Complacency could end Asian recovery

Complacency could end Asian recovery

CANBERRA (AFP): Asia's extraordinary recovery from financial crisis will not be sustained if complacency destroys economic, political and corporate restructuring, the head of the Asian Development Bank (ADB) warned here Monday.

But ADB President Tadao Chino also said recent slumps on Asian share markets did not mean the region was heading for a second economic crisis.

The former Japanese government minister who was appointed head of the Manila-based bank last year said recovery from the catastrophe of 1997/98 proved the region had the ability to withstand economic shocks.

He told the National Press Club that developing economies in the region grew more than six percent last year and growth was set to continue at a more moderate pace this year and next.

"I believe that the weakening of the Asian financial markets now may well be a short-term correction and that the region's growth momentum will be maintained," Chino said.

However, he warned this could be put at risk by growing budget deficits and complacency, which has seen a number of countries ease off on reforms and revert to more protectionist policies because of a belief the crisis was now over.

"My optimism is based on the assumption all the countries in Asia will continue their serious reforms in the near future," he said.

"If people become slow in this economic reform process... there is a risk of a further stoppage of this rate of economic growth."

But Chino said the greatest challenge to the region and the ADB was to make the economic recovery deliver for the 900 million people in the Asia-Pacific who still live in poverty.

He said economic growth was the most powerful weapon in the fight against poverty as it delivered employment and wealth and gave governments the money needed to improve infrastructure and social services.

But he said it was not enough on its own, and social development, such as education and better governance, was also essential to ensure the most vulnerable did not slide back into poverty.

"The Asian crisis has shown how quickly poverty can recapture those who had only recently escaped it," he said.

Chino, a veteran economist who rose to become Japan's vice minister of finance for international affairs, was elected president by the ADB's board of governors last November.