This piece from last week’s Economist takes a look at the repercussions of the Asian financial crisis of 1997. Immediately after the crisis, projections for the region were heavy on the gloom and doom, but sure enough, Asia’s developing economies bounced back, posting an average of 8.3% growth last year. But, the ADB still finds the region’s growth underwhelming:
The annual Outlook published by the Asian Development Bank (ADB) this week looks at the growth record of the five worst-hit countries: Indonesia, Malaysia, the Philippines, South Korea and Thailand. Comparing the period from 1990-96 with 2000-06 (ie, after the crisis had passed), it finds that “growth has settled on a lower trajectory.” It has slipped by an average of 2.5 percentage points a year. The ADB finds the slowdown cannot be satisfactorily explained by demographic changes, by worsening “human capital”, ie, educational shortcomings, or by falling productivity. Rather the cause lies in falling investment rates. These plummeted in the wake of the crisis, and have never returned to pre-crisis levels.
As the article goes on to say, the Asian tigers still suffer from investors’ crisis of confidence, which — relatively speaking — keeps investment lower and growth slower. With minimal corporate governance, trouble with property rights enforcement, and rampant corruption looming large, it is hard to blame them for being nervous, but as CIPE Asia partners ADFIAP, ISA, IICD, LKDI and IBL could all tell you, things are getting better.
Many of the organizations that CIPE works with in Southeast Asia were founded in response to the 1997 financial crisis and have been at the forefront of corporate governance reform and anti-corruption movements in their countries. The Association of Development Finance Institutions in Asia and the Pacific works in development finance banks across the region to train teams of officers dedicated to enforcing corporate governance. The Institute for Solidarity in Asia helps firms and local governments to improve communities’ buy-in on governance issues. The Indonesian Institute for Corporate Directorship and Lembaga Komisaris dan Direktur Indonesia train corporate executives and board directors in the basics of corporate governance and help evaluate firms’ levels of transparency and disclosure. Indonesia Business Links works directly with Indonesia’s Corruption Eradication Commission to teach entrepreneurs and government officials how to live without facilitation payments and bring ethical decision making into their businesses.
The recovery from the crisis may be long, but CIPE Asia’s work on corporate governance and anti-corruption has a real impact on the thinking and actions of local businesspeople and government officials, and helps pave the way for a better investment environment and stronger democratic institutions for the Southeast Asia.