On Eve Of APEC Asian Nations May Have Had Enough
After two years of having their currencies and companies trashed, only to be bought up by Anglo-American investors at fire-sale prices, the Asian nations may have had enough. John Howard reports.
In seminars from Seoul, to Kuala Lumpur to Beijing leaders of East Asia are reflecting on what has happened to them over the past two years.
Since the $US3.5 billion August 1998 Fed bailout of New York's Long Term Capital Management hedge fund, Asian nations are taking a second look at the hedge fund/International Monetary Fund (IMF) system.
They now see that London and New York hedge funds were let loose on them, raping Thailand, Indonesia and South Korea, and then turning the shivering survivors over to the IMF system, not to help the victims, but to ensure no Western bank was stuck with non-performing loans.
Asians sources say these actions made East Asia's crony capitalism look tame in comparison to what they see as so-called globalisation now being discredited as a crooked financier's scam.
At an Ashi Newspaper conference in Tokyo the consensus was that the IMF policy in Asia has been a disaster.
Something of this is behind South Korea's Kim Dae-Jung government’s refusal to sell off Daewoo Co.
On July 30 the South Korean government said that it would not bail out the $15 billion which New York and London banks had loaned to the giant Daewoo conglomerate. Daewoo had borrowed much more than other Korean companies - $80 billion in debt, against only $65 billion in assets.
The Daewoo crisis was created, Asian's believe, by a string of IMF press releases on Korea telling Kim to watch it because you're not restructuring as we've told you to. The IMF economists had been complaining for months that South Korea has not sold off huge chunks of the "chaebol" (conglomerates) to Anglo-American companies.
The objective, it seems, was to force Seoul to sell large slices of Daewoo, Hyundai and Samsung, South Korea's three largest firms, to foreigners.
Many leaders in Asia now believe the message is - if you don't globalise on our terms, we'll trash you. They believe the Anglo-Americans want to buy Asian businesses cheap.
Holding the foreign creditors off, Kim arranged for South Korea's four largest banks to loan Daewoo the $6 billion to roll over domestic loans. In exchange, the Korean banks received $9 billion in collateral (stock in Daewoo and its subsidiaries), which the government has said domestic banks may sell as they please. Foreign banks, however, were told to wait for their money, at least until $5.5 billion of it comes due in December.
Earlier, the headquarters of every major foreign creditor in New York and London had demanded all their money back at once. They wanted the $15 billion in foreign loans paid first and that Daewoo be put into bankruptcy, carved up and sold to foreign investors.
But in a gamble which did not pay off, the foreign banks had demanded bankruptcy for a company big enough to bring down the global financial system. Kim, however, had successfully organised a "checkmate."
My sources says the foreign banks were furious. The New York Times went ballistic against Seoul. "The government's decision to take charge of the overhaul of Daewoo (rather than selling it off) can be seen as the biggest sign of backsliding against the IMF reform......"
Korea has refused to sell its best companies to foreigners, the New York Times frothed. It especially complained that the well-publicised sales of Korea First Bank and Seoulbank to foreigner's had not yet been approved in fact by the Kim government.
For the foreign banks, in most cases, there is now no alternative but to negotiate. Daewoo is to big to fail.
But even this small amount of resistance in Seoul was highly unlikely without the behind-the-scenes support of Japan.
Anger throughout Asia at what is seen as a brain-dead IMF system, believed to be set-up to rape and pillage economies, is clearly building. And it looks like the Asian nations have had enough.
Many of them now want a regional East Asia Economic Caucus which would group Asian economies and exclude the United States, Australia and New Zealand.
For example, Malaysia' Prime Minister, Mahathir Mohamad, has pulled out of APEC believing that it is unwilling to take steps with regard to the financial crisis and that it will not achieve much.
Therefore, the outcome of the 11 sector APEC talks, particularly on regional finance, will be very interesting.