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South-East Asia

Lessons from Southeast Asian currency turmoil

Zafar Bangash

The turmoil that has hit Southeast Asian currencies should serve as a reminder to all those who move too fast in trying to catch up with the west or attempt improving their economies. First it was the baht, the Thai currency, that was forced to abandon its fluctuating rate in a fixed exchange band; then the Malaysian ringgit, the Indonesian rupiah and the Singaporean dollar hit the doldrums.

The Indonesian government announced on August 14 that it had decided to abandon its policy of protecting the rupiah in the face of speculative attacks that have weakened currencies throughout the region. Central bank chief Sudrajad Jiwandono said Indonesia had spent $1.5 billion defending the rupiah since turmoil swept through the region after Thailand floated the baht on July 2.

Contrary to western media reports, it was not market forces per se but currency speculators, mostly Americans, who created the crisis. Malaysian prime minister Mahathir Mohamed on July 14 accused the American currency speculator, George Soros, of causing the fall in the value of the ringgit. Whether Soros alone was responsible is a moot point. America is full of junk bond speculators whose only loyalty is to money, and of course, to the zionist State of Israel.

In the eighties, America was also hit by such speculation. Ivan Boesky and Michael Milkens, both zionist-Jews, made billions of dollars in fraudulent paper transactions. Both were caught and served limited time in prison without coughing up the loot. If they did not spare the US, why should they care about upstart foreigners?

The baht presented a soft target. Thailand has been vulnerable because of rampant corruption and speculation in the real estate market. Other Southeast Asian countries, with the exception of Singapore, are also plagued by corrupt politicians and businessmen. Nothing new there.

Corruption is a global phenomenon. Some countries are better able to cope with its consequences than others. Thailand’s is a curious case. At the end of July, it had foreign exchange reserves of US$32 billion but this was not considered enough to stave off the assault on its currency. It had accumulated a debt of $89 billion, most of it owed to Japanese banks.

On August 18, the International Monetary Fund (IMF) announced a $16 billion bail-out package. Most of the money again came from Japan with the remainder from Southeast Asian countries including Australia, Malaysia, Singapore and Indonesia. There was very little except soothing words from the US, whose currency speculators triggered the crisis in the first place.

IMF ‘help’ never comes without strings attached. And their far end is always in Washington. The IMF has demanded that Thailand maintain a minimum foreign exchange reserve of $23 billion. Even so, the money will not come in lump sum. It is spread over a period of three years.

The Southeast Asian currency crisis should alert other countries, notably Pakistan, that are busy opening their economies to foreign investment. Such investment comes only after the economies have been prised open and stringent conditions imposed on the recipient country in which it becomes vulnerable to investors’ preferences.

For instance, foreign investors and their governments have demanded, and secured, assurances that profits and capital can be taken out freely. Large corporations should be privatised. Pakistan is in the process of doing precisely that. Foreigners who buy stakes in these corporations are able, essentially, to dictate government policy. Pakistan’s energy sector would be most vulnerable to foreign manipulation.

Behind the Thai currency crisis and bail-out package lurks another demon: the vulnerability of the western financial system itself. This cannot be cured by throwing money at it. The western financial system is like a balloon inflated to the point of bursting. Much of the money is made in currency and other speculative practices. Unless there is production or resources - metals, minerals and other commodities - to back it, the market will remain vulnerable.

In 1994, a similar crisis hit Mexico. A $50 billion rescue package had to be arranged in a hurry. Prior to that, there was the American savings-and-loans bank scandal. The US government will shovel $500 billion - yes, half-a-trillion dollars of American taxpayers’ money - in principal and interest for that scam by the year 2020.

These are vast sums. There is clearly something seriously wrong with the western financial system if it needs such massive rescue packages. Soon, there will be no more money to throw at these white elephants.

But one needs to return to the Southeast Asian economies. The tigers are on their backs despite taking huge strides in terms of economic growth. They have also kept their wages relatively low in order to compete in the international markets. Now they are coming under pressure from another quarter: big corporations have found that Chinese labour is even cheaper. They are moving their industries out of the Southeast Asian region and into China.

They must all compete with each other to please the big corporations. And these corporations are free to move their capital or undermine any economy. They have grown fat by sucking the blood of the masses in these countries but they have no allegiance to anyone, only to their profits.

Muslimedia - September 1-15, 1997

Article from

Crescent International Vol. 26, No. 13

Rabi' al-Thani 28, 14181997-09-01

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