Economist Prescribes Slow, Steady Reform for "Sick" Asian Economies

According to Bernard Yeung, a leading emerging markets expert on Asian economies at the William Davidson Institute, the entire Asian region is on the verge of its second economic crisis since 1998. Little leadership is coming from the United States, and the ongoing political crises in both Japan and the Philippines underline the lack of leadership in the region. Taiwan (China) is already on the verge of a crisis because of its property and stock market slump. What the economies of Asia need most is patience and determination to stay the course they have plotted.

There is no source for optimism in the economic outlook for any Southeast Asian country, Yeung believes, largely because of their overreliance on the financially troubled high-technology sector. By tying their manufacturing hopes to high-tech industries in the United States and Europe, the Republic of Korea, Singapore, Thailand, and other East Asian nations have left themselves highly vulnerable to instability in the global technology market.

At the same time, none of the recovery measures prescribed by the IMF or the World Bank since the 1998 economic crisis have been taken. After the 1998 economic crisis, Asian countries needed to install more checks and balances in their governments and better corporate governance to assure local and international investors of their stability. Only the Republic of Korea took steps in this direction. To make matters worse, there is no end in sight to Japan’s economic illness, to the continued political turmoil between China and Taiwan (China), to the imminent economic slow down in the United States, and to rapidly rising energy prices, which could be fatal to nations like the Democratic People’s Republic of Korea as winter approaches. In the long run, industrial pollution of the environment is a serious concern as well.

"Japan, Taiwan (China), the Philippines, and other East Asian Tigers need to sweat out this economic slowdown if they are not to repeat the broad collapse of 1998," says Yeung, "They must not rush to make rapid changes in the expansion of their fiscal supply, boosting their government spending, or in their economic diversification. A sick body needs rest, and Asia should simply try to gather its strength for a slow—but certain—recovery. If you try to boost the economy, you get inflation, currency devaluation, and a repeat of the old problems."

According to Yeung, Asian governments should implement the following measures to ensure their recovery: