Asia's short-lived recovery exposes export dependency

Asia's short-lived recovery exposes export dependency

Bernice Han, Agence France-Presse, Singapore

Asia's spectacular export-led recovery from the 1997-98
financial crisis turned out to be short-lived as the region fell
victim this year to a U.S.-led global slowdown.

Economists said the region's woes this time round are
distinctly different from the economic mess four years ago,
essentially triggered by weak financial systems and unsustainable
exchange rates.

Instead, Asia's over-reliance on exports -- particularly in
electronics -- was cruelly exposed as demand slumped worldwide,
particularly in the United States, the biggest market for several
economies in the region.

"The highlight of the year has been the slowdown in
electronics exports feeding into the economies," said Sanjeev
Sanyal, a regional economist at Deutsche Bank.

The Manila-based Asian Development Bank (ADB) echoed similar
thoughts.

"While the slowdown has cut across all sectors, it is most
evident in manufacturing and particularly in the production and
export of electronics," it said.

According to Sanyal, a revival in electronics exports will be
the key challenge facing the region.

"Looking forward, one of the big issues will be when and to
what extent electronic exports will revive next year," he said.

At this stage, however, the prognosis is looking bleak for
Asia as the fallout from the September terror attacks on the
United States continue to reverberate throughout the global
economy, said the ADB.

The ADB said the region is projected to grow 3.9 percent this
year -- its second slowest growth in decades -- compared with 7.4
percent growth in 2000.

"Over much of the last year or so, East Asia has come under
stress. After a faster than expected recovery in 1999 and 2000
has now come a sharp economic slowdown, which has been made worse
by the Sept. 11 attacks on the US," the ADB said in its latest
quarterly review.

"With the worsening of the global economic situation in the
aftermath of the Sept. 11 attacks, the economic slowdown in East
Asia is likely to deepen further while being more prolonged," it
said.

One glaring development has been the reversal of fortunes for
economies which, having weathered the 1997-98 crisis better than
their neighbors, are now in a recession or on the verge of
slipping into one, said economists.

Singapore and Taiwan are the most striking examples.

"The worst hit during the 1997 crisis are actually not in a
recession. Taiwan which hardly blinked its eye during 1997 is now
in a recession," said Chia Woon Khien, regional economist at
Anglo-Dutch bank ING Barings.

Taiwan's economy last month was confirmed to be in a recession
after its gross domestic product (GDP) suffered the biggest
quarterly fall in 26 years with a 4.21 percent contraction in the
September quarter.

Singapore, Southeast Asia's strongest economy, was the first
in the region to fall into a recession in July when its second
quarter GDP shrank.

"Some have been hit harder especially for those who are small
and dependent on exports and has a small domestic economy, for
example Singapore," said Irene Cheung, a sovereign and forex
strategist at Dutch bank ABN Amro.

In contrast, the five countries -- the Philippines, Malaysia,
Indonesia, Thailand and South Korea -- most affected during the
1997-98 crisis will still see some growth this year, although the
figures are likely to be well down from last year, the ADB said.

The five economies as a whole will grow 1.9 percent in 2001,
down sharply from 7.0 percent last year, it predicted.

Asia's largest economy, Japan, has been no big help to its
neighbors but the one bright spot is China, although planners
have predicted that growth will slow to 7.4 percent this year,
from eight percent in 2000.

Japan sank into its third recession in a decade in the three
months to September and the jobless rate hit a new record high of
5.4 percent in October as companies slashed payrolls in a bid to
survive the slowdown.

On the positive side, reforms carried out in the aftermath of
the 1997-98 financial meltdown have made the region more
resilient than ever, said the ADB.