The Asian Tigers
The “Asian Tigers” arrival into the world economy has been extraordinary. Hong Kong, Indonesia, Malaysia, Singapore, South Korea, and Thailand have experienced dramatic changes over the past 20 years. Their economies have fundamentally changed from traditional agriculturally based societies to rapidly growing newly industrialized nations. Their incredible rates of growth were accompanied by significant structural changes. While most of the change has been positive, from time to time these nations have been rocked by economic “growing pains.” These transformations of the South East Asian economies have attracted considerable attention in popular and scholarly publications.
In these countries the crises was caused by a bad macroeconomic management, which has influenced in the bad situation of their payment balance. The absence of competitivity, the fix exchanging rates in relation to the dollar and the foreign indebtedness provoked hard speculative attacks against these economies. All these phenomenon have created in these countries a disquieting situation.
These countries, including in the group South Korea, have been specially affected by the drop of their indexes and the massive devaluation of their currencies.
Eastern Asia has the 20% of the world commodities exportations and the industrialised countries have an important commercial deficit with these area. In this situation, the depreciation of their currencies could have influence in the importation in the European Union and in the United States (between June 1997 and February 1998 the drop of the indexes in relation to the dollar was: 303% in Indonesia, 105% in Thailand, 87% in Korea 63% in Malaysia, 25% in Taiwan, 22% in Singapore, etc.).
The lost of the international markets and the financial sector trust has provoked the cancellation of great infrastructure projects ( subway in Bangkok, a ditch in Malaysia, etc.).
There are some countries, like Thailand and South Korea, that have asked for help to the International Monetary Fund. This institution has imposed a couple of conditions to these countries in order to help them:
-Macroeconomic stabilization.
-Commercial opening and by capital account.
-Flexibilization of the working market.
We can say that the countries more affected by the Asian crises are Thailand, South Korea and Indonesia, but the situation is serious in all the south-west Asian area.
There are predictions which say that the economy will fall, in 1998, 10 points in Indonesia, 8 points in Thailand and 4 points in South Korea. The situation is so bad that Malaysia, who didn't asked for the IMF help could have a deduction in its GNP.
One of the negative factors of this situation is the dependence between the countries of the area. This factor has made that the crises infected all the countries of the area. One of the most important examples is Japan, who was in charge to give a solution to the problem in the start, has become clearly a part of the problem.
There are two countries that have a special commercial and financial importance in Asia. They are South Korea and Hong Kong (which is not a country yet).
Before July in 1997, all the experts trusted that the economical stability in Hong Kong was guaranteed.
One year and a bit more later, the economic situation has fallen so down that Hong Kong is going to his worst recession in the last 50 years.
In the start of the south-west Asian crises, nobody though that the crises could affect Hong Kong, because it only had a little current deficit and, moreover, it had the guarantee of its great reserve of foreign exchange.
But the situation became worst and the Hang Seng index had the worst drop in all the history and the local government was forced to increase the rates in order to reduce the currency pression, in an instability context.
The high rates reduced the bank lending, reducing at the same time the private wasting and provoking a hard reduction in the ground price. The building sector began to be affected and the quotations of the building enterprises fell down in the 48%.
Moreover, the tourism profits decreased because the number of tourists fell down in the 70%.
The government adopted a couple of measures in order to alleviate the difficult economic situation:
-The suspension, until April 1999, of any selling of public property ground.
-A more important injection of solvency in the banking system.
-A reduction of the building taxes.
-More facilities for the tourists from the continent and Taiwan.
In the future, it