Enduring political woes in SE Asia weigh on investors
Enduring political woes in SE Asia weigh on investors
TOKYO (Reuters): From revolt in the southern Philippines to
ethnic clashes in Indonesia, the political agonies that have
helped to drag down Southeast Asian markets this year are
unlikely to ease any time soon.
Analysts said on Wednesday that unsettled political conditions
would remain a major deterrent to investors who might otherwise
be tempted by reasonable growth rates to dabble in stock markets
such as Manila, Jakarta and Bangkok, which are all down by more
than a third so far this year.
"Within Asia, the general lack of macroeconomic imbalances
should mean that politics or policy shifts are likely to take
center stage," Salomon Smith Barney said in its most recent Asian
Economic Outlook and Strategy report.
Asia's political background in fact could have been worse:
June's historic summit between North and South Korea has reduced
tensions on the peninsula, with defense ministers of the Cold War
foes holding landmark talks this week and officials agreeing in
principle on important investment and taxation accords.
Elsewhere, though, investors have their choice of headaches.
In Thailand, uncertainty over the outcome of a general
election due by mid-November was heightened on Tuesday when the
country's anti-corruption commission announced a probe into the
share dealings of telecoms billionaire Thaksin Shinawatra, whose
newly formed Thai Rak Thai party is ahead in the opinion polls.
In the Philippines, President Joseph Estrada resuscitated his
action-man image by ordering a military assault nearly two weeks
ago on Muslim rebels on the southern island of Jolo to try to end
a five-month-old hostage drama.
But Professor Mark Turner of Canberra University said that
while the Philippine military had seized the initiative for the
first time in ages, the root causes of the insurgency remained.
"I don't think it will make it worse, but it doesn't resolve
it in any shape or form," Turner said. "It's just something we're
going to have to live with for the foreseeable future.
Investors were right to worry about the cost of the war on the
country's budget deficit, which was already over target.
"The hold of the Philippine government over these territories
is at best tenuous. Can it afford to maintain huge numbers of
troops in these areas to try to maintain a semblance of control?
I very much doubt it," Turner said.
Carlyle Thayer, a regional security specialist with the Asia-
Pacific Center for Security Studies in Honolulu, agreed there was
no solution in sight to the insurrection.
But he said investors could take some comfort from the fact
that, although hostages had been abducted twice from Malaysian
diving resorts, the conflict had not spread.
"It's always going to be a drain on Philippine resources that
investors will have to take into account, but it's contained in
the south and contained regionally except for the recent
kidnappings, and you can never protect against that completely,"
Thayer said.
Similarly, the rash of political and religious violence in
Indonesia was unlikely to lead to the markets' nightmare: the
disintegration of the sprawling archipelago into a clutch of
mini-republics.
"There's no outside force from the Middle East, or regionally,
that is going to grant recognition to an independent republic or
province. That's unlikely to happen," Thayer said.
But what sets Indonesia apart even from the Philippines is
weakness in the government at every level, from President
Abdurrahman Wahid down, which Thayer said was translating into
inconsistent policies. "It's going to take years for that to be
sorted out," he said.
Compounding the sense of drift is a lack of direction from
Asia's regional political groupings.
The Asia Pacific Economic Cooperation Forum (APEC) is "pretty
moribund", while the Association of South East Asian Nations
(ASEAN) has disappointed those who wanted it to play a more
active economic role, Thayer said. "Getting coherent policy at
regional level is more difficult," he said.