PM wrong on haze, hope he correct on “no repeat of 1997 crisis’

In Economy, Indonesia on 15/09/2013 at 5:47 am

(Or “1997/ 1998 revisited”)

Earlier this week, PM said: “On balance, I would take a sanguine view. I think the Asian economies are in a stronger position than they were in 1997 when the crisis came. I think we’ve got more safeguards instituted now, over the last decades since the Asian crisis to deal with the likely consequences of big capital flows. CNA

Well, Indonesia’s central bank has raised interest rates for the second time in two weeks as it looks to stem the sharp decline in its currency, the rupiah.

It raised its key rate to 7.25%, the highest level in more than four years.

Indonesia’s currency has dipped nearly 18% against the US dollar since May this year as investors pull out of emerging markets, stoking concerns about the economic impact.

The central bank also cut its growth forecast for the current year.

On Thursday, it said that it now expects the economy to grow between 5.5% to 5.9% compared with its earlier projection of a growth between 5.8% to 6.2%.

That will be the lowest pace of growth since the global financial crisis in 2009.

But he got the haze issue wrong: he said would return “for weeks”. Hasn’t has it? And haze season is almost over. I’m glad he was wrong on this.

Here’s hoping he’s right on the Asian economies because if not

vivid memories of the 1997 crisis in Indonesia … watching in disbelief as a once stable currency slid, gently at first, from 2,400 rupiah to the US dollar in July, to 4,000 by early December, and then, dramatically to more than 16,000 in January.

The economy seized up, and within months Indonesia was in chaos.

… something else too.

The foreign fund managers, who had been cheerleaders for the investment boom before the crisis, privately admitting that the corporate data they were given by Indonesian companies was suspect.

But they continued buying into the country’s broader economic growth story, despite nagging fears about corruption and the persistent current account deficit.

“Start Quote

Today the Thai economy is very different. Because we learned things like risk management, corporate governance, the ability to be flexible”

Jada Wattanasiritham SCB

I remember the World Bank and other respected international experts telling us, after Thailand’s economic collapse in July 1997, that Indonesia was different, its fundamentals were sound. It would not be infected by the disease, they said.

For anyone who experienced those bewildering months, and especially those who were victims of the crisis, they left a lingering mistrust of official reassurances, and an anxiety that they could be caught out again.

She seems to have forgotten:

— Fresh from leveraging up to buy a stake in insurer Ping An (he borrowed US$5.5bn), Dhanin Chearavanont is borrowing US$6 billion to finance a takeover of Siam Makro. Combining the Thai cash-and-carry group with his 7-Eleven convenience store chain makes sense. He co-founded Siam Makro with Dutch group SHV in the late 1980s, but was forced to sell out in 1998 when the Asian crisis left his empire overextended (soon to be repeated?). Sentimentality aside, the combined business should also be in a stronger position to expand into neighbouring Southeast Asian countries such as Laos and Myanmar.

The reunion is expensive. The offer price of 787 baht per share is 75% above where Siam Makro was trading at the beginning of January, and values the business at 53 times last year’s earnings. The advantage is that both Siam Makro and CP All, Mr Dhanin’s partially listed Thai retail company, currently have no debt.

— And in January another Thai tycoon, Charoen Sirivadhanabhakdi, won the battle for control of Fraser and Neave with a debt-heavy $11.2 billion offer based largely on breaking up the Singaporean conglomerate.

1997/1998 again? Both had problems then, esp the former.

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  1. PM Lee,a top high flyer from Catholic High, should first read up on China’s economy,as his wife(top engineer with no understanding of economics) loves to punt my & many others “coffin money” in China collapsing banking stock.

    • Don’t be so anti-PAP and Ho Ching. Maybe you are TRE reader and poster? There is a case for investing in Chinese banks

      BTW yr coffin money invested by GIC, not Temasek. Temasek has had only one capitalinjection since inception. $10bn that then was lost on ang moh banks. But that 10bn likely came from sale of land in 2009 or 10. Numbers look similar.

      • Yes,Sir,thank you.I am neither pro or anti PAP,I speak from Truth I know,a voter for WP.
        Economist may think that there is a case for punting in Chinese banks,so too are many prominent economists who believe that China will surely exceed USA by 2020 or earlier,GDP wise.
        I respect their opinion but do not agree.Robet predicts that China may reach $123,000,000,000,000*,*China’s estimated economy by the year 2040. Be warned.
        I do not believe,but he may or may not be right.I think he is totally wrong.
        Pl tell me that Mad Ho has no influence on GIC,I do not believe,but I respect your kind opinion.Madam Ho is now the guru of investment in Singapore.
        The answer will be out by 2013/2014,no later than 31.12.2014,so we wait.
        Thank you for the kind article.

      • Ain’t Economist. Is from China financier not from the system.

      • To be fair to PAP,I became anti PAP since the elections had been 100 % free but 0% fair,situation has changed now,it is now 100% free but 40% fair,I am quite happy with that as I do not expect much from PAP after looking at them for a very long time,longer than you.After all,USA my admired state probably score only 100% vs 50/60% depending who is the President in power.

  2. I did read the TRE frequently when I was interested in the elections,but not so now as the die has been cast,nothing can change the situation now ,that is PAP will go down by 2016 or earlier.I am more interested in the global situation now as it is now rapture ready.

  3. Just arrived this am,Professor larry Lang on
    Financial difficulties, Chinese people confused 金融困局 百姓困惑

  4. September 13, 2013
    China mainland former Foreign Minister Li Zhaoxing: only Shamao (fools) believe China world number two.
    陸前外長李肇星:中國世界第二 傻帽才信
    Read more: World News Network – North America Chinese News, Chinese Information – Lu’s former Foreign Minister Li Zhaoxing, China is the world’s second for Shamaos陸前外長李肇星-中國世界第二-傻帽才信?instance=top_rec

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