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20 years after the Asian Financial Crisis: What have we learned?

By Takehiko Nakao (The Philippine Star

Photo:)This month marks 20 years since the Asian Financial Crisis. It’s appropriate to consider at this juncture why the crisis happened, and what we have learned about how countries can safeguard their economies from future shocks and deliver sustainable and inclusive growth. File

MANILA, Philippines - This month marks 20 years since the Asian Financial Crisis. It’s appropriate to consider at this juncture why the crisis happened, and what we have learned about how countries can safeguard their economies from future shocks and deliver sustainable and inclusive growth.

The combined currency and banking crises started in Thailand in July 1997 and quickly spread to the Republic of Korea, Indonesia, Malaysia and the Philippines. In little more than a year, gross domestic product at the five crisis-affected countries fell by a combined 30 percent.

The crisis can be traced to the premature opening-up of capital accounts before domestic financial systems and regulations were ready. Short-term borrowing was liberalized even more than long-term foreign direct investment in those countries.

Encouraged by dollar-pegged exchange rates, portfolio investment and bank loans from advanced economies flooded into Asia before the crisis, fueling domestic asset and property price bubbles. Large short-term US-denominated debts financed long-term domestic investments, creating currency and maturity mismatches. Once it became clear they were unsustainable, capital flows suddenly reversed. This led to large devaluations of the currencies and massive bank defaults.

The international community quickly came to the rescue. The International Monetary Fund, World Bank, Asian Development Bank (ADB) and the region’s governments provided foreign exchange liquidity and budget support. ADB offered $7.8 billion in loans over two years, mainly through fast disbursing policy-based lending for financial sector reform and social protection to Indonesia, the Republic of Korea and Thailand.

In the event, countries recovered faster than expected. After the initial stabilization measures, authorities at crisis-affected countries reinforced sound macroeconomic policies supported by fiscal prudence and more independent central banks. They adopted more flexible exchange rates, strengthened financial sector regulation and governance and implemented structural reforms. Countries adopted more prudent approaches to capital account liberalization with better sequencing, consistent with domestic economic conditions. The crisis also gave strong impetus to regional cooperation initiatives.

Today, Asia has a stronger economic outlook. Developing Asia’s economies grew 6.8 percent yearly over the past two decades, faster than any other region. The region’s growth now relies much more on domestic demand. These achievements belie criticisms during the crisis that Asia’s growth miracle was a myth and unsustainable.

I believe that the development pattern in Asia is evolving from the “flying geese model” popular in the 1960s, in which certain industries shifted from the front runner – Japan – to the “four tigers” and others as technology advanced. It is now based on a “production sharing network model,” in which different countries share parts of production processes, not necessarily reflecting their development stages.

This new process enables developing countries to integrate into the regional and global value chains more quickly, thereby facilitating technical and skills transfers which broaden growth opportunities for late comers.

But Asia should not be complacent. Around 330 million of its people still live in absolute poverty, and many economies are experiencing rising inequality. Further steps are needed to make economies more resilient and ensure sustainable and inclusive growth.

First, countries must continue pursuing sound macroeconomic policies. They need to keep adequate fiscal space and international reserve buffers against future shocks. The region requires greater revenues from tax reforms and better collection to finance infrastructure and social sector needs.

Second, countries need deeper and broader financial systems. In addition to sound banking sectors, they need strong capital markets, especially in local currency bonds, both sovereign and corporate. The ASEAN+3 Asian Bond Markets Initiative, supported by ADB, has helped to expand outstanding local currency bonds from $1 trillion in 2002 to over $10 trillion in 2016.

Third, both macro- and micro-prudential policies are critical to maintain financial stability. Cross-border capital flows, domestic credit growth and asset price inflation should be monitored closely. And much wider financial inclusion is needed, not just to support social equity, but to enhance sustainable growth by boosting access to financial services for small and medium-sized enterprises and for households.

Fourth, the region must narrow large infrastructure gaps, which ADB estimates will require over $1.7 trillion a year through 2030. Over 400 million people still lack electricity and about 300 million have no access to safe drinking water.

Fifth, Asia must also address climate change risks through both mitigation and adaptation measures. By using smart urban planning and technology, Asian cities can be more resilient and livable.

Sixth, human capital development is essential for countries to advance and avoid the middle-income trap. Education systems should equip people with the necessary skills and knowledge to adapt to a rapidly-evolving technology and business environment. Adequate health services are urgently needed.

Finally, regional cooperation can mitigate risks from globalization. Financial crises are becoming more frequent and costly in a world of free capital flows and financial liberalization.

Strengthening regional financial cooperation for emergency financing, macroeconomic surveillance and collective efforts for financial sector development through initiatives such as the Chiang Mai Initiative Multilateralization will contribute to macroeconomic and financial stability.

Asia is in a much stronger position than 20 years ago, but should remain vigilant.

Takehiko Nakao is president of the Asian Development Bank.


Bosch PH sustains double-digit growth; welcomes new leadership

By Jing Garcia, News5 | InterAksyon

MANILA, PHILIPPINES | Effective July 1, 2017, Bosch Philippines will be under a new leadership with the appointment of Richard Walker, who will replace Andrew Powell, who, on the other hand, will be assuming a new role as managing director of Bosch Indonesia, also in July.

Under Powell, Bosch Philippines saw double digit growth in the country closing its 2016 fiscal year with US$56 million in consolidated sales in the country. Compared to the previous year, the company achieved a growth of 13 percent.

The momentum, Bosch executives said, was driven by robust growth in the area of construction, automotive and manufacturing industries, and of course, the increased consumer spending power on the back of a steady economic growth.

“With double-digit business growth for the third consecutive year, the Philippines earns a bright spot in Southeast Asia as one of the best performing markets for Bosch,” said Powell, outgoing managing director of Bosch Philippines. “We continue to see many opportunities here.”

Employee headcount in the Philippines grew by 16 percent to 530 associates over the course of 2016, due to expansion of its geographical footprint, along with Bosch’s product and solutions portfolio.

Bosch Power Tools continued to be the company’s strongest contributor to sales in the Philippines, according to the Germany-based company. The division’s revenue was fueled by heavy demand for its Contractors’ Choice mid-price product range, as well as for cordless tools for both professional users and hobbyists.

The introduction of new tools for woodworking is scheduled for 2017, including the one-battery-fits-all concept for Cordless Tools range.

“In 2016, all Bosch business divisions present in the Philippines have developed strongly”, said Powell.

The Power Tools division also expanded its online retail presence in Lazada.

For the Automotive Aftermarket division, the group said that it has achieved a double-digit increase in sales as well, making 2016 its strongest year yet.

The division’s growth, according to Bosch, was attributed to its “parts, bytes, services” philosophy, offering automotive technology with services, based on its network of 85 Bosch Car Service, Bosch Diesel Service workshops, and the opening of Express Car Service workshops nationwide.


Dom Martin's vestments: Indigenized robes for worship


MANILA -- A collection of 60 liturgical vestments from 20 ethno-linguistic groups is currently on display at the Ayala Museum in Makati City.
The exhibit, entitled “Vested for Worship, Wrapped in Identity”, showcases the designs of Benedictine monk, Dom Martin Hizon Gomez, OSB from the Abbey of the Transfiguration in Malaybalay, Bukidnon.
Dom Martin studied at the SLIMS Fashion and Arts School from 1967-1968 and had a 22-year career as a fashion designer before entering the monastery.
The Catholic Church has quite recently adopted the concept of “enculturation”, which means that songs -- and now vestments -- can be indigenized. Vestments can make use of fabrics belonging to the cultural identity of each parish.
Amazed by the country’s rich cultural heritage, Dom Martin was prompted to ask, “We have all these beautiful materials. How come we never use them for the Church?”
Dom Martin however had to make certain that fabrics and other ornaments from the various ethno-linguistic groups in the country remain available. “If I am going to promote the use of indigenous materials, I should be assured of the supply. I know they are beautiful but do people still weave them? I might be creating a market but then all of a sudden, there might be no supply,” he said.
Acting as his own researcher and anthropologist, Dom Martin set out on a journey that would take him from his native Mindanao to the northernmost parts of Luzon in search of the best materials that would represent the ethno-linguistic groups of the Philippines.
It was a project that would take him four-and-a-half years to complete. Dom Martin traveled and studied 20 ethno-linguistic groups to make sure they are still weaving and can weave for the Church.
The monk sought the help of the Philippine Textile Research Institute (PTRI), Fiber Industry Development Authority (FIDA), and the Katutubong Pilipino Foundation, whose chairperson Margie Macasaet encouraged him to create a whole collection in time for the Philippine Centennial Celebrations in 1998.
He also checked with his embroiderers in Parañaque and Las Piñas to see if they were still around and working. They were only too glad to help with his project.
“I was very blessed that all the people I approached believed in what I wanted to do — to enculturate liturgical vestments and make them Filipino,” Dom Martin said.
In the field while doing research, Dom Martin realized how remote and inaccessible some of these indigenous groups were, for instance, the “Itneg” in Abra, which he reached after a long trek that included crossing a hanging bridge over a raging river.
“Two days later when I came home, I talked to my brother and I said, please get me an insurance policy. I did not realize this research was going to entail some danger,” he quipped.
The resulting pieces were nothing short of breathtaking. The vestments were done in a variety of fabrics, including abaca and “pinya”, and incorporated the colors of the Itneg, Gaddang, Ifugaos and many other indigenous peoples.
Each piece is totally rendered by hand. The ornaments and embroidery work are intricate and exquisite, fusing in such liturgical symbols as the cross, vines and branches.
According to Dom Martin, the simplicity of the vestments in the early days signified that the Church closely identified itself with the poor. This explains why he left out symbols on the stole --“stola” in Greek -- which means “towel”.
“You do not put symbols on top of symbols. In the early ages, all of these vestments were ordinary clothing. The stola was just a towel that the men used to wipe their faces and hands,” he explained.
”Later on, they had to put emblems and different symbols for catechetical instruction. It served its purpose in those years but at this point in time, they are not strictly necessary, which is why my stoles do not have any additional symbols.”
We have to take pride in our heritage and culture and bring this pride and culture in our liturgical celebrations, he said.
”Only then can we say that our worship has become truly Filipino. Enculturating vestments is very important because when a priest celebrates the Holy Eucharist wearing a vestment using indigenous materials, he is not only clothed for worship, he is wrapped in the Filipino identity,” Dom Martin.
The exhibit runs at the Ayala Museum until September 5. -- PNA

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