Asia Report from Indira Lakshmanan
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CHARLES KRAUSE: Asia was a big story in 1997, first Hong Kong, then the economic crisis. Joining us now is one of the correspondents who’s been covering those stories, Indira Lakshmanan, Asia Bureau Chief for the Boston Globe, who’s based in Hong Kong. Indira, welcome.
INDIRA LAKSHMANAN, Boston Globe: Thank you.
CHARLES KRAUSE: You went out to Asia last January when it was still booming. Is it a very different place today than it was then?
INDIRA LAKSHMANAN: It certainly is. When I went out, the economy was a big story but always in a positive way. The issue was always the Asian miracle, how can other emerging markets in Eastern Europe and Latin America replicate what has been done so successfully throughout Asia from the Asian Tigers on down to sort of second string countries like Vietnam that people were hoping would also come up? Now, since July 2nd, when the Thai baht was floated and really collapsed, the Thai currency, we’ve seen nothing but negative economic stories coming out of Asia and just a real–a really unexpected collapse.
CHARLES KRAUSE: Tell me some–give me a couple of examples of how–how that collapse has manifested itself?
INDIRA LAKSHMANAN: Right. I mean, the really–obviously, there have been incredible crashes with every–you know, practically every currency in Southeast Asia, from the Thai baht, the Malaysian ringgit, the Indonesian rupiah, and we finally saw it infect the South Korean won, which was a real disaster and unexpected for people because that is the 11th largest economy. The way that that plays out on the street level has been really interesting.
When I was in Thailand recently, I saw that the sort of new austerity that has come into people’s lives as a result of the $7.2 billion IMF bailout, it ranges from everything from down-scaling people’s lives–you know, Thailand was famous for being so lavish–now you see people renting out designer handbags in stores because people can no longer afford to buy the Gucci’s that they want. You see people downscaling weddings. I saw an invitation from one family–the bride’s family–that said, we’re just going to celebrate with a service, please don’t bring a gift to save us the trouble of having to have a banquet.
There’s poor man’s karoke now, where they’ll put on a tape in a local pub or restaurant and you can sing along to the cassette. There’s a market for the formerly rich, where people are selling off their Mercedes Benzes and jewelry, so there’s been–you’ve really seen how it’s hit people at that level.
CHARLES KRAUSE: And how about poor people, working class people, has it hit them yet?
INDIRA LAKSHMANAN: Yes. I mean, obviously it’s hit richer people in more colorful ways, you know, that you see an executive now driving a taxi or now selling sandwiches, but the poor have been affected in the sense that they’re worried about entire companies closing down and then they lose their jobs. I mean, with your average taxi driver or tuk-tuk driver, those auto rickshaws, the cost of gasoline has gone up so much for them because of the conversion of the currency that now they’re working twice as long as they did before and making half as much in many cases.
CHARLES KRAUSE: I covered the Mexico crisis in ’94, and actually it took six months or so for the impact to really be felt among the people, and then it took a couple of years before things began to improve. Do you think that the crisis in Asia has really been felt yet, the way it’s going to be felt?
INDIRA LAKSHMANAN: I think it’ll probably be something like what you experienced in Mexico that it’ll take time for it to sink in. In Thailand, you know, we saw the closure recently at 57 finance companies, and that means that many people, down to the tellers and the janitors, you know, will be out of work, and I do think that the reverberations will come later. Similarly, in South Korea, where I was just recently, right before the elections, it’s the same sort of thing. We’re going to see merchant banks reopening for the first time next week, but by the end of January, it’s quite likely that many of them will have to close down, and that there will be many failures, bankruptcies, and that will affect everyone, so I think a lot of the pain is still yet to come.
CHARLES KRAUSE: And do these countries have the kind of social safety net work that–well, not Mexico so much–but that other countries do?
INDIRA LAKSHMANAN: It’s a very good question, and, no, in fact, many of them do not. In Thailand, for example, there’s no employment insurance. In South Korea, there’s basically a tradition of lifetime employment and very militant labor unions. So it’s true that as we see all of this rippling out, there is not the same kind of safety net that we see in many western countries because in many ways we’ve gotten so used to booming growth. You know, Malaysia was the second fastest-growing economy for a decade, Thailand as well. So they’re not used to this kind of slowdown. They haven’t needed those kinds of nets.
CHARLES KRAUSE: Do you have any sense of what could happen if–I mean, if all these people–if millions of people are thrown out of work, if they have no unemployment insurance, what’s going to happen?
INDIRA LAKSHMANAN: Well, obviously, I hope it doesn’t come to that, and because of the bailouts, I think it’s, you know, possible to stave off that kind of a crisis situation. If it does come to that, it could get quite ugly, particularly in South Korea, where the unions are so militant and you’ve also got student militant activists. It’s true they have a new president now who will be taking off in February, but I think what you might start to see is the fallout in terms of politics. You might see the economics, you know, infecting that side and affecting politics. And a lot of people say that Kim Dae-Jung’s election, a long-time dissident who ran four times in South Korea, that he may have finally been elected this time because of the economic crisis and people blaming the ruling party for it. So I think more and more you’ll see how that affects politics. Similarly, in China, the whole question of the reform of state-owned enterprises, there is–there is a serious question about whether they will be able to go about those reforms if they’re not getting capital investment from other Asian countries that they’ve been so used to having an infusion of investment from.
CHARLES KRAUSE: Well, let’s turn to Hong Kong, where you are based, for a minute. Do you–you wrote a piece that I thought was really quite interesting in July calling it a kind of arranged marriage between Hong Kong and China. You said it was two partners who were told they were supposed to love each other, but they didn’t even know each other. How’s that marriage going?
INDIRA LAKSHMANAN: So far, so good for the most part. I’d say that, contrary to a lot of people’s expectations, for the most part China has really made an effort to keep up their side of the bargain, which was one country, two systems and hands off of Hong Kong. And you’ve seen that in many different ways. For example, with the economic crisis, which has not really affected Hong Kong, you know, nearly as badly as it has so many other countries, but China has basically kept quiet, and the one thing they said was if you need currency to back you up against currency speculators, and you have reserves behind you, but we trust you to do what we want to do, and that really encouraged a lot of people. I think the ways in which there have been changes in Hong Kong have been in large degree brought on by Hong Kong people’s own worries like self-censorship. There has been some self-censorship in the papers, as well as not showing certain movies because they were afraid that those were going to offend China. I wrote about that.
CHARLES KRAUSE: What movies?
INDIRA LAKSHMANAN: There were three movies that were expected to be big box office hits here in the United States, that in Hong Kong this summer they refused to show, distributors refused to show them. There was “Red Corner,” which was an attack on the legal system starring Richard Gere, “Seven Years in Tibet” with Brad Pitt about the Dalai Lama, and “Kundun,” a Disney movie, also about the Dalai Lama, and Hong Kong distributors refused to take them because they said it’s going to really annoy China, and the Hong Kong government came out on record and said we’re not banning you from showing those movies, go ahead. And the movie distributors who I talked to said, we’re afraid, and if that changes, we don’t want to lose our money, and Hong Kong people were very upset about that. So some of those restrictions, I think, have been brought on by Hong Kong authorities, either businessmen or newspaper editors, who themselves are afraid, perhaps without reason. It’s not clear.
CHARLES KRAUSE: Let’s kind of finally turn toward the next year, towards 1998. What are the big stories? What are you looking–what do you think you’ll be covering next year?
INDIRA LAKSHMANAN: Definitely the economic crisis and how that plays out will continue to be a very big story, particularly with South Korea, where I just was, we’re going to have to continue to watch what happens. Do their loans get rolled over? I mean, I saw some incredibly interesting things just two weeks ago with people burning Marlboro cigarettes in the streets because they think that imports are the problem, and collecting American coins, thinking that, you know, if they have American dollars, that that will save the banking system, you know, these sort of little ways of trying to put out a fire by spitting on it. I think we have to watch what happens with that. Hong Kong at the one-year mark will be really interesting to see what has happened politically there, and I think the general question of how the economics is influencing politics throughout Asia will be very interesting. We’ll be seeing elections in Cambodia, the Philippines, and Hong Kong all in May. So those will all be important things to watch.
CHARLES KRAUSE: Great. Well, thank you very much for joining us and best of luck.
INDIRA LAKSHMANAN: Thanks very much for having us.
CHARLES KRAUSE: Thank you.
INDIRA LAKSHMANAN: Thanks.