The Asian economic rebound has been driven by consumption rather than a growth in exports and savings. Regional economies are undoubtedly growing, some from very depressed bases, as consumer confidence slowly returns.
However, if this rebound is to continue, there must be greater deregulation and liberalisation of national economies, especially government companies owned by corrupt politicians, whose incompetent management has diverted funds from more important aspects of the economy.
One of the most important sectors is the construction industry, subject of a recent report by BIS Shrapnel, Building and Construction in the Asia Pacific Region. This predicts that many of the region’s building sectors will have recovered substantially by 2002, albeit at different rates.
It adds: `Companies which maintained contacts in Asia will reap the benefits, as late 1999 and 2000 will see a general return to growth in construction. However, the outlook is not as optimistic for building material suppliers with a large involvement in Asia.’
In Hong Kong, recovery will be driven by government spending on infrastructure, with a boom in engineering construction forecast from 2000 to 2003.
Conversely, in South Korea, the recovery will be dependent on overseas capital inflows, with civil engineering growth bolstered by airport and railway developments.
Infrastructure spending will also underpin Singapore’s recovery, but the short-term outlook for commercial and industrial property remains gloomy. In Malaysia and Thailand, construction is likely to be the only economic sector not to improve next year, as there is a major oversupply depressing both markets. Construction in Indonesia will be in the doldrums for the foreseeable future.
The outlook in the Philippines is brighter, boosted by government spending on housing, health, education and infrastructure.
China, as always, remains the enigma; a huge potential market seldom realised. The country’s biggest problems are falling exports and a lack of consumer confidence cutting spending, although it retains an overall trade surplus.
The economy is deflating and growth has slipped to 7%. Despite this, BIS Shrapnel forecasts enormous opportunities in housing as incomes rise and mortgages become more established.
Analysts believe China missed a golden opportunity to realign the yuan earlier this year when real interest rates were at record highs. Also working against the yuan, which remains protected from international markets, is the huge amount of government funds still committed to unprofitable state enterprises.
To increase liquidity, the government has decided to force the release of an estimated $1 trillion held in private bank accounts by taxing interest at 20% from 1 October.
Unfortunately, one of the main recipients will probably be the local share market, which resembles a casino.
Many households have lost confidence in the system and will only commit their savings to a genuine private sector, one that has been deliberately deprived of credit to prevent competition with state companies.
Copyright: Centaur Communications Limited