Second wave Asian economic tigers face woes

Second wave Asian economic tigers face woes

SYDNEY (AFP): Asia's second wave of economic tigers --
Indonesia, Thailand and Malaysia -- face problems because they
are not managing their growth as well as the first group did, the
head of Australia's biggest company warned yesterday.

John Prescott, managing director of steel and resources giant
BHP Co. Ltd. said the three countries had achieved "stunning
economic improvements" and great investment opportunities were
evident in all three.

But there were signs they were not managing the growth as well
as had Hong Kong, Singapore, Taiwan and South Korea at the same
stage of their economic development.

"Current account deficits are creeping upwards, and so from a
business perspective, macroeconomic instability and a sharp slow-
down cannot be entirely ruled out," he said.

Prescott, delivering the "Asialink" lecture to a Melbourne
business audience on the challenges of doing business in Asia,
said the common link in Asia's economic transformation were the
very high rates of growth compared to the rest of the world.

"The key question we continue to monitor at BHP are not only
whether that growth can be sustained, but at what pace and in
which countries."

BHP expected growth to continue in the range of historic
performance, "say six to eight percent overall."

"However, there will undoubtedly be hiccups and variations
based on the different stages of economic development country by
country."

Mature economies like Hong Kong, Singapore, Taiwan and South
Korea were now facing a variety of problems familiar to western
industrialized economies such as environmental concerns,
manufacturing capacity constraints, social welfare issues and so
on.

"As a consequence, they face the challenge of remaining
competitive at a time when their productivity performance has
been declining and unit costs have risen."

He nominated a third group of Asian countries which he said
were experiencing high growth resulting from trade and economic
reforms -- Vietnam, Cambodia, China and India.

"Because these countries are in the process of integrating
into the world economy, a bumpy ride is almost inevitable,"
Prescott added.

"Managing the change from a command to a market economy is
tricky, and nationalist sentiments can mean sudden policy
reversals. So I guess there are many opportunities which BHP and
others are pursuing, but we keep a close eye on the risk and
rewards equation."

Prescott said the region generally faced key challenges posed
by bottlenecks caused by difficulties in finding and holding
labor and in infrastructure such as power and transport
requirements and sewerage.

But the growth opportunities presented by Asia were the reason
11 percent of BHP's assets were located in Asia and why the
region would continue to figure prominently in the company's
future planning.

BHP had outgrown the Australian market, he said. "Selling
competitively in Asia often means producing there, with all the
advantages of being close to and better understanding the
markets."