Asia needs tough economic steps: Lee

Asia needs tough economic steps: Lee

SINGAPORE (Reuters): Troubled Asian economies are only prolonging the agony if they fail to take tough measures needed to correct fundamental problems, Singapore Senior Minister Lee Kuan Yew said.

Delaying reform means "dragging out the misery" he told Reuters in an interview yesterday.

Better he said, "if you face it head on, and bite the bullet, swallow the bitter medicine, find any metaphor you like but take the pain and take it quickly. Get it over with".

For similar reasons, an Asia fund aimed at providing financial support to countries hard hit by economic problems must be linked to the International Monetary Fund (IMF), he added.

"The Asia fund as a supplement to the IMF, to back up the IMF, and the rigors that the IMF must impose, that's good. But the Asia fund in place of the IMF, I don't know what the others think, but my Prime Minister (Goh Chok Tong) says 'count me out'," he said.

"Let me put it in a very succinct way. I'd rather the IMF tell the Thais what they have to do than me and my ASEAN neighbors clubbing together, putting up US$17 billion and telling the Thais if you don't do this we won't give you $17 billion. We won't be friends for a very long time," he said.

The Association of South East Asian Nations (ASEAN) groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Lee said financial aid, no matter how massive, was meaningless if countries did not make needed major reforms.

"It's meaningless because without the fundamental reforms in financial structures, banking, stock market supervision, disclosures, transparency and getting the macro-economic policies right, you can throw in a hundred billion, it's down the tube," he said.

Lee said Asia's economic woes would have an impact on Singapore and its economic growth, but it would be limited.

"We'll have less tourists, we'll have less trade, we'll have less investments, and less return on investments" as the extra stimulus which comes from neighbors' growth is lost, he said.

"From about seven or eight (percent annual growth) we'll go down to five or six. I don't think it will be as bad. Maybe one percent will be lost, depending on how they recover."

"I don't think it will be immediate. It's going to be six to 18 to 24 months from now," Lee said.

He noted Singapore experienced strong growth rates before regional markets opened up, thanks to its trade with industrialized countries, and was a manufacturing center for numerous multi-national corporations selling worldwide.

Earlier on Monday, Singapore reported a 10.2 percent year-on- year economic growth rate in the third quarter, and projected 1997 growth at about seven percent.

Officials said next year's growth rate was expected to moderate and gave a preliminary growth forecast for 1998 of between five and seven percent.

The relative strength of the Singapore dollar, which has fallen far less against the U.S. currency than some other Asian currencies, would have a negative impact, Lee said.