on Saturday urged members of the Association of Southeast Asian Nations (ASEAN) to push ahead with corporate restructuring to pave the way for economic recovery.

"Corporate restructuring is the area where the least progress has been made," said Hubert Neiss, director of the Asia-Pacific department at the International Monetary Fund (IMF).

"That is easy to explain because this is basically a voluntary activity," Neiss said.

"What we are doing is to discuss with the governments and try to find ways how the government can push the process", Neiss told reporters following a meeting between IMF, World Bank and Asian Development Bank representatives and ASEAN finance ministers.

Corporate restructuring includes a rescheduling of the tens of billions of dollars owed by Asian companies as well as a retrenchment of excess production capacity built up during the boom years.

International agencies, which have arranged multi-billion- dollar financial bailouts for ASEAN members Indonesia and Thailand, say that Asian economies have made progress, albeit slow, in bank reform but lag behind on corporate restructuring.

Neiss stressed the importance of enacting bankruptcy laws to spur debtors and creditors to solve their problems on their own.

"So if creditors and debtors are not able to work out their debts then they will have their cases end up in the bankruptcy courts. Without the bankruptcy courts both parties would be worse off," he said.

He said, however, that most ASEAN countries were still at the bottom of the learning curve and that one way international finance institutions could help was through technical assistance.

Neiss cited debt restructuring efforts in Indonesia after the IMF brought in a debt restructuring expert from New York as an example of how international institutions could help.

However he said that if the carrot did not work, a stick might be more appropriate.

"The harder way is setting some deadlines for the government. If you don't come to an agreement by such and such a date, we have will a more intensified involvement," he said.

Asian Development Bank vice president Peter Sullivan also said reform of the banking and corporate sectors held the key to economic recovery.

"Ultimately, to rekindle economic vitality, significant progress on the restructuring and the recapitalization of distressed banking sectors is needed, as is parallel progress on resolving corporate debt," he said.

World Bank vice president Jean-Michel Severino reinforced the message, warning ASEAN ministers it was "no time for complacency."

"We have to deepen economic and financial reforms. This is the only insurance that the countries of the region can buy against the instability of the world market," he told AFP.

Keeping pressure on regional governments even as signs that the regional crisis may be bottoming out was the job of the international financial institutions, said Severino.

The institutions however said they were satisfied with the countries' commitment to reforms, and lauded both Indonesia and Thailand for recent steps to get their corporates back into shape.

"There have been positive steps in these directions in the most severely afflicted economies..," Sullivan said.

ASEAN groups Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.