2. Economic success
Annual GDP growth in the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) averaged close to 8% over the decade before the crisis
Almost half of total capital inflows to developing countries
nearly $100 billion in 1996
inflation & unemployment rates both low

3. Ramifications Negative consequences Significant and real benefits
Environmental degradation
growing inequality between rich and poor
rampant corruption
social malaise
Significant and real benefits
great majority of the people’s living standard
have not been erased by the crisis

4. Weaknesses in financial system
inadequate financial sector supervision
poor assessment and management of financial risk
growth of bad loans
state-directed lending
relatively fixed exchange rates
violent asset price cycles
property boom bubbles

5. Weaknesses in financial system
Large amounts of short-term international capital, denominated in foreign currency

6. Corruption Transparency International’s 1999 survey of corruption
Singapore 7th
Malaysia 31st
South Korea 50th
Philippines 54th crisis countries
Thailand 68th
Indonesia 96th

7. Diary of the crisis: I

8. Diary of the crisis: II

9. The cause of capital outflows
Bank failure in Thailand
Corporate failure in Korea
Political uncertainty due to the potential for a change in government in Korea, Thailand, the Philippines, and Indonesia
net outflow of $105b from Thailand, Malaysia, South Korea, and the Philippines between 1996 and 1997

10. The cause of capital outflows
Contagion effects hit Malaysia, the Philippines and Indonesia
The IMF’s intervention actually helped to incite panic

11. Causes of financial crisis
macroeconomic imbalances
structural deficiencies in financial sector
loss of market confidence
rising political risk

12. IMF's immediate response
Help Indonesia, Korea, and Thailand arrange programs of economic stabilization and reform
Approve IMF financial support for reform programs in Indonesia, Korea, and Thailand

13. IMF’s immediate response
Consult with other members that needed to take policy steps to ward off the contagion effect

15. Asian programs comprehensive reform of financial systems
closure of unviable financial institutions
associated write down of shareholders' capital
recapitalization of undercapitalized institutions
close supervision of weak institutions
increased potential for foreign participation in domestic financial systems

16. Reforms in governance
break the close links between business and governments
ensure that the integration of the national economy with international financial markets is properly segmented

17. Real GDP Growth (%)

18. Inflation rate (%)

19. GDP growth rate (%)

20. Impact on Japan

21. Impact on World

22. Three schools of thought

23. Three schools of thought
Revisionist: “developmental state”
Market must be mediated, regulated and guided by the state
Culturalist
“Asian values”
Culture context of East Asia explains the miracle

24. Recovery from the Crisis

25. Lessons from the Crisis
Better information
Regulation and restraint
Controlling capital flows

26. International Organizations
Authority vis-à-vis sovereign governments
Access to information
Risk of ``creating” a crisis
Globalization and interdependence