Asian can achieve another miracle: WB

Asian can achieve another miracle: WB

HANOI (Reuters): Asian economies can achieve "miracle" status
again but must ensure their reform efforts are not derailed by
complacency, the World Bank said on Friday.

Jean-Michel Severino, World Bank vice president for East Asia
and the Pacific, said signs of regional recovery had emerged,
such as better export performance, more stable financial markets
and a halt in the collapse of domestic demand.

But Severino said public opinion in countries such as
Thailand, South Korea and the Philippines could hinder
governments trying to haul their economies out of crisis.

"Governments are serious but in some quarters of public
opinion we see complacency spreading," he said in an interview on
the sidelines of an Association of Southeast Asian Nations
(ASEAN) finance ministers meeting.

"We see this sometimes in the local press in the countries
that are doing better and we think this is dangerous."

Severino said it was expected that people would question why
tough reforms were needed when economies were improving.

Indeed, he said there had been a fundamental change in the way
Asian governments, banks and companies did business, with more
transparency and less cronyism -- two factors economists say
helped plunged the region into crisis in the first place.

"Now how fast and how deep and how far this (change) will be
is the question. This is one of the reasons why we are talking
about the risk of complacency," he said.

The other wildcard was unemployment, likely to rise in the
coming months because of slow corporate restructuring, Severino
said.

"Restructuring in the corporate sector has been relatively
slow, too slow in our minds and this is one reason there is huge
potential for additional unemployment," he said.

But Severino said he had no doubt Asia had the potential to
rediscover growth rates of 6-8 percent.

Asian countries still possessed the strong fundamentals that
triggered the "Asian Miracle" such as high levels of education,
high savings rates, export-oriented economies and overall sound
macroeconomic policy, Severino said.

He said because many Asian countries remained poor the large
difference in gross domestic product with the developed world
left room for high growth.

"This type of growth can be achieved again provided these
countries continue or finalize reforms they have undertaken and
provide a good environment for investment. But it won't happen
just by chance," he said.

Severino said Asian governments had learned the hard lessons
of the crisis and that reform efforts of the last 18 months were
impressive. The key lesson was that liberalization of financial
markets must be accompanied by strong governance of corporations
and banks.

In addition, the World Bank believed financial markets were
currently differentiating between the political dimension of the
crisis in Indonesia and economic events elsewhere in the region,
Severino said.

Nevertheless, Indonesia still posed a strategic challenge for
Asia because any collapse of the political situation there would
have a regional economic impact because of the country's size.