WASHINGTON-While the mounting Asian financial crisis cuts into the booming wireless business worldwide, the threat of a longer-term impact depends on whether a workable rescue plan can be implemented by the International Monetary Fund and whether troubled Asian economies will shun crony capitalism in favor of market forces. Last week, the situation did not look good.
Indonesian President Suharto jeopardized the IMF’s $43 billion bailout plan for his country by firing the central bank governor and continuing to embrace the creation of a currency board that would peg the battered rupiah to the dollar.
The United States and the IMF are opposed to Suharto’s approach; they want real market reforms. Many of the Asian nations in financial straits have depended largely on exports to fuel their economies and shunned meaningful economic reforms.
Meanwhile, a debate is raging in Congress over whether the United States should support a $100 billion bailout of South Korea, Thailand and Indonesia.
The argument against an IMF rescue effort is that it would reward undisciplined wealthy banks in Asia and thereby send precisely the wrong message. The Clinton administration and others argue IMF monetary aid is critical to restoring investor confidence and financial market credibility and preventing a domino effect that could devastate the global financial system.
The U.S. wireless industry is cautiously optimistic the Asian meltdown is a blip on the radar screen. But beneath the surface, there is trepidation and fear over how far the Asian contagion may spread. Are Japan and China next?
Indonesia, South Korea, Thailand, Malaysia, the Philippines and other emerging Asian markets represent huge potential for American suppliers of pagers, mobile phones, two-way radios and infrastructure.
In addition, new telecom free trade rules let Asian firms increase investments in American wireless firms. Is that money there?
“When a country is going through a tough cash crunch they are going to curtail their investments abroad,” said Robert Choi, an international specialist at the Strategis Group Inc.
Choi said some Asian countries are being hit harder than others with respect to consumer wireless demand. Indonesia appears to have been hit among the hardest. That has translated into falling U.S. exports of wireless equipment.
But Choi and others see the impact on wireless as temporary. He pointed out there is flexibility within vendor financing to accommodate struggling system operators. “I don’t think this should keep a company from selling equipment.”
Likewise, Telecommunications Industry Association President Matthew Flanigan said equipment vendors do not see the impact as long lasting. He added the impact varies among telecom sectors, with wireless feeling it worse than others. But he believes that will change.
“The whole infrastructure is going into wireless and they (Asian nations) realize how critical it is for communications and economic stability,” said Flanigan.
TIA supports the IMF bailout plan for Asia. “It (wireless demand) will come back and come back strong,” Flanigan predicted.
Still, Flanigan said U.S. telecom vendors are worried about the possibility of the crisis getting out of hand.
“We believe all that (IMF)money will be circulated back into equipment purchases. There has to be a bailout.”
The Associated Press contributed to this report.
