Quite Volatile and Large Capital Flows
Beware 'unknown unknowns'
Hot News // Monday, June 25, 2007
PM Lee warns of risks despite greater resilience, upbeat outlook across East Asia
Christie Lohchristie@mediacorp.com.sg
TEN years after the dizzying Asian financial crisis, the region is on a firmer footing and set for continued progress. But the march onward could be cut short if complacency blinds countries to the risks ahead.
.
.
Prime Minister Lee Hsien Loong sounded this note of caution at a high-level economic gathering last night, while portraying a hardier East Asia. Compared to fateful 1997, confidence has returned. The region's gross domestic product per capita has jumped nearly 30 per cent over the decade and stock markets are up, he said.
.
.
"Going forward, can East Asia's growth be sustained, or are we retracing the footsteps that led to the crisis in 1997? I believe there is greater resilience in the region today compared to 10 years ago," Mr Lee said during a welcome reception at the Istana for delegates of the 16th World Economic Forum (WEF) on East Asia.
.
.
What's positive: East Asian economies today are running balance of payment surpluses, not deficits; their currencies are not overvalued; and they have built up foreign reserves to deal with unexpected situations. It also has a broader base of growth — China and India have risen as centres of economic dynamism, Japan has emerged from "the lost decade of the 1990s", while South Korea's chaebols have undergone restructuring.
.
.
Yet, despite the stronger position in East Asia, "mishaps can still happen", he warned.
.
.
As income disparities widen, governments may be pressured to roll back reforms and revert to nationalistic rules for foreign investments, choking off growth and leading to the souring of relationships, warned Mr Lee.
.
.
"In a world that is seeing more and more rapid and discontinuous change, there are surely many surprises and 'unknown unknowns' ahead," said Mr Lee, borrowing the phrase made famous by former United States Defence Secretary Donald Rumsfeld.
.
.
Similarly cautious was Mr Tharman Shanmugaratnam, Education Minister and Second Minister for Finance, who warned of "vicious unknown unknowns" around the corner. Bubbles in the asset and equity markets suggest a financial shock could come, he told about 300 delegates at a WEF session, adding that financial markets are seeing "a significant build-up of risk" amid rising complacency due to a long period of uninterrupted growth.
.
.
"It's precisely because everyone's feeling good that we know something is coming," he said. "Seasoned observers know there are risks piling up in the system. We don't quite know how to put our finger on it and we don't know how it's going to play out, but let's be a little more cautious."
.
.
Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.
.
Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.
.
These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
.
.
"We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.
.
Thailand triggered the Asian financial crisis when the country tried to shore up its faltering economy by devaluing the baht and abandoning the US-dollar peg. That set off a chain reaction that turned Asia's investment and real-estate boom into a bust, as foreign investors pulled out.
.
.
"The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
PM Lee warns of risks despite greater don't know how it's going to play out, but let's be a little more cautious."
.Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
."We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.Thailand triggered the Asian financial crisis when the country tried to shore up its faltering economy by devaluing the baht and abandoning the US-dollar peg. That set off a chain reaction that turned Asia's investment and real-estate boom into a bust, as foreign investors pulled out.
."The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
PM Lee warns of risks despite greater resilience, upbeat outlook across East Asia
Christie Lohchristie@mediacorp.com.sg
TEN years after the dizzying Asian financial crisis, the region is on a firmer footing and set for continued progress. But the march onward could be cut short if complacency blinds countries to the risks ahead.
.Prime Minister Lee Hsien Loong sounded this note of caution at a high-level economic gathering last night, while portraying a hardier East Asia. Compared to fateful 1997, confidence has returned. The region's gross domestic product per capita has jumped nearly 30 per cent over the decade and stock markets are up, he said.
."Going forward, can East Asia's growth be sustained, or are we retracing the footsteps that led to the crisis in 1997? I believe there is greater resilience in the region today compared to 10 years ago," Mr Lee said during a welcome reception at the Istana for delegates of the 16th World Economic Forum (WEF) on East Asia.
.What's positive: East Asian economies today are running balance of payment surpluses, not deficits; their currencies are not overvalued; and they have built up foreign reserves to deal with unexpected situations. It also has a broader base of growth — China and India have risen as centres of economic dynamism, Japan has emerged from "the lost decade of the 1990s", while South Korea's chaebols have undergone restructuring.
.Yet, despite the stronger position in East Asia, "mishaps can still happen", he warned.
.As income disparities widen, governments may be pressured to roll back reforms and revert to nationalistic rules for foreign investments, choking off growth and leading to the souring of relationships, warned Mr Lee.
."In a world that is seeing more and more rapid and discontinuous change, there are surely many surprises and 'unknown unknowns' ahead," said Mr Lee, borrowing the phrase made famous by former United States Defence Secretary Donald Rumsfeld.
.Similarly cautious was Mr Tharman Shanmugaratnam, Education Minister and Second Minister for Finance, who warned of "vicious unknown unknowns" around the corner. Bubbles in the asset and equity markets suggest a financial shock could come, he told about 300 delegates at a WEF session, adding that financial markets are seeing "a significant build-up of risk" amid rising complacency due to a long period of uninterrupted growth.
."It's precisely because everyone's feeling good that we know something is coming," he said. "Seasoned observers know there are risks piling up in the system. We don't quite know how to put our finger on it and we don't know how it's going to play out, but let's be a little more cautious."
.Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
."We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.Thailand triggered the Asian financial crisis when the country tried to shore up its faltering economy by devaluing the baht and abandoning the US-dollar peg. That set off a chain reaction that turned Asia's investment and real-estate boom into a bust, as foreign investors pulled out.
."The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
PM Lee warns of risks despite greater resilience, upbeat outlook across East Asia
Christie Lohchristie@mediacorp.com.sg
PM Lee warns of risks despite greater don't know how it's going to play out, but let's be a little more cautious."
.Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
."We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.Thailand triggered the Asian financial crisis when the country tried to shore up its faltering economy by devaluing the baht and abandoning the US-dollar peg. That set off a chain reaction that turned Asia's investment and real-estate boom into a bust, as foreign investors pulled out.
."The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
PM Lee warns of risks despite greater resilience, upbeat outlook across East Asia
Christie Lohchristie@mediacorp.com.sg
TEN years after the dizzying Asian financial crisis, the region is on a firmer footing and set for continued progress. But the march onward could be cut short if complacency blinds countries to the risks ahead.
.Prime Minister Lee Hsien Loong sounded this note of caution at a high-level economic gathering last night, while portraying a hardier East Asia. Compared to fateful 1997, confidence has returned. The region's gross domestic product per capita has jumped nearly 30 per cent over the decade and stock markets are up, he said.
."Going forward, can East Asia's growth be sustained, or are we retracing the footsteps that led to the crisis in 1997? I believe there is greater resilience in the region today compared to 10 years ago," Mr Lee said during a welcome reception at the Istana for delegates of the 16th World Economic Forum (WEF) on East Asia.
.What's positive: East Asian economies today are running balance of payment surpluses, not deficits; their currencies are not overvalued; and they have built up foreign reserves to deal with unexpected situations. It also has a broader base of growth — China and India have risen as centres of economic dynamism, Japan has emerged from "the lost decade of the 1990s", while South Korea's chaebols have undergone restructuring.
.Yet, despite the stronger position in East Asia, "mishaps can still happen", he warned.
.As income disparities widen, governments may be pressured to roll back reforms and revert to nationalistic rules for foreign investments, choking off growth and leading to the souring of relationships, warned Mr Lee.
."In a world that is seeing more and more rapid and discontinuous change, there are surely many surprises and 'unknown unknowns' ahead," said Mr Lee, borrowing the phrase made famous by former United States Defence Secretary Donald Rumsfeld.
.Similarly cautious was Mr Tharman Shanmugaratnam, Education Minister and Second Minister for Finance, who warned of "vicious unknown unknowns" around the corner. Bubbles in the asset and equity markets suggest a financial shock could come, he told about 300 delegates at a WEF session, adding that financial markets are seeing "a significant build-up of risk" amid rising complacency due to a long period of uninterrupted growth.
."It's precisely because everyone's feeling good that we know something is coming," he said. "Seasoned observers know there are risks piling up in the system. We don't quite know how to put our finger on it and we don't know how it's going to play out, but let's be a little more cautious."
.Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
."We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.Thailand triggered the Asian financial crisis when the country tried to shore up its faltering economy by devaluing the baht and abandoning the US-dollar peg. That set off a chain reaction that turned Asia's investment and real-estate boom into a bust, as foreign investors pulled out.
."The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
PM Lee warns of risks despite greater resilience, upbeat outlook across East Asia
Christie Lohchristie@mediacorp.com.sg
TEN years after the dizzying Asian financial crisis, the region is on a firmer footing and set for continued progress. But the march onward could be cut short if complacency blinds countries to the risks ahead.
.
.
Prime Minister Lee Hsien Loong sounded this note of caution at a high-level economic gathering last night, while portraying a hardier East Asia. Compared to fateful 1997, confidence has returned. The region's gross domestic product per capita has jumped nearly 30 per cent over the decade and stock markets are up, he said.
.
.
"Going forward, can East Asia's growth be sustained, or are we retracing the footsteps that led to the crisis in 1997? I believe there is greater resilience in the region today compared to 10 years ago," Mr Lee said during a welcome reception at the Istana for delegates of the 16th World Economic Forum (WEF) on East Asia.
.
.
What's positive: East Asian economies today are running balance of payment surpluses, not deficits; their currencies are not overvalued; and they have built up foreign reserves to deal with unexpected situations. It also has a broader base of growth — China and India have risen as centres of economic dynamism, Japan has emerged from "the lost decade of the 1990s", while South Korea's chaebols have undergone restructuring.
.
.
Yet, despite the stronger position in East Asia, "mishaps can still happen", he warned.
.
.
As income disparities widen, governments may be pressured to roll back reforms and revert to nationalistic rules for foreign investments, choking off growth and leading to the souring of relationships, warned Mr Lee.
.
.
"In a world that is seeing more and more rapid and discontinuous change, there are surely many surprises and 'unknown unknowns' ahead," said Mr Lee, borrowing the phrase made famous by former United States Defence Secretary Donald Rumsfeld.
.
.
Similarly cautious was Mr Tharman Shanmugaratnam, Education Minister and Second Minister for Finance, who warned of "vicious unknown unknowns" around the corner. Bubbles in the asset and equity markets suggest a financial shock could come, he told about 300 delegates at a WEF session, adding that financial markets are seeing "a significant build-up of risk" amid rising complacency due to a long period of uninterrupted growth.
."It's precisely because everyone's feeling good that we know something is coming," he said. "Seasoned observers know there are risks piling up in the system. We don't quite know how to put our finger on it and we don't know how it's going to play out, but let's be a little more cautious."
.
."It's precisely because everyone's feeling good that we know something is coming," he said. "Seasoned observers know there are risks piling up in the system. We don't quite know how to put our finger on it and we don't know how it's going to play out, but let's be a little more cautious."
.
Mr Shanmugaratnam called on governments to put in place "shock absorbers", including a managed float system instead of fixed exchange rates.
.
.
Meanwhile, the Finance Minister of Thailand — the country which sparked off the Asian financial crisis in 1997 — warned of the "economic chaos" that would result due to the global imbalances.
.
.
These imbalances traditionally refer to the twin US budget and current account deficits, the accumulation of huge foreign currency reserves by Asian central banks and divergent growth rates in the world's major economies.
."We are moving in a situation where there's no real correcting mechanism, hoping that one day the market will perform a correction," said Mr Chalongphob Sussangkarn. "But, as we all know, it's like when you stretch an elastic band. If you let the market correct the mechanism, eventually it will snap. This will bring about a huge amount of economic chaos in the world," he added.
.
"The challenges to the region stem very much from the same source as 10 years ago: quite volatile and large capital flows," said Mr Chalongphob. "Countries such as Thailand still face the challenge of how to deal with this. We are still trying to search for the best answer."
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