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.