Third in a series

No pain, no gain.

The same lesson fitness buffs learn in the gym also applies to countries caught up in the Asian economic crisis, according to a business leader from Hong Kong.

Raymond Ch’ien, chairman of the Hong Kong-Japan Business Cooperation Committee, says those hit by the turmoil must implement reforms to strengthen their economic structures, a suggestion he aims not only at Indonesia, one of the worst hit, but Japan as well. “We are somewhat concerned about whether there is sufficient political will in Japan to carry out needed changes,” said Ch’ien, who was in Tokyo last weekend for the Third Asian Neighbors Forum, hosted by the Japan Federation of Economic Organizations (Keidanren).

Ch’ien, who is also chairman of Inchcape Pacific Ltd., an auto distribution firm, said in an interview that given the importance of Japan’s economy, its failure would bring severe suffering to all of Asia, and could even affect the global economy. “Japanese financial institutions need to take steps,” he said, adding that they need to strengthen their balance sheets and improve transparency even though such steps could be painful.

Ch’ien also said that Asian economic development has by and large been fueled by loan capital as opposed to equity capital, adding that Asian companies “borrow too much and build too much beyond the safety zone.”

But Ch’ien pointed out that as Asian companies become more globally active, they will need to shift more to equity capital instead of relying on loans. They will have to make their management more transparent and more accountable to shareholders, he said.

Ch’ien disagreed with a proposal — made at a forum last week by Asian business leaders — to create an Asian monetary fund to solely serve Asian economies, and designed to replace the role of the International Monetary Fund in the region. “You have to be sure it can be more effective than the IMF,” he said, adding that the IMF package, which is based on the principle of a free market economy, is appropriate.

After receiving strict orders from the IMF to restore their economies, some Asian business leaders are becoming critical of IMF policy, saying that it is based on Western values and will not effectively resuscitate the Asian economy. “We have to ask ourselves whether Asian values are compatible with the true requirements of the global economy, where competition has to be based on how much knowledge and technology you have as well as how efficient you are,” Ch’ien said. “If the so-called Asian values are not compatible with these competitive requirements, we need to change,” he said.

The Hong Kong government is planning many public construction projects in 1999, which should stimulate the economy, Ch’ien said. “There is a general feeling that we’re going to go through a very difficult period in 1998,” he said. “But we feel that recovery will come to Hong Kong before it comes to other Asian countries,” he said, adding that Hong Kong is expecting positive growth of around 2.5 percent to 3 percent this year.

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