| Asian governments are fast realizing that if bullish predictions of the region's growth rates are to materialize, financial deregulation is of paramount importance. Although most recent studies have cited poor physical infrastructure as the main stumbling block to continued rapid development, economists are now arguing that the relative weakness of capital markets is a more serious problem. Increasing interest in Asia from western investors, together with high local savings rates of 30% to 40% of GDP, mean that supply of capital is not a major constraint in funding infrastructure requirements put at $1.4 trillion over the next 10 years. But a lack of institutions to channel capital into projects could derail the process unless a consistent and rigorous reform programme is put in place. "A number of Asian infrastructure funds have been set up but their problem has been finding projects to invest in that carry an acceptable level of risk," says Robert Broadfoot, managing director of Hong Kong-based Political and Economic Risk Consultancy. "It's clear that before the infrastructure can be built, there will have to be financial reform. And the countries with the biggest need for new infrastructure, such as China and India, are the ones with the most rudimentary financial sectors." That's |