From the article of 'Petrel'
No.660 / January 1, 1998

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Sudden fall of Asian currency and IMF intervention to it

Failing life of people


The currency crisis of Asia came to light starting with the sudden fall of the baht of Thailand. Especially, Thailand, Indonesia, and Republic of Korea face the debt breach (default). International organization of IMF etc. and each country decided this enormous amount of cooperated financing contingent on a severe economic reformation. Japan also determined the confidence granting of the maximum scale on the history. On earth, what is this? Is not a deep crisis into which the international financial capital falls made demonstrative?

Asian economy of critical

A certain big trading company worker said so. "The health of Suharto might be deteriorating considerably according to the representative in Jakarta. When a rapid situation is developed, we are anxious because the influence goes out to our business". To our regret, I did not hear that what influence goes out to their business. President Suharto in Indonesia is the serious corresponding healthy.

He destroyed the physical condition by making a round of calls like South Africa etc. on the middle of November last year. He was absent from head ASEAN (the Association of Southeast Asian Nations) conference in Malaysia and Kuala Lumpur which had been opened on December 15, and he did not show the appearance to the graduation ceremony attendance of the army officer school the 18th in all public seats afterwards. I hear the round-up of the graduation ceremony in a considerable short time annually and retiring early. This dictator who is in the seat of a super-long-term regime which extends over 30 years and is deciding the seventh winning by "the president election" in March this year, is already aged of 70 years old. It will not be mysterious no matter what and when is for him.

However, Indonesian economy has become "critical" earlier than they. The rupiah was fallen rapidly too when the currency baht of Thailand dropped sharply in the first ten days July last year. The fall did not stop though it shifted to the change market price system in August. The government announced the correction of the high interest rate policy on September 3 and "Economic making health" plan of 10 items which contained the control of financial expense etc. was announced. However, the rupiah kept being sold. Arriving at last on October 31, Indonesia will receive the support of IMF (International Monetary Fund) etc. Meanwhile, half the vicinity fell on dollar rupia market price. Ringit of Malaysia, the peso of the Philippines, and Won of Republic of Korea, etc. have dropped similarly sharply, too.

In Asia of 1980's, the average growth rate of the year of GDP (total domestic production) was high pace of 7% level. The World Bank named it "Miracle of east Asia" in 1993 and praised the rapid growth. It was before only two months of the sudden fall of the bhart to have announced the report which Asia Development Bank (ADB) entitled "Rising Asia" in the rally. However, a serious currency crisis has attacked Asia named "Growth center in the world" now.

Thailand and Republic of Korea also fell into the situation supported to IMF etc. as well as Indonesia. IMF thrust the improvement condition (Conditionality) of the proper national administration prefecture to the substitution. This was severe by going up of the voice of repulsion, "With this, it is the same as the trusteeship of IMF".

What is "Condition" of IMF

The Indonesia support plan which IMF announced at the end of October is as follows. (1)IMF finances total $10,000,000,000 to Indonesia at the time limit of three years. (2)The World Bank finances as supplementary support and $4,500,000,000 and ADB finance $3,500,000,000 to Indonesia. (3)Indonesia should use $5,000,000,000 of part of own overseas property. (4)Japan, the United States, Australia, and Singapore, etc. help to Indonesia by two countries. --- It is forecast that support to Indonesia becomes $37,000,000,000 scale, when you total these all.

Thailand agreed from this about receiving the support of $17,200,000,000 in total with IMF two months or more ago. Breakdown is $4,000,000,000 from IMF, $1,500,000,000 from the World Bank, $1,200,000,000 from ADB, additionally first on the list $4,000,000,000 from Japan, amount of each country granting is $10,500,000,000 in total. Support to Republic of Korea which decided in December rose to as many as $57,000,000,000 in total including $35,000,000,000(IMF, the World Bank and ADB) in total and $10,000,000,000 of Japan and became cooperated international support of the maximum scale in the past. These capitals precede by an international organization and are being granted one by one. However, the thought effect has not been shown yet. And the currency, stock prices, and fall tendencies in each country are not settled.

On the other hand, "Condition" pointed at Indonesia is as follows. (1)Restructuring in financial section (2)Deregulation and trade reformation (3)Promotion of both parties' of government and the people transparent and opening to the public. In short, control of economic growth rate, deficit decreasing by retrenchment finance, arrangement of bank of inactive management, liberalization of foreign capital introduction and trade, "rot" correction of politics etc. were requested. The condition which looked like was imposed about Thailand and Republic of Korea.

The managing staff of Ministry of Finance in Japan was speaking so in meeting. "An international organization like IMF etc. faces the support by the posture of a political nonintervention. An economic reformation is a principal object to the end and an attitude in IMF similar as for Japan which cooperates." However, IMF insisted on the rot correction of politics in fact as understood even if (3) of the condition was seen. Political rot in each country is reached too much. The privilege and the rot which remains in eyes of the Suhart family and the country army are known in Indonesia and the financial clique is pointed out in Republic of Korea and politics is pointed out the rotting relation. Thailand prohibited cabinet ministers and the member of an assembly from serving concurrently to prevent the rights inducement in the new constitution which had been passed last September and provided for the installation of a new administrative organization named national graft prevention committee (NCCC).

The east Asian nations accomplished the high growth under intervention guiding of strength to economy by authority principle and national powers. A certain kind of "State capitalism" technique named "Despotism for development" was introduced. The rot relation between politics and economy was inevitable. There is be sure to being able not to do the breaking down in IMF. However, it was necessary to add to one of conditions.

"Condition" by which people are hit directly

Each country will follow conditionality and take concrete improvement measures. An Indonesian government decided liberalization of food import and liquidation of bank 16 companies etc. A Thailand government announced the close of 56 companies of banks of 58 companies. For the Republic of Korea government, it is said that IMF names 12 companies which are the hold of a large sum of bad debt of no bank 30 companies and self-capital ratio is also low, and urged giving up business. Actually, 11 companies were driven in to the sales stop in the end of December.

These invent "unemployed" the first. The unemployed of Republic of Korea will exceed 800,000 persons before long by 450,000 present persons and have even the forecast with the sudden increase to 1,200,000 persons. It is thought to be a newly born of 1,000,000 unemployed in Thailand. The employment chance was missed from 2,000,000 persons only as a construction worker in Indonesia which had frozen several 100 billion doller worth of a large-scale business. In addition, prices will soar by the import price rise by the currency fall and original of the retrenchment finance, public utility rate price hike, and a great cutting etc. of the budget related to social welfare be executed. Thailand has raised the value added tax. Anyway, the life of people is hit directly.

In "recipe" based on such conditionality, it is said, "Structural adjustment program" in the area of the development economy. There are economic policies which have been executed in Central and South America etc. through 80's. In the basis, the idea of "New classics sect approach", that is Market economy, deregulation, promotion of trade liberalization and protection of "small government" swept over the world exists. It can be called "Capitalism of begin the peel" route.

What "effect" does it bring? When the peso of Mexico which happens suddenly drops sharply to 95 beginning of the year head at the end of 94 years, IMF executed $17,800,000,000 financing and the United States executed the enormous amount, that is, $20,000,000,000 financing under a severe condition. At that time, the bank about 500 lines of the United States executed a huge confidence granting to Mexico. Therefore, if it is default (debt breach), it is not possible to collect the interest not to mention principal also. After all, IMF and intervention and financing of the United States were to have opened the road to the relief of the financial capital.

Crisis with deep financial the capital

The maximum donation country of two country support is Japan this time. The relation between Japan, Thailand, and Indonesia and Republic of Korea looks like that of the United States and Mexico well. A financial organization in Japan besides a deep relation in a trade and a direct investment is doing a huge loan to three countries.

The attached table showed the rate to an Asian main country which the financing balance (private claim) and the Japanese bank occupied. (end of 1996 years) Neither Singapore nor Hong Kong are majority the balance of the interbank market (dealings between banks) and exist even though are the debt. However, when it is excluded, it is obvious that a financial organization in Japan is holding enormous amount of financing balance in each country. The ratio of Japanese banks of debt 70,200,000,000‡j of Thailand reaches as many as 53.5%, 24.3% every $99,900,000,000 of Republic of Korea, 39.7% every $55,500,000,000 of Indonesia.

The dollar turned on to three countries by IMF and each country is carried over to the foreign currency preparation of a central bank. ($4,000,000,000 has already been transferred to a Thailand central bank by Export-Import Bank of Japan.) And, it is used to sell the dollar for the debt repayment and the currency defense (home country currency purchase) and dollar for settlement in import money etc. Because, the each country and foreign currency preparations run short. The foreign currency preparation amount of Republic of Korea decreased sharply to falling below in the end of December last year because of 33,000,000,000 dollars of the end of 1996 years than about 10,000,000,000 dollars. The foreign currency preparation amount of Thailand is not sufficient from the sudden fall of the baht for two months and has decreased for as many as 2,000,000,000 dollars.

"Neither IMF nor dollar granting of Japan are directly used to relieve the bank(of Japan etc.)." (Managing staff Ministry of Finance in Japan) However, If the prevention of default, stability of currency, promotion of financial deregulation, etc. by the granting execution succeeds, largely contributing to the prevention of financing the bank from becoming a bad debt is correct. Is not this not neither a relief of the financial capital by turning on the public capital in Japan nor a basically similar composition? Up to now, a Japanese government has done the structural adjustment financing of the amount of corresponding centering on Central and South America. Financing of Export-Import Bank of Japan counted 13 from Mexico of 89 years to Peru on February, 1997. However, it remained even by the maximum amount in 1,000,000,000 dollars for Mexico.

Japan has started financial support, 4,000,000,000 dollars for Thailand, 10,000,000,000 dollars for Republic of Korea (it is unexecution.) of the large scale not compared up to now this time. This shows whether failure to which the country is successive is included and how the crisis of the Japanese financial capital is serious. It is possible to think the appearance which each country is making efforts to enormous amount of cooperated financing with IMF and the World Bank, etc. to be appearance of the crisis that the entire international finance capital is deep at the same time.

( Masaru Sumiya )