1. Kimberly Husa ; Miri Nam

2. The Asia’s Experiences  East Asian countries were remarkable in developing world until 1997  Rapid growth rate brought them far up development scale ; put several in striking distance  Overwhelmed by financial crisis  Shock by speed with East Asia’s economic success turned into economic chaos

3. The East Asian Economic Miracle  South Korea - Desperately poor nation in the 1960s - Launched economic reforms in 1963 - Increase in per-capita GDP by factor of 10  More outstanding was economic parallel rise - Hong Kong, Taiwan, and Singapore in 1960s - Malaysia, Thailand, Indonesia and China in 1970s-1980s

4. The East Asian Economic Miracle (Cont.)  Growth Regimes - Depending on active role of government among industries exists (i.e. South Korea) or not (i.e. Hong Kong, Taiwan)  Types of Growth - South Korea, Hong Kong : Domestic Entrepreneurs - Taiwan, Singapore : Multinational Firms

5. The East Asian Economic Miracle (Cont.)

6. What Did East Asia Do Right?  Success Ingredients - High rates saving and investment: Saved 34% of GDP - Strong emphasis on education: High enrollment rates in basic education - High degree of openness, integration: To world market if not free trade

7. The Asian Weaknesses  Productivity - Relatively little increase in output per unit of input - Convergence toward Advanced-country output per capita mainly appeared - Due to rapid shift of workers from agriculture to industry, rise in educational level, and increase in capital-labor ratio

8. The Asian Weaknesses (Cont.)  Banking Regulation - Poor state in most Asian economies - Moral Hazard : Excessive lending led to unsustainable boom in Asian economies ; This boom caused declining prices and failing banks

9. The Asian Weaknesses (Cont.)  Legal Framework - Lack for dealing with companies in trouble - Weak bankruptcy law - Due to astonishing economic growth made corporate failures rare event  Why paid much attention to performance of East Asian Economies? - So spectacular although every economy has weaknesses

10. The Asian Financial Crisis  Started on July 2, 1997  Devaluation of Thai baht - During 1996, it became apparent in nation’s real estate market, then in stock market - Accelerating loss of foreign exchange reserves in 1997 - Controlled 15% devaluation - Despite small economy, sharp drop in Thai currency affected neighbor countries

11. The Asian Financial Crisis (Cont.)  Effects on Neighborhood - Economic slowdown in Japan - All afflicted countries except Malaysia turned to IMF - In Spite of IMF’s aid, Crisis was sharp: Growth rate to a sever contraction in 1998 - Worst case : Indonesian rupiah lost 85% of value

12. The Asian Financial Crisis (Cont.)  Results - Mass unemployment - Collapse of confidence - However, it forced to dramatic reversal of troubled Asian economies  “V-shaped” in downturn of East Asia - Growth returned in 1999 - In general, investment rates remained depressed and CA remained in surplus, sometimes substantially so.