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Wednesday, 17 October, 2001, 14:45 GMT 15:45 UK
Asia's economies face aftershocks
Buddha Wat Mahathat and reflections Sukhothai Thailand
Tourist Authority of Thailand are launching new packages to revive the industry
By BBC East Asia analyst Larry Jagan in Bangkok

Asia's economies are bracing themselves for further economic damage stemming from the attacks on the US.

But there is still substantial disagreement on how economies will be effected.

Most international financial institutions, such as the World Bank and Asia Development Bank, are simply saying the US military action is going to delay the region's recovery by at least six months.

"We think the current economic slowdown in East Asia will be prolonged by one or two quarters more than it would have been without the attacks," said Pradumna Rana, head of the regional monitoring team at the ADB in Manila.

"And when it does pick up in the later part of next year, the recovery will be weaker."

But many businessmen in the region are less sanguine.

Kim Hak-Su, Executive Secretary of UN's Economic and Social Commission for Asia and the Pacific
UN think future crisis unlikely

Privately many of them fear that Asia is in for more than a year of sustained recession.

"The next six months are going to be very tough," said Richard Henderson head of research at Eng Securities in Bangkok.

"There is unlikely to be any significant recovery before the end of next year."

"It is worse than anyone is saying," said Walden Bello, director of "Focus on the South" at Chulalongkorn University in Bangkok.

Even before the attacks the threat of recession in the US, and globally, was more significant than could be put down to cyclical affects, Mr Bello said.

He blamed the threat largely on the creation of over-capacity within sectors over the last 20 years.

"Because of its reliance on exports Asia was terribly exposed," he added.

Countries worst affected will be those such as Malaysia and Singapore which rely heavily on their exports.

States such as China and Vietnam, whose economies are more insulated, will be affected the least.

Optimism in tourism

Thailand is hoping that its tourist trade will help boost its economy.

Already the Tourist Authority of Thailand and Thai International are launching packages to revive the industry in the wake of the massive cancellations that followed the attacks in the US.

Thailand, like many countries in South East Asia, relies heavily on tourism to earn foreign exchange.

Initially tour operators and hotel managers in the region said the impact was significant - 20% cancellations in September and October - but would recover quickly.

Now the US attacks on Afghanistan have forced them to revise their outlet.

"It's pretty bleak," said one travel agent who did not want to be identified.

"Bookings for November to January are down by 50%," he said, "and that could prove disastrous as these three months provide a major part of the industry's annual profits."

Eng Securities' Richard Henderson said: "It isn't only US consumer confidence which will determine how severe the downturn is, but domestic consumer confidence within the region."

That has already showing a drastic downturn in the past two months.

In Thailand, the University of the Thai Chamber of Commerce puts out a monthly report on consumer confidence.

In October the figure was at its lowest for more than two years. The figure had fallen by almost 30% between September and October.

If this trend continues the Thai economy is in for a torrid time, analysts said.

"But it's not like the financial crisis of 1997, unless the government tries to defend the Baht as it did then," Mr Henderson said,

Most financial journalists believe that while the country's finance minister and central bank governor are worried about the value of the Thai currency, they are more concerned about the domestic rates of interest.

If rates fall too low compared with those in the US, funds will flow out of the country at a time when the government is committed to attracting more foreign investment as part of a strategy to boost economic development.

Singapore innovation

The same concern is pre-occupying most governments in the region.

Singaporeans have come up with their own innovative way of raising funds - getting its citizens to invest in the country's recovery in bonds - know officially as New Singapore Shares.

While economic recovery may be slow in Asia - and the downturn worse than many have been prepared to predict - a repeat of the Asian financial crisis does not seem likely.

"It is just not possible," said Dr Kim Hak-Su, executive secretary of UN's Economic and Social Commission for Asia and the Pacific (ESCAP) in Bangkok.

"The governments and the private sector in the region are better prepared than they were then, they have learnt the lessons of the crisis, their banking systems are more transparent and they have accumulated enough foreign reserves."

But no one predicted the crisis three years ago.

One thing seems sure though.

While countries such as Thailand, South Korea and Indonesia were largely dependent on export-led growth for turning their economies around, that strategy now seems less of an option.

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