It was, in the annals of Taiwan's economic history, a dark moment.
Taiwan's central bank in July moved to censor private-sector economists who dared predict the nation's currency might fall.
Officials in Taipei didn't call it censorship, but what else are we to make of a senior monetary authority saying: "We object to [banks] expressing views to the press that create a trend"?
That's what Hsu Yi-hsiung, deputy governor of Taiwan's central bank, told Bloomberg reporter Brett Cole at the time. Hsu also charged that the "media seem to be trying to conspire a falling Taiwan dollar trend."
The bank even faxed bullish analyst reports to news agencies, hoping for positive stories.
Bloomberg's Taipei bureau chief, George Hsu (no relation to deputy governor Hsu), was summoned to the central bank for a talking-to about his team's coverage of Taiwan's currency trends.
Monetary officials took exception with Bloomberg reporting the views of some analysts who felt the dollar might fall.
The episode was but one example of economic policy makers blaming the messenger and missing the point. Analysts and journalists merely say and write what they see. If an economy is weakening and government officials or monetary authorities aren't taking prudent steps to correct things, observers will warn investors. It's their job and responsibility to do so.
Tell that to many of Asia's policy makers. Rather than get their economies in order, they are reverting to conspiracy theories and anti-capitalist rhetoric that's scaring the very markets they're hoping to soothe. Call it the blame game, Asian style.
"If you take care of your economy, investors will stick with you," says Anthony Chan, chief economist at Banc One Investment Advisors.
Asia hardly has a monopoly on the blame game. European Central Bank officials aren't above ranting and raving about foreign exchange traders undervaluing the euro. US Treasury Secretary Paul O'Neill lashes out at the press now and again for moving markets by reporting what he says. South Africa's central bank governor, Tito Mboweni, recently chastised Bank of America Corp for "dumping the rand."
Still, Asia's blame game seems to be attracting many players these days. Take the Philippines, where President Gloria Arroyo recently cracked down on "currency speculators." Many of the alleged speculators were banks that dared to sell the peso, driving it below the government's preferred rate of 50 per US dollar. Waning investor demand has made the peso Asia's worst performing currency over the last six months.
So concerned is Arroyo about the "economic sabotage" being committed by traders selling the peso that she's raised the specter of fixing the currency's exchange rate. Such talk left few doubts Arroyo was reading from the playbook of Malaysian Prime Minister Mahathir Mohamad, who she's called a "model of a leader." Mahathir is famous for blaming everyone and everything for Malaysia's troubles, except himself and his policies.
Events in Manila, Taipei and elsewhere serve as reminder of how leaders' words and actions can scare away the investors they're trying to comfort. In today's anything-goes global economy, where capital zooms freely and rapidly across borders, officials must be careful not to "Mahathir" their economies.
Mahathir in 1997 and 1998 nearly toppled Malaysia's economy with words. By blasting capitalism, saying currency trading was "immoral" and should be made illegal and demonizing investors, Mahathir spooked global markets and capital fled. Rather than blaming others, he should've fixed the weak banking system at the root of Malaysia's problems.
If you want to attract investors and keep them engaged in your country, sound economic policies will do the trick. Solid banking systems, transparency and sober leadership are what pulls in capital. Without them, investors leave. And many know it's time to go when politicians and policy makers begin railing against markets. Investors know officials tend to blame markets for their own failures out of desperation.
Yet it's not just smaller economies making scapegoats of markets. Japan, Asia's biggest economy, has taken to complaining that currency speculators are wreaking havoc with the yen. "I suspect there might be something intentional behind the currency's rapid swing," Japanese Finance Minister Masajuro Shiokawa said last month.
While Tokyo hasn't resorted to Mahathir-like condemnations of market participants, it's strange indeed to hear a huge economy like Japan suggesting traders are to blame for its problems.
Shiokawa last week said he would step up efforts to get the Group of Seven industrial nations to eliminate "speculative trading," which he believes is hurting each nation.
Japan also sees sinister forces hurting its stock market.
Financial Services Agency Commissioner Shoji Mori this week instructed Japan's market watchdog group to look into the Nikkei 225 average's dive. He told Japan's Securities and Exchange Surveillance Commission to make sure "there were no trades that run afoul of regulations."
Stocks are falling because Japan's economy is deteriorating anew and Prime Minister Junichiro Koizumi hasn't made good on promises to fix things. Investors are dumping Japanese shares because the fear the Nikkei will soon be trading below the Dow Jones Industrial Average. And what is Tokyo's short-term solution? To investigate who's selling and why.
Tokyo also has taken to blaming the US for its economic woes, especially the Nikkei's plunge. "The decline in stocks is largely affected by the [slowdown in] the US economy," Taku Yamasaki, secretary-general of the ruling Liberal Democratic Party, said this week. The piles of bad loans in Japan's banks and its worsening economic prospects wouldn't have anything to do with it?
Asia's blame game also extends to neighbors pointing fingers at each other. China, for instance, is the brunt of criticism these days for essentially being a better competitor than its neighbors. If China can offer lower labor and property costs than Japan, Singapore or Taiwan, companies will produce there.
Yet rather than dumping industries in which they're no longer competitive, folks in Tokyo, Singapore and Taipei complain that China is "hollowing out" their economies. That Beijing is some evil force killing Asia's economy. In reality, others in Asia would do exactly what China is doing if they were able.
It's human nature to blame others for your problems. But when you're running an economy, it's better to work to win investors' confidence than point fingers at them.
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