SE Asian growth sustainable only after fiscal reform

SE Asian growth sustainable only after fiscal reform

SINGAPORE (AP): Sustainable growth could return to Southeast
Asia in three to five years, but only after financial and banking
reform, Singapore's Deputy Prime Minister Tony Tan said in
remarks made available yesterday.

"The end of the economic crisis in Southeast Asia, and the
restoration of economic growth can only come about with the
establishment of properly regulated and well supervised banking
and financial systems," said Tan during a speech at the
Massachusetts Institute of Technology in Boston on Saturday.

He said that regional economies can return to sustainable
growth in three to five years provided "the governments in the
region have the necessary will and determination" to implement
such changes.

Tan argued that Southeast Asian banks were not equipped to
handle the large influx of foreign capital in the 90's, and bank
practices "have not kept up with the rapid pace of growth in the
last few years."

He said between 1990 and 1996, the flow of private capital
from industrial countries to emerging economies in the region
grew five times, to US$200 billion from $40 billion.

He added that sound domestic banking systems were sometimes
lacking during those years of easy money, and when confidence in
Asia ebbed, large outflows of capital precipitated the crisis.

Although he did not specify what reforms were needed, regional
and international bodies like the Asian Development Bank and the
International Monetary Fund have stressed the need for greater
transparency in the banking sector and more cautious lending
practices.

Tan added that for the short term, the political and economic
situation in Indonesian remained the "main worry," because the
country occupies a large and important role in Southeast Asia.

Despite riding the storm better than its neighbors, Singapore
has felt the pinch too, he said. The island republic's commerce
and financial sectors, which rely heavily on regional trade and
activity, have been "severely affected by the regional downturn."

But he said Singapore would reap the benefits of its sound
macroeconomics, large foreign reserves, fiscal surpluses, and its
well established trade with the strong U.S. and European
economies.