Asian Crisis
A large economic downturn in East Asia threatens to end its nearly 30 year run
of high growth rates. It is hard to understand what these declines will actualy
do to the world market. The crisis has caused Asian currencies to fall 50-60%,
stock markets to decline 40%, banks to close, and property values to drop. The
crisis was brought on by currency devaluations, bad banking practices, high
foreign debt, loose government regulation, and corruption. Due to East Asia\'s
large impact on the world economy, the panic in Thailand, Indonesia, Korea, and
other Asian countries has prompted other countries to worry about the affect on
their own economies and offer aid to the financially troubled nations. The
countries that are included in the East Asian crisis, known as "Tiger"
economies, are Hong Kong, Indonesia, South Korea, Malaysia, the Philippines,

Singapore, Taiwan and Thailand. For these countries to participate effectively
in the exchange of goods, services, and assets, an international monetary system
is needed to facilitate economic transactions. To be effective in facilitating
movement in goods, services, and assets, a monetary system most importantly
requires an efficient balance of payments adjustment mechanism so that deficits
and surpluses are not prolonged but are eliminated with relative ease in a
reasonably short time period. The Asian crisis of recent falls into this
category of inefficient balance of payments facilitated by depreciation of its
currency. By competitively depreciating its currencies, Asia is exporting its
deflation, its overcapacity and its lack of growth to the West, particularly to
the US. No other group of countries in the world has produced more rapid
economic growth and dramatic reduction in poverty than East Asia. Korea,

Malaysia, and Thailand have virtually eliminated absolute poverty, and Indonesia
is within reach of that goal. Nevertheless, this financial crisis has exposed
weaknesses in Asian economies that must be addressed if the region is to return
to its high growth of recent years. Despite the great cries of anguish we hear
from bankers and corporations, the real victims of the collapse of "globalisation"
in Asia, are the same people who were the victims of the "miracle".

Their low wages, or incomes from farming, are now devalued by 25% - 55%.

Millions of casual construction workers are idle across the region. And now
hundreds of thousands of public sector employees and finance sector workers are
being sacked as the IMF enforces government budget cuts, bank and finance
company closures. The East Asian crisis has affected almost all of the Asian
nations, but the three hardest hit countries are Thailand, Indonesia, and South

Korea. The panic began in Thailand in May of 1997 when speculators, worried
about Thailand\'s slowing economy, excessive debt, and political instability
devalued the baht as they fled for market-driven currencies like the American
dollar. Indonesia\'s economy soon fell soon after when the rupiah hit a record
low against the U.S. dollar. Indonesia is plagued by more than $70 billion worth
of bad debts and a corrupt and inefficient government. Thailand and Indonesia
also suffer from being overbuilt during real estate booms that were the result
of huge influxes of cash by optimistic foreign investors. South Korea faltered
under the weight of its huge foreign debt, decreasing exports, and weakening
currency. World Bank support for East Asian governments focuses on carrying out
three principal objectives: build the foundation for restoring growth and
raising incomes by adopting wide-ranging reforms in the financial sector, in
corporate governance and competition, and in managing external debt. This builds
on the IMF-led rescue efforts in the region; strengthen social protection
for the poor and other vulnerable groups to help cushion the impact of the
crisis; and improve the quality and transparency of key government
institutions, including helping governments address problems of corruption and
accountability. The World Bank believes these objectives are inseparable and
essential components of winning and holding public support for difficult
reforms. There must be visible help with the social costs of reform,
particularly protection for the unemployed; the financial and corporate sectors
must be better regulated, more transparent, and adequately capitalized to regain
the confidence of investors, both foreign and domestic. Once confidence is
restored, economic growth can resume, raising incomes for the poor in the
process. The World Bank\'s Involvement to Date Since July 1997, the Bank has
pledged some $16 billion to the region, almost the equivalent of an entire
year\'s regular lending, and already disbursed more than $3.5 billion in loans.

In Thailand, the Bank pledged $1.5 billion in support of the $17.2 billion
international effort initiated in Tokyo in August, 1997. The initial emphasis of
the Bank program was on reforming