Asian crisis to be protracted: WB

Asian crisis to be protracted: WB

SINGAPORE (AP): Experts who thought the Asian financial crisis would be short lived are now predicting it will be "painful and protracted," a regional World Bank official said yesterday, as he urged regional bankers and governments to restructure, reform and open up their systems.

Recent estimates "indicate a far more severe collapse in domestic demand and sluggish growth," than expected in South Korea, Indonesia and other countries, said Javad Khalilzadeh- Shirazi, the World Bank regional manager.

"The crisis will be painful and protracted with major social and economic consequences in a part of the world that was regarded as an economic miracle," Shirazi said, opening a two-day seminar on "Global Lessons in Banking Crisis Resolution for East Asia."

Because of the severe social consequences of the economic crisis, "an unemployment safety net must be the highest priority in Asia, to sustain growth in an unstable situation," Shirazi said.

Many Asian nations do not have unemployment insurance or extensive welfare benefits. As thousands of people lose their jobs in an economic crisis, many end up on the city streets, or go home to their already poor villages.

He said the Institute of International Finance has estimated that the crisis will cause Asian countries US$100 billion in lost GDP growth, and that some countries will experience negative growth ranging from 3 to 12 percent this year.

Separately, a second major investment concern, J.P. Morgan, said in a report released Monday that Singapore may go into recession this year. The Singapore government is still predicting at least 2.5 percent growth, but its economy is strongly tied to investment and exports to its neighbors.

Singapore's deputy prime minister and head of the de facto central bank, Lee Hsien Loong, told the banking seminar that because of the unstable situation, the republic will proceed more gradually with financial sector reforms "rather than a big bang."

The Monetary Authority of Singapore, which Lee heads, will increase its supervision of financial institutions, while encouraging the island's traditionally secretive banks to give more information, and boost investor confidence.

"Far from the bad news spooking markets, the candor and openness has boosted confidence that problems will not be swept under the carpet, or allowed to fester," Lee said.