Asian recovery could take decades: Hewson

Asian recovery could take decades: Hewson

CANBERRA (AP): Former conservative leader John Hewson on
Monday warned that Asia could take decades to recover from its
economic crisis, and more contagion is possible if major
economies devalue their currencies.

"In terms of the long-term structural process that has been
unleashed by the Asian crisis, I am pessimistic for many years to
come," Hewson, an economist with ABN AMRO, told the Australian
Industry Forum.

Hewson led the Liberal Party's unsuccessful campaign to unseat
Labor Prime Minister Paul Keating in 1993.

"While there may be some short-term recovery in some of these
countries, the debt overhang and the difficulties of adjusting to
the reality of that debt and non-performing loans I think will
dominate their economic capacity to grow, and they will have a
debt-ridden hangover for the next five to 10 years at least."

He said signs of recovery in Asia were a "blip" in the long-
term structural process.

Hewson said he doubted there would be a sustained recovery in
Japan, and predicted moves to lower the value of the yen in an
effort to spur economic growth and exports.

"My suspicion is that you will see the yen driven down and
that risks of course bringing about another significant wave of
competitive devaluations in the Asia Pacific region," he said.

Hewson also pointed to devaluation of the Chinese currency and
the Hong Kong dollar.

"I think there's an increasingly high probability of the
devaluation of both, and that could in itself trigger another
round of Asian contagion," he said.

"(There is) real pressure from the Chinese economy ...
ultimately it will result in a devaluation of the yuan."

Hewson said that as part of the recovery, the links between
government, business and the corporate sector need to be severed.

"As I see the economic solution in Asia it's the unbundling of
that relationship, and I think that's going to take one or two
decades rather than one or two months, or one or two years.

"I think the forces that the Asian crisis has unleashed are
the enormous amounts of economic and social reform -- in some
cases political reform, it will take many years to work through
the system."

He said in countries like Indonesia there was "blatant
corruption, cronyism and nepotism" at the center of the economic
system.

Hewson said there had been signs of strength in South Korea in
recent days, with positive economic growth possible.

But "I think it will prove to be short-lived as long as
there's a massive debt overhang," he said.