Southeast Asia´s Economies: Corporate Sector Concerns Return to the Fore

Abstract

Introduction One could almost hear the collective sigh of relief that echoed around the capitals of Southeast Asia in late 1999 and early 2000, as most countries' economic growth rates returned to positive territory, and the anni horribilis of 1997-98 began to fade into memory. During the first half of 2000, economists began to talk of a V-shaped recovery for the region in the propitious Year of the Dragon. In big picture terms at least, Southeast Asia appeared to be much improved, with most headline macroeconomic numbers looking fairly encouraging: positive gross domestic product (GDP) growth; positive current and capital account balances; rising foreign exchange reserves; and so on. Policy-makers probably felt able to relax a little in the first part of 2000, as the region began to show signs of returning to some degree of normalcy. With the notable exception of Indonesia, it was hoped that the region's economies could now strive for the sorts of growth trajectories they had enjoyed prior to 1997. However, news from the corporate sector did not seem to tally with this general impression of growing economic well-being. National and regional business newspapers across Southeast Asia continued to run stories about persistent delays in banking and corporate debt restructuring. De-coupling completely from the GDP growth figures, all the region's main stock market indices declined quite significandy in 2000, while local currencies remained weak and appeared vulnerable to bad news in the political realm (of which there was quite a lot in 2000). Estimates of the scale of aggregate (both public and private sector) debt carried by the region also made for uncomfortable reading. Meanwhile, foreign investors appeared ambivalent towards Southeast Asia as a host for their capital. Little foreign direct investment (FDI) in new production capacity was evident in 2000, and even FDI in existing ? but often distressed ? businesses was fairly patchy, despite the significantly reduced price tags attached to them (particularly in U.S. dollar terms). The jitters felt by both the currency and equity markets suggested that all was not well with