Asia looming to crisis again
Hong Kong, June 27:
Ten years after the Asian financial crisis stung unwitting investors, stock markets have returned to record highs and free-wheeling capitalism is back, prompting many to ask, can it happen again?
Probably not, according to analysts, who argue the fiscal psyche of the region was fundamentally changed by the social and economic upheavals of 1997 and 1998 that marked an end to decades of unprecedented regional growth.
David O’Rear, chief economist with the Hong Kong General Chamber of Commerce said there were no reasons why the same circumstances that led to the Asian crisis could not happen again but the odds are low.
“First and most important, the decision makers have been there, done that, and got the message,” he said. “Experience is a great teacher and no one in Asia will forget the economic depression of the late 1990s.”
Absent from today’s bustling economic growth numbers are the extraordinary debt levels of the 1990s and O’Rear added that $3 trillion in foreign exchange reserves currently being held by central banks are sufficient.
This was helped along by the 2000 Chiang Mai initiative when the 10 member ASEAN, Japan, China and South Korea agreed to set up a bilateral currency swap scheme in a bid to prevent any repeat of the 1997 crisis.
Under the umbrella accord, an Asian country in financial trouble can borrow foreign currency — usually US dollars — from another to bolster its international reserves until the crisis passes.
However, some say this is not enough and the Thai finance minister, Chalongphob Sussan-gkarn, wants ASEAN to expand the bilateral scheme into a multilateral one using foreign reserves from each ASEAN member.
O’Rear also noted that China and Japan, while not affected ba-dly by the crisis, lost important markets for a couple of years aft-er the crash and so would be qu-ite willing to help out.
What is Asian crisis:
Hong Kong: The crisis was sparked on July 2, 1997 when Thailand attempted to ease immediate pressure on its own faltering economy by floating its currency which had remained peg-ged within narrow trading band against the US dollar. Other currencies followed suit and crashed under cri-ppling debt levels and amid soaring interest rates. Governments were forced to slash budget spending and drastically reduce subsidies to business and the poor.
Widespread and often bloody protests erupted ar-ound the region, governm-ents were thrown out of office and the IMF extended bailout packages. — AFP