InfoAnda - Asia struggles to spend its way out of gloom

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Yahoo! My Yahoo! Mail Yahoo! Search Search: Sign InNew User? Sign Up News Home - Help Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Singapore Asia Pacific World Search Search: Asia struggles to spend its way out of gloom AFP - Monday, February 16 HONG KONG (AFP) - - Asians should raid their piggy banks and go shopping if the region wants to dodge the worst fallout from the global economic crisis, but analysts doubt entrenched saving habits can be broken. ADVERTISEMENT As the global slowdown has spread across the region in the past few months, the call from economists for Asia to boost sluggish consumer spending has reached a crescendo. "I think an important outcome of this global crisis is you will see Asia finally 'get religion' of internal private consumption -- the piece that was missing from the response to the financial crisis of 1997-98," Stephen Roach, chairman of Morgan Stanley Asia, said recently. Demand for goods from South Korea and Japan is collapsing, while even China's previously unstoppable export machine is stuttering. Chinese exports fell 2.8 percent in December for the second consecutive month -- and the largest drop in a decade. Asian Development Bank (ADB) Institute head Masahiro Kawai said the region needed people to open their wallets. "Asia should remain the factory of the world, but Asians have to start consuming more. Asians have to start spending more," he said. There is little sign that stimulus packages and moves to boost spending have stifled the region's saving habits, the experts said. "It is hard to see Asia's consumers going on some sort of splurge," said HSBC's senior Asia economist Robert Prior-Wandesforde, who is based in Singapore. But that hasn't stopped governments across the region from trying. In Taiwan, the government dished out shopping vouchers worth 105 US dollars to each of the island's 23 million residents. The government is still to release figures on whether the scheme has been successful, but Johnny Lee of President Securities in Taipei doubted it would help. "I think most people will use the vouchers and put their own money in the banks," he said. Similar scepticism was evident in Japan, Asia's largest economy, where the government has handed back 22 billion dollars, around 130 dollars a person, to fight the recession. A recent opinion poll showed 44 percent of people will use the money just to finance living expenses, followed by 18 percent who plan to save it. Government data showed Japan's household spending slumped 4.6 percent in December year-on-year, the 10th consecutive month of decline, and a pattern repeated across Asia. South Koreans are hawking jewelry -- even their wedding rings in extreme cases -- to get extra cash. Office staff are taking packed lunches or using the company cafeteria rather than dining out. The justice ministry is even considering cutting fines for minor offences committed by poor people because of the economic downturn. In Malaysia, the government has cut monthly contributions that workers must make to pensions, but there are doubts this will translate into ringing tills. "People are cautious and they prefer to keep their cash. It will be difficult to convince people to part with their money," said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Berhad in Kuala Lumpur. Global and local retailers are inevitably suffering. Luxury retailer Louis Vuitton, whose growth in the region has been staggering, in December dropped plans for a massive flagship store in Tokyo. British retailer Marks and Spencer closed it Taiwanese store last year, while in South Korea, total sales at the three leading discount outlets dropped 5.8 percent year-on-year in December, and department store sales fell 4.5 percent. China has put forward some of the region's most aggressive stimulus measures, to tackle both short-term and long-term demand. These include a huge boost to the healthcare safety net and subsidies for rural residents to buy televisions, refrigerators and mobile phones. Despite these goodies, consumer spending during the week-long Lunar New Year holiday last month showed weaker growth than the same period last year, although sales were still up. Prior-Wandesforde said Asians' inveterate saving habits would only be overturned if the region's governments introduced welfare systems that provided a true safety net, so people were not always terrified of having to pay for a family crisis. Such measures would only bear fruit in the long term, so economists will have to be patient if they are hoping for Asian shoppers to mitigate the global downturn, he said. "It is all very well the Western world saying that Asia has to increase spending, but the scale of the consumption in the West is what has got it into such significant problems," said Prior-Wandesforde. "Asia has to be careful not to follow what happened there." Email Story IM Story Printable View Blog This Recommend this article Average (0 votes) Sign in to recommend this article » Most Recommended Stories » Related Articles: China's Economy Asian stocks fall as Japan's recession deepensAP - 1 hour 3 minutes ago Jakarta tells civil servants to 'buy Indonesian'AFP - 1 hour 20 minutes ago S.Korean won hits 10-week closing low vs dollarReuters - 1 hour 35 minutes ago China expresses deep concern over US trade protectionismAFP - 1 hour 39 minutes ago Related Articles: Business China Money: Loan surge may fuel equities bubbleReuters - 1 hour 1 minute ago Singapore Airlines to cut capacity, ground planesAP - 1 hour 1 minute ago Reliance Infra founder pledges 16.35 pct equityReuters - 1 hour 1 minute ago Asian stocks fall as Japan's recession deepensAP - 1 hour 3 minutes ago Asahi Kasei to buy U.S. medical firm TechniKromReuters - 1 hour 5 minutes ago Enlarge Photo Asia struggles to spend its way out of gloom Related Photos Slideshow Full Photo Coverage: Business & Economy Related Full Coverage China Economy china economy All Full Coverage Most Popular – Business Viewed Seductive chemicals hidden in sloppy kisses Climate change could be even worse than feared Swiss banks go back to basics In defence of bonuses: experts warn on banker pay caps Saudi king shakes up government View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Copyright © 2009 Yahoo! 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