Elections to stall reforms

Business Asia, March 3, 2000 by Cameron Cooper

Fears are rising that a series of elections across Asia this year will put crucial economic and corporate reforms on the backburner.

The exception should be Asia's current bright spot, South Korea, according to Andrew Agnew, head of financial institutions for ABN AMRO's Asia-Pacific region.

Taiwanese go to the polls this month to replace outgoing president Lee Teng Hui, while Thai Prime Minister Chuan Leekpai also faces voters in 2000.

Japanese Prime Minister Keizo Obuchi must call general elections by October.

Parliamentary polls are also slated for South Korea, while Malaysia's dominant United Malays National Organisation (UMNO) will hold internal leadership elections in May.

Agnew, speaking at a Sydney conference recently, said elections in Asia "will clearly delay" corporate reforms.

He implied that a politically dominated agenda would ensure that decision-making in the months ahead will be driven by pork-barrelling, rather than good governance.

But Agnew remained confident of continuing reforms in South Korea.

Of all the crisis-hit countries, Korea has recovered the fastest -- fuelled by a combination of tough leadership by President Kim Dae Jung and the legendary determination of the Korean people.

Agnew noted that significant corporate reform was taking place in Seoul, despite claims that taking on the much-vaunted chaebol, or conglomerates, would be impossible.

The government's decision not to prop up the troubled Daewoo company underlines Korea's determination to impose reforms.

Agnew said crucial agricultural reforms were likely to stall in Thailand because of elections.

In general, ABN AMRO is bullish on South Korea and India in 2000, but bearish on Indonesia and the Philippines.

On a positive note, Agnew said across Asian economies major improvements had occurred in:

* the consistency of macroeconomic policy;

* the reduction of external debt reliance; and

* labour market reforms.

More work was still needed on finance-sector restructuring, while corporate restructuring remained the region's greatest problem.

ABN AMRO is predicting continuing growth in all major Asian markets in 2000.

Buoyant electronics demand should be one of the major drivers of growth, particularly in South Korea, which is one of the world's largest makers of semiconductors.

In 2000 and 2001, respectively, the year-on-year rise in demand for semiconductors is forecast to grow around 20 per cent each year.

Agnew said Asian stock markets had returned to 75 to 90 per cent of their pre-crisis values in terms of local currencies.

He said, however, that high office vacancies pointed to ongoing problems in the region.

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