"The effects of the crisis have not been completely erased," especially in the five countries worst hit, that is Indonesia, the Philippines, Malaysia, South Korea and Thailand, the Manila-based bank said in its annual Asian development Outlook report.

It said gross domestic product (GDP) growth in the five was cut by an average 2.5 percentage points a year in the 2000-2006 period compared to 1990-1996.

"The persistence of such a gap implies large permanent losses of income compared to pre-crisis levels. Indeed, if the impacts of the crisis on income levels are to prove transitory, a period of faster than 'normal' growth would be required to compensate for the output 'lost' during the crisis years."

It urged Indonesia and the Philippines to improve "the quality and performance of key institutions that influence investor perceptions about uncertainties, risks, and the costs of doing business."

Policy and regulatory risks, as well as the costs of corruption, are often cited as factors for Indonesia while "governance issues are to the fore" as well in the Philippines where "contract enforcement, corruption, and crime and security are of particular concern."

Their investment ratings remain below that of the international setting despite improved macroeconomic management.

"It may be that earlier reforms need more time to gain traction but the presence of deeply embedded institutional constraints, including high levels of corruption, may slow progress even then."

However, the ADB said the slowing in South Korea "most probably reflects lower potential at elevated income levels" and that had the crisis not occurred, investment and growth rates "would have probably decelerated of their own volition."

Labor force growth in all five countries save Thailand showed slower trends, while investment rates "declined steeply" after the crisis and have since been "broadly flat, showing little inclination to the levels seen in the precrisis period.

"In fact, declining capital productivity in Indonesia, (South) Korea, Malaysia, and Thailand would require higher investment rates to deliver the same growth."

The report concluded that "firms and investors may now be more circumspect than a decade ago" as indicated by rapidly falling debt-to-equity ratios and slow growth of credit to the private sector.

It said the circumstances in the five countries were different, with South Korea's situation "consistent with the maturation that occurs as income levels approach those of the richest countries in the world."

In Malaysia and Thailand's case, investment rates are possibly "too low," due perhaps to increased uncertainty and bottlenecks in skilled technical and scientific workers, among others.

It suggested there was a "mismatch" between worker supply and relevant skills in these countries, which it said also need to improve their regulatory environments.