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.