Three more Asian countries might, like Thailand, set up emergency credit lines with the World Bank and International Monetary Fund, a leading Hong Kong economist said yesterday.
John Greenwood, the chief economist for fund management group Chancellor LGT Asset Management and known for his work in setting up the peg between the Hong Kong dollar and the US dollar, said the Philippines, Malaysia and Indonesia would have to develop a plan to strengthen their financial institutions.
He said moves to create a fund to bail out troubled regional economies would be a second-best solution and that efforts should be focused on reform of the financial sector.
'Whereas Hong Kong has had a fixed exchange rate and disciplined policies in terms of balanced budget, low levels of government expenditure and a sound and stable banking system, these things have been lacking in some of the other Asian countries.' Some of the most damaging mistakes involved excess credit extension, wasteful spending, hasty expansion of the financial system and undisciplined monetary policies, he said.
In the case of Malaysia, there had been a 'commitment to a number of projects of dubious commercial viability, and a number are liable to end up as bad debt on the books of the banks'.
The potential problem projects included the Petronas Towers, the multimedia corridor, a new airport and the Bakun Dam.
'In Hong Kong, the high level of supervision, quality of management and the extension of foreign participation has helped to raise the standards of the local banks.
