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Asia Business News: The Week Ahead - 2002-03-25


Japan and South Korea sign a bilateral investment accord and Malaysia places a heavy tariff on steel imports.

Japan and South Korea have moved to increase economic cooperation. Japanese Prime Minister Junichiro Koizumi and South Korean President Kim Dae-jung signed a pact Friday that is expected to help South Korea attract more investment from Japan and make it easier for South Korean companies to enter the Japanese market.

The move came during Mr. Koizumi's three-day trip to Seoul ahead of the World Cup soccer finals, which the two nations are co-hosting.

The two leaders also agreed to start discussing a bilateral free trade agreement. They say they will establish a joint panel of experts and business leaders to examine the idea. But some analysts, including Paul Presler, General Manager of Nomura Securities in Seoul, say that setting up such a deal could prove challenging. "I would be very surprised if there is any free trade agreement of any sort within five years," he says. "It would probably work for the benefit of both countries, but there are generally too many entrenched interests, whether it is farmers or companies, to allow this to go through."

The Asian Wall Street Journal reports that the Malaysian government has imposed a 50 percent tariff on a wide variety of steel products. The newspaper says that the new duty came into effect March 15, but without any public announcement.

In addition, manufacturers are now required to secure the government's permission before sourcing raw materials from other countries. Analysts believe the move is an attempt to help a struggling Malaysian conglomerate which owns the country's largest steel manufacturer. The move appears unrelated to U.S. tariffs on steel imports which took effect last Wednesday.

In Hong Kong, a deflationary trend has taken root and could deepen. The government says the consumer price index dropped 2.3 percent in February from the same period last year. While that drop is less severe than in previous months, economists predict deeper deflation for the rest of the 2002 as rising unemployment further erodes consumer buying power.