...RESEARCH PAPER 99/14 11 FEBRUARY 1999 The Asian Economic Crisis This paper considers the economic crisis that began in the financial markets of South East Asia in 1997 and the consequences for the economies of the region and the rest of the world. The paper provides a chronology of and explores the factors that led to the crisis. An overview is given of the policy measures that the international financial institutions (IFIs), such as the IMF, have taken to deal with the crisis. Some of the arguments and policy proposals made to try to avoid future crises are also covered. Eshan Karunatilleka ECONOMIC POLICY AND STATISTICS SECTION HOUSE OF COMMONS LIBRARY Recent Library Research Papers include: 98/119 98/120 99/1 Unemployment by Constituency - November 1998 Defence Statistics 1998 The Local Government Bill: Best Value and Council Tax Capping Bill No 5 of 1998-99 16.12.98 22.12.98 08.01.99 99/2 99/3 99/4 Unemployment by Constituency - December 1998 Tax Credits Bill Bill 9 of 1998-9 The Sexual Offences (Amendment) Bill: 'Age of consent' and abuse of a position of trust [Bill 10 of 1998-99] 13.01.99 18.01.99 21.01.99 99/5 99/6 99/7 The House of Lords Bill: 'Stage One' Issues Bill 34 of 1998-99 The House of Lords Bill: Options for 'Stage Two' Bill 34 of 1998-99 The House of Lords Bill: Lords reform and wider constitutional reform Bill 34 of 1998-99 28.01.99 28.01.99 28.01.99 99/8 99/9 99/10 99/11 99/12 Economic Indicators Local Government...
Words: 16600 - Pages: 67
...Impact of the Asian Financial Crisis in 1997 and effect to Latin America Name: Institution: Date: Abstract In 1997, the Asian Financial Crisis spread rapidly all over the Asia and affected almost all the economies in the world. Prior to the Asian Financial Crisis, the Asian countries such as Thailand, Malaysia, South Korea, Indonesia, Hong Kong and Singapore experienced a remarkable growth in the economy that was considered the highest in the world. These Asian economies increased by a notable proportion of 6 to 10 percent annually in the GDP. However, what had been regarded as an Asian miracle seemed to crumple down rapidly 1997 when these Asian countries were faced with a severe financial crisis in their local stock and currency markets. When the economies started recovering from the crisis in 1998, the stock markets in several countries had considerably lost more than 70 percent of their worth, while their currencies depreciated in comparison to the US dollar (Pettis, 2001). The Asian Financial Crisis also affected several nations in the Latin America as they experienced a relentless economic meltdown that had detrimental effects to the economies. For instance, the financial crisis force multinational firms to close down due to liquidation, the banking system deteriorated and this forced high levels of lay-offs leading to unemployment. In addition, the financial crisis resulted in the loss of the people’s purchasing power in the Latin American while nations turned to...
Words: 1875 - Pages: 8
...Implications of the Asian Financial Crisis. The Asian Financial Crisis also called the "Asian Contagion". This was a series of currency devaluations and other events that spread through many Asian markets beginning in the summer of 1997. The currency markets first failed in Thailand as the result of the government's decision to no longer peg the local currency to the U.S. dollar. Currency declines spread rapidly throughout South Asia, in turn causing stock market declines, reduced import revenues and even government upheaval. Although the economic storm that swept through Asian in 1997 has now declined, the wreckage left in its wake has undoubtedly take years to repair. By indulging in a debt spree that ultimately bought its high flying economies crashing to the ground, Asia may have lost a decade of economic progress. Beyond this, however, the crisis has raised a series of fundamental policy questions about the sustainability of the so called Asian Economic Model, the role of the IMF, and the virtues of floating and fixed exchange rates. The crisis also has important implications for international businesses. For a decade, the Asian Pacific region has been promoted by many as the future economic engine of the world economy. Businesses have invested billions of dollars in the region on the assumption that the rapid growth of the last decade would continue. But at the dawn of the aforementioned crisis, it has come grinding to a halt. So what could this mean for international...
Words: 3167 - Pages: 13
...An Overview of The Asian Financial Crisis Prepared for Mahrufa Bashar Assistant Professor Course Instructor: International Finance Prepared by S.M. Ishtiuaque (ZR 30) Md. Sakib Khaled (ZR 55) Md. Mahmudur Rahman (ZR 82) Mazharul Islam Bin Towhid (ZR 89) Debojit Saha (ZR 110) BBA 18th batch Institute of Business Administration, University of Dhaka October 02, 2013 Contents 1. Introduction 2 2. Background of the Asian Financial Crisis 2 3. Development of the Crisis 3 4. Reasons Behind the Crisis 4 5. Solutions to Problem 5 6. Conclusion 6 ------------------------------------------------- 1. Introduction In 1993 the Worldbank, celebrating the outstanding performance of eight Asian economies, coined the term ‘The Asian Miracle’. Less than five years later, four of these economies (Indonesia, Malaysia, Korea, and Thailand) and the Philippines found themselves in one of the sharpest economic crises of the last decades. The resulting economic recession shocked the world with its staggering economic and social costs. Over a million people in Thailand and approximately 21 million in Indonesia found themselves impoverished in just a few weeks, as personal savings and assets were devalued to a fraction of their pre-crisis worth. As firms went bankrupt and layoffs ensued, millions lost their jobs. Soaring inflation raised the cost of basic necessities. Strapped fiscal budgets imposed a financial squeeze on social programs, and the absence of adequate...
Words: 1775 - Pages: 8
...ASIAN FINANCIAL CRISIS Reading this article brings me back to the unpleasant memories which occurred 15 years ago in the month of July. That time Peso suddenly depreciated by more than 10 percent in a single day and the depreciation further continued in the days to come. Panic suddenly gripped the financial sector and days later the panic spread like a domino effect into other sectors such as the property sector and import sector. The last time the peso depreciated by double- digit percentage was during the political crisis of the Marcos era which began when the late Senator Benigno Aquino was assassinated. What was so unusual about this economic crisis was that it was not limited to a specific country but it spread like wildfire from one country to another within the Southeast Asian region. I remember this crisis began in Thailand and that I was reading the business section of Manila Bulletin and one of the headlines was the sudden depreciation of Thailand Baht against the USD. Little did everyone know that a few days later our Philippine Peso would suffer the same fate. Had I known I would have converted all my pesos into USD. Many of the leaders in the Southeast Asian countries, notably the then Malaysian Prime Minister Mahatir Mohammad blamed the Asian financial crisis to currency speculators. Mahatir specifically single out US financial wizard George Soros as the one who was to be blamed for the crisis contagion. Allegedly, Soros speculated heavily against the Malaysian...
Words: 713 - Pages: 3
...Consequences of the Asian Financial Crisis,” in Gregory W. Noble and John Ravenhill, eds., The Asian Financial Crisis and the Architecture of Global Finance, ed., Cambridge, 2000, pp. 1-35 [pic] Summary: The Asian financial crisis resulted from the sudden flight of large amounts of capital from Asian countries that lacked adequate systems of prudential regulation, and whose foreign exchange rate proved disastrously brittle. The crisis was unique in its unprecedented severity of corporate distress and banking sector problems, and its quickness in recovery from the crisis. While technical improvements in the financial system were institutionalized, the crisis did not bring fundamental structural revisions, in both political and economic arena. Doughty resistance from entrenched ideologies and interests in the U.S, the U.K, and the IMF prevented the reforms and rearrangements in the international financial system from happening. ➢ The East Asian crisis---the severest jolt to the world economy since the Oil Shock in early 1980s. ➢ Asian Crisis ---spread from Thailand to Indonesia, the Philippines, Malaysia and Korea. Sequences---Export decline ( loss of investors’ confidence( Currency devaluation due to lack of foreign reserve( IMF emergency fund requiring tight budget and monetary policy( increase in non-performing loans and damage in domestic industries ➢ Drastic increase in international private capital inflow in the ‘90s was key to understand this crisis. Liberalization...
Words: 984 - Pages: 4
...Summary This paper analyses the factors which led to the economic crisis which faced Indonesia in 1997, which in turn led to Indonesia making major reforms in government as well as in every other sector. It also looks at the major factors that also have to be improved even though major reforms have swept the nation. The policy of decentralisation, although done for the better, has its drawbacks which can hurt Indonesia in the long run. Contents - Executive Summary 2 -Acknowledgements 3 -Introduction To The Topic 3 -Background Literature Survey 4 -Observations 8 -Conclusions and Recommendations For Future Studies 9 -Appendix/Bibliography/References 10 Acknowledgements I would like to thank Prof. Perrie, for initiating this project and letting us choose suitable topics to analyse. Introduction to topic Indonesia is a country with around 240 million people. From being one of the worst hit countries of the Asian financial crisis of 1997-1998 it has become one of the largest countries in the South East Asia in terms of Economy. With a population so big and also a diverse ethnic culture to keep in mind the reforms which were propagated after the financial crisis has been largely the decentralisation of the Government. Background...
Words: 2448 - Pages: 10
...From the Asian Miracle to an Asian Century? Economic Transformation in the 2000s and prospects for the 2010s: Review Essay The chosen article, “From the Asian Miracle to an Asian Century? Economic Transformation in the 2000’s and prospects for the 2010s” by Dr. Yiping Huang and Bijun Wang was published by the Reserve Bank of Australia (RBA) as part of proceedings of their annual conference “The Australian Economy in the 2000s” held by Bank's Economic Group. 1.Introduction The article examines Asian economies key transformation during the 2000s and provides prospects for the next decade. In this review essay, I will summarise the article consistent with sections provided by the article and offer appraisal from the economic and political perspective of the proposed prospects. Post significant transformation of Asian economic during the 2000s, the Asian markets is now major contenders in the global market. Their participation in the global market has reached a point where their actions bring global economic impacts of great consequence for the financial, commodities and goods markets. This rapid expansion into the global market brings concerns of potential global economic crisis. 2. Integrated Supply Chains and Dominant Commodity Consumers Past decade reveals integration of supply chains, industrial restructuring and labour allocation contributed to overall Asia market’s GDP growth with major acceleration from China and India. Vertical integration of supply chains with China...
Words: 1952 - Pages: 8
...Economics and Management in Developing Countries INSEAD P4 Assignment MICROFINANCE in INDONESIA By Dewi BRAMONO Ming CHUNG Yoonmi EOM Kevin LAM Yenn Khan Executive Summary • • Microfinance in Indonesia can be traced back to more than a century ago, where village credit organizations (BKDs) offered small loans to villagers. Today, BRI unit desa of Indonesia is one of the most successful and profitable microfinance institutions in the world with more than 3.1 million borrowers with a gross loan portfolio of more than USD 1.7b as of Dec 2003. Indonesia’s successful experience in microfinance is further shown during the hard-hitting Asian Financial Crisis in 1997 to 1998. At a time when commercial banks were collapsing, savings in microfinance institutions rose from IDR 8 trillion in 1997 to about IDR16 trillion in 1998, as depositors sought the stability of these institutions. There are however some outstanding issues: o Inadequate outreach to the rural community o Politics impact the microfinance efforts negatively o Lack of awareness of microfinance among stakeholders o Microfinance may not be the answer for the poorest of the poor. Recommendations include: o Greater co-ordination required with the NGOs to target the poorest of poor, especially in the rural areas(through aid, training and provision of the infrastructure) o Increase the awareness of the benefits of microfinance, and to educate stakeholders accordingly. • • • Page 1 of 12 Economics and Management...
Words: 4855 - Pages: 20
...2 million shares at a fixed price of 11,400 won ($10.75) per share. The finance ministry stated both local and foreign investors evenly shared the offering. IBK was established as a bank policy to support small and midsize businesses in 1961 and went public in 2003. ii) Background: Industrial Bank of Korea has contributed to facilitating the economic activities of SMEs and enhancing their economic status. IBK has proven itself during challenging times such as the 1997 Asian financial crisis and the 2008-2009 global financial crisis. IBK started with only 200 million capital stock but is now a powerful bank that competes globally with the world’s best banks. As the world’s seventh largest exporter, South Korea has shown barely any economic growth this past October. South Korea’s growth of sales to China, the United States, and the European Union have all slowed down and its exports to the Association of Southeast Asian Nations (ASEAN) showed one of the worst declines since the recent global financial crisis. South Korea’s exports include 18% by ASEAN, 27% by China, and 10% by the United States. The finance...
Words: 1320 - Pages: 6
...The Economy of the Philippines and Its Neighbors: Indonesia and Malaysia By Larry Gulley In Partial Fulfillment of Requirements for MGMT 220: Individual Project 3 AIU June 30, 2012 Abstract The economy of the Philippines, as well as that of its neighbors, Indonesia and Malaysia, has weathered some rough patches. This area of the world has not lived up to its potential in spite of its naturally rich resources. But they are showing improvement, especially Malaysia. These countries compete with tourism and the services area. They also have strengths in agriculture and manufacturing. Table of Contents Economy of the Philippines Speaker Notes……………………………………………...1 Introduction………………………………………………………………………………4 Economy of the Philippines…………………………………………………………....4 Economy of the Philippines 2012……………………………………………………..4 Philippines Economic Strengths………………………………………………………4 Economy of Indonesia………………………………………………………………….5 Economy of Indonesia 2012…………………………………………………………...5 Indonesia Economic Strengths………………………………………………………..5 Economy of Malaysia…………………………………………………………………...6 Economy of Malaysia 2012…………………………………………………………….6 Malaysia Economic Strengths…………………………………………………………6 Impacts of Economic Strengths………………………………………………………..7 Investing in the Philippines: Management Issues……………………………………7 Investing in the Philippines: Management Issues……………………………………8 Conclusion……………………………………………………………………………….8 References…………………………………………………………………………………..9 Economy...
Words: 1268 - Pages: 6
...sobering.1 These countries recorded real per-capita growth rates of 4.4, 5.7 and 7.5 percent, respectively, during the same period. As shown in Figure 1, Malaysia was at a similar level of development as Korea and Taiwan, China in 1980, and yet while these countries have made the transition from middle-income to high-income status during the subsequent decades, Malaysia has found such an evolution more difficult. In addition, Malaysia’s absolute productivity gap with high-income (OECD) countries has also widened; in the case of the industry sector, the productivity differential nearly doubled from $21,786 in 1980-1985 to $38,946 in 2000-2004 (Felipe et al, 2007). After markedly reduced rates of productivity and growth after the Asian financial crisis of 1997-98, there is a growing concern that emerging markets like Malaysia might fall into a “middle income trap”, unable to subsequently achieve high levels of economic growth and further economic transformation.2 The form and pace of structural and spatial transformation is a crucial driver shaping whether countries come out of the middle income trap. The objective of this paper is to examine prior patterns of growth in Malaysia, document the cross-country evidence of how...
Words: 540 - Pages: 3
...Trisha LaFleur Econ 375 McNeil 17 November 2014 IMF’s Role on Asian Crisis In July of 1997 Thailand devalued the Baht and thus began the ‘Asian Crisis’ that would soon affect other Southeast Asian countries including the other two that were hit the hardest Indonesia and South Korea. Each country had no choice but to seek help from The International Monetary Fund (IMF). The IMF would have to pull through in aiding these countries out of this crisis, after carefully reviewing each country and see to what extent their financial problems had developed. As you can see below on Graph 1 each country’s exchange rate had depreciated tremendously during the crisis. With the demise of each Country’s currency their public debt, as shown on Chart 2 below, had grown tremendously. Thailand, Indonesia, and South Korea each developed specific financial restructuring measures that were agreed upon with the IMF. Graph 1: Chart 2: It all started on May 14th 1997 when Thailand started pouring foreign currency into the market in order to ‘to defend the Thai baht against speculative attacks,’ according to the “TimeLine of the Crisis” written by PBS. Two months later the Baht had reached an all-time low of 20% devaluation. Indonesia started to widen its ‘trading band for the rupiah in a move to discourage speculators’ only seven days after Indonesia’s reach for assistance (PBS). No more than two weeks pass until the Singapore dollar starts to devalue. Shortly after that, the...
Words: 1734 - Pages: 7
...International School of Manageme f ent Doctor of Philosophy ( P (Ph.D.) Presented to: Professor Peter Horn t P 26 July 201119 July 2011 1 Word Coun 3,706 nt: WHIRLPOOL’s GLOBAL STRATEGY CASE ANALYSIS 2 Abstract The paper analyses Whirlpool Corporation’s Global Strategy case study conducted in the year 2001. The paper aims to spot key reasons behind the declining performance the company experienced in the late 1990s a few years after the start of its globalization plan in the year 1987. The plan initiated under the new leadership of David Whitwam encountered many problems in its early stages illustrated in a declining profitability in its home market, losses in the European market and failure in some of its joint ventures in the Asian market.1 With such poor performance and failure in achieving competitive edges in global markets, Whirlpool was at a great risk of losing huge investments made in foreign markets, and losing highly-potential market shares in emerging international markets to aggressive competitors. The paper illustrates core strategic mistakes around three main strategies; sourcing and operations, entry, and marketing strategies adopted. The goal is to address lessons learned from Whirlpool’s experience in globalization in order to shed light for future strategies or building globalization plans for small and medium enterprises aiming to have global footsteps. Keywords: Household Appliances, Globalization, Internationalization, International Management, Case...
Words: 6106 - Pages: 25
...Business Failure 1 Running Head: BUSINESS FAILURE Examining a Business Failure Ric L. Rushing March 6, 2009 University of Phoenix Business Failure 2 In March of 1967 Daewoo Group was founded by Kim Woo- Jung, he was a graduate of a prestigious in university in Seoul where he received an Economics degree. Jung decided became an entrepreneur and founded Daewoo Group. Daewoo Group had benefited from government sponsored loans which were based on potential export profits. The company initially concentrated on labor-intensive clothing and material industries that provided elevated profit margins. The most significant source in this plan was South Korea's large workforce. After a few years of trying to profit off of the clothing and material industries the government saw that the there was a greater demand and order Daewoo into shipbuilding. Daewoo Group then extended its services into the automobile industry and was ranked as the seventh largest car exporter and the sixth largest automobile manufacturer in the world (Economist, 1999). Throughout this era, Daewoo experienced immense achievement at turning around faltering companies in Korea. Twenty years later after the founding of Daewoo Group this company began to make consumer, computers, electronics, musical instruments, and buildings. Daewoo Groups performance was affected by several factors: Government Involvement, Industry Market, and Product Value. The government was involved with Daewoo...
Words: 1064 - Pages: 5
