Asia trails China in reforms: ABN

Asia trails China in reforms: ABN

SINGAPORE (AFP): Asia's commitment to push ahead with structural reforms in the aftermath of the 1997-98 crisis paled in comparison to that of China, Dutch bank ABN Amro said.

The bank said this could see the region losing out to the world's most populous nation in the race to attract foreign investment funds.

While it gave no specific data on foreign direct investment (FDI), ABN noted that they "appear to be directed more and more to China in the run-up to the country's WTO (World Trade Organization)".

"The economic stresses and the slow progress of economic reforms in many other Asian developing countries are other push factors," the bank said in its latest quarterly report.

"To lure foreign investors back, other Asian countries have to step up their efforts to reform and liberalize their restrictive domestic industries," the bank added.

But the region's appetite to implement these reforms was weakening and this placed its long-term prosperity at risk.

"One major reason for the difference in reform progress between China and other Asian countries is the political will to push through difficult reforms," ABN said.

Chinese authorities are implementing a raft of pro-competitive economic policies in several areas such as the banking sector, capital markets and agricultural sectors.

In contrast, the rest of Asia most affected by the 1997-98 regional crisis has been slow to carry out their promises to carry out structural reforms.

"A variety of reforms have been announced, notably reforms aimed at revamping damaged banking systems, some attempts at corporate restructuring and some market opening or liberalization measures," the bank said.

"However, after most economies recovered from the crisis with strong cyclical rebounds, the commitment to, and the pace of reform, reduced."

Asia's long-term growth outlook remained cloudy if the acute stress on its financial systems brought about by the crisis was not solved, ABN said.

Apart from Singapore, other Asian countries have been reluctant to stay on the reform bandwagon, notably those that were hit hardest by the crisis.

The report noted the city-state has "aggressively liberalized" key services like telecommunications and banking and pushed its homegrown companies to look beyond the tiny home market of four million people.

Malaysia, the city-state's closest neighbor to the north, was a sharp contrast, the bank said.

It said "Malaysia is least eager to reform" and long-term growth prospects were under threat from structural constraints and slow progress in liberalizing the services sector.

Malaysian leaders have often voiced fears that globalization, if left unchecked, will hurt the Third World most.

Indonesia, one of three Asian economies which received multi- billion dollar bailouts from the International Monetary Fund, looked likely to be the last to recover from the regional crisis.

"The economic problems of Indonesia are so pervasive that the economic cost of reforms may be too high for any government to bear," the bank said.

"Worse, leadership uncertainties distract the government from resolving economic problems."

In Thailand, the deficient legal system was an obstacle to reforms, the bank said.

The South Korean government and chaebols now appeared to be shying away from reforms, the bank added.

"While the government has been less enthusiastic about selling nationalized distressed assets, the chaebol have also been less keen on selling their non-core assets."