Today, Singapore

5 November 2004

Bush better for Asia

... but worries ahead as US tackles its twin deficits ... and it must come to grips with China juggernaut

Derrick A Paulo

FOUR more years of a George W Bush presidency should be good for Singapore and the region, but he must now pay closer attention to Asia, say analysts.

The United States must come to grips with the China juggernaut and assert its role as a stabilising force in the region, they argue.

On the economic front, the incumbent is the "better of two evils" for Asia as a John Kerry administration might have meant the rearing of the ugly head of American protectionism, said IDEA global deputy research head Nizam Idris.

"For example, if you look at Thailand, which is trying to negotiate an free trade agreement (FTA) with the US, it stands a greater chance under Bush," said Mr Nizam. "And any other interested parties will not be discouraged by Bush as he has already signed a few (FTAs)."

Going by the Singapore example, whose companies now have better access to the American market and, notably, more visa opportunities, these FTAs can be a fillip for South-east Asia, said Singapore International Chamber of Commerce executive director Phillip Overmyer.

He expects the "exceptionally good" business relationship between the US and Singapore to continue under Mr Bush.

On a broader scale, Mr Bush has largely encouraged good business ties with India and China, Mr Overmyer said. With most Chinese goods - whose initial design and production might be done in South-east Asia - eventually bound for the US, a Bush presidency will continue to be good for business.

The worry, though, is the US economy, which is plagued by the twin deficits - current account and fiscal - and low household savings, noted Mr Alistair Thompson, deputy equities head of Asia Pacific ex-Japan for First State Investments.

"We believe the Bush administration will have to make some compromises on the tax front and perhaps raise interest rates to boost savings," he said.

This could mean that the US dollar will continue to remain weak and affect confidence in the greenback as the world’s principal store of value.

Mr Thompson warned that an uncontrollable shift out of US dollars by Asian central banks or the private sector could have serious ramifications for the global economic outlook and on stock markets around the world.

If Mr Bush sticks to his tax cuts, said Mr Nizam, shades of Reaganism could make a re-appearance in Asia.

Mr Bush might emulate his Republican predecessor by asking Asian countries to liberalise their capital accounts and float their currencies in order to ease the pressure on the US deficit, which he has vowed to halve by 2008.

China would be a sticking point, then, and if countries are not equipped for liberalisation, it could lead to circumstances leading to the 1997 Asian financial crisis, added Mr Nizam.

Analysts agreed, though, that Asian economic growth could take a knock as easily from Mr Bush’s foreign policy as his economic strategy, if not more.

Oil prices rose by a dollar after Mr Kerry conceded defeat, indicating a pricing-in of potential terror attacks.

For political scientist Associate Professor Paul Harris of Lingnan University, Hong Kong, Mr Bush’s foreign policy intent will become clearer when he announces his new Cabinet.

However, Dr Harris doubts that the Bush administration’s attitude to Asia, which he described as one of "inattention" would change, despite the presence of a sizable Muslim population on the continent that it needs to reach out to.

"It’s a mystery why not enough attention was paid," he told TODAY.

If the status quo remains, China would be able to continue its "softly softly" growth and expansion of power in the region. Without a solid US counterbalance, in the long term, this would not be in the interest of smaller Asian countries, said Dr Harris.

National University of Singapore political scientist Dr Bilveer Singh agreed that the Iraq war has given China some "respite", and that Mr Bush will remain committed to his existing policies. However, he doubts that Asia will drop out of Mr Bush’s radar screen.

"The centre of gravity has shifted to the Asia Pacific. The US will ignore this region at its own peril. It can see the emergence of China and the containment of China will be a major factor, even if they don’t say so," he said.

As for Singapore, the Bush election victory should be seen as a boon, Dr Singh believes. "We’ve gotten to know him and he has a high regard for us," he said.