The outlook for '98: Why the tiger is an endangered species

Bangkok's Golden Town stands as a monument to what went wrong in Thailand, the country that kicked off the current financial turmoil in the Far East. Begun in 1989, when the Thai economy was expanding by more than 10 per cent a year, Muang Thong Thani - Golden Town in Thai - was supposed to house half a million people by 2005.

Today, most of Golden Town's 30 skyscraper apartment blocks and hundreds of low-rise condominiums stand empty. Thailand's biggest residential project, funded by easy money from local banks and foreign loans, is now home to miles of silent corridors and unpainted walls. Thirty thousand people live in a community intended for 500,000.

Many of them will be among the million Thais that are unemployed. Few remaining jobs in the country are secure. The government predicts no growth for next year. Most experts, and government economists speaking in private, think Thailand has already entered a recession and the economy next year could contract by as much as 3 per cent.

The government is banking that the falling baht will boost exports and thus lead the way out of the crisis. But so do other governments in the region.

"At first it looked like it might be good," says M Sawanchi, sales manager for textile company Luckytex. "But then everyone else devalued and we were all back in the same boat."

Piti Sithi-Amnuai, executive vice chairman of Bangkok Bank Pcl, the country's biggest bank, says Thailand should never have joined Southeast Asia's rush to industrialisation. "We should never have tried to be a tiger."

Thailand is one of the poorer countries of the region, and therefore likely to feel the pain most acutely, but the other tigers are now also reeling.

On Wednesday for the first time the South Korean authorities overcame their fear of losing face and called in foreign bankers to try to gain their support as the nation hovered on the verge of calling a moratorium on repaying short-term borrowings.

The International Monetary Fund and the Group of Seven leading industrial nations immediately pledged $10bn in accelerated aid to the country, sending stocks and the country's currency soaring - but the rally could easily be reversed.

"Korea managed to douse the flames with the help of foreign fire fighters," said Shin Woo Hyun, a senior fund manager at Dehan Investment Trust in Seoul. "But it's too early to say the fire is out as the embers are still flickering."

To cap a disastrous year for Asian financial markets, not only Korea but Indonesia and Thailand, where the crisis first began, saw their debt dowgraded to junk bond status by the world's biggest credit-rating agencies last week.

Just when they needed it least, these nations will find it more difficult and expensive to roll over their debts as they try to impose austerity programmes imposed by the International Monetary Fund in return for emergency credits.

The Bank of England also stepped in asking British banks to extend the length of their loans - worth about $6bn - to South Korean banks to ease Korea's financial crisis.

The current crisis in the Far East has its roots in years of cheap loans and free spending. Murky banking laws and corrupt business practices have imposed a cost that is being paid with plummeting currencies, high unemployment and thousands of bankruptcies.

"If they do nothing, we could see foreign debt moratoriums, political unrest and we'll see a deep recession," said Karma Wilson, vice president of fund management at Goldman Sachs Asset Management in Singapore.

From Seoul to Bangkok, Jakarta and Manila, interest rates are higher than they have been in decades and foreign investors have fled.

Hardly surprising that Asian equity markets were the 10 worst performers in the world among the 59 indices tracked by Bloomberg as currencies crumbled to record lows. Measured in sterling the Seoul, Bangkok, Kuala Lumpur and Jakarta stockmarket indices all crashed around 70 per cent. Only shares in the Indian sub-continent and in China gained.

The biggest borrowers from the days of the "Asian miracle" have billions of dollars of outstanding foreign loans. Those that can still afford to buy dollars are scooping them up and holding them, driving down local currencies and making their loans even more expensive to pay back.

More than $100bn in emergency loan packages for South Korea, Thailand and Indonesia sponsored by the IMF failed to stem the slide.

Few companies are secure. From Korea's giant "chaebol" company groups to Thailand's family-controlled business empires, many have fallen and more are sure to follow. And on the national level even Hong Kong, which so far at least has successfully defended its currency's peg to the dollar, interest rates have soared and the stock and property markets have collapsed.

As for the walking wounded, veteran South Korean opposition leader Kim Dae Jung won his country's presidential election as the economy stands on the edge of its first recession in two decades. The IMF and selected countries are demanding radical changes in exchange for as much as $60bn in aid.

"The IMF is asking them to change not just their economy, but to change their culture," said David Roche, formerly with Morgan Stanley and now president of the London-based Independent Strategy.

The independent Daewoo Institute predicts growth will decline by two- thirds next year to just over 2 per cent from 6 per cent in 1997. The government itself projects automobile output will be more than halved next year, and steel production cut by a fifth.

Unemployment,the Daewoo Institute forecasts, will exceed 5 per cent. That represents a major shock in a country where workers expect to keep a job for life. And mass layoffs could bring civil strife.

"There is quite a militant union movement in Korea," said Aidan Foster- Carter, an independent Korea analyst. "They had virtual full employment, but now [they enter] the world of downsizing, which nobody enjoys."

In Indonesia, the IMF/G7 emergency package sent the rupiah surging 20 per cent Friday but economists say whatever the industrialised nations do will come too late to stave off the country's first recession in 20 years. Since 1970 the nation had powered ahead at about 6.5 per cent a year.

"It really is a vicious cycle," said Nick Brooks, a regional economist for Peregrine Securities in Singapore. "The rupiah drops; your foreign debt in rupiah terms rises substantially. That forces companies to reschedule debt or default, and no one wants to be exposed to that kind of environment so they start pulling their money out faster."

Some expect a contraction of as much as 5 per cent. That compares with a forecast for growth of about 7 percent made before the rupiah crisis.

Even the Philippines, operating under the scrutiny of the IMF for the last three years, has suffered from the stampede of investors out of Asia. The peso has fallen 33 per cent against the dollar this year.

"Those companies that funded themselves massively with US dollars, if you look at their translation losses, they're quite insolvent," said Sam Chin, analyst for Fitch IBCA ratings agency.

For the Philippines, the threat of recession is a bitter end to a year that began with pronouncements that it might be Asia's next "tiger" economy. Five months after the Philippines bowed to market pressure and let its currency weaken, its benchmark stock index has fallen more than 60 per cent in dollar terms.

The currency decline is a reminder of 1983, when the peso lost more than half its value in the span of a few months and an exodus of capital forced the country to declare a moratorium on its foreign debts.

"The big problem will be asset deflation and deteriorating credit quality," said Scott Gibson, head of research for ABN-Amro Hoare Govett Securities. "The pain is getting sharper, but it's all in the same places."

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
i100  ... he was into holy war way before it was on trend
Life and Style
lifeDon't get caught up on climaxing
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
scienceScientists try to explain the moon's funny shape
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
ebookA unique anthology of reporting and analysis of a crucial period of history
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
Arts and Entertainment
As Loki in The Avengers (2012)
filmRead Tom Hiddleston's email to Joss Whedon on prospect of playing Loki
voices In defence of the charcoal-furred feline, by Felicity Morse
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star