World Bank cautious on Asian growth REUTERS
Tokyo, Dec 21: Asia's growth rates over the next decade will depend more than anything on how governments privatise the huge volume of assets acquired as a result of the region's Financial crisis, a senior World Bank official said on Tuesday. Jean-Michel Severino, vice-president for East Asia and the Pacific, said the bank was cautious about the region, whose economic success was not assured despite its current rapid recovery. "We are staying on red alert," Severino told a seminar on the lessons to be learned from the currency chaos two years ago that plunged East Asia into a deep recession. He said the region stood at a crossroads, with politicians in a number of countries unsure what model of economic management to adopt now that the immediate crisis was over. Privatisation would be a litmus test, Severino said. In most countries, the state owns, directly or indirectly, more than half the economy as a consequence of bank bail-outs. In the case of Indonesia, the figure is more than 70 percent, he said. Whether the inevitable privatisation process results in more open, transparent and equitable societies will be critical for Asia's economic competitiveness, Severino argued. "We think most Asian economies haven'T made their minds up which way they want to go," he said. This was a legitimate political debate but, until it was settled, policy contradictions would persist that would hamper the region's economies."They will remain very vulnerable," Severino said. He predicted heightened market volatility and the risk of fresh Financial shocks, especially if the export demand that is currently boosting growth were to fall sharply. The need for deep-seated structural reform and limited room for manoeuvre on fiscal policy would also make it difficult to sustain strong growth, he said.Severino stressed that the World Bank was not seeking to impose a specific free-market model on Asia. In particular, holding up free-wheeling U.S. Capitalism as an ideal would be a huge mistake and would fuel resentment, he said. But that did not mean the Bank should accept any set of "lousy policies". Vietnam, for example, was following a development model that was leading to failure, Severino said. What was important was policy consistency. A country that decides it wants to borrow from the international capital markets must realise that transparency is vital for winning the confidence of lenders and investors."If you don'T, you'll hit the wall at some point," Severino said. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd. All rights reserved throughout the world. feedback at financialexpress.com