'Fast buck' scheme behind fiasco

By Erwin Ramedhan

JAKARTA (JP): North American financiers, foreign exchange operators and others have launched repeated attacks on Southeast Asian currencies and economies. These attacks have led to the fall of the Thai baht, the Malaysian ringgit, the Philippino peso and the Indonesian rupiah, while the Singapore dollar is teetering on the edge. Who will be the next victim of currency manipulation? The Hong Kong dollar?

Currency erosions and flotations are an ersatz for official devaluations and generally reflect an unhealthy or sick economy. This was not the case of ASEAN economies -- reputed as the power houses of the Asia-Pacific -- at least until now.

What is behind these currency manipulations?

To make a fast buck, on the back of these reputedly dynamic economies, could be one plausible reason. The growth of these economies have made them financially over-extend investments in real estate, public works and other prestige operations.

At the same time, the rising ASEAN middle class has also been on a consumer binge. This trend reminds me of the Mexican middle class fervor for imitating the expensive consumer patterns of the U.S.

Added to this are the loose ends of the nations' economic systems. Some of the phenomena that have weakened these otherwise resilient economies include: corruption here and there, high cost economies, pseudo privatized bureaucratic and economic entities.

And that is where the currency manipulators (perhaps in the name of the global economy) saw the opportunity to lead attacks against the Southeast Asian foreign exchange system, plunging the currencies to their lowest levels while raising the value of the U.S. dollar.

A quick profit was made by speculators at home and abroad. In Indonesia the dollar attained heights of 3,100 rupiah per dollar, against a more realistic 2,700 in the U.S. itself.

Worse still, financial and monetary sectors from highly industrialized countries (whether they were speculators or not is not really important) then prepared themselves for eventual bail- out solutions with tens of billions of dollars. Mexico received about US$50 billion in 1995 and Thailand $16 billion in 1997.

This solution was one way of saying: "With the money that you have lost I can lend you some money for which you will also owe me interest ..."

The "fast buck" strategy aside, there could also be some other considerations behind the speculations on ASEAN currencies. Are these economies (and their economists) being taught the lesson that financial and monetary institutions -- both private and public -- from the highly industrialized countries reign supreme over the growth and industrial and technological production capabilities of ASEAN. Money and money accumulation is more powerful than the factories, executives, managers and workforce in Southeast Asia.

It is a kind of brinkmanship that developed nations have mastered. There exists, however, a danger about which these industrialized nations may not be sufficiently aware: globalization is not a one-way street.

How can ASEAN countries continue to purchase all sorts of new and traditional, visible and invisible, exports from North America and other highly industrialized countries if their economic systems are thrown into chaos by their currencies.

An economic slump in ASEAN would also mean a slump in the West's sales of franchises, technology, managerial know-how, software and brainware, leisure and entertainment products, as well as traditional export products.

ASEAN countries have had their lesson in globalization, maybe the highly industrialized countries will be next.

The difference between ASEAN countries and the lean, mean and hungry "tigers of Asia" of yesteryear (Taiwan, South Korea, Hong Kong and Singapore) is that nations like Thailand, Malaysia, Indonesia and the Philippines were always the "elephants of Asia". They did not have to be aggressive on the international market because they had a very important domestic markets of their own. Indonesia has, for instance, a domestic market of 200 million people.

But if speculators make these elephants lean, mean and hungry -- with their currency speculations -- tomorrow they may become aggressive tigers with the power of angry elephants.

Just give them time to endure the hardship and put their houses in order!

The writer is executive director of the World Trade Center, Jakarta.