Asia Seen Bouncing Back

Asia seen bouncing back

NICHOLAS REYNOLDS
Obituaries for East Asia's economic growth are premature as the fundamental conditions for high growth remain in place, the Asia Pacific Economics Group says.

In its annual analysis of Asia-Pacific economies released yesterday, the Australia-based group said growth for the region's developing economies should return to an average of at least 7 per cent by 2001.

Group chairman Ross Garnaut said: "If the developing countries get through this economic period while maintaining political cohesion and commitment to growth, there is no reason not to have 6 to 7 per cent growth."

Growth for the more developed economies would be less able to return to past levels as they were reaching the technological frontier of the industrial countries.

The group's Asia Pacific Profiles 1998 , which analyses 15 regional economies, said many of the countries still had considerable scope to raise productivity as they were a long way from the technological frontier.

The report warned the return to high growth would not last very long without the rebuilding of financial-sector institutions and regulatory frameworks, and further reform of the political system.

These innovations should proceed at a sufficient pace to restore the East Asian economies to comfortably within a percentage point of their previous growth by 2001.

Growth would be promoted by high savings and investment, commitment to openness and a focus on human development.

The crisis had brought further factors promoting growth as the International Monetary Fund's packages required new commitment to financial systems, trade regimes and foreign investment policies.

Malaysia and the Philippines were expected to recover relatively quickly, Thailand, Indonesia and Vietnam more slowly.

Mr Garnaut said it was unlikely growth could return to earlier heights for developed economies such as Japan and Hong Kong.

Hong Kong should see a long-term growth rate of a few per cent a year, while Japan, with its aging workforce, probably would record long-term growth of just 1 per cent.