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FIVE: Markets are quick to forgive and forget

Yes, there is a heavy price to pay for going hat-in-hand to the IMF.

The key will be conditionality.

There is much griping in Asia about how the terms of Greece’s IMF package are far less stringent than those forced on Indonesia, Korea and Thailand.

Fresh starts are possible, though, as the powerful gains in Asian markets over the last 14 years attest.

So drop the denial, Europe.

Let Greece do what it needs to do, even if it means default, and move on.

Asia shows there is life after crisis. 

BLOOMBERG

William Pesek is a Bloomberg View columnist.

The opinions expressed are his own.

FOUR: Growth beats taxes when repairing fiscal balance

JAPAN is a cautionary tale when it comes to rich nations getting incentives wrong.

It issued mountains of debt, assuming for 20 years that it was only one stimulus plan away from 5 per cent growth. That never happened.

Then, amid a ballooning budget deficit, it increased consumption taxes in 1997.

That killed a nascent recovery.

In the current global environment, growth is the route to balanced budgets, not higher taxes.

The latter would simply destroy the former.

THREE: Don’t forget reforms

In all the obsessing over debt, European leaders are taking their eyes off the need to retool in a world increasingly influenced by China. Fiscal austerity is important, of course, but so is altering policies to make economies more nimble, competitive and conducive to entrepreneurs who create jobs.

In the years following its crisis, Asia worked to open service sectors to competition.

It also cut red tape and took steps to limit cronyism.

It is a work in progress.

Asia is still home to many of the world’s poor and corruption is pervasive.

What Asia got right is that crises cannot only be about austerity.

While you are trimming spending, you must be creative about generating new dynamism.

Since euro nations cannot resort to currency devaluation to revive growth, reform is the only way.

Lowest CAR for China's five commercial banks unchanged

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TWO: Recovery is quicker once debts are purged

Greece fudged its way into the common currency with the help of Goldman Sachs Group Inc’s financial creativity.

That leaves the government in Athens with a yawning credibility gap. When it says the country can close its budget deficit with stop-gap measures, traders roll their eyes and policy makers lose more sleep.

In December 1997, Korea caved in and sought a US$57-billion (S$70.8-billion) IMF bailout. It acted quickly to

let weak companies fail,

closed insolvent banks,

clamped down on tax cheats

and came clean about the magnitude of its debts.

Greece will have to restructure its debt, and the fallout from this will increase pressure on Portugal, Spain and Italy.  [PIIGS]  Ireland ? 

If Greece had acted a year ago, markets might not be spending every waking moment on edge over how and when a default will arrive.

“Asia’s crisis showed that the quicker you deal with the root of the problem, however painful that may be, the quicker you are likely to recover from it,” says Mr Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore.

“Europe could do worse than to heed that lesson.”

One: A default is unavoidable

What makes Europe’s bailout efforts so hard to watch is that they are so futile.

The Greek public has been very consistent about one thing:

The belief that it bears no responsibility for all the debt its leaders took on over the last decade.

If that does not provide the backdrop for debt repudiation, what does?

As Greece runs through more and more of the funds its European neighbours throw at it, other dominos will fall.

We saw that in Asia after Thailand devalued the baht in July 1997. Indonesia swore up and down it would not get dragged into Thailand’s mess — until it was. Korea assured the world it would avoid an IMF aid package — until it could not.

The US and Japan are near recession.

China’s boom continues to squeeze wages in uncompetitive economies such as Greece.

This won’t end well for the euro zone.

Europe now is Asia in 1997

Why a crash is inevitable ?     

William Pesek

Watching Greece slide into chaos from 6,000 miles away is painful. Asia, after all, was the last region to experience what Europe may be about to endure.

Asia’s implosion in 1997 toppled leaders, touched off riots, set back living standards a decade or more and tarnished the International Monetary Fund’s (IMF) reputation.

Expect similar developments as Europe’s grand monetary experiment cracks.

Asia and Europe are half a world apart and it is true that the differences are considerable.

Indonesia, South Korea and Thailand were much less developed 14 years ago than their euro-zone counterparts are today.

China had yet to emerge as a dominant manufacturing economy.

The United States was also in a better position to offer international assistance than it is today.

With that in mind, here are five lessons Europe might learn from Asia.

changing needs of society: PM

HOE YEEN NIE

yeennie@mediacorp.com.sg

SINGAPORE

At their swearing-in yesterday, Mr Lee said that, as the Government continues to improve and refine the safety net to increase support to groups in need, the responsibility of the Community Development Councils (CDCs) will grow.

And he outlined the tasks ahead for the CDCs, and their Mayors, as the key agents in delivering help: To do more outreach, explore new programmes and give good support to grassroots leaders, their advisers and residents, In noting the reasons why CDCs have worked well — they are close to the ground and can tap on community support — Mr Lee also called for greater effort to gather more volunteers.

“In this way, we not only multiply the resources [frOm  aIr  ?]  to help the needy, but at the same time, make sure the resources are delivered sensitively, with the right touch, and we foster a caring community,” he said.

The CDCs were formed in 1997 to administer social assistance schemes and to build bonds within the community.

And even as the Mayors should “always remember the basic ABCs” — assist the needy, bond the people and connect the community — Mr Lee said the Mayors have a key role to evolve the CDCs to meet the changing needs of society.— More targeted help for older Singaporeans and better ways to connect the community — these are among the priorities of the five Mayors, and some of their responses to the call by Prime Minister Lee Hsien Loong.

S’pore—Johor rapid transit link by 2018

 

Malaysia's Minister in The Prime Minister's Department Nor Mohamed Yakcop (R) and Singapore's Minister for Foreign Affairs K Shanmugam (AFPPHOTO/ Saeed Khan)

SINGAPORE: The Singapore and Malaysian governments plan to open a rapid transit link between the city—state and the neighbouring city of Johor Bahru in Malaysia’s south by 2018, both governments said in a joint statement on Monday.

" The terminating stations of the (rapid transit system) link will be in the vicinity of JB Sentral, Johor Bahru and in the vicinity of Republic Polytechnic, Singapore," the statement said.

" It is targeted that the RTS link will be operational by 2018. The RTS link will have a co—located (customs, immigration and quarantine) facility in Singapore and another co—located CIQ facility in Johor Bahru so that commuters need to clear immigration only once for each way of travel."

The announcement comes as Malaysia and Singapore officially sealed the Points of Agreement (POA) on Malayan railway land in Singapore.

The signing ceremony took place in Putrajaya, Malaysia on Monday.

Foreign Minister K Shanmugam signed on behalf of Singapore while Malaysia’s side was represented by the Minister in the Prime Minister’s Department, Nor Mohamed Yakcop.

The signing officially marks an end to year—long negotiations on implementation details that kickstarted following the landmark announcement of the POA breakthrough by the prime ministers of both countries in May 2010.

The joint statement by the prime ministers of Singapore and Malaysia said that preparations for the relocation of Keretapi Tanah Melayu (KTM) from Tanjong Pagar to the Woodlands Train Checkpoint on July 1 are on track.

A joint venture company, called M+S Pte Ltd, and Iskandar JV Company will be established by Thursday.

M+S will develop the four land parcels in Marina South as an integrated development and the two land parcels in Ophir—Rochor, also as an integrated development.

Iskandar JV will undertake two wellness developments in Iskandar Malaysia.

In addition, Khazanah and Temasek will jointly consider other potential developments which are commercially viable in Iskandar Malaysia of up to 500 acres of land, inclusive of the said 215 acres.

Also on schedule is the implementation of the work plan to hand over the waterworks under the 1961 Water Agreement by Singapore free of charge and as a matter of goodwill after the expiry of the agreement on 31 August 2011.

Malaysian Prime Minister Najib Razak and Singapore Prime Minister Lee Hsien Loong expressed appreciation and satisfaction on the work done by the ministers and officials in achieving the historic breakthrough in the POA.

Both prime ministers also reiterated their commitments towards further strengthening bilateral relations.

They noted that the resolution of the POA would pave the way for the two countries to explore new areas of cooperation.

— CNA/ir