Five years after a financial crisis crippled Asia and shattered a decade-long boom, economists are putting a positive spin on the painful reforms which followed, pointing to the region's ability to ride out the current economic downturn.
"Nobody wanted the crisis. It had a devastating effect on poverty," said Arup Raha, regional chief economist at Swiss investment bank UBS Warburg. "But if you look at it from a market perspective, it has had a lot of positive influences."
While the double-digit growth of the pre-crisis years, which made Asia the envy of the world, is unlikely to return, Asian policymakers are winning praise for the significant inroads made to prevent a recurrence of the disaster.
PHOTO: AFP
Although much remains to be done, Asia has largely succeeded in strengthening its financial systems and regulatory frameworks, and raised the level of corporate governance, economists said.
Deficiencies in these areas along with an influx of speculative capital inflows -- termed "hot money" -- to finance the region's expansion triggered the 1997 financial crisis.
The end result saw the region forced to undertake major policy adjustments, laying the foundations for sustainable growth.
"I think the net effect is good in the sense that it was a wake up call for a lot of people," said Rabobank's head of Asia Pacific research, Andew Fung.
"It made people realise there is no such thing as an unending run."
Raha said the changes had put Asia in a stronger position to face new challenges.
"We are much better equipped to deal with cyclical gyrations. We also are growing at a much more sustainable rate," he said.
"The markets are rewarding Asia for the structural changes they have undertaken. In a sense we have paid our dues and are coming out a lot stronger."
Thailand, South Korea and Indonesia were the hardest hit during the crisis, with all three countries having to seek out multi-billion dollar bailout packages from the IMF.
In return for the funds, they were forced to adopt strict economic measures. And while critics have charged corruption and protectionism remain rampant, economists say it is unrealistic to expect big improvements in these areas.
"Those sort of things cannot be done overnight," said Nizam Idris, regional economist at IDEAglobal research house.
"In terms of effort and direction in where they are going, they are moving in the right direction. They are trying to avoid what they did earlier, which is debt and balance-of-payments crises. Throughout the region now, almost everyone is having a trade surplus, which is more than what you can say in the pre-crisis period."
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