SE Asian turmoil seen as catalyst for liberalization
SE Asian turmoil seen as catalyst for liberalization
SINGAPORE (AFP): The currency crisis in Southeast Asia will spur governments to hasten liberalization of vital sectors, including financial services, and deal effectively with inflation, bank officials and analysts say.
"To restore the confidence in certain countries, markets will need large amounts of foreign investment, therefore it will be necessary for some of these markets to open considerably," Neil Frost, general manager of National Australia Bank Asia in Singapore told AFP.
"The crisis of the currency markets will bring them to speed the pace of financial reform and deregulation," Frost said.
In a report released here Thursday, investment house SocGen- Crosby Securities noted that with the need to maintain competitiveness, "markets must be made more efficient through a concerted program of deregulation and liberalization."
"This is the best way to avoid the inflationary impacts of the devaluations," it said.
Among the policies it proposed was cutting import duties for exporters, deregulating the financial sector to allow cheaper cost of funds for local business, the privatization of key industries such as telecommunications and ports, and to deregulate the prices of fuel and food.
"This is most applicable to Indonesia, where progress will be slow due to political constraints," the SocGen-Crosby report said.
Some US$30 billion of aid from the International Monetary Fund (IMF) and Asian countries to revive the Indonesian economy was hailed as a positive move, but doubts remained about Jakarta's will to impose IMF-approved measures to rehabilitate business.
"There seems to be a lot of doubt in terms of transparency with the (Indonesian) financial system, the transparency of the corporate sector in general," said another official with a Singapore-based foreign bank.
SocGen-Crosby head of regional research Neil Saker noted that the political economy in Thailand, which also received aid under an IMF-led rescue package in August, "is too weak to produce the necessary adjustments quickly enough" and "adjustments in policy will be weak."
"Fiscal account deterioration and a likely negative IMF review later this year will damage confidence and we do not see a return of foreign inflows until at least 1999 ... when a very undervalued baht will attract sizable (direct foreign investment) and portfolio flows," the SocGen-Crosby report added.
Frost was optimistic over a slow but steady recovery of the Southeast Asian economies.
"I think in the medium term, growth prospects will still be there even if it's a bit dampened and there'll be activity and it will continue to increase demand for financial services," he said.