**For the moment it seems that a repeat of the 1997-98 type crisis is most unlikely. The most dangerous elements for the generation of the crisis have been identified more than one way. So the policy planners or the party in power cannot make the same mistake to face the fury of another attack, at least for the time being.

THE month of July of 1997 would not be remembered as an auspicious one in the financial diary of the people of East and Southeast Asia. Then the Thai baht was devalued and subsequently a financial flu spread over to most of the countries in the region. In the bout of the crisis foreign investors flocked to flee, stock market crashed, import plunged, banks went bankrupt, property bubble burst and people became poorer by generation. To the extreme of the cri-siSf Indonesia reached on the verge of. cpljapse-1 Loptihg.-j: jhooting, Jci^ing" became- daily affairs there soon after the crisis blew out. Social unrest with the most dangerous potential broke out in many parts of Indonesia. And all these oscillated because of the massive loss of the value of the rupiah, the national currency.

Now after a journey through two painful years, financial dusts seem to have started settling down again. Reports emanating from different capitals and financial hubs of East and Southeast Asia provide a picture of recovery of the economies which have passed through the trouble. Even the 21-27 August. 1999 issue of The Economist comes out with the cover page titled "Asia's astonishing bounce-back." Now it is a big question whether the trend of recovery would continue or not. Before trying to answer this part, let us look at the happier half of the present picture.

Indonesia, South Korea. Thailand and Malaysia are the four countries that were the most affected in the financial crisis that spilled over the region. So when we will be discussing the recovery part, we would mostly be focused on

South Korea remains at the forefront of the recovery race. Soon after the crisis struck the

country in 1997. people were seen on the street to pray and collect funds to help the government to tackle the financial emergency. Factories were closed down, unemployment rose and the most dynamic Korean . 'chaebols' lost much of (hfiri glamour. _The ..cu/tency iwon’jalso' lost its* tfahieMae to the crisis. The e'conortiy Contracted a provisional 5.8 per cent in 1998 from 1997, the worst performance on record. But the worst seems to be over for Korea. Now the industrial output is back to the pre-crisis level. Investment in plants and equipment is expected to go up by 25 per cent in the second half of 1999. Private consumption is rising, unemployment rate is dropping, and so the confidence level of the Korean people is gaining momentum. The confirmation of the recovery has been substantiated by the forecast of the Ministry of Finance and Economy that the GDP would expand by 7.2 per cent in the second quarter after posting a 4.6 per Cent rise in the first quarter. The Bank of Korea has projected that the economy is to grow by an average 6.8 per cent year-on-year in 1999, while the private economists are forecasting 5-8 per cent GDP growth for this year.

Malaysia is turning around quickly. Prime Minister Mahathir Mohammad was straight fast in refusing the IMF's fund and prescription package after the debacle. He even "horrified repeatable opinion by imposing capital controls," as described by Paul Krugman, the famed M.I.T. professor. In

the process of controlling the foreign capital, one-year locking system was imposed, fixed pegging of ringgit against the dollar remained in place and . exchange market was kept un-1 der close watch. . Aided by a. * rtiijch devalued ringgit’ the ex-. ’ port' of the country has gone up.

The problem of trade deficit has ' tiifned into a widening trade surplus. Actually the manufacturing sector has bounced back strongly fuelled by the strong export-driven demand. In the domestic market demand for various industrial and consumer products is increasing. Consumer confidence is an important element to keep the growth going. The latest information suggests a 5.2 per cent surge of industrial output in the 12 months upto May 1999. After the contraction of the economy in 1998. the economic recovery seems to be underway.

For Thailand, the crisis-led recession hit the economy very badly. But now the economy might be On the mend. It was the devaluation of the Thai baht that ignited the financial flu that engulfed the entire region hitting most of the economies. The crisis adversely affected the entire Thai society in all respects. The property business became the single most victim of the crisis. Multinationals had to curtail or even stop many production lines. In the year 1998, the economy contracted by 9.4 per cent. Now the National and Social Development Bqard estimates that the Thai economy is poised to grow by 0.9 per cent year-on-year in the first quarter of this year.

For the whole of 1999. projections are for one per cent or slightly better economic growth. Again the Thai recovery is led by the growth in the manufacturing sector. Good signals are.emanatingfrbm the export 'sector as well. Actually, figured''indicate a positive trend —'the manufacturing irid^x is up. the current account surplus is strong, and export trend is good. Though the improvement is not at all comparable with that of the hey days of the Thai economy or the recovery like that is going on there in South Korea, the positive signal towards recovery should not be missed.

Indonesia, the worst hit in the turmoil, is also expounding confidence in the recovery. The confidence is based on the facts that the rupiah stabilized between 6300 and 6700 per dollar: inflation is also down and interest rates have also declined sharply. Though the GDP in the first half of 1999 still contracted and during the period of the crisis has sustained a 20 per cent drop, it is expected to start expanding in the second half of the year.

Singapore, the Philippines. Hong Kong and of course Japan are showing signs of recovery. The stock market indexes indicate that bourses at all-important centers of Asia are doing better business in recent days. The speed and extent of the recovery in the stock markets have taken even the optimists by surprise. Over the past 12 months those in Thailand and Malaysia have doubled. The main Indexes in Seoul and Sin-

gapore are now above where they were in mid-1997 when the collapse began. Foreign investors are coming back, though not in flocks, to the markets they were so bullish about not so long ago. The economic malaise seems 'to1 have been arrested and driven back by the economy managers.

But will the recovery last? This is probably a billion-dollar question right now. Though the policy planners and others who know about economics are optimistic about the continuation of the process, skeptics are also there.

"For when you come down to it", wrote Paul Krugman in a recent article in the Time. "Asia has not emerged from the crisis with any clear idea about to avoid the next one. None of the vulnerabilities that made the great Asian crisis in 1997-98 possible has disappeared, and there is every reason to belitve that Asia has emerged from the crisis with its long term prospects far less promising than had seemed only two years ago." Professor Krugman definitely has his points when he argues this.

Actually many more 'chaebols’ in South Korea need to be shaking up. They have huge debt burden: the weight of debt can push them to collapse creating another crisis for the country. Daewoo, the second largest conglomerate in South Korea, shake-up might be an indicator in the direction. In Thailand huge loans are still on the book and trade surplus is shrinking again. For Indonesia, a constant fear of a political insta-

bility is looming large in the horizon. An independent East Timor might have a snowballing effect on the entire nation. On the financial side, the banking sector is yet to recover from the damage the ’crony capitalism’ has done to the sector. Moreover, as the signs of recovery is becoming evident, a kind of complacency might emerge with the reform measures initiated after the debacle. The already sluggish reform measures may furtner be slowed down keeping a fertile ground for any future crisis to spread fast. , „ ,_Anptber major cause of cprt-c.erp'fpr most of the countries would be the huge amount of domestic and foreign debt, particularly the second one. they are having at this moment. The figure might go up for few of them in the near future. Management of debt, rather prudent management of it to lower the burden of servicing them would ■ be needed to handle the present as well as the coming situation of the economies.

Though some progress has been made in the implementation of fundamental and structural reforms, further reforms are still, needed to avoid any future crisis. But for the moment it seems that a repeat of the 1997-98 type crisis is most unlikely. The most dangerous elements for the generation of the crisis have been identified more than one way. So the policy planners or the party in power cannot make the same mistake to face the fury of another attack. at least for the time being. The involvement of international financial organizations and other lending agencies and also the people of the countries would play the balancing role in this regard.

The writer is an Assistant Professor at Bangladesh Institute of Bank Management. Mir-pur, Dhaka.