Political commitment key to ASEAN reforms: Malaysia

Political commitment key to ASEAN reforms: Malaysia

KUALA LUMPUR (AFP): Southeast Asian countries need strong
political commitment to carry out reforms to shore up the
emerging economic recovery, Malaysia's finance ministry said
Friday.

The ministry also warned that macroeconomic instability and
uneven growth among key industrial nations may mar prospects for
the world economy in the millennium year.

In its annual economic report accompanying the budget, it said
the main challenge facing ASEAN economies was to sustain recovery
in the long run.

"The recent favorable macroeconomic developments, high costs
involved in rehabilitating the banking sectors and the large
public sector deficits could weaken the support for the financial
and corporate sector restructuring agenda," it said.

"Significant political commitment is therefore required to see
the reform process through and ensure that the growth process is
not derailed.

"Apart from this, the crisis has left overcapacity in many of
the ASEAN economies, high unemployment levels, increasing
government debts and rising incidence of poverty."

The ministry urged the Association of Southeast Asian Nations
(ASEAN) to put in place the "right mix of economic and social
policies" to ensure a recovery that can withstand future
macroeconomic shocks.

The report said ASEAN's four hardest hit economies --
Indonesia, Thailand, Malaysia and the Philippines -- were
expected to grow by an average 3.6 percent in 2000, up from 1.4
percent this year.

Indonesia is projected to achieve 2.6 percent growth after
contracting 0.8 percent this year.

The report said structural reforms in the Philippines would
push growth to 3.5 percent in 2000 from 2.2 percent. Thailand was
expected to maintain 4.0 percent growth in 2000.

The report tipped 3.5 percent growth for the world economy in
2000, up from 3.0 percent this year.

It forecast global trade rising sharply from 3.7 percent to
6.2 percent in 2000. World inflation, which declined to 5.0
percent this year -- its lowest level in 40 years -- is seen to
fall further to 4.1 percent.

The report said a return of investor confidence was likely to
see net private capital flows to emerging market economies
increase to 118.5 billion dollars, up from a projected 68.3
billion dollars in 1999.

Despite this, the finance ministry warned that macroeconomic
instability persisted in much of the world and said the "uneven
pattern of growth among the major industrial countries" was a
serious concern.

AFTA

The finance ministry also said that Malaysia is expected to
lose 170 million ringgit (US$45 million) in revenue next year
under an ASEAN free trade area (AFTA) plan,

Under the AFTA timetable, Malaysia and five other senior
members of the Association of Southeast Asian Nations (ASEAN)
would reduce their tariffs on most manufactured products to
between zero and 5.0 percent by 2002.

In its annual report accompanying the budget, the ministry
said the government was expected to "forgo 170 million ringgit in
potential revenue due to lower tariffs and excise duties" under
AFTA next year.

But it tipped government revenue to rise 5.7 percent to 59.897
billion ringgit in 2000, thanks to higher direct tax collection
due to better business prospects and increased job opportunities.

The ministry said tax collection would remain the major
contributor, accounting for 79.4 percent of revenue next year.

ASEAN also groups Brunei, Cambodia, Indonesia, Laos, Myanmar,
the Philippines, Singapore, Thailand and Vietnam.