Crisis forces rethink on policies

By Geoff Senescall

When Asian economies were enjoying growth of 5 to 10 per cent companies did not need to be efficient. So says Pote Videt, managing director of Credit Suisse First Boston Singapore.

"You could be inefficient and not have the best technology and still do extremely well."

However, the Asian crisis has forced companies to restructure.

Now that economies are starting to recover, Mr Videt says the question that needs to be asked is whether the restructuring is real or just "window dressing".

Restructuring generally means "getting a grip on the level of debt as well as new capital. It should also mean a reassessment of strategy."

A company, for example, with 12 core operations should contract itself down to just three or four.

While there is still some way to go, Mr Videt, who was a former Deputy Minister of Commerce for the Thai Government, does see fundamental change going on.

Major corporates in the Southeast Asia region are realising that the real bosses of their businesses are the shareholders - more specifically the minority shareholders, as many companies are still family-controlled and managed.

Analysts meetings are starting to emerge. Through e-mails, some companies are keeping shareholders up to date with the latest developments.

"So we are seeing a leap-frog from no dialogue to complete disclosure."

There are also examples of companies buying new management, not just locally but from abroad. That was unheard of before, Mr Videt says.

Because corporates are freeing up there are better investment opportunities now than in the old days. However, going hand in hand with corporate restructuring is Government and public-sector reform.

Here it becomes more complex.

"The key thing in the private sector-public sector dialogue is, what is the equivalent of maximising the return on capital in the arena of Government leaders and public policymaking?"

Mr Videt believes the equivalent of return of capital is not just being re-elected - it is increasing the size of the economic pie.

Furthermore, he says Governments need to take a long-term view and institute policies that lead to an efficient allocation of resources.

Here issues such as "money politics, corruption and Government polices that perpetuate oligopolist behaviour" need to be looked at. There are also less obvious issues, such as a politicised bureaucracy.

Mr Videt says that another part of the public sector reform process is good governance.

"I don't think governance comes about through talking, it comes about through a system of checks and balances, penalties and rewards."

Are directors who have mishandled situations really penalised? Does the court system enforce the law on things such as bankruptcies?