BUSINESSWEEK ONLINE : JULY 10, 2000 ISSUE
BUSINESS OUTLOOK

Southeast Asia: A Surge from Electronics


The post-crisis economies of Southeast Asia, which rebounded strongly in 1999 from their 1998 recessions, are off to another year of good growth with generally tame inflation. However, individual performance is varied, depending on the contribution of electronics exports and the degree of recovery in domestic demand. Also, the outlooks are clouded by slow reform efforts and political uncertainty.

Malaysia and Singapore are the growth leaders, benefiting the most from the global tech boom. First-quarter growth from a year ago was 11.7% and 9.1%, respectively. Exports of electronic equipment and components are 47% of gross domestic product in Singapore and 65% in Malaysia, while the concentrations in Thailand, Indonesia, and the Philippines are far less, according to economists at Morgan Stanley Dean Witter. Singapore also has received a big lift from pharmaceutical exports.

Malaysia's success largely reflects its cheap exchange rate, fixed by the government at a well-undervalued 3.8 ringgits per U.S. dollar. The move has heightened Malaysia's regional competitiveness, and domestic capital controls have helped the government keep interest rates at a decade low. This strategy has kept the financial system liquid and attracted foreign investment, but it could lead to overinvestment and imported inflation.

Reflecting less thrust from tech exports and a slower rebound in domestic demand, first-quarter growth in Indonesia and the Philippines, at 3.2% and 3.4% respectively, slowed notably from the fourth quarter. The pace in Thailand, while a healthy 5.2%, also cooled. Slow debt restructuring in Thailand is keeping bank lending sluggish. The Philippine government has been forced to lift interest rates to shore up its sagging currency, and Indonesia is still wracked by political woes.

Overall, Southeast Asia's rebound still is keenly dependent on exports, especially to the U.S., which takes two-thirds of all Asian electronics exports. A sudden slowing in the U.S. would be a blow to the region's recovery.

By JAMES C. COOPER & KATHLEEN MADIGAN

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

BACK TO TOP
RELATED ITEMS
Southeast Asia: A Surge from Electronics

CHART: How Tech Exports Drive Southeast Asia



INTERACT
E-Mail to Business Week Online

 
Copyright 2000-2009, Bloomberg L.P.
Terms of Use   Privacy Notice