Magazine article Business Asia

Asia Needs Equity Injection

Magazine article Business Asia

Asia Needs Equity Injection

Article excerpt

Increasing foreign direct investment (FDI) into Asia is a more urgent task than pursuing bank reforms, according to one of Asia's most respected business figures.

Victor Fung claims a preoccupation with restructuring Asia's banking system is natural but misguided, saying "the first step is an injection of equity".

"Even if the banks are now rehabilitated and are in a position to lend, I don't think they will be that anxious to lend, primarily because the balance sheets of companies in the region have been devastated," he said.

Fung, a prominent APEC Business Advisory Council (ABAC) official, is also chairman of the Hong Kong Trade Development Council and Prudential Asia Investments.

"What we really need is a very heavy injection of equity to rebalance those devastated balance sheets, or maybe debt-equity conversions," he said. "That's why people are so anxious to talk about FDI and other types of equity investments. And that means really making sure there is a regime that actually gives a certain level of protection to the foreign investor. The key is what's known as national treatment: treating foreigners the same way as you treat the domestic companies."

Speaking to Business Asia during the recent APEC Summit in Auckland, Fung said there was evidence that some countries' banks were becoming more liquid -- but they remained reluctant to lend.

In his role as an ABAC committee member, Fung said trade ministers had taken on board criticism that APEC had lost sight of its goals. A 1994 Bogor pledge calls on economies to completely free up their respective economies to trade and investment by 2010 for developed economies and 2020 for developing economies.

ABAC released a report in August suggesting APEC was dragging its feet and that individual action plans (IAPs) being taken by member economies were not ambitious enough.

Fung said ABAC wants action plans put on the world wide web to ensure greater transparency. …

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