Asia braces for unrest as turmoil spreads

Asia braces for unrest as turmoil spreads

By Sarah Davison

HONG KONG (Reuters): Asia's economic turmoil is threatening to
spill over from the financial markets to the streets, with many
analysts predicting outbreaks of violence and nationalism as the
crisis intensifies.

Social unrest was now considered an almost inevitable adjunct
to the region's economic distress, with currencies plunging ever
lower, economies in recession and labor unions gearing up to
protest against apparently externally imposed austerity.

"Political tension is the issue," said Marshall Mays,
strategist at Nikko Research Center.

"Balancing fiscal policy and monetary policy is something the
technocrats are more or less up to. Handling the communication
process as you do that...is a little bit more difficult," he
said.

And Asia's lack of experience with economic downturn was about
to become a major problem for governments used to taking credit
for strong economies rather than accepting blame for austerity,
said Mays.

Violence was predicted in many countries, particularly those
already under political stress and facing high unemployment.
"At one time, they had secular hope -- hope that the secular
forces, the market, would improve their lives," said Michael
DeGolyer, political analyst at Hong Kong's Baptist University.

"Now they're going to feel betrayed by the market, that
foreigners somehow oppressed them. We have to remember, Asian
nationalism has always been very profound, almost vigilant."

The Korean peninsula topped the list of trouble spots. With
North Korea gripped by famine and South Korea on the verge of
default, the entire peninsula was now unstable with strategic
implications for the globe.

"Korea has a long history of xenophobia. They are much more
extreme than nearly any other country in Asia. That is the one
that is most of a worry," said DeGolyer.

"The whole of society -- dissidents, the middle class,
workers, students -- they could all tell the world to go to hell,
even though they can't, because they'll wreck the place. They are
an exporting nation and they must have external ties."

More than 1,000 angry protesters staged rallies in downtown
Seoul on Saturday, demanding the government renegotiate a record
International Monetary Fund aid package and punish officials for
driving the nation to crisis.

The prospect of widespread job losses as conglomerates and
banks collapse, apparently on Western orders, was expected to
prompt violence in a nation known for rioting. There was also
implicit tension in a request for aid from arch-rival Japan.

Next on the list of trouble spots was Indonesia, where rumors
about the health of President Soeharto, 76, caused the rupiah to
fall by almost 11 percent on Friday.

Although the government stressed that Soeharto was in good
health, markets panicked after he canceled a trip to Malaysia,
raising the prospect of a sick leader and no obvious successor.

Soeharto was formally sworn in as President in 1967 and has
ruled longer than anyone except Cuba's Fidel Castro, managing to
hold together one of the world's most populous and restive
nations scattered across a vast Asian archipelago.

Political succession has traditionally been a problem in Asian
countries, but confidence has been restored by the resolution of
the region's biggest succession uncertainty -- China.

But China remains a wild card, and Asia's financial crisis
could put the brakes on the Communist giant's plans to privatise
industry, with state leaders opting to delay the social upheaval
from rampant unemployment associated with wide-ranging economic
reform.

Asia's biggest economy, Japan, has too many troubles of its
own to provide much regional leadership, analysts said.
Japanese banks were suffering liquidity crises and were in no
condition to lend to the region.

All these tensions made the future of established elites
tenuous, said Chris Tinker, economist at ING Barings.
"It is perhaps no coincidence that Asia's current crisis
coincides with similar cross-roads within the political and
corporate systems of much of the region," he wrote recently.

"The socio-political implications of the wide-ranging shifts
in power and control that could potentially flow from the
widespread financial sector overhauls now being demanded are
profound for many of Asia's political systems."

But not all is doom and gloom, say some analysts, and
elections scheduled for next year in Hong Kong and the
Philippines are expected to go well.

"I think the political problems of Asia are usually
overstated," said Jake van der Kamp, strategist at ABN AMRO.
South Korea, Taiwan, the Philippines and Thailand are full
democracies, while partial democracy holds sway in Malaysia,
Indonesia, Singapore and Hong Kong, he said.

"What does tend to happen is that people in Asia tend to elect
a strong man, and a strong man tends to assume more power when in
power, and push people into voting for them," said Van der Kamp.

"But this is what the people accept... You need strong person
in government. If you do not have a strong man, civil war is the
result. And the history of Asia indicates that (is true)."

But how well existing strong men hang on to the reins of power
while their citizens become poorer remains one of the most urgent
issues associated with the crisis.

Only one thing is certain, Tinker said.

"The Asian landscape will be a very different place as we
enter the next century."