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Eastern/Central Europe: Leaders Should Take An Economic Lesson From Asia

Prague, 16 January 1998 (RFE/RL) -- U.S. Secretary of Commerce William Daley says southeastern Asia's economic crisis should convince eastern European leaders that they must create better mechanisms to regulate financial services and banking systems in their countries.

Daley told RFE/RL that legislation and regulatory agencies which ensure the openness and transparency of stock markets and banks are vital for boosting the confidence of both domestic and international investors.

He said the turmoil in southeastern Asian markets has made global investors very leery about putting their money into other countries that lack such mechanisms.

The trend is dangerous for Central and Eastern European markets hoping to attract greater investment from abroad. Many Eastern European markets resemble the Asian markets in crisis because accurate financial information often is not readily available.

The Security and Exchange Commission (SEC) in the United States has strict guidelines for companies to follow before they are allowed to publicly sell shares, bonds or other financial instruments.

Daley said similar regulatory structures could have protected Asia against the events that led to its market crises during the last three months.

He said: "The problem is that you haven't had the transparency, the openness or the regulatory structures. And I think there are good examples there for governments in Central and Eastern Europe to look at and say 'We ought to learn something'."

Daley is visiting Prague to attend the fifth West-East Conference of Ministers of Economy, Industry and Trade. The forum --also know as the Muenster conference-- aims to improve the business climate in Eastern and Central Europe by recommending specific policy goals for the region's governments.

Daley told ministers from across the region that they must accelerate economic reforms in order to maintain long-term growth and political stability.

Daley also told eastern leaders that they should focus the next phase of their privatization programs on their energy sectors, telecommunications, banking, and heavy industry. He said enterprises also must be restructured to ensure that they can be competitive after they are privatized.

He said firms that do not restructure management have the tendency to continue operations under the same inefficient methods used during the communist era. He said history has proven that such firms cannot compete and become successful in the free market. The end result is that a country's overall economic growth suffers.

Daley said he thinks both citizens and governments are becoming aware that bribery and corruption impedes economic growth by making firms less competitive in the long run.

Daley also said the Clinton administration is generally pleased with the course of reforms during the first half of the 1990s, but that Washington recently has become concerned about a slowdown in the pace of reforms.

He said: "There seems to have been great movement, and then in the last two years or so there has been a lull. There now has to be another push on continuing the liberalization, the reforms, and the opening of (market) processes. The model of what has happened in some Asian countries is a good model to stimulate this second move toward reform."