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.