S.E. Asia Faces Long-Term Trade Shift

Export-Dependent Nations Will See Less Demand From West, Analysts Say

BANGKOK -- Stimulus packages being put in place by many export-dependent nations in Southeast Asia may not do enough to protect those economies from the consequences of the fundamental shift in trading patterns that underlies the current financial crisis, analysts warn.

The exporting nations have taken slightly different paths in attempting to combat the global slowdown, but all their packages rest on a similar assumption: that the world economy will pick up in the third quarter, causing things to return to normal.

Regional analysts say, however, that the present crisis is not just another cyclical downturn but is instead a structural realignment and that Southeast Asia's export economies need to act quickly to adjust to a new reality in which American and European consumers will no longer be the main market.

"We are geared towards selling what the U.S. and Europe want, not what Asians want. We need a readjustment," said Supavud Saicheua, the managing director of Phatra Securities in Bangkok. "In the long term, Asians have to consume more, and Europe and the U.S. have to consume less."

In a world dominated by born-again Keynesians, deficit-funded stimulus packages are all the rage. In Southeast Asia, there have been a variety of approaches: Vietnam has chosen to support industry, Thailand is trying to mitigate the effects on the most vulnerable, and Singapore has gone for a mixture of the two.

Tai Hui, head of economic research for Southeast Asia at Standard Chartered Bank in Singapore, said he believes that the packages will work for the region's bigger economies but are likely to have limited effects in smaller nations.

"It will work well for India and China, but for the smaller economies like Hong Kong and Singapore, no matter how much you spend, it is not going to compensate for the slowdown in Europe and the U.S.," Hui said, adding that the packages "will at best break the fall."

For the countries in the middle, the scale of the problems they face appears to have blunted governmental ambitions. Korn Chatikavanij, Thailand's new finance minister, said his $3.3 billion stimulus package was designed to "stop the bleeding" until the global economy picks up. His biggest fear, he said, is that the global economic revival will not come soon enough.

Some analysts have said that the packages raise two questions: What effect will they have on domestic demand? And if they are effective, will they save the region's export industries?

Compared with the rest of the world, Asia has very high savings rates, which are considered likely to rise, given the present mood of uncertainty.

"Domestic demand was starting to come off even before you saw the collapse of exports," said Prakriti Sofat, a Singapore-based economist with HSBC.

The high savings rates mean that consumers will take at least some of their country's stimulus money and squirrel it away, further limiting the effects of packages that are in some cases fairly small, anyway.