WTO failure may dampen East Asia rebound: WB

WTO failure may dampen East Asia rebound: WB

Roberto Coloma, Agence France-Presse, Singapore

East Asia is poised for a strong cyclical recovery in 2004
after a dip this year but the failure of global trade talks and
other problems might dampen the rebound, the World Bank said on
Thursday.

China, Vietnam and Thailand will power the region's forecast
average of 5.7 percent gross domestic product (GDP) growth in
2004, up from 5.0 percent this year, it said in a half-yearly
update released in Singapore.

East Asia, excluding Japan, grew 5.8 percent in 2002 and 3.5
percent in 2001, according to the Washington-based lender.

The Severe Acute Respiratory Syndrome (SARS) epidemic sharply
curtailed growth in the second quarter this year but the economic
impact of the flu-like disease which hit tourism and related
industries especially badly has eased.

"With the quick passing of SARS (at least for the time being),
clearer signs of recovery in the developed world and healthier
domestic conditions in East Asian economies, the prospects for a
strong cyclical recovery and more sustained long-term growth are
good," the bank's regional vice president Jemal-ud-din Kassum
said in a statement.

The bank also lauded the region's continued progress against
poverty and its intensifying efforts toward regional integration,
with China as the focus.

It cited four key reasons for the expected rebound: an
improved global economy, strong growth in China, the end of "fire
fighting" linked to the 1997-98 financial crisis and improvements
in the region's political situation.

"Recovery in the developed world is picking up, led by
stronger growth in the U.S. and Japan which, combined with strong
growth in China, should also propel an upturn in world trade
growth," Kassum said.

"Portfolio flows to emerging markets including East Asia are
also reviving this year, helping boost local stock markets," he
added.

Kassum noted too the recovery in the long-depressed technology
sector, which is vital to Asian electronics producers.

At the same time, the bank warned against two key dangers,
topped by the failure of the World Trade Organization (WTO) talks
in Cancun, Mexico last month.

"The difficulties at Cancun might allow protectionist
interests worldwide to go on the offensive, causing long-term
damage to the world trade system," it said.

The second danger is slow progress on "institutional and
governance reforms" compared to other emerging regions such as
Central and Eastern Europe, which now attract more foreign
investment than East Asia.

Despite the SARS setback, China's growth will be hardly dented
this year at 7.8 percent after 8.0 percent in 2002, although this
will moderate to 7.4 percent in 2004 -- still the pace-setter in
East Asia.

"Far from too little growth, China is in the midst of a
powerful boom that has policymakers looking for ways to cool the
pace of expansion," the World Bank said.

Continuing growth in China is propelling a vast expansion in
its imports from the rest of East Asia and this is "gradually
balancing fears about the competitive threat" from the fast-
rising Asian giant.

In 2004, Vietnam is forecast to post 7.0 percent growth,
similar to this year's expansion, while Thailand will grow 6.0
percent after 5.8 percent, followed by Malaysia on 5.4 percent
after 4.6 percent in 2003.

The Philippines will grow 4.2 percent in 2004, up from 4.0
percent this year, and Indonesia 4.0 percent after 3.5 percent.

On poverty reduction, a central concern of the World Bank, it
said the number of people living in poverty in East Asia based on
the income threshold of two U.S. dollars a day is expected to
drop by 30 million to around 680 million in 2003, following an
even stronger performance in 2002.

However, future progress may be more difficult as poverty
becomes more concentrated in remote areas among ethnic minorities
and other socially disadvantaged groups, the bank cautioned.