One can tell the state of the Asian economy by exploring its shopping malls. From Seoul to Surabaya, these cool chrome and marble emporiums had come to symbolise the Asian economic miracle. Now they stand as testimony to the varying fortunes of countries buffeted by the region's worst post-World War recession.
In Hong Kong some expensive stores have closed. In Kuala Lumpur assistants snooze in upmarket dress shops. In Jakarta those malls not burnt to the ground by angry mobs have many boarded up outlets.
The recession in Asia can also be measured by the number of beggars in the streets. Hundreds of kids jostle for coins at traffic lights in Indonesia, where the rupiah lost 85 per cent of its value against the dollar in a year and high interest rates have crippled businesses.
Millions of people can barely afford one meal a day. The tiger economies of southeast Asia lifted more than 370 million people out of poverty, but in the last year more than 100 million have slipped below the poverty line, and the middle class is shrinking fast, say World Bank officials.
This is due not just to the withdrawal of capital and the collapse of currencies, but the measures being imposed across the region to create the conditions for recovery. Food subsidies have been withdrawn, big conglomerates which guaranteed employment have been shaken up as protectionism and cronyism are exposed, some industries closed under new bankruptcy laws, debt-laden banks have been put out of business and under-performing industries are being shut down to reduce over-capacity. The question many suffering people might be entitled to ask is: when will the pain give way to gain?
Up to recently few analysts would attempt an answer. The contagion effect has been so severe that Russia and Brazil are in crisis due to large-scale short-term capital outflows and currency depreciation. Asia remains hostage to global shifts, and to political uncertainties. Some governments in the region fear being overwhelmed by the sheer scale of unemployment and the security concerns brought on by poverty and desperation.
The much touted reforms of debt-ridden companies in Thailand and the break-up of the chaebols (family conglomerates) in South Korea are proceeding at a snail's pace as vested interests assert themselves. The Asian crisis has proved deeper and longer-lasting than anticipated.
But after 15 months of unrelenting bad news, some economic experts say they can detect signs of a new dawn in Asia, and are predicting that the region may actually be on the road to recovery. The International Monetary Fund, whose reputation is tied up with the success of its harsh prescriptions, is most anxious to detect signs of recovery and is assuring governments that Asia's crisis-hit economies will bottom out in the first half of next year.
The IMF's deputy director for research Mr Flemming Larsen maintains that the recent rebound in southeast Asian stocks and currencies suggests that the financial markets at last see the IMF-inspired reforms working. Outside factors have helped build confidence after a bleak September when it looked as if the global crisis was spinning out of control.
These include US interest rate cuts, the rally on Wall Street since October 14th, Japan's bank reforms, the recovery of the yen, and the signs of accelerated growth in China. The yen's rally removed the risk that Asia would be plunged into a new round of currency devaluations, pulling down the Chinese yuan and the Hong Kong dollar.
Asian markets have also rallied this month, with Bangkok's 45 per cent rise leading the way, though they remain far below their 1997 highs. Optimists say that the region's easing of monetary and fiscal policies could boost export growth, allowing the worst-affected Asian countries to build up foreign reserves, though one expert cautioned, "Don't hold your breath".
Such a development depends on a continuing demand for Asian products in Europe and the US. Asian exports will have to grow by more than 2 per cent, analysts say, and there must be sustained world demand for electronics, on which they are so dependent.
But growth in the EU will slow down next year from 2.9 per cent to 2.4 per cent, according to the European Commission and while the US economy will sustain growth of 2 per cent next year it faces a downturn. Consumer confidence in the US hit a 22-month low just this week.
The US Federal Reserve Board chairman Alan Greenspan warned on October 7th that the US was "facing a set of forces that should be dampening demand to an unknown extent in the months ahead".
Some analysts maintain that with the exception of Indonesia and Japan, most economies in the region will still manage to expand next year, despite the uncertainty of foreign demand and the collapse in domestic consumption.
South Korea and Thailand, the two countries which swallowed the harsh IMF medicine from the start, should experience economic growth by the second half of 1999, IMF officials say. South Korea is experiencing painful unemployment and the presence of a popularly-elected leader in President Kim Dae Jung has helped contain labour unrest. But the IMF admits Seoul's economy will shrink 7 per cent this year, much worse than anticipated, as exports have so far failed to fuel a recovery.
Indonesia, the region's worst case, experienced a massive capital outflow and currency collapse. Nevertheless it is achieving a measure of stability, helped by the ousting of President Suharto and a move towards democracy.
The IMF executive director for the Asia and Pacific region, Mr Hubert Neiss said last week that "the process of Indonesian economic recovery has started, marked by the increase in foreign exchange reserves, a stronger rupiah and a surplus in the balance of payment."
It was too early to declare victory, he warned as "the southeast Asian countries this year will see economic growth dropping by 4 to 6 per cent; but next year, they will probably grow by 8 per cent."
The Indonesian government, encouraged by a strengthening in the rupiah from 11,000 to 7,400 to the dollar in recent weeks - which might bring down interest rates - also claims its crisis is bottoming out.
What matters most to Asia is Japanese growth. East Asian leaders meeting in a crisis atmosphere in Singapore this month appealed to Japan to "further expand its money supply in order to bolster their own economies and the world economy against the rising threat of global recession in 1999".
They stressed that Japan, as Asia's major high-income economy with a gross national product twice as large as all of the rest of Asia combined, has a special responsibility to help the region emerge from its deep recession. Tokyo should recapitalise its financial sector, use public funds for the banking sector and expand domestic consumption, they said.
Japan has produced a US$30 (£19.8 billion) package to revitalise Asia's ailing economy. However, in Tokyo analysts say that employment and income conditions are deteriorating and personal consumption is getting weaker. Japan's jobless rate for September equalled its August record high of 4.3 per cent, with data indicating that big firms may be entering a new phase of reducing their work forces.
The man dubbed "Mr Yen", Japan's vice-finance minister, Eisuke Sakakibara, said foreign reserves and public money would have to be injected as quickly and as massively as possible into the Japanese economy to avert a global credit crunch that could have devastating consequences, especially to Asian countries.
"If Japan collapses, it will be really bad for the whole of Asia," Sakakibara told an economic conference in Tokyo.
Japan's economy shrank 0.7 per cent in the year ending March 31st and is expected to contract by a further 1.8 per cent in the current fiscal year. Tax cuts, spending increases and injections of public funds into debt-ridden banks to boost lending, are all being promoted by the government to get Japan out of its worst recession in 50 years, but the head of Japan's economic and planning agency has warned of negative growth continuing into the year 2000.
The gravity of the crisis is a challenge to the Asia Pacific Economic Co-operation forum (APEC) which will bring world leaders like presidents Bill Clinton, Boris Yeltsin (health permitting) and Jiang Zemin in Kuala Lumpur in mid-November.
As a forum to promote greater freedom of international trade, APEC has been unable to suggest real initiatives as the crisis unfolded. Indeed its case for greater market freedom has run up against the fact that China, Malaysia and Hong Kong have successfully challenged orthodoxy. China, which remains closed to world capital movements, has remained an engine of growth in the region.
Its gross domestic product grew 7.2 per cent in the first three quarters of this year. Officials said that with increased investment in basic construction, and accelerated reconstruction of flood-ravaged areas the growth target of 8 per cent for 1998 was attainable. A World Bank official said the figures indicated that "a recovery of the Chinese economy has begun".
Malaysia, for its part, expects to end recession and record 1 per cent growth next year after a recovery enhanced by artificial exchange rate stability and easing of credit. Hong Kong intervened massively in its own stock market to scare away speculators and seems to have got away with it.
Western leaders will try to save APEC from irrelevance by using it as a vehicle for encouraging greater economic and financial transparency. Members such as Indonesia and Malaysia want it to concentrate on measures to restore economic growth and restrict the adverse affect of large movements in capital.
Measures to tackle the economic crisis should be the forum's main goal, said Malaysian Prime Minister Mahathir Mohamad, who will chair the APEC meetings.
The summit will be overshadowed by Malaysia's simmering political crisis, a reminder to APEC that the ebbing of the tide of wealth which fuelled the region's growth has left not just empty shopping malls but dangerous fault lines. "Growth is the ideology which guarantees the cohesion and stability of the region," said a diplomat in Jakarta. "The sooner it returns the better."
