Malaysia, Thailand ready to deal with China

Malaysia, Thailand ready to deal with China

Deutsche Presse-Agentur, Singapore

South Korea, Malaysia and Thailand look well placed to deal with the economic threat from China, but Indonesia, the Philippines and Vietnam raise the most concern, a research report said on Wednesday.

The problems are not insurmountable for the three in the final category, provided the countries act fast, said Steve Brice, Standard Chartered Bank's chief economist for Southeast Asia.

"They need confronting without delay," said Brice. "The longer the delay, the greater the sub-optimal outcome for these countries will be."

Singapore, Hong Kong, India and Taiwan are in a tighter situation than South Korea, Malaysia and Thailand, he said, but are nevertheless likely to deal with the threat.

Countries have four options: move up the value-added chain, improve the business environment, reduce costs or devalue their currencies, the report said.

Moving up the value-added chain is the most desirable route as it not only avoids direct competition with China, but also results in finding a niche for the country in terms of China's increasing demand for high-tech products, Brice said.

World Bank data shows high-tech exports make up as much as 70 percent of Singapore's exports, against a low of 15-20 percent for Indonesia and the Philippines.

"The good thing for Taiwan and Singapore is that they are significantly ahead of China in the value-added chain with Singapore expected to open two top-of-the-end semiconductor plants in 2003 while Taiwan already has such plants," he added.

While Hong Kong is well-positioned to capitalize on China's growth, the report said the competitive forces unleashed by China's development are also forcing the Special Administrative Region to move up the value-added chain fast.

"The economic transformation is putting a lot of strain on the less competitive segments of the community," it noted.

Thailand looks relatively well-protected given its competitive auto sector, Brice said. There are also signs it would be able to compete in higher-end consumer electronic goods.

Indonesia and the Philippines were identified as the most worrying countries, requiring strong leadership to deal with the frustrations faced by businessmen.

This is unlikely until the current leaders emerge stronger from the next elections, the report said.