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ANNEX A
ECONOMIC PROSPECTS FOR THE ASEAN COUNTRIES AND BRUNEI
1.
Despite high growth rates in the 70s, all ASEAN economies (like the rest of the developing world) are suffering from the
effects of the world recession and a fall in commodity prices. Growth rates have fallen in the last 2 years and growth forecasts for 1982 have been cut back:
GROWTH RATE
late 1970s 1981
forecast for 1982
Malaysia
8%
6.5%
Indonesia
9.6%
7.8%
4% Falling
Thailand
8%
7%
5%
Philippines
6.3%
5.4%
4.7%
Singapore
8.9%
9.9%
under 6%
Indonesia
2. In the short-term the Indonesian economy is heading for a show-down because of low oil production and static prices. Indonesia cannot expand her oil exports or carry on borrowing at the present rate because she already has a relatively high debt service ratio. In the longer-term the growth rate should pick up again when the oil price rises unless Indonesia has become over-burdened with debt. In the meantime Indonesia is trying to increase her non-oil exports by a policy of counter-trading. Indonesia is very well endowed with energy resources but she also has the fifth largest population in the world and a lot of energy will be needed for domestic development. In order to keep up foreign exchange earnings and creditworthiness, Indonesia needs to reduce her dependence on oil for domestic consumption by developing alternative energy sources and improve the performance of other export sectors.
Malaysia
3. Malaysia's economy is under control at present but two factors cause concern. From a low base foreign borrowing has increased rapidly. There is a continuing and growing fiscal deficit. Policy will need to change in order that these two forces are held in check. Malaysia has a rich energy and natural resource endowment and should recover quickly with world economic turn round.
Thailand
4.
Thailand is restructuring her economy with the assistance of the World Bank. Reduced dependence on imported oil as indigenous energy is developed will assist the turn round of the external balance. Energy policy will also aim to promote conservation. The industrial sector's competitiveness needs to be maintained and there are dangers of losing traditional markets for agricultural exports as neighbouring states achieve self-sufficiency and the developed world protects its farmers. Thailand's high participation in external trade makes her particularly vulnerable to protectionism. Debt service ratio is forecast to reach 18% in 1985 and decline thereafter but economic management will need to be very effective to achieve this.
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