Asia and the Global Crisis

The Industrial Dimension

It was a financial crisis, or was it? Did a band of speculators and money-changers pull the rug out from under the Thai, Malaysian, Philippine, Indonesian and Korean economies, thereby trashing the Asian Miracle? Or were more profound, longer-term pressures building in these economies which finally boiled over in 1997? In this book, the OECD explodes the myth of conspiracy and evil design, showing that well-intentioned and previously successful economic policies put the Asian economies at risk. Generous support for heavy and high-tech industries created "turnkey" companies with an excessive reliance on imported technology and inputs. In many cases, the success of these industries came at the expense of small and medium-sized enterprises, and more generally of the ability to foresee and respond to the need for adjustment. There were also detrimental effects as traditionally strong parts of these economies lost their competitive edge due to limitations in technological linkages coupled with upward pressures on wage costs and appreciating exchange rates. The book shows that the Asian breakdown had far-reaching structural global implications extending beyond the financial sphere. In examining the policy implications, the OECD argues that far-reaching industrial reforms are needed to accompany the measures being taken to address the financial aspects of the crisis. Learning the lessons from these reforms will reduce the risk of similar crashes in the future.