Asia News Digest
Malaysia, China Sign $1.5-Billion Swap Deal
Malaysia's Bank Negara and the People's Bank of China (PBC) have signed an agreement on a U.S.$1.5 billion (RM5.70 billion) U.S. dollar-ringgit bilateral swap deal under the Chiang Mai Initiative. The agreement was signed on Oct. 9 in Beijing. "The agreement is part of the regional cooperative effort towards contributing to greater financial stability in the region," said Bank Negara.
Resistance Builds to ASEAN Tariff Cuts
The six original members of the Association of Southeast Asian Nations (ASEAN) are bracing for the January 2003 implementation of tariff cuts under the Common Effective Preferential Tariff (CEPT). Agricultural and industrial products traded among the ASEAN countries are slated to be reduced to 0-5% tariffs on agricultural and industrial products.
Some are signs of resistance:
*Raul T. Concepcion, long-time leader of Manila's business community and convenor of the Alliance of Concerned Downstream Industries, has called for a six-month to one-year delay of the AFTA tariff cuts to give more time to the Tariff Commission and the affected industries to sort out all petitions for tariff-cut delays.
*Philippines Trade and Industry Secretary Manuel Roxas said the Association of Petrochemical Manufacturers of the Philippines has petitioned for suspension of cuts in petrochemicals and resin tariffs from the current 15%.
*The Filipino tuna industry has succeeded in getting the government to warn that U.S./European trade barriers to its tuna exports could wipe out 100,000 jobs for locals, especially in the politically troubled southern provinces, which could trigger the potential for terrorism in the country.
*Indonesian textile producers are urging the government to delay import tariffs cuts, pointing out that the industry, which, prior to the 1997 crisis, was the 10th-largest textile producer in the world, has slipped to 17th, even with tariffs of 20-30%. Even so, estimates are that 40 textile producers are running at a financial loss, and 76 others have closed.
Manila's Trade Minister Roxas said he should not be blamed if more industries ask for extended tariff protection, because these industries were just using all the means available to defend their businesses.
Thailand Privatization Program on Hold Due to Falling Market
In yet another sign of Southeast Asian nations pulling back from globalization orthodoxy, the Thai Prime Minister Thaksin Shinawatra's new cabinet has responded to the market collapse by scrapping the privatization program indefinitely, and stalling new issues. Finance Minister Jatusripitak said that, "because of the global stock-market slump, the board of state enterprises should have its own say as to when to privatize."
A September issue of BankThai (a merger of 13 failing banks three years ago) was a flop, selling only 78% of the offer, even at a 30% discounted price. The new Transport Minister Suriya Jungrungreankit announced that the newly established Airports of Thailand (AoT) was delaying its initial public offering plans until some time next year. Several other cash-making state enterprises Thai Airways International, TOT and the Port Authority of Thailand have also missed their privatization deadlines, due to political and labor opposition.
Thai PM Renews Call for Asian Bond Market
In his speech to the World Economic Forum meeting in Putrajaya, Malaysia, Thai Prime Minister Thaksin Shinawatra said that Asian countries must work together so that the region could stand on its own economic feet and not be at the mercy of foreign financial speculators.
"Isn't it time," the Prime Minister asked, "for Asia to explore the setting up of an Asian bond market as a financial instrument to help maximize our continent's potentials, and prevent exploitation of our reserves by others against the interests of ourselves?" He suggested that a fund be set up to purchase bonds issued by Asian countries by mobilizing 1% of each country's reserves on a voluntary basis. In addition, he said, Asia needed a reliable credit-rating agency to provide impartial analysis of bond issuers.
Thaksin opened the three-day World Economic Forum, in Malaysia's capital city, Putrajaya, on Oct. 6, the theme of which is to rejuvenate growth and prevent a second Asian economic crisis at a time of looming uncertainty. The Prime Minister recalled the lessons of the first crisis in 1997: "Sadly and paradoxically, such flows [of capital] that had been inflicted upon us were the results of using, manipulating, and managing our own capital, very much against our own interests," Thaksin declared.
He warned that Asia's financial agenda still had to be addressed to ensure the full and sustainable recovery of the economies. "With the total combined international reserves amounting to over $1 trillion, and with adequate savings, should Asia be suffering from a liquidity dilemma?"
Indonesian Veep Warns Against Terrorist Allegations
Indonesian Vice President Hamzah Haz, without naming the U.S., on Sept. 28 urged foreign countries to stop branding Indonesia a hotbed of terrorism, saying the campaign would incite people's fury against their countries. In his address to the Congress of the Indonesian National Youth Committee (KNPI), the Vice President said: "We warn that these baseless issues be stopped [from being spread] before [the] Indonesian people get angry. If the Indonesian people get angry and cannot be reined in, how will the government rein them in?"
Hamzah chairs the largest Muslim political party, the United Development Party. Previously, moderate Muslim leaders Hasyim Muzadi of the 40-million-strong Nahdlatul Ulama, and Sjafii Ma'arif of the 30-million-strong Muhammdiyah, criticized U.S. pressure on Indonesia.
Collapse of IMF's 'Korea Model' Continues
Just as Wall Street is touting the IMF's "economic miracle" in South Korea, it is rapidly collapsing. Based on foreign hot money, Seoul's KOSPI index is down over 27% this year, as the hot money flees once again. The Ministry of Commerce reported Oct. 8, that Foreign Direct Investment (FDI) in Korea plunged 44% in September to $589 million, from $1.051 billion in September 2001, after dropping in August by 8%. Total third-quarter FDI fell 18% from the same period in 2001. U.S. investors accounted for 54% of the total FDI in the third quarter, followed by Japan with 17%, and the European Union 9.8%.
Meanwhile, the massive borrowing by consumers has begun to implode. The Bank of Korea (the central bank) and several Seoul think tanks issued a report Oct. 8 entitled "Household Debt Feared To Spur Mass Bankruptcies." The report warns that "Households are increasingly exposed to credit risks by taking out more loans from financial institutions, which is causing worries over a possibly massive number of household bankruptcies." Kim Min-ho, an official at the central bank, said, "The increase in loans to the retail sector accelerated last month due to a hike in housing mortgage loans caused by real estate price increases. It seems individuals still have the expectation that they can make capital gains from real estate speculation."
According to the Bank of Korea, household debt reached almost $400 billion at the end of June, up 34.3% from the previous year. In particular, the ratio of household debt against the nation's Gross Domestic Product reached around 70% at the end of June, and is fast approaching the U.S. level of 80% of GDP, BOK warns. "Market experts said that having a credit expansion when real-estate prices are in bubble is a dangerous signal for the economy," they note.
India-Pakistan Border Tensions Lessened; India Endorses Preemptive Strike Principle
India has removed "some high-tech equipment and aircraft" posted along the India Pakistan borders, according to Pakistan's Director-General Inter Services Public Relations. Pakistan has not reciprocated the Indian initiative yet, in reaction to what it deems aggressive statements issued by some Indian leaders recently.
Indian Prime Minister Atal Behari Vajpayee, who is visiting Cyprus and the United Kingdom, has told the British media that there will be no war between India and Pakistan. His statement stands somewhat in contradiction to his External Affairs Minister Yashwant's Sinha's statement last week when he told the media at Ranchi that "war is the last option, and it will be used after all diplomatic options are exhausted."
At the same time, Indian Finance Minister Jaswant Singh told the American media on Sept. 30 in Washington, that India recognizes preemptive strike as a valid interpretation of Article 51 of the UN Charters. Jaswant Singh's statement was read in India as expressive of New Delhi's intent to hit Pakistan preemptively to remove the terrorist training camps within the Pakistan-held part of Kashmir.
An Indian Defense Ministry spokesman has also told the Press Trust of India that India has signed a deal, worth about $70 million with Israel, whereby India will receive 1,022 portable radars, manufactured by the Israeli EL-OP company. Some of these portable radars have already been installed along the disputed Line of Control in the state of Jammu and Kashmir. These radars can detect human movement up to 10 kilometers.
Pakistan Test-Fires Another Missile
In its second test within five days, Pakistan test-fired an HATF-IV medium-range surface-to-surface ballistic missile which could hit targets at a range of 750 km (about 470 miles), according to The Hindu Oct. 8. A Pakistan Defense Ministry spokesman said the missile test was a success. He also said the test "was in continuation of the one conducted on Oct. 4 to validate certain additional parameters."
Beside this flexing of muscle to deter the fully prepared 700,000 Indian troops deployed along the India-Pakistan border and ready to wage war, Pakistan's missile test-firings were also a part of grandstanding by the military rulers for the general elections on Oct. 10. President Pervez Musharraf is under attack from the religious-political grouping, which was hand-shaped by the President himself, for selling out to the "American dogs." By testing these missiles against Washington's expressed opposition, President Musharraf is exhibiting his "independence" from foreign controllers.
Beijing: India and Pakistan Should Ally To Fight Terrorism
Beijing's Vice Minister of Foreign Affairs, Wang Yi, during his discussions with a senior editor of the Times of India, said that instead of frittering away its energies in debilitating quarrels with Islamabad, New Delhi should join hands with Pakistan to fight the menace of terrorism that targets both countries with equal animosity, The Dawn reported Oct. 7.
Addressing the Kashmir issue directly, Wang Yi said that while recent armed attacks in Kashmir were acts of terrorism, the issue of Kashmir was not about terrorism alone. "It was a leftover from history, from the aftermath of British colonialism, and it involved very complicated territorial and religious issues," Wang added.
Wang also made it clear to the Times of India that Pakistan is an "old friend," and "it is in the Chinese tradition to value an old friend." "Pakistan is our neighbor as well as your neighbor Our relationship with Pakistan is based on the principles of panchashila (five principles of peaceful co-existence). It is not targetted at a third country [India], and this is why China could not understand why our Indian friends are suspicious about the China-Pakistan relationship."
Indian Prime Minister Vajpayee will be visiting China soon. The date has not been fixed, but it is likely that he will go this year. These press briefings are ostensibly a part of Vajpayee's forthcoming trip.
Nepal's Constitutional Crisis Worsens
Nepali King Gyanendra, who on Oct. 4 dismissed the government of Prime Minister Sher Bahadur Deuba and the Parliament, and promised to form a Cabinet on Oct. 9, left the capital abruptly, throwing the country into a Constitutional crisis. Meanwhile, Gyanendra has called off all his appointments set earlier with the Nepali political party leaders. The King has cut off all communications with the political parties.
Following the sacking of the Deuba government and dismissal of the Parliament, the King left for his ancestral home in Gorkha, 95 miles west of Kathmandu, to celebrate a Hindu festival. Gyanendra's shock move last week was the first time a king had assumed direct power since parliamentary democracy replaced absolute monarchy in 1990.
Meanwhile, suspected Maoist rebels set off a small bomb at a Norwegian-funded private Hydel hydroelectric project, but the explosion caused no major damage. It was the third blast since Gyanendra dismissed Deuba. The Maoists have denounced the King's takeover and urged "a united struggle against the feudalistic and despotic move."
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