The Asian financial crisis of 1997-98 shook the foundations of the global economy and what began as a localised currency crisis soon engulfed the entire Asian region. This book explores what went wrong and how did the Asian economies long considered 'miracles' respond, among other things. The combined effects of growing unemployment, rising inflation, and the absence of a meaningful social safety-net system, pushed large numbers of displaced workers and their families into poverty. Resolving Thailand's notorious non-performing loans problem will depend on the fortunes of the country's real economy, and on the success of Thai Asset Management Corporation (TAMC). Under International Monetary Fund's (IMF) oversight, the Indonesian government has also taken steps to deal with the massive debt problem. After Indonesian Debt Restructuring Agency's (INDRA) failure, the Indonesian government passed the Company Bankruptcy and Debt Restructuring and/or Rehabilitation Act to facilitate reorganization of illiquid, but financially viable companies. Economic reforms in Korea were started by Kim Dae-Jung. the partial convertibility of the Renminbi (RMB), not being heavy burdened with short-term debt liabilities, and rapid foreign trade explains China's remarkable immunity to the "Asian flu". The proposed sovereign debt restructuring mechanism (SDRM) (modeled on corporate bankruptcy law) would allow countries to seek legal protection from creditors that stand in the way of restructuring, and in exchange debtors would have to negotiate with their creditors in good faith.
The Asian financial crisis 4 Korea: crisis, reform and recovery We don’t know whether we would go bankrupt tomorrow or the day after tomorrow. I can’t sleep since I was briefed. I am totally flabbergasted . . . This is the bottom. It’s a matter of one month, no, even one day. I just can’t understand how the situation came to this (President-elect Kim Dae-Jung, December 23, 1997).1 In the 1950s, Korea was among the poorest countries in the world, with a per capita income of under US$100. In per capita terms, this placed the country below Haiti, Ethiopia, Peru
but failed to deliver any lasting results. As Head of the Asia Department in the Swedish Foreign Ministry I visited North Korea a number of times. In 2001 I accompanied Prime Minister Göran Persson, then-chairperson of the European Council, to Pyongyang for an EU–North Korean summit with Kim Jong-il. South Korean President Kim Dae-jung’s Sunshine policy and the Clinton administration’s advanced direct talks with Pyongyang had created a conducive climate, but when President George W. Bush entered the White House in 2001, he launched a policy reversal, choosing to
Japan and South Korea working together under the umbrella of the American alliance. The smaller problem, however, was that Seoul had been through a fit of “anti-Americanism” as Beltway denizens saw it, under Presidents Kim Dae-jung (1998–2003) and, especially, Roh Moo-hyun (2003–8). Fortune eventually smiled in the form of President Lee Myung-bak (2008–13), a former Hyundai executive who harked back to the days of Korean–American amity when the dictators were in power (1948–87). Even better, they thought, was the subsequent election of Park Geun-hye, a daughter of one
(under Kim Dae-Jung, January 1998–) and to a lesser extent, in Indonesia, first under the “quasi-democratic” interim Habibie regime (May 1998–October 1999) and later under the democratic Abdurrahman Wahid government (October 1999–July 2001), were quite successful in exploiting their new popular mandates (not to mention their honeymoon periods), to implement some important reforms, including taking action against the previously favored vested interests. Thus the crisis opened a maximum window for reform – and given the substantial popular expectations that the new