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Asian Financial Crisis: Eclecticism is the answer
Be eclectic, and we will not only survive from future shocks, but will be ready to move ahead.
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Indonesia has been continually registering respectable economic growth. (Shutterstock, Inc./AsiaTravel)
I
would like to revisit the Asian Financial Crisis of 1997/1998 on its 20th anniversary, commonly dated July 2. Twenty years ago, the Thai baht plummeted in a single day after its flotation, and what happened afterwards is history. For Indonesia, the crisis turned our economy into a basket case, falling from the prestigious status of being part of “the Asian miracles” as termed by the World Bank in the early 1990s.
The contagion triggered by the plunging Thai baht crashed like a tsunami, rapidly striking most other Southeast Asian currencies, including the rupiah, and then on to the Korean won; hence the term, Asian Financial Crisis (AFC).
The rupiah melted from around Rp 2,500 to the US dollar in midJuly 1997 to as low as Rp 17,000 after Soeharto resigned in May 1998.
I have contributed to enhancing public awareness and understanding about the AFC through lectures and seminars, articles and books. In the last six years, one of the courses I have taught at the S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University happens to be Regional and Global Financial Crises.
I have aimed to put on record my personal views, at times to straighten out others describing the crisis or related issues that I found to be inaccurate or even erroneous, misinformation or, according to present-day terms, “fake news.”
Regarding how the crisis unfolded, Indonesia experienced a peculiar process of contagion that, in addition to being part of the shockwave spreading across geographical borders, spread domestically from one sector to another.
It started as an exchange rate shock when the rupiah drastically depreciated, and then rapidly spread to banking in distress and crisis, then to economic and ultimately became a multifaceted crisis that included society and politics.
