No Dust Settling on Asian Business Heads
JUST flown to Boston from Manila, an Asian Development Bank report still smells strongly of tropical mustiness. But the growth numbers in the ADB report, for release today, show no mold developing on Asian entrepreneurs.
Real output in the Asia-Pacific region is expected to grow a robust 7 percent on average this year, the same as last year. Chinese growth accelerated from 7.5 percent in 1991 to a sizzling 12.8 percent last year. Industry grew at an exceptional 20 percent in 1992. The Manila-based bank, in its annual look at the Asian economy, sees a modest slowdown for China to 11-percent growth in total output this year and 10 percent next year. The country will face some bottlenecks in transportation, energy, and raw materials. It also may need to contain inflation.
World trade with the "Chinese economic area" (China, Hong Kong, and Taiwan) has been growing at a double-digit rate for the past 15 years. If that trend were to continue, this trio of nations will be more important to global trade in a decade than Japan.
Last year the 26 developing countries that are members of the ADB expanded their exports by about 13 percent, reaching $555 billion or about 15 percent of world trade. Their exports grew twice as fast as world exports as a whole.
The Asian economic outlook is cheerier than that in the United States or Europe. A consensus of 50 economists surveyed earlier this month by Blue Chip Economic Indicators sees 3.3 percent real growth in gross domestic product in the US this year. This group is counting on expenditures on plant and equipment, making a major contribution to growth. Retail sales aren't doing much to boost the economy. Battered by the Blizzard of 1993, they dropped 1 percent in March, the second consecutive monthly decline.
Europe is in worse shape. Declining interest rates and hopes that the German Bundesbank will ease monetary policy further have boosted economic confidence in Europe. "But there is little reason, so far, to conclude that this psychological inflection point will be translated into accelerating economic growth," notes J. Paul Horne, international economist for Smith Barney, Harris Upham & Co., a brokerage house.
Industrial production and total output in most of the European Community has declined since autumn. Industrial output in the former West Germany was down 2 percent last year. Mr. Horne expects gross domestic product to have declined in most Community countries in the first quarter. The major exception is Britain, which is now enjoying a recovery. Most forecasts for Europe call for a mere 1 percent real growth or slightly better this year.
Asia's another story. Japan is in a slump - by its standards. The ADB predicts 2.1 percent real growth this year. The Japanese government on Tuesday announced a $116.4 billion fiscal stimulus package. But other Asian countries show more zip. The Malaysian and Thai economies will grow about a real 8 percent this year; Cambodia, Laos, and Vietnam 6 to 8 percent; Bangladesh 5 percent; India, Pakistan, and Sri Lanka 5.5 to 6 percent, and the Philippines 3 to 4 percent.
The ADB sees a number of factors behind Asia's success. One is the remarkable vigor of the Chinese economy. That has helped expand trade and investment within the region. Another is continued rapid export growth to industrial nations through greater market penetration and diversification. Also, domestic demand has been rising rapidly. Increasing foreign investment has upgraded technology and increased productivity.
Governments have been more willing to encourage business competition and privatize state enterprises.
The industrial countries still account for three-quarters of world output. But economic policy reforms, measures to deal with the overhang from the debt crisis, and the liberalization of trade and domestic economies are boosting business prospects in much of the developing world. The experts see the 1990s as far better than the 1980s for these countries. Some developing countries are now able to issue bonds or sell corporate securities on the international money markets. Foreign direct investment in deve loping countries - different than the commercial bank loans of the 1970s and early 1980s - reached $38 billion last year, up 50 percent from two years ago. These nations got 22 percent of total foreign investment in 1991, up from 12 percent in 1987.