SE Asia warned of prolonged currency pains

SE Asia warned of prolonged currency pains

HONG KONG (AFP): Southeast Asia's currency crisis will be prolonged and could even get worse, a senior official of the World Economic Forum warned yesterday, as the group prepared to stage an East Asian summit here next week.

"We are not yet at the end of the process," said Claude Smadja, managing director of the Geneva-based foundation to encourage global economic dialog.

"It is a phase of getting back to economic reality. I think the region has been carried away by exuberance. It is realistic to plan for a two to three year restructuring phase.

"The question is not whether economic fundamentals are there. They are here. The question is at the political level ... whether the will is there."

Smadja said one session of the three-day East Asia Economic Summit beginning Monday would be devoted to the currency crisis, which has slashed 30 to 50 percent from the values of the Thai, Indonesian, Malaysian and Philippine currencies against the greenback in three months. The crisis was sparked by the July 2 float of the Thai baht.

"I think there are still a lot of questions about whether this is just a passing crisis or something much deeper ... whether we are at the bottom of the crisis or there are still some more shocks to expect," he said.

"Is Asia getting the right message from the crisis and is Asia getting the right answers to the crisis?"

Smadja said Malaysian Prime Minister Mahathir Mohamad was invited to the meeting but declined. Mahathir has blamed international currency dealers for the crisis, singling out billionaire U.S. financier George Soros. Soros denies the charge and has in turn criticized Mahathir's leadership.

Malaysian Deputy Prime Minister and Finance Minister Anwar Ibrahim had indicated he would attend the forum, even just for the opening dinner, but was forced to cancel, Smadja said, adding the Indonesian government would also be without official representation.

Southeast Asian officials were mostly "tied up at their desks and overwhelmed by the issues they have to confront," he said However, Philippine President Fidel Ramos and Singaporean Prime Minister Goh Chok Tong are to deliver keynote speeches at the talks.

The World Economic Forum organizes the annual summit of international business and political leaders at Davos in Switzerland and a series of regular regional conferences such as the East Asia Economic Summit.

Other major issues on the agenda at this year's forum include the impact of Chinese economic reforms endorsed at the recent Communist Party Congress in Beijing, Smadja said.

The region's environmental woes, including thick smog caused by Indonesia forest fires which is blanketing southeast Asia, would also be highlighted.

A delegation from North Korea, led by State Commission of External Economic Affairs Vice Chairman Kim Mun-Song, will mark the isolationist Stalinist state's first international appearance since Kim Jong-Il was officially named head of the country's Workers' Party Wednesday.

A session of the forum will be devoted to foreign investment prospects in North Korea. Rival South Korea will be represented at the talks by Deputy Prime Minister and Finance Minister Kang Kyong-Shik.

Taiwanese government officials were not invited to the meetings as the forum observes the "one China" policy of recognizing only Beijing, Smadja said.

They would only be allowed to attend the World Economic Forum's summits in a private capacity and as representatives of Chinese Taipei.