Asia may spur world slump, warns Soros
Currency speculator says Far East economies suffer from fundamental structural problems
Sunday 11 January 1998
But in a speech to a Harvard University symposium on US-Russian investment late on Friday afternoon, he sought to put the best face on events by singling out the countries in the region, particularly Korea, best placed to weather the storm.
"I think Korea is different than say Indonesia," he said. "Korea has a new president who was in the opposition and is eager to change the system.
"In Indonesia, you've got the same old corrupt regime, and that's why the situation has deteriorated as much as it has."
Earlier this week, Mr Soros met with South Korea's President-elect, Kim Dae Jung, and said afterwards that Korea's difficulty isn't just a short- term lack of cash. "There is also a structural problem," he asserted. "This requires reorganisation of the entire Korean economy."
Mr Soros called for a significant relaxation of Korea's labour laws, which make it very difficult for companies to fire employees. Right now his Quantum Fund has "practically no investments" in Korea, he said, though these could "expand quite rapidly". He has said he is willing to spend $1bn in South Korea and has sent a team over to examine possible investments.
The mood of the symposium - a gathering of International Monetary Fund, Russian and US officials along with private investors and academics - was sombre. Talk in the corridors concerned the odds of the Asian financial contagion spreading to Moscow and destabilising President Boris Yeltsin's regime.
Participants were shaken by news that US stocks suffered their biggest drop on Friday since 27 October, when the collapse of the Hong Kong stock market forced Wall Street to shut down.
Last week in New York was the worst for shares in eight years, as the Dow Jones Industrial Average tumbled 222 points. In the City, the FT-SE 100 fell 1.89 per cent on Friday, stirring fears that the London stock market will open down tomorrow.
The City was further unsettled by news last week of lay-offs in the Asian offices of the former BZW and NatWest merchant banks, and by the suspension from the Hong Kong stock exchange of Peregrine Investments Holdings - a Hong Kong merchant bank with strong City links.
The move by Hong Kong regulators came after Zurich Group, a Swiss insurance company, abandoned plans to pay $200m for more than 20 per cent of Peregrine, Asia's largest merchant bank outside Japan.
Bad news from Asia and Western financial capitals prompted Washington to take dramatic steps to try and get the Asian financial crisis under control.
Yesterday deputy treasury secretary Lawrence Summers, the Clinton administration's point man on international finance, flew to the region to begin a whirlwind series of talks with officials in light of the possible collapse of Indonesia's economy.
Mr Summers will be in Jakarta for talks with President Suharto today. Indonesia's access to $40bn in international rescue funds may hinge on the assessments he makes, along with those of the top two officials from the International Monetary Fund, who flew out to Jakarta on Friday.
From Jakarta Mr Summers and the IMF team will fly on to Bangkok, Kuala Lumpur and Singapore. There is speculation they may also go to Seoul, Tokyo and Peking.
Copyright: IOS & Bloomberg
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