South-east Asia Heeds Lessons of '97 Shock
BRUSSELS, Sep 19 (IPS Asia-Pacific) - South-east Asia is back on the development path more than a decade after the 1997 Asian financial crisis, which sent many economies reeling and slashed their growth rates. Experts, however, caution that pre-crisis levels of economic growth have yet to return.
"The growth in the region would be in the realm of 6 percent, whereas before the crisis, it had been up to 10 percent," pointed out Zainal Aznam Mohammad Yusof of Malaysia's Institute of Strategic and International Studies, at a seminar this month organised by the European Policy Centre-Sasakawa Peace Foundation Policy Dialogue here.
Citing Indonesia as an example, journalist Yuli Ismartono said that the country had difficulty in getting back foreign direct investments it had lost during the crisis. "The country's social programmes had suffered most from the crisis and must be rebuilt," said the executive editor of Indonesia's TEMPO weekly news magazine.
The Asian financial crisis began in Thailand in July 1997, and it was not long before the rest of the region followed suit. Malaysia, Indonesia, South Korea and Hong Kong were the hardest hit, said Yusof.
"After the events in Thailand, the Indonesian economy went into 'free fall', leading to demonstrations (over the removal of price subsidies that had to be done due to economic problems), a loss of public order and the ousting of President Suharto, who had ruled the country for 32 years," Ismartono said, recalling the May 1998 ouster of the former dictator.
Indeed, all the speakers agree, the crisis ushered in major economic and political changes — both positive and negative — in most countries of the region.
Although its economy dipped, Indonesia nonetheless benefitted from the crisis politically, and Ismartono referred to it as a "revolution of political reforms".
After Suharto was deposed, the country experienced its first free elections since 1955 under President B J Habibie. The latter also introduced media reforms, including the passing of the Indonesian Press Law, which amended the country's 1966 and 1982 press laws under Suharto's rule. This sea change resulted in the launch of 700 new publications, 1,000 radio stations and 11 national television stations, Ismartono pointed out.
However, she added, restrictions still apply mainly as a result of "the old mindset prevailing", she added. "Huge fines are still imposed for defamation and journalists' mobile phones are still tapped," she said.
Despite the presence of the 'old Indonesia' and bumps on the way to a more democratic environment, reforms continue to be underway. For instance, new autonomy laws that substantially decentralised government authority in the country of more than 220 million people were introduced, allowing a stronger role by regional legislators.
"The provinces have 'bloomed' under these new laws. The pace of reform continues unabated, with a vibrant civil society and more respect for human rights. This 'revolution in Indonesia's political system is the story of the decade," Ismartono added.
The political changes in Indonesia also made the European Commission, whose trade relations with countries in the region were affected, to sit up and take stock of the situation. "The financial crisis had laid down a challenge to the EU, as it showed that the Union had not been paying enough attention to developments in the region," said Seamus Gillespie, head of South-east Asia desk of the EU Directorate-General, which is involved in shaping external policy.
He added that in the years since the financial crisis, the EU made efforts to "build strong political contacts and engagement", including in the form of the Aceh Monitoring Mission jointly supported by the Association of South-east Asian Nations (ASEAN) and the EU, as well as the ASEAN-EU foreign ministers meeting' in March 2007.
Regional economic integration became a buzzword for ASEAN, as countries like Malaysia, Thailand and Indonesia took steps to stem the movement of footloose and speculative inflows of foreign funds that played a role in the financial damage caused by the 1997 crisis.
While ASEAN remained committed to reducing tariff barriers among members through the ASEAN Free Trade Area, it also recognised that some member nations, especially those like Cambodia, Laos, Vietnam and Burma that joined the organisation more recently, needed the leeway to cut tariffs at different speeds due to domestic concerns. Other measures were also launched to attract more foreign direct investments, such as allowing 'financially threatened' countries to borrow foreign currency, and putting in place long-term financing schemes to build up private sector investment and combat the risk of short-term debt.
But even as integration continues and economic growth picks up, care must be taken to resolve "growing inequalities" as a result of increasing wealth for those enjoying economic growth, such as Vietnam. Gillespie also noted the need for managing well Indonesia's move from being a middle-income to a high-income country.
"Greater integration in the region will help ASEAN tackle economic and political challenges, and the EU is supporting efforts to promote this, even though this is not 'panacea' for all the region's ills," said Gillespie.
Greater economic integration also has a political bonus -- and gives South-easte Asia means "more political clout" in international fora such as the World Trade Organisation. (END/IPSAP/LLC/JS/09070208)
