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.