Asia's commitment to push ahead with structural reform in the aftermath of the 1997-98 crisis paled in comparison to that of China, Dutch bank ABN Amro said.
The bank said this could see the region losing out to the world's most populous nation in the race to attract foreign investment funds. While it gave no specific data on foreign direct investment (FDI), ABN noted that they "appear to be directed more and more to China in the run-up to the country's WTO."
"The economic stresses and the slow progress of economic reforms in many other Asian developing countries are other push factors," the bank said in its latest quarterly report.
"To lure foreign investors back, other Asian countries have to step up their efforts to reform and liberalise their restrictive domestic industries," the bank added.
But the region's appetite to implement these reforms was weakening and this placed its long-term prosperity at risk.
"One major reason for the difference in reform progress between China and other Asian countries is the political will to push through difficult reforms," ABN said. "Indeed, up until now, China is just about the only Asian country that has come up with reform after reform and has been able to deliver many of them."
Chinese authorities are implementing a raft of pro-competitive economic policies in several areas such as the banking sector, capital markets and agricultural sectors.
In contrast, the rest of Asia most affected by the 1997-1998 regional crisis has been slow to carry out their promises to carry out structural reforms.
"A variety of reforms have been announced, notably reforms aimed at revamping damaged banking systems, some attempts at corporate restructuring and some market opening or liberalization measures," the bank said. "However, after most economies recovered from the crisis with strong cyclical rebounds, the commitment to, and the pace of reform, reduced."
Asia's long-term growth outlook remained cloudy if the acute stress on its financial systems brought about by the crisis was not solved, ABN said.
"As long as the economies remain full of financially distressed companies to which banks are reluctant to lend, it will be difficult for these economies to resume normal growth paths, particularly when FDI is being directed to China."
Apart from Singapore, other Asian countries have been reluctant to stay on the reform bandwagon, the bank said.
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