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Hist > AFC > Flashcards

AFC Flashcards

1
Q

Internal causes of AFC

A
  • Over-liberalisation
  • Weak regulations
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2
Q

Over-Liberalisation

A
  • Thailand’s bank had policies that increased foreign borrowing without any supervision
  • Short term capital were 10% of tis GDP
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3
Q

Local Banking Boom

A
  • Lending activities increased in the 90s due to economic growth
  • Governments laxed in regulation
  • Indonesia banks lent heavily to Suharto family
  • Thailand’s banks lent to corrupt political figures
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4
Q

Foreign Debt

A
  • Result of unregulated foreign credit
  • 100b in Indonesia
  • 60b in Thailand, 7x increase from 1980
  • Private sector debt of Msia is 130% its GDP
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5
Q

Weak Regulations

A
  • Lack of regulations against currency speculation
  • Lack of management over real estate led to a bubble and thus NPLs
  • Huge influx of foreign hot money
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6
Q

Results of internal factors

A

Weak regulations–Speculation and caital flight
Foreign debt–Inability to cope with effects
Overliberalisation–Capital flight
Banking boom–NPLs

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7
Q

Changes in international trade environment

A
  • Economic slowdown of Japan and recall loans to SEA
  • Dollar fell against most currencies, thus by maintaining the dollar peg, P(m) increases
  • by 96, all were suffering current account deficits up to 8%
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8
Q

International caital flows

A
  • Encouraged the unjustified optimism in SEA
  • Mostly short term, led to investment spree
  • Mostly went into real estate, which were underperforming
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9
Q

Currency speculation

A
  • Soros and his clique sold Thai Baht on masse in May 97
  • Depreciation of all currencies that went under attack
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10
Q

Results of external factors

A

Speculation–Immediate trigger
Capital flows–Boosted rate of over-liberalisation
Changes in trade climate–Lowered growth (lowered ability to deter against)

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11
Q

Spread of contagion

A
  • Thailand attacked on 2nd May 97
  • Malaysia went under attacks and floats it on 14th Jul
  • Singapore was next on 7th
  • Indonesia on 14 Aug, depreciation of 400%
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12
Q

Thailand’s response to AFC

A
  • Failure, unable to make concrete decisions
  • More interested in bailig out cronies
  • Exhausted 30b just to float the Baht
  • Seeked IMF after depreciation of 60 %
  • IMF requirement of fiscal surplus worsened inflation
  • Economic restructuring faced objection from senators who were adversely impacted
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13
Q

Indonesia’s response to AFC

A
  • Sound initial measures
  • Floated currency, increased i/r to 90%, cut tariffs to increase X
  • Further collapse in regional economy pushed them to seek IMF help
  • IMF bond eliminated gov monopolies, and postpond the money, prolonged effect
  • Suharto resisted IMF reforms, continued projects only after 1 day
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14
Q

Philippines’s response to AFC

A
  • Limited economic integration shielded the effects
  • Banking sector also better regulated
  • Immediate response was to buy USD, which still led to depreciation and reverse growth
  • IMF bail out imediately
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15
Q

M’sia’s response to AFC

A
  • Took alternatives
  • Sought WB and created the NEAC
  • Was free of IMF bonds, and was deemed as a good place for investments by the WB, increased confidence
  • Resilient export industries also relatively larger
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16
Q

Singapore’s response to AFC

A
  • Recovered in only half a year
  • Strengthened domestic financial system
  • Regulated the laxed ones, freed the competent ones
  • Past accomplishments and legacy cushioned impact
  • Sound management of e/r through MAS kept depreciation at a minimal level
17
Q

Immediate effects of AFC

A
  • Credit crunch, NPLs led to closure of banks
  • Trade slump, lowered demand for all goods
  • Contraction and unemployment, Indonesia 14%, u/e doubling
18
Q

Impact of Congation on M’sia

A
  • Inflation doubing to 5.3%
  • Unemployment and underemployment increased drastically
  • Education expenditure cut back, overseas scholars reduced by 44%
19
Q

Impact of AFC on Indo

A
  • Inflation accelerated to 11%, agriculture fell by 10% due to AFC and El-Nino
  • Unemployment rose to 2m, most significant in banking and manufacturing
  • End to affluence, returnt to poverty with breakdown of public services
20
Q

Impact of AFC on Philippines

A
  • Firms reporting a contraction or straight up shut down increased by 3x
  • Education enromment rate reduced by 3.3%
  • Healthcare were less than 50% of promised amount
21
Q

Impact of AFC on Singapore

A
  • Growth fell by 6x
  • Economy shrunk with construction industry falling to 1/5 its original level, financial sector 1/4 its original
  • Unemployment doubled, tourism reduced by 10%
22
Q

Impact of AFC on Thailand

A
  • Negative growth of 2.8%
  • Baht lost half of its value from July to end 1997
23
Q

Impact of AFC on migrants

A
  • Indonesia: Chinese scapegoated, Chinese business looted and women raped, decline in significance
  • Thailand: Olnly 4 of the 50 wealthy families survived, declined in significance
  • M’sia: Chinese were already economically disadvanteged with the NEP, and found ways to work around it which exposed them to government shielding, not much impact
24
Q

Long term impacts of AFC

A
  • Regulations
  • Thailand: FSA
  • Indo: IBRA
  • M’sia: Danamodal
  • Created shields against continuation of past weaknesses
  • Strengthened relevant laws, like bankruptcy laws, opening up of bankruptcy courts
25
Q

Thailand’s corporate restructuring due to AFC

A
  • Large conglomerates ordered to consolidate their assets to increase competitiveness
  • However, restructuring was largely slow and inadequate
  • Corrupt gov officers remained corrupt
26
Q

Indo’s economic restructuring due to AFC

A
  • Firms like Texmaco were to surrender 70% control to IBRA
  • Supposedly against corruption and collusion, but Suharto’s fam still controlled a large sector of the economy
27
Q

Indo’s political change due to AFC

A
  • New Order’s legacy put to an end
  • Increase in prices of basic goods sparked protests that ousted Suharto in 98
  • Pushed Habibie forth as a reformer
28
Q

Phi’s political change due to AFC

A
  • Estrada assumed presidency in 98, but economy worsened under his governance
  • He was also caught in corruption scandals, which galvanized street revolution that led to his ouster in 2001
29
Q

Thailand’s political changes due to AFC

A
  • Created oversight institutions to ensure proper governance
  • Previous government scapegoated as the one reponsible for AFC
30
Q

M’sia’s political changes due to AFC

A
  • Mahathir and Anwar split due to different ruling ideals
  • Anwar later expelled
31
Q

Singapore’s political continuity

A

Reinforced PAP legitimacy

32
Q

AFC’s impact on regional coorperation

A
  • Emphasised greater regional interdependence
  • APEC and ASEAN+3 became more engaged

Hist (6 decks)

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