This article is written exclusively for Worldfutures by our special Op-Ed in Singapore. It is with regards the current financial turmoil in the United States and its possible impact on the Asean states. The author indicates that the Asean region may eventually be safe from the fate of the US dollar in this crisis.

President George Bush and Congress may be in the midst of some tough negotiations to save the US economy from defaulting from the recent domino-like collapse of Wall Street titans that first began with the Sept 8th collapse of investment giant Lehman Brother.

 

 

But South East Asia, which 10 ten years ago was the epicentre of the Asian financial crisis affairs of state to say the very least are a touch ‘sedate’. Though long queues have snaked out of Singapore’s American International Assurance Building (AIA) or with employees of the Singapore branch of Lehman Brothers enjoying a breeze at work, no where in the Republic or for that matter anywhere in South East Asia is there any of the reprises of the panic-stricken scenes that approximated the scenes now occurring in Washington and Wall Street.    

Is that déjà vu? As after all 1998 wasn’t that long ago for people not to forget the West and their Dutch-uncle like lectures to Asian nations on the futility of bailing out failing corporations?

Whatever history’s verdict, one salient fact is conspicuously germane. Asian nations are clearly wiser after learning from their own experience when bank deregulations, so widely blamed for the current financial maelstrom in the United States; wreaked untold financial havoc in their own financial backyard.

The crisis in 1998 not only caused tens of thousands of job losses. But the speed with which governments fell in domino-like succession first in Indonesia, coupled with the political earthquake in Malaysia and Kuala Lumpur’s consequent resorting to exchange controls and followed by similar upheavals in Thailand and the Philippines; the region then as now would have figured that economic restructuring would have to mean more than just a mere reorganisation with their banks.

Then as now, or if an inference can be gleaned from former Malaysian Prime Minister Tun Dr Mahathir’s call for an Asian version of a World Bank and an Asian currency, ground sentiments in Asia have long held for a weaning of dependence from Western or principally American administered aid. They are not only expensive but come with so many so strings, so tautly strung around them that nations are sometimes reduced to penury if not bondage.

Importantly, the pendulum fluctuations that occur with such regularity in the US economy have only convinced that dependence on a single market is not only economically viable for the long sustainability of the grouping, but amounts to a kind of suicide and hence not wise. 

As a matter of fact with the soon to be concluded Free Trade Agreement (FTA) deal with India as well as with an existing one with China (actually to be signed in October), ASEAN’s guiding principle since the heady days of 1998 or even before that, has always been the diversification of their respective economies along with a lessening of dependence on the United States and the European Union. 

“We have an FTA with China. We may get one with India at the end of the this year and we are intensifying relations with all countries”, expressed Rony Soerakosomah, an external economics officer with the ASEAN Secretariat to this newspaper on ASEAN’s push for economic diversification within the context of the financial turmoil now roiling the United States.

 

Asean unlikely to suffer massive layoffs in the immediate

 

FTAs, which owe their ideological genesis to the American-sponsored North American Free Trade Agreement (NAFTA), have been pivotal in generating growth within Asian nations. Singapore Prime Minister Lee Hsien Loong in his 2006 Lunar New Year called it the catalyst behind his country’s 14% spike in external trade volumes. And with the recent collapse in World Trade talks the importance of FTAs’ have only become that much significant to ASEAN states, perpetually frustrated by logjams in the global trading system, but the alternative they had long waited for to move away from today’s Western-dominated trading systems and rules. 

And what is more today’s financial problems in the United States hardly mirrors the experiences of Asian nations back in 1997 in doctrinaire economics.

“What originated in Thailand and spread to Korea, Indonesia and other countries was mainly a balance of payments problem, so it was our core business. This crisis even if it is a huge crisis has had almost no impact on the exchange rate, on the dollar”, declared IMF’s managing-director, Dominique Strauss-Kahn to Singapore’s Straits Times, clearly divorcing events in the United States and its potential for it to have any bearing, or impact on ASEAN substantially.

With ASEAN states drawing most of their keeps from manufacturing that is paid always in the greenback – as the most of the region’s financial markets are yet to achieve maturity – Kahn may just have hit the nail on the head: there is no prospect of the current US crisis hurting ASEAN or Asia.

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