SUNS 4332 Thursday 26 November 1998
INDOCHINA: ASIAN FLU SAPS REGION'S GROWTH
Bangkok, Nov 25 (IPS/Ron Corben) -- Vietnam, Cambodia, Laos and Burma, catching more than just a whiff of Asia's economic flu, are fast becoming sidelined in a regional game of economic survival.
While the spotlight has focused on Thailand and Indonesia, the most afflicted of South-east Asia's economies, the four Indochinese countries are foundering amid falling foreign investment, inflation and shaky currencies.
"At an generic level all four countries are suffering a lot," Peter Brimble, president of The Brooker Group Ltd, said here.
"They had relied so much on trade and investment from other ASEAN (Association of South-east Asian Nations) members -- until last year," Brimble said.
Malaysian, Thai and Singaporean investors had been key players in projects from manufacturing to tourism and infrastructure in Indochinese countries. But the flows of funds have now slowed or halted altogether.
The slide in foreign investment forced Hanoi to acknowledge faltering economic growth. Prime Minister Phan Van Khai recently warned Vietnam that faced its most severe downturn since economic reforms were introduced a decade ago.
"We must focus our priorities of investing in developing the struggle against recession and prepare favourable conditions for the coming years," Khai said.
The Vietnamese economy is expected to grow only by between 6.1 to 6.7 percent, in contrast to 8.7 percent in 1997. World Bank officials say the final outcome could be as low as 3-5 percent.
Faced with reduced state revenues, the government has curtailed infrastructure projects, including roads, ports, theatres and schools.
"We must economise by cutting back on public expenses, such as receptions, conferences, seminars and trips, telephone and gasoline bills and car purchases," Khai said.
Foreign investment in the first eight months stood at 1.1 billion dollars, a fall of more than 20 percent from a year earlier.
"Investor confidence in Vietnam continues to fall and actual investment has returned to the levels of the early 1990s," U.S. Ambassador, Pete Peterson, said in a commentary in the `Vietnam Economic Times'.
"Without continued significant flows of foreign investment, Vietnam will have difficulty financing its development needs in the next century," Peterson said.
Across the Mekong River's wide span the Laotion economy, ravaged by inflation and a falling currency, awaits Thailand's recovery.
As Laos' largest investment and trading partner, Thailand's economic slide turned into a torrent for its neighbour, even as Vientiane struggles to press on with market reforms.
IMF representative Wayne Camard said Laos' growth had relied on tight fiscal policies and strong inflows of foreign investment. "The Asian crisis has knocked down both these pillars," the English-language 'Vientiane Times' reported Camard as saying.
The National Assembly was told 100 foreign private investment projects were given the go-ahead, with a value of 150 million dollars. But overall, analysts say foreign investment was down 60 percent.
"Most of the Thai projects have been stalled. There has been little going on in the whole of the investment sector over the past year," a diplomatic source in Vientiane said.
Inflation is galloping at 100 percent a year, with the local currency, the kip, having slumped to 4,200 to the U.S. dollar from 2,100 a year ago.
With the falling exchange rate, per capita incomes will shrink to just 220 dollars, from earlier estimates of 300 dollars.
Kao Kim Hourn, executive director of the Cambodian Institute for Co-operation and Peace (CICP), says Cambodia has suffered from Asia's crisis and political battles over the past year.
"It has been a double blow for Cambodia. Because of the elections and the post-election deadlock, it has put Cambodia into a deeper situation," Hourn said.
"It will be in the best interest of Cambodia for the (country's) leaders to put our own house inorder," he said. Cambodia's political parties, led by Prime Minister Hun Sen's Cambodian People's Party and Prince Norodom Sihanoulks' Funcincpec, have agreed on a coalition government once more.
Hourn had warned that "it will be imperative for the government to be formed" in November at the latest.
In Burma, a brief flurry with economic liberalisation in recent years is now on the retreat.
Signs of economic distress emerged earlier this year when the military government imposed sweeping restrictions on imported goods -- especially consumer goods. Later, controls were extended over sugar and rice.
But for Burma which had long been used to being shut off from the outside world, smuggling and the blackmarket economy were quickly revived. "The black-market trade could be as large as the formal trade," said the analyst.
"Although banned, the shops in Rangoon are full of stereos, TV and radios. And yet you are not supposed to be able to import these things," he said.
Growth projections for the Burmese economy of 4 percent for 1998 have been lowered to 2 to 2.5 percent.
The situation has been aggravated by Thailand's failure to meet a July deadline for the start-up of a natural gas-fired power station in the western Thai town of Ratchaburi.
The gas is sourced from the 1.2 billion dollar Yadana gas pipeline project in Burma's Gulf of Matarban. The junta has mortgaged annual revenues of 200 million dollars to meet new loans and finance its 15 percent stake in the project.