Our World Correspondents

Washington
Lee Siew Hua

Europe can differentiate now, says SM

He is confident it understands Asia well enough not to lump nations recovering from the financial crisis with those in greater difficulty

By CHUA LEE HOONG IN DAVOS

EUROPE is now able to differentiate among countries in Asia, and there is little danger that those in recovery will be lumped together with those in greater difficulty, Senior Minister Lee Kuan Yew said yesterday.

Speaking to a press conference to round off his six-day trip to attend the World Economic Forum here, he said he was confident that European countries understood Asia well enough now not to tar all countries in the region with the same brush.

Most of the European business and political leaders he spoke to had good things to say about Thailand and South Korea, he said.

They believed that these countries were recovering well and were optimistic about their prospects.

Indonesia, he noted, was still of concern to most of them, given its political uncertainty, which had to be resolved first before economic recovery could take place.

Many observers of the Indonesian situation are saying that free and fair elections in Indonesia in June will be crucial to avert widespread unrest.

Some are expecting more demonstrations when university term re-opens in February.

The Asian crisis, Mr Lee said, had brought Asian countries together in the sense that there was now greater interaction among them.

Asked if some countries had been put on the defensive as a result of the crisis, he said that some embarrassment was natural, given the high expectations generated by a decade of exuberant growth.

"But we need not be defensive if we have not done anything wrong," he said.

Asked if he agreed with Malaysian Prime Minister Mahathir Mohamad's view on hedge funds, Mr Lee said: "I don't think he's altogether wrong. But his presentation may be a bit too one-sided.

"I don't think speculators set out to decimate an economy, they set out only to make profits, and they will do so wherever opportunities present themselves."

Such an opportunity occurred in early 1997 with the Thai baht, he noted, when speculators sold it short in the expectation that it would decline further.

The Thai mistake, he noted, was not that they did not know that hedge funds were attacking their currency, but that they tried to defend it -- with the result that their reserves were depleted by US$23 billion (S$38.6 billion).

And the lesson for Asian countries?

Minimise budget deficits, foreign borrowings, and know what your private sector banks are doing.

"You don't have to be smarter than your private sector, just don't invite an attack," he said.

WHAT SM LEE SAYS

ON MAHATHIR'S VIEW ON HEDGE FUNDS

"I don't think he's altogether wrong. But his presentation may be a bit too one-sided. I don't think speculators set out to decimate an economy, they set out only to make profits, and they will do so wherever opportunities present themselves."

ON LESSONS FOR ASIAN COUNTRIES

"You don't have to be smarter than your private sector, just don't invite an attack."

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