RI situation feared to erode Asian gains

RI situation feared to erode Asian gains

SINGAPORE (AFP): A further deterioration in Indonesia's
economic situation due to a lack of clear government policies
could erode progress made by other Asian governments, an
independent risk consultancy said.

"Indonesia is the wildcard. The policy mix of its government
since last November has been so poor that is difficult to see how
the situation can be turned around short of a change in
government," Political and Economic Risk Consultancy Ltd. (PERC)
said in a report received over the weekend.

"That is unlikely to happen without a further deterioration in
both economic and social conditions. Such a deterioration could
be corrosive on the rest of the region as well," PERC said.

"Certainly, it will put other governments to the test, just as
the original meltdown in Thailand sent shockwaves through the
region," the Hong Kong-based firm added.

PERC noted that while most Asian countries had fared well, or
improved their ratings, on a scale measuring governments'
responses to the eight-month long crisis, there was no mechanism
"to isolate an errant country like Indonesia so that the fallout
from its mistakes does not extend beyond its borders."

"It would seem that the deterioration in Indonesia is
progressing so fast that it will be difficult to put such
protection mechanisms in place in time even if other governments
in Asia wanted to," PERC said.

Indonesia is now negotiating with the International Monetary
Fund (IMF) on IMF-mandated reforms in an effort to revive its
economy without aggravating social unrest.

The review came amid a PERC survey of 11 Asian countries,
rated from zero to 10, with zero being the best grade possible,
according to the wisdom of their government's policies in
handling the crisis.

Singapore emerged on top with a grade of 2.47 followed closely
by Hong Kong with 2.89. Indonesia rated an 8.

"The differences (between Singapore and Hong Kong) are too
small to be meaningful. Both governments have acted as one would
expect and hope of major financial centers. There have been no
rude surprises or policy flip-flops," PERC said.

However, Indonesia was a major risk to Singapore, it said,
noting that "should matters in Indonesia go seriously wrong,
passage through the sea lanes vital to Singapore's survival could
become hazardous," and that a "surge in economic refugees could
also pose serious political and economic problems."

Any deterioration in the political and economic situation in
Malaysia, which rated six on the scale, could also affect
Singapore.

Thailand rated 7.25 in the survey and South Korea 8.27. But
PERC said respondents to its survey "had not yet recognized the
progress" Thailand's new government led by Thai Prime Minister
Chuan Leekpai.

Investors have welcomed moves to address the crisis by Chuan's
administration, which survived last week's no confidence motion,
and was given resounding approval by the United States earlier
this month for its policies.

"Our own assessment of conditions today is that a few
governments which were rated very poorly early on in the crisis
have at least learned from their mistakes and are now taking
steps to put sounder policies in place," PERC said.

PERC gave kudos to the Philippines, Taiwan and China for
managing their economies, saying the Philippines had been
consistently implementing policies only now being enacted by
South Korea and Thailand.