Asia is not just one country

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