Three years after a financial crisis, Southeast Asia's once high-flying economies are back in trouble. But the current slowdown is different in nature, and one that few expect to be as bad.
A spate of gloomy economic data has some fearing a repeat performance of 1997, when massive capital flows out of emerging markets battered Asian currencies and pushed the region into recession.
Singapore is in recession now and other economies in the region may follow suit. This time around, however, the problem is slack demand for high-tech exports.
Structurally, Southeast Asia is very different place than it was in the late 1990s. Debt levels have declined. Currencies are no longer easy targets for speculative attacks. Most Asian economies have abandoned fixed exchange rates, making currencies more flexible.
Adrian Foster, an economist with Nomura Securities, says Southeast Asia's problems now are mostly cyclical, rather than systemic, because the region is so heavily reliant on exporting disk drives and computer chips to the US. The countries currently suffering the most -- Singapore, Malaysia, and Taiwan -- are the ones most dependent on computer chips and other high-tech exports. Those same countries suffered the least during the 1997 to 1998 Asian crisis.
Electronics make up roughly 70 percent of Taiwan's total exports, while they account for about 60 percent for Malaysia and Singapore, according to their governments. The heavy demand for high-tech exports in 1999 and last year had a negative impact on Asia because it allowed many countries to delay cleaning up their banking systems and corporate sectors. After all, why bother with painful reforms in the middle of a boom? But some reforms have taken place.
"We don't seem to be as fragile now as we were going into 1997," said David Cohen, an analyst with Standard & Poor's MMS International. "When problems came, everyone ran. Nobody's quite so wide-eyed anymore."
The thought of foreign investors yanking their money out of Southeast Asia is not as terrifying simply because the region has failed to attract much foreign investment since the crisis. China now lures more money than all 10 countries in ASEAN combined.
Wong Keng-Siong, a regional economist with Dai-ichi Kangyo bank, says the slowdowns will reinvigorate the reform process.
"Most of the weak banks are already gone," Wong said.
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