ELIZABETH FARNSWORTH: And tonight our correspondent is Indira Lakshamanan, Asia bureau chief for the Boston Globe. Thanks for being with us.
INDIRA LAKSHMANAN, Boston Globe: Thank you for having me.
ELIZABETH FARNSWORTH: What has changed in Hong Kong because of the tremendous economic difficulties this past year?
INDIRA LAKSHMANAN: Well, there's been a lot of change. I mean, interestingly, a year and a half ago when Hong Kong returned to Chinese sovereignty, the big issue was politics, and everyone was talking about what's going to happen to Hong Kong post '97, and interestingly enough, very little has happened politically. We've seen a retention of most of the freedoms that Hong Kong had before, and the big changes have been economic ones. I mean, Hong Kong is a small economy, and it's really been buffeted by, you know, the winds of the Asian crisis, and this year they registered their first recession in a couple of decades and the worst unemployment in many, many years, so the government even has officially said that unemployment is 5 percent. Labor groups put it at over 10 or 11 percent. So we're seeing a real shocking turnaround from what was such a strong economy at the time of the hand-over, is now really struggling with the crisis.
ELIZABETH FARNSWORTH: What do you see personally? I mean, you lived there before this happened, and you've lived there through it. What do you see in everyday life, what changes do you see?
INDIRA LAKSHMANAN: It's really incredible how the mood has changed in Hong Kong. I mean, in the months leading up to the hand-over and immediately after you saw, I mean, really Hong Kong at its wealthy, ritzy best. You know, Hong Kong is famous for having the most Rolls Royces in the world and the highest per capita number of Mercedes Benzes, and you really felt like people were flaunting their wealth. The property market was at an all-time high, the stock market was at a record high at the time of the hand-over. Now, when you've seen everything really go through the floor and the stock market cut in half, in terms of the index number, you see people economize, even the very rich are sort of downsizing in terms of designer dresses. There was, you know, an interesting piece in the local media about Tie-tie's who are the wives of Tai-pans, you know, buying only one designer dress this season and trying to accessorize it, rather than, you know, really going out in a profligate way, the way they did in the past. So you see that among the rich. Among regular people you see a lot of bitterness and a lot of anger at the government. They blame the government for not handling the crisis quickly enough, and taking strong enough actions. You see small protests on the streets in terms of housing and unemployment, and every day in the papers there's more and more news about layoffs and wage cuts. I mean, you know, the sort of classic foreign correspondent index is talking to taxi drivers - the big joke is, you know, every time you get in to a tax driver you ask them what they think, and it's amazing really how bitter people are, so the sense there is really quite different than it was even just a year ago.
ELIZABETH FARNSWORTH: Do you see any real privation, people sleeping on the streets, that kind of thing?
INDIRA LAKSHMANAN: You really don't in Hong Kong. I mean, it's not like Indonesia, where I've spent a lot of time this year, where the economy really went through the floor, and you saw people, you know, hungry and destitute, and that kind of privation fortunately you have not seen in Hong Kong. So it's not that kind of extreme. It's more like the middle class and the lower middle class getting squeezed and losing their jobs, and, you know, taking up sort of - you know - make work odd jobs, selling things on the street - you know - driving taxis, doing things they didn't do before - but you - you really don't see people sleeping on the streets - that hasn't happened yet.
ELIZABETH FARNSWORTH: Indira, do you get a sense in Hong Kong or in the other places you go that there's any consensus yet on what caused all of this? I love the way you put it - you said - what is the root of this woe.
INDIRA LAKSHMANAN: I mean, I think that's really the most interesting and central question that's come out of this crisis. I mean, we're now a year and a half into the Asian crisis and I think that nobody has really established what the cause of it is. I mean, you have some people saying oh, it's because of hedge funds who attacked Asian currencies and speculators, and, you know, so you have some people saying it's because our markets were too open. You see other people saying it's because our markets were too closed, cronyism and capitalism, that sort of nexus of politics and economics. What's so interesting to me about that is because there's no consensus on what caused the crisis there's no consensus on how to get out of the crisis, so you see different Asian governments sort of freelancing it, you know, each one going their own way and what one economist said to me that I thought was really wise is when there's no consensus you have volatility. You know, when there's consensus there's stability, so the fact is you know we've still got a long way to go in terms of coming out of this crisis because no one's figured out yet how to solve it.
ELIZABETH FARNSWORTH: Well, let's take Malaysia - as an example where you've been spending a lot of time, that's one case where the leader has made a decision about what he thinks caused it and then taken action based on it. Tell us about that and what the effects of all that have been from Malaysia.
INDIRA LAKSHMANAN: That's right. I mean, Malaysia's a very interesting case. They have a very strong - some people would say paternalistic prime minister, Mahatir Mohammed, who, you know, took a stand saying we think this is because of speculators and hedge funds and you know, we look at the other countries and what they've done, we don't think it's going to work. I mean, he sort of looks down on so-called IMF 3, which is Thailand, Indonesia, and South Korea, who were the worst-hit countries who were forced to take International Monetary Fund rescue bailouts, and he was very proud that Malaysia didn't have to do that, but his answer has been rather than reforming and opening up the economy, basically shouting it down by putting on capital controls and currency controls, and this has really upset international investors, fund managers, who say, you know, I don't want to invest in Malaysia if I'm not going to be able to take my money out, so in the short run he has actually stabilized the situation by fixing the currency at 3.8 to 1 U.S. dollar. You know, he has stabilized, their markets are stabilized, their economy is okay right now. The question is in the long run what is that going to do - I mean, has he scared off legitimate long-term investors, in addition to scaring off speculators? So I think the jury is very much out on whether that solution works or not.
ELIZABETH FARNSWORTH: And there is new political and at least some political uncertainty and a major trial in Malaysia partly because of the economic difficulties, right? Tell us about that.
INDIRA LAKSHMANAN: Well, that's a very interesting question. I mean, what is behind the trial is what everybody wants to know, and there's a huge discrepancy between the Western media and the Malaysia media over what's behind the trial. The trial we're talking about, of course, is the former Deputy Prime Minister of Malaysia, Anwar Ibrahim, who was the heir apparent to Mahatir and who Mahatir often referred to as his son, you know, someone who he really had been grooming to take over power -- a lot of people thought that might happen as early as next year or the year 2000. Instead, what we've seen is that Mahatir and Anwar clashed earlier this year in June at a party Congress and immediately after that an investigation into allegations of sexual misdeeds by Anwar was reopened. All these allegations had been out a year and a half ago, but Mahatir had said I don't believe so, that's not true, and he closed the investigation. He reopened it this year after the two of them clashed over economic policy and investigation of cronyism and corruption. And Anwar was ousted from his job in September right at the same time that Mahatir imposed capital controls, which Anwar disagreed with, so you see this sort of - again, this coming together of a fight between the two men - you know, the older generation and the younger generation over economics and politics and at the same time, you know, Mahatir or his allies possibly exploiting the situation, although there's no proof, by then putting Anwar on trial. So that's - it's a very controversial case.
ELIZABETH FARNSWORTH: What's the political consequence of this trial? What's it's like to be there during it?
INDIRA LAKSHMANAN: It's very strange, because immediately before the arrest - I mean, we're talking in September - Anwar basically was trying to whip up reformist sentiment once he was ousted from the party, ousted from his position, and at the maximum, he led 30,000 supporters one day in the streets calling for reformaci, or reform. It was the same rallying cry used in Indonesia that ultimately ousted former President Suharto there. So it looked like he was gaining some steam, and right after that, he was arrested, and jailed, and now is on trial. So you still see these rallies every week by supporters of reformaci, but they're down now to 500 people, or a thousand people and they seem quite paltry compared to anything that we saw this year in Indonesia.
ELIZABETH FARNSWORTH: But there is the freedom to do that sort of thing?
INDIRA LAKSHMANAN: I mean, that's again questionable. Yes, the freedom is there, but the police trucks drive up at the end of the night - and sort of menace over them and threaten them with water cannons and order them dispersed - to disperse, and then people disperse, and that's the end of it. I mean, you don't see the same kind of fervor that you saw in Indonesia. And, you know, Anwar is being held up - I mean, let's say he's like a lightning rod for all of these feelings, so you know, it's hard to say from the outside - is he guilty or is he innocent of these charges of sodomy and corruption - of course, I don't know whether he's guilty or innocent, but more importantly, he's become a lightning rod for a lot of discontent. You know, at the same time, it's hard to say, you know, what will happen to the cause at this point. Their situation has gotten a bit ridiculous. They've compared it to the Clinton/Monica Lewinsky case. I mean, just last week they dragged in some stained mattresses into the courtroom and, you know, so it's actually degenerated into something quite embarrassing for the nation.
ELIZABETH FARNSWORTH: Well, Indira Lakshmanan, thanks very much for being with us.
INDIRA LAKSHMANAN: Thank you very much for having me.