Krugman at Bretton Woods

By Maceda, Ernesto M. | Manila Bulletin, September 26, 2000 | Go to article overview

Krugman at Bretton Woods


Maceda, Ernesto M., Manila Bulletin


WE have just attended a 2 day World Business Forum at historic Bretton Woods in New Hampshire with Prof. Paul Krugman of MIT and Princeton as the principal attraction.

Sponsored by the Center for Asia and the Emerging Economics by Dartmount University, it was held at the Mount Washington Hotel and Resort in the legendary White Mountains, considered the most spectacular mountains and valleys in New England.

This is exactly the same place where the 1994 Bretton Woods international monetary conference was held, where 44 countries organized the World Bank and the IMF, set the gold standard at $35 an ounce, and chose the US dollar as the backbone of international exchange.

The World Business Forum was attended by 75 carefully selected Professors, government officials, journalists and top business executives from around the globe.

We represented the Philippines together with former Finance Secretary Bobby de Ocampo who was invited in his capacity as President of the AIM, Cesar Bacani, Senior Editor of Asia Week came from Hong Kong, Minister Lourdes Yparaguirre of the Philippine Embassy also attended.

The main subjects were:

1) "Finance System and Restructuring in the Key Asian Economies; Real Reform of the Roots of Another Asian crisis?"

2) "Cross Border Acquisitions and International Corporate Governance Convergence."

3) "E-Business in Asian: Challanges and Opportunities."

The bottom line conclusion were:

1) There is no looming Asian Financial crisis in the immediate future.

2) Korea, Thailand, Malaysia, the Philippinesand Singapore are out of the woods and doing well.

3) Indonesia and Japan are still problematic with a very uncertain future.

4) China is a big question mark especially infrastructure and legal regulations wise. To date foreign investors in China have not made money.

5) India continues to be the major player in the Internet and still the best bet for investors. Korea, Singapore and the Philippines are the other good investments bets.

Once again, the Philippines was cited for its excellent English Speaking. IT Workforce, including manage level. The Philippines is also cited for its good legal infrastructure and firm democratic system and established court or justice system.

It is significant to note that Korea is tops in recovery from the '97 financial crisis with its international reserves back to $92 Billion. It has repaid $13 Billion of the $21 Billion loan immediately injected by IMF in '98-'99.

Korean benefited by the large injection of government and foreign funds but what happened was a reversal of the government's privatization program with government taking as much as 80-100% ownership of distressed banks.

Most reform efforts in Korea concentrated in the banking system with the creation of new "Financial Supervisory Service."

Prof. Krugman who correctly predicted the Asian financial crisis as early as 1994 was confident that a new Asian financial crisis is not in the making. He noted the '97 financial crisis was basically a liquidity problem and not a systemic problem. He noted however the excessive foreign borrowing by Thailand (and Korea) triggered by too much real estate development was the major cause of the collapse.

It is significant that while he was not high on the Philippines, he was not critical either and together with 3 or 4 other speaker considered the Philippines a good investment area in certain spots.

It was surprising to bear from him and others that Japan is going to be stagnant for a while and that the unstable leadership structure with frequent change of Prime Ministers a big negative factor.

Krugman did not comment on China, said he has never visited China, impliedly indicating that he does not feel too excited about China.

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