Lee Hsien Loong: ASEAN post-crisis - rebuilding confidence and prosperity  Speech by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, at the Bank of Thailand, Bangkok, 30 November 2000. *  *  *  Distinguished Guests, Ladies and Gentlemen, Introduction I am honoured to be here today to deliver this lecture organised by the Bank of Thailand in conjunction with the 72nd birthday celebrations of His Majesty the King. On this joyous occasion, on behalf of Singapore and its citizens, I wish His Majesty good health and many happy returns of the day. The topic of my talk today is, “ASEAN post-crisis: rebuilding confidence and prosperity”. The Asian crisis is past, but its consequences are still with us. I propose to review the post-crisis environment which ASEAN faces today, and discuss some of the lessons to be drawn from the crisis. Then I will focus on what ASEAN and its member countries should do to restore confidence, long-term growth and prosperity in the region. Passing of the crisis The financial crisis swept through ASEAN economies like a tidal wave. Between 1997-99, the combined GDP of the original five ASEAN members fell about one-fifth, in $ terms. Unemployment rose, businesses folded, and governments and societies came under stress. Three years after the crisis struck, the region is stabilising. The worst passed much sooner than many expected. The recovery initially depended on expansionary fiscal policies, and strong exports especially of electronics products.

Their challenge is to evolve into modern corporations that are more than family companies. They need to be run professionally by the best man for the job, and not by heirs who may or may not have inherited the business skills and acumen of the founder. Third, governments need to untangle the complicated and deeply-entrenched ties between state, banks and industry, which exist in many Asian countries, like the chaebols in South Korea, or the state-owned enterprises in China. Such industries and enterprises often account for a significant share of GDP, but they are neither subject to market discipline, nor driven purely by economic considerations. They often find it difficult to operate as efficiently as private sector firms. Banks fail to apply normal criteria in approving loans, because of political pressure or implicit state guarantees. Employees enjoy de facto life-time job security. Well-connected persons help themselves to privileges at the companies’ expense. And governments find it politically impossible to close down the operations, no matter how unsuccessful. It is essential to speed up restructuring and reforming these unproductive enterprises. In China, the government is making a massive effort to reform its SOEs. In South Korea President Kim Dae Jung is pushing chaebols to rationalise and consolidate, and change their traditional ways of doing business. ASEAN countries must not lag behind, or else it will affect confidence in their investment climate. Banking sector reforms Besides pursuing corporate restructuring, ASEAN economies must persevere to clean up and recapitalise unsound banks, and strengthen the banking sector.