Tagarchief: Japan

June 1998

June 1998

June 1998

Change in Indonesia – Asian addition

Change in Indonesia

The economic crisis seems not have reached the bottom. After a short and respectable recovering in the first quarter of the year things turned bad again. The problems in Japan and especially the continuing disaster in Indonesia was the main reason for the renewed depression.

The lagging Japanese economy, the near insolvent banks and the limited actions of the government are responsible that Japan is not able to take the lead in the reconstruction and build up of the South East Asian economies. And we should not forget that the South East Asian economies are to a high degree connected with eachother. The mutual exports to eachother range from 40 till 60 % of the total of each country. With Japan and China being the most important partners.

The other probably bigger reason for the downturn is the severity of the Indonesian crisis. The austerity measures, the cutting of all subsidies, of the Indonesian government have made live for the ordinary citizen very expensive. The social unrest which started after the second round of price increases have led to the resignation of Suharto as president of Indonesia.

The number of questions have risen after the resignation of Suharto. Are the changes in the government and in the economy enough to satisfy the demands of the population and the international investors. Is the new government able to restore order on the long term.

Law and order, economic and fiscal regulations and trust in the government are preconditions to stabilise Indonesia. And a strong Indonesia is necessary to make any South East Asian economic resurrection lasting longer than one summer.

Political change

The crowds in the major cities in Indonesia went on the rampage after the increases of the prices became public. The situation of the already pressed poor people of Indonesia became unbearable. Supported or even initiated by some criminal gangs large scale looting started. The better off, especially businesses of Chinese descent were targeted by the crowds. There are even some rumors that some government organisations were involved in the beginning of the looting. But there is no substantial evidence to support that theory.

The intensity and scale of the demonstrations by the students of Jakarta increased. The popular uprising and the inactivity of the police against the lootings were the reasons that the demonstrations moved out of their campusses and took over the streets.

Military forces had in the mean time took over control in Jakarta and restored order in the capital. But they permitted the students to demonstrate and opposition groups to operate against the Suharto regime.

Under pressure from the street, the military and even his own Golkar party, Suharto decided to give up power. The new president was going to be B.J. Habibi which is a staunch ally of Suharto, the whole career of Habibi was arranged and supported by Suharto. Habibi the former minister of industry and technology is reknowned for its very expensive modernisation plans like a turbo-prop aircraft and a jet powered aircraft in the design stage. Most of Habibi’s policies were very ambitious but also economic doubtfull.

Habibi is an important player in the Suharto clan but he does not possess that much support in the military and business community in Indonesia. Habibi is therefore considered as an intirim president, the promised elections should deliver a stronger figure.

The first acts of government of Habibi was to restore order, build some confidence in the world by eliminating some business connections with companies of the Suharto clan and replace the majority of the Suharto clan out of the important government positions.

The retirement of Suharto had in the mean time created some stabilisation in Indonesia. The currency did not loose substantially more in value for a couple of days, order could be re-established in the country and the protestors against the Suharto regime could return home with the good feeling of having gained a (small and partial) victory.

Habibi is not the president to lead the country for a long time. He does not possess the political, economical and above all military support to be president for a long time. He is the care-taker to stabilise the economy as much as possible and to get as much as international support as possible at better terms or at least at a better time table. Habibi will try to convince the IMF to make the promised funds of up to $ 43 B. available at easier and better conditions. Or better at less stringent conditions. This would buy the Indonesian government some extra time to solve the crisis on their way.

The IMF will most probably stick to their demands to create political stability and to change the political and economical organisation in Indonesia before new funds are released. With some luck they might be a little lenient on the time table.

Political and economical changes are however unavoidable and they have to be implemented as much as possible. But if the austerity measures could be implemented at a slower pace the hardships to the people could be lesser. If the above mentioned IMF funds would also be available and if the economy would return to a more promising situation the transition would be more acceptable.

The political future

It will be difficult to predict the outcome of the coming political struggle in Indonesia. There are three or four major players which could rally enough support to take over government if the promised election would take place. And some kind of personal change will be very likely, by true free elections, an election in the peculiar Indonesian system or by simply putting a strong figure in command by the armed forces.

The mostpowerful person in Indonesia is without doubt minister of defence and CoS, general Wiranto. General Wiranto has at the moment the support of the defence forces, he enjoys the respect of the socalled Islamic faction and the nationalistic faction. The existence of both factions does not mean that the army is divided it only gives a rather crude indication of preferred policies which exists in the army.

All changes in Indonesia have to be approved by the army. They are the most important power factor and the decisions are born out of a kind board of directors of the most important people in the defence forces. The influence of Wiranto in this group is considerable, especially because he could eliminate the closest and probably the most ambitious allies of Suharto out of the most important positions in the forces. For example the son-in-law of Suharto Lt.-Gen. Prabowo who was the commander of Kostrad and the commanders of other elite units like Kospassus and of the Jakarta army district.

At the moment it seems as Gen. Wiranto does not have any political ambitions. The goal of Wiranto and the army is to preserve the unity of Indonesia and make any change as peacefull and gradual as possible. Any violence and revolution-like activities will be suppressed by the army.

The peculiar Indonesian form of democracy will try to implement this gradual change. They will get the support of the defence forces in this course of action. The candidates who want to become the next president are Amien Rais, Emiel Salim, Golkar chairman Harmoko, Megawati Sukarnoputri and possibly Abdurrahman Wahid. The candidates have all some kind of popular support but the problem with some of them is the inability to transform the popularity in to political power. Especially Rais and Megawati are hit by this problem.

Amien Rais is the leader of the city based muslem organisation Muhammadiya. He has played an important role in the resignation of Suharto. He is somewhat of an opportunist and populist. He used the possiblilities of this crisis the excell his case. He was a member of the new alliance who had a shadow cabinet. He supported the students in their demonstrations. And he rallied his members to take part in several big other demonstrations. The speeches of Rais were moderate and acceptable to the majority of the Indonesians but his writings show a different person. He is a much more fundamentalistic writer, he agitated against zionism, imperialism, westernization and secularization. Rais has a lot of support but his policies could be unacceptable to the defence forces and the world community.

Emiel Salim is a former minister and a candidate of the vice-presidency. He is moderate in his policy but lacks the support to make a succesfull pass at the presidency.

The chairman of the Golkar party, Harmoko, was also active in the resignation of Suharto. He was a close ally of Suharto and one of the last to demand his resignation. The normal very loyal Golkar had to preserve their authority and that was the major reason to join the movement against Suharto. Harmoko could eventually get the support needed to become the next president. He has the right political and military connections to become a promising candidate.

Megawati Sukarnoputri, the daughter of former president Sukarno, has been one of the first and clearest opponents of the Suharto regime. She already tried to become president in the last election. This was countered by some rather unfriendly acts of the Suharto regime. She did not receive enough support in the elections and was rather quiet in the recent demonstrations and activities against the Suharto regime. Beside the failing of Megawati to be an active player in recent demonstrations, she never had a lot of support in the countryside and used probably most of the goodwill in the last elections to be a viable candidate in the next elections.

The last and most doubtfull candidate is Abdurrahman Wahid the leader of Nahdlatul Ulama, the largest muslem organisation in the country. The Nahdlatul Ulama receives most of its support out of the country side and they have been very reluctant to support the demonstrations and the resignation of Suharto. Wahid is very good strategist and kept his cards close to his chest. The moderation of Wahid and his organisation, the connections with the military and the backing of a large organisation could place him in a promising position to become the next president. But he could prefer it to maintain a background position and support another candidate.

It will be difficult to predict who will win but all candidates have conform to the ideas of the defence forces of a gradual transition of Indonesia to a more open society with a more western like administration and legal system. In essence the Indonesian unity and identity have to be preserved and the nation/government and economy reconstructed to bring prosperity to all Indonesians.

Asian addition

The economies and financial situation of South East Asia is still in depression. The growth figures of most countries have shrunk to a couple of percents at best. A number of countries will even experience shrinking economies. The currencies in the region have not made any progress to their old levels. The Asian crisis is more severe and more difficult to eliminate than was expected.

The IMF policy to demand political stability and to introduce western-like financial legislation, accountancy rules and government spending in combination with financial support packages will create a better business climate and growth prospects in the future but it is not enough to solve the crisis.

The depressed economies and devaluations of the curencies will be difficult to turn around. The region is highly interdependent. This means that the whole region must see an improvement to get out of this situation.

The most important economic partner in the region is Japan. Japan is the investor, lender, technology provider and customer of the Asean countries. Asean is an organisation in the Pacific-rim area of which nearly all countries in that region are member or associate-member.

But not only the Asean countries are victim of crisis, also Japan is hit by a crisis, however of different character. Lagging consumer spending, economic stagnation, banks with bad loans and an indebted and distrusted government are the problems of Japan. Japan could make a turnaround if the government would introduce a viable long term government policy on taxes, fiscal and criminal legislation, the elimination of the Yakuza(Japanese maffia) involvement in the economy and changes in the bureaucracy. Japan has all requirements to become an economic healthy country, the people have the highest amount of savings in the world and their industrial capacity is first class.

Japan is the linch-pin to the economic improvement in the Asian area. If Japan brings its house on order it could become a market to the struggling Asian economies. The well being of Japan is also of importance to the world economy, if Japan would experience a serious economic crisis, the whole world would feel it. The recovering of Japan would start a cyclical improvement all around Asia. With the additional benefit that the Asian countries could pay back the loans to Japan which is the biggest lender and investor in Asia. It would therefore be in Japan’s intrest to support Asia.

If Japan implements the above mentioned measurements it would become the powerhouse it was before the crisis. As an economic worldpower it could help the other Asian countries in the economic recovering. With a strong Japan, international support to the Asian countries would make much more sense.

As the crisis in Asia is for a large part the result of overborrowed companies which cannot fullfill their financial obligations, the only solution is to revitalise the companies. This has to be done by the rescheduling of debts, the reorganizing of the banking system, the stabilisation of the currencies and the creation of national and international markets.

The Asian countries with currency and other economic problems have therefore to do their share to get out of the crisis. They have to implement reorganisations in the business community, especially the financial sector, introduce fiscal and account legislation, eliminate bureaucracy, corruption and monopolies and create a stabile political and economical climate to attract international investors.

Standaard
February 1998

February 1998

February 1998

Security changes in the Asian-Pacific region – Iraq, the next battlefield?

Security changes in the Asian-Pacific region

The Asian-Pacpific region

The Asian-Pacific region stretches from the northern territories of Australia in the South to the southern tip of Sahkalin island in the North. This wide area with many different countries with even more different peoples have been the prime example of a successfull economic development. The GDP’s, the technological capabilities and even the self esteem of these countries was booming.

The large currency devaluations in Thailand, Malaysia, Philippines, Indonesia and South Korea and the following economic breakdown in essentially the whole Asian-Pacific region destroyed many big dreams in the region. The wish to become a developed country in their own manner and on the the fast lane was dashed within a couple months because of the already to often mentioned reasons.

Only a couple of countries could remain untouched by the problems in the region. China, Hong Kong and Taiwan could remain more or less stable with a negative reaction on the stock markets and a slow down in sales/exports. But even they, epecially China, have their economic problems. The large inefficient and uncapable Chinese state industry is a heavy mortgage on the economic development of China.

The exception is Japan. The economy of Japan has been depressed since the bubble economy of the eighties bursted. The crisis in Asia have been the reason for the further decreasing of the stock market and the bankruptcy of some large financial institutions. The bankruptcies were also an internal Japanese problem because of failing government policies and control and inappropriate bookkeeping and management in the companies. Japan is however strong enough in resources and knowledge to get business on order again if they are finally willing to settle the problems in the financial sector. But this will need a change of culture in Japanese politics and business customs.

The security situation

The security situation of the Asian-Pacific region will not be inbalanced by the recent difficulties. The independent movements and/or small leftovers from the communist insurgencies in some countries will try to benefit from the economic difficulties but in the end their causes will be to insignificant for the people to change something. They have other things on their mind then ideology or etno/religious -nationalism. To quote Berthold Brecht; “first food than the moral”.

The border squabbles which a large number of countries in the region have with eachother will also be in a state of suspension on the short term. All countries in the region will be to occupied in getting their economies on order before they will be able to settle their border differences.

The military equipment programmes which are planned and partly implemented by numerous countries, like Thailand, Malaysia and the Philippines, will be stretched, deferred, refinanced and even some very ambitious programs like the submarine program in Thailand be cancelled. The major equipment provider to the region, the U.S.A., is supporting this policy and is pressing companies to be flexible on the delivery schedules and payment on the orders of the countries in trouble.

The U.S.A. wants to maintain the stability in the region. It is important for them to keep the programmes alive to protect the security of each country, to satisfy the needs of the military establishment and at the same time support the economy through the offset and compensation programmes associated with the sales. Ofcourse the U.S.A. also wants to protect its market.

The two countries, China and Taiwan, who are in the position to influence the situation are at the same time also the most controversial in their support. Both countries will be tempted to bind the support to conditions and this will have a worsening effect on the stability on the longer term.

China can and has supported some countries who are suffering from the crises. The resources of China are however limited. The Chinese currency reserves are about 140 B. US dollar. This sum might look very big, as it is, but if we consider the resources needed to avoid a devaluation of the Hong Kong dollar and the internal economic problems of China, the money will be very badly needed by the Chinese themselve. If the support which given by China is politically connected then they will create a lot of hard feelings for the future. Finally the Chinese statement that they will not devaluate the Yuan, the Chinese currency, are nothing more then words. First they have already devaluated the Yuan in 1994 with 35 % and second another devaluation would be bad for the Chinese economy because they will loose the trust of international investors.

Taiwan is in a similar position, it also can and has supported a number of countries. The Taiwanese financial resources are about the half of China but the Taiwanese economy and industry is in much better shape than the Chinese one. Taiwanese entrepeneurs are already involved in the South-East Asian economies through large investments. These investments of Taiwan in S-E Asia are part of the South-movement of the Taiwanese government to be less dependent on China where the bulk of Taiwanese investments are placed. This familiarity with the S-E Asian markets will make Taiwanese support very usefull in the recovering phase.

Taiwan might be, even more than China, tempted to get a kind of recognition from the countries they help. But this will increase the hostility between China and Taiwan and it forces the Asian countries to choose sides.

Most of the countries in trouble will accept the support but they will not recognize Taiwan and continue to view the relations the same as before the crisis. The acceptance of Taiwanese support could however be already to much for the Chinese wishes. China only seems to accept Taiwanese support if it is absolutely free of any political connection.

The Asian economic disaster will limit the differences between a number of countries on the short term. The policy implemented in this crisis will however set the stage for the future cooperation in the Asian-Pacific region. If China and Taiwan are to much focused on eachother the results could dangerous. On the long term the tension between China and Taiwan could raise to unprecedented levels. This will place a number of countries, like Indonesia, Malaysia and the Philippines, in a dilemma. They have already differences with China and want to limit Chinese power but they also do not want to make China to a direct enemy because of Taiwan.

The crisis has proved that the U.S.A. is indispensable in the region. They are the stabilising factor which are able to help with economic problems as with possible political tensions in the area. China is faraway from being the power it wants to be in the region. They do not have the means to solve economic problems and are viewed as a country with geographical ambitions.

Iraq, the next battlefield?

The fullfillment of the U.N. resolutions, of eliminating all Weapons of Mass Destructions, WMD, seems to get more difficult as the second Gulf War is further away. The search of inspection teams to capabilities to build and the storage of WMD is being hindered by Iraqi security forces and by the refusal to let inspections teams into presidential palaces and properties.

The U.S.A. is however pressing for the fullfillment of the resolutions. They are supported by the U.K. Most of the other states agree with the U.S.A. that Iraq has to give up all capabilities which are related to WMD. They are however less willing to use violence to reach that goal. The large majority of Arab countries are against using military means where as Russia and France could be persuaded to agree to the use of air assaults but they will not actively support the assault.

The Arab countries, France and Russia are even pressing for the elemination of the embargo towards Iraq. They think cooperation and trade relations will be more successfull.

As the last remaining superpower the U.S.A. is determined to press Iraq into obeying to the U.N. resolutions. Iraq on the other hand is using all means available to split the international community. Saddam has interpreted the new situation in the Middle East very good. With exploiting the inconsistencies of the U.S. Middle East policy and the policy of offering a little and making at the same time objections to the composition of the inspection teams and refusing entry to some places he could forestall a creation of a new alliance against Iraq.

Problems with an assault on Iraq

An attack on Iraq will be a very difficult operation. The problem is not the launching of air strikes and missiles into Iraq but everything associated with an assault.

The U.S. will not be able to get the same support for this action as it had in the second Gulf War. It will be an operation with just a handfull other countries like the U.K. and political backing of Kuwait. The U.S. will loose a lot of friends in the Arab world especially their two biggest allies, Saudi Arabia and Egypt. These two countries would have a lot of difficulties to justify the support of a U.S. lead attack on an Arab country. Especially if one considers the large fundamentalistic organisations in those countries.

As mentioned above the launching of air strikes and missiles is not difficult. The problems start with the sense and usefullness of an air strike, the identification of the right targets and the proper elimination of those targets.

The use of airpower to solve problems can be usefull if the attacked party is sensitive towards the effects of such an air strike or in coordination with combined arms assault. In the case of Iraq, it will not be very effective. It is not possible to cripple the whole society by the use of massive air strikes. The results will be devastating, if not only military and industrial sites are attacked but also the infra-structure and other civil targets are destroyed. The long term civilian casualties, especially by the following epidemics, will be very high in the populated areas but the regime will still be in power. Beside that it will not change the leadership of Iraq, an assault on civilian targets is politically unacceptable.

To change the policies of Iraq one have to remove Saddam out of power or find a way to live with him. There are three ways to eliminate him. First, have the luck to get him in an air strike. This will be very difficult because Saddam is fully aware of this threat and therefore impossible to pinpoint. Further the U.S. have to violate executive order 12333 which forbids the elimination of foreign heads of state. But the executive order is the least of all problems.

Second, hope that an internal coup d’etat removes him from power, but the secret service is very capable in eliminating possible threats to Saddam.

And third, move in with a ground force, but this is political not feasible and if the forces have to stay on for a longer term it will be very dangerous.

The identification of targets will prove to be very difficult. After several years of research the inspection teams still have not yet found all sites. Thereby the Iraqis have become, because of the second Gulf War and the embargo period, specialists in hiding equipment/goods from being found. The military forces will be spread around the country and everything connected with WMD will be hidden. For example biological weapons can be designed and build in a large house, chemical weapons can be manufactured in a farm with a couple of large barns. Only the construction of nuclear weapons need a larger space but this can be done at several smaller sites. And finally you can hide a lot of production capacity in the existing agri-chemical production complexes. With the exception of the existing production sites all other sites will be impossible to target.

The number of clear targets is limited and they will be moving around to make it even more difficult to target them. One should remember the impossibility of the allied forces to capture one missile Scud launcher in the second Gulf War.

Finally a number of complexes will be bunkers who are very deep and well constructed. The U.S. will not be able to destroy these bunkers with existing conventional weapons and the ones in development. Even when they have received the ground plans of German and Yugoslav construction companies who builded a number of those sites. To destroy these sites you need a small nuclear device. The use of nuclear weapons could however create a precedence. As a result every self-respecting defence force will find that it needs nuclear devices to protect the interests of their country. Especially the nations in the Middle East.

Conclusion

The use of military means, air strikes, to force Iraq to obey the U.N. resolutions will be a fruitless affair. The U.S. is certainly be capable to hurt Iraq very badly but it is not enough, as long as they do not use ground forces, to remove Saddam out of power. The impact is not of that scale that the power structures will be destroyed. The Iraqi people will be the ones who will suffer most of an massive air strike. The position of Saddam will most probably be improved after an assault. The national and international “admiration” of Saddam, as the only man who has guts to resist the only superpower in the world, will grow. If it does not kill him it will make him stronger.

The U.S.A. will probably use violence, strike Iraq, to try to make Saddam obey the resolutions. The results will be minimal, with some luck Saddam will allow the inspectors more space to move but they will not find more then they have done till now. He will continue to tease the U.S.A. and the U.N. and this will weaken the influence of the U.S.A. in the Middle East.

The U.S.A. would be better advised if they would use the threat of force with diplomacy, the carrot and stick method. If Saddam gives in to the wishes of the U.N. he will get more freedom to move. The oil for food program is nice but it is not enough to persuade Saddam to obey to the U.N. resolutions. Saddam maybe an unpleasant leader to deal with but he is in power and will most probably be so in the future. Somebody who is participating in the world community can be more or less be controlled. If somebody has nothing to loose he will be more likely to react contrary to what is expected if he is under threat.

A comprehensive Middle East policy from the U.S.A. with equal treatment and chances for all countries in the Middle East will be more promising to regain the influence the U.S.A. has lost since the peace process has fallen apart. The U.S.A. as the remaining superpower has the obligation to have a balanced policy and to be a fair broker in world politics.

 

 

Standaard
December 1997

December 1997

December 1997

The threat of IT – Turmoil in Asia

The threat of IT

IT, or information technology, has become a major factor in the civilian world but also in the defence sector. IT improves the quality of life, things go faster, better and with lesser input.

IT means more than just the collection and dissemination of information. It encompasses the whole spectrum of everything what you can do with information. The jamming, the falsification, the manipulation, the collection, the processing, the emitting, the targetting, dissemination and so on. Information does not only play an important role in the military but also in all parts of the civilian society. The goal of IT in the defence forces is to reach a superior management of your own forces and to attain the ultimate victory as described by Sun Tzu: “vanquishing the enemy without fighting”. The decisive force multiplier of the future is therefore information. The side who possess the information dominance will most probably win the next conflict.

The giant leap forward because of the introduction of IT has also shown the achillesheel of modern society and their armed forces. IT is very susceptible to intrusions from the outside. With only limited resources you can enter IT systems and change their operation modus or even destroy it. Where as military systems are more or less protected against such intrusions, however they are certainly not invincible to intrusions, civilian systems are on the other side very easy to penetrate.

Most countries but also terrorist organisations are putting more attention into capabilities to exploit the weaknesses of the modern society. They are not only targeting military systems but especially civilian systems which are an absolute necessity like power systems, telecommunication, finance systems, sewage and water purification complexes and logistic systems which supply the necessary items to an urbanized society. If you destroy the command and control systems of modern society it will come to a standstill within a week. The same is ofcourse true for the defence forces as we have seen in the second Gulf War when the Iraqi forces were immobilized when their C3, Command, Control and Communications, systems were destroyed or jammed.

The military and especially the governments of the more developed countries are preparing themselves to fight the war on information. Several study groups have been launched to find out the weaknesses of our modern society and ways to eliminate or at least minimise the impact of IT warfare on a developed society.

This is just the beginning of a new kind of countering modern warfare. Therefore should the efforts to stay ahead in IT warfare be intensified. Study groups and firewalls to limit intrusions into IT systems are not enough. The intruders should be automatically tracked and indentified and at best active systems should be introduced to strike back at the intruder and eliminate his IT capabilities.

We should never forget that the development in the IT sector is moving ahead at an astonishing speed. And the basis of IT is knowledge which can be learned by everybody and can be moved across borders without a possibility to stop it. That is why we should continuously improve the capabilities on IT to stop rogue states and terrorist groups exploiting the possibilities of IT.

Turmoil in Asia

The Asian miracle has turned sour. The peculiarities of the Asian countries, like the protected home market, the availability of easy and cheap loans and the system of nepotism and cover ups, were the main reasons for the dramatic economic situation. After the devaluation of most of the Asian currencies and the subsequent fall of the stockmarkets all over Asia the last of the walls of Asian prowess fell down. The already stressed Korean economy and the problems in Japan were the last nail to the self esteem of Asia.

The Korean system which created in two decades the worlds tenth economy became victim of the trap they had created themselve. The Korean government builded there economic rise on a number of large companies, the Chaebols. Those chaebols were supported by a protected home market and very cheap loans to grow into global operators in a number of sectors, like steel, memory chips, electronics and cars. The already stressed markets were flooded by cheap products from Korea and the price was driven down even further. Then the devaluations of the Asian currencies destroyed the already small profit margins of the chaebols. The repayment of loans of as well the chaebols and the Korean government became increasingly difficult and finally the weakest of the chaebols had to file for bankruptcy and the government had to ask for support of the IMF.

This is a short summary of the beginning of the economic downfall in the northern Asian region. In the mean time the drop of the Nikkei, the Tokio stockmarket, under the 16.000 level forced the financial institutions in Japan to asses their position.

The Japanese financial powerhouses, or better former powerhouses, are finally coming to terms with their actual financial situation. Several institutions including the fourth largest and oldest broker, Yamaichi, went out of business. But it seems as Japan finally is introducing the necessary steps to clean up the mess after the bubble economy of the eighties bursted.

The bad loan problem has to be solved. As long this is not the case the Japanese banks will continue to feel the pressure of insolvency and they will not be able to grant loans to new enterprises which could stimulate the growth of the Japanese economy. As long as the bad loans stay on the balance sheet the Japanese economy will be in a vicious circle with only the export market as a small relieve.

The Japanese government has to open up the market and introduce harsh measurements and regulations to eliminate this problem. A number of banks will go bankrupt because of this but the survivors will emerge stronger as ever before. This is the only option to pull Japan and a great number companies out of the problems.

An economical and financial healthy Japan can than be the stimulant to push all other Asian countries to introduce the necessary steps to regulate their economies. Only after new regulations are introduced and the specific Asian “values” eliminated international investors and the national investors will be willing again to invest and re-start the economic boom. The devaluation of the currency, as happened because of the internal problems, will not suffice to solve the problems. It will promote the export on the short term but it will also destroy investment opportunities on the long term.

The investments are the pre-condition to stimulate trade and the economy. The importance of capital will only increase in the future because labor input growth is already to expensive to make an impact. There are other countries which offer cheaper labor costs than most of the Asian countries. The Asian Tigers and Tiger-cubs have to become investors into high tech and innovative production to maintain the impressive growth figures.

Asia is still a very promising region but the market has to be opened, the financial institutions regulated and the government influence minimised. This will be a guarantee to economic growth and political stability. The Pacific area can become the most important area in the next millenium but only if they can get their act together. This has nothing to do with Western values but just with a sound fiscal, economic and business policy.

Standaard