Japan and ASEAN: Partnership for a Stable and Prosperous Future

5. Asian Economic Crisis

13 The collapse of the USSR and the end of cold war saw ASEAN membership expand through the 1990s to include CLMV countries, and the regional body enter a new phase. In 1997, however, ASEAN faced a serious crisis. A series of currency or economic crises in Asia started with the sudden decline of the Thai baht in July 1997, and then spread to country after country, including Indonesia and the Republic of Korea, causing an unprecedented economic crisis that affected the entire regional economy. The real economies of these countries, which had been praised as the “East Asian miracle” and had achieved continued high growth, drastically deteriorated. In 1998, most of the ASEAN 5 Asian Economic Crisis 14 Takaaki Kojima countries experienced negative growth (Thailand: minus 10.5 per cent; Indonesia: minus 13.2 per cent; Singapore: minus 0.9 per cent). The crises was a serious challenge to Japan, too, because the effectiveness of Japan’s contribution to Southeast Asian countries was to be tested. Japan responded quickly, and played a leading role in bilateral assistance in the initial response to the crisis. In addition, it not only provided support for liquidity to compensate the temporary lack of funds but also long-term stable funds by using all of its policy financing vehicles, including Yen loans. Under the New Miyazawa Initiative, which was announced at the IMF/World Bank Annual Meeting in October 1998, Japan provided a financial support scheme totalling 30 billion dollars, including medium and longterm financial assistance by Yen loans, the Export-Import Bank loans, etc. to bring about the recovery of the real economies of Southeast Asian countries. This 30 billion dollars contribution was by far the largest and most wide-ranging support package followed by China’s contribution of 4 billion dollars. The provision of such a large credit line made clear Japan’s determination to 15 provide support to countries in crisis and served as a major backing for the restoration of international confidence in these countries. The Japanese Government extended its hands to those affected by the crisis. In addition to these measures, Japan also implemented emergency assistance for food and medical products, and provided aid for humanitarian , medical care, health measures totalling 1.2 billion dollars in scale. Japanese businesses also contributed greatly to the recovery of the real economies of Southeast Asian countries. While many foreign companies withdrew from Southeast Asia because of the crisis, most Japanese companies retained their operations in Southeast Asia, continuing their business activities while contending with the crisis. This can be shown by the rising membership trend experienced by the Japanese Chambers of Commerce and Industry in ASEAN countries. The total number of registered member in ASEAN countries in 1997 was 3,744 companies. Despite this crisis, the figure increased to 3,770 companies in 1998, and subsequently 3,862 companies in 1999. ASEAN countries which were affected by the crisis were able to overcome it in Asian Economic Crisis 16 Takaaki Kojima a relatively short period. Certainly, the main factor was again the resolute efforts of each government and its people, but the role played by Japan in supporting them was of considerable significance. ...