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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