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Asia Business: The Week Ahead - 2002-05-13

Japan and South Korea battle livestock diseases weeks ahead of the World Cup soccer finals, and Thailand scraps two large construction projects.

Retail analysts predict beef sales will fall further in Japan after Tokyo confirmed the nation's fourth case of mad cow disease. The brain-wasting illness, formally known as bovine spongiform encephalopathy, is thought to cause a fatal human variant of the disease. There have been hundreds of cases found in Europe, particularly Britain, but the cases in Japan are the first in Asia.

Agriculture Minister Tsutomu Takebe says more cases may be found in Japan. But he is optimistic that officials will pinpoint the origin of the illness in Japan and determine how it is spreading. The first cases were found last September; fear of the disease is blamed for a sharp fall in beef consumption.

The more recent case comes just weeks before thousands of visitors arrive in Japan for soccer's World Cup finals. The matches are being co-hosted with South Korea, which is fighting an outbreak of foot and mouth disease in pigs.

The South Korean Agriculture Ministry has slaughtered more than 40,000 animals, mainly pigs, and plans to cull 20,000 more. Seoul says it is testing more livestock for the illness, which can kill cloven-hoofed animals such as pigs and cows but is harmless to humans.

In economic news, the Bank of Korea raised interest rates last week. It lifted the key overnight call rate to 4.25 percent, from four-percent.

Robert Broadfoot is an analyst with the Political and Economic Risk Consultancy in Hong Kong. He says the move suggests that Korean officials are confident that domestic demand remains strong and that exports will increase, possibly triggering inflation. "The Korean economy is in high gear right now and there is the potential for inflation, especially with the World Cup soccer tournament coming up," he says. "You are going to have a population that is partying. Even before the World Cup, the Koreans were very aggressive spenders."

In Thailand, the government has indefinitely postponed the construction of two power plants that had been contracted to foreign companies. Bangkok says it did so because it has cut its energy demand forecast and also because it wants to avoid environmental damage. But investors warn the move could undermine foreign investors' confidence in the country.

The companies involved in the canceled projects are estimated to have already invested $125 million in planning and research. A statement issued by the Thai prime minister's office says the government will investigate alleged mismanagement of the contracts.