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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: James Strauss who wrote (21398)	11/14/1998 11:23:00 AM
From: Riskmgmt	Read Replies (1) \| Respond to of 50167

Jim and all: Iraq agrees to resume co-operation with weapons inspectors. Ray

To: James Strauss who wrote (21398)	11/14/1998 2:23:00 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

From BW-- The next six months will be critical in determining the winners and losers. The strongest economies, not surprisingly, are likely to be Taiwan, Hong Kong, and Singapore, none of which entered the Asia crisis with serious fundamental problems. China also is in remarkably good shape, though structural weaknesses put a cloud over its prospects for next year. Of the crisis countries, we give the highest marks to the Philippines and Thailand, which have done the best job of political reform and adhered most closely to painful remedies. But Asia's overall performance is spotty and varies widely from country to country. We give out few As--and loads of Cs and Ds. That's because even in areas where some nations have made impressive strides--such as financial-sector reform--the job is far from complete. Although each country has set up mechanisms to clean up and recapitalize its banks, for example, the region, including Japan and China, still chafes under some $1.7 trillion in nonperforming loans. Only after this debt overhang clears will banks be able to reignite Asia's real economies by unleashing new credit to the region's exporters and developers. The task of restructuring the wrecked corporate sector, meanwhile, has barely begun. On this count, we assign C grades to Thailand and South Korea, a D to Indonesia, and an F to Malaysia. True, there have been notable asset sales and mergers. An estimated $60 billion in merger-and-acquisition deals will be completed in 1998. But that's not enough. By and large, Asian corporate chieftains remain unwilling to sell assets for prices that suitors are willing to pay. Many insolvent conglomerates have yet to even agree with creditors on debt-workout programs, a function of weak bankruptcy laws. Unless Corporate Asia picks up the pace, there is a real danger that a recovery won't hold. Asian industries ranging from automobiles to chemicals to electronics will remain hobbled by inefficiency, overcapacity, and weak prices. In Thailand, 47% of industrial capacity is idle. Multiply that across the region and you get a deflationary environment in which few companies can turn a profit. In the auto sector alone, Southeast Asia is using a paltry 25% of its factory capacity. The biggest drag on Asia's prospects is Japan. True, Tokyo is finally fessing up to its own problems. A year ago, its mandarins acknowledged $200 billion in bad bank loans. Now, they admit to about $600 billion, though the real figure may surpass $1 trillion. The government has budgeted $500 billion in public funds to take over insolvent banks, inject capital into weaker ones, and cover all depositors. But the plan doesn't address the problems of lenders that remain less profitable and efficient than their major U.S. and European counterparts. Furthermore, Japan hasn't begun to address the bigger issue of corporate and industrial restructuring. Most job cuts are coming from attrition and limits on new hires. Tougher measures are needed to restore much of Japan Inc. to sustained profitability. Without a strong contribution from Japan, Asia's walking wounded have to rely on their own resources far more than they would like. Thailand gets a B+ on financial reform for making the most progress in clearing bad debts. Walk into a Bangkok bookstore and you can buy bilingual guides to property for sale at government auctions. Also, Thailand this year has sold off $900 million in finance company loans and other assets to foreign investors, who paid as much as 60% of book value.