ASEAN makes headway to restore economies

ASEAN makes headway to restore economies

BANGKOK: In the most unfamiliar terrain, some ASEAN member countries are making advances in finance and corporate debt restructuring with Indonesia and Malaysia leading the pack. Some good news has also come out of the Philippines. No matter what the leaders of the Association of Southeast Asia Nations may be preaching, they haven't neglected the bottom-line.

The twist in the economic management of major ASEAN member countries has become evident only in recent months. Perhaps propelled by the bad experience of the last four years of the economic crisis and/or the worsening of the world economy, the governments of Indonesia, Malaysia and Thailand appear to have accepted that their economies will go nowhere unless the books of their heavily indebted companies are cleaned up.

Quite a few of these leaders are known to be wary of foreign fund managers to the extent of being hostile to them, and a number of them do not want to rely on short term foreign capital flows. But they are putting aside their personal pride, rhetoric, and loss of face in favor of making the local environment attractive to foreign investment. The governments of Malaysia and Indonesia, in particular, have abandoned efforts in the past four years to ride out the economic crisis by themselves. Of course, the devil is in the details. The outcome remains to be seen.

The most visible effort of the ASEAN nations to tackle the root of their economic difficulties came with the announcement of the cabinet of Indonesian President Megawati Soekarnoputri. She may not say much, but her cabinet appointees have won international confidence and signaled that the new administration is serious about tackling the economic woes left undone by the previous government.

Attention is focussed on the appointment of Laksamana Sukardi as the State Minister for State Enterprises. He will take charge of state enterprises and the Indonesian Bank Restructuring Agency. He is expected to sell the assets quickly.

"I think the task ahead is very difficult in terms of convincing the people that we're willing to carry out this program," Sukardi told the Far Eastern Economic Review. "Because it involved privatization and asset sales and that is quite humungous. And for most Indonesians it looks like selling the country... Well, philosophically, I believe in the principle of benefit rather than the principle of ownership. You know you can own a company 100 per cent and get less benefit than if you own a company 50 per cent."

"There's no person associated with Mega who is more symbolic of reform and good governance," the weekly magazine quoted Jeffrey Winters, an Indonesia expert from Northwestern University in Illinois, as saying. "His choice symbolizes a determination to clean things up and run them according to the rule of law."

In Malaysia, despite Prime Minister Mahathir Mohamad's rhetoric, he is being applauded locally and overseas for sudden aggressive moves to solve the country's debt problems.

Mahathir has displayed a new toughness against politically favored, but heavily indebted, conglomerates and sidelined several prominent businessmen who had benefited from the government's policy of affirmative action for ethnic Malays.

"Dr Mahathir has taken over the reformasi mantle. A more enlightend electorate is demanding more transparency, accountability and good governance," the Financial Times quoted Arnold Lim, research head of ING Barings in Kuala Lumpur as stating in his recent presentation.

The efforts to shake up and restructure the debts of UEM- Renong, Malaysia's biggest debtor, Malaysian Resources and Malaysian Airlines, among others, were welcomed by investors and in July, the Kuala Lumpur stock market enjoyed a 10 per cent share price rise.

Singapore, which was affected less by the 1997 Asian crisis, has continued to strengthen its financial environment. A series of bank mergers are expected to make the island republic a strong financial offshore banking center in the coming years.

The Philippines was not hit by the over investment in the 1990s. Despite the lost decade of economic opportunities, the country seems to be making ground under President Gloria Macapagal Arroyo. The Philippines reported its manufacturing output rose 11.3 per cent in June, although its exports remained weak because of the slower demand from the US.

With many ASEAN economies holding ground somewhat despite a weakening world economy and apparent heightened confidence after peaceful political change in the Philippines and Indonesia, Thailand is also under pressure to resolve the debt hangover of its hundreds of thousands of companies.

Speculation continues as to the outcome of the Thai Asset Management Corp (TAMC) which is to assume control of Bt1.3 trillion worth of non-performing assets. TAMC's charter is to be scrutinized by the Senate soon. Yet, the working mechanics of the new agency remain unclear as to the effectiveness of its management. The Thai Rak Thai Party is also hoping to sponsor the next series of amendments to the Bankruptcy Act, designed to speed up the resolution of heavily indebted cases.

Prime Minister Thaksin Shinawatra has also steadily retreated from his earlier aspiration to rely less on external supports to prop up the economy. He is making frequent overseas trips to woo foreign investors.

Despite many shortcomings both here and in other ASEAN countries, this period is the first time in four years where some bright signs have emerged within the region -- propelled by favorable political changes and the apparent realization of regional leaders about what must be done in their own countries to change the course of their economies.

And as a group, they share more issues of common interest than ever before with the latest round of political resurrections. If they get away from the rhetoric and stir their economies towards stability and growth, then ASEAN could be back on track -- sooner than later. At the very least, Indonesia and Malaysia are trying to stay ahead of Thailand on corporate restructuring.

-- The Nation/Asia News Network