eemed poised to become its wealthiest economy. Even more remarkable was the economic growth of East Asia's tiger economies, the newly industrializing countries (NICs) of South Korea, Singapore and Taiwan, followed soon after by Indonesia, Malaysia, the Philippines and Thailand. During the period 1986-1996, South Korea increased its per capita income by ten times, Thailand five times and Malaysia four times. In just 27 years, 1960-1987, East Asia's percentage of world GDP increased from 13.7 percent to 18 percent and was predicted to increase to 22 percent by 2000. Alon and Kellerman said "such success led to acclaim for the Asian 'miracle' and recommendations [for the rest of the world] to adopt the 'Asian model.' An Asian millennium in the 21st century seemed at hand.
Asian Crisis. On July 2, 1997, the Thai government announced the devaluation of its currency, the baht. Alon and Kellerman summarized the ensuing economic and financial crisis, which was felt most acutely in the Southeast Asian nations of Indonesia, Thailand and Malaysia, and in South Korea, but which radiated throughout East Asia and the rest of the world:
within a several months, the entire region saw declining
currency values, large layoffs, contracting GDPs, bank
closures and consolidations, rising prices of staples,
and crashing stock prices [and] an overall rise in lending rates, inflation, debt repayment problems, and cutbacks on megaprojects.
Table 1 shows the overall decline in market capitalization among countries in the region between June 1, 1996 and August 1, 1998, which ranged from 83.7 percent in Indonesia to 28.8 percent in Japan. Table 2 shows the increase in the current account deficits of Southeast Asian nations (and South Korea) between 1980 and 1996, which ranged from 4 per cent in the Philippines to 2,668 percent in Malaysia. The effects of the crisis were political as well as economic. Governments changed hands several...