Asian economies struggling under hi-tech slump
Asian economies struggling under hi-tech slump
SINGAPORE (AP): Three years after a devastating financial
crisis, Southeast Asia's once high-flying economies are back in
trouble. But the current slowdown is different in nature, and one
that few expect to be as bad.
A spate of gloomy economic data has some fearing a repeat
performance of 1997, when massive capital flows out of emerging
markets battered Asian currencies and pushed the region into
recession.
Singapore is in recession now and other economies in the
region may follow suit. This time around, however, the problem is
slack demand for high-tech exports.
"It's anything but a crisis deja vu," said P.K. Basu, a
Singapore-based economist with Credit Suisse First Boston.
Structurally, Southeast Asia is very different place than it
was in the late 1990s. Debt levels have declined. Currencies are
no longer easy targets for speculative attacks. Most Asian
economies have abandoned fixed exchange rates, making currencies
more flexible.
Adrian Foster, an economist with Nomura Securities, says
Southeast Asia's problems now are mostly cyclical, rather than
systemic, because the region is so heavily reliant on exporting
disk drives and computer chips to the United States.
The countries currently suffering the most - Singapore,
Malaysia, and Taiwan - are the ones most dependent on computer
chips and other high-tech exports. Those same countries suffered
the least during the 1997-98 Asian crisis.
Electronics make up roughly 70 percent of Taiwan's total
exports, while they account for about 60 percent for Malaysia and
Singapore, according to their governments.
The heavy demand for high-tech exports in 1999 and 2000 had a
negative impact on Asia because it allowed many countries to
delay cleaning up their banking systems and corporate sectors.
After all, why bother with painful reforms in the middle of a
boom?
But some reforms have taken place.
"We don't seem to be as fragile now as we were going into
'97," said David Cohen, an analyst with Standard & Poor's MMS
International. "When problems came, everyone ran. Nobody's quite
so wide-eyed anymore."
The thought of foreign investors yanking their money out of
Southeast Asia is not as terrifying simply because the region has
failed to attract much foreign investment since the crisis. China
now lures more money than all 10 countries in the Association of
Southeast Asian Nations combined.
While China and fellow giant India have bucked the trend of
global gloom, Chinese and Indian appetites for electronics have
not been able to offset the slump in U.S. consumer demand.
With the U.S. economy expected to grow at an anemic rate over
the next year or so, it is urgent for Southeast Asian economies
to restructure their economies, analysts say.
Wong Keng Siong, a regional economist with Dai-ichi Kangyo
bank, says the slowdowns will reinvigorate the reform process,
but that Asia has already come a long way.
"Most of the weak banks are already gone," Wong said. "What
you have left with is a crop of banks that are generally in
better shape."
Although Thailand and Indonesia need to make major reforms in
their banking systems, most of the electronics-dependent
countries have already done so, he said.
Tiny, trade-dependent Singapore, which weathered the last
crisis better than most, may end up being the hardest hit by the
current electronics slump.
Exports of electronic goods fell 21.2 percent to US$2.6
billion in June, while the sale of computer chips fell 31 percent
to $650 million.
The data was worse than expected.
Singapore, Malaysia and Taiwan must work to diversify their
economies and develop stronger services industries, economists
say.
"Economies that have a bigger share of services tend to
exhibit less volatile growth," Wong said. "Manufacturing tends to
be more susceptible to boom and bust."