Regional Responses to the Southeast Asian Financial Crisis: A Case of Self-Help or No Help?

Abstract

The currency-cum-financial crises of the 1990s, particularly that which hit Southeast Asia after the devaluation of the Thai baht on 2 July 1997, are suggestive of the relevance and pervasiveness of contagion or negative spillover effects that are largely regional in scope. As such, one of the mantras since the onset of the Southeast Asian financial crisis has been the need for 'regional solutions to regional problems'. Given that the two focal institutions in Southeast Asia, namely the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC), were perceived as being successful in their past attempts in problem-solving, there were high expectations that such regionalism would be the key in finding solutions to the Southeast Asian financial crisis and mitigating the aftershocks. Accordingly, this paper evaluates the regional responses to the crisis, taking stock of both preventive and curative initiatives of significance. While the focus is on ASEAN and APEC, consistent with the concept of 'loose' or 'non-institutionalised' regionalism in Southeast Asia and the larger Asia-Pacific regions, other ad hoc unilateral or bilateral initiatives of significance by other Asian member countries in APEC are also examined, particularly those by the region's dominant economic power, Japan. Current regional responses have not been very successful. This has led to a shift in the emphasis to unilateral and bilateral arrangements. Japan's contribution has been by far the largest relative to others. The crisis and the responses to it have revealed that unless there is greater institutionalisation, ASEAN countries would continue to look outside the region for assistance to facilitate their recovery.