A protracted war

WASHINGTON — There are ambulances around the Capitol and our meeting with Sen. Daniel Inouye (Democrat, Hawaii) at the Senate building may be cancelled because of the anthrax scare here. Washington lives from day to day, with schedules being cancelled at a moment’s notice and streets being abruptly closed to the public because of yet another terrorist scare. No one knows when tours to the White House may resume. Americans are looking for their vice president.

On a knoll overlooking the spot where a plane crashed into the Pentagon, a chilly breeze brings a faint smell of something burned. Among the wreaths, letters and pictures of the dead and missing on this knoll, a placard declares: "Never give up. Never give in. Never forget. Never again."

American nerves are frayed and business is a mess. The uncertainty is spilling over into Asia, and this is bad news for the Philippines.

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Milan Brahmbhatt, the World Bank’s lead economist for East Asia and the Pacific, said the Sept. 11 terrorist attacks will have "quite a significant impact" on the region.

The world economy had already entered an unexpectedly steep slowdown in 2001, and Sept. 11 "will clearly deepen and lengthen that slowdown," Brahmbhatt told the Jefferson Fellows at the World Bank headquarters here. Asia, whose recovery from the 1997 financial crisis was fueled in large part by the high-tech boom, is now suffering the cost of the "exceptionally steep high-tech recession of 2001," he said.

Brahmbhatt notes that the events since Sept. 11 may lead to more political stress in some countries. While he sees no increase in the incidence of poverty in the near future, he believes poverty reduction is going to slow down.

Anoop Singh, deputy director of the International Monetary Fund’s Asia and Pacific Department, also sees lower growth for Asia next year as a result of the terrorist attacks.

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The outlook is not all that bleak, however. Both Brahmbhatt and Singh see no repeat of the 1997 financial crisis. "In some ways the region seems to be more resilient," Brahmbhatt said. "We haven’t seen financial panic. There’s less cause for investors to panic."

Most Asian economies, he noted, are running surpluses and the region’s macroeconomic position is "generally more sound" than in 1997.

He probably was not referring to the Philippines, whose deficit rose to P122 billion in the first nine months of the year — past the programmed level of P120.2 billion. Financial and banking reforms have been strengthened in Asia since 1997, and there has been less dependence on capital markets. But the equity markets in the Philippines and Indonesia have been the worst performing in the region since Sept. 11.

Both Brahmbhatt and Singh emphasize the need to continue with reforms in Asia. Brahmbhatt stressed the need to push corporate restructuring, further trade liberalization and reforms in governance.

"We’re seeing a gradual political maturation (in Asia)," he said. "There has been a lot of political turbulence but also peaceful transitions and a gradual consolidation of more democratic norms… and the outside world is seeing that."

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But how long will the uncertainties over terrorism last? No one has a crystal ball. A government official here said the bombing of Afghanistan will go on "as long as necessary." The official said that after the first stage, which is to take out the Taliban’s air defenses, the US-led forces are now on the second phase, which aims to disrupt logistics, communications and command control.

The third stage, the official said, involves going after Osama bin Laden and his al-Qaeda network.

Meanwhile, Americans are worrying about anthrax. What’s next on the terrorist menu?

This war is going to be protracted, the uncertainty is going to be protracted, and we better be ready for it on all fronts.