POST-CRISIS EAST ASIA DUCKING HARD CHOICES.
Asian countries want "to have their cake and eat it" when it comes to badly needed financial and economic reforms, Agence France Presse reports the World Bank's Asia-Pacific vice president Jean-Michel Severino as saying yesterday. Foreign banks have also failed to come to grips with a new climate for business in the aftermath of the financial crisis which swept across the region two years ago, he said.
"The countries of East Asia have not yet chosen what they want as their economic model," Severino said, noting a region-wide recovery which is steadily gaining ground. "In practical matters of financing, accounting and traditional business ways, none of these countries has yet made clear what they prefer. They want to have their cake and eat it."
Regional economies cannot "stick with their familiar methods of doing business based on personal relations and still play a role on the world stage. As long as this contradiction is not resolved, the consensus for change will remain ambiguous," Severino continues.
Financial transparency in the post-crisis future is essential to prevent a lurch back into economic catastrophe, notes the story. "Our message is that if Asia wants to continue looking to the rest of the world to finance its development, then the dynamic for change absolutely must deepen so that this part of the world can reduce its vulnerability faced with the chronic instability of the markets."
East Asia has made "enormous progress" in its reforms over the past two years, the piece adds. But they are "only a quarter of the way there. It is urgent that reforms are completed because failing to restructure the financial systems is one of the factors which could weigh on growth if the current favorable export trend reverses," he added.
"Globally Asia is more indebted now than before, and this heightens its vulnerability," Severino warned. Banks must not simply be re-capitalized but merged or even shut down. Major impediments to financial restructuring have to be dealt with. Too little has yet been done to restructure the heavily indebted corporate sector and in some areas excess capacity, both in jobs and plant, must be shed, he said.
Meanwhile more needs to be done to overhaul local financial systems, improve governance and supervision. But administrative branches, banks and companies may suffer from a lack of expertise, he notes. However, international banks for their part have also failed East Asia, according to Severino, and they could be tempted to repeat their mistakes.