| The following is a
synopsis of a paper prepared by Patrick Liew, who was Singapore's Institute of Estate
Agent's representative to the NAR Convention, held in Orlando, Florida, Nov. 12 - 15 1999.
This paper was provided to attendees of the Global Forecast Sessions.
Abstract
The Asian crisis sent shock waves across the globe. Its causes, conduct and
consequences have been well-analyzed and documented. There are many who argue that the
root of the crisis is due to fiscal profligacy, macroeconomic defects and moral hazards.
At the other end, there are prominent economists such as Professor Jeffery Sachs who
believe that, 'There is no fundamental reason for Asia's financial calamity except
financial panic itself.' Conflicting views notwithstanding, the trajectory of the crisis
was further exacerbated by the absence of sound regulatory and supervisory systems in the
capital market, uncoordinated monetary and trade policies, unhealthy speculation and, in
some ways, the 'one-medicine-for-all-diseases' policies of the IMF.
The heterogeneous views of the crisis is due to the interplay of different forces; both
sentiments and fundamentals, shaping it on a macro as well as micro levels. Further, each
Asian nation is unique in its economic development and has been impacted by the crisis
differently. Therefore, each of them has adopted different strategies in response to the
downturn ranging from economic deregulation to tighter capital and other controls.
This is an important perspective because the danger of over simplifying the nature of the
crisis through generalization is that we can be blinded to the opportunities within each
market. In every country, there are strong and weak property sectors and within each
sector, there are positive and risky investments.
As a result of the crisis and the ongoing recovery, there are unprecedented opportunities
which should not be overlooked by astute investors who are keen to maximize their returns
in property investments. Internationally reknown management consultant.' Kenichi Ohmae was
quoted to have said, 'This crisis is a 'natural process' and 'indeed, future historians
might call it a blessing in disguise!'
Asian economic growth: miracle or mirage.
For investors who are considering investing in Asia, there is one question that begs to be
answered, 'Is the Asian economic growth a miracle or a mirage?' In my personal opinion,
the answer is 'none of the above.'
The strong growth of East Asian economies is not due to any unnatural causes but factors
that can be rationalized by and are compatible with fundamental economic theones. They
include pro-business governments, stable socioeconomic environments, market-friendly
strategies, high saving rates and, a relatively skilled and hardworking workforce.
The past three decades of achievement in sustained industrialization and economic
development, unprecedented in history, is also not a myth but a fact.
From 1965 to 1995. the contribution of the ten economies in East Asia to the world economy
grew from 9 percent to 25 percent. This contribution is almost on par with North America
and the European Union which contributed 25 percent and 29 percent respectively.
The track record of economic growth was achieved with comparatively lower inflation rates
than countries in other developing nations. Statistics by the World Bank (1996) show that
the average annual inflation rate of Asia Pacific countries during 1980 to 1993 was
7.1 percent while that of the other developing countries is an average of 72.8 percent.
This impressive economic growth and inflation rate have resulted in positive and visible
improvements in the average standard of living, reductions in poverty, increasing real
wage and, a healthy employment record.
If the proof of the pudding is in the eating: on behalf of East Asian nations, I would
like to invite you to visit our countries and experience for yourself not just the beauty
of our land but also the dynamicism that results from the positive fundamentals that have
been established in our economies.
According to Professor Jeffery Sachs and Steven Radelet, despite the economic shocks
buffeting Asia; its long-term projections for growth are good. The currency crisis in
South East Asia is only short term and by 2025, Asia may account for half the world's
income, as capitalism pervades the continent. According to them. 'The tidal shift is
likely to continue, with Asia re-emerging by the early twenty-first century as the world's
centre of economic activity.'
The Asian recovery: boon or bane?
The gloomy outlook of the past two years has been replaced by renewed optimism with major
analysts predicting better-than-expected economic results. The economic recovery is
underpinned by, among others, increasing competitive advantage, easing of monetary
policies and, a stabilizing of nominal exchange rates.
The common denominator among the East Asian economies is that the trade balance has
improved; with many of them reflected by a current account surplus and rising
international reserves and, thus providing much needed liquidity in the economy.
Industrial productivity is turning around and the painful process of economic
restructuring, including recapitalisation of banks, is in the process.
The lowering of interest rates and the corresponding decrease in business costs created
the breathing space for the economy and enterprises to consolidate and engineer their
growth again.
The recovery track is uneven and differentiated with Singapore leading the turnaround.
follow by Thailand and South Korea. South Korea's GDP achieved an impressive growth of 7.3
percent in the first six months of 1999 and its output expanded by 9.8 percent
year-on-year. Even Malaysia is beginning to show signs of recovery. The GDP grew by 4.1
percent in the second quarter of 1999 year-on-year after five quarters of contraction. In
a poll of 10 research houses in October 1999 by Reuters. Malaysia's GNP is forecasted to
grow by 4.8 percent in 1999 year-on-year and by 5.7 percent in 2000.
The strengthening of economic fundamentals and increase in confidence levels are also
reflected in positive sentiments and an up trend in the equity markets.
As we scan the horizon, the Asian crisis has resulted in many positive outcomes. There is
a greater urgency to benchmark economic policies and structures so as to enhance the
comparative advantage in the global market. The demand for sound corporate governance has
increased, with greater emphasis on innovative and productivity improvement skills for the
knowledge-based era. Unhealthy and protective barriers are being dismantled. All these
factors will position Asian nations to compete more effectively in the globalized economy.
Let me close with the words of my Prime Minister, Mr. Goh Chok Tong at the World Economic
Forum on Oct. 18, 1999:
'Buy into Asia now at bargain prices
and position yourself for Asia's recovery.' |
