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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story


Financial well-being is a responsibility for each nation and the world

Donald Tsang

asia in the new millennium
Mapping the Future The future wealth and size of Asian nations

The 21st Century By Arthur C. Clarke

Asia Trends 2000 The promises and perils of one wired world

The Microchip Silicon will get into everything
The Power As the region prospers, chances for conflict may become greater
Essay by Fidel Ramos Ending repression was easy; now we must defend freedom
The Dynasty It's here to stay
The Classes Many more Asians may escape poverty
The People Democracy in Asia will become increasingly deep-rooted
Essay by Bishop Carlos Ximenes Belo Shifts to new paradigms may include the "common good" and spirituality
The Mind Classrooms of the future will be virtually unrecognizable
Essay by Stan Shih The challenge of creating markets in a competitive world
The Body Science will soon deliver miracle cures, designer babies and new dilemmas
The Soul Asia seeks a new cultural identity
Essay by the Dalai Lama Balancing material progress with inner development to achieve true success
The Food Are the pushers of genetically modified edibles out to lunch?
The Vacation Inner and outer space are the destinations of the future
The Design Asia still has a place in the shape of things to come
The Metropolis Sweeping global changes are reshaping urban destinies
The Earth Environmental awareness is growing
The Jobs New and reinvented careers will fire the imagination
The Money The cashless society is on the way
The Investor Globalization and the Net will empower future shareholders and savers
The Sexes Democracy, capitalism and the Internet can lift women to the top
Essay by Marina Mahathir In Malaysia, we should change the way society looks at their roles
The Family The family promises to be much different than it is today
The Economy New ways of working call for new ways of thinking
Essay by Donald Tsang Financial well-being is a responsibility for each nation and the world
The Network The connection will go much deeper

The Asiaweek Round Table on ASEAN in 2020

Celebrations Asia is gearing up

Celebrities How some of the region's most visible personalities intend to welcome the New Year

Millenium Dictionary From pop anthems to dawn sites and midnight nuptials, a guide to 2000

PAIN IS A TRANSIENT feeling. It can cripple us at its most intense, but when it abates how quickly we forget. With signs of economic recovery emerging in Asia, are we beginning to forget the pain and suffering we have endured over the past two years? Moreover, as stock markets across the region revive, there is a danger of forgetting important lessons learned from the financial crisis. If that happens, we risk falling into a similar, if not worse, crisis in the new millennium.

The message is clear: The world's economies must not weaken their resolve to push through reforms to global financial structures. The Asian crisis - like its European and Mexican predecessors - revealed a common problem of excessive leverage in the global financial system. Banks and corporations over-stretched themselves in risky or unproductive investments using borrowed money at home and abroad. Some hedge funds were on very high gearing, clearly untenable at the swing of the market. When some investors became nervous and withdrew investments, others quickly followed. This unleashed a sequence of predictable but disastrous events: corporate default on payments, massive outflow of foreign exchange, currency devaluation, market collapse and fall of government. The rest of the world suffered, too, as their banks re-scheduled payments and took "hair cuts," and the IMF passed its hat around for more rescue money.

Globalization of the world's financial institutions means that, irrespective of where a major financial problem began, it will spread almost immediately to the rest of the world. Indeed, we can no longer describe this effect as "contagion" spreading through wholly separate markets. The world's open markets are organs of the same body. If one organ goes down, the whole body falls ill. It is foolhardy to believe that any open market benefits from the demise of another.

There was inadequate risk management by investors, creditors, debtors and regulators. A lack of transparency at individual firm and government levels made it difficult for investors to assess risks. Aside from pressing on with reforms in each country, the problem must be tackled on a global scale. Outdated financial architecture must be strengthened to maximize global financial integration. The destabilizing impact of volatile capital flows on markets must be minimized.

In our increasingly interdependent world, building a more robust international financial system is everybody's business. Policymakers should pursue consistent and sustainable economic and exchange rate policies, enhance transparency and disclosure, promote the adoption of best practices and international standards, and strengthen regulatory regimes. International financial institutions should respond more swiftly and effectively to crises, and participate in efforts to improve transparency. Creditors and financial intermediaries should adopt sound market practices, exercise prudent risk management, and collect and disseminate sufficient information to allow accurate risk management. And investors need to better grasp underlying risks involved in their decisions.

The IMF is strengthening public sector transparency, and Hong Kong is involved by adhering to the Enhanced Special Data Dissemination Standard, which governs disclosure of international reserves and external debt. We have also taken part in the pilot study of the IMF's new Code of Good Practices on Transparency in Monetary and Financial Policies.

At the individual firm and market participant level, guidelines regulating entities are being reviewed by international working groups and regulatory bodies to ensure better risk measurement and management. Assigning appropriate capital structure to holders of risky assets is also being considered. Hong Kong welcomes the initiative of the Financial Stability Forum, formed earlier this year by the G7 economies, in broadening its participants to include Australia, Hong Kong, the Netherlands and Singapore. It will be useful in coordinating future efforts that address issues surrounding highly leveraged institutions, offshore financial centers and short-term capital flows.

The substantial effort devoted to reforming the global financial architecture is encouraging. But serious challenges lie ahead. So here I come back to my original point. With memories of the latest financial crisis fading, the momentum for change may lose steam. It is crucial that economies affected by the crisis continue reforms and pursue macroeconomic policies conducive to economic growth.

What's more, we need to establish a permanent mechanism for industrial and emerging market economies to discuss these problems, to build consensus and to take collective action. Only when these reforms are implemented will we have an effective global system to deal with future crises.

Donald Tsang Yam-kuen is Hong Kong's Financial Secretary

This edition's table of contents | Asiaweek home


U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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