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	May 1999

The opinions expressed were made in a private capacity and not as official representatives of the UNU.

Ramesh Thakur

Giovanni Andrea Cornia

What do you see as the key events of 1998?

Yoginder Alagh: In South Asia, last year's key event was the perspective that the East Asian meltdown is not a temporary aberration but is going to have a lasting impact. As of last September and October, South Asian countries hadn't grasped that. The second thing was the decision of the present government of India to conduct nuclear tests. India has always had a security doctrine that we should have the capability to do these things, but not do them: to keep the fist closed. Previous governments had considered this, but the current government did it.

Ramesh Thakur: Economically, the key event of the year was the depth, sweep, and durability of the financial crisis, and its consequences domestically, regionally, and globally - including for multilateral institutions. It is astonishing how much more widely accepted is the view now that the IMF mishandled the response in the early stages of the crisis. When you have even the World Bank implicitly criticizing a sister institution, that indicates the level of discomfort.

Also, there is the limit to how much major players can do to resolve the crisis. In the early months, when the crisis started in Thailand, there was a feeling that the rest of the world could be insulated or quarantined from the crisis. That is gone.

The big question mark for 1999 is how this fares for China, and will it be able to survive the particular contagion.

On the security side, the nuclear tests by India and Pakistan were a rude shock to most people who thought this issue had been settled and was already a part of history. And now, at the end of 1998, the same unsettling questions and uncertain situation in regard to The Democratic People's Republic of Korea have reappeared as well. Whether it was a missile or a rocket that was launched over Japanese territory, that had a global resonance as well. It raises fundamental, long-term questions for Japan.

The Clinton visit to China was also crucial. The whole question remains unanswered as to the long-term fundamental impact of the changing relationship with China, and the repercussions for Taiwan, Japan, and India, to name three prominent examples.

In a sense, we leave the year with as much uncertainty as we entered it.

Giovanni Andrea Cornia: Until two years ago, the world was divided into "virtuous" countries - such as the tigers and the First World - and the poor countries. The Asian financial crisis has brought to the fore the fact that the crisis is much more systemic than just certain culprits in specific parts of the world.

The crisis of the last year-and-a-half will send a signal to some about the end of the Asian miracle. This is false. The issue should be raised, and there are problems; but after the crisis, and the countries recover, they are likely to be stronger than they were before.

A third lesson, which is hotly contested, is that the two Asian giants - India and China - have not been affected. In relative terms, they come out with a more important role to play. There is quite a debate over the policy lessons. We need to look at countries that pursue policies at variance from the mainstream, and continue to prosper.

Wichit Srisa-an: The major concerns among the South-East Asian countries would be the economic crisis, which also leads in some countries to political crisis and social problems. Unemployment is one of the serious problems in quite a number of countries in Southeast Asia. The lessons learned from the crisis will lead to an improvement in economic, political, and social systems.

Thakur: The crisis that has hit Asia will, in time, rank as a defining moment for the region, just as the Great Depression ranks for the rest of the world. At the same time, the other thing that has been brought out by the crisis is the extent to which civil-society elements have already been developed throughout the region. And therein lies the hope for recovery and eventual stability and regeneration.

The relationship between politics and economics has been brought home, as well as the larger issue that, in a more fundamental sense, this is a crisis of governance rather than an economic crisis.

Alagh: I don't think of 1998 as a sort of cataclysmic year. Asian societies and Asian economies do have the inner strength and resilience to cope with these problems.

Cornia: The Great Depression triggered the birth of Keynesian economics, the New Deal, social security systems, and many other mechanisms. The reason that the crisis was worse in Thailand or the Republic of Korea than it would have been in, say, Europe is the absence of a system of unemployment compensation and public assistance. Those economies were growing steadily; they were close to full employment, so they didn't need these kinds of shock absorbers. The crisis forces them to create that, as well as clean up their own balance sheets in the financial sector.

What may emerge after the crisis, which will be much less severe than the Great Depression, is a system that is even more resilient than before.... Institutionally, there is a chance - with the major exception of Indonesia, and maybe one or two others where the problem is political and a consensus is lacking - the Asian economies may come out slightly more robust than they were at the beginning.

What impact has the Asian crisis had on international cooperation and regional relations?

Cornia: The big question is how the collapse of a medium-sized, middle-income country like Thailand has almost wrecked the whole world economy. We did not know enough about how crises in a country can affect so many other countries. In the end, it seems to be not too plausible that all these countries all of a sudden made all these policy mistakes. There is a phenomenon of contagion that does not seem to be understood by the standard economic theory. This is what we need to focus on.

Alagh: High growth is really dependent on trade increasing. And that will depend on better regional cooperation. Trade within Asia is significant. The slowdown is having an effect on the region as a whole.

What about the political impact of the crisis on regional relations?

Alagh: On the economic side, at least, there is no worsening of what is called the political economy, at least in South Asia. In fact, there are more regional cooperation projects being talked about right now.

Cornia: Much depends on how the social, political, and economic costs of the crisis are apportioned. Domestically, some of the people who have suffered the most have been migrant laborers. By and large, there is no mechanism to share the pain. So countries with surplus labor are seeing their labor returning in a rather unpleasant way. That does not make for better relations between countries.

In the end, I don't know if there will be a general deterioration of political relations in the region, or there will be new forms of aggregations.