NCPA - National Center for Policy Analysis

IMF Asian Bailout Delayed Reforms

November 1, 1999

Asia is once again on the economic march, but without achieving the reforms necessary to keep the momentum going long-term, analysts have concluded. Those economies were salvaged in part by injections of money from the International Monetary Fund. So that infusion has actually taken the pressure off of Asian leaders to move toward market-based policies.

  • When the Asian crisis developed in 1997, the IMF arranged a $110 billion bailout of Thailand, Indonesia and South Korea.
  • South Korea's economy -- which contracted 5.5 percent last year -- is expected to grow 6.5 percent this year.
  • Thailand's economy contracted 8 percent last year -- but may grow 3 percent to 4 percent this year.
  • Although Indonesia is in political turmoil, the IMF reports positive growth in this year's first half.

Analysts in Washington, D.C., say they have noted a change in attitude toward massive financial bailouts. In the first place, they are often used to insulate foreign investors from the risks they shouldered. Moreover, to dig themselves out of the hole and repay the IMF, countries all too often raise taxes and tariffs -- policy blunders which carry their own costs.

Experts believe it is only a question of time before Asian countries are forced to adopt a Western style of capitalism -- but that day has been pushed into the future.

Source: Brian Mitchell, "Reason to Doubt Asia's Rebound?" Investor's Business Daily, November 1, 1999.


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