Asia is not just one country
Are the world's financial markets finally beginning to make sharp distinctions between Asia's different countries? Is it beginning to dawn on investors and fund managers that while Singapore, Hong Kong, Seoul and Jakarta may be located on roughly the same longitude, that does not mean they are all in the same leaky boat? U.S. President Bill Clinton seems to think so. Investors, he said last week, "are beginning to see a differentiation" between Asian countries.
Obviously worried that continued Indonesian instability might infect the rest of Asia, he urged that the whole region should not be "thrown into a long-term recession because of the perception that everything is the same everywhere". We welcome the assessment. We share the worry. We second the recognitions that prompted both.
Mr. Clinton's observations are not simply a case of a politician trying to talk up the markets. One need only compare mid-March with mid-January this year to realize that there is an objective basis to this assessment. Two months ago, all of Asia was affected by turns of events in Indonesia and how Mr. Soeharto was dealing with them. Six weeks later, despite the continuing turmoil in Indonesia -- its on-off-on flirtation with a currency board, its seeming break from the International Monetary Fund's program of reforms, the pervasive feeling in the markets that its cabinet is desperately bereft of economic talent -- there is no panic everywhere. Clearly, investors no longer believe there is a "pan-Asian flu". They have learned a new precision. This time around, they know it's just the "Indonesian flu".
To be sure, it is not exactly over yet. The region is suffering from a banking crisis, the effects of which will take some time to work out. Nevertheless, it is possible to say with a certain degree of caution that the worst may be over. Foreign funds have begun to trickle back, and the sweeping, all- encompassing panic of a few months ago has given way to precisely the kinds of distinctions which reward virtue and provide an incentive for rational policies. The virtuous circle that Prime Minister Chuan Leekpai has instituted in Thailand, for example, could not be sustained if this were not the case.
But where does that leave Indonesia, the main reason why there is now talk of differentiating between Asian economies? It is no use pretending that events in that country will have no effect on the region. A nation of 200 million cannot go belly-up without causing a great deal of commotion. But the Indonesian authorities should realize that the rest of the region is not about to let itself be paralyzed with fear contemplating that awful fact. Indonesia will be left behind if it does not regain market confidence quickly. As the rest of Asia stabilizes, the incentive to come to its aid will lessen. Once the fear of contagion abates, so too will international concern with Indonesian affairs. Mr. Clinton did not spell it out precisely, but that is the message contained in his talk of differentiation. The rest of the region cannot possibly agree to be held hostage to Indonesia's fortunes.
-- The Straits Times, Singapore