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