AFC Flashcards
1
Q
Internal causes of AFC
A
- Over-liberalisation
- Weak regulations
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
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
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
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
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
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%
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
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
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)
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%
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
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
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
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
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
Thailand's corporate restructuring due to AFC
- Large conglomerates ordered to consolidate their assets to increase competitiveness
- However, restructuring was largely slow and inadequate
- Corrupt gov officers remained corrupt
26
Indo's economic restructuring due to AFC
- 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
Indo's political change due to AFC
- 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
Phi's political change due to AFC
- 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
Thailand's political changes due to AFC
- Created oversight institutions to ensure proper governance
- Previous government scapegoated as the one reponsible for AFC
30
M'sia's political changes due to AFC
- Mahathir and Anwar split due to different ruling ideals
- Anwar later expelled
31
Singapore's political continuity
Reinforced PAP legitimacy
32
AFC's impact on regional coorperation
- Emphasised greater regional interdependence
- APEC and ASEAN+3 became more engaged
