ASEAN sees modest economy recovery

ASEAN sees modest economy recovery

Rebecca Thurlow, Dow Jones, Bandar Seri Begawan

Economic ministers from the Association of South East Asian
Nations are predicting a modest economic recovery in the region
this year but warn growth could be stunted by a double dip in the
U.S. economy or an oil shock associated with an attack on Iraq.

In Brunei last week for the 34th ASEAN Economic Ministers, or
AEM, meeting, ASEAN Secretary-General Rodolfo Severino said he
expects the region's growth rate to rise this year after falling
to 2.94 percent in 2001 from 5.82 percent in 2000.

"Considering the global economic slowdown, the ministers feel
that the ASEAN economies have been doing fairly well," Severino
told Dow Jones Newswires.

"We expect average of about 3.5 percent to 4.0 percent gross
domestic product growth (across the 10 ASEAN member countries in
2002). Exports are down because of the economic slowdown but they
should pick up this year," he said.

Brunei Minister of Industry and Primary Resources Abdul Rahman
Taib, who chaired the AEM meeting, told a press conference last
Thursday that while the region has been hurt by the global
slowdown, the outlook is improving.

"We expect to achieve a modest recovery by the end of this
year," he said.

The AEM meeting came the day after the Fifth ASEAN Investment
Area Ministerial Council said foreign direct investment in
Southeast Asia is on the rise despite the negative effects of the
Sept. 11 attacks on the U.S. last year.

After meeting Wednesday, the council said that based on
balance of payments data, net FDI in Southeast Asia increased by
13.4 percent to US$13.06 billion in 2001 from 2000.

The ministers said the data indicate that Sept. 11 had limited
impact on the regional investment plans and commitments of
companies within and outside the ASEAN region.

Available data suggest that foreign investment continues to
trend higher in 2002, added Taib, who also chaired the investment
council meeting.

However, in a joint press statement issued after the AEM
meeting Thursday, the economic ministers said they are worried
about the global economic outlook.

"The ministers expressed concern on the impact of the global
economic downturn and the continued weakness of the U.S. economy
that slowed down growth in ASEAN," the statement said.

"The U.S. second-quarter GDP growth of 1.1 percent was below
expectations... The ministers warned that if the U.S. economy,
which accounts for 40 percent of global GDP growth in recent
years, suffered a relapse, the prospects for global economic
recovery would be at risk."

If the U.S. and its allies go to war with Iraq, both global
and ASEAN growth will be hit, said Myanmar Minister at the Office
of the Chairman of the State Peace and Development Council Brig.
Gen. David Abel.

"The growth of ASEAN will be partially retarded," Abel told
Dow Jones Newswires in an interview Saturday. "I think the whole
world will slow down."

Cambodia Minister of Commerce Cham Prasidh said Friday he has
been sounding out his colleagues at the AEM meeting on the issue
of oil in the event of a war in Iraq, and whether oil-producing
ASEAN members would help their neighbors.

ASEAN has a plan whereby oil-producers would make cheap oil
available to fellow members should there be a global shortage and
prices spike.

Cambodia, like Myanmar, is one of the four newer and least
developed members of ASEAN, which also groups Indonesia,
Thailand, Malaysia, Laos, Vietnam, Brunei, the Philippines and
Singapore.

"You know that in the case of Cambodia, we are not an oil
producer, and that would create problems for us in terms of
increasing electrical power charges.

"It would create all implications for the economy, it would
disrupt our plan to ensure sustainable development, " the
Cambodian minister told Dow Jones Newswires.

Oil futures prices have been hovering about the $30 a barrel
market in recent days, up from just $18 a barrel in January, amid
expectations that the U.S. may soon attack Iraq. Observers say
there is room for further sharp rises in oil prices should war
breaks out, as Iraq sits at the center of the world's greatest
oil reservoir and crucial shipping lanes.

Indonesia Senior Economic Minister Dorojatun Kuntjoro-Jakti
told Dow Jones Newswires Friday: "You learn from the past that
every time you have a crisis in the Middle East, the price of oil
moves up."

He declined to say how much prices could rise from their
current levels, saying it is unknown how long any conflict would
last.

He also said rising oil prices posed no threat to the
economies of ASEAN oil producers Brunei, Malaysia and Indonesia.

"However, we (ASEAN) have a full security system, an oil
sharing system in place, so I think we'll do what we did in the
past when we found ourselves in this situation," he said.