The opening up and deregulation of markets may be fuelling the fires of growth in Asia, but the expansion is sucking in imports and saddling some governments with widening trade deficits. This is the conclusion of the United Nations Economic and Social Survey of Asia and the Pacific 1996, which warns the balance of payments problem is worsening in a number of countries in the region. Imports are being encouraged by the liberalisation and opening up of trade, it says, as well as easier access to credit and capital, including foreign investment. At the same time, exports are facing more intense competition based on differences in cost and efficiency, the report says. The study pinpoints India, Indonesia, Malaysia, Pakistan, the Philippines, South Korea, Sri Lanka and Thailand as countries that are suffering a deterioration in the balance of trade and payments in what are otherwise well-performing economies. 'Bottlenecks are building in some countries, leading to a need for some fundamental changes in their structures. Several countries have severe labour and skills shortages, and consequently higher costs of production, and so are losing comparative advantage in producing simple manufactured goods based on cheap labour,' the report says. It suggests that there will have to be a shift in industrial and production structure towards more technology-intensive areas and an improvement in labour productivity in existing industries. 'The existence of cheap labour in low-wage countries is also no guarantee that they will be able to compete effectively in the international markets,' the study says. The role of the private sector in economic development - which is now official policy in almost every developing country in the region, from Burma to Pakistan and Vietnam to China and Sri Lanka - is being hampered in some cases by lack of state implementation of the necessary policies, it says. 'The lack of effective implementation, which is visible in many countries in the region, is often related to a lack of political will, a lack of reform of the public administration to increase its efficiency, and the influence of vested interest groups in both the public and private sector,' it says. The UN report provides ammunition for the growing number of business people who find themselves frustrated by the lack of enforceable contracts or property rights. Vietnam and China, while not mentioned specifically, have been criticised elsewhere for the uncertainties these problems generate. The penalty for not recognising these deficiencies could be a losing out on for capital, the report implies. Despite the widespread liberalisation, only a handful of countries have been grabbing the lion's share of direct foreign investment, it says. 'The reasons for this include the credibility of the regulations and the enforcement regimes within which the private sector operates,' it says. In its review of the economic performance of the Asia-Pacific region, the UN supports last week's forecast by the Asian Development Bank that growth is likely to moderate slightly, after a deceleration in average gross domestic product growth from 8 per cent in 1994, to 7.8 per cent last year. A further small slowing will provide some economies with the breathing space to overcome the shortages of labour, skills and infrastructure that have followed the rapid growth of recent years, it says.