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.