Asia told to continue with reforms for total recovery

Asia told to continue with reforms for total recovery

SINGAPORE (AP): A senior U.S. diplomat warned Tuesday that
recent optimism buoying markets in Asia was essentially
unfounded, and urged nations in the region to continue economic
and political reforms needed to spur a full-fledged recovery in
growth rates.

"I see no fundamental change in Asia over the past 90 days to
justify a sustained rally in the financial markets, much less to
sustain economic growth in the years ahead," U.S. Ambassador to
Singapore Steven Green told a gathering of businessmen in the
Southeast Asian city-state.

Many Asian currencies and stock markets have rallied in recent
weeks, despite a prognosis from most economists and observers
that the regional economic downturn will continue at least into
1999.

Some observers said an influx of foreign funds had lifted the
Asian market following rate cuts by the United States and major
European countries.

"As happy as I am for those of you who have made money and
increased your company values as a result of the recent surge in
stock prices, I do not believe that the long-term fundamental
problems of these markets are over," Green said.

Noting the rapid rise and subsequent fall in Asian markets in
the midst of the economic crisis earlier this year, Green
predicted that "this pattern of volatility will continue for some
time to come."

He attributed the recent market optimism in some Southeast
Asian countries to "short-term money" entering relatively small
markets.

For instance, he noted that the combined stock market
capitalization in Singapore, Thailand, Malaysia and Indonesia
totaled only US$300 billion, less than the market value of a
single large blue chip stock on the New York Stock Exchange.

Green said that while some money may be flowing into Asian
financial markets at the moment, other private capital continues
to flow out. He argued that more direct investment and loans to
the region were absolutely necessary for any return to sustained
growth in Asia.

"While investors are reputed to have short memories, I have a
feeling that the bankers who have lost billions in Asia over the
past year are not going to forget the lessons of this crisis any
time soon," he said.

He said U.S. bank executives have told him recently that the
lending market for Asia remains virtually suspended, and that
most American companies considering the purchase of Asian
businesses as mere "window shopping."

"Investors - both creditors and equity investors - cannot deal
with the level of uncertainty that now exists in most of the
countries in the region.'

Fundamental changes were required before long-term investors
would return, he said.

Asia needs to press ahead with political and economic reforms
that will ensure "greater transparency, proper bankruptcy laws,
and an honest and effective judicial system."

Unfortunately, many governments in the region seem more
concerned with bolstering their political positions than pursuing
painful reforms, said Green in answer to a question after his
speech.

"A lot of the resistance to financial reform is actually
resistance to political reform," he said.