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World: European Tigers Versus Asian Tigers

By Carolyn Tang

Prague, 3 April 1997 (RFE/RL) -- There's been considerable speculation in the media lately about whether the most advanced Central and East European economies are becoming so attractive to investors that they are beginning to lure away money that would have previously gone to the high-growth Asian countries.

Because of their spectacular performance in recent years, some East Asian states -- such as Taiwan, South Korea, Singapore and Hong Kong -- have become known as the Asian tigers. Now the term "tiger" is also being applied to the best-performing transition economies -- those of Poland, Hungary, the Czech Republic, Slovakia and Slovenia.

So it seems that in the economic jungle, the scene is set for a battle of the tigers.

Opinion among investment experts and bankers is divided on this question. Giving one side of the issue is Jonathon Hoffman of Credit Suisse First Boston in London, who tells RFE/RL that the Asian tiger economies are losing steam.

He says returns on investments are lower and market growth is down in that region. Baring Security's Asia index shows just a little more than a 2 percent growth over a one-year period, while Baring's Europe index reflects a 16 percent growth over the same period.

Hoffman says because of this difference, there is an increased interest in Central and Eastern European markets. He suggests it is the promise of economic reform with strict, westernized monetary policies and the undoing of state-owned businesses that is luring investors to the region. Hoffman says investors did not originally turn to countries in transition because the region was perceived as too politically unstable, more so than East Asia. However, he believes that sentiment has changed.

Hoffman says: "I think investors have become a lot more sanguine (optimistic) about politics in Central and Eastern Europe. At first there was a concern that these markets would overdose on democracy." He says this fear of anarchic conditions has proven largely groundless because governments are busy implementing monetary reforms and seeking guidance and assistance from other established economies.

However, on the other side of the question, Andreas Prindl, the outgoing chairman of Nomura International, says transition countries are still not as good a bet as Asian markets.

Prindl, at a finance and banking conference in Prague last week, said political problems in countries like South Korea are not as threatening to foreign investors as they might seem. He said Eastern and Central European economies are unable to match the consistency of growth of Asian markets. He attributes Asia's dependability to continual progress in the manufacturing sector, fluid trade in shares and bonds, and active lending.

On the contrary, Prindl says Europe has disadvantages, such as small markets and a lack of natural resources, and political unrest along some of its borders. Prindl also says the benefits of Central/Eastern European markets, such as high labor skills and large work forces, are also available in Asia.

He says it's true that Asian investors, particularly Japanese, are seeking new markets, as well as lower cost production bases. But they are tending to look at China, India, Vietnam and Indonesia, for example -- big countries with huge, untapped resources which are on the brink of fast development. And these countries are relatively politically stable. Not necessarily democratic, but stable.

Prindl says however that he believes there is enough investment money around to feed the tigers on both sides of the world.......