[IWAR] ECONOMY '98 outlook

From: Michael Wilson (MWILSON/0005514706at_private)
Date: Sun Dec 28 1997 - 09:57:32 PST

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                       Economics and money a big concern for 1998
          Copyright ) 1997 Nando.net
          Copyright ) 1997 The Associated Press
       (December 28, 1997 00:42 a.m. EST http://www.nando.net) - Money will be
       on a lot of minds in 1998. Asians are anxious about shoring up their
       humbled currencies. Europeans are debating how to give up their national
       money and switch to a single currency. Russians just want to make some.
       The world's perennial problems remain. Arabs and Jews enter another year
       still warily talking peace. Conflict simmers and flares across Africa.
       Poverty grips much of Latin America.
       Yet peace, however fragile, seems to be holding in some African nations
       long wracked by civil war. Economies are strengthening in much of the
       Americas. Democracy tenaciously retains its foothold in the Third World.
       Humankind always has been a swirl of contradictions, a producer of good
       and ill, and the coming year promises more of the same.
       The Associated Press asked some of its correspondents around the world
       to assess what lies ahead for 1998. Here are their reports:
       HONG KONG -- Many Asian countries will be preoccupied with rebuilding
       their financial systems or trying to stave off further currency
       collapses. They'll be closely watched by the United States and other
       nations whose markets have been roiled by Asia's economic stumble.
       Governments accustomed to rapid growth will have to cope with rising
       unemployment and the political and social tensions it produces.
       In Thailand and South Korea, which had the most bad debts and face the
       deepest recessions, outraged citizens hope newly elected governments
       will end the cronyism that helped produce the crisis.
       No such change is likely in Indonesia, also badly hit. The national
       assembly is expected to expand President Suharto's powers to declare a
       state of emergency in case economic hardship produces unrest.
       Japan seems to be learning from its neighbors' meltdowns and is expected
       to let more indebted banks and companies shut down rather than try to
       prop them up.
       Hong Kong will hold its first elections under Chinese rule. Democrats
       who lost legislative seats with the handover say new election rules
       favor pro-business and pro-China parties.
       Elections also are planned in the Philippines and in Cambodia, where
       strongman Hun Sen has quashed most opposition by force.
       Chinese President Jiang Zemin plans cautious moves to reorganize or
       close debt-ridden state industries. His main challenge will be
       containing protests from laid-off workers, making 1998 an unlikely year
       for political reform or softening on dissent.
       Beijing's tense relationship with Taiwan likely will be tested, if
       pro-independence forces on the island gain seats as expected in
       legislative elections.
       Australia may face early elections because of a deadlock in Parliament
       over government efforts to restrict aborigines' land rights.
       BRUSSELS, Belgium -- The European Union, in one of the biggest steps
       toward unity in continental history, is beginning the process of joining
       a dozen countries in a single currency -- an act as much political as it
       is economic.
       The new notes and coins won't fill cash registers until 2002, but the 15
       EU leaders will decide over a long weekend in May who gets in on the
       first wave and the value of national currencies against the new "euro."
       Eastern Europe will join the unity act as well when EU enlargement
       negotiations open with a number of former Soviet bloc nations.
       Three of those nations -- Poland, Hungary and Czech Republic -- also
       anxiously await ratification of their invitations to join the 16-nation
       NATO military alliance. At the same time, NATO is looking for ways to
       bring the suspicious Russians closer.
       Bosnia will continue to preoccupy Europeans east and west. It is
       virtually certain the NATO-led peace force will extend its mission past
       June on the widely accepted assumption that withdrawal would lead to a
       resumption of war.
       Two other clouds loom in the Balkans -- between Serbs and Albanians in
       the Serbian province of Kosovo and between Albanians and Macedonians in
       Romania and Bulgaria, left out of the first phase of NATO and EU
       expansion, are striving to overcome years of bad post-communist
       government. While Hungary seems to have righted itself, the Czechs face
       a protracted period of economic and political instability.
       Germans will decide in September whether to reward Chancellor Helmut
       Kohl with an unprecedented fifth term as head of Europe's most powerful
       economy. The opposition Social Democrats are moving toward a more
       business-friendly posture in an effort to end the conservatives' 15-year
       lock on power, but they can't decide whether to challenge Kohl with a
       leftist or a moderate.
       Russia and CIS
       MOSCOW -- Persuading the people of former Soviet states, and Russians in
       particular, that reform is starting to work will again dominate the
       region in 1998. And stability in Russia is vital to world stability.
       Ask Russians to sum up in a single word what's wrong with their country.
       Many will say reform.
       Ask what they mean by reform and they start ticking off the problems:
       rising crime, going without pay for months, falling life expectancy.
       In short, many Russians think reform is the name of the chaotic system
       they have lived under since the collapse of the Soviet Union at the end
       of 1991. Many people in other former Soviet republics say the same
       For all the grumbling, there are signs of progress. Russia expects to
       see its first economic growth since the 1980s. Individual rights are
       improving. And there are signs of prosperity in a few cities.
       Progress in most other former Soviet nations lags far behind, although
       Ukraine hopes to see growth in 1998.
       The problem, reformers say, is that decades of communist mismanagement
       cannot be fixed quickly. It will take years to turn Russia and its
       ex-Soviet neighbors into liberal democracies, but each year that passes
       peacefully boosts chances of success.
       Russia can still go wrong, and some Central Asian nations and Belarus
       are sliding back to autocracy. Russia's communists and nationalists hope
       they can ride people's disillusionment to power. Hardliners are hoping
       for big gains in Ukraine's parliamentary elections in March.
       Heading into 1998, the region is a bit more peaceful. Russia's war in
       Chechnya appears ended, but Tajikistan could slip back into civil war
       and there are worries of new fighting between Armenia and Azerbaijan.
       JERUSALEM -- Israeli Prime Minister Benjamin Netanyahu and Palestinian
       leader Yasser Arafat face critical decisions that will determine the
       direction of the Arab-Israeli peace process.
       Under pressure from the United States, Israel plans to offer to yield
       more land to the Palestinians, but it may not be enough to win back Arab
       confidence about Israel's overall intentions.
       Another key test will likely be whether Israel is willing to curtail
       expansion of Jewish settlements in the West Bank, which Arafat wants as
       part of an independent Palestinian state.
       For his part, Arafat will have to restrain Islamic militants and prevent
       suicide bombings to keep Israelis in a mood to compromise.
       Israel's talks with Syria are unlikely to move forward unless
       Netanyahu's conservative government changes its policy and agrees to a
       deep withdrawal from the Golan Heights, which Israel captured in 1967.
       Iran is gaining influence in the region under the new, more moderate
       leadership of President Mohammad Khatami. Saudi Arabia, Egypt and other
       Arab states that gave a cold shoulder to the recent U.S.-sponsored
       regional economic conference are now looking more warmly at the Islamic
       regime in Tehran.
       The rise of Iranian influence would likely spell an end to Washington's
       policy of keeping both Iran and Iraq isolated with economic and
       political sanctions.
       Islamic insurgencies still bedevil two secular Arab governments.
       Muslim militants in Egypt are increasingly torn between calling a
       unilateral cease-fire and continuing attacks that angered many Egyptians
       by killing more than 60 foreigners in 1997 and devastating the lucrative
       tourism industry.
       In Algeria, the government is locked in a bitter battle with religious
       militants that has killed 75,000 people since 1992 and left extremists
       in control of pockets of the country.
       Latin America
       MEXICO CITY -- President Clinton plans to join Western Hemisphere
       leaders at April's Summit of the Americas in Chile.
       Free trade is at the top of the agenda. But with Clinton struggling to
       win support for that at home, Latin Americans are moving ahead with
       their own free trade zones and reduced barriers to regional commerce.
       The political bloodshed of the 1980s is fading into history in most of
       the Americas, replaced by concerns about violent crime and the seemingly
       eternal problem of dire poverty.
       Most of the region's largest countries -- Argentina, Mexico and Chile
       among them -- expect strong economic growth from free-market policies,
       though benefits have been slow to trickle down to the poor.
       Brazil was hurt by Asia's financial crisis, causing problems for
       President Fernando Henrique Cardoso, who is expected to seek re-election
       in 1998.
       A more unusual race is shaping up in Venezuela, where Miss Universe
       1981, Irene Saez, is considered a strong contender for the presidency.
       She has generally won praise as mayor of Chacao in the Caracas area.
       Ecuador, Paraguay and Costa Rica also will have presidential elections.
       Drugs and political violence continue to plague Colombia and Mexico.
       The leading candidate in Colombia's presidential campaign, Horacio
       Serpa, is distrusted by Washington because of his ties to President
       Ernesto Samper, accused by U.S. officials of taking drug money to win
       office. But he recently said he might back legislation to let suspected
       drug traffickers be extradicted to the United States.
       Colombians expect no letup in attacks by leftist rebels and paramilitary
       gangs that some suspect are linked to the army.
       Mexico still struggles with repeated crises over the influence of drug
       traffickers, and enters the year with two small rebel movements
       relatively dormant but not quelled.
       By JOHN RICE
       SAN JUAN, Puerto Rico -- Pope John Paul II's historic trip to Cuba will
       pose a challenge for Fidel Castro and the Roman Catholic Church, whose
       relations have been frosty, if not hostile, since the 1959 revolution.
       Castro's communist government hopes the Jan. 21-25 visit will enhance
       its image by showing religious tolerance. One possible windfall: a papal
       denunciation of the U.S. economic embargo of Cuba.
       The church, meanwhile, hopes John Paul II can galvanize believers on the
       island and broaden its influence among Cuba's 11 million people. Cuba
       officially embraced atheism in 1962, and believers suffered for their
       Cuba wants more regional trade, and Caribbean countries are prepared to
       bring it back into the fold. While Washington disapproves of such moves,
       area leaders grumble that the U.S. government hasn't come through with
       aid and scholarships promised at a regional summit last May. Look for
       some of those pledges to be fulfilled in 1998.
       The region is looking for help after the World Trade Organization ruled
       in favor of a U.S. complaint that Caribbean bananas compete unfairly in
       Europe. Without a hand, island farmers could turn to drug trafficking,
       leaders warn.
       As it is, the drug trade is thriving. Squeezed in Mexico, traffickers
       are turning to the Caribbean as a preferred trade route. Washington will
       be fortifying its interdiction efforts in the region in coming months.
       1998 may be a watershed year for Haiti. U.N. peacekeepers are gone, and
       the government is paralyzed by infighting, putting the U.S.-backed
       democratic experiment in the Western Hemisphere's poorest nation at
       Puerto Rico marks 100 years of U.S. rule with competing commemorations
       by advocates of statehood, independence and the current commonwealth
       system. A proposed plebiscite on the island's status will be considered
       by Congress.
       NAIROBI, Kenya -- Four African giants -- Nigeria, Congo, Sudan and South
       Africa -- will set the continent's tone in 1998.
       Nigeria's dictator, Gen. Sani Abacha, will attempt the transformation
       from iron-willed military ruler to popular politician if he goes through
       with August elections.
       Laurent-Desire Kabila, Congo's new strongman, will try to obtain
       much-needed aid and foreign investment while attempting to keep at bay
       those who call for a more open government and respect for human rights.
       In Sudan, President Omar El-Bashir continues to insist his Islamic-based
       government is sincere about allowing regional autonomy for southern
       Sudan. But rebels, backed by neighboring countries and the United
       States, will keep chipping away at northern authority.
       South Africans are preparing for the day they will have to live without
       President Nelson Mandela. Thabo Mbeki has just replaced him as leader of
       the governing African National Congress and is widely expected to become
       president in two years.
       Low-level conflict continues in Rwanda, where Hutu rebels are stepping
       up attempts to destabilize the Tutsi-dominated government.
       Neighboring Burundi likely will see more countries drop economic
       sanctions, but efforts are proceeding to coax its Tutsi regime and Hutu
       rebels into some kind of coalition government.
       Personal rivalries remain a threat to the stability of Charles Taylor's
       fragile civilian regime in Liberia, and doubts persist the military
       junta in Sierra Leone will keep its promise to return power to the
       elected government it overthrew.
       In Angola, Jonas Savimbi probably won't go to Luanda to fulfill his
       government role under the 1994 peace accord that formally ended a
       19-year civil war. But international pressure is nudging his UNITA army
       toward giving up most of the territory and diamond fields it controls.
       United Nations
       UNITED NATIONS -- The United Nations enters the new year with the
       prospect of further downsizing and downgrading as a forceful and
       independent global institution.
       Iraq and its refusal to cooperate with U.N. weapon inspectors remains a
       thorn for the 15-member Security Council. No strong action seems likely,
       however, with the the United States and the four other council powers
       unable to reach a consenus on dealing with Saddam Hussein.
       Secretary-General Kofi Annan's efforts to restructure the organization
       have not been enough to convince the United States to pay its $1 billion
       in arrears.
       As a result, the United Nations is expected to finish 1998 with a $200
       million deficit in the operating budget and owing $800 million to
       countries that have provided troops to U.N. peacekeeping operations.
       For years, the United Nations has lumbered along by borrowing from the
       fund used to reimburse countries for peacekeeping expenses. But as many
       peacekeeping operations close, that fund is dwindling.
       Annan has warned that new sources of cash must be found unless the
       United States and other major debtors start paying their bills.
       At the same time, the United Nations' role as an independent player in
       world affairs is clearly in decline. Annan's predecessor, Boutros
       Boutros-Ghali, was denied a second term in 1996, largely because
       Washington resented his independence.
       Annan, in turn, has deferred to Washington and other major powers on
       such issues as sending peacekeepers to the Republic of Congo or
       increasing the oil revenues that Iraq can use to buy food and medicine.
       Annan's supporters say he has little choice. Without resources and
       rights of a sovereign state, he must serve the interests of the U.N.
       membership, and especialists its wealthiest and strongest members.
       But critics argue Annan must also serve as an advocate for those without
       the power and the voice to influence the great powers.
       By ROBERT H. REID
                      Rough year in the making for Japan's economy
          Copyright ) 1997 Nando.net
          Copyright ) 1997 Agence France-Presse
       TOKYO (December 27, 1997 11:30 p.m. EST http://www.nando.net) - When
       Japan's fourth leading securities house collapsed and its president
       finished his last press conference in tears, the Japanese public knew
       their economy was in a shambles.
       Amid shattered corporate confidence, many facing up to the bad shape the
       economy is in, fear their year-end salary bonuses could be cut.
       "We had one horrible news after another and many think it is not over
       yet, " said Tetsu Ishijima, chief strategist at Okasan Securities.
       Some analysts are tracing the current crisis back to a consumption tax
       increase in April, which affected consumer spending, and has in turn led
       many corporates into a life-or-death struggle.
       The catchphrase in Japan these days is "financial system crisis."
       The description of the local economy has become more real for many
       Japanese following the recent decision by the century-old Yamaichi
       Securities Co. Ltd. to declare insolvency just a week after one of the
       country's top 10 city banks collapsed under a mountain of bad loans.
       Economic indicators point to more bad news to come for the world's
       second largest economy before any reversal of the current trend.
       The Ministry of International Trade and Industry said Thursday that
       industrial output in November dropped 4.1 percent from the previous
       month, much more than the 2.2 percent decline forecast by the ministry.
       The ministry said on the following day that retail sales in November
       dropped 4.7 percent year-on-year, the largest fall since the ministry
       began compiling such data in 1955.
       The nationwide consumer price index in the same month fell 0.7 percent
       from the previous month, a sign that stagflation may be just around the
       corner. The unemployment rate has remained at 3.5 percent, matching an
       all-time high.
       Trading on the Tokyo Stock Exchange has also suffered with prices
       plunging 3.3 percent on Friday.
       Analysts are pessimistic about any measures to launch a recovery of the
       economy and many businesses are looking to a rough ride ahead in 1998.
       Those who remain optimistic that a recovery is possible, however, point
       to Japan's strong economic growth potential and immense public savings.
       They blame the country's politicians for the economic standstill and
       believe the government could improve confidence.
       "We still have not seen constructive policies or measures which can help
       circulate money," says Hiroshi Sakurai, an economist at Kankaku Research
       The economist said that falling share prices were a fair verdict on
       politicians' inability to address the economic slump and take necessary
       "Some economic measures did come out but the stock market, where so many
       investors have their money, has responded correctly," Sakurai said.
       "Those investors have eyes which cannot be deceived by mere looks of
       clever policies by the government."
       While most analysts and investors welcomed Prime Minister Ryutaro
       Hashimoto's surprise announcement 10 days ago of a one-time income tax
       cut worth $15 billion, they said much more was needed.
       "The government needs to launch a system in which unlimited amount of
       public funds can be injected" to rescue financial institutions burdened
       with huge bad loans, independent economist Keitaro Hasegawa said.
       Hasegawa said the ruling Liberal-Democratic Party's scheme announced
       Wednesday to issue 20 trillion yen ($153.8 billion) worth of
       government-backed bonds to help the ailing finance sector was not the
       form of a public fund called for in revamping the economy.
       "It is senseless to impose an upper limit for the public fund use when
       there is no telling how much it will cost," Hasegawa said.
       Hashimoto, he said, needs to shift his policy priority on fiscal reforms
       to tackling economic troubles at hand and carrying out painful, but
       healthy reforms of the finance sector.
       "The policy turnabout is an absolute (necessity) as doing things at the
       wrong timing would cost huge money," Hasegawa said.

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