While the extent of crisis differed from country to country, the Asian economies were brought face to face with serious difficulties that came from over-reliance on short-term foreign capital, speculative investments, and poor supervision by financial authorities. Even the resilient economies of Singapore, Taiwan, and Hong Kong have shown related problems, slowly being eroded by the persistent weaknesses of their neighbouring economies (Robison, Beeson, Jayasuriya, & Kim, 2000, p. 100).
What may have gone wrong that spelled the unfortunate events to take place Why did some countries in the region, like China and India, have been unaffected by the crisis What measures did these affected countries do to thwart the eventual downfall of their economies What did policies did India and China foster in order to insulate them from the said crisis As this paper explored answers to these questions, further recommendations by experts will also be tackled in order to prevent the same crisis from ever happening again.
Liberalisation is termed as a programme of changes in the direction of moving towards a free-market economy. This normally includes the reduction of direct controls on both internal and international transactions, and a shift towards relying on the price mechanism to co-ordinate economic activities. In such a programme less use is made of licences, permits and price controls, and there is more reliance on prices to clear markets. It also involves a shift away from exchange controls and multiple exchange rates, towards a convertible currency (Black, 2002).
Long before U.S. Treasury Secretary James Baker, and thereafter everyone else, began to speak of "liberalisation" in late 1985, Helleiner (1992) informed that it was the developing countries that originated the logic of "growth-oriented adjustment" to solve balance of payments and debt difficulties. But when they spoke of the need for growth, they, unlike Baker and the World Bank, attached no controversial excess "liberalisation" baggage to it.
The World Bank, through the IMF, typically recommend the earliest and fullest possible import liberalization, beginning with the replacement of quantitative import restrictions by tariffs, thereby creating both government revenue and greater transparency of incentives, and thereafter reduction in the levels and dispersion of tariffs. Gradualist approaches have generally been favoured by the more pragmatically oriented in the liberal camp and many have noted the importance of favourable macroeconomic conditions (capital inow, terms of trade, weather, etc.) in the timing of successful major policy changes (Helleiner, 1992). The World Bank itself has recently argued:
The more ambitious and long-lasting liberalizations-in Portugal, Greece, Spain, Israel, Chile and Turkey-all started with macroeconomic stabilization. The countries which have tried to liberalize trade in the midst of macroeconomic crisis have failed (World Bank, WDR, 1987, p. 109).
More importantly, it is important to note that the main purpose of the IMF in imposing liberalisation has been to encourage free