Is the Asian economic dream lost? Maybe not

Is the Asian economic dream lost? Maybe not

By Michael Battye

SINGAPORE (Reuters): Just a few short months ago, Asian
businessmen had no doubts the world was theirs for the taking.

"Invincible, emboldened by success and drunken by growth, we
were all the next Masters of the Universe," Singapore businessman
Ho Kwon Ping told a recent East Asia Summit in Hong Kong.

"Our self-confidence now seems more like brittle brashness,"
he said, reflecting on the traumatic economic crisis that began
in Thailand and swept through Southeast Asia before knocking at
the fortress doors of Hong Kong and Seoul.

Currencies have been beaten down against the U.S. dollar since
Thailand effectively devalued the baht in July. The rampaging
growth rates of Asia's tiger economies have either already taken
a hit or are bracing for one next year.

As a result, investors who had shoveled money into the region
for years have fled as fast as they could, leaving Asia's dreams
of a Golden Age suddenly looking like a mirage.

But many analysts around the region say there is a gleaming
silver lining in a crisis which has obliged Asian governments to
face their problems for the first time.

"It's been a shock, and a good one," said Beijing-based
analyst Enrique Subercaseaux.

"The days of golf-course capitalism are over," he said,
referring to the golf courses which have spread across Southeast
Asia like a rash over the past decade or so -- a symbol of non-
productive investment.

"Governments are now going to have to concentrate on
productive investments and liberalization," he said.

Liberalization will be the key to restoring the dream of an
Asian-dominated 21st Century, he and other analysts said.

And the key to liberalization will be pacts like the Asia-
Pacific Economic Cooperation (APEC) forum and the ASEAN Free
Trade Area (AFTA), they said.

"It's all about momentum," said a Malaysian economist who
asked not to be identified. "Don't worry about the rhetoric. Look
at the reality. Do you see anyone reversing liberalization? If
they were going to do it, the time is now," he said.

"They're not going to do it and APEC and AFTA, as well as the
WTO (World Trade Organization) will keep the momentum going."

APEC, which includes giants like the United States, Japan and
China, aims at free trade between its 18 members by 2020.

"By then, we should have free trade and investment (in the
region)," said a senior U.S. official who asked not to be
identified.

"If that doesn't happen, there will be a lot of tension
because people would point fingers at each other," he said.

APEC leaders meet in Vancouver this month to set the latest
targets for a wide range of economic sectors.

ASEAN, the Association of Southeast Asian Nations, aims to
slash most import tariffs to between zero and five percent
between its members -- Brunei, Myanmar, Indonesia, Laos,
Malaysia, the Philippines, Singapore, Thailand and Vietnam -- by
2003 at the latest.

Businessman Ho said Asian regional leaders did not have much
choice but to pursue free trade.

"Asia's political leaders may wish otherwise, but they can
only further liberalize their economies and become truly
competitive players in an integrated world economy, or they can
follow the Myanmar road to wealth," he said.

Myanmar, one of Asia's richest nations 50 years ago, cut
itself off from the world economy in pursuit of the "Myanmar Road
to Socialism" and is now one of the region's poorest.

The goals set out by APEC and AFTA are achievable, most
analysts said.

"I think the goals are do-able," said Julius Cesar Parenas,
executive director of Manila's Center for Research and
Communications.

"Despite the crisis, I have been impressed by the strong
desire for ASEAN to accelerate its regional integration efforts,"
he said.

"APEC and the WTO are forcing the less developed economies to
concentrate on the areas where they are really competitive and
the advanced economies are indeed going to face ever greater
challenges from us," he added.

"It's much easier for less developed economies to pursue
structural change."

Others held equally rosy views.

"In the medium and long term, I'm still very optimistic," said
Sofyan Wanandi, director of the Center for Strategic and
International Studies in Indonesia.

"But you have to make a very clear timetable and get the
commitments and stick to them," he said.

There is the fly in Asia's ointment: whether Asia's politics
will allow full pursuit of ambitious free trade goals or force
reversals.

"Protected markets, sweetheart deals, pork barrel politics and
all the other nice things that come with cronyism was in large
part the secret to their success," said Ho of Asian companies.

"Is there the political will?" asked Bruce Gale of the
Political and Economic Risk Consultancy in Singapore, doubting
the readiness of some leaders to go through with economic
reforms.

"Some could jump either way -- either get things done faster
or go back down the protectionist path," he said of concerns in
some countries that opening economies could foment domestic
strife.

"Look at Mahathir, which way is he going to jump? He's warning
developing nations to be careful in how they open their markets,"
he said of Malaysian Prime Minister Mahathir Mohammad.

Others worry about what will happen when Indonesian President
Soeharto, now 76 and with no designated successor in sight,
finally cedes control of the sprawling archipelago.

Some fret it could turn into a Yugoslavia or go through a
torrid passage of ethnic hatred focused on the small ethnic
Chinese population, which is highly influential in the economy.

"If Indonesia enters a period of serious political
instability, it might derail the whole process," said Parenas.
"But I don't think that is a probable scenario."

China's rapidly growing economy -- and its promises to settle
border issues in the South China Sea peacefully -- is likely to
be a significant factor driving other Asian economies to freer
trade, the analysts said.

Beijing is likely to overcome a dispute with the United States
over whether it should enter the WTO as a developed or developing
economy sooner rather than later, while its problem with Taiwan,
which Beijing regards as a rebel province, will solve itself over
time, they said.

The analysts said everyone expected China's economic tsar Zhu
Rongji to take over as prime minister from Li Peng in March.

"When Zhu comes in, things will happen very quickly," said
Subercaseaux.

And China's huge potential market will become more integrated
with the rest of Asia, reinforcing the region's economic
momentum, said Parenas.