[Kerajaan telah mempersiakan waktu yang lega untuk membaiki kelemahan sebab itulah kita mungkin akan dihenyak oleh krisis ekonomi yang kedua. Kini Malaysia terpaksa bergantung harap kepada perkembangan IT di Amerika untuk pulih semula. Pemimpin negara telah gagal mempelajari dari kesilapan yang silam sebab itulah kita sekali lagi terhumban.
- Editor]

http://quote.bloomberg.com/fgcgi.cgi?
ptitle=Patrick%20Smith&touch=1&s1=smith& tp=ad_topright_bbco&T=markets_fgcgi_content99.ht& s2=ad_right1_bbco&bt=blk&s=AO1IE3hLIVGhlIFJp

07/15 17:02

The Right and Wrong Ways Ahead for Asia:

By Patrick Smith

Norfolk, Connecticut, July 15 (Bloomberg) -- So much for soft landings. The signs of danger have been abundant for months, but little prepared Asians for recession's abrupt arrival late. All too suddenly, the region must now begin wrestling with the starkest question it has faced in years: What is the way forward this time?

There is a solution to this conundrum. But it involves neither waiting for the information-technology industries in the U.S. to begin making new capital investments nor accepting more neoliberal wisdom, if that is the word for it. The latter, which had actually come to seem a little scarce of late, is suddenly flooding the market again.

Wrong idea -- at a minimum, an ill-timed distraction. The wise way ahead for Asia lies in launching strenuous, serious, ambitious new programs to encourage domestic demand and wean the region away from its long, unbalanced dependence on export- led growth. The world, notably the U.S., has to buy less of what Asians produce and Asians more of it.

There may be little short-term joy in this, but at some point Asian exporters must recognize the fundamental source of their problems. And it is not to be found in their failure to heed the advice of Westerners, either four years ago or now.

Comeback

Only a few weeks ago, many purportedly serious people still seemed to believe those idiotic television ``analysts'' who get paid to say things like ``tech is coming back.'' It isn't -- not soon, not ever. Daniel Lian, Morgan Stanley Dean Witter's economist in Singapore, thinks high-technology capital expenditure is likely to recover in early 2003. ``But we don't see the 30 percent to 40 percent growth in IT cap ex that we had over the past few years,'' he adds.

This reality should be enough to persuade Asian exporters that it is time to start moving decisively beyond an old economic model. It's a cargo ship, and it will take time and seamanship to change course. But if not now, you have to ask, when?

Singapore's report Tuesday of a second consecutive quarter of contraction stands well enough as an announcement of regional recession. Taiwan had a negative first quarter and has since reported an average year-on-year export decline of 17 percent in April, May, and June. South Korea, the Philippines, Thailand, Malaysia -- recession beckons everywhere. Add in the emerging market panic set off late last week by the Argentine debt debacle and it begins to look like 1997 all over again.

Clear Culprit

It isn't. There's no fundamental crisis in Asia -- not yet, anyway -- and the source of weakness is different: No speculative currency attacks this time.

More important, the solutions to the problem should be clearer simply because its origins are. Andy Xie, who is also with Morgan Stanley Dean Witter in Singapore, estimates that IT demand in the U.S. accounted for fully 40 percent of economic growth last year in Asian countries other than Japan. And that, expressed in a single statistic, is the problem.

Nowhere to run to, nowhere to hide. No Asian nation is going to export itself back to prosperity this time -- not with demand collapsing in the U.S., weakening in Europe, and more or less nonexistent in Japan. But neither should they spend a lot of time on the criticism and castigation now abundantly on offer from mainstream economists and most investors.

The ``missed opportunity'' thesis, we may as well call it, and it is currently making the rounds. The Asians have wasted the past four years, the standard line runs. The banks and corporations remain overloaded with debt, most of the cronies remain in place, and too few of the Western-style reforms urged during the late-1990s financial crisis have been implemented.

One Economy, Many Variations

Anyone who flinches at this analysis should not be excused but complimented. What are Asians supposed to see when they look across the Pacific? Demand for their products has collapsed as U.S. high-tech companies struggle to work off overbuilt inventory stock and overbuilt capital stock -- all financed with overbuilt debt on the balance sheets of non- financial companies. Isn't this just what the Asians were criticized for four years ago?

Deregulation, supremely efficient capital allocation, scientifically precise inventory controls, and so on: These are the nuts and bolts of the neoliberal model, known until it became simply too embarrassing as the ``new economy.'' They may have been standard features in the speeches of Federal Reserve Board Chairman Alan Greenspan throughout the 1990s, but few of them have proven out.

When Silicon Valley executives, high priests of the faith, are seen in Washington asking for corporate subsidies to construct high-speed communications networks -- as reported in The Wall Street Journal a few weeks ago -- you know there's only one economy, after all. The next step is to recognize that there are many variations within it.

Clear Sight, Hindsight

Asian banks and corporations have their problems -- messes galore that require attention. But uprooting a fragile but proven model based on high savings and high bank debt -- one being the accounting counterpoint of the other -- is not the solution to them. Anyone who understands the term ``political economy'' knows such a radical exercise is not possible anyway -- which is the true lesson of the past four years.

Asians have indeed missed opportunities since the 1997 crisis, but not the ones you read about in the Western playbooks. They should have moved more aggressively to monetize their high levels of private-sector debt, so eliminating a major source of financial fragility. Most of them effectively declined the West's economic advice, as delivered by the International Monetary Fund; but they were nowhere near bold enough in developing a set of alternative policies. And they made a front-door bet on the new economy when they took their place in the high-tech bubble that has now burst.

Neglected vs. Addicted

As the good times rolled back, they made too little progress toward the kind of domestic-demand economy that will give them a stabler future. Better infrastructure via stimulative public-works spending would make a practical, achievable start. So would groundwork for the financial institutions -- domestic and regional -- needed to push cheap credit right down to the street, where demand is most neglected.

It is the reverse side of the opportunity Americans have missed. The U.S. Federal Reserve's interest-rate policy is explicitly intended to prolong the American addiction to consumption just as the Asian exporters are addicted to feeding it.

The 1990s were a disaster for Americans in this respect. The decade's consumption binge delivered them into the new century with a household savings rate of negative 0.9 percent, compared with a hard-to-believe average of 8 percent over the last 50 years.

First Step

We're all hooked at this point. ``The near-term fate of America and the world economy rests on the spending proclivities of the U.S. consumer,'' Christopher Wood, regional strategist at ABN-AMRO Asia Ltd., noted in a recent edition of ``Greed & Fear,'' his newsletter.

I find this a singularly depressing thought. Short term, Americans dare begin saving more only gradually -- and no one will encourage them anyway. Asians can scarcely be blamed for hoping demand in their traditional markets picks up again.