Protectionist tendencies 'still rife in Asia'

Protectionist tendencies 'still rife in Asia'

SINGAPORE (AFP): Most Asian economies are reluctant to ease existing protectionist barriers to trade, even as the regional financial crisis shook Asian governments out of their resistance to change, an independent think-tank said.

Discrimination against foreign goods and services in the form of tariffs, import barriers, or distribution constraints are high in countries such as South Korea and Thailand, the Political and Economic Risk Consultancy (PERC) said in its latest report received over the weekend.

Other countries, such as Indonesia, the Philippines and Malaysia, were exhibiting signs of protectionism, while Hong Kong and Singapore were exceptions to expatriate businessmen's perceptions of liberalized goods and services trade in the region.

The South Korean government has reined in criticism of imports being bad for the economy, and has manifested its openness to free markets, but 21 protected sectors, including agricultural products, telecommunications and power generation, still exist.

Amid "largely bureaucratic practices, and procedures and standards that are out of touch with international norms," businessmen felt that "there is little doubt ... that Korea is difficult terrain for importers."

Political uncertainty in Indonesia and Thailand also gave nationalists more room to advocate protectionist policies, PERC noted.

It cited indications that Indonesian opposition leader Megawati Sukarnoputri's party, which is likely to dominate the new legislature according to polls, would seek to renegotiate the timetable for opening up Indonesia's economy to free trade under the Asia Pacific Economic Cooperation forum agreement to liberalize by 2020.

"Since then, Kwik Kian Gie, the party's chief economic thinker has been making far more IMF-friendly statements," the report said, referring to Indonesia's pledge to economic and financial reforms under an International Monetary Fund agreement.

"It is by no means certain, however, that what he says will necessarily be accepted by the economic nationalists in the party."

Thailand's coalition government is facing renewed tension and this may escalate as it moves into the campaign for a new senate and lower house next year.

"As campaigning gets under way, new alliances could emerge between political parties and specific power groups that could have a direct influence on protectionism and related issues," it said.

The Philippines is "flirting with the idea of increasing rather than decreasing the level of protection afforded to particular goods and services.

"While officials continue to insist that the economic liberalization policies introduced by (former President Fidel) Ramos will not be reversed, there is evidence to suggest that vested interests with personal ties to the president are beginning to get their way in specific areas," the report said.

The Malaysian government's imposition of foreign exchange controls last year was a "potentially very damaging protectionist move, but beyond that there have been few practical indications that he authorities intend to turn the clock back in other areas," such as its services sector and banking industry.

Hong Kong and Singapore, with its openness to free trade, were best positioned to benefit from the entry of foreign companies returning to the region, PERC said, adding however that Singapore has taken a "more proactive approach."

"Singapore's more aggressive approach seems to be attracting more companies these days, specially since Hong Kong is still operating at a cost disadvantage," citing the island-state's tax concessions and infrastructure support.

Singapore would suffer adversely if its Southeast Asian neighbors put on hold previously agreed tariff reduction schedules, thus setting back the growth of regional trade volumes and affecting its status as a transshipment hub.

"Those markets that are going to offer the greatest opportunities for foreign companies will be the ones that not only go the furthest in liberalizing imports of physical products, but also liberalize services and embrace the flexibility that new technology like the Internet affords, rather than resist it," PERC said.