Southeast Asia not out of crisis yet

Southeast Asia not out of crisis yet

By Andreas Baenziger

SINGAPORE (DPA): Has the economic crisis in Southeast Asia
already reached its low point? Is an upturn likely in the
foreseeable future? Is the catastrophe which brought down the
region's "Tiger economies" in mid-leap almost over?

It depends on which expert is talking. And whichever one it
is, it is wise to remember that not one of them -- not a single
one! -- saw the crisis coming. Indonesia, for example, was
praised to the heavens as a wunderkind, a model economy for other
developing countries to emulate, almost to the moment it went
into free-fall.

When these same individuals and institutions -- the World
Bank, the International Monetary Fund, governments and various
economists -- try to tell us exactly how things are going to play
out, a little caution is in order. The signals out of the region
are mixed, contradictory even.

The Philippines, for example, appears to have the worst behind
it, having even recorded a small measure of growth in gross
domestic product in the third quarter. And Thailand is also
showing some positive trends: the stock market is climbing again,
the baht has regained a little ground, and interest rates have
fallen.

To the same extent, however, the Thai government's willingness
to push through painful reforms has declined.

And next door, meanwhile, Malaysia has just reported a
disastrous third quarter, with the economy contracting by 8.6
percent from the same period a year before -- a showing that was
much worse than expected.

Malaysia has broken ranks with the countries which, in return
for billions of dollars in financial support, have agreed to
follow strict IMF stabilization plans. Going its own way,
Malaysia has suspended free trading in its currency, the ringgit,
opting instead to peg it to a fixed rate against the dollar.

Prime Minister Mahathir Mohamad wants to protect his country
from the unpredictable fluctuations of free markets and what he
sees as the avarice of international speculators, whom he blames
for Malaysia's problems.

The Malaysian experiment has attracted huge interest, running
as it does directly contrary to the worldwide trends towards
globalization and deregulation. And there is no doubt that
Mahathir has gained his compatriots a certain breathing space.

But the question remains of whether it really represents
reform or is intended merely to help keep his cronies' debt-
burdened conglomerates above water.

Indonesia, whose estimated 202 million people make it the
world's fourth most populous country, remains a near hopeless
case. Interest rates have fallen and the rupiah has regained some
ground after the terrible battering it took early this year, but
both gains were from extremely weak positions; the basis for a
solid economy is still missing.

Gross domestic product has plunged this year by 15 percent and
is expected to fall further next year. The deep mass poverty this
has caused is so grave that even the IMF was moved to support
massive aid for the hardest-hit Indonesians.

More significant for the long term, perhaps, is the change in
thinking that is coming increasingly into evidence, with
unrestrained globalization and deregulation no longer the
unquestioned holy writ. The "Tigers" are still developing
countries, and as such are not yet ready to be abandoned to the
laws -- some might say the lawlessness -- of the international
financial markets.

Increasingly, a call is being heard for more transparency and
stronger institutions, along with rules for controlling the
speculative capital which in seconds can cross the world.

In its most recent analysis, released last week, the World
Bank went so far as to make an indirect criticism of the orthodox
formula which its sister organization, the IMF, applied at the
beginning of the Asian economic crisis.

The IMF hoped to overcome the crisis with stronger budget
discipline and high interest rates, both aimed at stabilizing
currencies. But these policies, while failing to halt a slide in
the currencies' values, pushed small and mid-sized businesses
into bankruptcy.

Perhaps everyone would benefit from a good look at Singapore
for an idea of what the near future will bring. The city-state,
as a regional service center with no significant agricultural
production, is obviously a special case, but it also has a well-
deserved reputation for keeping a cool head during crises.

Singapore has introduced a package of measures which will have
the effect of giving the economy an additional boost of S$10.5
billion (US$6.25 billion); after years of piling up surpluses,
the government will run a budget deficit, in large part by
halving the percentage of salaries which employers must
contribute for social benefits to 10 percent. And salaries
themselves will be reduced by 6 percent.

This should increase Singapore's competitiveness -- especially
vis-a-vis rival Hong Kong, and even Singapore's (admittedly
state-linked) labor unions have not complained.

They must recognize the seriousness of the situation.