IMF urges Asia to rely less on exports and attract more FDI

IMF urges Asia to rely less on exports and attract more FDI
AP



Singapore: Asia must reduce its heavy reliance on exports and attract more foreign direct investment (FDI) if it wants to sustain its robust turnaround after the 1997-98 financial crisis, an International Monetary Fund expert said on Monday.

"Asia continues to rely heavily on net exports as an engine of economic expansion," David Burton, director of the IMF's Asia-Pacific Department said.

"Over time, greater reliance on domestic demand will be needed to assure a more balanced and sustainable pattern of growth," he said in a speech to the Singapore Press Club that addressed challenges facing Asia 10 years after the financial crisis, which erupted on July 2, 1997, the day the Thai baht plunged.


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Burton said one way to address the problem would be to bolster foreign investment, which hasn't recovered strongly in the region - except for China - following a sharp drop 10 years ago.

"While pre-crisis levels of investment were certainly excessive, the limited recovery is puzzling," Burton said.

Background

The crisis started when foreign capital flows, which had sustained investment in property and other projects, rushed out of Thailand, leading to a rapid devaluation of the baht. The crisis spread through the region, with Indonesia and South Korea also falling into recessions.