Impact Of The Asian Financial Crisis Of 1997 On The Region 's Development

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Examine the impact of the Asian Financial Crisis of 1997 on the region’s development

“Since World war II, development has been the most important term used to describe economic, social and political changes in what have come to be known as Third world countries” (Zhang, 2003).

The Asian financial crisis of 1997 had a major impact on the regions development as it was the end of the East Asian economic miracle, a time that showed staggering economic growth throughout the Asia Pacific. However, despite evidence that the economic development has slowed down within the region, it can be argued that the 1997 crisis encouraged intra-regional co-operation and collaboration, developing intra-regional trade and encouraged the creation of ASEAN
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Garran (1998) argues that most countries affected failed to set up acceptable regulations and supervision that would have allowed capital markets to develop without risky imbalances. He states that countries “over-borrowed, over-invested and over-reached themselves”.

Although it can be argued that the entire region felt the effects of the crisis, some countries suffered more than others. According to Barro (2001) the countries mainly affected include Indonesia, South Korea, Malaysia, the Philippines, and Thailand, this is because between July 1997 to early 1998 these countries experienced currency depreciations of more than 50%. In these countries, offshore nominal interest rates reached at least 25% at some point between June 1997 and January 1998. Real per capita GDP fell by 16% in Indonesia, 12% in Thailand, 10% in Malaysia, and 8% in South Korea, and 3% in the Philippines. He argues that China, Hong Kong, Japan, Singapore and Taiwan were much less affected by the crisis as they experienced depreciations of less than 25%, and nominal interest rates remained below 20%.

The crisis resulted in the set back of over 30 years of strong economic and social development in the region, the loss of jobs caused riots, destruction and even death from poverty in the affected countries. Henderson (2011)
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