Singapore sees shakeout of weak companies in Asia

Singapore sees shakeout of weak companies in Asia

HONG KONG (Reuters): Singapore Prime Minister Goh Chok Tong yesterday predicted a shakeout of weak companies in Southeast Asia and called upon governments to take firm steps to reclaim international investors' confidence.

Describing the region's currency turmoil as "hiccups", Goh said that east Asian economies would head for more robust growth in the longer term.

Goh made his comments during a keynote address at the 1997 East Asia Economic Summit organized by the World Economic Forum.

"My view is that despite the current hiccups in East Asia's financial sector, its economies will grow robustly in the medium and long term," he told an audience of more than 500 people.

"I have faith that while near-term growth in East Asia will likely slow, its economies will not stall because of good economic fundamentals," the Singapore leader said.

Southeast Asian currencies have taken a beating from speculative attacks in recent months, sparked by Thailand's effective devaluation of the baht in July.

Malaysian Prime Minister Mahathir Mohamad has called for a ban on currency speculation.

Goh predicted more fallout from the crisis in the short term in the region. "There will be a shakeout of weak corporations, financial companies and banks in Southeast Asia."

But he said there could be no turning the clock back and east Asian countries -- which have liberalized their economies and relaxed capital controls to support growth -- must move on.

"East Asian economies have to undertake more fundamental reforms and liberalize their economic systems to sustain continued growth of the real economy," he urged.

"Our supervisory systems have also to be strengthened and the financial infrastructure made more robust to cope with the increased volatility in our financial markets."

Goh, who took over the helm in the city-state from the now elder statesman Lee Kuan Yew, spoke of his vision for Asian banks, a scenario in which they grew stronger through mergers, even across national boundaries.

"There are genuine concerns that indigenous East Asian banks are not strong enough to withstand the onslaught of competition from foreign financial institutions...from the developed world."

"East Asia should build up strong regional banks, by combining their resources, if necessary...By getting banks to merge within (their) own countries so that they become stronger banks. Or getting banks to merge with other banks within the region to produce stronger regional banks," Goh said.

But he cautioned that the initiative must come from the private sector and government involvement would spell failure.

"It must be private sector-driven...once governments get involved, each one of us (will have our) own vested interests and we'll never agree on anything," he said.