SE Asia still struggling as ASEAN summit nears

SE Asia still struggling as ASEAN summit nears

SINGAPORE (AP): In Indonesia, separatist violence, pervasive
corruption and massive corporate debt are derailing hopes for a
full recovery from the worst economic crisis in three decades.

In the Philippines, President Joseph Estrada's impeachment on
corruption charges is battering business confidence.

And a weak currency, high oil prices and bad bank loans in
Thailand are dealing serious blows to the economy.

Amid this chaos - both economic and political - the heads of
government from the Association of Southeast Asian Nations will
hold a three-day summit starting Wednesday, with regional
integration and economic recovery high on their agenda.

"We will discuss the present difficulties we are all faced
with," Singapore Prime Minister Goh Chok Tong told reporters last
week at the Asia-Pacific Economic Cooperation summit in Brunei.
"But we should not just be wringing our hands and lamenting that
we have big problems."

Southeast Asia is slowly coming back from the financial crisis
that wreaked havoc with its economies in 1997 and 1998. Yet the
region is falling behind other parts of Asia in attracting
investment and technology, despite strong growth in countries
such as Singapore and Malaysia.

Goh said ASEAN leaders' challenge this week will be to
convince the world "that we are on the right track despite our
present difficulties, and all of us are working together to
integrate our economies."

Among the major initiatives Singapore is promoting for the
ASEAN summit is an e-commerce accord in which Southeast Asian
nations are expected to agree to tear down trade barriers and
promote investment in information technology.

Of all the ASEAN countries, Singapore is in the best position
to spearhead such an aggressive response to the challenges of
globalization. Officials on Friday announced that the economy
grew by a whopping 10.4 percent in the year's third quarter, and
confirmed that Singapore's employment levels are back to the pre-
Asian economic crisis levels.

Yet emphasizing technology and e-commerce is a luxury that
many Southeast Asian countries might find elusive given their
current need to concentrate on more basic priorities such as
staving off economic and political disasters.

Indonesia and the Philippines provide the two most glaring
examples of countries where political uncertainty threatens to
spill over into the economy.

While Indonesia's economy is expected to expand this year by
4.5 percent - the first growth since 1997 - political instability
and a perceived lack of will to reform the country's distressed
banking system are keeping foreign investors away.

In the Philippines, which was largely unscathed by the 1997-98
financial crisis, foreign investment has plunged 80 percent this
year, the stock market is trading near two-year lows, the
currency hit a record low last month, inflation is rising and
export growth is declining.

ASEAN members Brunei, Malaysia, Myanmar, Indonesia, Thailand,
the Philippines, Singapore, Laos, Cambodia and Vietnam are trying
hard to compete with Northeast Asia as a destination for foreign
investment.

But a lack of confidence in the way Southeast Asia has handled
the financial crisis has sent much of that investment north,
where countries such as South Korea and Taiwan have responded to
the same crisis by liberalizing their economies and opening up
key sectors.

By contrast, Malaysia imposed capital controls, Thailand did
little to clean up its banking system and Indonesia has been
accused of showing favoritism in a huge bailout of a corporate
debtor.

The region's economic outlook has been hampered by massive
flooding in Vietnam, Laos and Cambodia, uncertainty surrounding
upcoming elections in Thailand and calls for a slowdown in the
pace of tariff reductions under the ASEAN Free Trade Agreement.

ASEAN Secretary-General Rodolfo Severino recently told
reporters that foreign direct investment into ASEAN countries had
shrunk from US$19.6 billion in 1998 to $16.9 billion in 1999.
This year's figure was expected to be "about the same" or less,
he said.

Despite the problems, economic growth is expected to occur
this year in most Southeast Asian countries, albeit at a slower
pace than once predicted.

Malaysia's Gross Domestic Product is expected to grow 7.5
percent this year and 7.0 percent in 2001, but the exuberance
that once characterized global investors' view of Malaysia has
been muted.

"Yes, the economy is nearing pre-crisis levels but the
ramifications (of the crisis) will continue far longer," said
Ping Tan, an analyst at JP Morgan in Singapore. "It is something
that will continue to haunt the region for some time."