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.