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.