Elections a risk for Asian economies in 2004: Bank

Elections a risk for Asian economies in 2004: Bank

Martin Abbugao
Agence-France Presse
Singapore

Elections in several Asian countries this year pose varying
degrees of economic risks that are expected to defer many big
investment plans until after the polls, German lender Deutsche
Bank said.

India, Indonesia, Malaysia, the Philippines, South Korea and
Taiwan are scheduled to hold presidential and parliamentary
elections this year, the results of which could result in
important policy changes.

This could disrupt the bank's otherwise rosy 7.2 percent
growth forecast for the Asian region outside Japan, which should
be powered by strong export growth and a pick-up in domestic
demand.

"In our view, the biggest risk to domestic demand growth in
the region stems from the unusually high degree of political
risk," the bank said in a report released here.

"A climate of political uncertainty such as this is unlikely
to encourage investors. Instead, we expect many large-scale
investment plans to be on hold until after elections are over."

Deutsche Bank chief economist for Asia Michael Spencer singled
out the Philippines and South Korea as the countries where the
elections would most likely result in significant policy shifts
that could unsettle investors.

"It is possible, probably not likely but possible, that the
(elections) in (South) Korea could lead the National Assembly to
a more rightward direction in terms of economic policy than the
current government has been trying to pursue," he said at a
seminar organized by the bank here on Friday.

South Korea is scheduled to hold parliamentary elections in
April.

For the Philippines, Spencer said there was a chance the next
president after the May elections would not have the same
commitment to fiscal sustainability than the current government
of President Gloria Arroyo.

Arroyo, an economist, is being challenged by movie actor and
school dropout Fernando Poe Junior, whose lead in popularity
surveys is giving jitters to business executives and investors
because of his lack of political experience.

Poe's long-time close friend and disgraced former president
Joseph Estrada is on trial for corruption after being deposed in
an uprising in 2001.

Deutsche Bank said it expected investments to suffer in the
first half of this year in South Korea and the Philippines as
companies sidelined spending plans until after the polls.

The risks in Taiwan's presidential elections in March seem to
be more on the polls' impacts on relations with China following
increasingly strident rhetoric about independence from President
Chen Shui-bian.

In other countries, although elections by nature add to
economic uncertainty, the status quo is expected to be preserved.

While the process of choosing a president in Indonesia is
complicated and drawn out, there should be no drastic shifts in
policies whoever is elected, the bank said.

"Economic policy is not the issue in the election and we see
broad support for the current policy framework of relatively
tight fiscal policy and slightly expansionary monetary policy,"
it said.

Indonesia is to hold parliamentary elections in April, the
first round of presidential voting in July and a second round in
September.

India's ruling Hindu nationalists have suggested an early
election in March ahead of the scheduled date of October.

General elections in Malaysia, held every five years, must be
called by the year-end but there is speculation they could be
called earlier.

Apart from the elections, foreign policy issues in the region
such as North Korea's nuclear program, the territorial dispute
between India and Pakistan over Kashmir and terrorism also pose
significant political risks, the bank said.