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Volume 12 Number 2 Summer 2000 Reconsidering the Asian Financial Crisis:
Ahn Seung-gook
INTROUCTION
Beginning with the depreciation of the Thai baht in 1997, the most dynamic economies in Asia plunged into a financial mire. The currency values of Korea and Thailand depreciated to 60~70 percent of their normal levels, while the value of the Indonesian rupiah precipitated to 20 percent of its former value. Although financial crises had plagued Latin America, including Mexico and Brazil, as well as Russia and South Africa, the economic conditions of the East Asian countries were thought to have been sound, based on high levels of investment and savings, balanced national budgets, low inflation rates, and small current account deficits. Nevertheless, they were toppled by a sudden financial crisis, owing to the original structural weaknesses of their own growth models and the instability of the international financial system. In particular, both over-investments in strategic industries followed by government-led growth policies of the East Asian countries and insolvencies of the financial institutions caused by the fast drain of short-term foreign debts had worked as catalysts to the crisis. Paul Krugman has pointed out that the truth behind the East Asian financial crisis lay deep within the East Asian business culture. The problem began with financial intermediaries-institutions whose liabilities were perceived as having an implicit government guarantee, but were essentially unregulated and therefore subject to severe moral hazard problems.1) That is, the risky lending of financial institutions sprees led to their own insolvency. Krugman explained that the financial crisis with the Asian model which caused the export recession and the insolvency of financial intermediaries, arguing that the financial crisis could be overcome by correcting the insolvencies of business and financial intermediaries and achieving a current account surplus to restore domestic liquidity in the countries. Jeffrey Sachs, on the other hand, focused on external factors. He maintained that the Asian crisis was caused by the panicked flight of foreign loans which had flooded into East Asian countries.2) Hence, rebuilding international financial credibility would be the key to resolving the crisis and a drastic structural reform would only deteriorate the situation. In short, financial panic, not economic fundamentals spurred the crisis.3) Krugman argues that crony capitalism and moral hazard brought on the economic bubble, and the bursting of that bubble had resulted in the financial crisis.4) However, the self-fulfilling character of the East Asian financial panic should not be overlooked, in spite of the apparent vulnerability of the Asian economy, since reasons for the East Asian crisis differ widely from those of Mexico in which the cause was a liquidity problem. Sachs and Krugman also disagree on the resolution of the financial crisis in Asia. If the financial crisis were brought on by panic, the crisis could have been resolved quickly by restoring the credibility of the nations involved. However, if the crisis resulted from weak economic fundamentals, it would hardly have been overcome without drastic economic reform, and its negative effects would linger for a long time.5) In fact, the financial crisis was the result of inter-linked domestic and foreign factors. While Krugman's view succinctly explains the liquidity-trap caused by a stagnant export and the insolvency of financial institutions, Sachs' perspective is useful to explain the panicked flight of foreign capitals, following the fallen national credibility. In this article, therefore, both perspectives will be considered in reviewing the financial crises in Korea, Thailand, and Indonesia.
THE STRUCTURAL CAUSES OF THE EAST ASIAN FINANCIAL CRISIS
The origins of the East Asian financial crisis include: dollar-pegged East Asian currencies, devaluation of the yen, China's growth, easily transferable international financial capital, and the influx of speculative capital. First, the financial crisis stemmed from East Asia's dependence on the dollar currency. In an effort to establish a monetary union, the currencies of EU countries have been converted to dollars or dollar assets since 1993. In 1995, as the European currencies depreciated 25 percent against the dollar, the dollar-pegged currencies in East Asian countries appreciated. Subsequently, those countries' competitiveness was lowered, leading to export decreases and current account deficits.
Second, the bubble in the Japanese economy also expanded into East Asia, finally triggering a financial crisis. As shown in Table 1 in the early 1990s, the burst of the bubble in the Japanese economy made the yen so strong that Japanese companies tried to shift production to the other East Asian countries and Japanese banks transferred their financial capital there. This was possible because of the extremely low interest rates of the yen. That is, while other Asian countries' average lending interest rate was around 16 percent, the interest rate of the yen was at 5 percent. Japanese capital flooded into Asia after the meeting of the G5 advanced countries' Financial Ministers and Governors of Central Banks held in September of 1985. In response to the so-called "Plaza Agreement," the yen appreciated so quickly that U.S. protectionism was lessened and Japanese companies' investments in Southeast Asian countries greatly increased (see Table 2.) with expanded export opportunities to U.S. markets.6) The deluge in Japanese currency resulted not only in over-investment, but in excessive loans to East Asian countries.
Third, Chinese export expansion was also closely related to the East Asian financial crisis. While newly-industrializing countries in East Asia enjoyed the fruits of their economic growth, China was struggling to develop its economy. Finally, the end result was that China succeeded in a remarkable growth with low labor costs and highly depreciated Chinese reminbi (CNY). Because the average labor cost per hour was just 0.9 U.S. dollars in China during 1997, China had a comparative advantage over other Asian countries as low labor costs enabled the export of more products to U.S. and European markets. Moreover, in 1994, China devaluated 30 percent of its reminbi, and in 1995, it discounted 11 percent of its textiles, shoes, and electronics prices to dominate the foreign market. By 1997 China had achieved an export volume of 150 billion U.S. dollars. Furthermore, with in the first quarter of 1998, it recorded a 25 percent export increase over the first quarter in 1997. Thus, severe export competition in the Asian region triggered an inevitable financial crisis. Before the crisis, Japan, Korea, Taiwan, and other Southeast Asian countries complemented one another by specializing in different trade markets. However, when China emerged as a strong rival, relations could no longer be sustained. Fourth, The origin of the East Asian financial crisis goes back to the Plaza Agreement, when the G-5 including the U.S. and Japan, adjusted the value of the yen, ignoring sufficient exchange rate. Until the end of 1994, the export competitiveness of the East Asian countries had stood firm based on the strong yen. With a drastic depreciation of the yen at the end of 1995, however, the trade balances of East Asian countries could not be sustained. The yen's depreciation basically resulted not only from the bursting of its bubble economy but also from the distrust of the Japanese financial system. Thirteen Japanese financial institutions effectively went bankrupt in 1995. With perhaps 70 trillion in bad loans hovering over the banking system, 14 of the top 21 banks posted pre-tax losses for fiscal year 1995. Consequently, in 1997, a number of securities companies and banks went bankrupt. The government-led financial system exacerbated the situation, deterring the quick resolution of bad loans made by financial institutions. The rate of equity (ROE) of Japanese commercial banks soared from 4 percent to 8 percent so rapidly that a liquidity-trap ensued. Its low-interest policy, aiming to restore domestic investments, was then implemented, but it induced a drain of funds. Japan wanted the yen to depreciate in order to spur the recovery of its economy. To induce consumer demands and investments in the private sectors, Japan needed a huge tax reduction as well as increased government expenditure, and that meant an unbalanced budget. As a result, the Japanese government attempted to jumpstart its economy by increasing its exports by devaluating the yen, rather than depending on the expansion of domestic demands. Therefore, the yen successively depreciated to around 100 yen per dollar on August 20 1995, to 110 yen on July 3, 1996, and finally to 120 yen on January 24, 1997. Successive devaluation of the yen, however, had a negative impact on the rest of Asia. Despite other East Asian countries' efforts to increase their exports by depreciating their currencies, they could not compete with Japan' depreciated yen. In particular, Korea, whose export items were similar to Japan's, lost a great deal of its competitiveness to Japan. Finally, The East Asian financial crisis also stemmed from short-term international loans, such as hedge funds. Those funds were rampant in the region with the opening of the capital flows in the early 1990s.7) Under the liberalization of capital, the speculative funds stirring the international financial markets resulted in a financial crisis. Presumably, 400 billion dollars worth of off-shore funds, consisting of four to five thousand speculative funds, prevailed in the newly-emerging markets without any restrictions. In March 1997, at the outset of the financial crisis, the scale of speculative capital exceeded by two-fold, the total market values of listed stocks in Korea, Thailand, and Indonesia combined. As a result, the increased liquidity following the influx of foreign capitals resulted in inflationary pressure. Moreover, overall financial stability weakened by both an export decrease and the current account deficit led by the soaring real exchange rate, demanded the increased influx of foreign capitals. Consequently, international credit rating agencies, such as Standard & Poor's and Moody's Investors Service, downgraded the credit ratings. What was worse was that the downgrade resulted in massive, rapid flight of foreign capital from East Asian financial markets. The self-fulfilling outflow of short-term capital, in amounts exceeding each country's foreign reserves, triggered the financial crisis.8)
DOMESTIC CAUSES OF THE EAST ASIAN FINANCIAL CRISIS
It is argued that the East Asian countries could succeed in economic development following the "Japanese Model," the so-called "flying geese" formation, whereby the rest of Asia follows the lead of Japan.9) The flying geese formation is quite applicable to the case of Asia. When industrialized Japan transformed its key industries from labor-intensive consumer products to capital-intensive industries, such as electronics and cars, Korea and Taiwan inherited the labor-intensive industries. Moreover, when Japan advanced its key industries from electronics and cars to high technology industries, Korea and Taiwan stepped forward to take over electronics and car industries, emerging as newly-industrializing countries in the process. When the leading goose cannot fly, however, the rest cannot migrate. In 1997, the flying geese formation faced a deadlock. The momentum for Asian development was weakened by the financial crisis in Southeast Asian countries, Korea and Japan, casting doubt on Japan's ability to play the role as leader.
Growth-Oriented Policy
The main feature of the East Asian development model is a Japan-style government-led industrialization,10) whereby the government induces financial institutions to focus on investments in leading industries.11) However, arbitrary government control leads to over-investment. As Krugman pointed out, the accumulated structural discrepancies in the East Asian countries focusing only on input-driven growth, irrespective of productivity growth and efficiency of the economy, triggered the financial crisis.12)Since the early of 1990s, Korea, Thailand, and Indonesia had recorded large current account deficits. In the case of Korea, after a temporary current account surplus from 1986 to 1989, the collapse of the market for semiconductors,13) a major Korean export, had caused current account deficits of 8.5 billion dollars in 1995, 23.7 billion dollars in 1996, and 20.6 billion dollars in 1997.14) Even though they kept high export rates in the early 1990s, since 1996, Thailand and Indonesia could not avoid large current account deficits, because of the weak yen and low-priced Chinese exports. While Thai exports increased annually at an average of 18.8% from 1990 to 1995, it fell to 4.0% in 1996. Subsequently the rate of economic growth decreased from 8.9% to 6.4%. In addition, the current account deficit grew from 8.4 billion dollars in 1994 to 14-15 billion dollars in the years 1995 and 1996. The current account deficit jumped from 5.6% of GDP in 1994, to 8.2% in 1995, and then to 8.0% in 1996. The economic fundamentals of Indonesia were relatively solid before the financial crisis. The nation had maintained an annual average of a 7% real economic growth rate until the mid-1990s, most notable, the 7.8% rate in 1996. Even though its current account deficit jumped from an annual average 2.5 billion dollars in 1992¡1994 to 7 billion dollars in 1995~1996, it was much lower than that of Thailand. However, with a total foreign debt of 50% of GDP, Indonesia also faced repayment deadlines like Thailand. Most East Asian countries were solely focused on growth, which led to over-investment, and finally, to lower productivity and profitability.15) In Indonesia, for example, of 68 billion dollars of foreign debt in the private sector, 30 billion dollars had been loaned to business. As a result, the over-extension of loans led to over-investment in industries. Unfortunately, as market demands dropped as a result of a worldwide recession, the national economy was shaken, and company insolvencies soon affected financial institutions.16)
Dependency on Foreign Capital
Meanwhile, the growth-oriented policies of East Asian countries also depended excessively on foreign capital. The lack of domestic savings meant that foreign capital had to be appropriated to meet large investments in industries. Thus, with the liberalization of capital in the late 1980s, the governments of Korea and Thailand recklessly deregulated requirements for establishing financial institutions. In the case of Korea, chaebols, whose priority was to expand the market share, accrued massive foreign debts in order to maximize production in almost every subsidiary field. In addition, the Korean government allowed the establishment of second-tier financial markets, such as provincial banks and investment trust companies, to compensate for the shortage of funds caused by chaebol investments. Twelve investment trust companies were established in 1972. In the 1980s, requirements for establishing second-tier financial institutions, such as mutual savings and finance companies, were loosened again. At the outset of the Kim Young-sam government in 1992, the government permitted the investment companies to engage in foreign investment and foreign exchange. The politically-backed investment companies were so carelessly involved in international and lease businesses, that chaebols could easily access foreign loans.17) In short, Korea's finance companies' reckless inflow of capital and chaebols' excessive loans made the financial crisis unavoidable.18)
In Thailand, financial institutions involved in loans using real estate as security lending, emerged in the 1990s. However, with a recession in the real estate markets in 1997, the bubble burst and those institutions faced insolvency. From 1990 to 1994, Thailand had enforced foreign exchange liberalization three times. In 1993, in particular, it established the Bangkok International Banking Facility (BIBF) to improve the access of domestic institutions to international capital markets, and this resulted in increasing amounts of short-term flows being channeled through the banking system. Indonesia also increased its rate of foreign debt in the private sector, practically allowing private companies and banks to deal in foreign exchange. Consequently, the expanded influx of foreign capital following capital liberalization deepened the instability of their capital markets.19)
Foreign capital flooded the East Asian region because the interest rates in this region were much higher than in the U.S.20) However, most of the capital was invested in stock or real estate markets to expand the bubble economy on assets.21) With the huge influx of short-term foreign capital in the East Asian countries, the capital account surplus exceeded the current account deficit so that the pressure of currency appreciation increased. Consequently, the currency appreciation widened the gap between the nominal and the real exchange rate so that the international payment balance collapsed.
The Business-Government-Banking Collusion
The implicit government guarantee of banks' liabilities in the crisis countries created a moral hazard by fueling excessively risky investment and over-investment in every sector of the economy. In doing so, these guarantees created a banking system that was very vulnerable to asset price declines. The lack of transparency in financial and corporate dealings and the close relationship among business-government-banking sectors hindered the operations of markets and prevented early and effective policy responses. In Korea, domestic companies borrowed funds beyond their repayment capabilities, and consquently, banks' debt-equity ratios increased. This could only have been possible with the government selectively guaranteeing company's credits and pressuring the banking systems. Businessmen bribed politicians into lending them low-interest foreign funds, and thus, unethical collusion distorted the financial system. Close relationships between government and business prevailed, consequently, capital allocations were not determined by the market mechanism, Likewise, in Indonesia, among the sixteen insolvent banks proclaimed by the International Monetary Fund (IMF) three were owned by Premier Suharto's family. In particular, Andromeda Bank, owned by the second son of Suharto, extended a total of 25 percent of total loans to its stockholders. Moreover, the third son recieved a preferential loan of 690 million dollars for his national car business.
The Bubble Economy
The stock and real estate markets in East Asian countries were over-expanded in comparison with the real economy. Between 1975 and 1994, stock prices in Korea and Thailand soared to 1, 600-1, 700 percent, respectively. In particular, since 1995, the influx of foreign funds had soared. Thus, in spite of unstable financial markets, the premature liberalization of capital caused the current crisis. Financial institutions increasingly borrowed more foreign funds and invested them in the stock or real estate markets. Thus, it brought on over-investments and raised asset prices. The problem was that the inflated assets were used as a collateral for other loans, and consequently, it led to further expansion of the bubble economy. In the early 1990s, financial institutions in East Asian countries borrowed low-interest rate foreign funds and invested in domestic real estate markets, such as condominiums and golf resorts, to make high profits.22) However, as the supply in the real estate markets far exceeded the demand, the bubble started to burst. In the case of Thailand, both the regulations on loans in real estates in 1994 and the tight financial policy in 1995 to prevent inflation, pushed down real estate prices which resulted in a recession, bankruptcy, and insolvent financial institutions.23) In the end, it triggered the dumping of banking institution stocks. In March 1997, stock trade stopped and the stock prices fell to rock-bottom. In July 1997, Thailand's failure to stabilize its financial and foreign exchange markets caused the financial crisis to spill over into the rest of East Asia. In fact, Thailand experienced a rapid flight of foreign capital in early 1997, and unstable foreign exchange rates owing to speculative attacks (by speculative fund managers) on the baht in May 1997. At first, Thailand intentionally stuck to the baht appreciation to draw foreign capital, in spite of the current account deficits. However, when it abandoned the high-baht policy, the bath value severely deteriorated.24)
RESOLUTION OF THE EAST ASIAN FINANCIAL CRISIS
In response to the financial crisis, the IMF proposed guidelines such as low economic growth, tight credit, and reduced government spending policies. However, the IMF prescription worsened the economic situation and made repayment difficult, since tight credit increases the chance of default by companies faced with imminent repayments of debts. Moreover, a low economic growth policy places export-oriented countries in danger, since the policy may cause a decrease in employment and investment. In particular, the decrease in facility investment weakens export competitiveness and further increases the unemployment rate. Unlike the financial crisis in Latin America, foreign debts of Korea, Thailand, and Indonesia, borrowed from the private sector, far surpassed those held by the government. However, there are also subtle differences among the three countries. In Korea the financial institutions hold most of the foreign debts, while in Thailand and Indonesia, debts are held by the private sector. Therefore, policies such as tight credit and reduced government spending proposed by the IMF only result in bankruptcies of the companies and default on loans. Furthermore, the effects of reduced government expenditure were minimal since inflation resulted not from domestic currency expansion, but from the soaring foreign exchange rate. In short, reduced government spending forced all three East Asian countries into low economic growth and weak export competitiveness. As long as the Mexican financial crisis was localized, the IMF could help the Mexican economy to recover by means of reduced government expenditures, because the U.S. opened its market to more Mexican exports. However, with the East Asian financial crisis spilling over into the entire region, it was very difficult to increase exports. Moreover, even increased exports to the U.S. and the European Union could not compensate for diminished exports in the region.25) The advanced countries' help is critical for realizing a trade account surplus. In 1995, Mexico overcame the financial crisis because the U.S. opened its markets to 90 percent of Mexican exports. If Japan had opened its market to other East Asian countries, East Asia could have profited. Japan, however, is still in a long-term recession, despite spending 60 trillion yen to stimulate domestic demands in the 1990s. Moreover, there is no guarantee that Japanese domestic expansion will lead to an increase in the other East Asian countries' exports. Therefore, it is necessary to create demands in the entire region, rather than to depend only on Japan. The affected countries must launch a concerted program for domestic expansion, along with an increase in both imports and exports in order to bolster regional demands.26) A negative consequence, however, would be that the foreign exchange rates in those countries could soar when programs for domestic expansion are launched. Since expanded currency or government spending would raise foreign exchange rates drastically, structural reforms of the countries should be considered after resolving the problem of the unstable foreign exchange rates. Consequently, to prevent the financial crisis from spilling over, even into Russia and Latin America, the present international financial system should be modified. For instance, one possibility would be the establishment of a new "Bretton Woods"-type of system based on the adjustable fixed exchange rate system. As it stands, the IMF cannot properly control the movement of reckless speculative funds, yet such funds, which wreak havoc on the international financial market, must be restricted.27) That is, since borderless speculative funds triggered the financial crisis, stimulating the bubble economies and currency depreciations in the East Asia, tighter limits on short-term foreign borrowing must be imposed. For instance, a tariff such as a transaction tax 28) on speculative funds could be considered in order to control them. To overcome the financial crisis, there are several measures that the East Asian countries could take to help themselves. First, the government-controlled financial system should be abolished to prevent distortions in the allocation of funds. Even though preferential financing to large conglomerates once provided momentum for national growth, the distorted system has led to both economic inefficiencies and negligence in business operations. The key is to reform the financial system in order to allocate funds efficiently.29) Second, structural reforms must be implemented by the government, in order to secure stability of the financial institutions. In promoting growth-oriented policies, the government has focused on the control of financial institutions rather than on their supervision. First of all, domestic interest rates must be reduced to deter reckless short-term borrowing, and a supervisory commission on foreign capital borrowed by financial institutions should be established.30) Third, conglomerates must stop over-investments and duplicated-investments and refocus on their own strategic business through industrial restructuring.31) For the time being, the influx of foreign capital should be allowed to resolve the financial crisis. Speculative funds can be also included in the influx of foreign capital following the opening of domestic financial markets, however, the scale of the domestic financial market should be expanded so as to minimize their negative effects. A consultative committee on currency, exchange rates, and interest rates should be established in the Asian countries. Since East Asia contains the world's largest foreign exchange reserves,32) that committee could prevent another financial crisis caused by a recession.
1) Paul R. Krugman, "Currency Crises," Mimeo, (1998); Paul R. Krugman, Ⱦhat Happened to Asia?" Mimeo, (1998). 2) Jeffrey D. Sachs, "To Stop the Money Panic," Asia Week, (Feburary 13, 1998). Jeffrey D. Sachs, "Global Capitalism: Making it Work," Economist, (September 1998). 3) Jeffrey D. Sachs, "IMF is a Power unto Itself," Financial Times, (December 11, 1997). 4) Paul R. Krugman, "Saving Asia: It's Time to Get Radical," Fortune, (September 7, 1998). 5) Warwick McKibbin, "The Crisis in Asia: An Empirical Assessment," Brookings Discussion Paper on International Economics, No. 136 (Washington: Brookings Institute, 1998). 6) According to "the Plaza Agreement," the Japanese yen was so highly appreciated that the Japanese companies increased investments in the Southeast Asian countries, moving their production facilities there. Moreover, other newly-developed East Asian countries with high domestic production costs also increased their investments in the Southeast Asia which boasted a cheap and abundant labor force and raw materials. 7) Jeffrey D. Sachs, "Global Capitalism: Making it Work," Economist, (September 1998). 8) Jeffrey D. Sachs, "The IMF is a Power unto Itself," Financial Times, (December 11, 1997). 9) Bruce Cumings, "The Origins and Development of the Northeast Asian Political Economy: Industrial Sectors, Product Cycles and Political Consequences," International Organization, Vol.38 No.1, (1984); Fred C. Bergsten, ȸ New Strategy for the Global Crisis," The Washington Post, (September 20, 1998). 10) In 1994, Krugman argued that although the East Asian countries do not have the same systems, they nevertheless have implemented strategic trade and industrial policies based on their own resource mobilization. Moreover, he pointed out that the Asian spirit of self-sacrifice and abstinence also contributed to East Asian economic growth. 11) Ahn Seung-gook, "Political Economics of Capital Accumulation: the Structural Changes of the World Economy and the East Asian Newly-industrializing countrie," The Korean Journal of International Relations, Vol. 36 No. 3 (1997), p. 119. 12) Paul R. Krugman, "The Myth of Asia's Miracle," Foreign Affairs (November/ December 1994) 13) Semiconductor exports of 4.5 billion dollars in 1993 soared to 14.6 billion dollars in 1994. However, it fell suddenly to 10.6 billion dollars in 1995 and then to 9.6 billion dollars in 1996. Moreover, the growth rate of GDP dropped from 7.1% in 1996 to 5.9% in 1997. 14) Martin Feldstein. "Refocusing on the IMF," Foreign Affairs (March/April 1998). 15) Ahn Seung-gook, "Political Economic Review on the Crisis of Fordism in South Korea: Focused on the Regulation Theoretical Approach," Korean Political Science Review, Vol. 33 No. 2 (1999). 16) Ahn Seung-gook, "Political Economic Review on the Crisis of New Order Regime in Indonesia: Focused on Economic Crisis and Political Instability," A paper presented for The Korean Association of International Studies' Spring Conference (1998). 17) Lee Yon-ho, "Role of State for the Economic Liberalization: Politics of Regulations on Economy," Korean Political Science Review, Vol.32 No.3 (1998), p.88. 18) Ahn Seung-gook, "The South Korean Economic Crisis and Reform: Issues and Assignments," The Kim Dae-jung Peace Foundation, Peace Forum, Vol.3, No.2 (1999). 19) Jeffrey D. Sachs, "Global Capitalism: Making it Work," Economist (September 1998). 20) Noland, Marcus, Li-Gang Liu, Sherman Robinson, and Zhi Wang. Global Economic Effects of the Asian Currency Devaluation (Washington: Institute for International Economics, 1998). 21) Morris Goldstein, "Early Warning Indicators and The Asian Financial Crisis," EMEAP Meeting on Early Warning Indicators (February 19, 1998). 22) Jeffrey D. Sachs, "Personal View: Jeff Sachs," Financial Times (July 30, 1997). 23) In the case of Thailand, bad loans have reached an estimated 1 trillion baht (31.5 billion U.S. dollars). Moreover, the Bank of Thailand spent 500 billion baht, 10% of the GDP, to prevent bankruptcies of financial institutions. 24) On this point, the Thai financial crisis is similar to that of Mexico. Like Thailand, Mexico was also faced with a financial crisis because the peso was highly appreciated to increase current account deficits and short-term foreign debts, even though the Mexican economy had been in a growth cycle since the early of 1990s. In the case of Thailand, the rate of current account deficit of GDP was 8.2%, higher than that of Mexico, at 7.8%. 25) Marcus Noland, op. cit. 26) Fred C. Bergsten, "New Strategy for the Global Crisis," The Washington Post (September 20, 1998). 27) Devesh Kapur, "The IMF: A Cure or a Curse?" Foreign Policy (Summer 1998). 28) Professor James Tobin called for the adoption of a "Tobin's Tax." to prevent the speculative funds, imposing a tax on every capital transaction in the international financial markets. 29) Seung-gook Ahn, "The South Korean Economic Crisis and Reform: Issues and Assignments," The Kim Dae-jung Peace Foundation, Peace Forum, Vol.3 No.2 (1999), p. 10. 30) Morris Goldstein, The Asian Financial Crisis: Causes, Cures, and Systemic Implications (Washington: Institute for International Economics, 1998). 31) Ahn Seung-gook, "The South Korean Economic Crisis and Reform: Issues and Assignments," The Kim Dae-jung Peace Foundation, Peace Forum, Vol.3, No.2 (1999). 32) East Asian countries hold a total of around 600 billion dollars in foreign exchange reserves: Japan 222 billion dollars, China 143.7 billion dollars, Taiwan 84 billion dollars, Hong Kong 80 billion dollars, Singapore 74.4 billion dollars and South Korea 30 billion dollars. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||