Global IT demand to support Asia's economic growth
Global IT demand to support Asia's economic growth
SINGAPORE (AFP): Global demand for information technology goods and services will increasingly underpin Asia's economic growth, a report by research house Salomon Smith Barney said.
But for several countries in the region, leadership problems as well as separatist rebellions in Indonesia and the Philippines would remain a concern for investors, it said.
Surging productivity in the United States, largely related to technology investment, and a sharp increase in electronics and IT orders in Japan bode well for the region -- a key producer of these products.
The report received at the weekend said global growth has been dominated by the IT sector and its impact is likely to benefit the region substantially.
Singapore, Taiwan, South Korea, Malaysia and Taiwan have been among the major contributors to the IT boom.
"The traditionally strong correlation between Asian and global growth is still there," Salomon Smith Barney said.
"Global tech does not have more influence than non-tech on Asian growth but it is faster growing.
"More importantly, the tech up-cycle still has further to run, into at least 2002, providing important support for Asia's growth," it added.
The IT sector has been growing more rapidly than the non-tech sector, Salomon Smith Barney said.
It cited the United States where IT expanded at an average annual rate of 30 percent in the 1990s compared to 2.5 percent for the non-IT sector.
The research house said it had raised its gross domestic product projection for Asia next year to 6.7 percent from 6.6 percent.
"At an industry level, our analysts remain confident that the IT cycle will persist into 2002, driven by among other things the diffusion of telecoms," Salomon Smith Barney said.
"With tech growth the dominant force in IP (internet protocol) growth globally and within much of Asia, this is crucial to our demand view," it said.
IT also sparks growth by lowering the costs of information and coordination as well as easing uncertainty, which is important to increasing global trade.
"Investment in technology is an increasing feature of Asian investment, boding well for gains in productivity and growth, especially in North Asia," it said.
But, with the risks from external shocks diminishing, domestic political conditions are likely to take on greater weight in determining growth prospects, the report added.
"Within Asia, the general lack of macroeconomic imbalances should mean that either politics or policy shifts are likely to take center stage," it said.
"This is especially true in Indonesia, the Philippines and Thailand, but also China and Taiwan."
Leadership problems as well as separatism in Indonesia and the Philippines remain a concern.
"We expect fractured politics to keep investment down and markets guessing, although probably not enough to forestall modest improvements next year," Salomon Smith Barney said of Indonesia.
On the Philippines, it said: "The dominant issue remains the effectiveness of the (President Joseph) Estrada administration."
Turning to Thailand, it said investors remain concerned over a policy vacuum or shift resulting from a change in government.
China-Taiwan tensions might be heightened by any US decision on theater missile defense for Taiwan. There was also concern over the new government's ability to run the civil service after years of leadership by the Kuomintang, it said.