ASEAN out of recession but still 'vulnerable'

ASEAN out of recession but still 'vulnerable'

MANILA (AFP): Southeast Asia on Tuesday declared itself out of
a recession but still "vulnerable" and pledged to press ahead
with reforms to blunt "significant risks" that could pose
problems down the road.

Association of Southeast Asian Nations (ASEAN) economies
should grow between two and three percent on average this year
from a seven percent decline in 1998, and are now "poised for
higher and sustainable growth" from 2000, ASEAN finance ministers
said after a meeting here.

Asked if the ASEAN recession is over, Philippine Finance
Secretary Edgardo Espiritu told a news conference: "Yes, I would
venture to say that."

But the ASEAN ministers said in a joint statement that "while
our economies look much healthier compared to a year ago, the
situation still remains vulnerable and there are risks that need
to be addressed if our economies are to experience high
sustainable quality growth."

ASEAN members Indonesia, Malaysia, the Philippines and
Thailand were at the center of a mid-1997 currency meltdown that
ushered East Asia to its worst post-war economic crisis. Brunei,
Cambodia, Laos, Myanmar, Singapore and Vietnam are the group's
other members.

Economists say the crisis exposed the absence of modern
support systems such as unemployment benefits in the region,
where millions of people lost their jobs or saw their earnings
drastically slashed as companies and banks went bust.

The ministers said they "conducted a peer review" and agreed
"to press on with structural reforms.

Indonesian Finance Minister Bambang Sudibyo said that during
the review, member countries took care "not to criticize our
dialogue peers," and focussed "more on the positive side."

"We are pleased with the progress in restructuring the
financial sector. Public and corporate governance is being
strengthened," the ministers said in their statement, referring
to anti-corruption measures.

"Viable banks are being recapitalized, bad assets are being
dealt with, and prudential supervision and regulation is being
tightened."

The ministers said "corporate restructuring will be
accelerated," with members agreeing to "implement bankruptcy
codes and foreclosure laws that are in line with international
standards."

The absence of proper bankruptcy and foreclosure laws has been
blamed for distortions resulting from the continued operation of
non-viable companies.

The ministers said ASEAN recognizes "the important role of
capital flows to further sustain growth in our region," and
reiterated the countries' commitment to create "an investment
region with free-flowing capital."

They said there was a short-term "possibility of sharply lower
growth in export demand if growth slows down" in the United
States.

"Japan's recovery, which is critical for ASEAN, is still
subject to significant risks despite recent positive views."

Southeast Asia expects the European Union to take up some of
the slack should the US economy slow and Japan remain in the
doldrums, Espiritu said.

On the fiscal side, the Filipino official said ASEAN members
had a "common problem" of ballooning public sector debt that
"needs to be addressed now."

Most of the governments had boosted spending to get their
economies out of the hole.

The Asian Development Bank on Tuesday sharply upgraded this
year's regional economic growth forecasts for Asia to 5.7 percent
on the back of a "far better than expected" rebound from the
crisis.

The Manila-based bank boosted the original projection of 3.8
percent owing to strong recovery by the humbled economic tigers
of South Korea and Southeast Asia and robust growth in China.