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September 11 one year on Monday, 2 September, 2002, 09:29 GMT 10:29 UK
SE Asia's hesitant recovery
The Patrons Twin Towers, the worlds tallest buildings, crown Kuala Lumpur's skyline
Malaysia was hard hit by the decline in tourism

Countries in Asia weren't exactly seeing an economic boom in the summer of 2001.

The continuing weakness of the Japanese economy cast a long shadow across the region.

American industry was already contracting, with only consumers keeping the economy from sliding into recession.

Singapore is built on trade, and reliant on high tech exports, particularly to the US. The country actually slipped into recession in the first half of 2001, well before the attacks in September.

Immediately after 11 September people feared there would be a serious economic impact in Asia.

Tourism hit

The most obvious impact was on travel. People simply stopped flying.

That threatened to cripple the region's tourism industry, which by now is vital for its economy.

In the past 20 years, Thailand's tourist industry has doubled in size, and is now the country's biggest foreign currency earner.

As Cambodia slowly emerges from decades of conflict, the trickle of adventurous travellers drawn to the splendours of Angkor Wat has grown to a steady stream.

In 1999 400,000 tourists arrived, earning the country $200m - more than 6% of GDP.

Over the past few years Malaysia has watched the number of visitors grow steadily, and it's become an increasingly important part of the economy.

By 2001 tourism accounted for 7.8% of Malaysia's GDP.

The drop in visitor numbers was rapid, and dramatic. Between October and December last year, 2.3 million people visited Malaysia - a drop of 17.9%.

The same thing happened across the region - and only now are tourist numbers beginning to recover.

Export worries

Asia's exporters, particularly those making hi-tech goods, also feared hard times when the American economy slipped into recession.

Exporters prepared for the worst, but American consumers showed more defiance than fear, and demand held up better than many had expected.

But some countries continued to struggle.

Indonesia was already struggling under a mountain of debt, political instability and allegations of corruption - it was hardly in a strong position to win foreign direct investment.

It didn't seem likely its position as the world's most populous Muslim nation would help matters in the wake of September 11th.

And indeed foreign direct investment has fallen - but is politics the cause?

China: threat or promise?

China is winning an ever greater share of the foreign investment heading to Asia, as investors are won over by the appeal of its staggering rates of economic growth.

And since it joined the WTO in December, China's markets are beginning to open up, offering greater access to its hundreds of millions of consumers.

China's rapid growth and low cost of production is often seen as a threat to South East Asian economies.

However China isn't only a market for western investors. South East Asia is seeing considerable growth in exports to China.

Malaysia alone has seen exports to China grow by 50%. To some extent, this has helped pick up the slack from a slower US economy.

US influence

But the US remains a dominant factor in the region's economic health, especially for Malaysia and Singapore, and we're not out of the woods yet.

Early in the year it was becoming clear that the economic impact hadn't been as bad as people expected.

There were tentative signs of real recovery.

Singapore's recession was officially over - it reported positive growth for the final quarter of 2002.

Then corporate scandals in the US sent stock prices tumbling and the US economy teetering back towards recession.

Millions of Americans saw their savings and investments wiped out.

That has caused much more serious damage to American buying power, and so economists here are warning the current downturn may prove to be a greater problem for Asia's economic recovery.

New York despatches





See also:

28 Feb 02 | Business
17 Oct 01 | Business
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