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Home > Debates Last Updated: 14:30 03/09/2007
Online Debate

What Caused the Asian Crisis and How to Prevent Its Recurrence

This onlie debate on May 24 was conducted based on the preliminary discussion on May 22, also responding to public comments and observations.

Message Colors:

[1] Online Debate to Start at 9:00, May 24th (Japan Time)

from  Platform Staff   23:30 Tue. 5/23/2000  

Welcome to the Online Debate BBS.

An opening statement will be posted here at 9:00, May 24th (Japan time) to initiate the debate.

Please come back here by 9:00, May 24th to follow the online debate. We are looking forward to your participation.

[2] Questions from the audience

from  MIYAO   23:52 Tue. 5/23/2000 - 08:09 Wed. 5/24/2000  

FROM Masaaki Horiguchi
1: For the quick recovery, the undemocratic government like Indonesia seems to be problematic. For the crisis, how do we think the impact of the political systems? And is the so-called "Asian Value" still working on the Asian recovery?

2 Transparency is very important for the resolution of economic and political problems. On the stage of Indonesian case, IMF seemed to be not transparent for the information of the process. Can we think IMF was responsible on that point?

[3] Comments from the audience

from  MIYAO   08:01 Wed. 5/24/2000  

From T. Taniguchi (in London)
Currency pegging is a thing of the past. Everyone is a floater now. The question remains to be solved as to what currency regime we should envisage.
This debate about the international currency regime, once a heated one whenthere were three interventionists on board - former finance ministers inboth France and Germany as well as Japan's Eisuke Sakakibara - has sincelargely lost its steam. Paul Volcker, I have to say, was overly optimisticin that he hoped the Asian crisis would teach the advanced countries an important lesson - i.e. that a new, solid international financial
architecture is needed. The lesson has not been learned, because, as JacobFrenkel once put it, there are only two kinds of investors: those with shortmemories and those with nomemories.

In fact it is conceivably the least opportune time for us to address the issue, largely because of the following reason. The structural imbalances inthe world economy, i.e., the record current account deficit of the United States and the need thereof to finance the US economy by absorbing the world savings, have grown to such a grotesque degree that very few US policymakers anticipate anything bolder than to hope merely to maintain the status quo.

This almost implies that it will take a financial calamity before we wake up to the fact that a new, versatile international currency regime must be struck out. And in the meantime? We can do very little except repeat the truism that prudent management of financial institutions, full scale disclosure of financial information and the like are paramount.

That is not to say, however, that there can be no regional solutions, either. Indeed there can be. The mutual repurchase agreement combining Asian central banks is one such attempt, albeit as a small fire extinguisher. Th key factor here is whether Japan can provide the rest of the region with enough liquidity, a large part of which in turn depends on the efficiency of the Japanese capital market. I see the Bank of Japan doing its homework in this regard. The Japanese government is now taking more determined steps to distance itself and the rest of Asia from the Dollar sphere of influence, if
indeed you read between the lines of their policy statements.

[4] Introduction

from  MIYAO   09:09 Wed. 5/24/2000  

Hello, everyone.
Welcome to our online debate on Asia's crisis and recovery.
Today I am happy to have Prof. Shiraishi and Prof. Kinoshita,
not here with me, but somewhere on line.
Shall we begin by briefly introducing ourselves first?
I am Takahiro MIYAO, Professor at GLOCOM (Center for Global
Communications), International University of Japan, here in
Roppongi, Tokyo.
Prof. Shiraishi, where are you now?

[5] asian crisis

from  SHIRAISHI   09:10 Wed. 5/24/2000  

This is a test. Let me know if you get this message.

[6] SHIRAISHI\s Comment

from  SHIRAISHI   09:11 Wed. 5/24/2000  

I am now in Kyoto, in my office at the center for southeast asian studies, kyoto university. I am a professor there, working on governments and politics in southeast asia.

[7] Introduction

from  MIYAO   09:17 Wed. 5/24/2000  

Prof. Kinoshita, are you with us?
Please introduce yourself.

[8] Political Systems

from  MIYAO   09:21 Wed. 5/24/2000  

It looks like Prof. Kinoshita will join us a little later.
In the meantime, shall we take up Mr. Horiguchi's question
about the impact of political systems:
What do you think, Prof. Shiraishi?

Mr. Horiguchi's question:
1: For the quick recovery, the undemocratic government
like Indonesia seems to be problematic. For the crisis,
how do we think the impact of the political systems?

[9] KINOSHITA\s Comment

from  KINOSHITA   09:23 Wed. 5/24/2000  

Good morning,Miyao-sensei and everybody,
It is excellent for me to join this conference. This is my first trial. I have studying Asia for sometime. Thanks.

[10] MIYAO\s Comment

from  MIYAO   09:28 Wed. 5/24/2000  

Prof. Kinoshita, welcome to our debate.
As I am asking Prof. Shiraishi, what do
you think of the impact of political
systems on the Asian crisis and its
recovery, compared to economic factors?

[11] RE: (No Subject)

from  KINOSHITA   09:31 Wed. 5/24/2000  

In message [15] KINOSHITA wrote:
> Good morning,Miyao-sensei and everybody,
> I am Toshihiko Kinoshita, Professor of Graduate School and School of Commerce, Waseda University. I worked fot the Japan EXIM for 32 years before retiring four years back, majoring in Asia. It is excellent for me to join this conference. This is my first trial. I hope we can make a good discussion and debating.

[12] new PC

from  KINOSHITA   09:35 Wed. 5/24/2000  

I am preparing my second PC.

[13] SHIRAISHI\s Comment

from  SHIRAISHI   09:45 Wed. 5/24/2000  

The crisis was like a big earthquake. It hit all the region, but its impact was different from one country to another, in part because of difference in the economic system and in part because of difference of the political system. Whether the political system was democratic or authoritarian was not a cause of the asian crisis. Both democratic Thailand and authoritarian Indonesia was hit. But all the countries, except Malaysia which remains authoritarian, came out of the crisis with a democratic system. Though Horiguchi-san mentions the undemocratic government in Indonesia, it is democratic now, and democratization helps, I believe, in Indonesia's overcoming the crisis, because the current democratically elected government under Abdurrachman Wahid now enjoys public trust, which is very important for the effectiveness of any policy. But the public trust in the government is not enought to overcome the crisis, of course. The government needs to negotiate with the IMF, come up with policies, and implement reforms. It is here, in the realm of policy making and implementation in which the current government has been having a lot of problems. But this is not the question of being democratic or undemocratic.

[14] KINOSHITA\s Comment

from  KINOSHITA   09:51 Wed. 5/24/2000  

Well, East Asian economies are now recovering more quickly than most of the concerned people predicted,with some reservations. However, Indonesia's case is an excetion. the country received a big soico-political imapct by the economic crisis following the case of Thailand. This is mainly because the political sytem of the country had reached a critical period of change, after a long rule of the former President Suharto. So, Chinese and other local money flied when economic situatation deteriorated in the fall of 1997.

[15] Political Systems

from  MIYAO   09:51 Wed. 5/24/2000  

Prof. Shiraishi
Thanks for your insightful comment, but you say
"Whether the political system was democratic or
authoritarian was not a cause of the asian
Then what do you think was the real cause of the
Asian crisis in the first place?

[16] SHIRAISHI\s Comment

from  SHIRAISHI   09:56 Wed. 5/24/2000  

I am not an economist, and I frankly do not want to make any unprofessional remark. But it was financial globalization and the premature financial liberalization and the lack of prudence on the part of some countries that produced the crisis.

[17] Asian Value

from  MIYAO   09:58 Wed. 5/24/2000  

Prof. Kinoshita,
As you say "East Asian economies are now recovering
more quickly than most of the concerned people predicted"
with Indonesia aside.
What do you think of Mr. Horiguchi's second question about
the Asian Value? It is still valid in facilitating the
Prof. Kinoshita and Prof. Shiraishi, please respond.

[18] KINOSHITA\s Comment

from  KINOSHITA   10:08 Wed. 5/24/2000  

I should add. In case of Korea, Korean government, new President Kim Dae Jung could take a good intiative to negociate with the IMF, whose economic recovery came first. Its economic growth rate last year was around 10% and is expected to be rather high this year.On Thailand, although the government(s) received quite a big blow by the financial crisis, the leader PM Chuan could take a good leadership to manage the politico-economic policy. In case of Indonesia, total socio-political system changed without enough preparation. President Gus Dur(Wahid) has done more than many tended to think politically given the severest conditions, his or his team's economic policy is not deemed to be successful until now. Briefly, the country is paying a high cost to the way of true democratic, florishing society.

[19] SHIRAISHI\s Comment

from  SHIRAISHI   10:08 Wed. 5/24/2000  

Asian Values mean a lot of different things. In the past, for instance, authoritarianism was justified in the name of asian values. In that case, I do not want to share asian values. But if you mean emphacising the importance of education, for instance, by asian values, education certainly helps in the long term health of any country. But is there anything specifically asian in emphacising the importance of education? I doubt it.

[20] Globalization and regionalism

from  MIYAO   10:18 Wed. 5/24/2000  

Professor Shiraishi says that the real cause of the Asian
crisis lies in "financial globalization and the premature financial liberalization and the lack of prudence on the
part of some countries that produced the crisis. "
Basically I share this view, as Mr. Taniguchi (in London)suggested in his comment.
Then the question is what the Asian countries as a region
should do or could do to deal with such global forces
which might (just might) only be tackled by global
alliances and cooperation.
What do you think, Prof. Shiraishi?

[21] KINOSHITA\s Comment

from  KINOSHITA   10:31 Wed. 5/24/2000 - 10:51   

On Asian value, I must define what is Asian value. Some scholars don't believe that there exists Asian value. I consider that since there are diversified values and perfomances among nations and ethnic groups in the East Asian region,it may be risky to use the word Asian values. For instance, if the values, cultures and practices among pri-bumi in Indonesia and Bumi-putra in Malaysia and those of the naturalized Chinese be the same, the socio-political tensions in those countries would be far smaller. If, however, we dare to define the term more family-oriented or more collective rather than individualistic, more saving-oriented rather than high consumption attitude, and the tendency to spend more family money to education, surely we have observed broadly in East Asia until now and we can expect the tendency will last for some more time at least,we may safely say that can help the higher economic growth rate in the region in coming years.
But again I wish to say, we should be careful about the term. America in the last century or some people even after the WWII behaved same way as we have seen in East Asia right now. Chinese are far more individualistic than Japanese. Chileans behave as most Asians do, for instance. Over-simplification will make things complexed and inaccurate.

[22] SHIRAISHI\s Comment

from  SHIRAISHI   10:36 Wed. 5/24/2000  

It is important to think of the regional system in between the global and the national. The world does not globalize evenly. Think of financial globalization. The crisis hit East Asia and Latin America (as well as Russia) in 1997-98, but its impact was felt differently. The US moved very fast to establish a special account at IMF to bail out Brazil, I believe, while it did not give a penny to Thailand in 1997. The Japanese government decided to acquiece in the US bailing out Brazil, in return for the US acquiecence in Japan bailing out Mahathir's Malaysia. This is because powers, both the super power and just powers, have different stakes in different regions. It is important, therefore, to think of a regional structure which is different from one region to another.

[23] Question to Prof. Kinoshita

from  MIYAO   10:38 Wed. 5/24/2000  

Prof. Shiraishi, before exploring more about "globalization
and regionalism," let me take up an e-mail message which
we just received from Mr. Oswald, who is asking the following question to Prof. Kinoshita about his comment in our
preliminary discussion.
Prof. Kinoshita, please respond.
Prof. Shiraishi, do you also have some comments?

Prof. Kinoshita's optimism on the future economic outlook
of Asia is okay, but given that in the richer countries
there is some connection between the influential/rich
citizens and the common citizens through social welfare
elections, etc. In addition there are also connections
between the influential/rich citizens in poor countries
and the influential/rich citizens in rich countries.
But the common citizens in poorer countries do not seem
to be connected in any way. The problem here is that
the vast majority of citizens in poor countries are isolated
and it is upon the hard work of these individuals that a
bright economic future must be built.
Would not reform in these areas help contribute to a
brighter economic future for poorer Asian countries?
Please comment.

R. Mike Oswald

University of Southern California (USC) Regional Office - Tokyo

[24] SHIRAISHI\s Comment

from  SHIRAISHI   10:49 Wed. 5/24/2000 - 11:44   

There is something important in the question Mr. Oswald raised. I don't believe the common citizens are disconnected with the power elite in Asian countries. This kind of statement is too sweeping. But if you take it to mean that in some countries, say in Thailand, the Philippines or Indonesia, there are quite a sizable number of people, largely living far away in the countryside and poor, who remain only marginally integrated in the system, this question needs to be addressed seriously.
How to think about those poeple, then? The best way is to imagine if we were among those people. I would certainly sell my vote when the election comes, because I know the government won't deliver anything good for me whoever I vote and selling my vote in return for some money is a sensible thing to do under those circumstances. I believe this goes a long way to explain money politics and the practice of vote selling/buying in Thailand and the Philippines, and though I did not notice money politics very much in the general elections in Indonesia last year, I won't be surprised if I see a lot of it in the future elections there.

[25] KINOSHITA\s Comment

from  KINOSHITA   11:05 Wed. 5/24/2000  

Thank you, Mike for your good questions. I will largely agree to your comment. And that is one of the role of the government and the congress in each country. However, we cannot stop the globalization through the quick development of IT in the world or more precisely from the U.S., Europe ,and Japan to a certain degree. And this gives the energy to those who are more capable and more adaptive, not necessrily to citizens but nations and regions. Africa is left untouched with the exception of South Africa and a few others. What you are saying seems largely on the distribution in a country.
In the past years, primary and secondary education level was related to the industrialization in East Asia, for instance. Now, the higher ducation is required to catch up the world IT revolution. Most poorer nations could not catch up the trend. We may see another north-south problems in future among continents, and regions. And other factors like huge current account deficits in the U.S., which has helped economic recovry of the Asian countries, has bocome another risk which most of developping pr even other developped nations can hardly absorve.
The problem is how to cope with these issues internationally.

[26] Globalization and Regionalism(2)

from  MIYAO   11:05 Wed. 5/24/2000  

Prof. Shiraishi and Prof. Kinoshita, thanks to your
very insightful responses to Mr. Oswald's question.
Now we need to conclude our discussion by asking
again about globalization and regionalism.
What can be done at the regional level in Asia to
prevent a crisis (of the global nature) from
happening again?
What should Japan do to facilitate the stability and revitalization of the Asian region?
Prof. Shiraishi and Prof. Kinoshita, give us your
conclusions, as briefly as possible, on this point.

[27] SHIRAISHI\s Comment

from  SHIRAISHI   11:25 Wed. 5/24/2000  

Since Mr. Gyoten has made a number of sensible suggestions in his essay, let me say two things. The first and most important is the need for the human resources development and the institution building. We need to train hundreds of thousands of professionals and to create a kind of institutional environment in which they can work in East Asia. How central a role Japan can play, I don't know, but we certainly need regional and global cooperation to make this happen.
Second, we need the political will to go regional and global - we meaing Japanese, for there still are a lot of resistance in this country to regionalization and globalization. It is one thing to embark on creating a regional financial architecture and establishing a free trade zone with Singapore. But we can not go very far on the trade front, for instance, unless we do not come to a new broad consensus on our now largely bankrupt agriculture policy. And I am not sure how sensible it is to talk about making Japan's financial sector internationally competitive without revamping the bureaucratic structure of Japanese banks and without radically opening Japan's job market for non-Japanese professionals. In this sense, it is crucial to put our house in order, as many people say.

[28] KINOSHITA\s Comment

from  KINOSHITA   11:45 Wed. 5/24/2000  

Thanks for giving me a chance to join this program.
I will raise some important agendas which we should keep in mind.
1 How to avoid the repetion of this financial crisis: there are two basic things. One is how to reduce the excessive investments(especilly portfolio investments) and lending internationally. Malaysia has been successful in suppressing the contagion of the crisis by its own way. But, such a country like Indonesia cannot take the Malaysian way. How to give more accrate figures on these international capital flows is not only the issue of the national economy. International assitance is essential.The other is an effort of the country in question. They will use good economists as the decision makers of this issue. They will prepare good statistics. They will refrom banking and other financial instituions so that they can overcome a ceratin level of difficulties not only from domestic but from overseas.
Coutry-specific approach is efective on this issue. How to lessen risks should be studied in the region and internationally.
2 Japan has done an excellent job basically money-wise after the crisis happened. Miyazawa-intitiative is the one.
But I am recognizing we need more experts who can assist in the field of reconstrucuiton of banks and other financial institutions. 3 We need the reform of internaitional institutions including IMF, World Bank, Asian Development Bank and WTO. We will have the first Asian Director General of WTO from Thailand (Dr. Supachai)in three years. He told that he would not criticize major countries in the developed nations but he would criticize smaller countries and developping countries who have not been involed and not interested on those issues which WTO had posed.
I wish he will make a better job.I will omit what kind of reform is necessary on hte IMF, World Bank due to the time constraint. 4 Japan should envigorate its economy more wisely not using much fiscal money. This is a bisis for the higher economic growth of Asian countries inn general.
Japan and Europe should assist the U.S. so that U.S.economy can have a soft landing of its economic path from now.
Japan should open its market more open. FTA between Japan and Korea, Singapore and Chike, respectively will pose a better future prospects of Japan.
On education, we should make best efforts for ourselves. we can assisst, however, in some areas in Asia with the rest of the world. 5 On currency, Asians countries have advanced by signing a pact enlarging the swaps. But naturally, there are many other things we can cooperate in this field in the region,and the other regions. We must step forward to the target.
I will end . Thanks again.

[29] Concluding Remark

from  MIYAO   11:47 Wed. 5/24/2000  

Although we have so many problems to explore further,
I have to bring the online debate to a close now.
Thank you, Prof. Shiraishi and Prof. Kinoshita, for
your participation in the debate, despite your busy
schedule, and your valuable comments

To audience members;
Please send any comments or suggestions, and we will
respond as soon as we can.]
Thank you everyone.

[30] SHIRAISHI\s Comment

from  SHIRAISHI   11:47 Wed. 5/24/2000  

Sorry, I have to excuse myself, because I have to run to another meeting. It was fun, and let's do it in some near future. TS

[32] Thank you

from  MIYAO   11:49 Wed. 5/24/2000  

Prof. Shiraishi and Prof. Kinoshita
Thank you again for your participation.
Have a nice day.

[31] RE: Concluding Remark

from  SHIRAISHI   11:48 Wed. 5/24/2000  

Thanks for inviting me to this forum.

[32] Final comment from the audience:

from  Masaaki Horiguchi    22:54 Wed. 5/24/2000  

Thank you very much for taking up my questions in the debate. I appreciated both professors' replies.

But I am afraid that my question about "undemocratic government" was misunderstood. I did not mean that the present government of Indonesia is undemocratic. On the contrary, I think it is duly elected through a fully democratic process unlike the former regime.

To avoid any misunderstanding I would like to delete the expression "like Indonesia" from my question. Could you please understand my sincere desire for the quick recovery of Indonesia.

Thank you.

Masaaki Horiguchi

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