Crisis, reform and recovery

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.

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was in tatters. Inflation was rising alarmingly, as was the level of imports. British industry began to suffer from the The economy 9 effects of rising wages and prices and several large companies were threatening to go out of business. When Rolls-Royce went bust, the writing was on the wall. Heath did what he said he would never do and stepped in to save Rolls-Royce with government money. He also imposed a six-month freeze on wage rises, to be replaced later by strict controls. His Chancellor, Anthony Barber, was forced to raise taxation in order to control

in Understanding British and European political issues
Towards a union or not?

financial markets that it lower its policy-setting rate, in the meantime raised to 4.75 per cent, to prevent Euroland from sliding into recession. The ECB’s argument was that inflation was too high and risked rising further if the rate was lowered. In May 2001, however, the ECB changed course and lowered the rate to 4.5 per cent, arguing that it had overrated actual inflation. Markets did not take to this kindly and the euro weakened further to $0.83 in July, but then firmed at around $0.90 during the autumn.36 The ECB’s dilemma perfectly illustrated the previously

in Destination Europe

protracted one. Though the reasons seem to be more cultural and emotional with strong relevance to human rights (see Chapter 5 ), and not strictly economic, deep gaps still exist in the latter area as well. For instance, EU inflation for the years 1998–2000 has been 1.3–1.7 percent annually. Alas, the Turkish average figure was close to 70 percent, and the crisis of winter 2001 elevated inflation even further. The average increase of EU exports and imports for the same period comes to 7.1–6.7, and 7.0–6.2 percent, respectively. The Turkish average figures amount to minus

in Turkey: facing a new millennium
Germany, Sweden and Australia compared

–75 suffered declining M1738 - CALLAGHAN TEXT.indd 20 3/8/09 12:13:30 Explanations for neo-liberal social democracy 21 growth, high inflation and rising unemployment (Dyster and Meredith 1990: 221; Brezniak and Collins 1977). Compared to the 4.2 per cent and 5.3 per cent growth achieved on average per year in the 1950s and 1960s respectively, this fell to 3.5 per cent in the 1970s and 3.3 per cent in the 1980s, before rising slightly to 3.5 per cent in the 1990s. It then fell to less than 3 per cent in the first six years of the twenty-first century, despite the economy

in In search of social democracy
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Post-crisis Asia – economic recovery, September 11, 2001 and the challenges ahead

to investment grade. The recovery in Hong Kong, China has been equally impressive. The first-quarter growth in 2000 was 14.3 per cent, followed by 10.8 per cent in the second quarter. GDP growth in Singapore of 5.4 per cent in 1999 was partly due to rising productivity levels. Moreover, Singapore experienced a rapid growth of its information technology industry – no doubt benefiting from the government’s policy of transforming the island republic into a “wired” economy. Malaysia, the Philippines and Thailand grew at 5.4, 3.2 and 5.2 per cent respectively in the first

in The Asian financial crisis
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Crisis, reform and recovery

$100,000 or more, certain-term Eurodollars, and balances in money-market mutual funds restricted to institutional investors. The 7–8 per cent differentials were the result of weak competition in financial markets and a government policy of maintaining high domestic interest rates in order to control inflation and rising current-account deficits. The relatively high domestic interest rates, together with fixed foreign-exchange rates, attracted shortterm foreign funds, especially in the form of non-resident baht accounts. Thailand’s organized financial markets are made up

in The Asian financial crisis
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War, Debt, and Colonial Power

quantity with an overly progressive social agenda. The privileged whites dreaded the possibility of high taxes for reparations, rampant inflation due to social spending, and a redistribution of wealth from whites to blacks and the rich to the poor. To overcome these threats and to appease international and domestic creditors, the ANC agreed to tie its hands while in power. The chief way this was done was by agreeing to a loan from the International Monetary Fund that was, according to Bond, not needed. The real purpose of the loan was to ensure policy continuity: In

in Debt as Power
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The evolving international financial architecture

Limited flexibility Fixed Managed floating Pegged arrangement Thailand January 1970–June 1997 July 1997–December 2000 Fixed Independently floating for authorities to support a peg. Specifically, when capital inflows accelerate, if the exchange rate is prevented from rising, inflationary pressures build up and the real exchange rate will appreciate through higher domestic inflation. To avoid such consequences, central banks usually attempt to “sterilize” the inflows by using offsetting open-market operations to try to mop up the inflowing liquidity. However, sterilization

in The Asian financial crisis
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economic decline by a vigorous promotion of private business, a reduction of trade-union power and a major rethinking about the welfare state. However, domestic problems such as industrial unrest, rising unemployment and high inflation led to a reversal of such policies in 1972; massive oil price rises in 1973–74 and their impact on the weakening British economy also contributed to a return to the consensus within the Conservative

in Understanding political ideas and movements