Pew International Journalism Program

Asian Economic Crisis Impact Will Last "Half a Decade More," Expert Says

Washington, Sept. 6, 2000 -- It will take "at least half a decade more" for Asia to recover from the effects of the severe financial crisis that hit the region in 1997, a leading Asia scholar told the Pew Fellows in International Journalism today.

"You've all read the Asia economic slowdown is over: That's wrong," said Karl Jackson, director of Asian Studies at the Johns Hopkins University's School of Advanced International Studies and a former high-ranking Defense Department and National security Council official.

Jackson, the first in a series of speakers in the fall 2000 session of the Pew Fellowships in International Journalism program, said that while economic recovery has begun in several of the worst-hit Asian countries, such as Korea and Thailand, it will take years to "get back to where they were before" the crisis.

In an overview on Asian political and economic challenges, Jackson said the "Asia-wide problem" in recovering from the financial crisis is that it has become a crisis of the "private sector." Asian companies made "so many unwise investments" in the 1990s that the region's government-affiliated banks went "down with them." Recovery now will take longer than many people expect.

A former assistant to the vice president for national security affairs at the National Security Council and now the C.V. Starr Distinguished Professor at SAIS, Jackson offered his analysis of major issues facing Asian countries. His observations included the following comments:

On Indonesia:

President Abdurrahman Wahid is the "best possible person for the job," but is "not good enough" to solve the country's formidable economic and political problems. Even as the country faces the worst effects of the region's financial crisis and with its banking system in ruins, Wahid's "knowledge of economics you could place in a thimble, and it would rattle." Indonesia faces the prospect of a "lost decade" while it struggles to make the transition to a democracy after 30 years of authoritarian rule. "The struggle is not going well," Jackson said, citing ethnic and religious unrest on top of the political and economic problems.

On Japan:

Japan's outmoded economic system is dying, but change is happening too slowly at a time when the country's banks have piled up more than "$1 trillion worth of bad loans" through the practice of merging weak banks with stronger ones. Japan is undergoing a "revolution" as it tries to transform itself from a centrally directed economy to a free-market one. Jackson suggested the country needs to raise taxes and Japanese companies need to turn away from being "social institutions" and become more conscious of returning a high return on investment.

Still the "linchpin" for U.S. interests and policy in Asia, Japan must reform its traditional political system that has produced deterioration in the quality of top leaders. Many Japanese feel the quality of the country's top politicians has sunk so low that political parties are now reaching to find leaders "not only to the bottom of the barrel, they've gone right through the barrel."

On China and India:

The emergence of China and India as major powers in the 21st century will be one of the world's "biggest challenges since the emergence of a united Germany" a century ago. India, which will soon surpass China as the most populous country in the world, will assume increasing importance in global affairs. For China to maintain its important role in the world, it must find ways to cope with the destabilizing potential of a "huge floating labor pool of 120 million unemployed" and to reconcile economic growth with challenges to its authoritarian political rule. Washington, Sept. 6 -- It will take "at least half a decade more" for Asia to recover from the effects of the severe financial crisis that hit the region in 1997, a leading Asia scholar told the Pew Fellows in International Journalism today.