Never again for Asian economies
A shiver ran through Asia this week when a United Nations report warned that the region is vulnerable to a repeat of the financial meltdown of a decade ago. It was an unwelcome reminder of the tenth anniversary, coming up this July, of the financial tsunami that began in Thailand and swept Asia. Radio Australia's Foreign Affairs correspondent Graeme Dobell gives his insights.

Asia has some notable "never again" surrender moments. The most famous was under the 16-inch guns of the American battleship, the Missouri, in Tokyo Bay in September, 1945. Having signed the instruments of surrender, the Japanese polity made a silent resolve: "We're never going to do that again."

There was another "never again" moment in Jakarta in January, 1998. The photograph of a surrender moment still burns in the minds of Asian elites.

The image shows Indonesia's President Suharto, his head bowed, signing the terms of a tough bail-out deal with the International Monetary Fund (IMF). The director of the IMF, Michel Camdessus, is standing over the seated president, his arms folded across his chest like a schoolmaster.

This one image, with its colonial overtones, has imposed a permanent question mark over the role of the IMF and the World Bank in Asia. Indeed, if Asian governments want special loans these days they're as likely to go to the China Development Bank as the World Bank or the Asian Development Bank.

And come the next financial crisis - well Asia governments have spent a decade ensuring that never again will they have to make that emergency call to the IMF. One of the factors that has turned Beijing from foe to friend in this past decade has been China's offer of an alternative to the so-called Washington Consensus.

It was those Washington-based institutions, the World Bank and the IMF, that imposed their solutions (the Washington Consensus) as more than US$100 billion of private capital fled the region during the meltdown years: 1997 and 1998.

With Beijing holding currency reserves of more than one thousand billion US dollars, who needs the IMF? And slowly the region is creating an Asian Consensus to replace the one imposed from Washington.

Economist Professor Raghbendra Jha, on the terms of this new Asian view: "Part of the Asian consensus is to go beyond integration through trade to include items like energy, to include items like financial cooperation in the event of a crisis looming. And to ensure smoother flows, capital flows, within the region, when a sudden shock occurs. So these kinds of things are part of the Asian Consensus."

The new Asian way is a work in progress, which is why the ESCAP (Economic and Social Commission for Asia and the Pacific) warning caused a shive. The 60-year-old Economic and Social Commission for Asia and the Pacific has created a vulnerability index for Asia, based on real exchange rates, adequacy of currency reserves and levels of private sector debt.

Using that index, ESCAP judges that all the countries hit by the Asian crisis - except Malaysia - show renewed economic vulnerability. The survey warns that Asia's policy makers are being lulled into inaction and are missing danger signals.

It says relying only on economic growth as an indicator of vulnerability can be misleading.That's a reminder from a decade ago, that booming economies attract hot money, but if that hot cash flees, the fever can be dreadful. And Asia knows, it never wants to do that again.

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