Camdessus links Asian practice of crony capitalism to crisis

Camdessus links Asian practice of crony capitalism to crisis

BISHKEK, Kyrgyzstan (Reuters): The International Monetary Fund
(IMF) had harsh words for some Asian states on Wednesday, with
managing director Michel Camdessus naming "crony capitalism" as a
major factor behind the region's economic crisis.

With Indonesia still reeling from the impact of financial
collapse, dragging other emerging markets in its wake, he also
blamed leaders for not addressing "overheating pressures" quickly
enough and not ensuring exchange rate flexibility.

"Under the nice facade of market economics, there was a high
degree of inappropriate government intervention, including
lending based on personal connections," Camdessus said.

In an address to an economic conference in the Kyrgyz capital,
he added: "When the structure of ownership is not
transparent...when too many ad hoc decisions are taken and when
market forces are prevented from playing their normal
disciplining role, serious imbalances and deadly inefficiencies
can build up."

Camdessus said that Asian "tiger" economies like Thailand,
South Korea and Indonesia achieved high growth rates quickly by
implementing many key requirements, including macroeconomic
stability and outward-looking policies.

Those policies and the impact of globalization of the world's
financial system, helped Asian countries attract nearly half of
the $235 billion total private capital investment flows into
developing and transition economies in 1996. But they failed to
meet the increasing demands of economic success because domestic
institutions and policies were neither strong nor flexible
enough.

Investments were also often wasted.

"Subsequent events have shown that some of those funds were
not invested wisely," he added.

Camdessus said that success in the global economy relied on
governments allowing market forces to set prices, opening
economies to foreign trade, achieving low inflation and creating
stable institutions to give investors confidence.

Dubbing transparency the "golden rule" of economic growth, he
said that a lack of data helped conceal the extent of the woes
facing the "tiger" economies, not only from the outside world,
but from the Asian countries themselves.