Damage to Asian economies likely limited if U.S.-Iraq war is short
Damage to Asian economies likely limited if U.S.-Iraq war is short
Associated Press, Hong Kong
Airlines are cutting flights, some shoppers and tourists are
staying home, and exporters predict shrinking orders. But
analysts said Friday damage to Asian economies from the war in
Iraq is likely to be minimal and short-lived, assuming the
conflict ends quickly.
The key is how long it lasts, how bad it gets - and whether it
leads to any retaliatory terror strikes in the region. Southeast
Asian nations with large Muslim populations are being viewed as
possible trouble spots, experts said.
"If the law and order situation remains relatively stable - as
in no repeats of the Bali kind of incident - we should have a
minimal impact on the economy," said Song Seng Wun, a regional
economist at GK Goh Research Pte. Ltd. in Singapore.
Song predicted retailers will suffer in the short term as many
people stay home and watch developments on television instead of
going to the shopping malls. Some tourists will scrap their
trips. Exporters may get fewer orders from crucial markets in the
U.S. and Europe.
A Hong Kong businesswoman who said her export company gets 60%
of its trade from the Middle East joined an anti-war protest just
hours after the first U.S.-led attacks.
"This war is shameful and the act of barbarians," said
40-year-old Florence Mak, adding she's worried about disruptions
in air service affecting her business.
Despite the protests, stock prices across Asia and elsewhere
greeted the onset of the war with some surprisingly powerful
rallies this week. Traders are glad to be rid of the uncertainty
about what was coming. Many are now betting on a quick and
decisive victory by the U.S.-led forces.
To put it in stark economic terms, they envision some economic
damage in the second quarter of the year. Some look beyond the
war and see better times ahead, based on the assumption there are
no bad surprises in Iraq.
"If the war ends in a month or so, look for a pickup in Asia
by June," said Joseph Tan, an economist at Standard Chartered in
Singapore.
Some traders remain cautious, however, and Hong Kong Financial
Secretary Antony Leung warned that small investors in particular
should be wary of any market turbulence.
If the resolution of the crisis brings a drop in oil prices,
like the first Gulf War did, that will help most Asian economies
- although crude exporters Indonesia and Malaysia would miss the
extra revenues that came in during a recent run-up based partly
on fears of a Mideast supply disruption.
Despite optimism about the ill effects being short-lived,
there are already some real cuts in business emerging.
Singapore Airlines and Korean Air have already reduced or
halted services to destinations in the U.S., Europe or the Middle
East.
Many other carriers around the region say they are sticking
with full schedules for now but could cut back if the war drags
on and people stop flying.
Wars typically frighten a fair number of tourists, and some
have been holding back on their plans. Travel industry executives
say those most likely to stop flying to Asian destinations for
now would be Americans and Europeans.
Many manufacturing executives around the region, from
Taiwanese chipmakers to South Korean automakers, say their
biggest concern is the war could drag on and any business losses
thus would multiply.
Others take a gloomier long-term view, fearing the U.S.-led
attack on Iraq could bring lasting damage to world economic
confidence.
"If the war is short, its impact on India's software industry
will be minimal," said Run Jain, chairman of Polaris Software
Laboratory in Madras, India. "But the larger concern is the
confrontationist and big brotherly attitude of the U.S. That will
hurt the global economy."
Jain added: "Trust is crucial for business, and this trust has
not been handled by the U.S. properly."
Kiran Karnik, the president of India's main software trade
body, agreed, warning the war will make the world "more
protectionist."