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."