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.