Ike: Analytical article published today which I thought you'd find interesting:
A year down the road ... crisis begins with attacks on Thai baht - Views still divided over roots of Asian economic fall-out:
BANGKOK (AFP): A year after Asia's economic crisis began with massive speculative attacks on the Thai Baht, opinions are still sharply divided over the roots of the problem - and the strategies needed for recovery.
It was in mid-May last year that currency speculators - the self-styled wolves of the international money markets - took their first bite out of the Thai currency, selling about 260 million baht ($10 billion at the old rate) in one day.
The central Bank of Thailand (BoT) fought back, buying baht to the tune of more than nine billion dollars in a bid to comfort international investors and maintain the integrity of the currency's peg to the greenback.
And so the crisis unfolded over the next few weeks. By July, when the baht was eventually unhinged from the dollar, the BoT's failed defence of the currency had left Thailand almost bankrupt and the wolves looking for their next prey.
Over the ensuing months, the International Monetary Fund would hand out more than $100 billion in rescue funds to Thailand, Indonesia and South Korea, the latter receiving the largest bailout in the fund's history.
Currencies around the region faced massive adjustments, banking and finance sectors collapsed, once-mighty companies folded and governments continue to be rocked by revelations of mismanagement and corruption.
Bangkok has recently decided to set up a committee to investigate what civil or criminal charges, if any, can be laid against those named in a recent report on the BoT's disastrous defence of the baht, including two former bank governors, ex-finance minister Amnuay Viravan and former prime minister Chavalit Yongchaiyudh.
But not everyone agrees they can be held accountable. "What is very clear in the investigations that have come out recently is that the BoT mismanaged the defence of the baht," said Chulalongkorn University economics lecturer Walden Bello. "But I think what also seems fairly obvious is that the concerted attack by international speculators on the baht was a real problem," Bellow said. "In a sense we can no longer deny that what Mahathir said had a very strong grain of truth in it," he said.
Malaysian Prime Minister Mahathir Mohamad drew fire from international fund managers when he blamed them, and US-based financier George Soros in particular, for deliberately undermining developing nations for the sake of an easy profit.
Despite sending shivers through the Malaysian markets at the time, his calls for tighter international controls on currency speculation fell on sympathetic ears in Asia. "This crisis would not have happened had there not been such attacks," Bello said. "Asia is the Waterloo of globalisation. There is a search for a new paradigm."
Bello echoes many analysts in Asia who blame the IMF for "pushing" Asian economies to liberalize too quickly, fostering their addiction to foreign capital without regard to the potential consequences.
According to this line, the crisis was "aggravated" by the austerity measures attached to the IMF bailout money, which paid scant attention to the impact on everyday people. Hence the riots in Indonesia, suicides in Thailand and union unrest in South Korea.
"What will emerge from this crisis is not just more transparency in this economy but a tightening in international cash flows," Bellow said. The key thing is to regenerate our domestic resources and limit our dependence on foreign capital. What we have here is not just a crisis of economic models but a crisis of entrenched leadership. There is a need for new and creative leadership."
Jimmy Koh, a Singapore-based regional analyst with British finance house IDEA, agreed that the IMF may have been slow to realize the depth of the problem, but he said the fund could not be blamed for the crisis. "We have to be responsible for our own mistakes rather than blame everything on the IMF," Koh said.
The Asian financial crisis had a chilling impact on China's trade in the first four months of 1998, with export growth plummeting 15.3 percentage points from a year earlier, the state media reported at the weekend.
While the figures showed clearer damage than in the unexpectedly rosy with first quarter, analysts said the result was heavily anticipated by the government and would not prompt any panic moves to devalue the yuan.
Exports in January-April grew just 11.6 per cent year-on-year to $56.2 billion, compared to 26.9 per cent during the same period last year, the official Xinhua news agency said, quoting the General Administration of customs.
Shipments to Southeast Asian countries fell 9.5 per cent to $3.2 billion, while those to South Korea shrank 24.5 per cent to $1.9 billion, the China Daily said.
Bolstered by the yuan's strength against the crisis-battered Asian currencies, overall imports growth surged 3.1 per cent to $41.3 billion. South Korea led the way, expanding its shipments to China 13.6 per cent to $4.7 billion.
China's overall trade growth slowed 5.1 percentage points to 7.9 per cent.
Trade with the European Union and Russia - which saw exports accelerate and imports slow - partially offset the damage however, Xinhua said. Trade with Hong Kong and the United States, meanwhile, saw continued expansion of both imports and exports.
Xiao Geng, a Hong Kong University economist, said the fall in exports was unlikely to spark any panic among Beijing leaders - or a change of position on holding stable the yuan's exchange rate.
"This was fully anticipated by both the government and the markets," he said, dismissing chances of any devaluation in 1998. "Exports are still growing . it's still a (trade) surplus," he said, adding that the figures were actually more favourable than some predictions.
A Beijing-based analyst agreed, saying the trade figures would have been down in the first half of this year even without the crisis. "The Chinese economy has been slowing for four years," he said, adding that it was also experiencing the effects of a long political transition to Premier Zhu Rongji's leadership, which temporarily froze decision making. |
